<PAGE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------------
CGB&L FINANCIAL GROUP, INC.
(Name of small business issuer in its charter)
DELAWARE 6039 REQUESTED
- ----------------------------- ---------------------------- -------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
229 E. South Street, P.O. Box 680, Cerro Gordo, Illinois 61818-0680
(217) 763-2911
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(Address and telephone number of principal executive
offices and principal place of business)
MRS. MARALYN F. HECKMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CGB&L FINANCIAL GROUP, INC.
229 E. SOUTH STREET, P.O. BOX 680
CERRO GORDO, ILLINOIS 61818-0608
(217) 763-2911
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(Name, address, and telephone number of agent for service)
Please send copies of all communications
to:
THEODORE L. EISSFELDT, ESQ.
MARK A. DAVIS, ESQ.
HOWARD & HOWARD ATTORNEYS, P.C.
321 LIBERTY STREET, SUITE 200
PEORIA, ILLINOIS 61602
(309) 672-1483
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Approximate date of proposed sale to the public:
as soon as practicable after this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each class of Amount to Proposed maximum offering Proposed maximum Amount of
securities to be be registered price per unit aggregate offering price registration fee
registered
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<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 145,475(1) $10.00 $1,454,750.00 $430.00
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</TABLE>
(1) The estimated maximum number of shares is based upon the maximum
valuation range, as established by an independent appraisal, divided by the
proposed offering price per share.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
PROSPECTUS
[NAME AND LOGO]
(PROPOSED HOLDING COMPANY FOR CERRO GORDO BUILDING AND LOAN, S.B.)
ANTICIPATED MAXIMUM OF 126,500 SHARES OF COMMON STOCK
$10.00 PURCHASE PRICE PER SHARE
CGB&L Financial Group, Inc., a Delaware corporation (the "Holding
Company"), is offering an estimated 126,500 shares of its common stock, par
value $.01 per share (the "Common Stock"), in connection with the conversion
of Cerro Gordo Building and Loan, s.b. (the "Savings Bank") from an
Illinois-chartered mutual savings bank to an Illinois-chartered stock savings
bank and the simultaneous issuance of the Savings Bank's capital stock to the
Holding Company (the "Conversion"). The conversion of the Savings Bank to
stock form, the issuance of the Savings Bank's capital stock to the Holding
Company and the offer of the Common Stock by the Holding Company are being
undertaken pursuant to a plan of conversion of the Savings Bank (the "Plan"
or "Plan of Conversion"). See "THE CONVERSION -- General" as to certain
circumstances under which utilization of the Holding Company may be
eliminated from the Conversion and common stock of the Savings Bank may be
substituted for the Common Stock.
(CONTINUED ON NEXT PAGE)
-------------------------------
FOR INFORMATION ON HOW TO SUBSCRIBE,
CALL THE CONVERSION CENTER AT (217) 763-6053.
-------------------------------
FOR A DISCUSSION OF CERTAIN RISKS TO BE CONSIDERED BY
EACH PROSPECTIVE INVESTOR, SEE "RISK FACTORS."
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION ("SEC"), ANY STATE SECURITIES COMMISSION,
THE ILLINOIS OFFICE OF BANKS AND REAL ESTATE ("COMMISSIONER"), OR
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC")
NOR HAS THE SEC, ANY STATE SECURITIES COMMISSION,
THE COMMISSIONER, OR THE FDIC PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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SUBSCRIPTION ESTIMATED UNDERWRITING ESTIMATED NET
PRICE(1) AND OTHER EXPENSES(2) PROCEEDS TO ISSUER(3)
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<S> <C> <C> <C>
Per Share........................... $10.00 $2.32(4) $7.68
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Minimum Total....................... $935,000 $254,850 $680,150
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Midpoint Total...................... $1,100,000 $254,850 $845,150
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Maximum Total....................... $1,265,000 $254,850 $1,010,150
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Maximum Total, as adjusted(5)....... $1,454,750 $254,850 $1,199,900
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</TABLE>
(1) The estimated aggregate value of the Common Stock is based on an
independent appraisal by JMP Financial, Inc. ("JMP") as of May 27,
1998. Based on such appraisal, the Holding Company has determined to
offer up to 126,500 shares, subject to adjustment, at a purchase price
of $10.00 per share.
(2) Includes estimated printing, postage, legal, accounting and
miscellaneous expenses which will be incurred in connection with
the Conversion. Also includes estimated fees and reimbursable
expenses to be paid to Trident Securities, Inc. ("Trident") in
connection with the Subscription and Community Offerings,
estimated to be $88,500.00. Trident may be deemed to be an
underwriter, and certain amounts to be paid to Trident may be
deemed to be underwriting compensation for purposes of the
Securities Act of 1933, as amended. The Holding Company and the
Savings Bank have agreed to indemnify Trident against certain
liabilities, including liabilities that may arise under the
Securities Act of 1933, as amended. See "USE OF PROCEEDS" and
"THE CONVERSION -- Subscription and Community Offerings Marketing
and Other Fees."
(3) Actual net proceeds may vary substantially from the estimated amounts
depending upon the number of shares sold in the Subscription and
Community Offerings. See "PRO FORMA DATA."
(4) Assumes the sale of the midpoint number of shares. If the minimum,
maximum or 15% above the maximum number of shares are sold, estimated
expenses per share would be $2.73, $2.01 or $1.75, respectively,
resulting in estimated net Conversion proceeds per share of $7.27,
$7.99 or $8.25, respectively.
(5) Gives effect to the sale of an additional 18,975 shares in the
Conversion, either in the Subscription Offering or the Community
Offering, to cover additional subscriptions, without the
resolicitation of subscribers or any right of cancellation, based
on a determination by JMP, as the Savings Bank's independent
appraiser, that such issuance is compatible with its determination
of an increase in the appraised pro forma market value of the
Common Stock. See "THE CONVERSION -- Stock Pricing and Number of
Shares to be Issued."
TRIDENT SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS ________________, 1998
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Non-transferable rights to subscribe for shares of Common Stock
("Subscription Rights") have been granted to (i) depositors with aggregate
account balances of $50 or more on deposit at the Savings Bank as of December
31, 1996 (the "Eligible Account Holders"), (ii) the employee stock ownership
plan (the "ESOP") adopted by the Savings Bank, (iii) depositors with
aggregate account balances of $50 or more on deposit with the Savings Bank as
of June 30, 1998, excluding directors and officers of the Savings Bank and
their associates ("Supplemental Eligible Account Holders"), and (iv)
depositors of the Savings Bank as of ___________________, 1998 who are not
Eligible Account Holders or Supplemental Eligible Account Holders ("Other
Members"), subject to the priorities and purchase limitations set forth in
the Plan (the "Subscription Offering"). Any shares of Common Stock not
subscribed for in the Subscription Offering will be offered for sale in a
community offering (the "Community Offering" and, when referred to together
with the Subscription Offering, the "Subscription and Community Offerings" or
"Offerings") to members of the general public to whom this Prospectus and the
accompanying stock order form (the "Order Form") are delivered, with
preference to natural persons residing in the Illinois county of Piatt. The
Holding Company and the Savings Bank have the right to reject, in their sole
discretion, orders in whole or in part in the Community Offering. The
Community Offering, if one is held, is expected to begin immediately after
completion of the Subscription Offering. SUBSCRIPTION RIGHTS ARE
NON-TRANSFERABLE; PERSONS FOUND TO BE TRANSFERRING SUBSCRIPTION RIGHTS WILL
BE SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE COMMISSIONER OR THE FDIC. See "THE CONVERSION -- The
Subscription and Community Offerings" and "-- Restrictions on Transfer of
Subscription Rights and Shares."
The Savings Bank has engaged Trident Securities, Inc. ("Trident"), a
securities and investment banking firm headquartered in Raleigh, North
Carolina, to act as selling agent and to consult with and advise the Holding
Company and the Savings Bank with respect to the Subscription and Community
Offerings. If necessary, any shares of Common Stock not subscribed for in the
Subscription and Community Offerings will be offered to certain members of
the general public on a best efforts basis through a selected dealers
arrangement (the "Syndicated Community Offering"). Trident has agreed to
solicit purchase orders and subscriptions for shares of Common Stock in the
Subscription and Community Offerings, including developing and managing a
Syndicated Community Offering if utilized. Neither Trident nor any other
registered broker- dealer is obligated to take or purchase any shares of
Common Stock in the Subscription and Community Offerings.
With the exception of the ESOP, which is expected to purchase 8% of the
Common Stock sold in the Conversion, NO PERSON OR ENTITY, TOGETHER WITH
ASSOCIATES OF, OR PERSONS ACTING IN CONCERT WITH, SUCH PERSON OR ENTITY, MAY
PURCHASE MORE THAN 6,325 SHARES OR $63,250 OF THE COMMON STOCK SOLD IN THE
CONVERSION (WHICH REPRESENTS 5% OF THE SHARES OF COMMON STOCK BEING OFFERED
IN THE OFFERINGS AT THE MAXIMUM OF THE ESTIMATED VALUATION RANGE). The
purchase limitation of 6,325 shares of Common Stock may be increased or
decreased in the discretion of the Boards of Directors of the Holding Company
and Savings Bank, subject to approval by the Commissioner and certain other
conditions. Each person subscribing for Common Stock in the Subscription and
Community Offerings must subscribe for at least 25 shares. See "THE
CONVERSION -- Limitations on Purchases of Shares" for other purchase and sale
limitations.
The total number of shares to be issued in the Conversion will be based
upon an independent valuation of the aggregate pro forma market value of the
Common Stock performed by JMP Financial, Inc. ("JMP"). The price per share
has been fixed at $10.00 per share (the "Purchase Price"). Based on the
current aggregate valuation range of $935,000 to $1,265,000 (the "Estimated
Valuation Range"), the Holding Company is offering from 93,500 to 126,500
shares in the Subscription and Community Offerings. If the aggregate purchase
price of the Common Stock sold in the Conversion is below $935,000 or above
$1,454,750 (I.E., 15% above the maximum of the Estimated Valuation Range),
subscribers will be resolicited and will have the opportunity to modify or
cancel their subscriptions and to have their subscription funds returned
promptly with interest. Any change in the total dollar amount of the
Offerings outside of this range will be subject to the approval of the
Commissioner and the FDIC. See "PRO FORMA DATA" and "THE CONVERSION -- Stock
Pricing and Number of Shares to be Issued." The sale of Common Stock and
completion of the Conversion are subject to, among other things, approval of
the Plan of Conversion by the Savings Bank's members. See "THE CONVERSION --
General."
THE SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS IN THE SUBSCRIPTION
OFFERING WILL EXPIRE AT 12:00 NOON, CERRO GORDO, ILLINOIS TIME, ON
______________, 1998 (THE "SUBSCRIPTION EXPIRATION TIME"), UNLESS EXTENDED.
THE COMMUNITY OFFERING, IF ANY, IS EXPECTED TO COMMENCE IMMEDIATELY AFTER THE
SUBSCRIPTION EXPIRATION TIME AND MAY TERMINATE ON ANY DAY AFTER THE
SUBSCRIPTION EXPIRATION TIME AT THE DISCRETION OF THE SAVINGS BANK WITHOUT
PRIOR NOTICE, BUT NOT LATER THAN _________________, 1998, UNLESS EXTENDED
WITH THE APPROVAL OF THE COMMISSION. The Holding Company must receive, at the
office of the Savings Bank, a completed Order Form along with full payment
(or withdrawal authorization from a deposit account at the Savings Bank) of
$10.00 per share for each share ordered. Funds so received will be placed in
a segregated account established for purposes of the Conversion at the
Savings Bank, and interest on funds in such account will be paid at the
Savings Bank's then current passbook rate from the date payment is received
until the Conversion is completed or terminated. Payments authorized by
withdrawals from deposit accounts will continue to earn interest at the
contractual rate of the deposit account until the Conversion is completed or
terminated. If the Conversion is not completed within 45 days after the date
on which the Subscription Expiration Time occurs (I.E., on or before
___________, 1998, assuming the Community Offering has been fully extended)
and the Commission consents to an extension of time to complete the
Conversion, subscribers will be given the right to increase, decrease or
rescind their orders. If an affirmative response to any resolicitation is not
received by the Savings Bank or the Holding Company from subscribers, such
orders will be rescinded and all funds will be returned promptly with
interest. If such period is not extended or, in any event, if the Conversion
is not completed by ___________, 1998, all subscription funds will be
promptly returned, together with accrued interest, and all withdrawal
authorizations terminated.
As a newly organized company, the Holding Company has never issued
capital stock, and consequently there is no established market for the Common
Stock. Following the completion of the Subscription and Community Offerings,
it is anticipated that the Common Stock (symbol: ___________) will be traded
on the over-the-counter market with quotations available through the OTC
Bulletin Board. Trident is
<PAGE>
expected to make a market in the Common Stock by developing and maintaining
historical stock trading records, soliciting potential buyers and sellers and
attempting to match buy and sell orders. In connection with its market making
activities, Trident may buy or sell shares from time to time for its own
account. However, Trident will not be subject to any obligation with respect
to such efforts. If the Common Stock cannot be quoted and traded on the OTC
Bulletin Board it is expected that the transactions in the Common Stock will
be reported in the pink sheets of the National Quotation Bureau, Inc.
The development of an active trading market depends on the existence of
willing buyers and sellers. Due to the small size of the Offerings, it is
highly unlikely that an active trading market will develop and be maintained.
Purchasers of the Common Stock could have difficulty disposing of their
shares and should not view the shares as a short-term investment. Purchasers
may not be able to sell their shares at a price equal to or above the price
paid for the shares. See "RISK FACTORS -- Potential Illiquidity of Market for
Common Stock" and "MARKET FOR COMMON STOCK."
AVAILABLE INFORMATION
Neither the Holding Company nor the Savings Bank is currently subject to
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
The Holding Company has filed a Registration Statement with the SEC on
Form SB-2 under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Common Stock offered hereby. As permitted by the
rules and regulations of the SEC, this Prospectus does not contain all of the
information set forth in the Registration Statement. Such information can be
examined and copied at the public reference facilities of the SEC located at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC at 75 Park Place, 14th Floor, New York, New York
10007 and Room 3190, John C. Kluczynski Building, 230 South Dearborn Street,
Chicago, Illinois 60604. Copies of such material can be obtained by mail from
the SEC at prescribed rates from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the SEC
maintains a worldwide web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the SEC, including the Holding Company; the address is
(www.sec.gov). Copies of the Registration Statement, including JMP's
appraisal report, are also available for inspection at the office of the
Savings Bank at 229 E. South Street, Cerro Gordo, Illinois 61818. Inquiries
concerning such inspections can be made to the Savings Bank at (217) 763-2911.
The Savings Bank has filed an Application for Conversion with the
Commissioner for approval to convert from an Illinois-chartered mutual
savings bank to an Illinois-chartered stock savings bank. Such application
was approved on ___________, 1998. Pursuant to the rules and regulations of
the Commissioner, this Prospectus omits certain information contained in such
application. The application may be inspected at the offices of the
Commissioner located at 310 South Michigan Avenue, Chicago, Illinois 60606
and 500 West Monroe Street, Suite 800, Springfield, Illinois 62701. Copies of
the Plan, copies of the Savings Bank's proposed stock articles of
incorporation and stock bylaws and copies of the Holding Company's
certificate of incorporation and bylaws, are available for inspection at the
office of the Savings Bank and may be obtained by writing to the Savings Bank
at P.O. Box 680, Cerro Gordo, Illinois 61818-0680, or by telephoning the
Conversion Center at (217) 763-6053.
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
229 E. SOUTH STREET
CERRO GORDO, ILLINOIS 61818
[MAP]
(Map showing where the Holding Company
is located in the State of Illinois)
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS DEPOSITS AND ARE NOT
INSURED BY THE FDIC, THE COMMISSIONER, THE SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS.
CGB&L FINANCIAL GROUP, INC.
The Holding Company was organized as a Delaware corporation on May
21, 1998 at the direction of the Board of Directors of Savings Bank to
acquire all of the capital stock to be issued by the Savings Bank in the
Conversion. Following the Conversion, the Holding Company will be engaged in
the business of directing, planning and coordinating the business activities
of the Savings Bank. In the future, the Holding Company may acquire or
organize other operating subsidiaries, although there are no current plans,
arrangements, agreements or understandings to do so. The Holding Company's
offices are located at 229 E. South Street, Cerro Gordo, Illinois 61818, and
its telephone number is (217) 763-2911. See "CGB&L FINANCIAL GROUP, INC."
CERRO GORDO BUILDING AND LOAN, S.B.
The Savings Bank is an Illinois-chartered mutual savings bank
regulated by the Commissioner, and its deposits are insured by the FDIC
through the SAIF. The Savings Bank was originally chartered in 1886 as a
state-chartered savings and loan association and converted to a
state-chartered savings bank on December 31, 1992 under its current name of
Cerro Gordo Building and Loan, s.b. At March 31, 1998, the Savings Bank had
total assets of $6.9 million, total deposits of $5.3 million, retained
earnings of $873 thousand and total equity capital of $986 thousand. The
Savings Bank conducts its business through its office located at 229 E. South
Street, Cerro Gordo, Illinois 61818, and its telephone number is (217)
763-2911.
The Savings Bank provides its customers with a range of community
banking services. The Savings Bank is primarily engaged in the business of
attracting deposits from the general public and using such deposits to invest
in one- to four-family residential mortgage loans and, to a lesser extent,
multi-family residential, commercial real estate and share loans. In
addition, the Savings Bank invests in interest bearing time deposits and
FHLMC common stock. See "BUSINESS OF THE SAVINGS BANK."
THE CONVERSION
The Savings Bank is in the process of converting from an
Illinois-chartered mutual savings bank to an Illinois-chartered stock savings
bank and becoming a wholly-owned subsidiary of the Holding Company. As part
of the Conversion, the Savings Bank will issue all of its capital stock to
the Holding Company in exchange for 50% of the net proceeds of the
Conversion, less the amount of proceeds necessary to fund the ESOP. The
Holding Company will simultaneously sell its Common Stock on a priority basis
to certain depositors of the Savings Bank, the ESOP and other persons and
entities in the Subscription and Community Offerings.
The Board of Directors of the Savings Bank approved the Plan of
Conversion on March 11, 1998 and an amendment to the Plan of Conversion on
May 26, 1998, subject to approval by the Commissioner, the receipt of notice
from the FDIC that it does not intend to object to the Conversion, and the
approval of the members of the Savings Bank holding not less than two-thirds
of the total outstanding votes as of the record date fixed for, and who
continue to be members on, the date of the special meeting of members called
for approval of the Plan. The Board of Directors of the Savings Bank approved
the Plan of Conversion because it believes that conversion to a stock form of
organization and the concurrent formation of a holding company will offer a
number of advantages to the Savings Bank, including a larger capital base,
enhanced services to its customers, and the opportunity for depositors,
management and employees of the Savings Bank to become stockholders of the
Holding Company.
<PAGE>
On _____________, 1998, the Commissioner approved the Savings
Bank's Application for Approval of Conversion, subject to the receipt by the
Savings Bank and the Holding Company of all other required regulatory
approvals and compliance with all other outstanding legal requirements. On
__________________, 1998, the FDIC issued a letter to the Savings Bank
stating its non-objection to the consummation of the Conversion, subject to
the satisfaction of certain conditions including the approval of the Plan of
Conversion by the Savings Bank's members and the receipt by the FDIC of an
updated appraisal that takes into account the results of the Subscription
Offering. In accordance with applicable Illinois law, the Plan of Conversion
will be submitted to the Savings Bank's members for their approval at a
special meeting to be held on _________________, 1998 (the "Special
Meeting"). See "THE CONVERSION -- General;" and "-- Purposes of Conversion." On
______________, 1998, the Federal Reserve Bank also approved the Holding
Company's application to acquire all of the outstanding capital stock of the
Savings Bank, subject to compliance with certain restrictions upon the
investments of, and the incurrence of additional debt by, the ESOP and the
expiration of the statutory post-approval waiting period. Such waiting period
expired on _______________, 1998. See "CGB&L FINANCIAL GROUP, INC."
After the Conversion, the Savings Bank's account holders will not
have voting rights with respect to the converted Savings Bank. See "THE
CONVERSION -- Effects of Conversion Voting Rights."
THE OFFERINGS
The Holding Company is offering up to 126,500 shares of Common
Stock at $10.00 per share in the Subscription Offering. Non-transferable
Subscription Rights have been granted to the following persons and entities,
who may exercise such Subscription Rights in the following order of priority:
(i) Eligible Account Holders (depositors with aggregate account balances of
$50 or more on deposit at the Savings Bank as of December 31, 1996), (ii) the
ESOP, (iii) Supplemental Eligible Account Holders (depositors with aggregate
account balances of $50 or more on deposit with the Savings Bank at June 30,
1998, excluding directors and officers of the Savings Bank and their
associates), and (iv) Other Members (depositors of the Savings Bank as of
______________, 1998 who are not Eligible Account Holders or Supplemental
Eligible Account Holders). Subject to the prior rights of holders of
Subscription Rights, the Holding Company may subsequently offer the Common
Stock for sale in a Community Offering to persons to whom this Prospectus and
an Order Form are delivered, with preference to natural persons residing in
the Illinois county of Piatt. All purchases in the Community Offering are
subject to the right of the Holding Company and Savings Bank to reject any
order in whole or in part.
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE; PERSONS FOUND TO BE
TRANSFERRING SUBSCRIPTION RIGHTS WILL BE SUBJECT TO FORFEITURE OF SUCH RIGHTS
AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE COMMISSIONER OR
THE FDIC. THE SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS IN THE
SUBSCRIPTION OFFERING WILL EXPIRE AT THE SUBSCRIPTION EXPIRATION TIME (12:00
NOON, CERRO GORDO, ILLINOIS TIME, ON _____________, 1998), UNLESS EXTENDED.
THE COMMUNITY OFFERING, IF ANY, IS EXPECTED TO COMMENCE IMMEDIATELY AFTER THE
SUBSCRIPTION EXPIRATION TIME AND MAY TERMINATE ON ANY DAY AFTER THE
SUBSCRIPTION EXPIRATION TIME AT THE DISCRETION OF THE SAVINGS BANK WITHOUT
PRIOR NOTICE, BUT NOT LATER THAN _________________, 1998, UNLESS EXTENDED
WITH THE APPROVAL OF THE COMMISSIONER.
Any holder of Subscription Rights who desires to subscribe for
shares of Common Stock must do so prior to the Subscription Expiration Time
by delivering (by mail or in person) to the Savings Bank's office a properly
executed and completed Order Form, together with payment of $10.00 per share
for each share for which subscription is made. Payment may be made (i) in
cash, if delivered in person to the office of the Savings Bank, (ii) by check
or money order, or (iii) by appropriate authorization of withdrawal from a
deposit account in the Savings Bank. In the event of an oversubscription,
available shares will be allocated pro rata in accordance with procedures
established in the Plan of Conversion. An executed Order Form, once received
by the Holding Company, may not be modified, amended or rescinded without the
consent of the Holding Company, except in the
2
<PAGE>
event of a resolicitation or unless the Conversion is not completed within 45
days of the termination of the Subscription Offering. See "THE OFFERING" and
"THE CONVERSION."
PURCHASE LIMITATIONS
With the exception of the ESOP, which is expected to purchase 8% of
the Common Stock sold in the Conversion, no person or entity, together with
associates of, or persons acting in concert with, such person or entity, may
purchase more than 6,325 shares or $63,250 of Common Stock sold in the
Conversion (which represents 5% of the shares of Common Stock being offered
in the Offerings at the maximum of the Estimated Valuation Range). The
purchase limitation of 6,325 shares of Common Stock may be increased or
decreased in the discretion of the Boards of Directors of the Holding Company
and the Savings Bank, subject to the approval of the Commissioner and certain
other conditions. Each person subscribing for Common Stock in the
Subscription and Community Offerings must subscribe for at least 25 shares.
See "THE CONVERSION -- Limitations on Purchases of Shares" for other purchase
and sale limitations.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION; APPRAISAL
The Commissioner's regulations and the Plan of Conversion require
that the aggregate purchase price of the Common Stock to be issued in the
Conversion be based upon an independent appraisal of the estimated pro forma
market value of the Common Stock. The Savings Bank has retained JMP to
prepare an appraisal of the pro forma market value of the Common Stock to be
issued in connection with the Conversion. JMP has advised the Savings Bank
that, in its opinion, at May 27, 1998, the aggregate estimated pro forma
market value of the Common Stock ranged from $935,000 to $1,265,000 or from
93,500 shares to 126,500 shares, assuming a purchase price of $10.00 per
share. The $10.00 purchase price per share is a uniform price for all
purchasers in the Subscription and Community Offerings and was set by the
Board of Directors of the Savings Bank.
The appraisal of the pro forma market value of the Common Stock is
based upon a number of factors and should not be considered a recommendation
to buy shares of the Common Stock or assurance that, after the Conversion, an
investor will be able to resell shares of Common Stock at the Purchase Price.
JMP will update or confirm its appraisal prior to completion of the
Conversion, and the number of shares to be sold will be fixed at that time.
Consummation of the Offering is subject to the Commissioner's and the FDIC's
approval of the pro forma market value reflected in the updated or
re-confirmed appraisal. See "THE CONVERSION -- Stock Pricing and Number of
Shares to be Issued."
SUBSCRIPTION AND COMMUNITY OFFERINGS MARKETING AND RELATED FEES
The Savings Bank has engaged Trident to act as selling agent in
connection with the Offerings. Trident will consult with and advise the
Holding Company and the Savings Bank with respect to the Subscription and
Community Offerings and will solicit subscriptions and purchase orders for
shares of Common Stock in the Subscription and Community Offerings. The
Savings Bank and the Holding Company will pay Trident $53,500 for financial
advisory services and for acting as selling agent in connection with the
Subscription and Community Offerings and an amount not to exceed $35,000 for
Trident's out-of-pocket expenses, including legal fees. The fees paid to
Trident for financial advisory services and acting as selling agent may be
deemed underwriting fees.
BENEFITS OF THE CONVERSION TO MANAGEMENT AND RELATED PERSONS
GENERAL. The Board of Directors of the Holding Company expects to
approve three benefit plans pursuant to which officers, directors and
employees of the Holding Company and the Savings Bank may be entitled to
receive, following the Conversion, shares of Common Stock or options to
acquire shares of Common Stock, in
3
<PAGE>
addition to the shares which such officers, directors or employees may
purchase in the Subscription and Community Offerings. Those benefit plans
consist of the ESOP, the MRP and the Stock Option Plan (collectively, the
"Employee Benefit Plans"). If the MRP and Stock Option Plan are adopted, such
plans will be subject to stockholders' approval at a meeting of stockholders
of the Holding Company to be held no earlier than six months following
consummation of the Conversion.
ESOP. Under the terms of the Plan of Conversion, the ESOP will be
eligible to purchase, in the aggregate, approximately 10,120 shares, or 8% of
the aggregate number of shares of Common Stock issued and sold in connection
with the Conversion (assuming the sale of 126,500 shares at the maximum of
the Estimated Valuation Range). Such shares will be allocated among the
officers and employees of the Savings Bank in accordance with the terms and
conditions of the ESOP. See "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS
BANK -- Employee Benefit Plans -- ESOP."
MRP. Subject to and following the approval of the MRP at a
stockholder's meeting to be held no earlier than six months following
consummation of the Conversion, the MRP intends to purchase (with funds
provided by the Holding Company), either in the open market or from the
Holding Company in the form of newly issued shares, 5,060 shares, or a number
of shares equal to 4% of the aggregate number of shares of Common Stock
issued and sold in connection with the Conversion (assuming the sale of
126,500 shares at the maximum of the Estimated Valuation Range), for issuance
to officers, directors and employees of the Holding Company and the Savings
Bank in accordance with the terms and conditions of the MRP and applicable
laws and regulations. See "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK
- -- Employee Benefit Plans -- Management Recognition Plan."
STOCK OPTION PLAN. Subject to and following the approval of the
Stock Option Plan at a stockholder's meeting to be held no earlier than six
months following consummation of the Conversion, an additional 12,650 shares
of authorized but unissued shares of Common Stock, or a number of shares
equal to 10% of the aggregate number of shares of Common Stock issued and
sold in connection with the Conversion (assuming the sale of 126,500 shares
at the maximum of the Estimated Valuation Range), will be reserved for
issuance to officers, directors and employees of the Holding Company and the
Savings Bank in accordance with the terms and conditions of the Stock Option
Plan and applicable laws and regulations. See "MANAGEMENT OF THE HOLDING
COMPANY AND SAVINGS BANK -- Employee Benefit Plans Stock Option Plan."
EMPLOYMENT AGREEMENTS. Maralyn F. Heckman will be provided with
employment agreements with the Savings Bank and the Holding Company which
will provide her with employment rights and payments upon her termination of
service under certain circumstances. The terms of employment are for three
years and will be automatically renewed each day unless the Board of
Directors of the Savings Bank and/or the Holding Company give Ms. Heckman
notice of its intent not to renew the employment agreements. See "MANAGEMENT
OF THE HOLDING COMPANY AND SAVINGS BANK -- Employment Agreements."
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock are expected to
range from $680,150, at the minimum of the Estimated Valuation Range, to
$1,010,150, at the maximum of the Estimated Valuation Range, with $845,150 at
the midpoint of the Estimated Valuation Range. The Commissioner has granted
the Holding Company approval to retain 50% of the net proceeds received in
the Conversion, plus the amount necessary to finance the purchase of Common
Stock by the ESOP in the Conversion. The balance of the net proceeds will be
paid to the Savings Bank in exchange for all of its capital stock.
4
<PAGE>
The net proceeds of the Offering which are paid to the Savings Bank
will become part of the Savings Bank's general funds and will be used for
general corporate purposes, including the expansion of its deposit base and
loan originations and investment in securities of the kind in which the
Savings Bank currently invests. The Holding Company intends initially to
invest the net proceeds of the Offering which it retains in securities of the
kind in which the Savings Bank currently invests. The proceeds of the
Offering may be used for additional contributions to the Savings Bank in the
form of debt or equity, for future acquisitions and diversification
activities, for a tax-free return of capital, and for dividends on, or
repurchases of, Common Stock, when and as permitted by the Commissioner, the
Federal Reserve Board and the FDIC. Neither the Savings Bank nor the Holding
Company has any specific plans, arrangements, agreements or understandings
with respect to any acquisitions, diversification activities or repurchases
of Common Stock.
DIVIDENDS
Following the Conversion, the Holding Company currently expects to
pay semi-annual cash dividends on the Common Stock at an initial aggregate
annual rate of approximately $.20 per share (a semi-annual rate of $.10 per
share), or 2% annually based upon the initial offering price of $10.00, with
the first dividend being declared and paid following fiscal year end 1999 and
every six months thereafter. Payment of dividends will be subject to
determination and declaration by the Holding Company's Board of Directors. In
determining whether or not to declare or pay dividends and the amount of such
dividends, if any, the Board of Directors of the Holding Company will take
into account such factors as the Holding Company's financial condition, its
results of operations, tax considerations, capital requirements, industry
standards, and economic conditions. Following the Conversion, the Holding
Company initially will have no source of income other than earnings from the
investment of the amount of the net proceeds of the Conversion it retains,
payments of principal and interest on its loan to the ESOP, and dividends
from the Savings Bank. Certain regulatory restrictions generally applicable
to savings institutions may limit the Savings Bank's ability to pay dividends
to the Holding Company. See "SUPERVISION AND REGULATION -- The Savings Bank --
Dividends." There can be no assurance that dividends will in fact be paid on
the Common Stock or that such dividends, if paid, will not be reduced or
eliminated in future periods. See "DIVIDEND POLICY."
MARKET FOR COMMON STOCK
As a newly organized company, the Holding Company has never issued
capital stock, and consequently there is no established market for the Common
Stock. Following the completion of the Subscription and Community Offerings,
it is anticipated that the Common Stock (symbol: ___________) will be traded
on the over-the-counter market with quotations available through the OTC
Bulletin Board. Trident is expected to make a market in the Common Stock by
developing and maintaining historical stock trading records, soliciting
potential buyers and sellers and attempting to match buy and sell orders. In
connection with its market making activities, Trident may buy or sell shares
from time to time for its own account. However, Trident will not be subject
to any obligation with respect to such efforts. If the Common Stock cannot be
quoted and traded on the OTC Bulletin Board it is expected that the
transactions in the Common Stock will be reported in the pink sheets of the
National Quotation Bureau, Inc.
The development of an active trading market depends on the
existence of willing buyers and sellers. Due to the small size of the
Offerings, it is highly unlikely that an active trading market will develop
and be maintained. Purchasers of the Common Stock could have difficulty
disposing of their shares and should not view the shares as a short-term
investment. Purchasers may not be able to sell their shares at a price equal
to or above the price paid for the shares. See "RISK FACTORS -- Potential
Illiquidity of Market for Common Stock" and "MARKET FOR COMMON STOCK."
5
<PAGE>
RISK FACTORS
See "RISK FACTORS" for a discussion of certain risks related to this
offering.
SELECTED FINANCIAL INFORMATION OF THE SAVINGS BANK
The following table sets forth certain selected financial data for the
Savings Bank. This summary has been derived from, and should be read in
conjunction with, the financial statements of the Savings Bank and the
related notes thereto and management's discussion and analysis of financial
condition and results of operations included elsewhere in this Prospectus.
6
<PAGE>
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------------------------------------------
1998 1997
---- ----
<S> <C> <C>
FINANCIAL DATA:
Total assets ...................................... $6,934,981 $6,288,646
Cash and due from banks ........................... 524,845 109,912
Interest-bearing time deposits .................... 590,000 1,279,000
Investment securities available for sale .......... 175,329 100,716
Loans, net ........................................ 5,526,189 4,705,287
Federal Home Loan Bank stock ...................... 46,200 43,000
Deposits .......................................... 5,250,307 5,308,464
Long-term debt .................................... 600,000
Total equity capital .............................. 986,014 894,897
FOR THE FISCAL YEAR ENDED
MARCH 31,
-------------------------------------------------------
1998 1997(1)
---- -------
<S> <C> <C>
OPERATING DATA:
Total interest income ............................. $541,984 $459,968
Total interest expense ............................ 309,763 270,470
-------- --------
Net interest income ............................... 232,221 189,498
Provision for loan losses ......................... 26,500 --
-------- --------
Net interest income after provision for loan ...... 205,721 189,498
losses ............................................ 6,708 6,510
Non-interest income ............................... 159,855 176,671
-------- --------
Non-interest expense .............................. 52,574 19,337
Income before income tax .......................... 10,702 1,378
-------- --------
Income tax expense ................................ $ 41,872 $ 17,959
-------- --------
-------- --------
Net income
OTHER DATA:
Number of:
Real estate loans outstanding..................
Deposit accounts...............................
KEY OPERATING RATIOS:
The table below sets forth certain performance
ratios of the Savings Bank
FOR THE PERIOD ENDED MARCH 31,
-------------------------------------------------------
1998 1997(1)
---- -------
<S> <C> <C>
Return on assets (net income divided by
average total assets)............................. 0.63% 0.31%
Return on average equity (net income divided by
average equity)................................... 4.60 2.27
Average equity to average assets................... 13.62 13.47
Interest rate spread (difference between
average yield on interest earning assets and
average cost of interest bearing liabilities)..... 2.67 1.81
Net interest margin (net interest income as a
percentage of average interest earning assets)... 3.47 2.97
Non-interest expense to average assets
Average interest-earning assets to interest
bearing liabilities............................... 2.38 2.76
Allowance for loan losses
to total loans at end of period................... 117.29 116.96
Net charge offs to average outstanding
loans during the period........................... 0.58 0.13
Ratio of nonperforming assets N/A N/A
to total assets(2)................................ 0.16 0.68
</TABLE>
(1) During fiscal 1997, the Savings Bank changed its fiscal year end from
April 30 to March 31. Accordingly, information related to income and expense
during the period ending March 31, 1997 is for the eleven-month period then
ended. Operating ratios have been annualized where appropriate.
(2) Nonperforming assets include non-accrual loans, accruing loans
delinquent 90 days or more and real estate owned.
7
<PAGE>
RISK FACTORS
BEFORE INVESTING IN SHARES OF COMMON STOCK OFFERED HEREBY, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS PRESENTED BELOW, IN
ADDITION TO OTHER CONSIDERATIONS DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
DECREASES IN RETURN ON EQUITY
As a result of the Conversion, stockholder's equity will be
substantially increased. Accordingly, the increase in equity is expected to
result in a reduction of the Savings Bank's return on average equity (net
income divided by average equity) compared with historical levels, absent a
corresponding increase in net income, and it is not expected that the Savings
Bank will be able to increase net income in future periods commensurate with
the increase in equity. Over the two-year period ended March 31, 1998, the
Savings Bank's return on average equity was approximately 3.44%. Assuming
110,000 shares are sold at the midpoint of the valuation range, using the
assumptions under "PRO FORMA DATA", the pro forma return on equity at March
31, 1998 would have been approximately 3.21%.
DEPENDENCE ON KEY PERSONNEL
The Savings Bank depends to a considerable degree on a limited number of
key management personnel, in particular, the Savings Bank's secretary,
treasurer and C.E.O., Maralyn F. Heckman. The loss of such personnel could
adversely affect the Savings Bank's operations. The Savings Bank and the
Holding Company intend to enter into employment agreements with Mrs. Heckman.
Neither the Savings Bank nor the Holding Company has obtained, or expects to
obtain, "key man" life insurance policies for any executive officers of the
Savings Bank or the Holding Company. Management believes that the Savings
Bank's future success will also depend in large part upon its ability to
attract and retain qualified personnel. There can be no assurance that the
Savings Bank will be successful in attracting and retaining such personnel.
See "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK."
POTENTIAL IMPACT OF CHANGES IN REAL ESTATE VALUES
At March 31, 1998, approximately 98.6% of the Savings Bank's net loan
portfolio consisted of loans secured by real estate. At such date, all of the
loans secured by real estate were secured by real estate properties located
in Central Illinois. In recent periods, several regions of the United States
have experienced declines in the market value of real estate, and there can
be no assurance as to the future performance of the Illinois real estate
markets, including those in which the Savings Bank operates. A decline in the
Illinois real estate market could have a material adverse effect on the
Savings Bank's operations. Depressed real estate values may result in an
increase in nonperforming assets, hamper disposition of such nonperforming
assets and result in losses upon such disposition.
COMPETITION
The Savings Bank's market area is a highly competitive market, and the
Savings Bank faces significant competition both in attracting deposits and in
originating loans. The Savings Bank faces direct competition from a number of
financial institutions, many of which are significantly larger than the
Savings Bank and, therefore, have greater financial and marketing resources
than the Savings Bank.
APPRAISALS
Real Estate securing a loan of greater than $250,000 is appraised by an
outside appraiser approved by the Savings Bank's Board of Directors. Real
Estate securing a loan of less than $250,000 is appraised by the Savings
Bank's internal appraisal committee. In either event, comparable sales group
data is often limited or unavailable.
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<PAGE>
RISKS ASSOCIATED WITH THE SAVINGS BANKS PRIMARY MARKET AREA
The Savings Bank's market area is primarily contained within a ten mile
radius of Cerro Gordo, Illinois. This area contains portion of Macon,
Moultrie and Piatt counties. Its economy is diversified among agriculture,
manufacturing and services. Although the economy is diversified and generally
stable, population and household growth, and median and per capa income
levels for the Savings Bank's primary market area are generally lower than
comparable levels for Illinois and the nation, while unemployment levels are
generally higher. Management regards the Savings Bank's primary market area
as a low growth area in which there is significant competition among
financial service providers for market share. See "BUSINESS OF THE SAVINGS
BANK Competition." Management believes that opportunities for future earnings
growth in the Savings Bank's primary market area are limited in light of
these factors.
ESOP AND MRP EXPENSE
In November 1993, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 93-6 entitled "Employers'
Accounting for Employee Stock Ownership Plans" ("SOP 93-6"). SOP 93-6, among
other things, changes the measure of compensation expense recorded by
employers for leveraged ESOPs from the cost of ESOP shares to the fair value
of ESOP shares. Under SOP 93-6, the Savings Bank will recognize compensation
cost equal to the fair value of the ESOP shares during the periods in which
they become committed to be released. To the extent that the fair value of
the Common Stock appreciates, the Savings Bank will recognize increased
compensation expense as the ESOP shares are committed for release. In
addition, it is anticipated that the MRP will purchase shares of Common Stock
equal to 4.0% of the shares issued in the Conversion. Both the ESOP and the
MRP will increase employee compensation expense in the future. See "PRO FORMA
DATA".
POTENTIAL ILLIQUIDITY OF MARKET FOR COMMON STOCK
As a newly organized company, the Holding Company has never issued
capital stock, and consequently there is no established market for the Common
Stock. Following the completion of the Subscription and Community Offerings,
it is anticipated that the Common Stock (symbol: ___________) will be traded
on the over-the-counter market with quotations available through the OTC
Bulletin Board. Trident is expected to make a market in the common stock by
developing and maintaining historical stock trading records, soliciting
potential buyers and sellers and attempting to match buy and sell orders. In
connection with its market making activities, Trident may buy or sell shares
from time to time for its own account. However, Trident will not be subject
to any obligation with respect to such efforts. If the Common Stock cannot be
quoted and traded on the OTC Bulletin Board it is expected that the
transactions in the Common Stock will be reported in the pink sheets of the
National Quotation Bureau, Inc.
The development of an active trading market depends on the existence of
willing buyers and sellers. Due to the small size of the offering, it is
highly unlikely that an active trading market will develop and be maintained.
Purchasers of the Common Stock could have difficulty disposing of their
shares and should not view the shares as a short-term investment. Purchasers
may not be able to sell their shares at a price equal to or above the price
they paid for the shares. See "MARKET FOR COMMON STOCK."
POTENTIAL EFFECTS OF CHANGES IN INTEREST RATES
The operations of the Savings Bank are substantially dependent on its
net interest income, which is the difference between the interest income
earned on its interest-earning assets and the interest expense paid on its
interest-bearing liabilities. Like most savings institutions, the Savings
Bank's earnings are affected by changes in market interest rates and other
economic factors beyond its control. 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
9
<PAGE>
positively affected by comparable declines in interest rates. The Savings
Bank has sought to reduce the vulnerability of its operations to changes in
interest rates by managing the nature and composition of its interest rate
sensitive assets and liabilities. However, at March 31, 1998, the Savings
Bank's Net Portfolio Value ("NPV"), which represents the present value of
expected cash flows from assets, liabilities and off-balance sheet contracts
(if any), decreased by 5% to 33% assuming interest rates increased by 100 to
400 basis points and decreased by 16% to 28% assuming interest rates
decreased by 100 to 400 basis points.
The Savings Bank's deposits have included a relatively high amount of
certificates of deposit ("Certificates"), which are generally higher costing
and more interest-rate sensitive than "core" deposits. At March 31, 1998,
$4.8 million of the Savings Bank's total deposits were comprised of
Certificates of which $2.2 million, or 45.8%, were scheduled to mature within
one year. Certificates generally are costlier and a more volatile source of
funds than savings accounts. In addition, certificates are more likely to be
invested in other instruments than are savings accounts. Notwithstanding the
foregoing, management believes that most of its certificates will remain at
the Savings Bank upon maturity. The Savings Bank does not accept brokered
deposits. See "BUSINESS OF THE SAVINGS BANK."
In addition to affecting interest income and expense, changes in
interest rates also can affect the value of the Savings Bank's
interest-earning assets, which are comprised of fixed 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. As of March 31, 1998, $5.6 million or 80.1% of the Savings Bank's
interest-earning assets were fixed-rate loans. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset and
Liability Management."
EFFECT OF ANTI-TAKEOVER PROVISIONS IN DISCOURAGING TAKEOVER OFFERS AND
CHANGES IN MANAGEMENT
The Holding Company's certificate of incorporation and bylaws provide,
among other things, that (1) for a period of five years following the
Conversion, no person may acquire the beneficial ownership of more than 10%
of any class of equity security of the Holding Company, and no person who
acquires the beneficial ownership of more than 10% of any class of equity
security of the Holding Company may vote any shares owned in excess of 10%
unless, in each case, the acquisition has been approved by a majority of the
disinterested directors on the Board of Directors of the Holding Company; (2)
the Holding Company's Board of Directors will be divided into three classes
with one class to be elected each year; (3) special meetings of the Holding
Company's stockholders may be called only by the chairman of the Board of
Directors, the president or a majority of the Holding Company's Board of
Directors; (4) the Board of Directors may issue additional shares of
authorized Common Stock and fix the terms and designations of and issue
shares of authorized preferred stock without any further action by the
stockholders; (5) approval of the holders of 80% of the outstanding shares of
voting stock must be obtained for consummation of certain Business
Transactions (as defined in the certificate of incorporation) not approved in
advance by the Board of Directors; (6) stockholders who propose to nominate a
candidate for election to the Board of Directors of the Holding Company or to
present new business at a stockholders' meeting must give advance notice of,
and furnish information relating to, the proposed nominee and business to the
Holding Company; and (7) a vote of 80% of the total votes eligible to be
cast, voting together as a single class, is required to amend, repeal or
adopt any provisions inconsistent with certain provisions of the certificate
of incorporation and the bylaws, including most of the provisions enumerated
above. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY -- Restrictions
in Certificate of Incorporation and Bylaws."
Such provisions are intended to encourage a potential acquiror of the
Holding Company to negotiate with the Board of Directors, which is in the
best position to act on behalf of all of the stockholders, before seeking to
obtain control of the Holding Company. Such provisions may, however, have the
effect of discouraging takeover offers that certain stockholders might deem
to be in their best interests, including takeover proposals in which
stockholders might receive a premium for their shares over the then-current
market price. Such provisions will also make it more difficult for individual
stockholders or a group of stockholders to replace existing management,
10
<PAGE>
whether or not such stockholders believe that a change in management is in
the best interests of the Holding Company.
EFFECT OF VOTING CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS ON CORPORATE
GOVERNANCE
Directors and executive officers of the Savings Bank and the Holding
Company expect to purchase approximately 22,175 shares of Common Stock, or
18% of the number of shares outstanding if 126,500 shares are sold at the
maximum of the Estimated Valuation Range. Directors and executive officers
are also expected to control 27,830 shares of Common Stock through the
Employee Benefit Plans, as more fully described below. For additional
information regarding the vesting schedules, shareholder approval
requirements, proposed allocations of stock awards and other terms of the
Employee Benefit Plans, see "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS
BANK -- Employee Benefit Plans."
Following approval of the MRP at a stockholders' meeting to be held no
earlier than six months following consummation of the Conversion ("MRP
Stockholder Approval"), directors and executive officers are expected to
control the voting of 5,060 shares, or 4% of the shares of Common Stock sold
in the Conversion, as a result of stock awards expected to be granted under
the MRP (including both allocated and unallocated shares). Directors and
executive officers are also expected to be granted stock options to purchase
12,650 shares of Common Stock, following Stock Option Plan Approval. If these
options are exercised, directors and executive officers would have voting
control over an amount of shares equal to 10% of the Holding Company's
outstanding shares of Common Stock.
Upon completion of the initial allocation of shares of Common Stock
under the ESOP, executive officers of the Savings Bank will have been
allocated 36% of the allocated shares. Under the terms of the ESOP, each
participant is entitled to vote the shares allocated to his account, and
unallocated shares will be voted by the ESOP trustee in accordance with the
instructions of the compensation committee of the Savings Bank's Board of
Directors, or, in the absence of such direction, in the same proportion as
the allocated shares. The ESOP will purchase 10,120 shares of Common Stock in
the Offering. Accordingly, the Board of Directors of the Savings Bank,
through instructions to the ESOP trustee, will initially have effective
voting control over 10,120 shares of Common Stock, or 8% of the Holding
Company's outstanding Common Stock.
As a result of the proposed purchases of the Common Stock by the Board
of Directors of the Holding Company, and officers of the Savings Bank, and
purchases under the ESOP and MRP, as well as the potential acquisition of the
Common Stock under the Stock Option Plan, directors and executive officers of
the Savings Bank and the Holding Company could acquire the power to vote
50,005 shares, or 40% of total outstanding shares (including shares owned by
the ESOP and MRP). Such voting control could render it difficult to obtain
majority support for a stockholder proposal opposed by the Board of Directors
of the Holding Company and management. Moreover, such voting control could
enable the Board of Directors of the Holding Company and management to block
the approval of transactions requiring the approval of 80% of the
stockholders under the Holding Company's certificate of incorporation. See
"MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK -- Employee Benefit Plans"
and "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
POSSIBLE DILUTIVE EFFECT OF GRANTS UNDER THE MRP AND STOCK OPTION PLAN
Subject to MRP Stockholder Approval, the MRP may purchase shares of
Common Stock totalling up to 4% of the Common Stock issued and sold in the
Conversion. Such shares may be purchased by the MRP in the open market, or if
sufficient shares are not available in the open market, the MRP may purchase
authorized but previously unissued shares from the Holding Company at the
then current market price for the Common Stock. Such shares will be issued at
no cost to the participants in the MRP. If the MRP is funded entirely through
purchases of authorized but previously unissued shares from the Holding
Company, the percentage interest of stockholders of the Holding Company at
the time of the Conversion will be diluted, at the time of such purchase, by
approximately 4%.
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<PAGE>
Subject to approval of the Stock Option Plan at a stockholders' meeting
to be held no earlier than six months following consummation of the
Conversion ("Stock Option Plan Stockholder Approval"), the Holding Company
intends to reserve for issuance under the Stock Option Plan authorized but
previously unissued shares of Common Stock in an amount equal to 10% of the
number of shares of Common Stock issued in the Conversion. Options to
purchase such shares will be granted to the directors, officers and employees
of the Holding Company at an exercise price equal to the fair market value
per shares of the Common Stock on the date of grant. In the event that all of
the options reserved under the Stock Option Plan are granted and exercised,
the percentage interests of stockholders of the Holding Company will be
further diluted, as of the time of such exercise, by approximately 9%.
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES
The Savings Bank has received an opinion of Geo. S. Olive & Co. LLC
which states that, for federal and state income tax purposes, consummation of
the Conversion will not be taxable to the Savings Bank, the Holding Company
or depositors of the Savings Bank. However, the opinion also states that if
the Subscription Rights granted to Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are deemed to have an
ascertainable fair market value, income or gain may be recognized by the
recipients of the Subscription Rights (in certain cases, whether or not the
rights are exercised) in an amount equal to such value. Additionally, the
Savings Bank could recognize a gain for tax purposes on such distribution.
Whether Subscription Rights are considered to have ascertainable fair market
value is an inherently factual determination. The Savings Bank has received
an opinion from JMP that Subscription Rights granted to Eligible Account
Holders, Supplemental Eligible Account Holders and the Members have no
ascertainable fair market value. This statement is based upon the observation
that such Subscription Rights are available without cost, will be legally
non-transferrable and of short duration, and will provide only the right to
purchase shares of Common Stock at the same price payable by the general
public if such shares are offered to the general public. This opinion is not
binding on the Internal Revenue Service ("IRS"). No assurance can be given
that the IRS will not take a contrary position. See "FEDERAL AND STATE
TAXATION" and "THE CONVERSION Effects of Conversion -- Tax Effects."
RISK OF DELAYED OFFERING
The Holding Company and the Savings Bank expect to complete the
Conversion on schedule and within the time periods indicated in this
Prospectus. Nevertheless, it is possible, although not anticipated, that
various factors could significantly delay completion of the Conversion. For
example, changes in market, economic or other conditions could result in a
change in the Conversion valuation which could delay completion of the
Conversion and necessitate the receipt of approvals from the Commissioner and
the FDIC for an extension of the Subscription and Community Offerings.
Subscriptions for shares of Common Stock are irrevocable, except that if the
Commissioner and the FDIC approve an extension of the Subscription and
Community Offerings beyond ___________, 1998, subscribers will be given the
opportunity to modify or rescind their subscriptions and to have their
subscription funds returned promptly with interest at the Savings Bank's then
current passbook rate and/or to have their withdrawal authorizations
terminated. No such extension will be permitted without the approval of the
Commissioner and the FDIC.
12
<PAGE>
CGB&L FINANCIAL GROUP, INC.
The Holding Company was organized as a Delaware corporation on May 21,
1998 at the direction of the Board of Directors of the Savings Bank to
acquire all of the capital stock to be issued by the Savings Bank in the
Conversion. The Holding Company has not engaged in any business to date and
is not expected to engage in any business until the consummation of the
Conversion. The Holding Company's offices are located at 229 E. South Street,
Cerro Gordo, Illinois 61818, and its telephone number is (217) 763-2911.
The Holding Company will have no material assets or liabilities prior to
the consummation of the Conversion. Immediately following the consummation of
the Conversion, the Holding Company will have, as its only material assets,
the stock of the converted Savings Bank acquired in the Conversion and that
portion of the net proceeds of the Conversion that the Commissioner permits
it to retain. The Holding Company has received the Commissioner's approval to
retain 50% of the net proceeds received in the Conversion (ranging between
approximately $340,075, if a minimum of 93,500 shares are sold in the
Conversion, and approximately $505,075, if a maximum of 126,500 shares are
sold in the Conversion), plus the amount necessary to finance the purchase of
Common Stock by the ESOP in the Conversion. The balance of the net proceeds
will be paid to the Savings Bank in exchange for all of its capital stock.
The Holding Company intends to lend to the ESOP an amount sufficient to
finance the purchase of up to 8% of the Common Stock issued in the Conversion
and, at least initially, to invest the remainder of the proceeds in
securities of the kind in which the Savings Bank currently invests. The
Holding Company may also use its capital to repurchase its stock or pay
dividends, if and as permitted under the regulations of the Federal Reserve
Board, the Commissioner and the FDIC. See "DIVIDEND POLICY" and "THE
CONVERSION -- Restrictions on Repurchases of Common Stock." Immediately
following the Conversion, the Holding Company will have no material
liabilities.
Following the Conversion, the Holding Company will be engaged in the
business of directing, planning and coordinating the business activities of
the Savings Bank. In the future, the Holding Company may acquire or organize
other operating subsidiaries, although there are no current plans,
arrangements, agreements or understandings to do so.
The Federal Reserve Board has approved the Holding Company's application
to become a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "BHCA"), and to acquire the Savings Bank. It has also
received approval from the Commissioner of its application to become a
savings bank holding company and to acquire the Savings Bank. Upon completion
of the Conversion, the Holding Company will be subject to regulation by both
the Federal Reserve Board and the Commissioner. See "SUPERVISION AND
REGULATION -- The Holding Company." Under certain circumstances, the Board of
Directors of the Savings Bank may decide not to use the holding company form
of organization in the Conversion. See "THE CONVERSION -- General."
13
<PAGE>
CERRO GORDO BUILDING AND LOAN, s.b.
The Savings Bank is an Illinois-chartered mutual savings bank regulated
by the Commissioner, and its deposits are insured by the FDIC through the
SAIF. The deposits of the Savings Bank will continue to be insured by the
FDIC after the Conversion. The Savings Bank was originally chartered in 1886
as a state-chartered savings and loan association and converted to a
state-chartered savings bank on December 31, 1992 under its current name of
Cerro Gordo Building and Loan, s.b. At March 31, 1998, the Savings Bank had
total assets of $6.9 million, total deposits of $5.3 million, retained
earnings of $873 thousand and total equity capital of $986 thousand. The
Savings Bank conducts it business through its office located at 229 E. South
Street, Cerro Gordo, Illinois 61818, and its telephone number is (217)
763-2911.
The Savings Bank is located in the Village of Cerro Gordo, in the county
of Piatt, Illinois, in the central part of the state. The Savings Bank's
deposit and lending base is presently concentrated within a ten-mile radius
of Cerro Gordo, Illinois. This area includes portions of the Illinois
counties of Macon, Moultrie and Piatt. Cerro Gordo has a population of
approximately 1,500. The primary employers located in and around Cerro Gordo
include the Cerro Gordo School District, Caterpillar, Inc., Archer Daniels
Midland and Bridgestone/Firestone, Inc. Management believes that Cerro
Gordo's economy has been stable in recent years.
The Savings Bank provides its customers with a range of community
banking services. The Savings Bank is primarily engaged in the business of
attracting deposits from the general public and using such deposits to invest
in one- to four-family residential mortgage loans and, to a lesser extent,
consumer (share), multi-family residential, and commercial real estate loans.
The Board of Directors has been evaluating the Savings Bank's historical
operations with a view to improving the Savings Bank's future earnings
prospects and growth opportunities. The Conversion is an integral step in
achieving these objectives.
HISTORICAL OPERATIONS. The Savings Bank's assets totalled $6.9 million
at March 31, 1998. The percentage of the Savings Bank's assets invested in
loans has increased for the past five years. The loan portfolio has increased
by $1.6 million, or 40%, from $4.0 million at April 30, 1993 to $5.6 million
at March 31, 1998. At March 31, 1998, the Savings Bank had cash and cash
equivalents of $525 thousand, which accounted for 7.6% of the Savings Bank's
total assets. For the periods ended March 31, 1998 and 1997, the Savings Bank
had interest income from deposits with financial institutions of $70,915 and
$82,277, respectively, representing 13.1% and 17.7%, of total interest
income, respectively.
The Savings Bank's historical lending strategy has focused on the
origination of residential mortgage loans secured by one- to four-family
homes, and, to a lesser extent, on the origination of consumer (share),
multi-family residential and commercial real estate loans. See "BUSINESS OF
THE SAVINGS BANK -- Lending Activities."
The Savings Bank offers traditional products, including passbook and
certificates of deposit. The Savings Bank's deposits have decreased $58
thousand, or 1.1%, between March 31, 1997 and March 31, 1998. At March 31,
1998, the Savings Bank had certificates of deposits totalling $4.8 million,
representing 90.6% of the Savings Bank's total deposits, with maturities
ranging up to five years.
At March 31, 1998, the Savings Bank had $873 thousand of retained
earnings, or 12.6% of total assets and total equity capital of $986 thousand,
and exceeded all of its minimum regulatory capital requirements. At March 31,
1998, the Savings Bank's Tier 1 capital and total risk-based capital to
applicable assets were 12.6% and 28.6%, respectively. See "SUPERVISION AND
REGULATION -- The Savings Bank -- Capital Requirements." Management attributes
its strong capital position to its focus on loans secured by residential
properties and a conservative lending philosophy on other loans. As a result
of the Conversion and assuming the Holding Company retains 50% of the net
proceeds of the Conversion at the midpoint of the Estimated Valuation Range
plus an amount sufficient to fund the ESOP, the Savings Bank will have pro
forma stockholders' equity of approximately $1.3 million, or 17.6% of total
pro forma assets.
14
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock are expected to range
from $680,150, at the minimum of the Estimated Valuation Range, to
$1,010,150, at the maximum of the Estimated Valuation Range. At the midpoint
of the Estimated Valuation Range, the estimated net proceeds of the
Conversion would be $845,150.
The Commissioner has granted the Holding Company approval to retain 50%
of the net Conversion proceeds, plus the amount necessary to fund the ESOP.
The balance of the net proceeds will be paid to the Savings Bank in exchange
for all of its capital stock. Assuming that the Conversion is consummated at
the midpoint of the Estimated Valuation Range, (i) the Savings Bank will
receive approximately $334,575 or 40% of the net proceeds of the Offering in
exchange for all of its issued and outstanding capital stock, and (ii) the
Holding Company will retain approximately $510,575 or 60% of the net
proceeds, out of which the Holding Company will make a loan to the Savings
Bank's ESOP in the amount of $88,000. The ESOP will repay such loan from the
Holding Company with contributions made to the ESOP by the Savings Bank and
any dividends on the Common Stock held by the ESOP. The loan will require
annual interest and principal payments over a ten-year period and will bear
interest at a rate of 8%.
The Holding Company intends to invest the net proceeds of the Offering
which it retains in securities of the kind in which the Savings Bank invests.
The proceeds of the Offering may be used for additional contributions to the
Savings Bank in the form of debt or equity, for possible future acquisitions
and diversification activities, for a tax-free return of capital, and for
future dividends on, and repurchases of, Common Stock, as and if permitted by
the Federal Reserve Board, the Commissioner and the FDIC. See "DIVIDEND
POLICY" and "THE CONVERSION -- Restrictions on Repurchases of Common Stock;"
see also "RISK FACTORS -- Competition." The Holding Company has no specific
plans, arrangements, agreements or understandings with respect to any
acquisitions, diversification activities, return of capital or repurchases of
Common Stock.
The net proceeds of the Offering which are paid to the Savings Bank will
become part of the Savings Bank's general funds and will be used for general
corporate purposes, including the expansion of its deposit base and loan
originations and investment in securities of the kind in which the Savings
Bank currently invests.
15
<PAGE>
DIVIDEND POLICY
Following the Conversion, the Holding Company currently expects to pay
semi-annual cash dividends on the Common Stock at an initial aggregate annual
rate of approximately $.20 per share (a semi-annual rate of $.10 per share),
or 2% annually based upon the initial offering price of $10.00, with the
first dividend being declared and paid following fiscal year end 1999 and
every six months thereafter. Payment of dividends will be subject to
determination and declaration by the Holding Company's Board of Directors. In
determining whether or not to declare or pay dividends and the amount of such
dividends, if any, the Board of Directors of the Holding Company will take
into account such factors as the Holding Company's financial condition,
results of operations, tax considerations, capital requirements, industry
standards, economic conditions and regulatory restrictions affecting the
payment of dividends by the Savings Bank to the Holding Company, as discussed
below. There can be no assurance that dividends will in fact be paid on the
Common Stock or that such dividends, if paid, will not be reduced or
eliminated in future periods.
Following the Conversion, the Holding Company initially will have no
source of income other than earnings from the investment of the net proceeds
of the Conversion it retains, receipt of principal and interest payments on
the loan to the ESOP, and dividends from the Savings Bank. Under the Illinois
Savings Bank Act (the "ISBA") and applicable regulations of the Commissioner,
the Savings Bank will generally be permitted to pay dividends to the Holding
Company in an amount equal to its net profits in any fiscal year, or in the
event the Savings Bank's total capital is less than 6% of total assets, 50%
of net profits, without the prior approval of the Commissioner, provided that
the Savings Bank is in compliance with its regulatory capital requirements,
both before and after the payment of such dividend, and the payment of such
dividend would not reduce the regulatory capital of the Savings Bank below
the amount required by the FDIC or the Commissioner or the amount of the
liquidation account required to be maintained by the Savings Bank following
the Conversion. See "SUPERVISION AND REGULATION -- The Savings Bank --
Dividends;" and "THE CONVERSION -- Effects of Conversion -- Liquidation
Rights." The Savings Bank had net profits of $41,872 in the fiscal year ended
March 31, 1998. Under the applicable regulations, the Savings Bank could have
paid dividends totaling $41,872 in 1998 without the written approval of the
Commissioner.
In addition to the foregoing, earnings of the Savings Bank appropriated
to bad debt reserves and deducted for federal income tax purposes cannot be
used by the Savings Bank to pay cash dividends to the Holding Company without
the payment of federal income taxes by the Savings Bank at the then current
income tax rate on the amount deemed distributed. See "FEDERAL AND STATE
TAXATION -- Federal Taxation -- Distributions." The Holding Company does not
contemplate any distribution by the Savings Bank that would result in a
recapture of the Savings Bank's bad debt reserve or create such federal tax
liabilities.
16
<PAGE>
MARKET FOR COMMON STOCK
As a newly organized company, the Holding Company has never issued
capital stock, and consequently there is no established market for the Common
Stock. Following the completion of the Subscription and Community Offerings,
it is anticipated that the Common Stock (symbol: ___________) will be traded
on the over-the-counter market with quotations available through the OTC
Bulletin Board. Trident is expected to make a market in the Common Stock by
developing and maintaining historical stock trading records, soliciting
potential buyers and sellers and attempting to match buy and sell orders. In
connection with its market making activities, Trident may buy or sell shares
from time to time for its own account. However, Trident will not be subject
to any obligation with respect to such efforts. If the Common Stock cannot be
quoted and traded on the OTC Bulletin Board it is expected that the
transactions in the Common Stock will be reported in the pink sheets of the
National Quotation Bureau, Inc.
The development of an active trading market depends on the existence of
willing buyers and sellers. Due to the small size of the Offerings, it is
highly unlikely that an active trading market will develop and be maintained.
Purchasers of the Common Stock could have difficulty disposing of their
shares and should not view the shares as a short-term investment. Purchasers
may not be able to sell their shares at a price equal to or above the price
paid for the shares. See "RISK FACTORS -- Potential Illiquidity of Market for
Common Stock."
Liquidity for shares of stock is measured by the number of willing
buyers and sellers for the stock, the frequency of trades in the stock and
the volume of shares traded when trades do occur. The smaller the number of
holders of the stock, the less likely a liquid market will develop. The
Holding Company is offering from 93,500 to 126,500 shares of Common Stock in
the Offerings at $10.00 per share, with a resulting anticipated market
capitalization ranging from $935,000 to $1,265,000. A substantial amount of
such stock is expected to be held by the directors, executive officers and
Employee Benefit Plans. See "THE OFFERING -- Subscriptions by Directors and
Executive Officers." The Holding Company is unable to predict, at this time,
how widely the remaining shares will be held.
17
<PAGE>
CAPITALIZATION
The following table represents the capitalization, including deposits,
of the Savings Bank as of March 31, 1998, adjustments as a result of the
Conversion, and the pro forma consolidated capitalization of the Holding
Company at that date, after giving effect to the Plan of Conversion.
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION
OF THE HOLDING COMPANY
BASED UPON THE SALE OF SHARES AT $10.00 PER SHARE
---------------------------------------------------------------------------------------------
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
THE SAVINGS ------- -------- ------- ----------
BANK, HISTORICAL 93,500 110,000 126,500 145,475
AT MARCH 31, 1998 SHARES SHARES SHARES SHARES(1)
----------------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Deposits(2)................... $5,250 $5,250 $5,250 $5,250 $5,250
Long term debt................ 600 600 600 600 600
Total deposits and borrowings $5,850 $5,850 $5,850 $5,850 $5,850
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Stockholders' equity:
Preferred Stock:
100,000 shares, $.01 par
value per share,
authorized; $ - $ - $ - $ - $ -
none issued or outstanding.
Common Stock:
900,000 shares, $.01 par
value per share,
authorized;
specified number of shares
assumed to be issued and - 9 11 13 15
outstanding.................
Additional paid-in capital.... - 670 834 997 1,184
Common Stock acquired by
ESOP(3)....................... (75) (88) (101) (116)
Common Stock acquired by
MRP(4)........................ (37) (44) (51) (58)
Retained earnings(5).......... 873 873 873 873 873
Net unrealized gain on
securities available for sale 113 113 113 113 113
--- --- --- --- ---
Total stockholders' equity.... $ 986 $1,554 $1,699 $1,844 $2,011
---- ------ ------ ------ ------
---- ------ ------ ------ ------
</TABLE>
- --------------------------
(1) Gives effect to the sale of an additional 18,975 shares in the Conversion,
which may be issued to cover additional subscriptions, based on a determination
by JMP that such issuance is compatible with its determination of an increase in
the appraised pro forma market value of the Common Stock. See "THE CONVERSION --
Stock Pricing and Number of Shares to be Issued."
(2) Withdrawals from deposit accounts for the purchase of Common Stock are not
reflected. Such withdrawals will reduce pro forma deposits by the amounts
thereof.
(3) Assumes that the ESOP will purchase 8% of the Common Stock sold in the
Conversion with funds to be borrowed from the Holding Company. The amount
borrowed by the ESOP is reflected as a reduction to stockholders' equity. Since
the Holding Company will finance the
18
<PAGE>
ESOP debt, the ESOP debt will be eliminated through consolidation, and no
liability will be reflected on the Holding Company's Consolidated Financial
Statements. The amount of Common Stock to be purchased by the ESOP represents
unearned compensation and is, accordingly, reflected as a reduction to pro
forma stockholders' equity. The Savings Bank expects to make discretionary
contributions to the ESOP in an amount at lest equal to the principal and
interest payments on the ESOP debt. As such payments are made, a
corresponding reduction in the charge against stockholders' equity will
occur. See "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK -- Employee
Benefit Plans -- Employee Stock Ownership Plan." For a discussion of recent
accounting developments involving ESOPs, see "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Impact of New
Accounting Pronouncements."
(4) Assumes that an amount of stock equal to 4% of the Common Stock sold in
the Conversion will be purchased by the Holding Company's MRP with funds
contributed to the MRP by the Holding Company no sooner than six months after
completion of the Conversion. In accordance with GAAP, the amount of Common
Stock to be purchased by the MRP will represent unearned compensation and
will, accordingly, be reflected as a reduction to stockholders' equity in
future periods. As shares of Common Stock granted to officers and directors
of the Savings Bank vest, a corresponding reduction in the charge against
stockholders' equity will occur.
(5) Retained earnings of the Savings Bank are restricted by the minimum
capital requirements of the Commissioner and the FDIC and will be restricted
by the liquidation account to be established upon Conversion. See
"SUPERVISION AND REGULATION;" "THE CONVERSION -- Effects of Conversion --
Liquidation Rights" and Notes to Financial Statements included elsewhere
herein. Retained earnings do not reflect the impact of the recapture of the
bad debt reserve in the unlikely event of liquidation.
19
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The following table presents the Savings Bank's historical and pro forma
capital position relative to its capital requirements at March 31, 1998. The
amount of capital infused into the Savings Bank for purposes of the following
table is 50% of the net Conversion proceeds. For purposes of the following
table, the amount expected to be borrowed by the ESOP and the cost of the
shares expected to be acquired by the MRP are deducted from pro forma
regulatory capital, also see "USE OF PROCEEDS," "CAPITALIZATION" and "PRO
FORMA DATA." The definitions of the terms used in the table are those
provided in the capital regulations issued by the FDIC. For a discussion of
the capital standards applicable to the Savings Bank, see "SUPERVISION AND
REGULATION -- The Savings Bank -- Capital Requirements."
20
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31,1998
---------------------------------------------------------------
MINIMUM OF ESTIMATED MIDPOINT OF ESTIMATED
VALUATION RANGE VALUATION RANGE
-------------------- ---------------------
HISTORICAL 93,500 SHARES 110,000 SHARES
AT MARCH 31, AT $10.00 PER SHARE AT $10.00 PER SHARE
------------------ --------------------- ---------------------
PERCENT OF PERCENT OF PERCENT OF
ADJUSTED ADJUSTED ADJUSTED
TOTAL TOTAL TOTAL
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
------ ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
The Savings Bank:
GAAP capital...................... $986 14.2% $1,214 16.9% $1,277 17.6%
---- ---- ------ ---- ------ ----
---- ---- ------ ---- ------ ----
Tier 1 capital.................... $873 27.5% $1,101 34.2% $1,164 36.1
Tier 1 capital to risk weighted
assets requirement................ 127 4.0 129 4.0 129 4.0
---- ---- ------ ---- ------ ----
Excess............................ $746 23.5% $972 30.2% $1,035 32.1
---- ---- ------ ---- ------ ----
---- ---- ------ ---- ------ ----
Tier 1 capital.................... $873 12.6% $1,101 15.3% $1,164 16.1%
Tier 1 capital to average total
assets requirement................ 278 4.0 287 4.0 290 4.0
---- ---- ------ ---- ------ ----
Excess............................ $595 8.6% $814 11.3% $874 12.1%
---- ---- ------ ---- ------ ----
---- ---- ------ ---- ------ ----
Risk-based capital................ $906 28.6% $1,134 35.3% $1,197 37.1%
Risk-based capital requirement.... 254 8.0 257 8.0 258 8.0
---- ---- ------ ---- ------ ----
Excess............................ $652 21.6% $877 27.3% $939 29.1%
---- ---- ------ ---- ------ ----
---- ---- ------ ---- ------ ----
Average Total Assets.............. $6,957 $7,185 $7,248
Total risk-weighted assets(1)..... 3,170 3,216 3,228
<CAPTION>
15% ABOVE
MAXIMUM OF ESTIMATED MAXIMUM OF ESTIMATED
VALUATION RANGE VALUATION RANGE
-------------------- --------------------
126,500 SHARES 145,475 SHARES
AT $10.00 PER SHARE AT $10.00 PER SHARE
-------------------- --------------------
PERCENT OF PERCENT OF
ADJUSTED ADJUSTED
TOTAL TOTAL
AMOUNT ASSETS AMOUNT ASSETS
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
The Savings Bank:
GAAP capital...................... $1,339 18.3% $1,412 19.1%
------ ---- ------ ----
Tier 1 capital.................... 1,226 37.8 1,299 39.9
Tier 1 capital to risk weighted
assets requirement................ 130 4.0 130 4.0
------ ---- ------ ----
Excess............................ 1,096 33.8 1,169 35.9
------ ---- ------ ----
------ ---- ------ ----
Tier 1 capital.................... $1,226 16.8% $1,299 17.6%
Tier 1 capital to average total
assets requirement................ 292 4.0 295 4.0
------ ---- ------ ----
Excess............................ $934 12.8% $1,006 13.6%
------ ---- ------ ----
------ ---- ------ ----
Risk-based capital................ $1,259 38.8% $1,332 40.9%
Risk-based capital requirement.... 259 8.0 260 8.0
------ ---- ------ ----
Excess............................ $1,000 30.8% $1,073 32.9%
------ ---- ------ ----
------ ---- ------ ----
Average Total Assets.............. $7,310 $7,383
Total risk-weighted assets(1)..... 3,241 3,255
</TABLE>
- ------------------------
(1) Assumes that the Conversion proceeds infused into the Savings Bank are
invested in assets with a risk weighting of 20%.
21
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $680,150 and $1,010,150 (or $1,199,900 in
the event the Estimated Valuation Range is increased by 15%) based upon the
following assumptions: (i) 100% of the shares of Common Stock will be sold in
the Subscription Offering and Community Offerings; and (ii) fixed Conversion
expenses will be approximately $254,850. Actual Conversion expenses may vary
from those estimated.
Pro forma net income and stockholders' equity have been calculated for
the year ended March 31, 1998 as if the Common Stock to be issued in the
Offerings had been sold at the beginning of the year and the net proceeds had
been invested at 5.03%, which represents the yield on one-year U.S.
Government securities at March 31, 1998. The use of this interest rate is
viewed to be more relevant in the current rate environment than the use of an
arithmetic average of the weighted average yield earned by the Savings Bank
on its interest-earning assets and the weighted average rate paid on its
deposits during such periods (as required by federal regulations). The effect
of withdrawals from deposit accounts for the purchase of Common Stock has not
been reflected. A combined effective federal and state income tax rate of 31%
has been assumed for the year, resulting in an after-tax yield of 3.47%
during the year ended March 31, 1998. Historical and pro forma per share
amounts have been calculated by dividing historical pro forma amounts by the
indicated number of shares of Common Stock, as adjusted to give effect to the
shares committed to be released during the period by the ESOP, with respect
to the net income per share calculations. See the footnotes to the Pro Forma
Data tables. 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 Holding Company intends to retain 50% of the net
Conversion proceeds, plus the amount necessary to make a loan directly to the
ESOP to enable the ESOP to purchase up to 8.0% of the Common Stock in the
Conversion.
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 Holding
Company computed in accordance with generally accepted accounting principles
("GAAP"). The pro forma stockholders' equity is not intended to represent the
fair market value of the Common Stock and may be different than amounts that
would be available for distribution to stockholders in the event of
liquidation. No effect has been given in the tables to the possible issuance
of additional shares equal to 10% of the Common Stock to be reserved for
future issuance pursuant to the Stock Option Plan to be adopted by the Board
of Directors of the Holding Company, nor does book value give any effect to
the liquidation account to be established for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders or to the bad debt reserve.
See "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK -- Employee Benefit
Plans -- Stock Option Plan" and "THE CONVERSION -- Liquidation Rights" and
"FEDERAL AND STATE TAXATION." The tables below give effect to the MRP, which
is expected to be presented (together with the Stock Option Plan) to
stockholders for approval at a meeting of stockholders which is expected to
be held not earlier than six months following completion of the Conversion.
If the MRP is approved by stockholders, the MRP intends to acquire an amount
of Common Stock equal to 4% of the shares of Common Stock issued in the
Conversion, either through open market purchases or from authorized but
unissued shares of Common Stock. The tables below assume that stockholder
approval has been obtained and that the shares acquired by the MRP are
purchased in the open market at $10.00 per share. There can be no assurance
that stockholder approval of the MRP will be obtained, that the shares will
be purchased in the open market, or that the purchase price will be $10.00
per share.
The following tables summarize historical consolidated data of the
Savings Bank and pro forma data of the Holding Company at the year ended
March 31, 1998 based on assumptions set forth above and in the tables and
should not be used as a basis for projections of market value of the Common
Stock following the Conversion.
22
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED MARCH 31, 1998
----------------------------------------------------------------------
15% ABOVE
MINIMUM OF MIDPOINT OF MAXIMUM OF MAXIMUM OF
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
VALUATION RANGE VALUATION RANGE VALUATION RANGE VALUATION RANGE
93,500 110,000 126,500 145,475
SHARES AT $10.00 SHARES AT $10.00 SHARES AT $10.00 SHARES AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE(1)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Gross proceeds ............................. $ 935,000 $ 1,100,000 $ 1,265,000 $ 1,454,000
Less: Estimated offering expenses ......... 254,850 254,850 254,850 254,850
----------- ----------- ----------- -----------
Estimated net proceeds ................... 680,150 845,150 1,010,150 1,199,900
Less: Proceeds to fund ESOP ............... (74,800) (88,000) (101,200) (116,380)
Proceeds to fund MRP ..................... (37,400) (44,000) (50,600) (58,190)
----------- ----------- ----------- -----------
Estimated investable net proceeds(1) ..... $ 567,950 $ 713,150 $ 858,350 $ 1,025,330
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income:
Historical ............................... $ 41,872 $ 41,872 $ 41,872 $ 41,872
Pro forma income on investable
net proceeds ........................... 19,712 24,751 29,791 35,586
Pro forma ESOP adjustments(2) ............ (5,161) (6,072) (6,983) (8,030)
Pro forma MRP adjustments(3) ............. (5,161) (6,072) (6,983) (8,030)
----------- ----------- ----------- -----------
Pro forma net income ..................... $ 51,262 $ 54,479 $ 57,697 $ 61,398
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share:(4)
Historical ............................... $ 0.48 $ 0.41 $ 0.36 $ 0.32
Pro forma income on investable
net proceeds(1) ........................ 0.23 0.24 0.26 0.27
Pro forma ESOP adjustments(2) ............ (0.06) (0.06) (0.06) (0.06)
Pro forma MRP adjustments(3) ............. (0.06) (0.06) (0.06) (0.06)
----------- ----------- ----------- -----------
Pro forma net income per share ........... $ 0.59 $ 0.53 $ 0.50 $ 0.47
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Number of shares used in earnings per
share calculations(4) .................... 86,768 102,080 115,115 132,382
Stockholders' equity:(3)(4)
Historical ............................... $ 986,014 $ 986,014 $ 986,014 $ 986,014
Estimated net proceeds ................... 680,150 845,150 1,010,150 1,199,900
Less: Common stock acquired by ESOP(2)... (74,800) (88,000) (101,200) (116,380)
Less: Common stock acquired by MRP(3).... (37,400) (44,000) (50,600) (58,190)
----------- ----------- ----------- -----------
Pro forma stockholders' equity(6) ........ $ 1,553,964 $ 1,699,164 $ 1,844,364 $ 2,011,344
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED MARCH 31, 1998
---------------------------------------------------------------------------------
15% ABOVE
MINIMUM OF MIDPOINT OF MAXIMUM OF MAXIMUM OF
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
VALUATION RANGE VALUATION RANGE VALUATION RANGE VALUATION RANGE
---------------- ---------------- ---------------- ----------------
93,500 110,000 126,500 145,475
SHARES AT $10.00 SHARES AT $10.00 SHARES AT $10.00 SHARES AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE(1)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Consolidated stockholders' equity per
share:(2)
Historical........................... $10.55 $8.96 $7.79 $6.78
Estimated net proceeds............... 7.27 7.68 7.99 8.25
Less: Common stock acquired by ESOP(2) (0.80) (0.80) (0.80) (0.80)
Less: Common stock acquired by MRP(3) (0.40) (0.40) (0.40) (0.40)
------- ----- ----- -----
Pro forma consolidated
stockholders' equity per
share(3)(5)(6)....................... $16.62 $15.44 $14.58 $13.83
------- ----- ----- -----
------- ----- ----- -----
Offering price as a percentage of pro
forma stockholders' equity per
share(7)............................. 60.17% 64.77% 68.59% 72.31%
Ratio of offering price to pro forma
net income per share................... 16.95x 18.87x 20.00x 21.28x
</TABLE>
- ------------------------
(1) Estimated adjusted net proceeds consist of the estimated net
Conversion proceeds, minus (i) the proceeds attributable to the purchase by
the ESOP and (ii) the value of the shares to be purchased by the MRP, subject
to stockholder approval, after the Conversion at an assumed price of $10.00
per share.
(2) It is assumed that 8% of the shares of Common Stock issued in the
Conversion will be purchased by the ESOP. For purposes of this table, the
funds used to acquire such shares are assumed to have been borrowed by the
ESOP from the Holding Company. The Savings Bank intends to make annual
contributions to the ESOP over a ten-year period in an amount at least equal
to the principal and interest requirement (which interest rate shall be 8%)
of the debt. The pro forma net income assumes (i) that the ESOP expense for
each respective period is equivalent to the principal payment for the
respective period and was made at the end of each respective period; (ii)
that 748, 880, 1,265 and 1,455 shares were committed to be released with
respect to the year ended March 31, 1998, at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range, respectively; and
(iii) in accordance with SOP 93-6, only the ESOP shares committed to be
released during the respective period were considered outstanding for
purposes of the net income per share calculations.
(3) The adjustment is based upon the assumed purchases by the MRP of
3,740, 4,400, 5,060 and 5,819 shares at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, assuming that: (i)
stockholder approval of the MRP has been received; (ii) the shares were
acquired by the MRP at the beginning of the period in open market purchases
at the Purchase Price; and (iii) the amortized expense for the year ended
March 31, 1998 was 20% of the amount contributed. If the MRP purchases
authorized but unissued shares instead of making open market purchases, the
voting interests of existing stockholders would be diluted by approximately
3.9% and pro forma net income per share for the year ended March 31, 1998
would be $0.58, $0.53, $0.50 and $0.46, and pro forma stockholders' equity
per share at March 31, 1998 would be $16.37, $15.24, $14.40 and $13.68, at
the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively.
(4) Net income per share computations are determined by taking the
number of shares assumed to be sold in the Conversion and, in accordance with
SOP 93-6, subtracting the ESOP shares which have not been committed for
release during the respective period. See Note 2 above.
(5) No effect has been given to the issuance of additional shares of
Common Stock pursuant to the Stock Option Plan. If the Stock Option Plan is
approved by stockholders, an amount equal to 10% of the Common Stock issued
in the Conversion, or 9,350, 11,100, 12,650 and 14,548 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 Stock Option Plan. The issuance of Common
Stock pursuant to the exercise of options under such plan will result in the
dilution of existing stockholders' interests. Assuming stockholder approval
of the Stock Option Plan, that all the options were exercised at the end of
the period at an exercise price of $10.00 per share, and that the MRP
24
<PAGE>
purchases shares in the open market at the Purchase Price, pro forma net
income per share for the year ended March 31, 1998 would be $0.57, $0.52,
$0.49 and $0.45, and pro forma stockholders' equity per share at March 31,
1998 would be $16.02, $14.95, $14.16 and $13.48, in each case, at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively.
(6) The retained earnings of the Savings Bank will be substantially
restricted after the Conversion. See "DIVIDEND POLICY" and "THE CONVERSION --
Liquidation Rights."
(7) Based on the number of shares sold in the Conversion.
25
<PAGE>
THE OFFERINGS
OFFERING OF COMMON STOCK
As part of the Conversion, the Holding Company is offering up to
126,500 shares of Common Stock at the Purchase Price of $10.00 per share in
the Offerings. Non-transferable rights to subscribe for the Common Stock in
the Subscription Offering have been granted to the following persons in the
following order of priority: (1) Eligible Account Holders (depositors with
aggregate account balances of $50 or more on deposit at the Savings Bank as
of December 31, 1996), (2) the ESOP, (3) Supplemental Eligible Account
Holders (depositors with aggregate account balances of $50 or more on deposit
at the Savings Bank as of June 30, 1998, excluding directors and officers of
the Savings Bank and their associates), and (4) Other Members (depositors who
are not Eligible Account Holders or Supplemental Eligible Holders and who
continue to be depositors as of ___________, 1998, the voting record date).
Subject to the prior rights of holders of Subscription Rights, the Holding
Company may subsequently offer shares of Common Stock in the Community
Offering to members of the general public to whom this Prospectus and an
Order Form are delivered with preference to natural persons residing in the
Illinois county of Piatt. In the event of an oversubscription in the
Subscription and Community Offerings, up to 18,975 additional shares may be
issued to reflect changes in market and financial conditions and to cover
additional subscriptions. The Holding Company may reject, in whole or in
part, orders received in the Community Offering in it sole discretion.
SUBSCRIPTION AND COMMUNITY OFFERINGS
THE SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS IN THE
SUBSCRIPTION OFFERING WILL EXPIRE AT 12:00 NOON, CERRO GORDO, ILLINOIS TIME,
ON __________________, 1998 (THE "SUBSCRIPTION EXPIRATION TIME"), UNLESS
EXTENDED. THE COMMUNITY OFFERING, IF ANY, IS EXPECTED TO COMMENCE IMMEDIATELY
AFTER THE SUBSCRIPTION EXPIRATION TIME AND MAY TERMINATE ON ANY DAY AFTER THE
SUBSCRIPTION EXPIRATION TIME AT THE DISCRETION OF THE SAVINGS BANK WITHOUT
PRIOR NOTICE, BUT NOT LATER THAN ______________________, 1998, UNLESS
EXTENDED WITH THE APPROVAL OF THE COMMISSIONER.
Orders for shares of Common Stock will not be filled until at least
93,500 shares of Common Stock have been subscribed for and sold. If the sale
of the Common Stock is not completed by ________________, 1998 (45 days after
the last day of the Subscription Offering) and the Commissioner consents to
an extension of time to complete the Conversion, subscribers will be given
the right to increase, decrease or rescind their subscriptions. In such an
event, unless an affirmative indication is received from a subscriber that
such subscriber wishes to continue to subscribe for shares, the funds
delivered by such subscriber with his or her Order Form will be returned
promptly, together with accrued interest at not less than the Savings Bank's
then current passbook rate from the date payment is received until the funds
are returned to the subscribers and all withdrawal authorizations will be
cancelled. If such period is extended, or, in any event, if the Conversion is
not completed by _________________, 1998, all withdrawal authorizations will
be terminated and all funds held will be promptly returned together with
accrued interest from the date payment is received until the Conversion is
terminated.
Subscription Rights may only be exercised by completion of an Order
Form. Any person receiving an Order Form who desires to subscribe for shares
of Common Stock must do so prior to the Subscription Expiration Time by
delivering (by mail or in person) to the Savings Bank's office a properly
executed and completed Order Form, together with full payment of $10.00 per
share for each share for which subscription is made. All Subscription Rights
will expire at the Subscription Expiration Time.
Subscription Rights may be exercised only by the person to whom
they are issued and only for his or her own account. SUBSCRIPTION RIGHTS ARE
NON-TRANSFERABLE. PERSONS FOUND TO BE TRANSFERRING SUBSCRIPTION RIGHTS WILL
BE SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE COMMISSIONER OR THE FDIC. Each person subscribing
for shares is required to represent that he is purchasing such
26
<PAGE>
shares for his own account and that he has no agreement or understanding with
any other person for the sale or transfer of such shares.
In the event Order Forms (i) are not delivered or are returned to
the Savings Bank or the Holding Company as undeliverable by the United States
Postal Service, (ii) are received after the Subscription Expiration Time,
(iii) are defectively filled out or executed, or (iv) are not accompanied by
the full required payment for the shares subscribed for (including instances
where a deposit account or other account from which withdrawal is authorized
is insufficient to fund the amount of such required payment), the
Subscription Rights of the persons to whom such rights have been granted will
lapse. The Savings Bank and Holding Company may waive any irregularity on any
Order Form or require the submission of corrected Order Forms, but do not
represent that they will do so. Pursuant to the Plan, the interpretation by
the Savings Bank and the Holding Company of the terms and conditions of the
Plan and of the Order Form will be final. AN EXECUTED ORDER FORM, ONCE
RECEIVED BY THE HOLDING COMPANY, MAY NOT BE MODIFIED, AMENDED OR RESCINDED
WITHOUT THE CONSENT OF THE HOLDING COMPANY, UNLESS THE CONVERSION IS NOT
COMPLETED WITHIN 45 DAYS OF TERMINATION OF THE SUBSCRIPTION OFFERING.
PAYMENT FOR SHARES
In order for subscriptions to be valid, payment for all subscribed
shares computed on the basis of the Purchase Price (I.E., $10.00 per share)
must accompany all completed Order Forms, except for shares subscribed for by
the ESOP. Payment for shares will be permitted to be made by any of the
following means: (i) in cash, if delivered to the office of the Savings Bank
in person, (ii) by check or money order, or (iii) by appropriate withdrawal
authorization from a deposit account at the Savings Bank (including
certificates of deposit). All checks or money orders must be made payable to
CGB&L Financial Group, Inc.
Payments made in cash or by check or money order will be placed in
a segregated account at the Savings Bank and interest will be paid by the
Savings Bank on such payments for Common Stock at not less than the Savings
Bank's then current passbook rate. Such interest shall be paid from the date
payments are received by the Savings Bank until consummation or termination
of the Offerings. The Savings Bank will not knowingly lend funds or otherwise
extend credit to any person to purchase Common Stock.
The Order Form will contain a withdrawal authorization by which funds
may be withdrawn from deposit accounts (including certificate of deposit
accounts) at the Savings Bank to pay for subscribed shares. Once such a
withdrawal has been authorized, a hold will be placed on the designated
withdrawal amount and none of such amount may be withdrawn from the deposit
account (except by the Savings Bank as payment for Common Stock) until
consummation or termination of the Offerings. Pending completion of the
Conversion, such deposits (including the amount of the authorized withdrawal)
will continue to earn interest at the contractual rate. Deposit accounts will
be permitted to be established for the purpose of making payment for
subscribed shares of Common Stock.
If a subscriber authorizes the Savings Bank to withdraw the amount
of the purchase price from a savings account, such subscriber's savings
account will be debited and the actual withdrawal will be made only on the
effective date of the Conversion. The Savings Bank will waive any applicable
penalties for early withdrawal from certificate of deposit accounts. If, as a
result, of such withdrawal, the remaining balance of a certificate of deposit
account is less than the applicable minimum balance, the certificate
evidencing such account will be canceled as of the date of the actual
withdrawal. In that event, the remaining balance will earn interest at the
Savings Bank's then current passbook savings account rate.
COMPLETION OR TERMINATION OF THE OFFERING
The Commissioner's regulations require that the Holding Company
complete the sale of Common Stock within 45 days after the close of the
Subscription Offering. The Subscription Offering may be extended by the
Savings Bank and the Holding Company until ________________, 1998 without the
Commissioner's approval. If
27
<PAGE>
the Community Offering is not completed by _________________, 1998 (or
________________, 1998 if the Subscription Offering is fully extended), all
funds received will be promptly returned with interest at not less than the
Savings Bank's then current passbook rate and all withdrawal authorizations
will be canceled or, if regulatory approval of an extension of the time
period has been granted, all subscribers and purchasers will be given the
right to increase, decrease or rescind their orders. If the Offerings are
extended beyond ________________, 1998, all subscribers will be notified of
such extension, of the duration of any extension that has been granted, and
of their rights to modify their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled). No
single extension can exceed 90 days. The Offerings must be completed within
24 months after approval of the Plan at the Special Meeting. See "THE
CONVERSION."
DELIVERY OF STOCK CERTIFICATES
Certificates representing Common Stock issued in the Conversion
will be mailed by the Holding Company's transfer agent to persons entitled
thereto at the addresses of such persons appearing on the Order Form as soon
as practicable following consummation of the Conversion. Consummation of the
Conversion will occur as soon as practicable after the expiration of the
Subscription and Community Offerings. Any certificates returned as
undeliverable will be held by the Holding Company until claimed by persons
legally entitled thereto or otherwise disposed of in accordance with
applicable law. Until certificates for Common Stock are available and
delivered to subscribers, subscribers may not be able to sell the shares of
Common Stock for which they have subscribed, even though trading of the
Common Stock will have commenced.
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock
of the Holding Company proposed to be purchased by the Holding Company's
directors and by all directors and executive officers as a group (including
purchases by any associates of or groups acting in concert with such
persons), assuming that sufficient shares will be available to satisfy their
subscriptions.
<TABLE>
<CAPTION>
AT THE MAXIMUM
OF THE ESTIMATED VALUATION RANGE(1)
------------------------------------------------------------
AS A PERCENT
NAME AMOUNT NUMBER OF SHARES OF SHARES OFFERED
----------------- ---------- ------------------ -------------------
<S> <C> <C> <C>
Dale C. Born, Director................................ $15,000 1,500 1.2%
Noel R. Buckley, Director............................. 63,250 6,325 5.0
Lester W. Crandall, Director.......................... 5,000 500 .4
Larry D. Gaitros, Director............................ 2,000 200 .2
Maralyn F. Heckman, Director, Secretary,
Treasurer and CEO.................................... 63,250 6,325 5.0
John A. Sochor, D.D.S., Director...................... 10,000 1,000 .8
C. Russell York, Director............................. 63,250 6,325 5.0
------- ------ ---
All Directors and Executive Officers
as a group (7 persons)................................ $221,750 22,175 17.60%
-------- ------ ------
-------- ------ ------
</TABLE>
- ------------------------
(1) Includes proposed subscriptions, if any, by associates. The ESOP
intends to acquire up to 8% of the Common Stock issued in the Conversion, or
10,120 shares at the maximum of the Estimated Valuation Range, which shares
are not reflected in the amounts to be purchased by the Holding Company's
directors and officers in the table above. In addition, this does not include
awards pursuant to the Stock Option Plan or the MRP, which will be submitted
for approval to stockholders at a meeting of stockholders expected to be held
not earlier than six months following the completion of the Conversion. See
"MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK -- Employee Benefit Plans."
28
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
STATEMENTS OF INCOME
The Statements of Income of the Savings Bank for the year ending March 31,
1998 and the eleven month period ending March 31, 1997 have been audited by Geo.
S. Olive Co. LLC, independent auditors, whose report thereon appears elsewhere
in this Prospectus. The following statements should be read in conjunction with
the Savings Bank's Financial Statements and related notes included elsewhere
herein.
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MARCH 31,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Interest income:
Loans receivable ..................................................... $466,389 $373,424
Investment securities ................................................ 4,680 4,267
Deposits with financial institutions ................................. 70,915 82,277
-------- --------
Total interest income .............................................. 541,984 459,968
Interest expense:
Deposits ............................................................. 289,130 270,470
FHLB advances ........................................................ 20,633 0
-------- --------
Total interest expense ............................................. 309,763 270,470
-------- --------
Net Interest Income .................................................... 232,221 189,498
Provision for loan losses ............................................ 26,500 0
-------- --------
Net interest income after provision
for loan losses ...................................................... 205,721 189,498
-------- --------
Non-interest income: ................................................... 6,708 6,510
-------- --------
Non-interest expense:
Salaries and employee benefits
Net occupancy and equipment expenses ................................. 115,617 98,964
Deposit insurance expense ............................................ 4,922 3,786
Insurance expense .................................................... 3,436 42,219
Other expenses ....................................................... 4,936 4,512
Total non-interest expense ......................................... 30,944 27,190
-------- --------
159,855 176,671
-------- --------
Income before income taxes ........................................... 52,574 19,337
Income tax expense ..................................................... 10,702 1,378
-------- --------
Net income ......................................................... $ 41,872 $ 17,959
-------- --------
-------- --------
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the Savings Bank's financial
condition, changes in financial condition and results of operations. The
information contained in this section should be read in conjunction with the
Financial Statements, the accompanying Notes to Financial Statements and the
other sections contained in this Prospectus.
COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED MARCH 31, 1998
AND 1997
GENERAL. The Savings Bank recorded net income of $42,000 in 1998, $22,000
or 110.0% higher on an annualized basis, than the $18,000 in net income reported
for fiscal 1997. The increase in earnings was primarily attributable to an
increase in net interest income which was somewhat offset by an increase in the
provision for loan losses and a decline in noninterest expense.
The return on average assets was 0.63% for 1998 compared to 0.31% for 1997
on an annualized basis. For 1998, the return on average equity was 4.60%
compared to 2.27% for 1997, also on an annualized basis.
SAIF ASSESSMENT. On September 30, 1996, the Deposit Insurance Funds Act of
1996 was enacted which required the Federal Deposit Insurance Corporation
("FDIC") to impose a one-time special assessment on deposits held by savings and
loan institutions that are insured through the Savings Association Insurance
Fund ("SAIF"). The special assessment was equal to $0.657 per $100 of insured
deposits and was required to be applied against SAIF-assessable deposits held as
of March 31, 1995. The charge to the Savings Bank for this one-time assessment,
which was paid to the FDIC in November 1996, was $36,000.
In 1997, SAIF insured institutions were assessed according to the same
risk-based assessment schedule as the Savings Bank Insurance Fund ("BIF")
members - 0 to 27 basis points per $100 of insured deposits. Prior to 1997, the
SAIF assessment range was 23-to-31 basis points per $100 of insured deposits. In
addition, SAIF assessed institutions were also billed an additional 6.48 basis
points for payments on the Financing Corporation ("FICO") obligation. BIF
members paid 1.296 basis points toward the FICO bonds. Because the Savings Bank
was in the lowest risk classification during 1997, it paid only the 6.48 basis
point FICO payment. The Savings Bank expensed $3,000 for FDIC insurance in 1998,
compared to $42,000 for fiscal 1997.
NET INTEREST INCOME. Net interest income, which is the difference between
interest income earned on loans and investments and interest expense recorded on
deposits and other interest bearing liabilities, was $232,000 for 1998, an
increase of $43,000 from the $189,000 recorded for the eleven months ended March
31, 1997. On an annualized basis, net interest income for 1997 was $206,000.
This increase was attributable to increased interest income and was partially
offset by an increase in interest expense.
Interest income was $542,000 for 1998 compared to $502,000 in 1997, on an
annualized basis. The increase was attributed to the increase in interest income
from loans. The average balance of loans outstanding during 1998 was $5,289,000
compared to $4,629,000 during 1997. The majority of this growth was in one- to
four-family residential mortgage loans which increased to $5,304,000 at March
31, 1998 from $4,680,000 at March 31, 1997. In addition, the average yield on
loans increased to 8.81% for 1998 from 8.79% during 1997.
INTEREST EXPENSE. Interest expense was $310,000 for 1998 compared to
$295,000 in 1997, on an annualized basis. The increase was attributable to
increased borrowings from the Federal Home Loan Bank ("FHLB"). During 1998, the
Savings Bank began to use borrowings from the FHLB as a supplement to customer
deposits for financing growth in its loan portfolio. As a result, interest
expense on FHLB advances increased to
30
<PAGE>
$21,000 in 1998 from $0 in 1997. This increase was partially offset by a
decline, on an annualized basis, in interest expense on deposits from
$295,000 in 1997 to $289,000 in 1998.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the year
ended March 31, 1998 was $26,500 compared to $0 for the eleven-month period
ended March 31, 1997. The provision for both periods reflects management's
analysis of the Savings Bank's loan portfolio based on information currently
available. In particular, management considers the level of nonperforming
loans and potential problem loans as well as the composition of its loan
portfolio. While the level of nonperforming loans declined from 1997 to 1998
and no loans were charged- off for either period, management felt it prudent
to increase the level of its allowance for loan losses as a result of
increases in its commercial real estate loans which increased to $185,000 at
March 31, 1998 from $24,000 at March 31, 1997 as well as to keep pace with
the overall growth of its loan portfolio. While management of the Savings
Bank believes that the allowance for loan losses is sufficient based on
information currently available, no assurances can be made that future
events, conditions, or regulatory directives will not result in increased
provisions for loan losses or additions to the allowance for loan losses
which may adversely affect net income.
NON-INTEREST EXPENSE. Non-interest expense for the year ended March 31,
1998 was $160,000 compared to $193,000 for the period ended March 31, 1997, a
decrease of 17.1% on an annualized basis. The fiscal 1997 amount includes the
one-time SAIF special deposit insurance assessment of $36,000.
Salaries and employee benefits were $116,000 for the year ended March
31, 1998 compared to $108,000 for the period ended March 31, 1997. This
represents an increase of $8,000 or 7.4%, on an annualized basis. This
increase was attributable to the addition of one part-time employee during
1998 as well as regular annual salary increases. The increase in salary and
employee benefit expense was partially offset by a decline in deposit
insurance expense resulting from the previously mentioned SAIF assessment
during fiscal year 1997.
INCOME TAX EXPENSE. Total income tax expense was $11,000 for the year
ending March 31, 1998, compared to $1,000 for the period ended March 31,
1997. This increase was attributable to higher income before tax in 1998
which resulted in the Savings Bank being in a higher federal tax bracket
(note corporate income tax rates range from 15% to 39% for corporations with
taxable income less than $335,000). In addition, the Savings Bank had
significant net unrealized gains on securities available for sale which
reduced its tax expense. Accordingly, the effective tax rates for 1998 and
1997 were 20.75% and 5.26%, respectively.
COMPARISON OF FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION AT AND
FOR THE FISCAL YEARS ENDED MARCH 31, 1998 AND 1997
TOTAL ASSETS. Total assets of the Savings Bank increased $646,000 or
10.3% from $6,289,000 at March 31, 1997 to $6,935,000 at March 31, 1998. The
growth in assets occurred primarily in loans, which increased by $848,000 or
18.0%, and cash and due from banks which increased $415,000 or 377.3%. These
increases were partially offset by a decline in interest-bearing time
deposits of $689,000 or 53.9%.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents increased from
$110,000 at March 31, 1997 to $525,000 at March 31, 1998 while
interest-bearing time deposits declined from $1,279,000 at March 31, 1997 to
$590,000 at March 31, 1998. These changes were the result of management
depositing proceeds from maturing time deposits into more liquid accounts at
the FHLB in order to keep them available to fund loan growth.
LOANS. Loan growth from March 31, 1997 to March 31, 1998 occurred in
both one- to four-family and commercial real estate mortgage loans. One- to
four-family mortgage loans increased $624,000 or 13.3%; commercial real
estate mortgage loans increased $161,000 or 670.8%. This growth was the
result of strong residential loan demand throughout the Savings Bank's
lending area and two commercial real estate mortgage loans totalling $170,000
made during fiscal 1998. These increases were partially offset by slight
declines in both multi-family real estate and share loans.
31
<PAGE>
PROVISION FOR LOAN LOSSES. The allowance for loan losses increased from
$6,000 at March 31, 1997 to $33,000 at March 31, 1998 as a result of the
$27,000 provision for loan losses recorded during fiscal 1998. The ratios of
the Savings Bank's allowance for loan losses to total loans were 0.58% and
0.13% at March 31, 1998 and 1997. The ratios of the Savings Bank's allowance
for loan losses to total nonperforming loans were 300.0% and 14.0% at March
31, 1998 and 1997.
DEPOSITS AND LONG-TERM DEBT. Interest-bearing deposits remained fairly
stable, declining $58,000 or 1.1% from 5,308,000 at March 31, 1997 to
5,250,000 at March 31, 1998 which reflects the Savings Bank's use of FHLB
advances to supplement customer deposits as a source of financing for its
loan portfolio. Accordingly, long-term debt (FHLB advances) increased from $0
at March 31, 1997 to $600,000 at March 31, 1998.
EQUITY. Total equity capital increased from $895,000 at March 31, 1997
to $986,000 at March 31, 1998, an increase of $91,000. This increase is the
result of fiscal year 1998 net income of $42,000 coupled with an increase in
the unrealized gain on securities available for sale of $49,000.
AVERAGE BALANCE SHEET
The Savings Bank's net income depends heavily on its net interest
income, which represents the difference between income on interest-earning
assets (primarily loans, deposits with financial institutions and
investments) and expense on interest-bearing liabilities (primarily deposit
accounts). Net interest income, in turn, depends upon the volumes of
interest-earning assets and interest-bearing liabilities and the interest
rate spread, which represents the difference the interest rate earned on such
assets and paid on such liabilities.
The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the
resultant yields, as well as the total dollar amount of interest expense on
average interest-bearing liabilities and the resultant rates, and the net
interest margin. The table does not reflect any effect of income taxes. All
average balances are based on average monthly balances during the periods.
<TABLE>
<CAPTION>
AT MARCH 31, PERIOD ENDED MARCH 31,
------------ ----------------------------------------------------------------------------
1998 1998 1997
-------- --------------------------------- -----------------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE(1)
---- ------- -------- ---- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Interest-earning assets:
Loans, net...................... 8.45% $5,289 $466 8.81% $4,629 $373 8.79%
Interest-bearing deposits with
financial institutions........ 6.06 1,205 71 5.89 1,636 82 5.47
Securities...................... 2.65 189 5 2.65 134 4 3.26
------ ---- ------ ----
Total interest-earning assets. 7.87 6,683 542 8.11 6,399 459 7.84
---- ---
Non-interest-earning assets..... 29 24
------ ------
Total assets.................. $6,712 $6,423
------ ------
------ ------
Interest-bearing liabilities:
Deposits:
Savings......................... 3.00 $ 462 15 3.25 $ 478 14 3.20
Certificates.................... 5.66 4,885 274 5.61 4,993 256 5.59
------ ---- ------ ----
Total deposits.................. 6.36 5,347 289 5.40 5,471 270 5.38
----
FHLB advances................... 5.52 351 21 5.98 0 -- --
------ ---- ------ ----
Total interest-bearing
liabilities................... 5.52 5,698 310 5.44 $5,471 270 5.38
---- ----
Non-interest-bearing liabilities.. 100 87
------
Total liabilities............. 5,798 5,558
Equity capital 914 865
------ ------
Total liabilities and equity $6,712 $6,423
capital..................... ------ ------
------ ------
Net interest income; interest rate $232 2.67% $189 2.46%
---- ------ ---- ------
---- ------ ---- ------
spread(2)....................... 2.35% 3.47% 2.98%
----- ------ ------
----- ------ ------
Net interest margin(3)............
Ratio of average-interest-earning
assets to average 117.29% 116.96%
interest-bearing................ ------- -------
------- -------
liabilities..................... 117.86%
-------
-------
</TABLE>
- ----------------------
(1) Annualized.
32
<PAGE>
(2) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate on
interest-bearing liabilities.
(3) Net interest margin is net interest income divided by average
interest-earning assets.
33
<PAGE>
RATE/VOLUME ANALYSIS. The following table describes the extent to which
changes in interest rates and changes in volume of interest-related assets
and liabilities have affected the Savings Bank's interest income and interest
expense during the periods indicated. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes
attributable to (i) changes in volume (change in volume multiplied by prior
year rate), (ii) changes in rate (change in rate multiplied by prior year
volume), and (iii) total change in rate and volume. the combined effect of
changes in both rate and volume has been allocated proportionately to the
change due to rate and the change due to volume.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------
1998 VS. 1997
--------------------------------------------------------------------------------
INCREASE
(DECREASE)
DUE TO
----------------------------------------------------
TOTAL INCREASE
VOLUME RATE (DECREASE)
-------------------- ---------------------- ----------------------
(In Thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans, net...................... $91 $2 $93
Interest-bearing deposits with
financial institutions....... (19) (8) (11)
Securities...................... 2 (1) 1
--- ---- ---
Total change in interest income $74 $9 83
--- ---- ---
Interest-bearing liabilities:
Deposits:
Savings......................... -- 1 1
Certificates.................... (1) 19 18
FHLB advances................... 21 -- 21
--- ---- ---
Total change in interest
expense........................ 20 20 40
--- ---- ---
Net change in net interest
income......................... $54 $(11) $43
--- ---- ---
--- ---- ---
</TABLE>
34
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The primary function of asset and liability management is to maintain an
appropriate balance between liquidity for the Savings Bank, on the one hand,
and interest-earning assets and interest-bearing liabilities, on the other,
in order to produce stable net income during changing market interest-rate
cycles. See "RISK FACTORS -- Potential Effect of Changes in Interest Rates".
The Savings Bank's Board of Directors monitors its interest rate
sensitivity through the use of the net portfolio value model produced by the
Commissioner which generates estimates of the change in the Savings Bank's
net portfolio value ("NPV") over a range of interest rate scenarios. NPV is
the present value of expected cash flows from assets, liabilities, and
off-balance sheet contracts. The NPV ratio, under any interest rate scenario,
is defined as the NPV in that scenario divided by the market value of assets
in the same scenario. The Commissioner produces such estimates utilizing its
own model, based upon data submitted on the Savings Bank's Call Reports on a
quarterly basis. The Commissioner's model assumes estimated loan prepayment
rates, reinvestment rates and deposit decay rates. The following table sets
forth the Savings Bank's NPV as of March 31, 1998 as calculated by the
Commissioner.
<TABLE>
<CAPTION>
NPV AS % OF PORTFOLIO
NET PORTFOLIO VALUE VALUE OF ASSETS
---------------------------------------------------- ----------------------------------------
CHANGE (IN BASIS POINTS)
IN INTEREST RATES(1) AMOUNT $ CHANGE % CHANGE NPV RATIO CHANGE(1)
- ------------------------ ------------- -------------- ---------------- --------------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+ 400 $ 901 $(445) (33) 14.05 (431)
+ 300 1,020 (326) (24) 15.36 (300)
+ 200 1,145 (201) (15) 16.63 (173)
+ 100 1,278 (68) (5) 17.92 (44)
0 1,346 -- -- 18.36 --
- 100 1,124 (222) (16) 15.51 (285)
- 200 1,116 (230) (17) 15.15 (321)
- 300 1,003 (343) (25) 13.58 (478)
- 400 963 (383) (28) 12.86 (550)
</TABLE>
(1) Assumes an instantaneous and permanent uniform change in interest rates at
all maturities.
Management believes that the assumptions used by it to evaluate the
vulnerability of the Savings Bank's operations to changes in interest rates
approximate actual experience and considers them reasonable; however, the
interest rate sensitivity of the Savings Bank's assets and liabilities and
the estimated effects of changes in interest rates on the Savings Bank's net
interest income and NPV indicated in the above table could vary substantially
if different assumptions were used or actual experience differs from the
historical experience on which they are based. In addition, the interest rate
characteristics of certain of the Savings Bank's assets and liabilities
impact the results of the above table.
35
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Savings Bank's liquidity, represented by cash and cash equivalents,
is a product of its operating, investing, and financing activities. The
Savings Bank's primary sources of funds are deposits, amortization,
prepayments and maturities of outstanding loans and interest bearing time
deposits and funds provided from operations. While scheduled payments from
the amortization of loans and interest-bearing time deposits are relatively
predictable sources of funds, deposit flows and loan prepayments are greatly
influenced by general interest rates, economic conditions, and competition.
In addition, the Savings Bank invests excess funds in overnight deposits and
other short-term interest-earning assets which provide liquidity to meet
lending requirements. The Savings Bank has been able to generate sufficient
cash through its deposits and has begun limited use of borrowings as a source
of funds during the past fiscal year. As of March 31, 1998, the Savings Bank
had the ability to borrow up to $924 thousand from the FHLB.
Liquidity management is both a daily and a long-term function of
business management. Excess liquidity is generally invested in short-term
investments such as overnight deposits. On a longer-term basis, the Savings
Bank maintains a strategy of investing in time deposits at other
institutions. The Savings Bank uses its sources of funds primarily to meet
its ongoing commitments. At March 31, 1998 there were no approved loan
commitments outstanding. Certificates scheduled to mature in one year or less
at March 31, 1998 totaled $2.2 million. Management believes that a
significant portion of maturing deposits will remain with the Savings Bank.
The Savings Bank anticipates that even with interest rates at lower levels
than have been experienced in recent years, which has caused a
disintermediation of funds, it will continue to have sufficient funds
together with borrowings, to meet its current commitments. The mixture of
deposit liabilities and borrowings will depend on the relevant cost of each
of these sources of funds.
Federally-insured state-chartered banks are required to maintain minimum
levels of regulatory capital. Under current FDIC regulations, insured
state-chartered banks generally must maintain (i) a ratio of Tier 1 leverage
capital to total assets of at least 3.0% (4.0% to 5.0% for all but the most
highly rated banks) and (ii) a ratio of Tier 1 capital to risk weighted
assets of at least 4.0% and a ratio of total capital risk weighted assets of
at least 8.0%. At March 31, 1998, the Savings Bank was in compliance with
applicable regulatory capital requirements. See "HISTORICAL AND PRO FORMA
CAPITAL COMPLIANCE."
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income is defined as "the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. It includes all changes in
equity during a period except those resulting from investment by owners and
distributions to owners." The comprehensive income and related cumulative
equity impact of comprehensive income items will be required to be disclosed
prominently as part of the notes to the financial statements. Only the impact
of unrealized gains or losses on securities available for sale is expected to
be disclosed as an additional component of the Savings Bank's income under
the requirements of SFAS No. 130. This statement is effective for fiscal
years beginning after December 15, 1997. The Savings Bank will adopt
Statement 130 during fiscal year 1999.
Also in 1997, the FASB issued Statement No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which supersedes SFAS 14,
"Financial Reporting for Segments of a Business Enterprise," and establishes
standards for the way that public enterprises report information about
operating segments in annual financial statements. In addition, it requires
reporting of selected information about operating segments in annual
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic area and major
customers. SFAS 131 defines operating segments as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. This standard is effective for
36
<PAGE>
financial statements periods beginning after December 15, 1997 and requires
comparative information for earlier years to be restated. Due to recent
issuance of this standard, management has been unable to fully evaluate the
impact, if any, it may have on the Savings Bank's future financial statement
disclosures.
IMPACT OF INFLATION AND CHANGING PRICES
The Financial Statements of the Savings Bank and related notes presented
herein have been prepared in accordance with Generally Accepted Accounting
Principles ("GAAP"), which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes
in the relative purchasing power of money over time due to inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to
a larger extent than interest rates. In the current interest rate
environment, liquidity and the maturity structure of the Savings Bank's
assets and liabilities are critical to the maintenance of acceptable
performance levels. Over the three most recent fiscal years, interest rates
have been relatively low and stable and such an environment has generally had
a positive impact on the Savings Bank's revenues and income.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In addition to historical information, forward-looking statements are
contained herein that are subject to risks and uncertainties that could cause
actual results to differ materially from those reflected in the
forward-looking statements. Factors that could cause future results to vary
from current expectations, include, but are not limited to, the impact of
economic conditions (both generally and more specifically in the markets in
which the Savings Bank operates), the impact of competition for the Savings
Bank's customers from other providers of financial services, the impact of
government legislation and regulation (which changes from time to time and
over which the Savings Bank has no control), and other risks detailed in this
Prospectus. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of
the date hereof. The Savings Bank undertakes no obligation to publicly revise
these forward-looking statements, to reflect events or circumstances that
arise after the date hereof.
YEAR 2000 COMPLIANCE
The Savings Bank is in the final stages of identifying those computer
applications where program changes will be required in order for the
applications to process information accurately subsequent to 1999. The
Savings Bank uses purchased software programs for a variety of functions,
including accounting for its loans and deposits. The majority of the
companies providing these software programs have already assured the Savings
Bank that the programs are Year 2000 compliant. The Savings Bank is also in
the process of surveying certain loan customers, to ensure that these
customers' computer systems and operations are or will be Year 2000
compliant. The total cost that the Savings Bank may incur for Year 2000
compliance is unknown, however, the cost is not expected to be material since
the Savings Bank does not use any proprietary software.
37
<PAGE>
BUSINESS OF THE SAVINGS BANK
GENERAL
The Savings Bank is a community-oriented savings institution offering a
variety of financial services to meet the needs of the markets it serves. The
Savings Bank is primarily engaged in the business of attracting deposits from
the general public and using such deposits, together with other funding
sources, to invest in one- to four-family residential mortgage loans and, to
a lesser extent, multi-family residential mortgage loans, commercial real
estate loans, share loans, and other assets.
The Savings Bank's deposit and lending base is presently concentrated
within a ten mile radius of Cerro Gordo, Illinois. This area includes
portions of the Illinois counties of Macon, Moultrie and Piatt. Cerro Gordo
has a population of approximately 1,500, and its economy is based primarily
on agriculture, industry, education and health care. The major employers in
the area include the Cerro Gordo School District, Caterpillar, Inc., Archer
Daniels Midland and Bridgestone/Firestone, Inc. Much of the surrounding
community is agricultural and less populated. Cerro Gordo is a bedroom
community of Decatur.
At March 31, 1998, the Savings Bank had total assets of $6.9 million,
total deposits of $5.3 million, retained earnings of $873 thousand and total
equity capital of $986 thousand. The deposits of the Savings Bank are insured
up to the applicable limits by the FDIC under the SAIF and will continue to
be insured by the FDIC subsequent to the Conversion.
LENDING ACTIVITIES
COMPOSITION OF THE LOAN PORTFOLIO. The Savings Bank's historical lending
strategy has focused primarily on the origination of residential mortgage
loans secured by one- to four-family homes. The Savings Bank also originates,
from time to time, multi-family and commercial real estate loans, and
consumer (share) loans, although such loans presently constitute a relatively
small percentage of the Savings Bank's total loan portfolio.
At March 31, 1998, the Savings Bank's total loan portfolio totaled $5.7
million, of which $5.3 million or 93.8% were loans secured by first mortgages
on one- to four-family properties. The balance of the gross loan portfolio
consisted of $87,000 of loans secured by multi-family residences, or 1.5% of
the total gross loan portfolio, $185,000 secured by commercial real estate,
or 3.3% of the total gross loan portfolio, and $80,000 of share loans, or
1.4% of the total loan portfolio. Virtually all of the loan portfolio is
secured by properties located in Macon, Moultrie and Piatt counties in
Central Illinois. All loans are fixed rate loans.
The following table sets forth in greater detail the composition of the
Savings Bank's loan portfolio by type of loan as of the dates indicated:
38
<PAGE>
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------------------------------------------
1998 1997
------------------------- -----------------------
TYPE OF LOAN: AMOUNT PERCENT AMOUNT PERCENT
- ------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Real Estate Mortgage Loans:
One- to four-family.............................................. $5,303,917 93.78% $4,680,155 94.88%
Multi-family..................................................... 87,348 1.54 95,128 1.93
Commercial....................................................... 185,060 3.27 24,098 0.48
---------- ------- ----------- --------
Total Real Estate Mortgage Loans...............................
Share loans...................................................... 79,534 1.41 133,586 2.71
---------- ------- ----------- --------
Total loans.................................................... 5,655,859 100.00% 4,932,967 100.00%
------- --------
------- --------
Less:
Undisbursed portion of loans..................................... (23,555) (156,598)
Deferred loan fees............................................... (73,415) (64,882)
Allowance for possible loan losses............................... (32,700) (6,200)
---------- -----------
Net loans........................................................ $5,526,189 $4,705,287
---------- -----------
---------- -----------
</TABLE>
ONE- TO FOUR-FAMILY RESIDENTIAL LOANS. The primary lending activity
of the Savings Bank is the extension of fixed rate first mortgage residential
loans ranging in terms from 15 to 20 years to enable borrowers to purchase
existing one- to four-family homes or to construct new one- to four-family
homes. Management believes that its policy of focusing on one- to four-family
residential mortgage loans has been successful in contributing to interest
income while keeping delinquencies and losses to a minimum. At March 31,
1998, approximately $5.3 million of the Savings Bank's total loan portfolio
consisted of loans secured by one- to four-family residential real estate.
The average outstanding balance of the loans included in the
Savings Bank's one- to four-family residential loan portfolio as of March 31,
1998 was approximately $28,500. Management estimates that the average size of
a new single-family residential first-mortgage loan in its market area is
approximately $45,000.
The loan-to-value ratio of most single-family first-mortgage loans
made by the Savings Bank is 80%. Under the Savings Bank's lending policies,
the maximum loan-to-value ratio on a loan for the construction of a new
single family residential home is 80%, and the maximum loan-to-value ratio on
loans on two- to four-family dwellings is 80%.
The Savings Bank requires title insurance, or an attorney's opinion
as to title, and fire and casualty insurance coverage of the property
securing any mortgage loan originated by the Savings Bank. All of the Savings
Bank's real estate loans contain due-on-sale clauses which provide that if
the mortgagor sells, conveys or alienates the property underlying the
mortgage note, the Savings Bank has the right at its option to declare the
note immediately due and payable without notice. See also "-- Loan
Solicitation and Processing." The Savings Bank's practice is to enforce such
due-on-sale clauses.
MULTI-FAMILY RESIDENTIAL LENDING. At March 31, 1998, approximately
$87,000, or 1.5%, of the Savings Bank's total loan portfolio consisted of
loans secured by multi-family residential real estate.
Under the Savings Bank's current lending policies, multi-family
real estate loans are generally limited to 80% of the appraised value of the
property or the selling price, whichever is less. Loans secured by
multi-family real estate are generally larger and, like commercial real
estate loans, involve a greater degree of risk than one- to four-family
residential loans. See "-- Commercial Real Estate Loans." The number of
multi-family residential dwellings in the Savings Bank's market area is
limited, and mortgage loans on such dwellings have historically represented a
relatively small percentage of the Savings Bank's loan portfolio. The Savings
Bank does not anticipate that the origination of such loans will constitute a
significant part of its future lending business.
39
<PAGE>
COMMERCIAL REAL ESTATE LOANS. The Savings Bank has historically
made commercial real estate loans on a limited basis. Such loans are
currently secured by office and retail buildings. At March 31, 1998, the
Savings Bank's commercial real estate loan portfolio amounted to $185,000, or
3.3%, of the Savings Bank's total loan portfolio as of that date. Borrowers
are always established businesses with ties to the Cerro Gordo community.
Loans secured by commercial real estate are generally larger and
involve a greater degree of risk than one- to four-family residential loans.
Because payments on loans secured by commercial real estate properties are
often dependent on the successful operation or management of the properties,
repayment of such loans may be subject to adverse conditions in the real
estate market or the economy. The Savings Bank's practice has been to
underwrite such loans based on its analysis of the amount of cash flow
generated by the business in which the real estate is used and the resulting
ability of the borrower to meet its payment obligations. Although such loans
are secured by a first mortgage on the underlying property, the Savings Bank
also generally seeks to obtain a personal guarantee of the loan by the owner
of the business in which the property is used. The Savings Bank does not
anticipate that the origination of such loans will constitute a significant
part of its future lending business.
SHARE LOANS. At March 31, 1998, approximately $80,000, or 1.4%, of
the Savings Bank's total loan portfolio consisted of Share Loans. Share Loans
are loans to depositors of the Savings Bank which are secured by the
borrowers' deposits. Under the Savings Bank's current lending policies, share
loans are limited to 90% of the borrower's savings on deposit with the
Savings Bank. The borrower's passbook account or certificate of deposit is
flagged by the Savings Bank. These accounts are monitored to insure that the
loan principal and interest balance is not more than 90% of the borrower's
passbook account or certificate of deposit. The rate of interest charged on
share loans is the greater of (i) the rate on direct reduction mortgage loans
on personal residences, or (ii) one and one-half percent over the interest
rate paid on the passbook account or certificate of deposit which is pledged
as collateral.
LOAN SOLICITATION AND PROCESSING. The Savings Bank receives loan
applications from a number of sources, including existing or past customers
of the Savings Bank, residents of the communities located in the Savings
Bank's primary market area, and prospective borrowers who have been referred
to the Savings Bank by real estate brokers or builders. The Savings Bank also
advertises its products and services in local newspapers circulated in the
Savings Bank's primary market area. Further business is solicited from the
Savings Bank's present customer base, from walk-in traffic, through brochures
and lobby signs.
Upon receipt of a completed loan application from a prospective
borrower, the Savings Bank obtains a credit report from a credit reporting
agency and, depending on the type of loan, verifies employment, income and
other financial information received from the prospective borrower and
requests additional financial information, if necessary. If a loan in the
amount of $250,000 or more is secured by real estate, the Savings Bank also
requires an appraisal of the real estate by an outside appraiser approved by
the Savings Bank's Board of Directors. Real estate securing a loan of less
than $250,000 is appraised by the Savings Bank's internal appraisal
committee; an outside appraisal is not required. Once such information and
appraisals are complete, the application is forwarded for review and action
to the Loan Committee of the Board of Directors. The Board of Directors
ratifies the actions of the Loan Committee. As of the date of this
Prospectus, the Savings Bank's lending officers consist solely of its C.E.O.,
Maralyn F. Heckman, and Sharon McCarty.
40
<PAGE>
The following table shows loans originated and repaid during the
periods indicated.
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31,
---------------------------------------------
1998 1997
---------------------- --------------------
<S> <C> <C>
Net Mortgage Loans at Beginning of Period ....... $4,705,287 $4,405,920
Loans originated
Realestate mortgage loans:
One- to four-family ........................... 1,739,550 1,313,940
Multi-family .................................. -- --
Commercial .................................... 200,000 --
Share loans ..................................... 40,190 14,970
---------- ----------
Total loans originated ...................... 1,979,740 1,328,910
Loan Principal repayments ....................... 1,132,338 1,029,543
Provision for loan losses ....................... 26,500 --
---------- ----------
Net loan activity ............................... 820,902 299,367
---------- ----------
Net Loans at End of Period ...................... $5,526,189 $4,705,287
---------- ----------
---------- ----------
</TABLE>
LOAN COMMITMENTS. The Savings Bank issues commitments for
first-mortgage residential loans, commercial real estate loans and share
loans conditioned upon the occurrence of certain events. Such commitments are
made in writing on specified terms and conditions and are honored for up to
60 days from approval, subject to extension for an additional 15 days,
depending on the type of loan. The Savings Bank had no outstanding
commitments of any kind at March 31, 1998.
LOAN ORIGINATION, SERVICING AND OTHER FEES. In addition to interest
earned on loans, the Savings Bank receives income through fees charged in
connection with loan origination late payments and miscellaneous services
related to its loans. Income from these activities varies from period to
period with the volume and type of loan originated.
The Savings Bank charges points for the origination of certain
types of mortgage loans. Each "point" is equal to 1% of the principal amount
of the mortgage loan. The point structure offered by the Savings Bank may
vary from time to time, depending upon the type of mortgage loan being made,
the interest rate offered and other competitive factors. A borrower is also
required to reimburse the Savings Bank for certain out-of-pocket expenses
incurred by the Savings Bank in connection with the processing and closing of
a loan, including the cost of independent appraisals, credit reports, title
insurance, and private mortgage insurance (if required).
Current accounting standards require fees received (net of certain
loan origination costs) for originating loans to be deferred and amortized
into interest income over the contractual life of the loan. At March 31,
1998, the Savings Bank's deferred loan fees totaled $73,000.
LOANS TO ONE BORROWER. Under the ISBA and subject to certain
limited exceptions, the total loans and extensions of credit of the Savings
Bank outstanding at any time to any one borrower may not exceed the greater
of $500,000 or 20% of the Savings Bank's total capital. Although the Savings
Bank has the regulatory authority to make any type of loan up to $500,000,
the Board has established a loan to one borrower limit on non-owner occupied
properties of $250,000. It should be noted that the Board could increase this
self-imposed limitation up to the limitations established by its regulators
without prior regulatory approval. As of March 31, 1998, the Savings Bank's
three largest outstanding loans to single borrowers, consisted of a eight
single-family mortgage loans in the amount of $197,756 secured by one
personal residence and seven rental properties, a single-family mortgage loan
in the amount of $137,282 secured by a personal residence, and a
single-family mortgage loan in the amount of $124,212 secured by a personal
residence. Each of these loans was current as of such date and was well
within the Savings Bank's lending limit.
41
<PAGE>
DELINQUENCIES. The Savings Bank's collection procedures with
respect to delinquent loans include written notice of delinquency and contact
by letter or telephone by Savings Bank personnel. Most loan delinquencies are
cured within 90 days and no legal action is taken. With respect to mortgage
loans, if the delinquency exceeds 90 days, the Savings Bank institutes
measures to enforce its remedies resulting from the default, including the
commencement of foreclosure action or the repossession of collateral.
NON-PERFORMING ASSETS. Non-performing assets include loans placed
on non-accrual status, loans that are 90 or more days past due, troubled debt
restructurings and foreclosed properties. The Savings Bank places loans that
are 90 days or more past due on non-accrual status unless such loans are
adequately collateralized and in the process of collection. Accrual of
interest on a nonaccrual loan is resumed only when all contractually past due
payments are brought current and management believes that the outstanding
loan principal and contractually due interest are no longer doubtful of
collection. As of March 31, 1998, no loans had been placed on non-accrual
status.
Property acquired by the Savings Bank as a result of a foreclosure,
property upon which a judgment of foreclosure has been entered but for which
no foreclosure sale has yet taken place and property which is in substance
foreclosed are classified as foreclosed property or real estate owned.
Foreclosed properties are recorded at the lower of the unpaid principal
balance of the related loan or fair market value. The amount by which the
recorded loan balance exceeds the fair market value at the time the property
is classified as foreclosed property is charged against the allowance for
loan losses. Any subsequent reduction in the carrying value of a foreclosed
property, along with expenses to maintain or dispose of a foreclosed
property, is charged against current earnings. As of March 31, 1998, the
Savings Bank had no foreclosed properties or "real estate owned."
The following table sets forth information with respect to Savings
Bank's non-performing assets for the periods indicated. During the periods
shown, Savings Bank had no troubled debt restructured loans within the
meaning of Statement of SFAS 15.
<TABLE>
<CAPTION>
AT MARCH 31,
----------------------------
1998 1997
------------ -------------
<S> <C> <C>
Loans accounted for on
a nonaccrual basis: ................................... $ -- $ --
Accruing loans which are contractually
past due 90 days or more:
Real estate -
One- to four-family .................................. 11,116 42,699
Multi-family ......................................... -- --
Commercial ........................................... -- --
Share ................................................. -- --
-------- --------
TOTAL ................................................ 11,116 42,699
-------- --------
Total of Nonaccrual and 90 days past due loans ........ 11,116 42,699
Real estate owned ........................................ -- --
Other Non-Performing Assets .............................. -- --
-------- --------
Total nonperforming assets ............................. $11,116 $42,699
-------- --------
-------- --------
Total loans delinquent 90 days or more to net loans ...... 0.20% 0.91%
Total loans delinquent 90 days or more to total assets ... 0.16% 0.68%
Total nonperforming assets
to total assets ........................................ 0.16% 0.68%
</TABLE>
CLASSIFIED ASSETS. FDIC policies require that each insured
depository institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, regulatory
examiners have the authority to identify problem assets and, if appropriate,
require them to be classified. The Savings Bank reviews and classifies its
assets at least quarterly. There are three classifications for problem
assets: substandard,
42
<PAGE>
doubtful and loss. Substandard assets must 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 as
loss is considered uncollectible and of such little value that continued
treatment of the asset as an asset on the books of the institution is not
warranted.
An insured institution is required to establish prudent general
allowances for loan losses with respect to assets classified as substandard
or doubtful. The institution is required either to charge off assets
classified as loss or to establish a specific allowance for 100% of the
portion of the asset classified as loss.
At March 31, 1998 and 1997 the aggregate amounts of Savings Bank's
classified assets, and of Savings Bank's general loss allowances for the
period then ended, were as follows:
<TABLE>
<CAPTION>
AT MARCH 31,
---------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Substandard assets........................... $11,116 --
General loss allowances...................... $32,700 $6,200
</TABLE>
The classified asset identified in the table above relate to one
residential mortgage loan.
ALLOWANCE FOR LOAN LOSSES. Under applicable federal policies, the
Savings Bank is required to establish general allowances for loan losses. In
addition to such general valuation allowances, the Savings Bank may establish
specific loss reserves against specific assets with respect to which a loss
may be realized General allowances represent loss allowances which have been
established to recognize the inherent risks associated with lending
activities, but which, unlike specific allowances, have not been allocated to
recognize probable losses on particular problem assets.
The Savings Bank's management evaluates the amount of its allowance
for loan losses quarterly. Such evaluation includes a review of all loans for
which full collectibility may not be reasonably assured and considers among
other matters, the estimated market value of the underlying collateral of
problem loans, prior loss experience, economic conditions and overall
portfolio quality. The Savings Bank's determination as to its classification
of assets and the amount of its specific and general valuation allowances are
subject to review by the Commissioner and the FDIC, either of which can
require the Savings Bank to establish additional general or specific loan
loss allowances. Provisions for losses are charged against earnings in the
year they are established and added to the allowance. Loan losses are charged
against the allowance.
The Savings Bank established provisions for loan losses for the
years ended March 31, 1998 and the eleven months ended March 31, 1997 of
$27,000 and $0, respectively. At March 31, 1998, the Savings Bank had an
allowance for loan losses of $33,000, or, 0.58%, of total loans, and 300.0%
of total non-performing assets.
Management believes that the Savings Bank's loan loss reserves were
adequate at March 31, 1998. There can be no assurance, however, that the
allowance for loan losses will be adequate to cover losses which may in fact
be realized in the future and that additional provisions for loan losses will
not be required. Any material increase in reserves or material loss for which
an adequate reserve has not been established may adversely affect the Savings
Bank's financial condition and earnings.
The following table sets forth an analysis of the Savings Bank's
gross allowance for possible loan losses for the periods indicated. Where
specific loan loss reserves have been established, any difference between the
loss reserve and the amount of loss realized has been charged or credited to
current income.
43
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31,
1998 1997
------------ -------------
<S> <C> <C>
Allowance at beginning of period ............................................. $ 6,200 $ 6,200
Provision for loan losses .................................................... 26,500 --
Total recoveries............................................................ -- --
Total charge offs .......................................................... -- --
------- -------
Balance at end of period ................................................... $32,700 $ 6,200
------- -------
------- -------
Ratio of allowance to total loans
outstanding at the end of the period ........................................ 0.58% 0.13%
Ratio of net charge offs to average
loans outstanding during the period ......................................... N/A N/A
</TABLE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------------------------------
1998 1997
------------------------------------ -----------------------------
AS % OF
AS % OF OUTSTANDING OUTSTANDING
AMOUNT LOANS IN CATEGORY AMOUNT LOANS IN CATEGORY
------ ------------------- ------ ------------------
<S> <C> <C> <C> <C>
Real estate - mortgage:
One- to four- family .......................... $30,850 94.30% $ 6,200 100.00%
Multi-family .................................. -- -- -- --
Commercial .................................... 1,850 5.70 -- --
Share ........................................... -- -- -- --
------- ------ ------- ------
Total allowance for loan losses ................. $32,700 100.00% $ 6,200 100.00%
------- ------ ------- ------
------- ------ ------- ------
</TABLE>
INVESTMENT ACTIVITIES
Under applicable regulations of the Commissioner, the Savings Bank has the
authority to invest in various types of liquid assets, including United States
Treasury obligations, obligations of various Federal agencies and corporations
and of state and municipal governments, Federal Home Loan Bank of Chicago stock,
and certificates of deposit, demand or savings accounts or other insured
obligations of federally insured financial institutions. Subject to various
restrictions, the Savings Bank may also invest a portion of its assets in
investment grade commercial paper and debt securities.
Investment decisions are made by the C.E.O. of the Savings Bank in
accordance with an investment policy adopted by the Board of Directors of the
Savings Bank. Under the investment policy in effect as of the date hereof, the
Savings Bank is permitted to invest in U.S. treasury bills, notes and bonds,
securities backed by the full faith and credit of the federal government or
federal agencies, state, county and municipal securities that meet specified
credit standards and certificates of deposit, demand or savings accounts or
other insured obligations of federally insured financial institutions. Under the
Savings Bank's investment policy, the Savings Bank may invest in certain other
forms of bank-eligible securities if such investment is approved by the Board of
Directors.
At March 31, 1998, the Savings Bank held $175 thousand in investment
securities, compared with $101 thousand at March 31, 1997.
The following table sets forth certain information with respect to each
security which had an aggregate book value in excess of 10% of the Savings
Bank's retained earnings at the dates indicated.
44
<PAGE>
<TABLE>
<CAPTION>
AT MARCH 31,
------------------------------------------------------------------------------------
1998 1997
----------------------------------- -----------------------------------
CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE
--------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation ("FHLMC") common
stock.......................... $175,329 $175,329 $100,716 $100,716
</TABLE>
The following table sets forth the Savings Bank's investment securities
portfolio at carrying value at the dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
------------------------------------------------------------------------------------
1998 1997
----------------------------------- -----------------------------------
BOOK PERCENT OF BOOK PERCENT OF
VALUE(1) PORTFOLIO VALUE PORTFOLIO
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
FHLMC common stock............ $175,329 100 $100,716 100
-------- ---- --------- ----
Total....................... $175,329 100% $100,716 100%
-------- ---- --------- ----
-------- ---- --------- ----
</TABLE>
45
<PAGE>
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
GENERAL. The Savings Bank's primary sources of funds for use in lending and
investing and for other general purposes are deposits and proceeds from
principal and interest payments on loans, investment securities and interest
bearing time deposits. Contractual loan repayments are a relatively stable
source of funds, while deposit inflows and outflows and loan prepayments 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.
The following table sets forth information concerning the deposit flows of
the Savings Bank during the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE PERIOD
ENDED MARCH 31,
-------------------------------------------------
1998 1997
--------------------- ---------------------
<S> <C> <C>
Total deposits at beginning of period $ 5,308,464 $ 5,482,630
Net withdrawals (227,181) (339,561)
Interest credited on deposits 169,024 165,395
----------- -----------
Total deposits at end of period $ 5,250,307 5,308,464
----------- -----------
----------- -----------
</TABLE>
DEPOSIT ACCOUNTS. The Savings Bank attracts deposits within its primary
market area by offering a variety of deposit accounts, including passbook
savings accounts and certificates of deposit. The flow of deposits is influenced
significantly by general economic conditions, changes in money market and
prevailing interest rates, and competition. Management generally reviews at
least on a monthly basis the interest rates set for its deposit accounts. The
Savings Bank has historically paid deposit rates at the higher end of the range
offered by its competitors, in order to retain existing and attract new
deposits, although there are no assurances that management will continue the
practice in the future. Such practice is also subject to regulation by the FDIC.
See "SUPERVISION AND REGULATION -- The Savings Bank -- Brokered Deposits." The
Savings Bank also relies on customer service and long-standing relationships
with customers to attract and retain deposits.
The following table sets forth the balances of savings deposits in the
various types of savings accounts offered by the Savings Bank at the dates
indicated.
<TABLE>
<CAPTION>
AT AND FOR THE PERIOD ENDED MARCH 31,
--------------------------------------------------------------------
1998 1997
--------------------------------- --------------------------------
AMOUNT PERCENT OF TOTAL AMOUNT PERCENT OF TOTAL
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Regular savings accounts ............................. $ 461,384 8.79% $ 409,467 7.71%
Fixed-rate certificates which mature
in the year ending (1):
March 31, 1999 ..................................... 2,190,214 41.72 2,590,242 48.79
March 31, 2000 ..................................... 1,469,142 27.98 390,223 7.35
March 31, 2001 ..................................... 311,441 5.93 1,335,233 25.16
Certificates maturing thereafter ................... 818,126 15.58 583,299 10.99
---------- ---------------- ---------- ----------------
Total .............................................. $5,250,307 100.00% $5,308,464 100.00%
---------- ---------------- ---------- ----------------
---------- ---------------- ---------- ----------------
</TABLE>
NOTE: Employee IRA-SEP accounts are included in certificate balances:
amounts are $132,641 and $112,577 for March 31, 1998 and 1997, respectively.
(1) At March 31, 1998 and 1997 jumbo certificates amounted to $100,000.
46
<PAGE>
The following table sets forth the amount and maturities of time deposits
classified by rates at March 31:
<TABLE>
<CAPTION>
1998
AMOUNT DUE 1997
--------------------------------------------------------------------- ---------
LESS THAN 1-2 2-3 AFTER
ONE YEAR YEARS YEARS 3 YEARS TOTAL TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
4.00 -- 4.99% ............ $ 53,662 -- -- -- $ 53,662 $ 151,929
5.00 -- 5.99% ............ 2,054,587 $ 410,863 $ 57,601 $ 165,510 2,688,561 2,437,819
6.00 -- 6.99% ............ 73,974 1,046,724 160,580 616,476 1,897,754 2,150,786
7.00 -- 7.99% ............ 7,991 11,555 93,260 36,140 148,946 158,463
---------- ---------- ---------- ---------- ---------- ----------
Total ............ $2,190,214 $1,469,142 $ 311,441 $ 818,126 $4,788,923 $4,898,997
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
BORROWINGS. The Savings Bank may obtain advances from the FHLB of Chicago
upon the security of the common stock it owns in that bank and certain of its
residential mortgage loans and securities held to maturity, 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. Prior to fiscal 1998, the Savings Bank had, from time to
time, used short-term borrowings, however, the Savings Bank had not used
long-term borrowings.
The following table sets forth the amounts of the Savings Bank's borrowings
and the weighted average rates for the year ended March 31, 1998. The Savings
Bank had no borrowings at the year ended March 31, 1997.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31, 1998
-------------------
<S> <C>
FHLB advances:
Average balance outstanding during the period (1)..................... $366,500
Maximum amount outstanding at any month-end during the period......... $600,000
Balance outstanding at end of period.................................. $600,000
Weighted average interest rate during the period...................... 5.98%
Weighted average interest rate at the end of period................... 6.36%
</TABLE>
- ------------
(1) The average balance was computed using an average of monthly balances during
the year.
COMPETITION
The Savings Bank faces strong competition both in attracting deposits and
making real estate loans. Its most direct competition for deposits has
historically come from other savings institutions, credit unions and commercial
banks located in its market area including many large financial institutions
which have greater financial and marketing resources available to them. As of
June 30, 1997, the Savings Bank's total deposits ranked eighth out of eight
commercial banks and savings associations operating in Piatt County, Illinois.
In addition, during times of high interest rates, the Savings Bank has faced
significant competition for investors' funds from short-term money market
securities, mutual funds and other corporate and government securities. The
ability of the Savings Bank 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.
The Savings Bank experiences strong competition for real estate loans
principally from other savings institutions, and commercial banks. The Savings
Bank competes for loans principally through the interest rates and loan fees it
charges, the efficiency and quality of services it provides borrowers and the
convenient location of its
47
<PAGE>
office. Competition may increase as a result of the continuing reduction of
restrictions on the interstate operations of financial institutions.
PROPERTIES
The Savings Bank's sole office is located at 229 E. South Street, Cerro
Gordo, Illinois 62801. The office was opened in 1963 and consists of the first
floor of a two-story, brick building. At March 31, 1998, the net book value of
the Savings Bank's premises and equipment was $16,000. The Savings Bank believes
that its facilities are adequate for its current needs and will continue to be
adequate for its needs following the Conversion.
EMPLOYEES
As of March 31, 1998, the Savings Bank had a total of 4 full-time
employees. The Savings Bank's employees are not represented by a union or
collective bargaining group. The Savings Bank considers its relationship with
its employees to be satisfactory.
LEGAL PROCEEDINGS
The Savings Bank is, from time to time, a party to legal proceedings
arising in the ordinary course of its business, including legal proceedings to
enforce its rights against borrowers. The Savings Bank is not currently a party
to any legal proceedings which could reasonably be expected to have a material
adverse effect on the financial condition or operations of the Savings Bank.
48
<PAGE>
MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK
DIRECTORS OF THE HOLDING SAVINGS BANK
The Board of Directors of the Holding Savings Bank is currently the same
as that of the Savings Bank. Their names and biographical information are set
forth below under "Directors of the Savings Bank." The Board of Directors is
divided into three classes, each of which will serve a three-year term
(except with respect to two of the classes for the first two years after the
incorporation of the Holding Company). One class of directors, consisting of
Lester W. Crandall and C. Russell York, has a term of office expiring at the
first annual meeting of the Holding Company following the Conversion; a
second class, consisting of Noel R. Buckley, Larry D. Gaitros and John A.
Sochor, D.D.S, has a term of office expiring at the annual meeting to be held
one year thereafter, and a third class, consisting of Dale C. Born and
Maralyn F. Heckman, has a term of office expiring at the annual meeting to be
held two years thereafter. Mrs. Heckman is the President, Secretary and
Treasurer of the Holding Company.
None of the directors has received remuneration from the Holding Company to
date, and it is expected that no compensation will initially be paid to them by
the Holding Company after the Conversion. Information concerning the principal
occupations and employment of, and compensation received from the Savings Bank
by, the directors of the Holding Company is set forth under "-- Directors of the
Savings Bank," and "-- Directors' Fees."
DIRECTORS OF THE SAVINGS BANK
The direction and control of the Savings Bank is vested in its Board of
Directors who, because the Savings Bank is organized in mutual form, have
previously been elected by the members of the Savings Bank. Upon completion of
the Conversion, each director of the Savings Bank immediately prior to the
Conversion will continue to serve as a director of the Savings Bank after the
Conversion. All of the members of the Board of Directors stand for election each
year. Because the Holding Company will own all of the issued and outstanding
capital stock of the Savings Bank following the Conversion, the Holding Company
will elect the directors of the Savings Bank following the Conversion.
The following table sets forth certain information with respect to the
persons who currently serve as members of the Board of Directors of the Savings
Bank.
<TABLE>
<CAPTION>
AGE AT POSITIONS HELD
NAME MARCH 31, 1998 WITH THE SAVINGS BANK DIRECTOR SINCE TERM EXPIRES
- ------------- ---------------- ----------------------- --------------- ------------
<S> <C> <C> <C> <C>
Dale C. Born 66 Director 1993 1999
Noel R. Buckley 63 Director 1995 1999
Lester W. Crandall 40 Director 1998 1999
Larry D. Gaitros 38 Director 1997 1999
Maralyn F. Heckman 57 Director, Secretary, 1977 1999
Treasurer and CEO
John A. Sochor, D.D.S. 50 Director and 1981 1999
President of Board
C. Russell York 56 Director and 1983 1999
Vice President of Board
</TABLE>
49
<PAGE>
The business experience for the past five years of each of the current
directors is as follows:
Mr. Born has been retired from the A.E. Staley Manufacturing Company since
1987. For more than the past five years, Mr. Born has been engaged in family
farming.
Mr. Buckley retired as a floor supervisor from the Firestone Tire and
Rubber Company in 1994.
Mr. Crandall has been the meat manager of Eagle Food Center in Decatur,
Illinois for more than the past five years.
Mr. Gaitros has been a millwright at Archer Daniels Midland in Decatur,
Illinois for more than the past five years.
Mrs. Heckman has held various positions with the Savings Bank since 1976.
In May of 1977, Mrs. Heckman became the Chief Executive Officer of the Savings
Bank.
Dr. Sochor has been a licensed self-employed dentist in Cerro Gordo,
Illinois for more than the past five years.
C. Russell York has been a service technician for Phil Flaugher Electric
Corporation in Decatur, Illinois since October of 1994. Prior to that, Mr. York
was employed with the A.E. Staley Manufacturing Company in Decatur, Illinois for
35 years.
MEETINGS AND COMMITTEES OF THE BOARDS OF DIRECTORS
The Savings Bank's Board of Directors conducts its business through
meetings of the Board and the activities of committees of the Board. During the
fiscal year ended March 31, 1998, the Savings Bank's Board of Directors held 18
meetings. Other than Mr. Coffey, who has been ill, no director of the Savings
Bank attended fewer than 75% of the aggregate number of meetings of the Board of
Directors or meetings of committees on which such director served held in the
1998 fiscal year.
On April 15, 1998, the Board of Directors of the Savings Bank reviewed its
committee structure and established six standing committees: audit, loan,
nominating, compensation, appraisal and conversion. It is expected that the loan
and appraisal committees will meet on a regular basis and that the audit,
nominating, compensation and conversion committees will meet only a few times
per year.
Messrs. Born, Buckley and York are members of the audit committee. The
audit committee is principally responsible for recommending which firm to engage
as the Savings Bank's external auditor. Further, the entire board meets with the
outside auditors to review the Savings Bank's annual financial statements and
matters relating thereto. If any matter needs additional attention, the audit
committee meets with the auditors without management present.
Mrs. Heckman and Dr. Sochor are members of the loan committee. The loan
committee is principally responsible for insuring that the lending policies of
the Savings Bank are implemented and observed. They meet between regular
scheduled board meetings to review the recommendations of the appraisal
committee and approve loan applications within the limits set forth in the
Savings Bank's lending policies.
Messrs. Born, Buckley, Crandall, Gaitros, York and director Emeritus Miller
are members of the appraisal committee. The appraisal committee is principally
responsible for insuring that the appraisal policy of the Savings Bank is
implemented and observed. Three members of this committee visually inspect each
property being appraised. All members of the appraisal committee sign a written
recommendation to the loan committee regarding each loan application and
appraisal.
50
<PAGE>
Messrs. Buckley, Gaitros and York are members of the nominating committee.
The nominating committee is principally responsible for recommending to the
Board of Directors the slate of nominees of directors to be elected by the
members of the Savings Bank. Any member of the Savings Bank may nominate an
individual for election as a director by notifying the secretary of the Savings
Bank in writing at least five days before the meeting at which the election is
to take place. Following the Conversion, the Holding Company will be the sole
stockholder of the Savings Bank, and such nomination procedures will no longer
apply.
All board members are members of the compensation committee. The
compensation committee is principally responsible for reviewing and establishing
the salaries and benefits for employees.
Mrs. Heckman and Messrs. Born and Buckley are members of the conversion
committee. The conversion committee is principally responsible for taking action
necessary or appropriate to implement the decision of the board to proceed with
adopting the Plan of Conversion.
DIRECTORS' FEES
All directors of the Savings Bank, including directors who are officers of
the Savings Bank, receive a fee of $125 for each meeting of the Board they
attend. No fees are paid for attending committee meetings. The Holding Company's
Board of Directors intends to meet quarterly. Directors of the Holding Company
will not receive any fees in consideration of their service.
EXECUTIVE OFFICERS
The Holding Company currently has one executive officer. Mrs. Maralyn F.
Heckman is the Secretary, Treasurer and President of the Holding Company. For
information concerning Mrs. Heckman's prior business experience, see
"-- Directors of the Savings Bank."
The Savings Bank currently has one executive officer. Mrs. Maralyn F.
Heckman is the Secretary, Treasurer and Chief Executive Officer of the Savings
Bank and has held that position since May, 1977.
Messrs. Sochor and York are respectively President and Vice President of
the Savings Bank's Board of Directors but only perform policy making functions
in their capacity as a director. Accordingly, the Board of Directors does not
consider Messrs. Sochor and York to be executive officers of the Savings Bank.
EXECUTIVE COMPENSATION
The table below sets forth the total amount of cash compensation paid by
the Savings Bank to its Chief Executive Officer during the fiscal year ended
March 31, 1998. No officer or employee of the Savings Bank received compensation
in excess of $100,000 during the fiscal year ended March 31, 1988.
EXECUTIVE COMPENSATION TABLES
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
------------------- ---- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Maralyn F. Heckman 1998 $35,100 $1,000 -- $1,800(1)
</TABLE>
(1) Directors fees.
51
<PAGE>
The Holding Company has paid no compensation to date to the sole executive
officer of the Holding Company. The Holding Company does not plan to pay
compensation to officers of the Holding Company for their services as such.
EMPLOYEE BENEFIT PLANS
SIMPLIFIED EMPLOYEE PENSION PLAN. The Savings Bank currently maintains a
simplified employee pension plan (the "SEP") to provide retirement benefits for
employees eligible to participate therein. The SEP is a qualified plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The SEP provides that the Savings Bank shall make monthly contributions of not
more than 15% of each eligible employee's compensation to an Individual
Retirement Account established for that employee. Employees, who have attained
at least age 21 and who have worked for the Savings Bank in two out of the five
preceding years are eligible for SEP contributions. Employees who are covered
under a collective bargaining agreement and employees who have compensation
during the year of less than $300 are not eligible to participate for that year.
The Savings Bank may, but does not anticipate that it will continue to make
contributions to the SEP, due to the costs associated with funding the ESOP
being adopted in connection with the Conversion and due to the limitations on
retirement plan contributions set forth in the Code.
EMPLOYEE STOCK OWNERSHIP PLAN. The Board of Directors of the Savings Bank
and the Holding Company have approved the adoption of an ESOP, to be effective
in connection with the Conversion. Employees of age 21 or older who have
completed at least 1,000 hours of service in a 12-month period of employment
with the Savings Bank will be eligible to participate in the ESOP. The Savings
Bank will submit an Application for a Letter of Determination to the Internal
Revenue Service as to the tax qualified status of the ESOP under Section 401(a)
of the Code. Although no assurances can be given, the Savings Bank and the
Holding Company expect that the ESOP will receive a favorable determination
letter.
Benefits under the ESOP will be paid in shares of Common Stock. The ESOP
anticipates borrowing funds from the Holding Company to acquire 8% of the Common
Stock sold in the Conversion. This loan will be secured by the shares purchased
with the proceeds and will be repaid by the ESOP with funds from the Savings
Bank's contributions to the ESOP and earnings on ESOP assets. Shares purchased
with such loan proceeds will be held in a suspense account for allocation among
participants as the loan is repaid. Such shares will be allocated among the
officers and employees of the Savings Bank each year, pro rata, in accordance
with their compensation for such year. The Savings Bank expects to make
contributions to the ESOP at such times and in an amount that, at a minimum,
will enable the ESOP to meet its debt service obligations in accordance with the
loan terms. Any contributions in excess of this amount may be made at the
Savings Bank's discretion. While the loan is outstanding, any cash dividends
received with respect to the shares purchased with the proceeds of the loan will
be applied to the principal and interest payments due on such loan. The loan
will require annual interest and principal payments over a ten-year period and
will bear interest at a rate of 8%.
The Savings Bank's contributions to the ESOP to retire the principal and
interest on the ESOP debt will be accounted for as compensation and employee
benefits expense. The Savings Bank expects that the annual compensation and
employee benefits expense related to the ESOP will be approximately $15,000
(including $8,000 for interest on the ESOP debt) on a pre-tax basis and assuming
that the ESOP purchases 8% ($101,200) of the Common Stock sold in the Conversion
based on the maximum of the Estimated Valuation Range ($1,265,000). The
contributions to repay principal and interest on the ESOP debt are tax
deductible to the Savings Bank.
The ESOP intends to purchase 8% of the Common Stock sold in the Conversion;
however, under certain circumstances the ESOP's purchases in the Conversion may
be limited to an amount less than 8% or may be prohibited altogether. If the
final Conversion valuation exceeds $1,265,000 (the maximum of the Estimated
Valuation Range), an additional number of shares may be issued in the Conversion
to the ESOP to enable the ESOP to purchase 8% of the total number of shares sold
in the Offering, subject to the approval of the Commissioner and
52
<PAGE>
the FDIC. If the final Conversion valuation does not exceed $1,265,000, the
ESOP will be permitted to purchase Common Stock in the Offering only if stock
is available after satisfaction of orders by Eligible Account Holders. If an
insufficient amount of stock is available after the satisfaction of orders by
Eligible Account Holders to permit the ESOP to purchase 8% of the total
number of shares sold in the Offering, the ESOP intends to purchase stock
after the Conversion, either in the open-market or from the Holding Company's
authorized but unissued shares, so that, following such purchase, the ESOP
will own 8% of the Holding Company's then outstanding Common Stock. If the
ESOP purchases shares of Common Stock after the Conversion, the ESOP must
purchase the Common Stock at the then prevailing market price.
ESOP participants must have completed 1,000 hours of service during a plan
year and be employed on the last day of the plan year or have terminated their
employment on account of death, disability or retirement during the plan year in
order to receive an allocation of shares for that plan year. Participants'
benefits vest at a rate of 20% for each year of service and are 100% vested at
the end of five years of service. Vesting will be accelerated upon retirement,
death or disability of the participant or upon termination of the ESOP. Vested
benefits will be payable upon retirement, death, disability, or separation from
service. Contributions and forfeitures will be allocated pro rata, based on the
ratio each participant's compensation bears to the compensation of all
participants entitled to share in such allocation.
The compensation committee of the Savings Bank's Board of Directors will
administer the ESOP. A trustee for the ESOP (the "ESOP Trustee") will be
appointed prior to the Conversion. The ESOP Trustee will invest the trust assets
only upon the direction of the compensation committee. The ESOP Trustee will
vote shares allocated to participants' accounts in accordance with the
participants' written instructions. The ESOP Trustee will vote unallocated
shares in accordance with the instructions of the compensation committee, or, in
the absence of such instructions, in the same proportions as the allocated
shares are voted.
STOCK OPTION PLAN. The Board of Directors of the Holding Company expects to
approve the adoption of the Stock Option Plan, subject to receipt of Stock
Option Plan Stockholder Approval. The Stock Option Plan may not, and will not,
be established and become effective unless and until Stock Option Plan Approval
is obtained. The Stock Option Plan is intended to promote stock ownership by
directors and selected officers and employees of the Holding Company and the
Savings Bank to increase their proprietary interest in the Holding Company and
to encourage them to remain in the employ of the Holding Company or the Savings
Bank.
The Stock Option Plan is to be administered by a committee (the
"Committee") comprised of two or more members of the Board of Directors of the
Holding Company. None of the members of the Committee may be an officer or
employee of the Holding Company or the Savings Bank or may have received any
discretionary stock-based incentive awards under any plan of the Holding
Company or the Savings Bank during the year prior to or during service on the
Committee. The Committee will have the authority, among other things, to select
the employees to whom options may be granted, to determine the terms of each
option, to interpret the provisions of the Stock Option Plan and to make all
other determinations that it may deem necessary or advisable for the
administration of the Stock Option Plan. Each determination or other action made
or taken pursuant to the Stock Option Plan, including interpretation of the
Stock Option Plan and the specific terms and conditions of the options granted
thereunder, by the Committee will be final and conclusive for all purposes and
upon all persons.
The Stock Option Plan provides for the grant of "incentive stock options"
within the meaning of Section 422 of the Code, and for options that do not
constitute incentive stock options (referred to herein as "nonstatutory
options"), as determined in each individual case by the Committee. Incentive
stock options granted under the Stock Option Plan have certain advantageous tax
attributes under federal and Illinois income tax laws. No taxable income is
recognized by the option holder for federal or Illinois income tax purposes at
the time of the grant or exercise of an incentive stock option, and no federal
or Illinois income tax deduction is available to the Holding Company or the
Savings Bank as a result of such a grant or exercise. Any gain or loss
recognized by an option holder on the later disposition of shares acquired
pursuant to the exercise of an incentive stock option
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generally will be treated as long-term capital gain or loss if such
disposition does not occur prior to one year after the date of exercise of
the option or two years after the date the option was granted.
As in the case of incentive stock options, the grant of a nonstatutory
stock option will not result in taxable income to the recipient of the option
for federal or Illinois income tax purposes nor will the Holding Company or
the Savings Bank be entitled to an income tax deduction. Upon exercise of a
nonstatutory stock option, however, the option holder will generally
recognize ordinary income for federal and Illinois income tax purposes equal
to the difference between the exercise price and the fair market value of the
shares acquired on the date of exercise, and the Holding Company, the Savings
Bank or the subsidiary of the Holding Company which is the employer of the
option holder will be entitled to federal and Illinois income tax deductions
in the amount of the ordinary income recognized by the option holder. In
general, any further gain or loss realized by the option holder on the
subsequent disposition of such shares will be long-term or short-term capital
gain or loss, depending on the length of time the shares are held after the
option is exercised.
Upon receipt of stockholder approval to establish the Stock Option Plan,
the Board of Directors intends to reserve, out of the authorized but unissued
shares of Common Stock of the Holding Company, an amount of stock equal to
10% of the Common Stock sold in the Conversion for issuance under the Stock
Option Plan (or between 9,350 shares and 12,650 shares, assuming the sale of
between 93,500 shares and 126,500 shares of Common Stock in the Conversion).
Under the Plan and presently effective regulations and policies of the FDIC,
the shares of Common Stock for which options may be granted during the first
year following the Conversion may not exceed 10% of the total number of
shares of Common Stock sold in the Conversion. In general, any shares of
Common Stock subject to issuance upon exercise of options but which are not
issued because of a surrender, forfeiture, expiration, termination or
cancellation of any such option will once again be available for issuance
pursuant to subsequently granted options.
The Committee will initially, and from time to time thereafter, select
those officers and other key employees of the Holding Company, the Savings
Bank or any of their subsidiaries to participate in the Stock Option Plan on
the basis of the special importance of their services in the management,
development and operations of the Holding Company, the Savings Bank or their
subsidiaries. Such officers and other key employees may receive either
incentive stock options or nonstatutory options under the Stock Option Plan.
Unless expressly provided otherwise at the time of the grant however, such
officers and other key employees will receive incentive stock options.
If the Stock Option Plan is implemented within the one year period
following consummation of the Conversion, options granted under the Stock
Option Plan will vest and become exercisable at a rate of 20% per year,
commencing one year after the grant date, and 20% on each anniversary date
thereof for the following four years. Notwithstanding such a five-year
vesting schedule, all awards will be 100% vested upon the death or disability
of the recipient. If an employee's employment terminates (or a director's
service as a director terminates) with the Savings Bank or the Holding
Company for reasons other than death, disability or retirement, the
employee's unvested options will be forfeited. Options held by nondirector
optionees will continue to become exercisable pursuant to the terms of the
applicable option agreements in the event of a nondirector's early or normal
retirement as defined in the ESOP. Options held by director optionees will
continue to become vested pursuant to the terms of the applicable option
agreements in the event of a director's retirement in accordance with the
retirement policies of the Board of Directors. Options granted under the
Stock Option Plan may be exercisable for up to ten years.
The exercise price of options granted under the Stock Option Plan must
at least equal the fair market value of the Common Stock subject to the
option (determined as provided in the Stock Option Plan) on the date the
option is granted.
An incentive stock option granted under the Stock Option Plan to an
employee owning more than 10% of the total combined voting power of all
classes of stock of the Holding Company is subject to the further restrictions
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that such option must have an exercise price of at least 110% of the fair
market value of the shares issuable on exercise of the option (determined as
of the date the option is granted) and will expire, and all rights to
purchase shares thereunder will cease, no later than the fifth anniversary of
the date the incentive stock option was granted. Incentive stock options are
subject to the further restriction that the aggregate fair market value
(determined as of the date of grant) of stock as to which any such incentive
stock option first becomes exercisable in any calendar year is limited to
$100,000. To the extent options covering more than $100,000 worth of stock
first become exercisable in any one calendar year, the excess will be
nonstatutory options.
The full exercise price for all shares purchased on exercise of options
granted under the Stock Option Plan may be paid in cash, in cash received
from a broker-dealer to whom the optionee has submitted an exercise notice
consisting of a fully endorsed option, by delivering shares of Common Stock
having an aggregate fair market value on the date of exercise equal to the
exercise price, by directing the Holding Company to withhold such number of
shares of Common Stock otherwise issuable upon exercise of such option having
an aggregate fair market value on the date of exercise equal to the exercise
price, by such other medium of payment, in the case of an officer or
employee, as the Committee, in its discretion, shall authorize at the time of
grant, or by any combination of the above.
If the Stock Option Plan is implemented within one year following
consummation of the Conversion, applicable regulations do not permit vesting
on options created under the plan at a rate greater than 20% per year,
accelerated vesting of stock options granted under a plan in the event of a
change in control or the granting of stock options to directors and officers
in excess of certain limits established by applicable regulations. If the
Stock Option Plan is implemented after the one year period following
consummation of the Conversion, subject to applicable regulatory requirements
then in effect, the Stock Option Plan described above may then provide for
vesting in options at a rate greater than 20% per year, accelerated vesting
of previously granted options in the event of a change in control of the
Holding Company or the Savings Bank and the grant of stock options to
directors and officers in excess of the limits that would have applied had
the Stock Option Plan been implemented within one year following consummation
of the Conversion. A change in control would be defined in the plan document
and would generally occur when a person or group of persons acting in concert
acquires beneficial ownership of 20% or more of any class of equity security
of the Holding Company or the Savings Bank or, in the event of a tender or
exchange offer, merger or other form of business combination, sale of all or
substantially all of the assets of the Holding Company or the Savings Bank or
contested election of directors which resulted in the replacement of a
majority of the Board of Directors by persons not nominated by the directors
in office prior to the contested election.
The Board of Directors or the Committee has the authority to terminate,
suspend or amend the Stock Option Plan, in whole or in part, from time to
time, without the approval of the stockholders of the Holding Company to the
extent allowed by law; provided, however, that (i) no amendment will be
effective until approved by the stockholders of the Holding Company insofar
as stockholder approval thereof is required in order for the Stock Option
Plan to continue to satisfy the requirements of Rule 16b-3 under the Exchange
Act, and (ii) the provisions of the Stock Option Plan applicable to
non-employee directors may not be amended more than once every six months,
except to comply with changes in the Code or the rules and regulations
thereunder. The Stock Option Plan provides for appropriate adjustment in the
number and kind of shares subject to the Stock Option Plan, and the number,
kind and per share exercise price of shares subject to unexercised options,
in the event of any change in the outstanding Common Stock by reason of a
stock split, stock dividend, combination or reclassification of shares,
recapitalization, merger or similar event.
Pursuant to the Plan of Conversion, if the Stock Option Plan is adopted
within one year following consummation of the Conversion, no individual may
be granted options to purchase more than 25% of the total shares covered by
the Stock Option Plan, and non-employee directors may not be granted options
to purchase more than 5% individually, or more than 30% as a group, of the
shares covered by the Stock Option Plan, unless the Commissioner and the FDIC
allow greater awards.
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Although no specific award determinations have been made at this time,
the Holding Company and the Savings Bank anticipate that if stockholder
approval is obtained it would provide awards to its directors, officers and
employees to the extent and under terms and conditions permitted by
applicable regulations. The size of individual awards will be determined
prior to submitting the Stock Option Plan for stockholder approval, and
disclosure of anticipated awards will be included in the proxy materials for
such meeting.
The shares used to fund the option awards will come from authorized but
unissued shares. As a result, in the event that all options under the Stock
Option Plan are awarded and exercised, the percentage interests of
stockholders as of the date the Conversion is consummated will be diluted by
approximately 9%. If more or less than 110,000 shares of Common Stock are
sold in the Conversion, the number of options granted under the Stock Option
Plan will be adjusted to maintain the ratio of the awards intended to be made
to the number of shares sold at the midpoint of the Estimated Valuation
Range. In the event of a stock split, reverse stock split or stock dividend;
the number of shares of Common Stock reserved under the Stock Option Plan and
the number of options granted pursuant thereto and exercise price of the
options will be adjusted to reflect such increase or decrease in the total
number of shares of Common Stock outstanding.
MANAGEMENT RECOGNITION PLAN. The Board of Directors of the Holding
Company expects to approve the adoption of the MRP, subject to receipt of MRP
Stockholder Approval. The MRP may not, and will not, be established and
become effective unless and until MRP Stockholder Approval is obtained. The
Board of Directors of the Holding Company has approved the MRP as a method of
providing directors, officers and employees of the Holding Company and the
Savings Bank with a proprietary interest in the Holding Company and to
encourage such persons to remain with the Holding Company and the Savings
Bank. If and when the Holding Company receives stockholder approval to
establish the MRP, the Holding Company will contribute funds to the MRP to
enable it to acquire shares of Common Stock in an amount equal to up to 4% of
the Common Stock sold in the Conversion, or up to 4,400 shares of Common
Stock assuming the sale of 110,000 shares at $10.00 per share (the midpoint
of the Estimated Valuation Range). No contributions by employees or
recipients will be permitted. Under the Plan of Conversion and present
regulations and policies of the FDIC, the total number of shares acquired by
the MRP and by the ESOP during the first year following consummation of the
Conversion may not, in the aggregate, exceed 12% of the total number of
shares sold in the Conversion.
The Plan of Conversion and applicable regulations and policies of the
FDIC prohibit the MRP from subscribing for shares of Common Stock in the
Conversion or otherwise being funded with shares of stock purchased in the
Conversion. Following consummation of the Conversion and MRP Stockholder
Approval, the MRP may purchase either outstanding shares of Common Stock in
the open market at the then market price of the Common Stock or authorized
but previously unissued shares of stock from the Holding Company (which the
Holding Company intends to reserve for issuance) at the then market price of
the Common Stock. Assuming that the MRP is funded entirely through purchases
of authorized but previously unissued shares of stock from the Holding
Company, the percentage interest of stockholders as of the date of such
purchase will be diluted by approximately 4.0%.
The MRP will be administered by a committee appointed by the Board of
Directors of the Holding Company. Officers and employees of the Holding
Company, the Savings Bank and any of their subsidiaries as of the date of MRP
Stockholder Approval will be eligible for grants of shares of Common Stock of
the Holding Company held by the MRP. It is the intention of the Board of
Directors that each non-employee director as of the effective date of the MRP
will be granted 220 shares of Common Stock held by the MRP (based on 110,000
shares of Common Stock sold at the midpoint of the Estimated Valuation Range
and 4,400 shares of Common Stock purchased by the MRP in the open market). If
the MRP is implemented within the one year period following the Conversion,
nonemployee directors, officers and employees become vested in shares of
Common Stock awarded to them under the MRP at a rate of 20% per year,
commencing one year after the grant date, and 20% on each anniversary date
thereof for the following four years. Notwithstanding such a five-year
vesting schedule, all awards will be 100% vested upon the death or disability
of the recipient. If an employee's employment terminates (or a
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director's service as a director terminates) with the Savings Bank or the
Holding Company for reasons other than death or disability, the employee's
unvested awards will be forfeited.
MRP award recipients will recognize taxable income equal to the fair
market value of the shares of Common Stock at the time such shares become
vested. Income recognized by MRP award recipients will be a deductible
expense of the Holding Company or the Savings Bank for tax purposes. When
cash dividends are paid with respect to plan shares vested and allocated to a
recipient, such recipient will be entitled to receive an amount equal to such
cash dividend. No recipient will have any voting or other rights of a
stockholder with respect to any plan shares awarded to such recipient prior
to the time such shares are actually distributed.
Pursuant to the Plan of Conversion, if the MRP is adopted within one
year following consummation of the Conversion, no individual may be awarded
more than 25% of the total number of shares of Common Stock held by the MRP,
and nonemployee directors may not be awarded more than 5% individually, or
more than 30% as a group, of the number of shares of Common Stock held by the
MRP, unless the Commissioner and the FDIC allow greater awards. Although no
specific award determinations have been made at this time, the Holding
Company and the Association anticipate that if stockholder approval is
obtained it would provide awards to its directors, officers and employees to
the extent and under terms and conditions permitted by applicable
regulations. The size of individual awards will be determined prior to
submitting the MRP for stockholder approval, and disclosure of anticipated
awards will be included in the proxy materials for such meeting.
If more or less than 110,000 shares of Common Stock are sold in the
Conversion, the number of MRP awards granted to directors, executive officers
and other employees of the Holding Company and Savings Bank will be adjusted
to maintain the ratio of the awards intended to be made to the number of
shares sold at the midpoint of the Estimated Valuation Range. In the event of
a stock split, reverse stock split or stock dividend, the number of shares of
Common Stock under the MRP will be adjusted to reflect such increase or
decrease in the total number of shares of Common Stock outstanding.
If the MRP is implemented within one year following consummation of the
Conversion, applicable regulations do not permit vesting in MRP awards at a
rate greater than 20% per year, accelerated vesting in MRP awards in the
event of a change in control or the grant of stock options to directors and
officers in excess of certain limits established by applicable regulations.
If the MRP is implemented after one year following consummation of the
Conversion, subject to applicable regulatory requirements then in effect, the
MRP may then provide for vesting in a MRP award at a rate greater than 20%
per year, accelerated vesting of previous MRP awards in the event of a change
in control at the Holding Company or the Savings Bank and the grant of MRP
awards to directors and officers in excess of the limits that would have
applied had the MRP been implemented within one year following consummation
of the Conversion.A change in control is expected to be defined in the plan
document, to generally occur when a person or group of persons acting in
concert acquires beneficial ownership of 20% or more of a class of equity
securities of the Holding Company or the Savings Bank or in the event of a
tender or exchange offer, merger or other form of business combination, sale
of all or substantially all of the assets of the Holding Company or the
Savings Bank or contested election of directors which results in the
replacement of a majority of the Board of Directors by persons not nominated
by the directors in office prior to the contested election.
EMPLOYMENT AGREEMENTS
Upon the Conversion, the Savings Bank and the Holding Company each
intend to enter into employment agreements with Mrs. Maralyn F. Heckman
(collectively, the "Employment Agreements"). The Employment Agreements are
intended to ensure that the Savings Bank and the Holding Company will be able
to maintain a stable and competent management base after the Conversion. The
continued success of the Savings Bank and the Holding Company depends to a
significant degree on the skills and competence of the above referenced
officer.
The Employment Agreements provide for three-year terms for Mrs. Heckman.
The term of the Employment Agreements will be extended on a daily basis
unless written notice of non-renewal is given by the
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Board of Directors. The Employment Agreements provide that Mrs. Heckman's
base salary will be reviewed annually. The base salary which will be
effective for such Employment Agreements for Mrs. Heckman will be her current
salary, $40,000.00. In addition to the base salary, the Employment Agreements
provide for, among other things, participation in stock benefits plans and
other fringe benefits applicable to executive personnel. The Employment
Agreements provide for termination by the Savings Bank or the Holding Company
for cause, as defined in the Employment Agreements, at any time. In the event
the Savings Bank or the Holding Company chooses to terminate Mrs. Heckman's
employment for reasons other than for cause, or in the event of Mrs.
Heckman's resignation from the Savings Bank and the Holding Company upon: (i)
failure to re-elect Mrs. Heckman to her current offices; (ii) a material
change in Mrs. Heckman's functions, duties or responsibilities; (iii) a
relocation of Mrs. Heckman's principal place of employment by more than 25
miles; (iv) a reduction in the benefits and prerequisites being provided to
Mrs. Heckman in the Employment Agreement; (v) liquidation or dissolution of
the Savings Bank or the Holding Company; or (vi) a breach of the Employment
Agreement by the Savings Bank or the Holding Company, Mrs. Heckman or, in the
event of death, her beneficiary would be entitled to receive an amount equal
to the remaining base salary payments due to Mrs. Heckman for the remaining
term of the Employment Agreement and the contributions that would have been
made on Mrs. Heckman's behalf to any employee benefit plans of the Savings
Bank and the Holding Company during the remaining term of the Employment
Agreement. The Savings Bank and the Holding Company would also continue and
pay for Mrs. Heckman's life, health, dental and disability coverage for the
remaining term of the Employment Agreement. Upon any termination of Mrs.
Heckman's employment, Mrs. Heckman is subject to a one year non-competition
agreement.
Under the Employment Agreements, if voluntary or involuntary termination
follows a change in control of the Savings Bank or the Holding Company, Mrs.
Heckman or, in the event of Mrs. Heckman's death, her beneficiary would be
entitled to a severance payment equal to the greater of: (i) the payments due
for the remaining terms of the agreement; or (ii) three times the average of
the five preceding taxable years' annual compensation. The Savings Bank and
the Holding Company would also continue Mrs. Heckman's life, health, and
disability coverage for thirty-six months. Notwithstanding that both the
Savings Bank and Holding Company Employment Agreements provide for a
severance payment in the event of a change in control, Mrs. Heckman would
only be entitled to receive a severance payment under one agreement.
Payments to Mrs. Heckman under the Savings Bank's Employment Agreement
will be guaranteed by the Holding Company in the event that payments or
benefits are not paid by the Savings Bank. Payment under the Holding
Company's Employment Agreement would be made by the Holding Company. All
reasonable costs and legal fees paid or incurred by Mrs. Heckman pursuant to
any dispute or question of interpretation relating to the Employment
Agreements shall be paid by the Savings Bank or Holding Company,
respectively, if Mrs. Heckman is successful on the merits pursuant to a legal
judgment, arbitration or settlement. The Employment Agreements also provide
that the Savings Bank and Holding Company shall indemnify Mrs. Heckman to the
fullest extent allowable under Illinois and Delaware law, respectively. In
the event of a change in control of the Savings Bank or the Holding Company,
the total amount of payments due under the Agreements, based solely on
current base salary for such Employment Agreements and excluding any benefits
under any employee benefit plan which may be payable, would be approximately
$120,000.
CERTAIN INDEBTEDNESS OF MANAGEMENT
The Savings Bank makes loans to executive officers and directors of the
Savings Bank and their affiliates, in the ordinary course of its business.
Such loans to executive officers, directors and their affiliates are made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time the transaction is originated for comparable
transactions with nonaffiliated persons and do not, in the opinion of the
Savings Bank's management, involve more than the normal risk of
collectibility or present any other unfavorable features. As of March 31,
1998, approximately $272,000 of loans were outstanding from the Savings Bank
to executive officers and directors of the Savings Bank and their affiliates,
which equals approximately 21.3% of the Savings Bank's pro forma
stockholders' equity at March 31, 1998, assuming the sale of 110,000 shares
at $10.00 per share, and approximately 31.2% of the Savings Bank's retained
earnings at March 31, 1998.
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SUPERVISION AND REGULATION
GENERAL
Financial institutions and their holding companies are extensively
regulated under federal and state law by various regulatory authorities
including the Federal Reserve Board, the FDIC and the Commissioner. The
financial performance of the Holding Company and the Savings Bank may be
affected by such regulation, although the extent to which they may be
affected cannot be predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the
scope of business, investments, reserves against deposits, capital levels
relative to operations, the nature and amount of collateral for loans, the
establishment of branches, mergers, consolidations and dividends. The system
of supervision and regulation applicable to the Holding Company and the
Savings Bank establishes a comprehensive framework for their operations and
is intended primarily for the protection of the FDIC's deposit insurance
funds and the depositors of the Savings Bank, rather than the stockholders of
the Holding Company.
The following references to material statutes and regulations affecting
the Holding Company and the Savings Bank are brief summaries thereof and are
qualified in their entirety by reference to such statutes and regulations.
Any change in applicable law or regulations may have a material effect on the
business of the Holding Company and the Savings Bank.
THE SAVINGS BANK
GENERAL. The Savings Bank is an Illinois-chartered savings bank, the
deposit accounts of which are insured by the SAIF of the FDIC. As a
SAIF-insured, Illinois-chartered savings bank, the Savings Bank is subject to
the examination, supervision, reporting and enforcement requirements of the
Commissioner, as the chartering authority for Illinois savings banks, and the
FDIC, as administrator of the SAIF, and to the statutes and regulations
administered by the Commissioner and the FDIC governing such matters as
capital standards, mergers, establishment of branch offices, subsidiary
investments and activities and general investment authority. The Savings Bank
is required to file reports with the Commissioner and the FDIC concerning its
activities and financial condition and will be required to obtain regulatory
approvals prior to entering into certain transactions, including mergers
with, or acquisitions of, other financial institutions.
The Commissioner and the FDIC have extensive enforcement authority over
Illinois-chartered savings banks, such as the Savings Bank. This enforcement
authority includes, among other things, the ability to issue cease-and-desist
or removal orders, to assess civil money penalties and to initiate injunctive
actions. In general, these enforcement actions may be initiated!for
violations of laws and regulations and unsafe and unsound practices.
The Commissioner has established a schedule for the assessment of
"supervisory fees" upon all Illinois savings banks to fund the operations of
the Commissioner. These supervisory fees are computed on the basis of each
savings bank's total assets (including consolidated subsidiaries) and are
payable at the end of each calendar quarter. A schedule of fees has also been
established for certain filings made by Illinois savings banks with the
Commissioner. The Commissioner also assesses fees for examinations conducted
by the Commissioner's staff, based upon the number of hours spent by the
Commissioner's staff performing the examination. During the fiscal year ended
March 31, 1998, the Savings Bank paid approximately $3,000 in supervisory
fees and expenses.
CAPITAL REQUIREMENTS. Under the ISBA and the regulations of the
Commissioner, an Illinois savings bank must maintain a minimum level of total
capital equal to the higher of 3% of total assets or the amount required to
maintain insurance of deposits by the FDIC. The Commissioner has the authority
to require an Illinois savings bank
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to maintain a higher level of capital if the Commissioner deems such higher
level necessary based on the savings bank's financial condition, history,
management or earnings prospects.
FDIC-insured institutions are required to follow certain capital
adequacy guidelines which prescribe minimum levels of capital and require
that institutions meet certain risk-based and leverage capital requirements.
Under the FDIC capital regulations, an FDIC-insured institution is required
to meet the following capital standards: (i) "Tier 1 capital" in an amount
not less than 3% of average adjusted total assets; (ii) "Tier 1 capital" in
an amount not less than 4% of risk-weighted assets; and (iii) "total capital"
in an amount not less than 8% of risk-weighted assets.
FDIC-insured institutions in the strongest financial and managerial
condition (with a composite rating of "1" under the Uniform Financial
Institutions Rating System established by the Federal Financial Institutions
Examination Council) are required to maintain "Tier 1 capital" equal to at
least 3% of total assets (the "leverage limit" requirement). For all other
FDIC-insured institutions, the minimum leverage limit requirement is 3% of
total assets plus at least an additional 100 to 200 basis points. Tier 1
capital is defined to include the sum of common stockholders' equity,
noncumulative perpetual preferred stock (including any related surplus), and
minority interests in consolidated subsidiaries, minus all intangible assets
(other than qualifying servicing rights, qualifying purchased credit-card
relationships and qualifying supervisory goodwill), certain identified losses
(as defined in the FDIC's regulations) and investments in certain
subsidiaries.
FDIC-insured institutions also are required to adhere to certain
risk-based capital guidelines which are designed to provide a measure of
capital more sensitive to the risk profiles of individual banks. Under the
risk- based capital guidelines, capital is divided into two tiers: core (Tier
1) capital, as defined above, and supplementary (Tier 2) capital. Tier 2
capital that may be recognized for risk-based capital purposes is limited to
100% of core capital and includes cumulative perpetual preferred stock,
perpetual preferred stock for which the dividend rate is reset periodically
based on current credit standing, regardless of whether dividends are
cumulative or non-cumulative, mandatory convertible securities, subordinated
debt, intermediate preferred stock and the allowance for possible loan and
lease losses. The allowance for possible loan and lease losses includable in
Tier 2 capital is limited to a maximum of 1.25% of risk-weighted assets.
Total capital is the sum of Tier 1 and Tier 2 capital. The risk-based capital
framework assigns balance sheet assets to one of four broad risk categories
which are assigned risk weighs ranging from 0% to 100% based primarily on the
degree of credit risk associated with the obligor. Off-balance sheet items
are converted to an on-balance sheet "credit equivalent" amount utilizing
certain conversion factors. The sum of the four risk-weighted categories
equals risk weighted assets. See "HISTORICAL AND PRO FORMA CAPITAL
COMPLIANCE" for a discussion of the Savings Bank's historical and pro forma
capital position relative to its capital requirements on March 31, 1998.
DIVIDENDS. Under the ISBA, dividends may only be declared when the total
capital of the Savings Bank is greater than that required by Illinois law.
Dividends may be paid by the Savings Bank out of its net profits (I.E., earnings
from current operations, plus actual recoveries on loans, investments and other
assets, after deducting all current expenses, including dividends or interest on
deposits, additions to reserves as required by the Commissioner, actual losses,
accrued dividends on preferred stock, if any, and all state and federal taxes).
The written approval of the Commissioner must be obtained, however, before a
savings bank having total capital of less than 6% of total assets may declare
dividends in any calendar year in an amount in excess of 50% of its net profits
for that calendar year. A savings bank may not declare dividends in excess of
its net profits in any year without the approval of the Commissioner. In
addition, before declaring a dividend on its capital stock, the Savings Bank
must transfer no less than 10% of its net profits of the preceding half year in
the case of quarterly or semi-annual dividends, or not less than 10% of the net
profits for the preceding two half year periods in the case of annual dividends
to its paid-in surplus until it shall have paid in surplus equal to its capital
stock. Finally, the Savings Bank will be unable to pay dividends in an amount
which would reduce its capital below the greater of (i) the amount required by
the FDIC, (ii) the amount required by the Commissioner or (iii) the amount
required for the liquidation account to be established by the Savings Bank in
connection with the Conversion. The Commissioner and the FDIC also have
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the authority to prohibit the payment of any dividends by the Savings Bank if
the Commissioner or the FDIC determines that the distribution would
constitute an unsafe or unsound practice. For the calendar year ended March
31, 1998, the Savings Bank's net profits were $41,872, and the Savings Bank
could have paid dividends totaling $20,936 without the written approval of
the Commissioner and continued to maintain compliance with its capital
requirements.
STANDARDS FOR SAFETY AND SOUNDNESS. Federal law requires each federal
banking agency to prescribe for depository institutions under its jurisdiction
standards relating to, among other things: internal controls; information
systems and audit systems; loan documentation; credit underwriting; interest
rate risk exposure; asset growth; compensation; fees and benefits; and such
other operational and managerial standards as the agency deems appropriate. The
federal banking agencies adopted final regulations and Interagency Guidelines
Establishing Standards for Safety and Soundness (the "Guidelines") to implement
these safety and soundness standards. The Guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. The Guidelines address internal controls and information systems,
internal audit system, credit underwriting, loan documentation, interest rate
risk exposure, asset growth, asset quality, earnings and compensation, and fees
and benefits. If the appropriate federal banking agency determines that an
institution fails to meet any standard prescribed by the Guidelines, the agency
may require the institution to submit to the agency an acceptable plan to
achieve compliance with the standard.
BROKERED DEPOSITS. FDIC regulations govern the acceptance of brokered
deposits by insured financial institutions. Well-capitalized insured financial
institutions that are not troubled are not subject to brokered deposit
limitations. Adequately-capitalized insured financial institutions are able to
accept, renew or roll over brokered deposits but only (i) with a waiver from the
FDIC and (ii) subject to the limitation that they do not pay an effective yield
on any such deposit that exceeds by more than 75 basis points (a) the effective
yield paid on deposits of comparable size and maturity in such association's
normal market area for deposits accepted in its normal market area or (b) the
national prime rate paid on deposits of comparable size and maturity for
deposits accepted outside the institution's normal market area. Undercapitalized
insured financial institutions are not permitted to accept brokered deposits and
may not solicit deposits by offering an effective yield that exceeds by more
than 75 basis points the prevailing effective yields on insured deposits of
comparable maturity in the institution's normal market area or in the market
area in which such deposits are being solicited. The Savings Bank is not
presently soliciting brokered deposits.
LENDING RESTRICTIONS. Under the ISBA, the Savings Bank is prohibited from
making secured or unsecured loans for business, corporate, commercial or
agricultural purposes representing in the aggregate an amount in excess of 15%
of its total assets, unless the Commissioner authorizes in writing a higher
percentage limit for such loans upon the request of an institution.
The Savings Bank is also subject to a loans-to-one borrower limitation.
Under the ISBA, the total loans and extensions of credit, both direct and
indirect, by the Savings Bank to any person (other than the United States or its
agencies, the State of Illinois or its agencies, and any municipal corporation
for money borrowed) outstanding at one time must not exceed the greater of
$500,000 or 20% of the Savings Bank's total capital plus general loan loss
reserves. In addition, the Savings Bank may make loans in an amount equal to an
additional 10% of the Savings Bank's capital plus general loan loss reserves if
the loans are 100% secured by readily marketable collateral.
The FDIC and the other federal banking agencies have adopted regulations
that prescribe standards for extensions of credit that (i) are secured by real
estate or (ii) are made for the purpose of financing the construction or
improvements on real estate. The FDIC regulations require each institution to
establish and maintain written internal real estate lending standards that are
consistent with safe and sound banking practices and appropriate to the size of
the institution and the nature and scope of its real estate lending activities.
The standards also must be consistent with accompanying FDIC guidelines, which
include loan-to-value limitations for the different types of real estate loans.
Institutions are also permitted to make a limited amount of loans that do not
conform to the
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proposed loan-to-value limitations os long as such exceptions are reviewed
and justified appropriately. The guidelines also list a number of lending
situations in which exceptions to the loan-to-value standard are justified.
PROMPT CORRECTIVE REGULATORY ACTION. Federal law requires, among other
things, that federal bank regulatory authorities take "prompt corrective action"
with respect to banks that do not meet minimum capital requirements. For these
purposes, the law establishes five capital categories: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized, and
critically undercapitalized.
The FDIC has adopted regulations to implement the prompt corrective action
legislation. Among other things, the regulations define the relevant capital
measures for the five capital categories. An institution is deemed to be "well
capitalized" if it has a total risk-based capital ratio of 10% or greater, a
Tier I risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or
greater, and is not subject to a regulatory order, agreement or directive to
meet and maintain a specific capital level for any capital measure. An
institution is deemed to be "adequately capitalized" if it has a total
risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of
4% or greater, and generally a leverage ratio of 4% or greater. An institution
is deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a
leverage ratio of less than 4%. An institution is deemed to be "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%, a
Tier I risk-based capital ratio of less than 3%, or a leverage ratio of less
than 3%. An institution is deemed to be "critically undercapitalized" if it has
a ratio of tangible equity (as defined in the regulations) to total assets that
is equal to or less than 2%.
"Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan. A bank's compliance with such plan is required to be
guaranteed by any company that controls the undercapitalized institutions in an
amount equal to the lesser of 5.0% of the Savings Bank's total assets when
deemed undercapitalized or the amount necessary to achieve the status of
adequately capitalized. If an "undercapitalized" bank fails to submit an
acceptable plan, it is treated as if it is "significantly undercapitalized."
"Significantly undercapitalized" banks are subject to one or more of a number of
additional restrictions, including but not limited to an order by the FDIC to
sell sufficient voting stock to become adequately capitalized, requirements to
reduce total assets and cease receipt of deposits from correspondent banks or
dismiss directors or officers, and restrictions on interest rates paid on
deposits, compensation of executive officers and capital distributions by the
parent holding company. "Critically undercapitalized" institutions also may not,
beginning 60 days after becoming "critically undercapitalized," make any payment
of principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into any material transaction outside the
ordinary course of business. In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator. Generally,
subject to a narrow exception, the appointment of a receiver or conservator is
required for a "critically undercapitalized" institution within 270 days after
it obtains such status.
TRANSACTIONS WITH AFFILIATES. Under current federal law, transactions
between depository institutions and their affiliates are governed by Sections
23A and 23B of the Federal Reserve Act. An affiliate of a savings bank is any
company or entity that controls, is controlled by, or is under common control
with the savings bank, other than a subsidiary. In a holding company context, at
a minimum, the parent holding company of a savings bank and any companies which
are controlled by such parent holding company are affiliates of the savings
bank. Generally, Section 23A limits the extent to which the savings bank or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such savings bank's capital stock and surplus, and
contains an aggregate limit on all such transactions with all affiliates to an
amount equal to 20% of such capital stock and surplus. The term "covered
transaction" includes the making of loans or other extensions of credit to an
affiliate; the purchase of assets from an affiliate; the purchase of, or an
investment in, the securities of an affiliate; the acceptance of securities of
an affiliate as collateral for a loan or extension of credit to any person; or
issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate. Section 23A also establishes specific collateral requirements for
loans or extensions of credit to, or guarantees, acceptances on letters of
credit issued on behalf of an affiliate. Section 23B requires that covered
transactions and a broad list of other specified transactions be on
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terms substantially the same, or no less favorable, to the savings bank or
its subsidiary as similar transactions with nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings
bank with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and
surplus. Section 22(h) also prohibits loans above amounts prescribed by the
appropriate federal banking agency to directors, executive officers, and
shareholders who control 10% or more of voting securities of a stock savings
bank, and their respective related interests, unless such loan is approved in
advance by a majority of the board of directors of the savings bank. Any
"interested" director may not participate in the voting. The loan amount
(which includes all other outstanding loans to such person and their related
interests) as to which such prior board of director approval is required, is
the greater of $25,000 or 5% of capital and surplus or any loans over
$500,000. Further, pursuant to Section 22(h), loans to directors, executive
officers and principal shareholders must be made on terms substantially the
same as offered in comparable transactions to other persons, except that such
insiders may receive preferential loans made pursuant to a benefit or
compensation program that is widely available to the Savings Bank's employees
and does not give preference to the insider over other employees. Section
22(g) of the Federal Reserve Act places additional limitations on loans to
executive officers.
ENFORCEMENT. The Commissioner and FDIC have extensive enforcement
authority over Illinois-chartered savings banks, including the Savings Bank.
This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease and desist orders and to remove
directors and officers. In general, these enforcement actions may be
initiated in response to violations of laws and regulations and to unsafe or
unsound practices.
The Commissioner is given authority by Illinois law to appoint a
conservator or receiver for an Illinois savings bank under certain
circumstances including, but not limited to, insolvency, a substantial
dissipation of assets due to violation of law, regulation, order of the
Commissioner or due to any unsafe or unsound practice, or the occurrence of
an unsafe or unsound condition likely to cause insolvency or a substantial
dissipation of assets or earnings that will weaken the condition of the
savings bank and prejudice the interests of depositors. The FDIC also has
authority under federal law to appoint a conservator or receiver for an
insured savings bank under certain circumstances. The FDIC is required, with
certain exceptions, to appoint a receiver or conservator for an insured state
savings bank if that savings bank was "critically undercapitalized" on
average during the calendar quarter beginning 270 days after the date on
which the savings bank became "critically undercapitalized." For this
purpose, "critically undercapitalized" means having a ratio of tangible
capital to total assets of less than 2%. See "-- Prompt Corrective Regulatory
Action." The FDIC may also appoint itself as conservator or receiver for a
state savings bank under certain circumstances on the basis of the
institution's financial condition or upon the occurrence of certain events,
including: (i) insolvency (whereby the assets of the savings bank are less
than its liabilities to depositors and others); (ii) substantial dissipation
of assets or earnings through violations of law or unsafe or unsound
practices; (iii) existence of an unsafe or unsound condition to transact
business; (iv) likelihood that the savings bank will be unable to meet the
demands of its depositors or to pay its obligations in the normal course of
business; and (v) insufficient capital, or the incurring or likely incurring
of losses that will deplete substantially all of the institution's capital
with no reasonable prospect of replenishment of capital without federal
assistance.
INSURANCE OF DEPOSIT ACCOUNTS. Deposits of the Savings Bank are presently
insured by the SAIF. The SAIF and the Bank Insurance Fund (the "BIF") are
required by law to achieve and maintain a ratio of insurance reserves to total
insured deposits equal to 1.25% percent. The BIF reached this required reserve
ratio during 1995, while some predictions indicated the SAIF would not reach
this target until the year 2002. The SAIF had not grown as quickly as the BIF
for many reasons, but in large part because almost half of SAIF premiums had to
be used to
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retire bonds issued by the Financing Corporation ("FICO Bonds") in the late
1980s to recapitalize the Federal Savings and Loan Insurance Corporation.
Until 1995, the SAIF and BIF deposit insurance premium rate schedules
had been identical. But in mid-1995, the FDIC issued final rules modifying
its assessment rate schedules for SAIF and BIF member institutions. Under the
revised schedule, SAIF members continued to pay assessments ranging from
$0.23 to $0.31 per $100 of deposits, while BIF members paid assessments
ranging from zero to $0.27 per $100 of deposits, but the majority of BIF
members paid only the $2,000 minimum annual premium. Thrift industry
representatives argued that this significant premium differential caused
savings associations to operate at a competitive disadvantage to their BIF
insured bank counterparts.
On September 30, 1996, President Clinton signed the Deposit Insurance
Funds Act of 1996 ("DIFA") which among other things, imposed a special
assessment of 65.7 basis points on SAIF assessable deposits held as of March
31, 1995, payable November 27, 1996. As a result of the DIFA and the special
assessment, the FDIC has lowered the SAIF assessment to the current rate of 0
to 27 basis points.
The amount each insured depository institution pays for FDIC deposit
insurance coverage is determined in accordance with a risk-based assessment
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. SAIF member institutions classified as
well-capitalized and considered healthy pay the lowest premium (currently 0%
of deposits) while SAIF member institutions that are undercapitalized and of
substantial supervisory concern pay the highest premium (currently up to .27%
of deposits).
FICO BOND PAYMENTS. The DIFA also amended the Federal Home Loan Bank Act
to impose the assessment for the payment of the FICO Bonds against both SAIF
and BIF deposits beginning in 1997. As of January 1, 1997, BIF deposits are
assessed for FICO payments at a rate that is 20% of the rate assessed on SAIF
deposits. The FICO assessment rate on BIF and SAIF deposits will be the same
beginning on the earlier of January 1, 2000 or the date the BIF and SAIF are
merged.
THRIFT RECHARTERING LEGISLATION. The DIFA provides that the BIF and SAIF
will be merged on January 1, 1999, provided no savings associations remain at
that time. It is possible that legislation will be enacted in Congress
eliminating the savings association charter. However, the Savings Bank is
unable to predict whether the SAIF and the BIF will be merged and what
impact, if any, such merger could have on the Savings Bank.
FEDERAL RESERVE SYSTEM. The Federal Reserve Board regulations require
depository institutions to maintain non-interest-earning reserves against
their transaction accounts (primarily NOW and regular checking accounts). The
Federal Reserve Board regulations generally require that reserves be
maintained against aggregate transaction accounts as follows: for that
portion of transaction accounts aggregating $47.8 million or less (subject to
adjustment by the Federal Reserve Board) the reserve requirement is 3%; and
for accounts greater than $47.8 million, the reserve requirement is $1.43
million plus 10% (subject to adjustment by the Federal Reserve Board between
8% and 14%) against that portion of total transaction accounts in excess of
$47.8 million. The first $4.7 million of otherwise reservable balances
(subject to adjustments by the Federal Reserve Board) are exempted from the
reserve requirements. The Savings Bank is in compliance with the foregoing
requirements. Because required reserves must be maintained in the form of
either vault cash, a non-interest-bearing account at a Federal Reserve Bank
or a pass-through account as defined by the Federal Reserve Board, the effect
of this reserve requirement is to reduce the Savings Bank's interest-earning
assets. Federal Home Loan Bank ("FHLB") System members are also authorized to
borrow from the Federal Reserve "discount window," but Federal Reserve Board
regulations require institutions to exhaust all FHLB sources before borrowing
from a Federal Reserve Bank.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act, as
amended ("CRA"), as implemented by FDIC regulations, a savings bank has a
continuing and affirmative obligation consistent with its
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safe and sound operation to help meet the credit needs of its entire
community, including low and moderate income neighborhoods. The CRA does not
establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the
types of products and services that it believes are best suited to its
particular community, consistent with the CRA. The CRA requires the FDIC, in
connection with its examination of a savings institution, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. The FDIC is required to provide a written evaluation of an
institution's CRA performance utilizing a four-tiered descriptive rating
system and an institution's rating is subject to public disclosure. The
Savings Bank's latest CRA rating, received from the FDIC was "Satisfactory."
FEDERAL HOME LOAN BANK SYSTEM. The Savings Bank is a member of the FHLB
System, which consists of 12 regional FHLBs. The FHLB provides a central
credit facility primarily for member institutions. The Savings Bank, as a
member of the FHLB of Chicago, is required to acquire and hold shares of
capital stock in that FHLB in an amount at least equal to 1% of the aggregate
principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB of Chicago, whichever is greater. The Savings Bank
was in compliance with this requirement with an investment in FHLB of Chicago
stock at March 31, 1998, of $46,000. FHLB advances must be secured by
specified types of collateral and all long-term advances may only be obtained
for the purpose of providing funds for residential housing financing. At
March 31, 1998, the Savings Bank had $600,000 in FHLB advances.
THE HOLDING COMPANY
GENERAL. Upon consummation of the Conversion, the Holding Company will
become the sole stockholder of the Savings Bank. As such, the Holding Company
will be a bank holding company. As a bank holding company, the Holding
Company will be required to register with, and will become subject to
regulation by, the Federal Reserve Board under the BHCA. In accordance with
Federal Reserve Board policy, the Holding Company will be expected to act as
a source of financial strength to the Savings Bank and to commit resources to
support the Savings Bank in circumstances where the Holding Company might not
do so absent such policy. Under the BHCA, the Holding Company will be subject
to periodic examination by the Federal Reserve Board and will be required to
file periodic reports of its operations and such additional information as
the Federal Reserve Board may require. Because the Savings Bank is chartered
under Illinois law, the Holding Company will also be subject to registration
with, and regulation by, the Commissioner under the ISBA.
The BHCA requires prior Federal Reserve Board approval for, among other
things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than five percent of the voting shares or
substantially all the assets of any bank or bank holding company, or for a
merger or consolidation of a bank holding company with another bank holding
company. With certain exceptions, the BHCA prohibits a bank holding company
from acquiring direct or indirect ownership or control of voting shares of
any company which is not a bank or bank holding company and from engaging
directly or indirectly in any activity other than banking or managing or
controlling banks or performing services for its authorized subsidiaries. A
bank holding company may, however, engage in or acquire an interest in a
company that engages in activities which the Federal Reserve Board has
determined by regulation or order to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
A bank holding company is a legal entity separate and distinct from its
subsidiary bank or banks. Normally, the major source of a holding company's
revenue is dividends a holding company receives from its subsidiary banks. The
right of a bank holding company to participate as a stockholder in any
distribution of assets of its subsidiary banks upon their liquidation or
reorganization or otherwise is subject to the prior claims of creditors of such
subsidiary banks. The subsidiary banks are subject to claims by creditors for
long-term and short-term debt obligations, including substantial obligations for
federal funds purchased and securities sold under repurchase agreements, as well
as deposit liabilities. Under the Financial Institutions Reform, Recovery and
Enforcement Act
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of 1989, in the event of a loss suffered by the FDIC in connection with a
banking subsidiary of a bank holding company (whether due to a default or the
provision of FDIC assistance), other banking subsidiaries of the holding
company could be assessed for such loss.
Federal laws limit the transfer of funds by a subsidiary bank to its
holding company in the form of loans or extensions of credit, investments or
purchases of assets. Transfers of this kind are limited to ten percent of a
bank's capital and surplus with respect to each affiliate and to twenty percent
to all affiliates in the aggregate, and are also subject to certain collateral
requirements. These transactions, as well as other transactions between a
subsidiary bank and its holding company, must also be on terms substantially the
same as, or at least as favorable as, those prevailing at the time for
comparable transactions with non-affiliated companies or, in the absence of
comparable transactions, on terms or under circumstances, including credit
standards, that would be offered to, or would apply to, non-affiliated
companies.
CAPITAL REQUIREMENTS. The Federal Reserve Board has adopted capital
adequacy guidelines for bank holding companies (on a consolidated basis)
substantially similar to those of the FDIC for the Savings Bank. On a pro forma
basis assuming consummation of the Conversion, the Holding Company's pro forma
Tier 1 and total capital would exceed the Federal Reserve Board's capital
adequacy requirements.
INTERSTATE BANKING AND BRANCHING
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal Act"), since September 29, 1995, the Federal Reserve
Board is permitted, under specified circumstances to approve the acquisition by
a bank holding company located in one state of a bank or a bank holding company
located in another state, without regard to any prohibition contained in state
law.
The Riegle-Neal Act permits states to require that a target bank have been
in operation for a minimum period, up to five years, and to impose
non-discriminatory limits on the percentage of the total amount of deposits with
insured depository institutions in the state which may be controlled by a single
bank or bank holding company. In addition, the Riegle-Neal Act imposes federal
deposit concentration limits (10% of nationwide total deposits, and 30% of total
deposits in the host state on applications subsequent to the applicant's initial
entry to the host state), and adds new statutory conditions to Federal Reserve
Board approval, I.E., the applicant meets or exceeds all applicable federal
regulatory capital standards and is "adequately managed."
The Riegle-Neal Act also authorized, effective June 1, 1997, the
responsible federal banking agency to approve applications for mergers of
depository institutions across state lines without regard to whether such
activity is contrary to state law. Any state could, however, by adoption of a
non-discriminatory law after September 29, 1994 and before June 1, 1997, either
elect to have this provision take effect before June 1, 1997 or opt-out of the
provision. The effect of opting out is to prevent banks chartered by, or having
their main office located in, such state from participating in any interstate
branch merger. Each state is permitted to retain a minimum age requirement of up
to five years, a non-discriminatory deposit cap, and non-discriminatory notice
or filing requirements. The responsible federal agency will apply the same
federal concentration limits and capital management adequacy requirements noted
above with respect to BHCA applications. Only Texas opted-out of the interstate
merger provision.
While Illinois adopted legislation to opt-in to the interstate merger
provision, unlike some states and as permitted by federal law, Illinois law does
not authorize the establishment of de novo branches or the purchase by an
out-of-state bank of one or more branches of a bank with its main office in
Illinois. Since the laws of the various states which do authorize de novo
branches or branch purchases normally have reciprocity provisions, Illinois
state-chartered banks generally are not able to establish or acquire branches in
other states except through the merger with a bank in another state.
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Branches acquired in a host state by both out-of-state state-chartered and
national banks will be subject to community reinvestment, consumer protection,
fair lending and interstate branching laws of the host state to the same extent
as branches of a national bank having its main office in the host state. Among
other things, the Riegle-Neal Act also preserves state taxation authority,
prohibits the operation by out-of-state banks of interstate branches as deposit
production offices, imposes additional notice requirements upon interstate banks
proposing to close branch offices in a low or moderate-income area, and creates
new Community Reinvestment Act evaluation requirements for interstate depository
institutions.
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FEDERAL AND STATE TAXATION
FEDERAL TAXATION
GENERAL. The Holding Company and the Savings Bank are subject to the
corporate tax provisions of the Code, as well as certain additional
provisions of the Code, which apply to thrift and other types of financial
institutions. The following discussions of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax
rules applicable to the Holding Company and the Savings Bank.
FISCAL YEAR. The Holding Company will file its federal income tax return
on a March 31 year-end basis.
METHOD OF ACCOUNTING. The Savings Bank maintains its books and records
for federal income tax purposes using the cash method of accounting. The cash
method of accounting generally requires that items of income be recognized
when cash is received, and that items of expense be recorded when cash is
paid.
BAD DEBT RESERVES. Savings institutions, such as the Savings Bank, which
meet certain definitional tests primarily relating to their assets and the
nature of their businesses, are permitted to establish a reserve for bad
debts and to make annual additions to the reserve. These additions may,
within specified formula limits, be deducted in arriving at the institution's
taxable income. For purposes of computing the deductible addition to its bad
debt reserve, the institution's loans are separated into "qualifying real
property loans" (i.e., generally those loans secured by certain interests in
real property) and all other loans ("non-qualifying loans"). The deduction
with respect to non-qualifying loans must be computed under the experience
method as described below. The following formulas may be used to compute the
bad debt deduction with respect to qualifying real property loans: (i) actual
loss experience, or (ii) a percentage of taxable income. Reasonable additions
to the reserve for losses on non-qualifying loans must be based upon actual
loss experience and would reduce the current year's addition to the reserve
for losses on qualifying real property loans, unless that addition is also
determined under the experience method. The sum of the additions as to each
reserve for each year is the institution's annual bad debt deduction.
Under the experience method, the deductible annual addition to the
institution's bad debt reserves is the amount necessary to increase the
balance of the reserve at the close of the taxable year to the greater of (a)
the amount which bears the same ratio to loans outstanding at the close of
the taxable year as the total net bad debts sustained during the current and
five preceding taxable years bear to the sum of the loans outstanding at the
close of the six years, or (b) the lower of (i) the balance of the reserve
account at the close of the Savings Bank's "base year," which was its tax
year ended March 31, 1988, or (ii) if the amount of loans outstanding at the
close of the taxable year is less than the amount of loans outstanding at the
close of the base year, the amount which bears the same ratio to loans
outstanding at the close of the taxable year as the balance of the reserve at
the close of the base year bears to the amount of loans outstanding at the
close of the base year.
Under the percentage of taxable income method, the bad debt deduction
equals 8% of taxable income determined without regard to that deduction and
with certain adjustments. The availability of the percentage of taxable
income method permits a qualifying savings institution to be taxed at a lower
effective Federal income tax rate than that applicable to corporations in
general. This resulted generally in an effective Federal income tax rate
payable by a qualifying savings institution fully able to use the maximum
deduction permitted under the percentage of taxable income method, in the
absence of other factors affecting taxable income, of 31.3% exclusive of any
minimum tax or environmental tax (as compared to 34% for corporations
generally). For tax years beginning on or after January 1, 1993, the maximum
corporate tax rate was increased to 35%, which increased the maximum
effective federal income tax rate payable by a qualifying savings institution
fully able to use the maximum deduction to 32.2%. Any savings institution at
least 60% of whose assets are qualifying assets as described in the Code,
will generally be eligible for the full deduction of 8% of taxable income. As
of April 30, 1996, 99.86% of the assets of the Savings Bank were "qualifying
assets" as defined in the Code and the Savings Bank anticipates that at least
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60% of its assets will continue to be qualifying assets in the immediate
future. If this ceases to be the case, the institution may be required to
restore some portion of its bad debt reserve to taxable income in the future.
Under the percentage of taxable income method, the bad debt deduction
for an addition to the reserve for qualifying real property loans cannot
exceed the amount necessary to increase the balance in this reserve to an
amount equal to 6% of such loans outstanding at the end of the taxable year.
The bad debt deduction is also limited to the amount which, when added to the
addition to the reserve for losses on non-qualifying loans, equals the amount
by which 12% of deposits at the close of the year exceeds the sum of surplus,
undivided profits and reserves at the beginning of the year. Based on
experience, it is not expected that these restrictions will be a limiting
factor for the Savings Bank in the foreseeable future. In addition, the
deduction for qualifying real property loans is reduced by an amount equal to
all or part of the deduction for non-qualifying loans.
At March 31, 1998, the Federal income tax reserves of the Savings Bank
included $125 thousand 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 the Savings Bank in
connection with the conversion of the Savings Bank to stock form, the
retained earnings of the Savings Bank are substantially restricted.
Pursuant to certain legislation which was recently enacted and which is
effective for tax years beginning after 1995, a small thrift institution (one
with an adjusted basis of assets of less than $500 million), such as the
Savings Bank, no longer is permitted to make additions to its tax bad debt
reserve under the percentage of taxable income method. Such institutions are
permitted to use the experience method in lieu of deducting bad debts only as
they occur. Such legislation requires the Savings Bank to realize increased
tax liability over a period of at least six years, beginning in 1996.
Specifically, the legislation requires a small thrift institution to
recapture (i.e., take into income) over a multi-year period the balance of
its bad debt reserves in excess of the lesser of (i) the balance of such
reserves as of the end of its last taxable year ending before 1988 or (ii) an
amount that would have been the balance of such reserves had the institution
always computed its additions to its reserves using the experience method.
The recapture requirement is suspended for each of two successive taxable
years beginning January 1, 1996 in which the Bank originates an amount of
certain kinds of residential loans which in the aggregate are equal to or
greater than the average of the principal amounts of such loans made by the
Savings Bank during its six taxable years preceding 1996. It is anticipated
that any recapture of the Savings Bank's bad debt reserves accumulated after
1987 would not have a material adverse effect on the Savings Bank's financial
condition and results of operations. As of March 31, 1998, the Savings Bank's
accumulated bad debt reserves after 1987 amounted to $12,602.
DISTRIBUTIONS. If the Savings Bank were to distribute cash or property
to its sole stockholder, and the distribution was treated as being from its
accumulated bad debt reserves, the distribution would cause the Savings Bank
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 that tax calculated on AMTI
in excess of an exemption amount exceeds the regular tax liability. The Code
provides that an item of tax preference is the excess of the bad debt
deduction allowable for a taxable year pursuant to the percentage of taxable
income method over the amount allowable under the experience method. Other
items of tax preference that constitute AMTI include (a) tax-exempt
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interest on newly issued (generally, issued on or after August 8, 1986)
private activity bonds other than certain qualified bonds 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 two taxable years and forward to the
succeeding twenty taxable years. This provision applies to losses incurred in
taxable years beginning after August 5, 1997. At March 31, 1998, the Savings
Bank had no NOL carryforwards for Federal income tax purposes.
AUDIT BY THE IRS. The Savings Bank's Federal income tax returns for taxable
years through March 31, 1994 have been closed for the purpose of examination by
the Internal Revenue Service (the "IRS").
STATE AND LOCAL TAXATION
STATE OF ILLINOIS. The Holding Company and the Savings Bank will file
Illinois income tax returns. For Illinois income tax purposes, they are taxed at
an effective rate equal to 7.2% of Illinois Taxable Income. For these purposes,
"Illinois Taxable Income" generally means federal taxable income, subject to
certain adjustments (including the addition of interest income on state and
municipal obligations and the exclusion of interest income on United States
Treasury obligations). The exclusion of income on United States Treasury
obligations has the effect of reducing Illinois Taxable Income. The Holding
Company is also required to file an annual report with and pay an annual
franchise tax to the State of Illinois.
DELAWARE TAXATION. As a Delaware holding company not earning income in
Delaware, the Holding Company is exempt from Delaware corporate income tax but
is required to file an annual report with and pay an annual franchise tax to the
State of Delaware.
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THE CONVERSION
THE BOARD OF DIRECTORS OF THE SAVINGS BANK AND THE COMMISSIONER HAVE
APPROVED THE PLAN SUBJECT TO APPROVAL BY THE MEMBERS OF THE SAVINGS BANK AND
TO SATISFACTION OF CERTAIN OTHER CONDITIONS. THE PLAN HAS ALSO BEEN REVIEWED
BY THE FDIC, WHICH HAS ISSUED A NOTICE OF ITS INTENT NOT TO OBJECT TO THE
CONVERSION, SUBJECT TO SATISFACTION OF CERTAIN CONDITIONS. COMMISSIONER
APPROVAL AND THE ABSENCE OF FDIC OBJECTION DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE COMMISSIONER, OR THE FDIC,
RESPECTIVELY.
GENERAL
The Board of Directors of the Savings Bank adopted the Plan on March 11,
1998 and an amendment to the Plan of Conversion on May 26, 1998. The Plan was
adopted subject to approval by the Commissioner, to receipt of notice from
the FDIC of its intent not to object to the Conversion, and to approval of
the members of the Savings Bank holding not less than two-thirds (2/3) of the
votes outstanding as of the record date fixed for the Special Meeting and who
continue to be members on the date of the Special Meeting. Pursuant to the
Plan, the Savings Bank will be converted from an Illinois-chartered mutual
savings bank to an Illinois-chartered stock savings bank and will become a
wholly-owned subsidiary of the Holding Company; and the Holding Company will
issue the Common Stock to be sold in the Offerings and will use 50% of the
net proceeds of the sale of the Common Stock, less the amount necessary to
finance the ESOP's purchase of Common Stock in the Conversion, to purchase
the capital stock of the converted Savings Bank. On ___________, 1998, the
Commissioner approved the Savings Bank's Application for Approval of
Conversion, subject to the receipt by the Savings Bank and the Holding
Company of all other required regulatory approvals and compliance with all
other outstanding legal requirements. On ___________________, 1998, the FDIC
issued a letter to the Savings Bank stating it does not object to the
Conversion, subject to the satisfaction of certain conditions, including
approval of the Plan of Conversion by the Savings Bank's members and the
receipt by the FDIC of an updated appraisal that takes into account the
results of the Subscription Offering. The Special Meeting of members of the
Savings Bank will be held on ____________________, 1998 for the purpose of
considering and voting on the Plan and the Conversion. On __________________,
1998, the Federal Reserve Board approved the Holding Company's application to
become the holding company of the converted Savings Bank.
If the Board of Directors of the Savings Bank decides for any reason
(such as policies or conditions which could adversely affect the Savings
Bank's or the Holding Company's ability to consummate the Conversion and the
Savings Bank's ability to transact its business as contemplated herein and in
accordance with its operating policies), at any time prior to the issuance of
the Common Stock, not to use the holding company form of organization in
implementing the Conversion, the Plan of Conversion will be amended not to
use the holding company form of organization in the Conversion. In the event
that such a decision is made, the Savings Bank will withdraw the Holding
Company's registration statement from the SEC and will take all steps
necessary to complete the Conversion without the Holding Company, including
filing any necessary documents with the Commissioner and the FDIC. In such
event, and provided there is no regulatory action, directive or other basis
upon which the Savings Bank determines not to complete the Conversion, the
Savings Bank will issue and sell the common stock of the Savings Bank. A
resolicitation for the Savings Bank's common stock will be commenced and
subscribers for the Common Stock will be required to reconfirm their orders.
The description of the Plan contained herein assumes that a holding company
form of organization will be utilized in the Conversion. In the event that a
holding company form of organization is not utilized, all other pertinent
terms of the Plan as described below will apply to the conversion of the
Savings Bank from a mutual to stock form of organization and the sale of the
Savings Bank's common stock.
The following is a brief summary of the material aspects of the Conversion.
It is qualified in its entirety by the provisions of the Plan, which contain a
more detailed description of the terms of the Conversion. Copies
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of the Plan, including the proposed articles of incorporation and bylaws of
the converted Savings Bank, are available without charge upon request from
the Savings Bank. A copy of the Plan is available for inspection at the
office of the Savings Bank and at the offices of the Commissioner in Chicago,
Illinois and Springfield, Illinois. The Plan is also filed as an exhibit to
the Registration Statement of which this Prospectus is part and may be
obtained from the SEC. See "AVAILABLE INFORMATION."
PURPOSES OF CONVERSION
The Savings Bank, as an Illinois-chartered mutual savings bank, has no
stockholders and no authority to issue capital stock. By converting to the
stock form of organization the Savings Bank will be structured in the form
used by commercial banks, most other business entities and a growing number
of savings institutions. Conversion to the stock form of organization and the
formation of a holding company in connection therewith offer a number of
advantages which may be important to the future growth and performance of the
Savings Bank, including (i) a larger capital base for the converted Savings
Bank's operations, (ii) enhanced future access to capital markets, and (iii)
an opportunity for depositors of the Savings Bank to become stockholders of
the Holding Company and thereby participate more directly in any future
growth of the Savings Bank. In addition, the capital contributed to the
Savings Bank by the Holding Company may assist the Savings Bank in offering
new programs and expanded service to its customers.
Management believes that the formation of the Holding Company will
provide greater flexibility than the converted Savings Bank would have to
diversify its business activities through existing or newly formed
subsidiaries or through acquisitions of other financial institutions
(including banks and savings associations) and other companies. Although
there are no current arrangements, understandings or agreements regarding any
such opportunities, the Holding Company will be in a position after the
Conversion, subject to regulatory limitations and the Holding Company's
financial position, to take advantage of any such opportunities that may
arise.
After completion of the Conversion, the unissued common and preferred
stock authorized by the Holding Company's certificate of incorporation will
permit the Holding Company, subject to market conditions, to raise additional
equity capital through further sales of securities and to issue securities in
connection with possible acquisitions. At the present time, the Holding
Company has no plans with respect to acquisitions or additional offerings of
securities. Management of the Savings Bank believes that the converted
Savings Bank will also benefit from management and employee ownership of
stock in the Holding Company, because such stock ownership is an effective
performance incentive and a means of attracting, retaining and compensating
personnel. Following the Conversion, the Holding Company will also be able to
use stock-related incentive programs to attract, retain and provide
incentives for qualified executive and other personnel for itself and its
subsidiaries. See "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK --
Employee Benefit Plans."
EFFECTS OF CONVERSION
GENERAL. The Savings Bank is presently an Illinois-chartered mutual
savings bank. Each person with a deposit account in a mutual savings bank,
such as the Savings Bank, has pro rata ownership rights, based upon the
balance in his or her account, to the net worth of the Savings Bank upon
liquidation. However, this right is tied to the depositor's account and has
no tangible market value separate from such deposit account. Further, mutual
savings bank depositors can realize value with respect to their interests
only in the unlikely event that the mutual savings bank is liquidated and has
a positive net worth. In such an event, the depositors of record at the time
of liquidation would share pro rata, based on the amounts of their deposits,
in any residual surplus after other claims, including those of depositors for
the amounts of their deposit accounts (including accrued interest), are paid.
When a mutual savings bank converts to stock form, the institution's
charter is amended to authorize the issuance of capital stock to represent
ownership of the bank, including its net worth. The Common Stock is separate
and apart from deposit accounts and is not insured by the SAIF or any other
government agency. Certificates are
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issued to evidence ownership of the 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 deposit account the seller may hold in
the institution.
In connection with the Conversion, the Savings Bank will amend its articles
of incorporation to authorize the issuance of capital stock which will be
separate and apart from any deposit accounts of the converted Savings Bank and
will not be insured by the SAIF or any other government agency. Certificates
evidencing ownership of this capital stock will be issued to the Holding
Company. The Holding Company's certificate of incorporation likewise authorizes
the issuance of capital stock, which will be separate and apart from any deposit
accounts of the converted Savings Bank and will not be insured by the SAIF or
any other government agency. Persons who purchase shares of the Common Stock in
the Conversion will be issued certificates evidencing ownership of such shares,
which will be transferable and, therefore, may be sold or traded by the holder
if a purchaser is available, with no effect on any deposit account the seller
may hold in the converted Savings Bank.
DEPOSIT ACCOUNT AND LOANS. The account balances, interest rates and other
terms of deposit accounts at the Savings Bank will not be affected by the
Conversion (except to the extent that a depositor directs the Savings Bank to
withdraw funds from his or her deposit account to pay for shares of Common Stock
and except with respect to voting and liquidation rights). Likewise, the
existing SAIF insurance coverage of such accounts will not be affected by the
Conversion. Upon completion of the Conversion, each depositor of the Savings
Bank will continue as a depositor in the converted Savings Bank, and will
continue to hold a deposit account or accounts with the same account balance(s),
interest rate(s) and other terms as the deposit account(s) held by such
depositor in the Savings Bank immediately prior to consummation of the
Conversion (after taking into account any reduction in account balance or change
in interest rate resulting from a withdrawal of funds at the direction of the
depositor to pay for his or her Common Stock and except with respect to voting
and liquidation rights). Furthermore, the Conversion will not affect any loan
account, the balances, interest rates or maturities of these accounts or the
obligations of borrowers or the Savings Bank under their individual contractual
arrangements with the Savings Bank. Upon consummation of the Conversion, all
loans of the Savings Bank will automatically become loans of the converted
Savings Bank, with no change in the outstanding principal balances, interest
rates or other contract terms of such loans.
CONTINUITY. The Savings Bank will continue without interruption, during
and after completion of the Conversion, to provide its services to depositors
and borrowers pursuant to existing policies and will maintain its office
operated by the existing management and employees of the Savings Bank. No
assets of the Savings Bank will be distributed in the Conversion other than
for the payment of expenses incident to the Conversion.
VOTING RIGHTS. Under the Savings Bank's current charter, deposit account
holders of the Savings Bank have voting rights with respect to certain matters
relating to the Savings Bank, including the election of directors. For the most
part, deposit account holders of the Savings Bank exercised these voting rights
by granting proxies to the Savings Bank's Board of Directors at the time such
depositors opened their accounts at the Savings Bank ("Omnibus Proxies"). These
Omnibus Proxies gave the Savings Bank's Board of Directors the ability to
control the voting on any issue requiring member approval. The Board of
Directors may not, however, use the Omnibus Proxies to vote for the Plan of
Conversion.
After the Conversion, (i) account holders will not have voting rights
with respect to the converted Savings Bank and will therefore not be able to
elect directors of the converted Savings Bank or to control its affairs; (ii)
any Omnibus Proxies previously granted by the Savings Bank's depositors to
the Savings Bank's Board of Directors will be of no further force and effect;
(iii) voting rights with respect to the converted Savings Bank will be vested
in the Holding Company, as the sole stockholder of the converted Savings
Bank; and (iv) voting rights with respect to the Holding Company will be
vested in the Holding Company's stockholders. Each purchaser of Common Stock
will be entitled to vote on any matters to be considered by the Holding
Company's stockholders. For a description of the voting rights of the holders
of Common Stock, see "DESCRIPTION OF CAPITAL STOCK -- Common Stock."
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TAX EFFECTS. An opinion has been received from Geo. S. Olive & Co. LLC
with respect to tax consequences of the proposed Conversion of the Savings
Bank to stock form that:
(i) the Conversion of the Savings Bank from a state-chartered
mutual savings bank to a state-chartered stock savings bank
will constitute a reorganization transaction within the
meaning of Section 368(a)(1)(F) of the Code, and neither the
Savings Bank in its mutual form nor the Savings Bank in its
stock form will recognize any gain or loss as a result of the
Conversion and the Savings Bank in its mutual and stock form
will each be a party to a reorganization within the meaning
of Section 368(b) of the Code;
(ii) the Savings Bank in its stock form will not reorganize gain
or loss upon the receipt of money and other property, if any,
in exchange for shares of its common stock;
(iii) no gain or loss will be recognized by the Holding Company
upon the receipt of money for Shares of Common Stock;
(iv) the basis of the Savings Bank's assets in the hands of the
Savings Bank after the Conversion will be the same as the
basis of those assets in the hands of the Savings Bank
immediately prior to the Conversion;
(v) the holding period of the assets of the Savings Bank after
the Conversion will include the period during which such
assets were held by the Savings Bank prior to the Conversion;
(vi) the creation of the Liquidation Account on the records of the
Savings Bank after the Conversion will have no effect on the
taxable income of the Savings Bank in either its mutual or
stock form;
(vii) the Savings Bank in its stock form will succeed to and take
into account, immediately after the reorganization, the
dollar amounts of those accounts of the Savings Bank in its
mutual form which represent bad debt reserves in respect of
which the Savings Bank in its mutual form has taken a bad
debt deduction for taxable years ending on or before the
date of reorganization, the bad debt reserves will not be
required to be restored to the gross income of either the
Savings Bank in its mutual form or the Savings Bank in its
stock form for the taxable year of the reorganization, and
such bad debt reserves will have the same character in the
hands of the Savings Bank in its stock form as they would
have had in the hands of the Savings Bank in its mutual
form, had no reorganization transaction occurred;
(viii) for purposes of Section 381 of the Code, the Savings Bank in
its stock form will be treated as if there had been no
reorganization, the tax attributes of the Savings Bank in
its mutual form enumerated in Section 381(a) of the Code
will be taken into account by the Savings Bank in its stock
form as if there had been no reorganization, the tax year
of the Savings Bank in its mutual form will not end on the
effective date of the Conversion, the part of the tax year
of the Savings Bank before the Conversion will be
includable in the tax year of the Savings Bank in its stock
form after the Conversion and the Savings Bank in its stock
form will not be required to make a federal income tax
return for the portion of the tax year prior to the
Conversion;
(ix) depositors will realize gain, if any, upon the constructive
issuance to them of withdrawable deposit accounts of the
Savings Bank in its stock form, Subscription Rights, and/or
interests in the Liquidation Account of the Savings Bank in
its stock form and any gain resulting therefrom, will be
recognized, but only in an amount not in excess of the fair
market value of the Subscription
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Rights and Liquidation Account received, and the Liquidation
Account will have nominal, if any, fair market value;
(x) based solely on the accuracy of the conclusions reached in
an opinion of JMP (the "JMP Opinion") that the Subscription
Rights have no economic value at the time of distribution or
exercise, no gain or loss will be required to be recognized
by the depositors upon receipt or distribution of
Subscription Rights, no taxable income will be realized by
the depositors of the Savings Bank as a result of the
exercise of the Subscription Rights to purchase Common Stock
at fair market value, and no taxable income will be
realized by the Savings Bank in either mutual or stock
form or the Holding Company on the issuance or distribution
of Subscription Rights;
(xi) a depositor's basis in the deposit accounts of the Savings
Bank in its stock form will be the same as the basis of the
deposit accounts in the Savings Bank in its mutual form, the
basis of the Subscription Rights received to acquire Common
Stock will be zero, and the basis of the interest in the
Liquidation Account of the Savings Bank in its stock form
received by Eligible Account Holders and Supplemental
Eligible Account Holders will be equal to the cost of such
property (which is assumed to be zero);
(xii) account holders will not recognize gain or loss upon the
deemed exchange of their deposit accounts in the Conversion;
(xiii) the basis of the Common Stock to its holders will equal the
purchase price thereof;
(xiv) a stockholder's holding period for Common Stock acquired
through the exercise of Subscription Rights shall begin on
the date on which the Subscription Rights are exercised and
the holding period for the Common Stock purchased pursuant
to the Community Offering or under other purchase
arrangements will commence on the date following the date
on which Common Stock is purchased;
(xv) regardless of any financial accounting entries that are made
for the establishment of a Liquidation Account, the
reorganization will not diminish the accumulated earnings and
profits of the Savings Bank in its stock form available for
subsequent distribution of dividends within the meaning of
Section 316 of the Code and the Savings Bank in its stock
form will succeed to and take into account the earnings and
profits or deficit in earnings and profits of the Savings
Bank in its mutual form as of the date of the Conversion; and
(xvi) the State of Illinois consequences of the proposed transaction
will be consistent with the federal tax results.
The opinion from Geo. S. Olive & Co. LLC is based on certain
representations made by the Savings Bank to Geo. S. Olive & Co. LLC, including
the representation that the exercise price of the Subscription Rights to
purchase Common Stock will be equal to the fair market value of that stock at
the time of the completion of the proposed Conversion. With respect to the
Subscription Rights, the Savings Bank has the JMP Opinion which, based on
certain assumptions, concludes that the Subscription Rights to be received by
Eligible Account Holders and other eligible subscribers have no ascertainable
fair market value at the time of distribution or exercise. All recipients of
Subscription Rights are encouraged to consult with their own tax advisors as to
the tax consequences which may result if it is subsequently determined that the
Subscription Rights have a fair market value.
The opinion of Geo. S. Olive & Co. LLC is limited to applicable Federal and
Illinois law. No legal opinion has been or will be received with respect to the
value of the Holding Company, of the Savings Bank (in either mutual or stock
form) or of the Subscription Rights, or with respect to any tax consequences of
the
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Conversion not specifically described above, including the tax consequences
under the laws of any other state or local or foreign taxing jurisdiction to
which they may be subject.
Unlike a private letter ruling, the opinion of Geo. S. Olive & Co. LLC and
the JMP Opinion have no binding effect or official status, and no assurance can
be given that the conclusions reached in any of those opinions would be
sustained by a court if contested by the IRS or the Illinois tax authorities.
LIQUIDATION RIGHTS. In the unlikely event of a complete liquidation of the
Savings Bank before the Conversion or of the converted Savings Bank after the
Conversion, account holders would have claims for the amount of their deposit
accounts, including accrued interest, and would receive the protection of SAIF
insurance up to applicable limits.
Prior to the Conversion, in the event of a complete liquidation of the
Savings Bank, each holder of a deposit account in the Savings Bank would receive
such holder's pro rata share of any assets of the Savings Bank remaining after
payment of the valid claims of all creditors (including the claims of all
depositors to the withdrawal value of their accounts, including accrued
interest). Such holder's pro rata share of such remaining assets, if any, would
be in the same proportion as the value of such holder's deposit account was to
the total value of all deposit accounts in the Savings Bank at the time of
liquidation.
As required by the Commissioner's regulations, the Plan provides that,
upon completion of the Conversion, a "Liquidation Account" will be
established on the converted Savings Bank's books, for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders who
continue to maintain their deposit accounts at the converted Savings Bank.
The amount of the Liquidation Account will be equal to the regulatory capital
of the Savings Bank as of the latest practicable date prior to consummation
of the Conversion. Under applicable regulations of the Commissioner, the
converted Savings Bank will not be permitted to pay dividends on its common
stock if its regulatory capital would thereby be reduced below the aggregate
amount then required for the Liquidation Account. After the Conversion,
Eligible Account Holders and Supplemental Eligible Account Holders will be
entitled, in the event of liquidation of the converted Savings Bank, to
receive liquidating distributions of any assets remaining after payment of
all valid creditors' claims (including the claims of all depositors to the
withdrawal values of their deposit accounts, including accrued interest), but
before any distributions are made on the converted Savings Bank's common
stock, equal to their proportionate interests in the Liquidation Account at
the time of liquidation.
Each Eligible Account Holder and Supplemental Eligible Account Holder
will have an initial interest ("subaccount balance") in the Liquidation
Account for each deposit account as of the Eligibility Record Date or
Supplemental Eligibility Record Date, respectively. Each initial subaccount
balance will be the amount determined by multiplying the total opening
balance in the Liquidation Account by a fraction, (i) the numerator of which
is the total of the deposit balances of the deposit accounts (as defined in
the Plan) of an Eligible Account Holder and Supplemental Eligible Account
Holder as of the close of business on the Eligibility Record Date or, in the
case of a Supplemental Eligible Account Holder, the Supplemental Eligibility
Record Date ("Qualifying Deposit") (provided that deposit accounts of an
Eligible Account Holder or Supplemental Eligible Account Holder with total
deposit balances of less than $50 shall not constitute a Qualifying Deposit),
and (ii) the denominator of which is the total of all Qualifying Deposits of
all Eligible Account Holders or Supplemental Eligible Account Holders,
respectively. If the amount in the deposit account on any subsequent annual
closing date (I.E., each March 31 commencing March 31, 1999) of the converted
Savings Bank is less than the balance in such deposit account on any other
annual closing date or the balance in such account on the Eligibility Record
Date, this interest in the Liquidation Account will be reduced by an amount
proportionate to any such reduction and will not thereafter be increased
despite any subsequent increase in the related deposit account. Each Eligible
Account Holder's and Supplemental Eligible Account Holder's interest in the
Liquidation Account will cease to exist if the Eligible Account Holder or
Supplemental Eligible Account Holder ceases to maintain an account at the
converted Savings Bank. The Liquidation Account will never increase and will
be correspondingly reduced as the subaccount balances in the
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Liquidation Account are reduced or cease to exist. Any assets remaining after
the above liquidation rights of Eligible Account Holders and Supplemental
Eligible Account Holders are satisfied would be distributed to the Holding
Company, as sole stockholder of the converted Savings Bank. A merger,
consolidation, sale of bulk assets or similar combination or transaction with
another FDIC insured institution, whether or not the converted Savings Bank
is the surviving institution, would not be viewed as a complete liquidation
for purposes of distribution of the Liquidation Account. In any such
transaction, the Liquidation Account would be assumed by the surviving
institution to the full extent authorized by regulations of the Commissioner
as then in effect.
THE SUBSCRIPTION AND COMMUNITY OFFERINGS
SUBSCRIPTION OFFERING. In accordance with the Commissioner's and the
FDIC's regulations, Subscription Rights have been granted pursuant to the
Subscription Offering under the Plan to the following persons (collectively,
the "Eligible Subscribers") in the following order of priority: (1) Eligible
Account Holders (depositors with aggregate account balances of $50 or more on
deposit at the Savings Bank as of December 31, 1996); (2) the ESOP; (3)
Supplemental Eligible Account Holders (depositors with aggregate account
balances of $50 or more on deposit at the Savings Bank, other than officers
or directors of the Savings Bank or any of their associates, as of June 30,
1998); and (4) Other Members (depositors who are not Eligible Account Holders
or Supplemental Eligible Holders and who continue to be depositors as of
__________________, 199___, the voting record date). Subscription Rights are
non-transferable and have been granted to Eligible Subscribers without
charge. No Eligible Subscriber is required to purchase any shares of Common
Stock in the Subscription Offering. All subscriptions received will be
subject to the availability of Common Stock after satisfaction of
subscriptions of all Eligible Subscribers having prior rights in the
Subscription Offering and to the maximum purchase limitations and other terms
and conditions set forth in the Plan and described below.
CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS. Subject to the maximum and minimum
purchase limitations set forth in the Plan, each Eligible Account Holder has
been granted, without payment therefor, non-transferable Subscription Rights
to purchase Common Stock up to an amount which, when added to the Common
Stock purchased by all of his associates and/or any persons acting in concert
with such Eligible Account Holder, equals 5% of the shares of Common Stock
offered in the Conversion (6,325 shares or $63,250), as calculated without
giving effect to any increase, subsequent to the date hereof in the Estimated
Valuation Range and the corresponding increase in the number of shares
offered and sold.
Subscription Rights of Eligible Account Holders that are received by
officers and directors of the Savings Bank and the Holding Company and their
associates based on their increased deposits in the Savings Bank in the
one-year period preceding the Eligibility Record Date shall be subordinated
to all other subscriptions involving the exercise of Subscription Rights by
Eligible Account Holders.
If Eligible Account Holders subscribe for more shares than are available
for purchase, other Eligible Subscribers will not be entitled to purchase any
shares and available shares will be allocated among Eligible Account Holders
in accordance with the following formula. Available shares of Common Stock
will first be allocated so as to permit each subscribing Eligible Account
Holder, as the case may be, to purchase the lesser of 100 shares of Common
Stock or the amount of each such subscriber's subscription. Thereafter,
shares of Common Stock remaining shall be allocated among subscribing
Eligible Account Holders in the proportion that the amount of the Qualifying
Deposit of each such subscriber bears to the total amount of the Qualifying
Deposits of all such Eligible Account Holders. If the amount of shares so
allocated to one or more of such subscribers exceeds the amount subscribed
for by such subscriber(s), the excess shall be reallocated (one or more
times, as necessary) among those Eligible Account Holders whose subscriptions
are still not fully satisfied on the same principle until all available
shares have been allocated or all subscriptions satisfied.
CATEGORY 2: ESOP. The ESOP has been granted, without payment therefor,
non-transferable Subscription Rights to purchase up to 8% of the Common Stock
offered in the Subscription Offering. It is anticipated that the
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ESOP will exercise Subscription Rights to purchase 8% of the shares sold in
the Offerings, assuming such shares are available after subscriptions of
Eligible Account Holders have been filled. Under certain circumstances, the
ESOP's purchases in the Conversion may be limited to an amount less than 8%
or may be prohibited altogether. For information regarding these
restrictions, see "MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK --
Employee Benefit Plans -- Employee Stock Ownership Plan." Pursuant to the
Plan, shares of Common Stock purchased by the ESOP will not be aggregated
with shares of Common Stock purchased directly by, or which are otherwise
attributable to, any other participants in the Offerings, including
subscriptions of any of the Savings Bank's directors, officers, employees or
associates thereof.
CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Subject to the
maximum and minimum purchase limitations set forth in the Plan, each
Supplemental Eligible Account Holder has been granted, without payment
therefor, non-transferable Subscription Rights to purchase Common Stock up to
an amount which, when added to the Common Stock purchased by all of his
associates and/or any persons acting in concert with such Supplemental
Eligible Account Holder, equals 5% of the shares of Common Stock offered in
the Conversion (or 6,325 shares, assuming the sale of 126,500 shares), as
calculated without giving effect to any increase in the Estimated Value Range
and the corresponding increase in the number of shares offered and sold
subsequent to the date hereof. The Subscription Rights of each Supplemental
Eligible Account Holder will be reduced by any Subscription Rights received
by such person as an Eligible Account Holder.
If Supplemental Eligible Account Holders subscribe for more shares than
are available for purchase, other subscribers will not be entitled to
purchase any shares. In the event of an oversubscription by Supplemental
Eligible Account Holders, shares of Common Stock available to the
oversubscribing subclass will be allocated in accordance with the following
formula. Available shares of Common Stock will be allocated so as to permit
each subscribing Supplemental Eligible Account Holder to purchase the lesser
of 100 shares of Common Stock or the amount of each such subscriber's
subscription. Thereafter, shares of Common Stock remaining shall be allocated
among subscribing Supplemental Eligible Account Holders in the proportion
that the amount of the Qualifying Deposit of each such Subscriber bears to
the total amount of the Qualifying Deposits of all such Supplemental Eligible
Account Holders. If the amount of shares so allocated to one or more of such
subscribers exceeds the amount subscribed for by such subscriber(s), the
excess shall be reallocated (one or more times, as necessary) among those
Supplemental Eligible Account Holders whose subscriptions are still not fully
satisfied on the same principle until all available shares have been
allocated or all subscriptions satisfied.
CATEGORY 4: OTHER MEMBERS. Subject to the maximum and minimum purchase
limitations set forth in the Plan, each Other Member has been granted,
without payment therefor, nontransferable Subscription Rights to purchase
Common Stock up to an amount which, when added to the Common Stock purchased
by all of his or her associates and any persons acting in concert with such
Other Member, equals 5% of the Common Stock offered in the Conversion (or
6,325 shares, assuming the sale of 126,500 shares), as calculated without
giving effect to any increase, subsequent to the date hereof, in the
Estimated Valuation Range and the corresponding increase in the number of
shares offered and sold, to the extent that shares remain available for
purchase after satisfaction of all subscriptions of Eligible Account Holders,
the ESOP and Supplemental Eligible Account Holders. In the event of an
oversubscription by Other Members, available shares of Common Stock will be
allocated among Other Members in the proportion that the number of shares
subscribed for by each Other Member bears to the total number of shares
subscribed for by all such Other Members.
COMMUNITY OFFERING. Subsequent to the Subscription Offering, and subject
to the availability of shares of the Common Stock after satisfaction of all
subscriptions of Eligible Account Holders, the ESOP, Supplemental Eligible
Account Holders and Other Members, the remaining shares of the Common Stock
will be offered in the Community Offering to members of the general public to
whom this Prospectus and Order Form are delivered with a preference to
natural persons residing in the Illinois county of Piatt in a manner designed
to achieve the widest possible distribution of Common Stock.
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No individual who purchases Common Stock in the Community Offering,
directly or indirectly or together with his or her associates or other
persons with whom such person is acting in concert, may subscribe for an
amount of Common Stock which would exceed 5% of the shares of Common Stock
sold in the Conversion (or 6,325 shares, assuming the sale of 126,500
shares), as calculated without giving effect to any increase in the Estimated
Valuation Range, and corresponding increase in the number of shares offered
and sold, subsequent to the date hereof.
If orders are received in the Community Offering for shares in excess of
the available shares of Common Stock to be offered in the Conversion,
accepted subscriptions from purchasers in the Community Offering shall first
be filled in full up to a maximum of 2% of the Common Stock offered in the
Conversion and thereafter remaining shares shall be allocated on an equal
number of shares per order until all orders of such purchasers have been
filled (subject to the minimum and maximum purchase limitations).
The Holding Company reserves the right to accept or reject, in whole or
in part, any or all orders in the Community Offering, either at the time of
receipt of an order or as soon as practicable following the termination of
the Offerings.
In the event that a Community Offering does not appear feasible, the
Savings Bank will consult with the Commissioner to determine the most viable
alternative available to effect completion of the Conversion. If no viable
alternative exists, the Savings Bank may terminate the Conversion with the
concurrence of the Commissioner.
SUBSCRIPTION AND COMMUNITY OFFERINGS MARKETING AND OTHER FEES
The Savings Bank has engaged Trident to consult and advise the Holding
Company and Savings Bank with respect to the Subscription and Community
Offerings. Trident is a registered broker-dealer and is a member of the NASD.
Trident will assist the Holding Company and the Savings Bank in the
Conversion by, among other things, (i) training the Savings Bank's employees
regarding the mechanics and regulatory requirements of the Conversion
process; (ii) conducting informational meetings for potential subscribers and
purchasers of the Common Stock; (iii) organizing the sales efforts in the
Savings Bank's local community; (iv) soliciting subscriptions and purchases
of Common Stock; (v) maintaining records of all subscriptions and purchases
of Common Stock and (vi) developing and managing a Syndicated Community
Offering, if implemented, involving local and regional brokerage firms. For
its services, Trident will receive a $53,500 financial advisory fee, and an
amount not to exceed $35,000 for reimbursement of certain out-of-pocket
expenses (including fees of Trident's legal counsel). If a Syndicated
Community Offering is implemented, Trident will be paid a fee to be agreed
upon jointly by Trident and the Savings Bank to reflect market requirements
at the time of the stock allocation in a Syndicated Community Offering. If
the Conversion is not consummated for any reason, or if the Conversion is
consummated without using the services of Trident, Trident shall be entitled
to retain the fees received up to the time that the Conversion is terminated
or Trident services no longer are utilized. Under the agreement with Trident,
the Savings Bank is also obligated to indemnify Trident against certain
liabilities and expenses, including legal fees, to which Trident may become
subject in connection with its engagement.
The Savings Bank has retained JMP to provide an appraisal of the pro
forma market value of the Common Stock to be issued in connection with the
Conversion and to prepare a business plan that is required to be filed with
the FDIC and the Commissioner as part of the conversion application. JMP will
receive $12,500 for this service. For information concerning fees paid to JMP
in its capacity as appraiser, see "-- Stock Pricing and Number of Shares to be
Issued."
PLAN OF DISTRIBUTION
Offering materials for the Subscription Offering and subsequent
Community Offering, if necessary, will be distributed to certain persons by
mail, with copies also available by request or at the Savings Bank's office.
In the Subscription and Community Offerings, officers and directors of the
Savings Bank will be available to answer questions concerning factual or
historical information regarding the Savings Bank and may also hold
informational
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meetings for interested persons. A representative of Trident will be present
at all such meetings and will respond to questions concerning the Offerings.
Officers and directors will not be permitted to make statements about the
Savings Bank unless such information is also set forth in the Prospectus nor
may they render investment advice. All subscribers for or purchasers of the
shares to be offered will be instructed to send payment directly to the
Savings Bank, where such funds will be held in a segregated account and not
released until all shares are sold or the Offerings are terminated.
In the event the Savings Bank is unable to find purchasers from the
general public for all unsubscribed shares, other purchase arrangements will
be made by the Board of Directors of the Savings Bank, if feasible. Such
other arrangements will be subject to the approval of the Commissioner and
the FDIC. The Commissioner may grant one or more extensions of the offering
period, provided that (i) no single extension exceeds 90 days, (ii)
subscribers are given the right to increase, decrease or rescind their
subscriptions during the extension period, and (iii) the extensions do not go
more than two years beyond the date on which the members of the Savings Bank
approved the Plan. If the Conversion is not completed by
____________________, 1998 all funds received will be returned with interest
(and withdrawal authorizations canceled) or, if the Commissioner has granted
an extension of such period, all subscribers will be given the right to
increase, decrease or rescind their subscriptions at any time prior to 20
days before the end of the extension period. If an extension of time is
obtained, all subscribers will be notified of such extension and of their
rights to modify their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled).
DESCRIPTION OF SALES ACTIVITIES
The Common Stock will be offered in the Subscription Offering and
subsequent Community Offering, if necessary, principally by the distribution
of this Prospectus and through activities conducted at a Savings Bank
facility not open to the public (the "Conversion Center"). The Conversion
Center is expected to operate during normal business hours throughout the
Subscription and Community Offerings. A representative of Trident will
supervise the activities in the Conversion Center and will respond to all
questions regarding the mechanics of the Subscription and Community Offerings.
Officers and directors of the Savings Bank may have occasion to discuss
the Subscription and Community Offerings in social or business situations and
otherwise answer questions from interested parties concerning factual or
historical information regarding the Savings Bank. Parties interested in
participating in the Subscription and Community Offerings or with questions
concerning the mechanics of the Subscription and Community Offerings will be
directed to a representative of Trident at the Conversion Center.
None of the Savings Bank's employees or directors who participate in the
Subscription and Community Offerings, either in the Conversion Center or
otherwise, will receive any special compensation or other remuneration for
such activities.
None of the Savings Bank's personnel participating in the Subscription
and Community Offerings are registered or licensed as a broker or dealer or
an agent of a broker or dealer. The Savings Bank's personnel will assist in
the above-described activities pursuant to an exemption from registration as
a broker or dealer provided by Rule 3a4-1 ("Rule 3a4-1") promulgated under
the Exchange Act. Rule 3a4-1 generally provides that an "associated person of
an issuer" of securities shall not be deemed a broker solely by reason of
participation in the sale of securities of such issuer if the associated
person meets certain conditions. Such conditions include, but are not limited
to, that the associated person participating in the sale of an issuer's
securities not be compensated in connection therewith at the time of
participation, that such person not be associated with a broker or dealer and
that such person observe certain limitations on his participation in the sale
of securities. For purposes of this exemption, "associated person of an
issuer" is defined to include any person who is a director, officer or
employee of the issuer or a company that controls, is controlled by or is
under common control with the issuer.
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In connection with this Offering, Trident has conducted due diligence
with respect to the Holding Company and Savings Bank to the extent it
considers necessary to satisfy its obligations as an underwriter under the
federal securities laws. Trident and its counsel have reviewed, among other
things, the corporate records of the Savings Bank and Holding Company and
will receive a "comfort" letter prepared by the Savings Bank's independent
certified public accountants and a legal opinion prepared by the Savings
Bank's outside counsel with respect to the Offering. Trident has also spent
time at the Savings Bank to view its operations and has conducted extensive
interviews with the Chief Executive Officer of the Savings Bank as part of
its due diligence. Finally, Trident and its counsel have been extensively
involved in the drafting of the Prospectus. THE DUE DILIGENCE PROCEDURES
FOLLOWED BY TRIDENT IN CONNECTION WITH THE OFFERINGS, HOWEVER, ARE NOT
INTENDED AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO
THE ADVISABILITY OF PURCHASING THE COMMON STOCK.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The Commissioner's regulations and the Plan of Conversion require that
the aggregate purchase price of the Common Stock to be issued in the
Conversion be based upon an independent appraisal of the estimated pro forma
market value of the Common Stock. The Savings Bank has retained JMP to
prepare an appraisal of the pro forma market value of the Common Stock to be
issued in connection with the Conversion. JMP's fee for its appraisal
services will be $12,500. The Savings Bank has agreed to indemnify JMP under
certain circumstances against liabilities and expenses (including legal fees)
arising out of, related to, or based upon the Conversion.
For its analysis, JMP undertook substantial investigations to learn
about the Savings Bank's business and operations. Management supplied
financial information, including annual financial statements, information on
the composition of assets and liabilities, and other financial schedules. In
addition to this information, JMP reviewed the Savings Bank's Conversion
Application and the Registration Statement. Further, JMP visited the Savings
Bank's facilities and had discussions with the Savings Bank's management. No
detailed individual analysis of the separate components of the Holding
Company's or the Savings Bank's assets and liabilities was performed in
connection with the evaluation.
In estimating the pro forma market value of the Common Stock, JMP's
analysis utilized three generally accepted valuation procedures, the
Price/Book ("PUB") method, the Price/Earnings ("PIE") method, and
Price/Assets ("PEA") method, all of which are described in its report. JMP
placed the greatest emphasis on the PIE and PUB methods in estimating pro
forma market value. In applying these procedures, JMP reviewed among other
factors, the economic make-up of the Savings Bank's primary market area, the
Savings Bank's financial performance and condition in relation to
publicly-traded institutions that JMP deemed comparable to the Savings Bank,
the specific terms of the offering of the Common Stock, the pro forma impact
of the additional capital raised in the Conversion, conditions of securities
markets in general, and the market for thrift institution common stock in
particular. JMP's analysis provides an approximation of the pro forma market
value of the Common Stock based on the valuation methods applied and the
assumptions outlined in its report. The use of other valuation methods and/or
different assumptions would likely yield somewhat different results. JMP
concluded that an appropriate range for the pro forma market value of the
Holding Company (and therefore the Savings Bank) as of May 27, 1998 was from
a minimum of $935,000 to a maximum of $1,265,000 with a mid-point of
$1,100,000. Assuming that the shares of Common Stock are sold at $10.00 per
share in the Conversion, the estimated number of shares would be between
93,500 and 126,500 with a mid-point of 110,000.
If, upon completion of the Subscription and Community Offerings, at
least the minimum number of shares are subscribed for, JMP, after taking into
account factors similar to those involved in its prior appraisal, will
determine its estimate of the pro forma market value of the Holding Company
(and therefore the Savings Bank) upon Conversion, as of the close of the
Subscription and Community Offerings.
Depending upon market and financial conditions, the number of shares
issued in connection with the Conversion may be more or less than the range
in number of shares shown above. In the event the total amount
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of shares issued is less than 93,500 or more than 145,475 (15% above the
maximum of the Estimated Valuation Range) for aggregate proceeds of less than
$935,000 or more than $1,454,750 subscribers will be given the opportunity to
increase, decrease or rescind their subscriptions and subscription funds will
be returned promptly with interest to each subscriber unless he indicates
otherwise. In the event a new valuation range is established by JMP, such new
range will be subject to approval by the Commissioner and the FDIC.
No sale of the shares will take place unless prior thereto, JMP confirms
to the Commissioner and the FDIC that, to the best of JMP's knowledge and
judgment, nothing of a material nature has occurred which would cause it to
conclude that the actual total purchase price on an aggregate basis was
incompatible with its estimate of the total pro forma market value of the
Holding Company and the Savings Bank as converted at the time of the sale.
If, however, the facts do not justify such a statement, the Subscription and
Community Offerings or other sale may be canceled, a new Estimated Valuation
Range and price per share set and new Subscription Offering held. Under such
circumstances, subscribers would have the right to modify or rescind their
subscriptions and to have their subscription funds returned promptly with
interest and holds on funds authorized for withdrawal from deposit accounts
would be released or reduced.
In formulating its appraisal JMP relied upon the truthfulness, accuracy
and completeness of all documents furnished by the Savings Bank. JMP also
considered financial and other information from regulatory agencies, other
financial institutions and other public sources, as appropriate. While JMP
believes this information to be reliable, JMP does not guarantee the accuracy
or completeness of such information and did not independently verify the
financial statements and other data provided by the Savings Bank and the
Holding Company or independently value the assets or liabilities of the
Holding Company and the Savings Bank.
On ______________, 1998, the Board of Directors of the Savings Bank held
a meeting to review and discuss the original appraisal report prepared by
JMP. The representative of JMP who prepared the report attended the meeting
via telephone and explained its contents including the methodology that JMP
employed to determine the pro forma market value of the Holding Company and
the assumptions JMP used in determining this value. JMP also answered
questions from the Board of Directors concerning the report. The Board of
Directors of the Savings Bank subsequently reviewed an update of JMP's
appraisal report at a meeting held on _______________________, 1998.
A copy of the complete appraisal is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. See "ADDITIONAL
INFORMATION." A copy is also on file and available for inspection at the
offices of the Commissioner, 205 W. Randolph Street, Suite 1900, Chicago,
Illinois 60606, and 500 E. Monroe Street, Suite 800, Springfield, Illinois
62701, and at the executive offices of the Savings Bank, 229 E. South Street,
Cerro Gordo, Illinois 61818. A copy of the complete appraisal report may be
inspected at the office of the Savings Bank, 229 E. South Street, Cerro
Gordo, Illinois, and inquiries concerning such inspection can be made to the
Savings Bank at (217) 763-2911.
THE APPRAISAL BY JMP IS NOT INTENDED TO BE, AND MUST NOT BE INTERPRETED
AS, A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF VOTING TO APPROVE
THE CONVERSION OR OF PURCHASING SHARES OF COMMON STOCK. MOREOVER, BECAUSE THE
APPRAISAL IS NECESSARILY BASED ON MANY FACTORS WHICH CHANGE FROM TIME TO
TIME, THERE IS NO ASSURANCE THAT PERSONS WHO PURCHASE SUCH SHARES IN THE
CONVERSION WILL LATER BE ABLE TO SELL SHARES THEREAFTER AT PRICES AT OR ABOVE
THE PURCHASE PRICE.
PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND COMMUNITY OFFERINGS
To purchase shares in the Subscription and Community 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
the Savings Bank (which may be given by completing the appropriate blanks in
the Order Form), must
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be received by the Savings Bank at or before the Subscription Expiration Time
or expiration of the Community Offering, if and as applicable. 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. The Savings Bank and the Holding Company have
the right to waive or permit the correction of incomplete or improperly
executed Order 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 Holding Company except in the event of
resolicitation or unless the Conversion has not been completed within 45 days
after the end of the Subscription Offering. For additional information
concerning the payment for shares, see "THE OFFERING -- Payment for Shares."
If the ESOP subscribes for shares during the Subscription and Community
Offerings, it will not be required to pay for such shares at the time of
subscription but rather, may pay for such shares upon consummation of the
Conversion, provided that there is in force from the time of its subscription
until such time, a loan commitment from an unaffiliated financial institution
or the Holding Company to lend to the ESOP, at such time, the aggregate
Purchase Price of the shares for which it subscribed.
Any interest due will be paid after completion of the Conversion.
Interest will be paid on payments whether or not the Conversion is completed
or terminated at the Savings Bank's then current passbook rate from the date
payment is received until completion or termination of the Conversion.
Certificates representing shares of Common Stock purchased will be mailed to
purchasers at the address specified in properly completed Order Forms, as
soon as practicable following consummation of the sale of all shares of
Common Stock. Any certificates returned as undeliverable will be held by the
Holding Company until claimed by persons legally entitled thereto or
otherwise disposed of in accordance with applicable law.
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the date on which the Subscription Expiration Time occurs, in
accordance with Rule 15c2-8 under the Exchange Act, no Prospectus will be
mailed any later than five days prior to such date or hand delivered any
later than two days prior to such date. Execution of the Order Form will
confirm receipt or delivery in accordance with Rule 15c2-8. Order Forms will
only be distributed with a Prospectus. The Savings Bank will accept for
processing only orders submitted on Order Forms. Payment by cash, check,
money order, bank draft or withdrawal authorization from an existing account
at the Savings Bank must accompany the Order Form.
LIMITATIONS ON PURCHASES OF SHARES
To the extent shares of Common Stock are available, each person
subscribing for Common Stock in the Offerings must subscribe for at least 25
shares of Common Stock (or $250, assuming a Purchase Price of $10.00). In
addition, all purchases of Common Stock by any person or entity, other than
the ESOP, in the Offerings are subject to the following maximum purchase
limitations:
- the maximum number of shares of Common Stock purchased in all
phases of the Offerings by any person, together with all associates
of such person, or group of persons otherwise acting in concert, is
6,325 shares of Common Stock (or $63,250, assuming a Purchase Price
of $10.00); and
- The maximum number of shares of Common Stock purchased by all
directors and officers of the Savings Bank, together with all
associates of such directors and officers, when aggregated with any
shares of Common Stock attributable to such directors and officers
and their associates but purchased by the MRP within one year
following consummation of the Conversion, may not exceed 35% of the
total number of shares sold in the Conversion.
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Notwithstanding the foregoing limits:
- the ESOP will be permitted, and is expected, to subscribe for 8% of
the total number of shares of Common Stock sold in the Conversion.
The Plan also permits the Holding Company and the Savings Bank, in their
sole discretion, to increase the maximum number of shares of Common Stock
which may be purchased in the Offerings by any one person, together with all
associates of such person or group of persons otherwise acting in concert,
above the generally applicable limit of 6,325 shares of Common Stock (which
represents 5% of the shares of Common Stock being offered in the Offerings at
the maximum of the Estimated Valuation Range). The maximum purchase
limitation may be increased to exceed 5% of the shares of Common Stock sold
in the Conversion, provided that orders for Common Stock exceeding 5% of the
total offering of shares of Common Stock shall not exceed in the aggregate
10% of the total offering of such shares (except that the ESOP may purchase
up to 8% of the total offering and not be included in the order limit). If an
increase is effected, each person who subscribed for the maximum number of
shares of Common Stock prior to such increase will be given the opportunity
to increase his subscription to the then applicable maximum number of shares
of Common Stock, and the Savings Bank and the Holding Company may, in their
sole discretion, resolicit certain other large subscribers. The Savings Bank
or the Holding Company may, with the approval of the Commissioner and the
FDIC, decrease the maximum purchase limitation below 6,325 shares of Common
Stock. The purchase limitations may be increased if, for example, there is a
substantial undersubscription for shares of Common Stock in the Offerings;
conversely, the purchase limitations may be decreased if, for example, there
is a substantial oversubscription for shares of Common Stock in the Offerings.
The Plan provides that for purposes of the maximum purchase limitations,
the term "associate" is used to indicate any of the following relationships
with a person:
- 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 Savings Bank, any of its subsidiaries or the
Holding Company;
- any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank or the Holding
Company) of which the person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any
class of equity securities; or
- 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.
Further, for purposes of the maximum purchase limitations:
- persons will be deemed to be "acting in concert" if they are (i)
engaged in knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal,
whether pursuant to an express agreement or otherwise, or (ii)
engaged in a combination or pooling of voting or other interests in
the securities of the Holding Company for a common purpose pursuant
to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise.
The members of the Savings Bank's or the Holding Company's Board of
Directors will not be deemed to be associates, or affiliated with each other
or a group of persons acting in concert, solely as a result of being
directors. Shares of Common Stock attributed to directors, officers or
employees of the Savings Bank or the Holding Company but held in the ESOP
will not be included in calculating the maximum number of shares that may be
purchased by directors, officers or employees of the Savings Bank or the
Holding Company individually or as a group. Shares of Common Stock attributed
to directors, officers and employees of the Savings Bank or the Holding
Company but purchased by the MRP within one year of consummation of the
Conversion will be included
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in applying the 35% limit on aggregate purchases by directors, officers and
their associates. The ESOP and MRP participants, officers and trustees will
not be deemed to be associated or affiliated with other participants or a
group acting in concert solely as a result of their participation in such
plan or service as an officer or trustee, nor will a trustee of the ESOP or
an MRP be deemed to hold shares held by the ESOP or the MRP, respectively,
for purposes of determining the number of shares which such trustee may
purchase in his or her individual capacity.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
Prior to the completion of the Conversion, the Commissioner's
regulations prohibit any person with Subscription Rights, including Eligible
Account Holders, the ESOP, Supplemental Eligible Account Holders and Other
Members, from transferring or entering into any agreement or understanding to
transfer the legal or beneficial ownership of the Subscription Rights issued
under the Plan or the shares of Common Stock to be issued upon their
exercise. Such rights may be exercised only by the person to whom they are
granted and only for his account. Each person exercising such Subscription
Rights will be required to certify that he is purchasing shares solely for
his own account and that he has no agreement or understanding regarding the
sale or transfer of such shares. The regulations also prohibit any person
from offering or making an announcement of an offer or intent to make an
offer to purchase such Subscription Rights or shares of Common Stock prior to
the completion of the Conversion.
The Savings Bank and the Holding 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 the
transfer of such rights.
Certain purchasers of Common Stock in the Conversion will be subject to
restrictions on the ability to transfer their shares. Members of the NASD,
persons 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 may not sell,
transfer or hypothecate shares of Common Stock purchased in the Conversion
for a period of 150 days following the issuance of the Common Stock. Shares
purchased by directors, executive officers or their associates in the
Conversion will be subject to the restriction that such shares may not be
sold during the period of one year following the date of purchase, except in
the event of the death of the stockholder. Accordingly, stock certificates
issued by the Holding Company to directors, executive officers and their
associates will bear a legend giving appropriate notice of such restriction
and, in addition, the Savings Bank and the Holding Company will give
appropriate instructions to the transfer agent for the Common Stock with
respect to the applicable restriction upon transfer of any restricted shares.
Any shares issued at a later date as a stock dividend, stock split or
otherwise, to holders of restricted stock, shall be subject to the same
restrictions that may apply to such restricted stock.
Shares of Common Stock purchased by any "affiliate" of the Holding
Company (as that term is defined under the rules and regulations issued under
the Securities Act) may also be sold only pursuant to an effective
registration statement covering such resales or in compliance with Rule 144
under the Securities Act or another applicable exemption from the
registration requirements of the Securities Act. In general, Rule 144, as
currently in effect, permits an affiliate of the Holding Company (or persons
whose sales of Common Stock are aggregated with the sales of such affiliate)
to sell within any three-month period, beginning 90 days after the
consummation of the Offerings, a number of shares of common stock of the
Holding Company equal to the greater of: (i) 1% of the shares of common stock
outstanding, or (ii) the average weekly trading volume of such common stock
during the four calendar weeks immediately preceding such sale. Sales under
Rule 144 are also subject to certain restrictions on the manner of sale,
notice requirements and the continued availability of current public
information about the Holding Company. Apart from the foregoing restrictions,
shares of Common Stock purchased in the Conversion will be freely
transferable.
RESTRICTIONS ON REPURCHASES OF COMMON STOCK
The Holding Company has committed to the FDIC that it will not
repurchase its capital stock for one year following consummation of the
Conversion. Following the first anniversary of the consummation of the
Conversion, the Holding Company's ability to repurchase its capital stock
will be governed by the regulations of the Commissioner, the Federal Reserve
Board and the FDIC.
Under the Commissioner's regulations, the Holding Company may not
repurchase any of its Common Stock from any person for a period of one year
from the date of the Conversion, except that capital stock repurchases of no
greater than 5% of the capital stock issued in the conversion may be
repurchased during this one year period if the Commissioner finds that: (a)
the repurchase would not adversely affect the financial condition of the
savings bank; (b) the repurchase would not reduce the savings bank's capital
below requirements established by the Commissioner or federal law; (c) the
repurchase would be equitable to shareholders; (d) the repurchase would be
undertaken for legitimate business reasons; and (e) the Savings Bank submits
information which is sufficient for the Commissioner to reach a conclusion
regarding such exception.
In addition to the foregoing, the Federal Reserve Board generally must
be given written notice before a bank holding company may purchase or redeem
its equity securities if the gross consideration for the purchase or
redemption, when aggregated with the net consideration paid by the bank
holding company for all purchases and redemptions during the preceding 12
months, is equal to 10% or more of the bank holding company's consolidated
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<PAGE>
net worth. The Federal Reserve Board has eliminated this prior notice
requirement for bank holding companies that are, and after giving effect to
the repurchase will be, well-capitalized and in generally satisfactory
condition.
APPROVAL, AMENDMENT AND TERMINATION
Under the Plan, the letter of the Commissioner giving approval thereto
and applicable Commissioner regulations, or the FDIC's notice of intent not
to object to the Conversion, consummation of the Conversion is subject to
satisfaction of the following conditions: (i) approval of the Plan by the
affirmative vote of members of the Savings Bank holding two-thirds of the
outstanding votes; (ii) sale of all the shares of Common Stock within a
prescribed range; (iii) receipt by the Holding Company and the Savings Bank
of favorable opinions of counsel or other tax advisors as to the federal and
state tax consequences of the Conversion and, (iv) receipt by the FDIC of an
updated appraisal that takes into account the results of the Subscription
Offering. Consummation of the Conversion is also subject to receipt of all
regulatory approvals, and satisfaction of all conditions with respect to such
approvals, required for consummation of the Conversion in accordance with
applicable laws and regulations. As of the date of this Prospectus, all
required approvals have been received.
The Plan may be substantively amended by the Savings Bank at any time
prior to the Special Meeting, and at any time thereafter with the concurrence
of the Commissioner and the FDIC. If the Savings Bank determines upon the
advice of counsel and after consultation with the Commissioner and the FDIC
that any such amendment is material, subscribers will be given the
opportunity to increase, decrease or cancel their subscriptions.
As required by the regulations of the Commissioner, the Conversion may
be terminated by the Board of Directors of the Savings Bank at any time prior
to the Special Meeting and may be terminated by the Board of Directors of the
Savings Bank at any time after the Special Meeting, but prior to the
completion of the Conversion, with the concurrence of the Commissioner,
notwithstanding approval of the Plan by the members of the Savings Bank at
the Special Meeting. If the Conversion is terminated, no shares of Common
Stock would be issued by the Holding Company, the Savings Bank will remain an
Illinois-chartered mutual savings bank, all funds delivered to the Savings
Bank or withdrawn from deposit accounts in payment for Common Stock will be
promptly returned, and all holds on funds authorized for withdrawal, but not
withdrawn, from deposit accounts will be cancelled.
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RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
RESTRICTIONS IN CERTIFICATE OF INCORPORATION AND BYLAWS
GENERAL. The Holding Company has implemented certain measures designed
to enhance the Board of Directors's ability to protect stockholders against,
among other things, unsolicited attempts to acquire a significant interest in
the Holding Company or to influence the Holding Company's management (whether
through open market purchases, tender offers or otherwise) that do not offer
an adequate price to all stockholders or that the Board of Directors
otherwise considers not in the best interests of the Holding Company and its
stockholders.
Certain provisions in the certificate of incorporation and bylaws of the
Holding Company may impact significantly the stockholders' ability to change
the composition of the incumbent Board of Directors or the ability of a
substantial holder of the Common Stock to acquire control of, or to remove,
the incumbent Board of Directors, and might discourage certain types of
transactions that involve an actual or threatened change of control of the
Holding Company.
The provisions of the certificate of incorporation and bylaws are
intended to encourage persons seeking to acquire control of the Holding
Company to initiate such an acquisition through arm's-length negotiations
with the Holding Company's management and Board of Directors. These
provisions could have the effect of discouraging a third party from making a
tender offer to or otherwise attempting to obtain control of the Holding
Company, even though certain stockholders of the Holding Company might deem
such an attempt to be in the best interests of the Holding Company and its
stockholders. At the same time, these provisions ensure that the Board of
Directors, if confronted by an unsolicited proposal from a third party who
has recently acquired a block of Common Stock, will have sufficient time to
review the proposal and alternatives to it and to seek better proposals or
negotiate better terms for its stockholders, employees, suppliers, customers
and others. These provisions are discussed below.
CLASSIFIED BOARD OF DIRECTORS. The Holding Company's certificate of
incorporation provides that the Board of Directors of the Holding Company
shall be divided into three classes of directors serving staggered three-year
terms. In addition, the certificate of incorporation and the bylaws provide
that directors may be removed from office only for cause and only upon the
vote of the holders of at least 80% of the outstanding shares of all classes
of capital stock of the Holding Company. The classification of directors and
the removal requirements have the effect of making it more difficult for
stockholders to change the composition of the Board of Directors in a
relatively short period of time.
VOTING RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS; FAIR PRICE
PROVISION. The adoption or approval of certain business transactions,
including mergers, consolidations, asset and securities sales, plans of
liquidation or dissolution and certain reclassifications, involving any
"Interested Party" (as defined below) and certain affiliates of such
Interested Party, requires an affirmative vote of the holders of at least
that number of voting shares which equals the sum of (i) the number of voting
shares beneficially owned by all Interested Parties with respect to the
business transaction, plus (ii) 80% of the remaining number of voting shares
that are not beneficially owned by any such Interested Party. An "Interested
Party" is defined in the Holding Company certificate of incorporation to mean
generally the beneficial owner of 10% or more of the voting stock of the
Holding Company.
The 80% affirmative voting requirement is not applicable to business
transactions (i) approved by a resolution adopted by a majority of the Board
of Directors holding office at the time such resolution is adopted provided
that such resolution approving the business transaction is adopted prior to
the time all Interested Parties with respect to the business transaction
become Interested Parties, or (ii) approved by a resolution adopted by
66-2/3% of the directors holding offices at the time such resolution is
adopted who are not themselves Interested Parties or an affiliate of an
Interested Party.
The 80% affirmative voting requirement also is not applicable to any
business transaction and the business transaction need only be approved by a
simple majority vote of the stockholders (if such vote is required under
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<PAGE>
applicable Delaware law) if: (i) the per share consideration to be received
by holders of Common Stock in such business transaction is not less than the
greater of (A) the highest per share price paid by the Interested Party in
acquiring its holdings of Common Stock during the preceding five years, (B)
the per share book value of the Common Stock at the end of the fiscal quarter
preceding such business transaction, or (C) the highest market price per
share of Common Stock during the two-year period ending immediately prior to
the first public announcement of such business transaction; (ii) the
consideration to be received by holders of Common Stock is in cash or in the
same form as the consideration paid by the Interested Party to acquire the
largest number of shares of Common Stock acquired by the Interested Party
from a non-Interested Party; (iii) as of the record date for the
determination of stockholders entitled to vote on the business transaction,
there is one or more directors of the Holding Company who is not an
Interested Party or an affiliate of an Interested Party; and (iv) holders of
voting shares as of the record date for the determination of stockholders
entitled to vote on the business transaction shall have received a proxy or
information statement complying with the rules and regulations under the
Exchange Act, which proxy or information statement includes, among other
things, an opinion of an investment banking firm as to the fairness from a
financial point of view of the consideration to be received by stockholders
in the business transaction.
NO ACTION BY STOCKHOLDER CONSENT; SPECIAL STOCKHOLDERS' MEETINGS. The
Holding Company's certificate of incorporation and bylaws prohibit action
that is required or permitted to be taken at any annual or special meeting of
stockholders of the Holding Company from being taken by the written consent
of the stockholders without a meeting. The certificate of incorporation and
bylaws allow only the chairman of the Board of Directors, the president or a
majority of the Board of Directors to call a special stockholders' meeting.
Stockholders do not have the right to call such a meeting. These provisions
may have the effect of delaying consideration of a stockholder proposal until
the next annual meeting of stockholders, unless a special meeting is called
by one or more of the persons entitled to call such meetings.
ADVANCE NOTIFICATION. The Holding Company's certificate of incorporation
requires advance notification to the secretary of the Holding Company of
nominations of persons for election to the Board of Directors by a
stockholder. The notice must be received not later than the date
corresponding to 60 days before the first anniversary date of the immediately
preceding annual meeting of stockholders. The notice by a stockholder must
comply with certain information requirements specified in the certificate of
incorporation.
Advance written notification is also required by the Holding Company's
bylaws before a stockholder may bring any item of business before the annual
meeting of stockholders. The notice must be received by the secretary of the
Holding Company not later than the date corresponding to 60 days before the
first anniversary date of the immediately preceding annual meeting of
stockholders. The notice by a stockholder must comply with certain
information requirements specified in the bylaws.
The purpose of such advance notice requirements is to insure the orderly
conduct of business at annual meetings of stockholders and to afford the
Board of Directors a meaningful opportunity to consider the qualifications of
proposed nominees and to inform themselves, and where appropriate, to inform
the stockholders in advance of the meeting of any business proposed to be
conducted at the meeting. Such procedures may, however, have the effect of
precluding the nomination of a director, or a slate of directors, or the
consideration of business at a particular meeting if the proper procedures
have not been followed prior to the meeting.
BYLAW AMENDMENTS. Amendments to the bylaws of the Holding Company may be
made only upon (i) the affirmative vote of a majority of the members of the
Board of Directors, or (ii) the affirmative vote of the holders of at least
80% of the outstanding shares of voting stock entitled to vote in the
election of directors.
LIMITATIONS ON BENEFICIAL OWNERSHIP. The certificate of incorporation of
the Holding Company provides that for a period of five years following the
Conversion, no person (including any individual, company or group acting in
concert) shall acquire beneficial ownership of more than 10% of any class of
equity security of the Holding Company. The certificate of incorporation
further provides that, where any person directly or indirectly acquires
beneficial ownership of more than 10% of any class of equity security of the
Holding Company during such five-year
88
<PAGE>
period, the securities beneficially owned in excess of 10% shall not be
counted as outstanding for purposes of determining a quorum or the
affirmative vote necessary to approve any matter submitted to the
shareholders for a vote. The certificates evidencing the shares of Common
Stock sold in the Conversation will bear a legend reflecting such
restrictions. Such restrictions on the acquisition and voting of equity
securities of the Holding Company do not apply if the acquisition of such
securities has been approved by a majority of disinterested directors of the
Holding Company. The Commissioner's regulations also include a provision
prohibiting any direct or indirect acquisition of 10% or more of the capital
stock of a converted savings bank for a period of three years following a
conversion without the prior approval of the Commissioner.
NON-STOCKHOLDER CONSTITUENCIES. The Holding Company's certificate of
incorporation provides that in evaluating certain transactions which could
effect a change in control of the Holding Company, it is proper for the Board
of Directors to consider the effects of such transactions on the employees,
suppliers and customers of the Holding Company and the communities in which
the principal offices of the Holding Company are located.
SUPERMAJORITY VOTING. The classified board, fair price, special meeting,
stockholder consent, advance notice, bylaw amendment and non-stockholder
constituency provisions of the certificate of incorporation may be altered,
amended, or repealed only if the holders of at least 80% of the outstanding
shares of voting stock entitled to vote in the election of directors vote in
favor of such action.
FEDERAL RESERVE BOARD REGULATION
Acquisitions of control of the Savings Bank and the Holding Company by
any company are subject to prior approval by the Federal Reserve Board under
the BHCA. "Control" is defined to include the ownership, control, or power to
vote, directly or indirectly, 25% or more of any class of voting securities
of a holding company or a bank, control in any manner of the election of a
majority of the board of directors of a holding company or a bank, or
exercise of a controlling influence, directly or indirectly, over the
management policies of a holding company or a bank, as determined by the
Federal Reserve Board after notice and hearing. A company that acquires
control of the Savings Bank or the Holding Company would be required to
register as a bank holding company and have its business activities limited
to those activities permitted by the Federal Reserve Board. In addition, a
bank holding company must obtain prior approval of the Federal Reserve Board
to acquire more than 5% of the voting securities of the Holding Company.
The Change in Bank Control Act ("CBCA") prohibits any person or group of
persons acting in concert from acquiring ownership or control of 25% or more
of the voting securities of the Holding Company unless such person or group
of persons have provided 60 days prior notice to the Federal Reserve Board
and the Federal Reserve Board has not disapproved the acquisition within that
time. Under Federal Reserve Board regulations, a person will be presumed to
have acquired control under the CBCA if the person acquires 10% or more of a
class of voting securities of the Holding Company and either the Holding
Company has a class of securities registered under the Exchange Act or no
other person would own a greater percentage of that class of securities. The
Federal Reserve Board will evaluate the proposed acquisition taking into
account various factors, including the financial and managerial resources of
the acquiror, the convenience and needs of the community served by the
Holding Company and the Savings Bank, and the anti-competitive effects of the
acquisition.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Holding Company consists of 900,000
shares of Common Stock, par value $.01 per share, and 100,000 shares of
Preferred Stock, par value $.01 per share. The Holding Company currently
expects to issue 110,000 shares of Common Stock at the midpoint of the
Estimated Valuation Range and no shares of Preferred Stock in the Conversion.
Each share of the Holding Company's Common Stock will have the same relative
rights as, and will be identical in all respects with, each other share of
Common Stock. Upon payment of the Per Share Purchase Price for the Common
Stock, in accordance with the Plan of Conversion, all such shares of Common
Stock will be duly authorized, fully paid and nonassessable. Series of
Preferred Stock may be issued by the Board of Directors, from time to time,
on terms set by the board without further authorization from the stockholders.
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED
BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
COMMON STOCK
GENERAL. The holders of shares of Common Stock are entitled to share pro
rata in distributions to stockholders upon liquidation, dissolution,
distribution of assets, or winding up of the Holding Company, subject to the
prior rights of any holders of Preferred Stock. No holders of shares of
Common Stock have any preemptive right to subscribe for or purchase any
additional issue of capital stock or securities convertible into capital
stock of the Holding Company.
DIVIDEND RIGHTS. Subject to the preferential dividend rights of any
outstanding Preferred Stock, the holders of Common Stock are entitled to such
dividends, ratably in proportion to the number of shares of Common Stock held
by them respectively, as the Board of Directors, in its discretion, may
declare out of funds legally available for the payment of such dividends.
Funds for the payment of dividends and expenses of the Holding Company will
be obtained primarily from dividends received from the Savings Bank.
VOTING RIGHTS. Except as may otherwise be required by law or the
certificate of incorporation of the Holding Company, each holder of Common
Stock is entitled to one vote for each share held with respect to all matters
voted upon by the stockholders.
STOCK REPURCHASES. For information regarding restrictions on the Holding
Company's ability to repurchase its stock, see "THE CONVERSION -- Restrictions
on Repurchase of Stock."
PREFERRED STOCK
Under the Holding Company's certificate of incorporation, the Board of
Directors of the Holding Company may, from time to time, authorize the
issuance of up to 100,000 shares of Preferred Stock, in one or more series,
with such provisions as to voting rights, dividend rates and preferences,
redemption, sinking funds, and convertibility, and such preferences,
privileges and powers, and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions of such series of
Preferred Stock, as shall be stated in the resolution of the Board of
Directors providing for the issuance of the Preferred Stock. No Preferred
Stock is currently outstanding nor will any be issued in the Conversion.
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CHANGE IN FISCAL YEAR
During fiscal 1997, the Savings Bank changed its fiscal year end from
April 30 to March 31. The Holding Company's fiscal year end is also March 31.
Accordingly, in future years, the Holding Company will prepare its annual
consolidated financial statement as of and for the year ended March 31.
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REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC pursuant
to Section 12(g) of the Exchange Act prior to completion of the Conversion
and will not deregister its Common Stock for a period of at least three years
following the completion of the Conversion. Upon such registration, the proxy
and tender offer rules, insider trading reporting and restrictions, annual
and periodic reporting and other requirements of the Exchange Act will be
applicable.
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TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Illinois Stock
Transfer Company.
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LEGAL AND TAX OPINIONS
The legality of the Common Stock will be passed upon for the Holding
Company by Howard & Howard Attorneys, P.C., Peoria, Illinois. The Federal and
Illinois income tax consequences of the Conversion will be passed upon for
the Savings Bank by Geo. S. Olive & Co. LLC. Howard & Howard Attorneys, P.C.
and Geo S. Olive & Co. LLC have consented to the references herein to their
opinions. The opinions are filed as an exhibit to the Registration Statement.
See "AVAILABLE INFORMATION." Silver, Freedman & Taff, L.L.P., Washington,
D.C., has acted as counsel to Trident.
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EXPERTS
The consolidated financial statements of the Savings Bank as of March
31, 1998 and for the eleven months ended March 31, 1997 included in this
Prospectus have been audited by Geo. S. Olive & Co. LLC, independent
certified public accountants, as stated in their report appearing elsewhere
herein, and have been so included in reliance upon such report given upon the
authority of said firm as experts in accounting and auditing.
JMP has consented to the inclusion herein of the summary of its
appraisal report as to the estimated pro forma market value of the Common
Stock, its opinion as to the fair market value of the Subscription Rights,
filed as an exhibit to the Registration Statement, and to the use of its name
and all statements with respect to it appearing herein.
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<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
Financial Statements
March 31, 1998 and
Eleven Months Ended March 31, 1997
With Other Information
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
- --------------------------------------------------------------------------------
<S> <C>
INDEPENDENT AUDITOR'S REPORT F-2
FINANCIAL STATEMENTS
Balance sheet F-3
Statement of income 26
Statement of equity capital F-4
Statement of cash flows F-5
Notes to financial statements F-6
</TABLE>
The financial statements of CGB&L Financial Group, Inc. ("CGB&L") have been
omitted because CGB&L had not yet issued any stock, has no assets or
liabilities, and has not conducted any business other than of an organizational
nature.
All schedules are omitted as the required information is not applicable or the
information is presented in the Financial Statements.
(F-1)
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Cerro Gordo Building and Loan, s.b.
Cerro Gordo, Illinois
We have audited the accompanying balance sheet of Cerro Gordo Building and
Loan, s.b. as of March 31, 1998 and 1997, and the related statements of
income, equity capital, and cash flows for the year ended March 31, 1998
and eleven month period ended March 31, 1997. These financial statements
are the responsibility of the Institution'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 described above present fairly, in
all material respects, the financial position of Cerro Gordo Building and
Loan, s.b. as of March 31, 1998 and 1997, and the results of its operations
and its cash flows for the year ended March 31, 1998 and eleven month
period ended March 31, 1997, in conformity with generally accepted
accounting principles.
Geo. S. Olive & Co. LLC
Decatur, Illinois
April 10, 1998
(F-2)
<PAGE>
<TABLE>
<CAPTION>
CERRO GORDO BUILDING AND LOAN, S.B.
BALANCE SHEET
MARCH 31 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 524,845 $ 109,912
Interest-bearing time deposits 590,000 1,279,000
Investment securities available for sale 175,329 100,716
Loans 5,558,889 4,711,487
Allowance for loan losses (32,700) (6,200)
--------------------------------
Net loans 5,526,189 4,705,287
Premises and equipment 15,726 9,438
Federal Home Loan Bank stock 46,200 43,000
Other assets 56,692 41,293
--------------------------------
Total assets $ 6,934,981 $ 6,288,646
--------------------------------
--------------------------------
LIABILITIES
Interest-bearing deposits $ 5,250,307 $ 5,308,464
Long-term debt 600,000
Other liabilities 98,660 85,285
--------------------------------
Total liabilities 5,948,967 5,393,749
--------------------------------
EQUITY CAPITAL
Retained earnings 872,685 830,813
Net unrealized gain on securities available for sale 113,329 64,084
--------------------------------
Total equity capital 986,014 894,897
--------------------------------
Total liabilities and equity capital $ 6,934,981 $ 6,288,646
--------------------------------
--------------------------------
</TABLE>
See notes to financial statements.
(F-3)
<PAGE>
<TABLE>
<CAPTION>
CERRO GORDO BUILDING AND LOAN, S.B.
STATEMENT OF EQUITY CAPITAL
NET UNREALIZED
GAIN ON
SECURITIES
RETAINED AVAILABLE
EARNINGS FOR SALE TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCES, MAY 1, 1996 $ 812,854 $ 48,686 $ 861,540
Net income for the eleven months ended
March 31, 1997 17,959 17,959
Net change in unrealized gain on securities
available for sale 15,398 15,398
--------------------------------------------------------
BALANCES, MARCH 31, 1997 830,813 64,084 894,897
Net income 41,872 41,872
Net change in unrealized gain on securities
available for sale 49,245 49,245
--------------------------------------------------------
BALANCES, MARCH 31, 1998 $ 872,685 $ 113,329 $ 986,014
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
See notes to financial statements.
(F-4)
<PAGE>
<TABLE>
<CAPTION>
CERRO GORDO BUILDING AND LOAN, S.B.
STATEMENT OF CASH FLOWS
YEAR ENDED Eleven Months
MARCH 31, Ended
1998 March 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 41,872 $ 17,959
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan loss 26,500
Depreciation 1,344 891
Deferred income tax benefit (12,780) (6,709)
Change in
Other liabilities 789 (105)
Other assets (15,399) (1,557)
---------------------------------
Net cash provided by operating activities 42,326 10,479
---------------------------------
INVESTING ACTIVITIES
Net change in interest-bearing deposits 689,000 196,000
Net change in loans (847,404) (299,367)
Purchase of premises and equipment (7,632) (658)
Purchase of FHLB stock (3,200)
---------------------------------
Net cash used by investing activities (169,236) (104,025)
---------------------------------
FINANCING ACTIVITIES
Net change in
Savings deposits (6,239) (23,041)
Certificates of deposit (51,918) (151,125)
Proceeds from long-term debt 600,000
---------------------------------
Net cash (used) provided by financing activities 541,843 (174,166)
---------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 414,933 (267,712)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 109,912 377,624
---------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 524,845 $ 109,912
---------------------------------
---------------------------------
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 306,925 $ 273,274
Income tax paid 25,500 5,438
</TABLE>
See notes to financial statements.
(F-5)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
- - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Cerro Gordo Building and Loan, s.b.
("Bank") conform to generally accepted accounting principles and reporting
practices followed by the thrift industry. The more significant of the policies
are described below.
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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
The Bank operates under a state thrift charter and provides full banking
services. As a state-chartered thrift, the Bank is subject to regulation by the
Illinois Office of Banks and Real Estate and the Federal Deposit Insurance
Corporation.
The Bank generates mortgage and share loans and receives deposits from customers
located primarily in Piatt County. The Bank's loans are generally secured by
specific items of collateral including real property and consumer assets.
Although the Bank has a diversified loan portfolio, a substantial portion of
its debtors' ability to honor their contracts is dependent upon economic
conditions in Piatt County and the surrounding communities.
CASH AND CASH EQUIVALENTS consist of cash on hand and deposits at the Federal
Home Loan Bank. The Bank considers all liquid debt instruments with original
maturities of 3 months or less to be cash equivalents.
INVESTMENT SECURITIES -- Marketable equity securities are classified as
available for sale. Securities available for sale are carried at fair value
with unrealized gains and losses reported separately in equity capital, net of
tax.
Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net security
gains (losses). Gains and losses on sales of securities are determined on the
specific-identification method.
LOANS are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans. The accrual of interest on impaired
loans is discontinued when, in management's opinion, the borrower may be unable
to meet payments as they become due. When interest accrual is discontinued, all
unpaid accrued interest is reversed. Interest income is subsequently recognized
only to the extent cash payments are received. Certain loan fees and direct
costs are being deferred and amortized as an adjustment of yield on the loans.
Escrow accounts for borrowers are not maintained, but rather tax and insurance
payments are charged to the mortgage loan balance. Monthly payments are
allocated first to interest income with the remainder credited to the unpaid
balance of the loan.
ALLOWANCE FOR LOAN LOSSES is maintained to absorb loan losses based on
management's continuing review and evaluation of the loan portfolio and its
judgment as to the impact of economic conditions on the portfolio. The
evaluation by management includes consideration of past loss experience, changes
in the composition of the portfolio, the current condition and amount of loans
outstanding, and the probability of collecting all amounts due. Impaired loans
are measured by the present value of expected future cash flows, or the fair
value of the collateral of the loan, if collateral dependent.
(F-6)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. Management believes that as of
March 31, 1998, the allowance for loan losses is adequate based on information
currently available. A worsening or protracted economic decline in the area
within which the Bank operates would increase the likelihood of additional
losses due to credit and market risks and could create the need for additional
loss reserves.
PREMISES AND EQUIPMENT are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method based on the estimated
useful lives of the assets. Maintenance and repairs are expensed as incurred
while major additions and improvements are capitalized. Gains and losses on
dispositions are included in current operations.
FEDERAL HOME LOAN BANK STOCK is a required investment for institutions that are
members of the Federal Home Loan Bank (FHLB) system. The required investment in
the common stock is based on a predetermined formula.
INCOME TAX in the statement of income includes deferred income tax provisions or
benefits for all significant temporary differences in recognizing income and
expenses for financial reporting and income tax purposes.
RECLASSIFICATIONS
Reclassifications of certain amounts in the 1997 financial statements have been
made to conform to the 1998 presentation.
- - CHANGE IN FISCAL YEAR END
During fiscal 1997, the Bank's Board of Directors approved a change in the
fiscal year end of the Bank from April 30 to March 31. Accordingly, the
statements of income, equity, and cash flows included in these financial
statements for fiscal 1997 are for the eleven-month period ended March 31, 1997.
- - PLAN OF CONVERSION
On March 11, 1998, the Board of Directors adopted a Plan of Conversion (the
"Plan)" whereby the Bank will convert from a state chartered mutual savings bank
to a state chartered stock savings bank. The Plan is subject to approval of
regulatory authorities and members at a special meeting. The stock of the Bank
will be issued to a holding company formed in connection with the conversion.
Pursuant to the Plan, shares of capital stock of the holding company are
expected to be offered initially for subscription to eligible members of the
Bank and certain other persons as of specified dates subject to various
subscription priorities as provided in the Plan. The capital 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 subscription price. 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 to be commenced
simultaneously with the subscription offering.
(F-7)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
The Plan provides that when the conversion is completed, a liquidation account
will be established in an amount equal to the retained income of the Bank as of
the date of the most recent financial statements contained in the final
conversion prospectus. The liquidation account is established to provide a
limited priority claim to the assets of the Bank of qualifying depositors at
December 31, 1996, who continue to maintain deposits in the Bank after
conversion. In the unlikely event of a complete liquidation of the Bank, and
only in such event, 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 the Bank 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 the Bank'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 its capital level and supervisory condition.
At March 31, 1998, a $10,000 retainer had been paid to the underwriter which was
recorded as an other asset.
- - INVESTMENT SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
MARCH 31 COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation common stock $ 3,619 $ 171,710 $ 0 $ 175,329
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
MARCH 31 COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation common stock $ 3,619 $ 97,097 $ 0 $ 100,716
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
There were no pledged securities at March 31, 1998 or 1997.
There were no sales of securities available for sale during 1998 or 1997.
(F-8)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
- - LOANS AND ALLOWANCE
<TABLE>
<CAPTION>
MARCH 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real estate mortgage loans
One-to-four family $ 5,303,917 $ 4,680,155
Multi-family 87,348 95,128
Commercial 185,060 24,098
Share loans 79,534 133,586
---------------------------------
Total loans 5,655,859 4,932,967
Less
Undisbursed portion of loans (23,555) (156,598)
Deferred loan fees (73,415) (64,882)
---------------------------------
$ 5,558,889 $ 4,711,487
---------------------------------
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for loan losses
Balances, January 1 $ 6,200 $ 6,200
Provision for losses 26,500
Recoveries on loans
Loans charged off
---------------------------------
Balances, March 31 $ 32,700 $ 6,200
---------------------------------
---------------------------------
</TABLE>
There were no impaired loans as of or during the periods ending March 31, 1998
and 1997.
The Bank has entered into transactions with certain directors, employees, and
their affiliates or associates (related parties). Such transactions were made
in the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at the
same time for comparable transactions with other customers, and did not, in the
opinion of management, involve more than normal credit risk or present other
unfavorable features. The aggregate amount of loans, as deferred, to such
related parties were as follows:
<TABLE>
<CAPTION>
1998
- --------------------------------------------------------------------------------
<S> <C>
Balances, April 1, 1997 $ 254,065
Changes in composition of related parties 93,000
New loans, including renewals
Payments, including renewals (74,986)
-----------
Balances, March 31, 1998 $ 272,079
-----------
-----------
</TABLE>
(F-9)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
- - PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 500 $ 500
Buildings and land improvements 21,382 21,382
Furniture and equipment 52,458 44,827
------------------------------
Total cost 74,340 66,709
Accumulated depreciation (58,614) (57,271)
------------------------------
Net $ 15,726 $ 9,438
------------------------------
------------------------------
</TABLE>
- - OTHER ASSETS AND OTHER LIABILITIES
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Other assets
Interest receivable
Investment securities $ 2,855 $ 5,174
Loans 16,594 12,191
Prepaid expenses and other 37,243 23,605
------------------------------
Total $ 56,692 $ 41,293
------------------------------
------------------------------
Other liabilities
Interest payable
Deposits $ 51,219 $ 51,667
Long-term debt 3,286
Accrued expenses payable 10,501 12,550
Deferred tax liability 33,654 21,068
------------------------------
Total $ 98,660 $ 85,285
------------------------------
------------------------------
</TABLE>
- - DEPOSITS
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings deposits $ 461,384 $ 409,467
Certificates of deposit of $100,000 or more 100,000 100,000
Other certificates of deposits 4,688,923 4,798,997
------------------------------
Total deposits $5,250,307 $5,308,464
------------------------------
------------------------------
</TABLE>
(F-10)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CERTIFICATES MATURING IN YEARS ENDING MARCH 31,
- --------------------------------------------------------------------------------
<S> <C>
1999 $ 2,190,214
2000 1,469,142
2001 311,441
2002 618,536
------------
2003 199,590
$ 4,788,923
------------
------------
</TABLE>
- - LONG-TERM DEBT
At March 31, 1998, long-term debt consisted of a Federal Home Loan Bank (FHLB)
advance, 6.36%, due December 2007. The FHLB advance is secured by all stock in
the FHLB and first mortgage loans totaling $960,000.
- - INCOME TAX
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income tax expense
Currently payable
Federal $ 19,885 $ 7,036
State 3,597 1,051
Deferred
Federal (12,780) (6,709)
--------------------------------
Total income tax expense $ 10,702 $ 1,378
--------------------------------
--------------------------------
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34% $ 17,875 $ 6,575
Graduated tax rates (11,610) (5,841)
Effect of state income taxes 2,374 697
Other 2,063 (53)
--------------------------------
Actual tax expense $ 10,702 $ 1,378
--------------------------------
--------------------------------
</TABLE>
(F-11)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
A cumulative net deferred tax liability is included in other liabilities. The
components of the liability are as follows:
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Loan fees $ 21,290 $ 18,817
Allowance for loan losses 5,828
---------------------------------
Total assets 27,118 18,817
---------------------------------
LIABILITIES
Accrual to cash adjustment (814) (2,523)
Depreciation (274) (274)
Allowance for loan losses (2,770)
Net unrealized gains on securities available for sale (58,379) (33,013)
FHLB stock dividends (1,305) (1,305)
---------------------------------
Total liabilities (60,772) (39,885)
---------------------------------
$ (33,654) $ (21,068)
---------------------------------
---------------------------------
</TABLE>
Retained earnings include approximately $125,000 for which no deferred income
tax liability has been recognized. This amount represents an allocation of
income to bad debt deductions as of April 30, 1988, for tax purposes only.
Reduction of amounts so allocated for purposes other than tax bad debt losses or
adjustments arising from carryback of net operating losses would create income
for tax purposes only, which income would be subject to the then-current
corporate income tax rate. The unrecorded deferred income tax liability on the
above amount was approximately $43,000.
- - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit, which are not
included in the accompanying financial statements. The Bank's exposure to
credit loss in the event of nonperformance by the other party to the financial
instruments for commitments to extend credit is represented by the contractual
or notional amount of those instruments. The Bank uses the same credit policies
in making such commitments as it does for instruments that are included in the
balance sheet.
Financial instruments whose contract amount represents credit risk were as
follows:
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loan commitments -- fixed rates $ 0 $ 115,000
</TABLE>
(F-12)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation. Collateral held varies but may include residential real
estate, income-producing commercial properties, or other assets of the borrower.
The Bank is subject to claims and lawsuits which arise primarily in the ordinary
course of business. It is the opinion of management that the disposition or
ultimate resolution of such claims and lawsuits will not have a material adverse
effect on the financial position of the Bank.
- - REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies and is assigned to a capital category. The
assigned capital category is largely determined by three ratios that are
calculated according to the regulations: total risk adjusted capital, Tier 1
capital, and Tier 1 leverage ratios. The ratios are intended to measure capital
relative to assets and credit risk associated with those assets and off-balance
sheet exposures of the entity. The capital category assigned to an entity can
also be affected by qualitative judgments made by regulatory agencies about the
risk inherent in the entity's activities that are not part of the calculated
ratios.
There are five capital categories defined in the regulations, ranging from well
capitalized to critically undercapitalized. Classification of a bank in any of
the undercapitalized categories can result in actions by regulators that could
have a material effect on a bank's operations. At March 31, 1998 and 1997, the
Bank is categorized as well capitalized and met all subject capital adequacy
requirements. There are not conditions or events since March 31, 1998 that
management believes have changed the Bank's classification.
The Bank's actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
1998
--------------------------------------------------------------------------
REQUIRED FOR TO BE WELL
ACTUAL ADEQUATE CAPITAL (1) CAPITALIZED 1
--------------------------------------------------------------------------
MARCH 31 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital (1) (to risk-
weighted assets) $ 906,000 28.58% $ 254,000 8.0% $ 317,000 10.0%
Tier (1) capital (1) (to risk-weighted assets) 873,000 27.54 127,000 4.0 190,000 6.0
Tier (1) capital (1) (to average assets) 873,000 12.55 278,000 4.0 349,000 5.0
</TABLE>
(F-13)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1997
--------------------------------------------------------------------------
REQUIRED FOR ADEQUATE TO BE WELL
ACTUAL CAPITAL (1) CAPITALIZED (1)
--------------------------------------------------------------------------
MARCH 31 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital (1) (to risk-
weighted assets) $ 837,000 31.35% $ 214,000 8.0% $ 267,000 10.0%
Tier (1) capital (1) (to risk-weighted assets) 831,000 31.12 107,000 4.0 160,000 6.0
Tier (1) capital (1) (to average assets) 831,000 13.07 254,000 4.0 318,000 5.0
(1) As defined by regulatory agencies
</TABLE>
- - BENEFIT PLANS
The Bank maintains a Simplified Employee Pension Plan for the benefit of
eligible employees. The contributions to the Plan were $12,753 and $11,487
during 1998 and 1997, respectively.
- - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
CASH AND DUE FROM BANKS -- The fair value of cash and due from banks
approximates carrying value.
INTEREST-BEARING TIME DEPOSITS -- The fair value of interest-bearing time
deposits approximates carrying value.
SECURITIES -- Fair values are based on quoted market prices.
LOANS -- For short-term loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair
values for mortgage loans, including one-to-four family residential, are
based on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan characteristics.
INTEREST RECEIVABLE/PAYABLE -- The fair values of interest receivable/payable
approximate carrying values.
FHLB STOCK -- Fair value of FHLB stock is based on the price at which it may be
resold to the FHLB.
DEPOSITS -- The fair values of interest-bearing savings accounts are equal to
the amount payable on demand at the balance sheet date. The carrying amounts
for variable rate, fixed-term certificates of deposit approximate their fair
values at the balance sheet date. Fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on such time deposits.
(F-14)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
LONG-TERM DEBT -- The fair value of these borrowings are estimated using a
discounted cash flow calculation, based on current rates for similar debt.
OFF-BALANCE SHEET COMMITMENTS -- Commitments include commitments to originate
mortgage loans, and are generally of a short-term nature. The fair value of
such commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------------------
CARRYING FAIR Carrying Fair
MARCH 31 AMOUNT VALUE Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 524,845 $ 524,845 $ 109,912 $ 109,912
Interest-bearing time deposits 590,000 590,000 1,279,000 1,279,000
Investment securities available for sale 175,329 175,329 100,716 100,716
Loans, net 5,526,189 5,576,000 4,705,287 4,541,000
Interest receivable 19,449 19,449 17,365 17,365
Stock in FHLB 46,200 46,200 43,000 43,000
LIABILITIES
Deposits 5,250,307 5,271,000 5,308,464 5,258,000
Long-term debt 600,000 603,000 0 0
Interest payable 54,505 54,505 51,667 51,667
OFF-BALANCE SHEET ASSETS (LIABILITIES)
Commitments to extend credit 0 0 0 0
</TABLE>
(F-15)
<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 HOLDING COMPANY OR SAVINGS BANK. 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 OR 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 HOLDING COMPANY OR SAVINGS BANK SINCE
ANY OF THE DATES AS OF THIS INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE
HEREOF.
---------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY.................................................... 1
RISK FACTORS.......................................................... 8
CGB&L FINANCIAL GROUP, INC............................................ 13
CERRO GORDO BUILDING AND LOAN, s.b.................................... 14
USE OF PROCEEDS....................................................... 15
DIVIDEND POLICY....................................................... 16
MARKET FOR COMMON STOCK............................................... 17
CAPITALIZATION........................................................ 18
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE........................... 20
PRO FORMA DATA........................................................ 22
THE OFFERINGS......................................................... 26
STATEMENTS OF INCOME.................................................. 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................. 30
BUSINESS OF THE SAVINGS BANK.......................................... 38
MANAGEMENT OF THE HOLDING COMPANY AND SAVINGS BANK.................... 49
SUPERVISION AND REGULATION............................................ 59
FEDERAL AND STATE TAXATION............................................ 68
THE CONVERSION........................................................ 71
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY.................... 87
DESCRIPTION OF CAPITAL STOCK.......................................... 90
CHANGE IN FISCAL YEAR................................................. 91
REGISTRATION REQUIREMENTS............................................. 92
TRANSFER AGENT AND REGISTRAR.......................................... 93
LEGAL AND TAX OPINIONS................................................ 94
EXPERTS............................................................... 95
INDEX TO FINANCIAL STATEMENTS.........................................F-1
UNTIL THE LATER OF _______________, 1998 OR 90 DAYS AFTER COMMENCEMENT
OF THE OFFERING OF COMMON STOCK, 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.
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
[NAME & LOGO]
UP TO 126,500 SHARES OF
COMMON STOCK
------------------------------------
PROSPECTUS
------------------------------------
TRIDENT SECURITIES, INC.
__________________, 1998
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors, officers and employees of the Holding Company and/or the
Savings Bank may be entitled to benefit from the indemnification provisions
contained in Article XII of the Holding Company's Certificate of
Incorporation and under the General Corporation Law of the State of Delaware.
The general effect of these provisions is summarized below.
SECTION 145 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Section 145 of the General Corporation Law of the State of Delaware
provides in part as follows:
(a) A corporation shall have power to 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, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea
of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
ARTICLE XII OF THE HOLDING COMPANY'S CERTIFICATE OF INCORPORATION
Article XII of the Holding Company's Certificate of Incorporation provides in
part as follows: Each person who is or was a director or officer of the
Corporation and each person who is or was a director or officer of the
Corporation and serves or served at the request of the Corporation as a
director or officer of another enterprise, shall be indemnified by the
Corporation in accordance with, and to the fullest extent authorized by, the
General Corporation Law of the State of Delaware as it may be in effect from
time to time.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Underwriting Fees and Expenses................... $ 88,500
Legal Fees and Expenses.......................... $ 77,500
Printing, Postage and Mailing.................... $ 15,000
Accounting Fees and Expenses..................... $ 35,000
Appraisal and Business Plan Fees and Expenses.... $ 12,500
Blue Sky Filing Fees and Expenses
(Including legal counsel)........................ $ 5,000
Federal Filing Fees (FDIC and SEC)............... $ 10,600
Stock Transfer Agent fees and certificates....... $ 5,000
Other Expenses................................... $ 5,750
--------
Total............................................ $254,850
--------
--------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 27. EXHIBITS:
The exhibits schedules filed as a part of this registration
statement are as follows:
1.1 Engagement Letter with Trident Securities, Inc.
2 Plan of Conversion
3.1 Certificate of Incorporation of CGB&L Financial Group, Inc.
3.2 Bylaws of CGB&L Financial Group, Inc.
5 Opinion of Howard & Howard Attorneys, P.C.
8.1 Tax Opinion of Geo. S. Olive & Co. LLC
8.2 Opinion of JMP Financial, Inc. as to the value of
subscription rights for tax purposes
10.1 Proposed CGB&L Financial Group, Inc. Stock Option and
Incentive Plan
10.2 Proposed CGB&L Financial Group, Inc. Management
Recognition Plan
10.3 Proposed Employment Agreements by and between CGB&L
Financial Group, Inc. and Maralyn F. Heckman
23.1 Consent of Howard & Howard Attorneys, P.C. (in opinion
filed As Exhibit 5)
23.2 Consent of Geo. S. Olive Co. LLC
23.3 Consent of JMP Financial, Inc.
24 Power of Attorney (reference is made to the signature
page)
II-2
<PAGE>
99.1 Appraisal Agreement with JMP Financial, Inc.
99.2 Appraisal Report
- -------------
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act.
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of 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 a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
Village of Cerro Gordo, State of Illinois, on May 26, 1998.
CGB&L FINANCIAL GROUP, INC.
By: /s/ Maralyn F. Heckman
--------------------------------
Maralyn F. Heckman, President
(Duly Authorized Representative)
The undersigned directors of CGB&L Financial Group, Inc. do hereby
constitute and appoint Maralyn F. Heckman as their attorney-in-fact with
power and authority to do any and all acts and things and to execute any and
all instruments which said attorney-in-fact determines may be necessary or
advisable or required to enable CGB&L Financial Group, Inc. to comply with
the Securities Act of 1933, as amended, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with
this Registration Statement. Without limiting the generality of the foregoing
power and authority, the powers granted include the power and authority to
sign the names of the undersigned directors in the capacities indicated below
to this Registration Statement, to any and all amendments, both pre-effective
and post-effective, and supplements to this Registration Statement, and to
any and all instruments or documents filed as part of or in conjunction with
this Registration Statement or amendments or supplements thereto, and each of
the undersigned hereby ratifies and confirms all that said attorney-in-fact
shall do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated opposite his name.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Dale C. Born Director May 26, 1998
- ---------------------------
Dale C. Born
/s/ Noel R. Buckley Director May 26, 1998
- ---------------------------
Noel R. Buckley
/s/ Lester W. Crandall Director May 26, 1998
- ---------------------------
Lester W. Crandall
/s/ Larry D. Gaitros Director May 26, 1998
- ---------------------------
Larry D. Gaitros
/s/ Maralyn F. Heckman Director, President, May 26, 1998
- --------------------------- Secretary and Treasurer
Maralyn F. Heckman (Principal Executive
and Financial Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ John A. Sochor, D.D.S. Director and May 26, 1998
- -------------------------- Chairman of the Board
John A. Sochor, D.D.S.
- -------------------------- Director May 26, 1998
Russell York
</TABLE>
II-5
<PAGE>
[LETTERHEAD]
March 4, 1998
Board of Directors
Cerro Gordo Building & Loan, s.b.
229 East South Street
Cerro Gordo, Illinois 61818
RE: Conversion Stock Marketing
Ladies and Gentlemen:
This letter sets forth the terms of the proposed engagement between TRIDENT
SECURITIES, INC. ("TRIDENT") and Cerro Gordo Building & Loan, s.b. (the
"Association") concerning our investment banking services in connection with the
conversion of the Association from a mutual to a capital stock form of
organization.
TRIDENT is prepared to assist the Association in connection with the offering of
its shares of common stock during the subscription offering and community
offering as such terms are defined in the Association's Plan of Conversion. The
specific terms of the services contemplated hereunder shall be set forth in a
definitive sales agency agreement (the "Agreement") between TRIDENT and the
Association to be executed on the date the offering circular/prospectus is
declared effective by the appropriate regulatory authorities. The price of the
shares during the subscription offering and community offering will be the price
established by the Association's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to TRIDENT and the Association.
In connection with the subscription offering and community offering, TRIDENT
will act as financial advisor and exercise its best efforts to assist the
Association in the sale of its common stock during the subscription offering and
community offering. Additionally, TRIDENT may enter into agreements with other
National Association of Securities Dealers, Inc., ("NASD") member firms to act
as selected dealers, assisting in the sale of the common stock. TRIDENT and the
Association will determine the selected dealers to assist the Association during
the community offering. At the appropriate time, TRIDENT in conjunction with
its counsel, will conduct an examination of the relevant documents and records
of the Association as TRIDENT deems necessary and appropriate. The Association
will make all documents, records and other information deemed necessary by
TRIDENT or its counsel available to them upon request.
For its services hereunder, TRIDENT will receive the following compensation and
reimbursement from the Association:
<PAGE>
Board of Directors
June 3, 1998
Page 2
1. A management fee in the amount of $53,500.
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by TRIDENT and the Association to reflect market requirements
at the time of the stock allocation in a Syndicated Community
Offering.
3. The foregoing fees and commissions are to be payable to TRIDENT at
closing as defined in the Agreement to be entered into between the
Association and TRIDENT.
4. TRIDENT shall be reimbursed for allocable expenses incurred by them,
including legal fees, whether or not the Agreement is consummated.
TRIDENT's out-of-pocket expenses will not exceed $10,000 and its legal
fees will not exceed $25,000. The Association will forward to TRIDENT
a check in the amount of $10,000 as an advance payment to defray the
allocable expenses of TRIDENT.
It further is understood that the Association will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either TRIDENT's attorneys or the
attorneys relating to any required state securities law filings, telephone
charges, air freight, rental equipment, supplies, transfer agent charges, fees
relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing.
For purposes of TRIDENT's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material dealings
within the last 12 months between the Association and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Association has any affiliation with the NASD; (d) except as
contemplated by this engagement letter with TRIDENT, the Association has no
financial or management consulting contracts outstanding with any other person;
(e) the Association has not granted TRIDENT a right of first refusal with
respect to the underwriting of any future offering of the Association stock; and
(f) there has been no intermediary between TRIDENT and the Association in
connection with the public offering of the Association's shares, and no person
is being compensated in any manner for providing such service.
The Association agrees to indemnify and hold harmless TRIDENT and each person,
if any, who controls the firm against all losses, claims, damages or
liabilities, joint or several and all legal or other expenses reasonably
incurred by them in connection with the investigation or defense thereof
(collectively, "Losses"), to which they may become subject under the securities
laws or under the common law, that arise out of or are based upon the conversion
or the engagement hereunder of TRIDENT. If the foregoing indemnification is
unavailable for any reason, the Association agrees to contribute to such Losses
in the proportion that its financial interest in the conversion bears to that of
the indemnified parties. If the Agreement is entered into with respect to the
common stock to be
<PAGE>
Board of Directors
June 3, 1998
Page 3
issued in the conversion, the Agreement will provide for indemnification, which
will be in addition to any rights that TRIDENT or any other indemnified party
may have at common law or otherwise. The indemnification provision of this
paragraph will be superseded by the indemnification provisions of the Agreement
entered into by the Association and TRIDENT.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (4) above with regard to the obligation to reimburse
TRIDENT for allocable expenses to be incurred prior to the execution of the
Agreement and the indemnity described in the preceding paragraph. While TRIDENT
and the Association agree in principle to the contents hereof and propose to
proceed promptly, and in good faith, to work out the arrangements with respect
to the proposed offering, any legal obligations between TRIDENT and the
Association shall be only as set forth in a duly executed Agreement. Such
Agreement shall be in form and content satisfactory to TRIDENT and the
Association, as well as their counsel, and TRIDENT's obligations thereunder
shall be subject to, among other things, there being in TRIDENT's opinion no
material adverse change in the condition or obligations of the Association or no
market conditions which might render the sale of the shares by the Association
hereby contemplated inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to TRIDENT one copy of this letter along with the advance payment of
$10,000. This proposal is open for your acceptance for a period of thirty (30)
days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ Timothy E. Lavelle
------------------------------
Timothy E. Lavelle
Managing Director
Agreed and accepted to this 11th day
of March, 1998
Cerro Gordo Building & Loan, s.b.
By: /s/ Maralyn F. Heckman
------------------------------
Maralyn F. Heckman
Chief Executive Officer
<PAGE>
AMENDED AND RESTATED
PLAN OF CONVERSION
CERRO GORDO BUILDING & LOAN, S.B.
CERRO GORDO, ILLINOIS
<PAGE>
ARTICLE I.
GENERAL
(a) This Plan of Conversion ("Plan") provides for the Conversion of
Cerro Gordo Building & Loan, s.b. (the "Savings Bank") from an Illinois
chartered mutual savings bank to an Illinois chartered stock savings bank.
The purpose of the Conversion is to enable the Savings Bank to increase its
equity capital base to provide for investment in its business, expansion of
deposit base and facilities and for potential and possible diversification
into other related financial services activities and to change its
operational structure to provide greater flexibility to consider acquisitions
of or affiliations or combinations with other financial institutions. The
Board of Directors of the Savings Bank currently contemplates that all of the
stock of the Savings Bank will be held by a Delaware corporation (the
"Holding Company"). If utilized, the Holding Company will provide greater
organizational flexibility, affording depositors and others the opportunity
to become stockholders of the Holding Company and to participate more
directly in any future growth of the Savings Bank. The increased capital
base is expected to further enhance the Savings Bank's ability to render
services to the public. The more flexible operational structure and
increased powers of a capital stock institution are expected to assist the
Savings Bank in competing with commercial banks and other financial
institutions.
(b) Shares of capital stock of the Savings Bank will be sold to the
Holding Company and the Holding Company will offer the Conversion Stock upon
the terms and conditions set forth herein to the Savings Bank's Eligible
Account Holders, Employee Benefit Plans, Supplemental Eligible Account
Holders and Other Members in the respective priorities set forth in this
Plan. Any shares of Conversion Stock not subscribed for by the foregoing
classes of persons will be offered for sale to certain members of the public
either directly by the Savings Bank and the Holding Company through a
Community Offering, if feasible. If the Savings Bank decides not to utilize
the Holding Company in the Conversion, Conversion Stock of the Savings Bank,
in lieu of the Holding Company, will be sold as set forth above and in the
respective priorities set forth in this Plan. In addition to the foregoing,
the Savings Bank and Holding Company intend to implement stock option plans
and other stock benefit plans, subject to ratification by stockholders of the
Holding Company, and will provide employment or severance agreements to
certain management employees and certain other benefits to director officers
and employees of the Savings Bank as will be described in the Prospectus for
the Conversion Stock.
(c) This Plan, which has been approved by a least a two-thirds majority
of the Board of Directors of the Savings Bank, must also be approved by the
affirmative vote of two-thirds of the total number of votes entitled to be
cast by Voting Members of the Savings Bank at a special meeting to be called
for that purpose. Prior to the submission of this Plan to the Voting Members
for consideration, this Plan must be approved by the Office of the
Commissioner of Banks and Real Estate (the "Commissioner"), and the Federal
Deposit Insurance Corporation ("FDIC") must not object to the Plan.
<PAGE>
(d) Upon Conversion, each Person having a Deposit Account at the
Savings Bank prior to Conversion will continue to have a Deposit Account in
the same amount and subject to the same terms and conditions (except for
voting and liquidation rights) as in effect prior to the Conversion. After
Conversion, the Savings Bank will succeed to all the rights, interests,
duties and obligations of the Savings Bank before Conversion, including but
not limited to all rights and interests of the Savings Bank in and to its
assets and properties, whether real, personal or mixed. The Savings Bank
intends at this time to continue to be a member of the Federal Home Loan Bank
System and all of its insured savings deposits will continue to be insured by
the FDIC through the Savings Association Insurance Fund to the extent
provided by applicable law. Furthermore, no change will be made in the Board
of Directors or management of the Savings Bank as a result of the Conversion.
ARTICLE II.
DEFINITIONS
In addition to terms defined elsewhere in this Plan, for purposes of
this Plan, the following terms shall have the following meanings:
SECTION 2.1 "ACTING IN CONCERT": The term Acting in Concert means:
(a) knowing participation in a joint activity or interdependent
conscious parallel action towards a common goal whether pursuant to an
express agreement; or
(b) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written
or otherwise.
For purposes of this Plan, a Person or company which acts in concert with
another Person or company ("other party") shall also be considered to be
acting in concert with any Person or company who is also acting in concert
with that other party, provided that any Employee Plan shall not be
considered to be acting in concert with its trustee or a Person who serves in
a similar capacity solely to determine whether stock held by the trustee and
stock held by such Employee Plan shall be aggregated. Persons who are Acting
in Concert may be referred to in this Plan as a "Group Acting in Concert."
SECTION 2.2 "ASSOCIATE": The term Associate, when used to indicate a
relationship with any Person, means:
(a) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank or Holding Company) of which
such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities;
3
<PAGE>
(b) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a
similar fiduciary capacity, except that the term "Associate" does not include
any Employee Plan in which a Person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity; and
(c) 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 Savings Bank, any of its subsidiaries or the Holding Company.
SECTION 2.3 "CAPITAL STOCK": The term Capital Stock means any and
all authorized stock in the Savings Bank as converted.
SECTION 2.4 "COMMISSIONER'S CONVERSION REGULATIONS": The term
Commissioner's Conversion Regulations means the regulations of the
Commissioner governing conversions of Illinois chartered savings banks from
the mutual to the stock form of ownership, set forth at 38 Ill. Adm. Code
1075.1800 et SEQ.
SECTION 2.5 "COMMUNITY OFFERING": The term Community Offering means
the offering for sale of shares of Conversion Stock to certain members of the
general public to whom the Prospectus and Order Form are delivered, with
preference given to natural persons who reside in Piatt County, Illinois,
concurrently with or after completion of the Subscription Offering, to the
extent shares of Conversion Stock remain available after satisfying all
subscriptions received in the Subscription Offering and accepted by the
Savings Bank and the Holding Company.
SECTION 2.6 "CONVERSION": The term Conversion means the adoption by
the Savings Bank of articles of incorporation and bylaws, authorizing the
issuance of capital stock and conforming to the applicable requirements of
the Illinois Savings Bank Act (205 ILCS 205/1001 et SEQ.) and the regulations
promulgated thereunder by the Commissioner (38 Ill. Adm. Code 1075.100 et
SEQ.), the issuance and sale to the Holding Company of all of the capital
stock issued by the Converted Savings Bank in connection therewith, and the
issuance by the Holding Company of the Conversion Stock, in accordance with
this Plan.
SECTION 2.7 "CONVERSION APPLICATION": The term Conversion Application
means the application filed by the Savings Bank and the Holding Company for
approval of the Conversion by the Commissioner.
SECTION 2.8 "CONVERSION STOCK": The term Conversion Stock means
Holding Company Stock to be issued and sold by the Holding Company pursuant
to the Plan or if a Holding Company is not utilized the stock to be issued
and sold by the Savings Bank.
SECTION 2.9 "CONVERTED SAVINGS BANK": The term Converted Savings
Bank means the Illinois chartered stock savings bank resulting from the
Conversion.
4
<PAGE>
SECTION 2.10 "DEPOSIT ACCOUNT(S)": The term Deposit Account means a
withdrawable deposit (including, without limitations, a savings account,
demand deposit account or checking account) or certificate of deposit in the
Savings Bank.
SECTION 2.11 "DIRECTOR": The term Director means a member of the
Board of Directors of the Savings Bank, but does not include an advisory
director, honorary director, director emeritus or person holding a similar
position unless such person is otherwise performing functions similar to
those of a member of the Board of Directors of the Savings Bank
SECTION 2.12 "EFFECTIVE TIME OF THE CONVERSION": The term Effective
Time of the Conversion shall mean the date and time at which the Conversion
is deemed to occur and be effective in accordance with Section 4.6 hereof.
SECTION 2.13 "ELIGIBLE ACCOUNT HOLDER": The term Eligible Account
Holder means the holder of a Qualifying Deposit in the Savings Bank on
December 31, 1996.
SECTION 2.14 "ELIGIBILITY RECORD DATE": The term Eligibility Record
Date means December 31, 1996.
SECTION 2.15 "EMPLOYEE PLANS": The term Employee Plans means any
employee stock benefit plans, MRPs and Stock Option Plans approved by the
Board of Directors of the Savings Bank.
SECTION 2.16 "EMPLOYEE STOCK BENEFIT PLAN": The term Employee Stock
Benefit Plan means any defined benefit plan or defined contribution plan of
the Savings Bank or the Holding Company other than an MRP, such as an
employee stock ownership plan, employee stock bonus plan, profit-sharing plan
or other plan, which, with its related trust, meets the requirements to be
"qualified" under Section 401 of the Internal Revenue Code.
Section 2.17 "ESTIMATED PRICE RANGE": The term Estimated Price Range
means the range of the estimated pro forma market value of the Conversion
Stock as determined by an independent appraiser prior to the Subscription
Offering and as may be amended from time to time thereafter.
SECTION 2.18 "FDIC CONVERSION REGULATIONS": The term FDIC Conversion
Regulations means the regulations of the FDIC governing mutual-to-stock
conversions of state-chartered savings banks codified at 12 C.F.R. Section
303.15 and 333.4, respectively.
Section 2.19 "FEDERAL RESERVE BOARD": The term Federal Reserve Board
means the Board of Governors of the Federal Reserve System.
SECTION 2.20 "HOLDING COMPANY": The term Holding Company means a
corporation to be formed by the Savings Bank under state law for the purpose
of becoming a holding company through the issuance and sale of its stock
under the Plan, and concurrent acquisition
5
<PAGE>
of 100 percent of the Capital Stock of the Savings Bank to be issued pursuant
to the Plan, unless the Holding Company form of organization is not utilized.
SECTION 2.21 "HOLDING COMPANY STOCK": The term Holding Company Stock
means any and all authorized stock of the Holding Company.
SECTION 2.22 "MARKET MAKER": The term Market Maker means a dealer
(i.e., any person who engages either for all or part of his time, directly or
indirectly, as agent, broker, or principal in the business of offering,
buying, selling, or otherwise dealing or trading in securities issued by
another person) who, with respect to a particular security, (1) regularly
publishes bona fide, competitive bid and offer quotations in a recognized
inter-dealer quotation system; or (2) furnishes bona fide competitive bid and
offer quotations on request; and (3) is ready, willing and able to effect
transactions in reasonable quantities at his quoted prices with other brokers
or dealers.
SECTION 2.23 "MEMBERS": The term Members means all persons or
entities who qualify as members of the Savings Bank as of the Voting Record
Date pursuant to its article of incorporation and bylaws prior to the
Conversion.
SECTION 2.24 "MRP'S": The term MRPs means any management recognition
plan(s) established by the Savings Bank to induce certain Directors, Officers
and employees of the Savings Bank to continue their service with the Savings
Bank following the Conversion through awards of Holding Company Stock in
accordance with the terms and conditions of this Plan and the documents
establishing the MRPs.
SECTION 2.25 "NET PROCEEDS": The term Net Proceeds means the number
of shares of Conversion Stock sold in the Conversion multiplied by the
Purchase Price, less the expenses incurred and payable by the Holding Company
to complete the Conversion.
SECTION 2.26 "OFFICER": The term Officer means an executive officer
of the Savings Bank which includes the Chairman of the Board; President; Vice
Presidents; the Secretary, Treasurer or principal financial officer,
Comptroller or principal accounting officer, and any other person performing
similar functions.
SECTION 2.27 "ORDER FORM": The term Order Form means the form to be
used for the purchase of Conversion Stock sent to Eligible Account Holders
and other parties eligible to purchase Conversion Stock in the Subscription
Offering and Community Offering pursuant to the Plan.
SECTION 2.28 "OTHER MEMBERS": The term Other Members means holders of
Deposit Accounts (other than Eligible Account Holders and Supplemental
Eligible Account Holders) in the Savings Bank as of the Voting Record Date.
6
<PAGE>
SECTION 2.29 "PLAN": The term Plan means this Plan of Conversion,
under which the Savings Bank shall convert from an Illinois chartered mutual
savings bank to an Illinois chartered stock savings bank as a wholly owned
subsidiary of Holding Company, as originally adopted by the Board of
Directors or as amended in accordance with the terms thereof.
SECTION 2.30 "PROSPECTUS": The term Prospectus means the document by
which the shares of Conversion Stock are offered for sale, as authorized for
use in connection with the Conversion by the SEC and the Commissioner.
SECTION 2.31 "PROXY STATEMENT": The term Proxy Statement means the
materials utilized to solicit proxies in connection with the vote by Members
on the Plan at the Special Meeting.
SECTION 2.32 "PURCHASE PRICE": The term Purchase Price means the per
share price at which Conversion Stock is ultimately sold in accordance with
the terms hereof
SECTION 2.33 "QUALIFYING DEPOSIT": The term Qualifying Deposit means
the total of the deposit balance of the Deposit Accounts of an Eligible
Account Holder or Supplemental Eligible Account Holder in the Savings Bank as
of the close of business on the Eligibility Record Date or, in the case of a
Supplemental Eligible Account Holder, the Supplemental Eligibility Record
Date, provided that Deposit Accounts of an Eligible Account Holder or
Supplemental Eligible Account Holder with total deposit balances of less than
$50 shall not constitute a Qualifying Deposit.
SECTION 2.34 "REGISTRATION STATEMENT": The term Registration
Statement means the registration statement on Form SB-2 filed by the Holding
Company with the SEC.
SECTION 2.35 "SAVINGS BANK": The term Savings Bank means Cerro Gordo
Building & Loan, s.b.
SECTION 2.36 "SEC": The term SEC means the Securities and Exchange
Commission.
SECTION 2.37 "SPECIAL MEETING": The term Special Meeting means the
special meeting of Members called for the purpose of considering the Plan for
approval.
SECTION 2.38 "STOCK OPTION PLAN": The term Stock Option Plan means
any stock option plan adopted by the Holding Company or the Savings Bank
providing for grants of options to purchase Holding Company Stock to
Directors, Officers and employees of the Holding Company and the Savings Bank
in accordance with the terms and conditions of this Plan and the documents
establishing the Stock Option Plan.
SECTION 2.39 "SUBSCRIBER": The term subscriber means any Person who
subscribes for shares of Conversion Stock in the Subscription Offering or the
Community Offering.
7
<PAGE>
SECTION 2.40 "SUBSCRIPTION OFFERING": The term Subscription Offering
means the offering of shares of Conversion Stock to the Eligible Account
Holders, Employee Stock Benefit Plans, Supplemental Eligible Account Holders
and Other Members of the Savings Bank.
SECTION 2.41 "SUBSCRIPTION PRICE RANGE": The term Subscription Price
Range is the price range established by the Savings Bank prior to the
commencement of the Subscription Offering, and is based on an independent
appraisal.
Section 2.42 "SUBSCRIPTION RIGHTS": The term Subscription Rights
means the nontransferable, non-negotiable, personal rights of the Eligible
Account Holders, Employee Stock Benefit Plans, Supplemental Eligible Account
Holders and Other Members to subscribe for shares of the Conversion Stock in
the Subscription Offering in accordance with this Plan.
SECTION 2.43 "SUPPLEMENTAL ELIGIBILITY RECORD DATE": The term
Supplemental Eligibility Record Date means the last day of the calendar
quarter preceding the approval of the Plan by the Commissioner.
SECTION 2.44 "SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER": The term
Supplemental Eligible Account Holder means the holder of a Qualifying Deposit
in the Savings Bank (other than an officer or director or their Associates)
on the Supplemental Eligibility Record Date.
SECTION 2.45 "VOTING RECORD DATE": The term Voting Record Date means
the date fixed by the Board of Directors of the Savings Bank for determining
the Members of the Savings Bank eligible to vote at the Special Meeting,
which shall be a date at least ten (10), but not more than forty (40), days
prior to the date of the Special Meeting unless otherwise approved in writing
by the Commissioner.
SECTION 2.46 "Y-3 APPLICATION": The term Y-3 Application means the
application to the Federal Reserve Board on Federal Reserve Board Form FR Y-3
for approval of the Holding Company's acquisition of control of the Converted
Savings Bank pursuant to the Conversion.
ARTICLE III
CONVERSION APPROVALS AND THE SPECIAL MEETING
SECTION 3.1 STEPS PRIOR TO SUBMISSION OF THE PLAN TO THE MEMBERS FOR
APPROVAL
Prior to submission of the Plan to its Members for approval at the
Special Meeting, the Savings Bank must receive approval of the Conversion
Application from the Commissioner and an indication from the FDIC that it
does not intend to object to the Plan. Prior to, and in connection with,
filing the Plan for the Commissioner's approval, the Savings Bank shall take
the following steps:
8
<PAGE>
(a) The Board of Directors of the Savings Bank shall adopt the Plan by
a vote of not less than two-thirds of its entire membership.
(b) The Savings Bank shall notify its Members of the adoption of the
Plan by publishing a statement in a newspaper having a general circulation in
each community in which the Savings Bank maintains an office.
(c) A press release relating to the proposed Conversion may be
submitted to the local media.
(d) Copies of the Plan as adopted by the Board of Directors shall be
made available for inspection at each office of the Savings Bank.
(e) The Savings Bank shall file the Conversion Application with the
Commissioner, the Holding Company shall file the Registration Statement with
the SEC and the Y-3 Application with the Federal Reserve Board, and the
Savings Bank shall notify the FDIC of the Conversion in accordance with the
requirements of the FDIC Conversion Regulations. Upon receipt of advice from
the Commissioner that the Conversion Application has been received and is in
the prescribed form, the Savings Bank shall publish a "Notice of Filing of an
Application for Approval to Convert to a Stock Savings Bank" in a newspaper
of general circulation in each community in which the Savings Bank maintains
an office. The Savings Bank shall prominently display a copy of such notice
in each of its offices. The Savings Bank and the Holding Company shall
publish such other notices of the Conversion as may be required in connection
with the Y-3 Application and the Conversion Application by the regulations
and policies of the Federal Reserve Board and the Commissioner, respectively.
(f) The Savings Bank shall obtain an opinion of counsel or a favorable
ruling from the Internal Revenue Service which shall state that the
Conversion will not result in any gain or loss for federal income tax
purposes to the Savings Bank or its Eligible Account Holders, Supplemental
Eligible Account Holders, or Other Members, and a comparable opinion or
ruling from the State of Illinois taxing authorities shall be obtained with
respect to Illinois income tax laws. Receipt of favorable opinions or
rulings are conditions precedent to completion of the Conversion.
(g) The Savings Bank shall cause the Holding Company to be incorporated
under state law and the Board of Directors of the Holding Company shall
concur in the Plan by at least a two-thirds vote. The Board of Directors of
the Savings Bank intends to take all steps necessary to form the Holding
Company including the filing of a Y-3 Application. In the event the Holding
Company is utilized, upon the Conversion to stock form the Savings Bank will
issue its Capital Stock to the Holding Company and the Holding Company will
issue and sell the Conversion Stock in accordance with the Plan.
(h) The Board of Directors of the Savings Bank may determine for any
reason at any time prior to the issuance of the Conversion Stock not to
utilize a holding company form of
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organization in the Conversion, in which case, the Holding Company's
Registration Statement will be withdrawn from the SEC, the Savings Bank will
take all steps necessary to complete the Conversion from the mutual to stock
form of organization, including filing any necessary documents with the
Commissioner and FDIC, and will issue and will sell the Conversion Stock in
accordance with the Plan. In such event a resolicitation for the Savings
Bank's Common Stock will be commenced and subscribers for the Common Stock
will be required to reconfirm their orders. Any reference to the Holding
Company in the Plan shall mean the Savings Bank in the event the Holding
Company is eliminated in the Conversion.
(i) The Plan shall be submitted to the Members after approval by the
Commissioner and an indication is received from the FDIC that it does not
intend to object to the Plan.
SECTION 3.2 THE SPECIAL MEETING
(a) GENERAL. Upon (1) receipt of written approval of the Conversion
Application by the Commissioner, (2) the expiration of the review period
established in the FDIC Conversion Regulations without extension or the
issuance of a notice of objection to the Conversion by the FDIC, or receipt
of a notice of no objection to the Conversion from the FDIC, whichever first
occurs, and (3) the declaration of the effectiveness of the Registration
Statement by the SEC, the Savings Bank shall convene a Special Meeting to
approve the Plan in accordance with the Savings Bank's mutual articles of
incorporation and bylaws and the requirements of the Commissioner's
Conversion Regulations and the FDIC Conversion Regulations.
(b) PROXY STATEMENT. Promptly after receipt of the approvals
referenced in Section 3.2(a) and at least 10 days but not more than 40 days
prior to the Special Meeting, the Savings Bank shall distribute proxy
solicitation materials to all Members and beneficial owners of Deposit
Accounts held in fiduciary capacities where the beneficial owners voting
rights, as of the Voting Record Date.
(i) The proxy solicitation materials shall include a copy of the
Proxy Statement to be used in connection with such solicitation and other
documents authorized for use by the regulatory authorities and may also
include a copy of the Plan and/or the Prospectus.
(ii) The Proxy Statement furnished to Members may be in summary
form, provided that a statement is made in bold-face type that a more
detailed description of the proposed transaction may be obtained by returning
an enclosed postage prepaid card or other written communication requesting
supplemental information. Without prior approval of the Commissioner, the
Special Meeting shall not be held less than 20 days after the last day on
which the supplemental information statement is mailed to requesting Members.
The supplemental information statement may be combined with the Prospectus if
the Subscription Offering and Community Offering are commenced concurrently
with or during the proxy solicitation of Members for the Special Meeting.
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(iii) The Savings Bank shall also advise each Eligible Account
Holder and Supplemental Eligible Account Holder not entitled to vote at the
Special Meeting of the proposed Conversion and the scheduled Special Meeting,
and provide a postage prepaid card on which to indicate whether he wishes to
receive the Prospectus, if the Subscription Offering is not held concurrently
with the proxy solicitation.
(c) VOTE REQUIREMENT. Pursuant to the Commissioner's Conversion
Regulations, an affirmative vote of not less than two-thirds (2/3) of the
total outstanding votes of the Savings Bank's Members is required for
approval of the Plan. Voting may be in person or by proxy. The Savings Bank
may not utilize a proxy that has been previously obtained from a Voting
Member to vote on matters to be presented at the Special Meeting. The
Commissioner shall be promptly notified of the actions of the Members.
(d) EFFECT OF APPROVAL. By voting in favor of the adoption of the Plan
and the Conversion, the Members will be voting in favor of the adoption by
the Converted Savings Bank of its articles of incorporation and bylaws.
SECTION 3.3 PROSPECTUS DELIVERY
(a) Prior to commencement of the Subscription Offering and Community
Offering, the Holding Company shall file a Registration Statement with the
SEC pursuant to the Securities Act of 1933, as amended. The Holding Company
shall not distribute the final Prospectus until the Registration Statement
containing the same has been declared effective by the SEC, the Conversion
Application has been approved by the Commissioner and the review period
established in the FDIC Conversion Regulations has expired, without extension
or the issuance of a notice of objection to the Conversion by the FDIC, or
the FDIC has issued a notice of no objection to the Conversion, whichever
first occurs.
(b) The Holding Company may commence the Subscription Offering and,
provided that the Subscription Offering has commenced, may commence the
Community Offering concurrently with or during the proxy solicitation of
Members. The Holding Company may close the Subscription Offering before the
Special Meeting, provided that the offer and sale of the Conversion Stock
shall be conditioned upon approval of the Plan by the Members at the Special
Meeting.
(c) The Savings Bank's proxy solicitation materials may require
Eligible Account Holders, Supplemental Eligible Account Holders and other
eligible subscribers to return to the Savings Bank by a reasonable date a
postage prepaid card or other written communication requesting receipt of the
Prospectus with respect to the Subscription Offering, provided that if the
Prospectus is not mailed concurrently with the proxy solicitation materials,
the Subscription Offering shall not be closed until the expiration of 30 days
after the mailing of the proxy solicitation materials. If the Subscription
Offering is not commenced within 45 days after the Special Meeting, the
Savings Bank may transmit, not more than 30 days prior to the commencement of
the Subscription Offering, to each Eligible Account Holder, Supplemental
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Eligible Account Holder and other eligible subscribers who had been furnished
with proxy solicitation materials a notice which shall state that the Savings
Bank is not required to furnish the Prospectus to them unless they return by
a reasonable date a postage prepaid card or other written communication
requesting the receipt of the prospectus.
SECTION 3.4 COMBINED SUBSCRIPTION AND COMMUNITY OFFERING
Instead of a separate Subscription Offering, all Subscription Rights
issued in connection with the Conversion may be exercised by delivery of
properly completed and executed Order Forms to the Savings Bank or selling
agent utilized in connection with the Community Offering. If a separate
Subscription Offering is not held, orders for Conversion Stock in the
Community Offering shall first be filled pursuant to the priorities and
limitations stated in Section 4.2.
ARTICLE IV
CONVERSION STOCK OFFERING
SECTION 4.1 NUMBER OF SHARES AND PURCHASE PRICE OF SHARES
(a) All shares of Conversion Stock sold in the Conversion, including
shares sold in the Subscription Offering and Community Offering, shall be
sold at a uniform price per share, referred to in this Plan as the "Purchase
Price". The Purchase Price and the total number of shares to be issued in
the Conversion shall be determined by the Board of Directors of the Savings
Bank and the Holding Company immediately prior to the completion of all such
sales contemplated by this Plan on the basis of the estimated pro forma
market value of the Converted Savings Bank. The estimated pro forma market
value of the Savings Bank shall be determined for such purpose by an
independent appraiser on the basis of such appropriate factors as are not
inconsistent with the Commissioner's Conversion Regulations and the FDIC
Conversion Regulations.
(b) Immediately prior to the Subscription Offering, an Estimated Price
Range shall be established which shall vary from 15 percent above to 15
percent below the average of the minimum and maximum of the Estimated Price
Range. The number of shares offered in the Conversion shall then be
determined within the Subscription Price Range by the Board of Directors of
the Savings Bank and the Board of Directors of the Holding Company by
dividing the minimum and maximum of the Subscription Price Range by the
Purchase Price. Subject to the approval of the Commissioner and
non-objection of the FDIC, the Estimated Price Range may be increased or
decreased to reflect market and economic conditions prior to completion of
the Conversion, and under such circumstances the Savings Bank and the Holding
Company may increase or decrease the total number of shares of Conversion
Stock to be issued in the Conversion to reflect any such change.
Notwithstanding anything to the contrary contained in this Plan and subject
to any required approval of the Commissioner and non-objection of the FDIC,
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
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Stock issued in the Conversion 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 amount of shares offered in the
Conversion due to an increase in the Estimated Price Range, the priority of
share allocation shall be as set forth in this Plan.
(c) If upon completion of the Subscription Offering all of the
Conversion Stock is subscribed for, or if because of a limited number of
unsubscribed shares or otherwise a Community Offering cannot be effected, the
Purchase Price for each share of Conversion Stock will be jointly determined
by the Savings Bank and the Holding Company as follows: (a) the estimated
aggregate pro forma market value of the Savings Bank or the Holding Company,
as the case may be, immediately after Conversion as determined by the
independent appraiser, expressed in the terms of a specific aggregate dollar
amount rather than as a range, upon completion of the Subscription Offering
or other sale of all of the Conversion Stock shall be divided by (b) the
total number of shares of Conversion Stock to be issued and sold.
(d) Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the independent appraiser
confirms to the Savings Bank and the Holding Company, if utilized, and to the
Commissioner and FDIC that, to the best knowledge of the independent
appraiser, nothing of a material nature has occurred which, taking into
account all relevant factors, would cause the independent appraiser to
conclude that the aggregate value of Conversion Stock at the Purchase Price
is incompatible with its estimate of the aggregate consolidated pro forma
market value of the Holding Company or the Savings Bank if no Holding Company
is utilized. If such confirmation is not received, the Savings Bank may
cancel the Subscription Offering and Community Offering, hold a new
Subscription Offering and Community Offering or take such other action as the
Commissioner and FDIC may permit.
(e) The Conversion Stock to be issued in the Conversion shall be fully
paid and nonassessable, unless subject to any limitations imposed by
applicable state corporate law.
SECTION 4.2 METHOD OF OFFERING SHARES
The Conversion Stock shall be offered and sold in the Subscription
Offering and Community Offering, or in such other manner as the Commissioner
may approve, as hereinafter provided in this Section 4.2.
(a) SUBSCRIPTION OFFERING
Subscription Rights shall be issued at no cost to Eligible Account
Holders, Employee Stock Benefit Plans, Supplemental Eligible Account Holders
and Other Members pursuant to priorities established by this Plan and the
Commissioner's Conversion Regulations and the FDIC Conversion Regulations.
The priorities established for the purchase of shares are as follows:
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(1) CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS
(A) Each Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Eligible Account Holder to purchase that
number of shares of Conversion Stock which is equal to the greater of the
maximum purchase limitation established for the Community Offering, one-tenth
of one percent of the total offering or 15 times the product (rounded down to
the next whole number) obtained by multiplying the total number of shares of
Conversion Stock to be issued by a fraction of which the numerator is the
amount of the Qualifying Deposit of the Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all Eligible
Account Holders.
(B) Subscription Rights received by Officers and Directors of the
Savings Bank and their Associates, as Eligible Account Holders, based on
their increased deposits in the Savings Bank in the one-year period preceding
the Eligibility Record Date shall be subordinated to all other subscriptions
involving the exercise of Subscription Rights pursuant to this Category.
(C) If Eligible Account Holders subscribe for more shares of
Conversion Stock than are available for purchase in the Subscription
Offering, available shares of Conversion Stock shall be allocated among the
Eligible Account Holders so as to permit each Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
total allocation equal to 100 shares or the total amount of his or her
subscription, whichever is less. Thereafter, any shares remaining shall be
allocated among Eligible Account Holders in the proportion that the amount of
the Qualifying Deposit of each such Eligible Account Holder bears to the
total amount of the Qualifying Deposits of all such Eligible Account Holders.
If the amount of shares so allocated to one or more Eligible Account Holders
exceeds the amount subscribed for by such Eligible Account Holder(s), the
excess shall be reallocated (one or more times, as necessary) among those
Eligible Account Holders whose subscriptions are still not fully satisfied on
the same principle until all available shares have been allocated or all
subscriptions satisfied; and
(2) CATEGORY 2: EMPLOYEE STOCK BENEFIT PLANS
Each Employee Stock Benefit Plan shall receive, without payment,
Subscription Rights to purchase the number of shares of Conversion Stock
requested by such Employee Stock Benefit Plan, subject to (A) the
availability of sufficient shares of Conversion Stock after filing in full
all subscription orders of Eligible Account Holders and (B) the purchase
limitations set forth in Section 4.3 of this Plan. The Employee Stock
Benefit Plans shall not be deemed to be Associates of any Director, Officer
or employee of the Savings Bank. In the event that, after completion of the
Subscription Offering, the number of shares of Conversion Stock to be issued
is increased above the maximum of the Estimated Price Range included in the
Prospectus distributed in connection with the Subscription Offering (whether
or not such increase requires a resolicitation of Subscribers), the Employee
Stock Benefit Plans shall be entitled to increase their subscriptions by a
percentage equal to the percentage increase in the amount of shares to
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be issued above the maximum of the Estimated Price Range, subject to any
applicable purchase limits and stock allocation procedure. In the event the
Employee Stock Benefit Plans, due to an oversubscription by Eligible Account
Holders, are unable to purchase the full amount of Conversion Stock
subscribed for by such Employee Stock Benefit Plans, such Employee Stock
Benefit Plans may, subject to the provisions of Section 8.2(a)(4) of this
Plan, (i) contemporaneously with the consummation of the Conversion purchase
up to ten percent of the Conversion Stock at the Purchase Price, but only if
the final conversion stock valuation exceeds the maximum of the Subscription
Price Range, (ii) contemporaneously with the consummation of the Conversion
or at any time thereafter, purchase authorized but unissued shares of Holding
Company Stock from the Holding Company at the then prevailing market price of
the Holding Company Stock (which in the case of shares purchased
contemporaneously with the consummation of the Conversion shall be the
Purchase Price) if the final conversion stock valuation does not exceed the
maximum of the Subscription Price Range and the FDIC approves such purchases
beforehand and/or (iii) following consummation of the Conversion, purchase
issued and outstanding shares of Holding Company Stock in the open market,
but only with prior FDIC approval.
(3) CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS
(A) Supplemental Eligible Account Holders shall receive, without
payment, Subscription Rights entitling such Supplemental Eligible Account
Holder to purchase that number of shares of Conversion Stock which is equal
to the greater of the maximum purchase limitation established for the
Community Offering, one-tenth of one percent of the total offering or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to be issued by a
fraction of which the numerator is the amount of the Qualifying Deposit of
the Supplemental Eligible Account Holder and the denominator is the total
amount of the Qualifying Deposits of all Supplemental Eligible Account
Holders.
(B) Subscription Rights received pursuant to this Category shall
be subordinated to the Subscription Rights received by Eligible Account
Holders and the Employee Stock Benefit Plans.
(C) Any Subscription Rights to purchase shares of Conversion Stock
received by an Eligible Account Holder in accordance with Category 1 shall
reduce to the extent thereof the Subscription Rights to be distributed
pursuant to this Category.
(D) If Supplemental Eligible Account Holders subscribe for more
shares than are available for purchase, available shares of Conversion Stock
shall be allocated among the Supplemental Eligible Account Holders so as to
permit each Supplemental Eligible Account Holder, to the extent possible, to
purchase a number of shares sufficient to make his or her total allocation
equal to 100 shares or the total amount of his or her subscription, whichever
is less. Thereafter, any shares remaining shall be allocated among
Supplemental Eligible Account Holders in the proportion that the amount of
the Qualifying Deposit of each such Supplemental
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Eligible Account Holder bears to the total amount of the Qualifying Deposits
of all such Supplemental Eligible Account Holders. If the amount of shares
so allocated to one or more Supplemental Eligible Account Holders exceeds the
amount subscribed for by such Supplemental Eligible Account Holder(s), the
excess shall be reallocated (one or more times as necessary) among those
Supplemental Eligible Account Holders whose subscriptions are still not fully
satisfied on the same principle until all available shares have been
allocated or all subscriptions satisfied.
(4) CATEGORY 4: OTHER MEMBERS
Other Members shall receive Subscription Rights to purchase shares of
Conversion Stock, after satisfying the subscriptions of Eligible Account
Holders, Employee Stock Benefit Plans, and any Supplemental Eligible Account
Holders, pursuant to Categories one, two or three above, subject to the
following conditions:
(A) Each such Other Member shall be entitled to subscribed for the
greater of the maximum purchase limitation established for the Community
Offering, or one-tenth of one percent of the total offering.
(B) In the event of an oversubscription for shares of Conversion
Stock by Other Member, the available shares of Conversion Stock shall be
allocated among the subscribing Other Members pro rata (to the extent of
their orders) in the amount of Conversion Stock subscribed for by each Other
Member bears to the amount of Conversion Stock subscribed for by all Other
Members.
(b) COMMUNITY OFFERING
(1) Any shares of Conversion Stock not subscribed for by Eligible
Account Holders, the Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members shall be sold in a Community Offering to
members of the general public to whom the Prospectus and Order Form are
delivered, with preference given to natural persons who reside in Piatt
County, Illinois, or under such other terms and conditions as may be
established by the Boards of Directors of the Savings Bank and the Holding
Company and approved by the Commissioner, subject to the absence of FDIC
objection thereto. The Community Offering may commence concurrently with or
as soon as practicable after the completion of the Subscription Offering and
must be completed within 45 days after completion of the Subscription
Offering, unless extended with the approval of the Commissioner. In
connection with any such extension, subscribers shall be permitted to
increase, decrease or rescind their subscriptions to the extent required by
the Commissioner in approving any such extension. The Conversion Stock shall
be offered and sold in the Community Offering at the Purchase Price and in a
manner which will achieve the widest possible distribution of the Conversion
Stock. The shares of Conversion Stock may be made available in the Community
Offering through a direct community marketing program which may provide for
utilization of a broker, dealer, consultant, or investment banking
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firm, experienced and expert in the sale of financial institution securities.
Such entities may be compensated on a fixed fee based on a commission basis,
or a combination thereof.
(2) The right to subscription for shares of Conversion Stock under
this Category is subject to the right of the Savings Bank to accept or reject
such subscriptions in whole or in part.
(3) If orders are received in the Community Offering for shares in
excess of the available Conversion Stock, orders accepted in the Community
Offering shall first be filled in full up to a maximum of 2 percent of the
Conversion Stock and thereafter remaining shares shall be allocated on an
equal number of shares basis per order until all orders have been filled
(subject to the maximum purchase limitation set forth in Section 4.3(b) of
this Plan and the minimum purchase limitation set forth in Section 4.3(h) of
this Plan).
(4) In the event a Community Offering does not appear feasible,
the Savings Bank will immediately consult the Commissioner to determine the
most viable alternative available to effect the completion of the Conversion.
Should no viable alternative exist, the Savings Bank may terminate the
Conversion with the concurrence of the Commissioner.
SECTION 4.3 LIMITATIONS UPON PURCHASES
The following additional limitations shall be imposed upon purchases of
shares of Conversion Stock:
(a) Purchases in the Subscription Offering, including purchases in the
Community Offering, by any person, and Associates thereof or a group of
persons Acting in Concert, shall be limited to 5.0% of the total Conversion
Stock offered in the Conversion, exclusive of any increase in the Estimated
Price Range to reflect changes in market and economic conditions after
commencement of the Subscription Offering and prior to completion of the
Conversion, except that the Employee Stock Benefit Plans may purchase up to 8
percent of the total Conversion Stock issued in the Conversion, including any
shares which may be issued in the event of an increase in the Estimated Price
Range to reflect changes in market and economic conditions after the
consummation of the Subscription Offering and prior to the completion of the
Conversion and shares to be held by the Employee Stock Benefit Plans and
attributable to a person shall not be aggregated with other shares purchased
by or otherwise attributable to such person.
(b) Purchases in the Community Offering by any person, including an
Associate thereof or a group of persons Acting in Concert shall be limited to
5.0% of the total Conversion Stock offered in the Conversion, exclusive of
any increase in the Estimated Price Range to reflect changes in market and
economic conditions after commencement of the Subscription Offering and prior
to completion of the Conversion.
(c) Officers and directors of the Savings Bank and associates thereof
may not purchase in the aggregate more than 35 percent of the shares issued
in the Conversion.
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(d) The Savings Bank's and Holding Company's Boards of Directors will
not be deemed to be Associates or a group Acting in Concert with other
directors or trustees solely as a result of membership on the Board of
Directors.
(e) No person, Associate thereof, or group of persons Acting in
Concert, may purchase more than 5.0% of the total Conversion Stock offered in
the Conversion, exclusive of any increase in the Estimated Price Range to
reflect changes in market and economic conditions after commencement of the
Subscription Offering and prior to completion of the Conversion, except that
the Employee Stock Benefit Plans may purchase up to 8 percent of the total
Conversion Stock issued in the Conversion, including any shares which may be
issued in the event of an increase in the Estimated Price Range to reflect
changes in market and economic conditions after consummation of the
Subscription Offering and prior to the completion of the Conversion and
shares held or to be held by the Employee Stock Benefit Plans and
attributable to a person shall not be aggregated with other shares purchased
directly by or otherwise attributable to such person.
(f) The Savings Bank's Board of Directors, with the approval of the
Commissioner and non-objection of the FDIC and without further approval of
Members, may, as a result of market conditions and other factors increase or
decrease the purchase limitation in paragraphs (a), (b) and (e) above. If
the Savings Bank or the Holding Company, as the case may be, increases the
maximum purchase limitations, the Savings Bank or the Holding Company, as the
case may be, is only required to resolicit persons who subscribed for the
maximum purchase amount and may, in the sole discretion of the Savings Bank
or the Holding Company, as the case may be, resolicit certain other large
subscribers. If the Savings Bank or the Holding Company, as the case may be,
decreases the maximum purchase limitations, the orders of any person who
subscribed for an amount in excess of the new maximum purchase amount shall
be decreased by the minimum amount necessary so that such person shall be in
compliance with the then maximum number of shares permitted to be subscribed
for by such person. The purchase limitation in paragraphs (a), (b) and (e)
may be increased to exceed 5 percent of the shares sold in the Conversion,
provided that orders for Conversion Stock exceeding 5 percent of the total
offering of shares shall not in the aggregate exceed 10 percent of the total
offering of shares, except that Employee Stock Benefit Plans may purchase in
the aggregate up to 8 percent of the total Conversion Stock issued and not be
included in the order limit.
(g) Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under this Plan or otherwise imposed by law, rule or regulation.
If the number of shares of Conversion Stock otherwise allocable pursuant to
Section 4.2 of this Plan to any Person or that Person's Associates would be
in excess of the maximum number of shares permitted as set forth above, the
number of shares of Conversion Stock allocated to each such Person shall be
reduced to the lowest purchase limitation applicable to that Person, and then
the number of shares allocated to each group consisting of a Person and that
Person's Associates shall be reduced so that the aggregate allocation to that
Person and his or her Associates complies with the above purchase
limitations, and such maximum number of shares shall be reallocated among
that Person and his or her
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Associates as they may agree or in the absence of an agreement, in proportion
to the shares subscribed for by each (after first applying the purchase
limitations applicable to each Person, separately).
(h) To the extent that shares of Conversion Stock are available, no
Subscriber will be allowed to purchase less than 25 shares of Conversion Stock
SECTION 4.4 MAILING OF OFFERING MATERIALS AND COLLATION OF SUBSCRIPTIONS
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the Commissioner, the expiration of
the review period established in the FDIC Conversion Regulations without
extension or the issuance of a notice of objection to the Conversion by the
FDIC, or receipt of a notice of no objection to the Conversion from the FDIC,
whichever first occurs, and the declaration of the effectiveness of the
Prospectus, the Holding Company shall distribute Prospectuses and Order Forms
for the purchase of shares of Conversion Stock in accordance with the terms
of the Plan.
The recipient of an Order Form shall be provided not less than 20 days
nor more than 45 days from the date of mailing, unless extended, to properly
complete, execute and return the Order Form to the Holding Company or the
Savings Bank. Self-addressed postage prepaid, return envelopes shall
accompany all Order Forms when they are made. Failure of any eligible
subscriber to return a properly completed and executed Order Form within the
prescribed time limits shall be deemed a waiver and a release by such
eligible subscriber of any rights to purchase shares of Conversion Stock
under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion must be completed within 45 days after the
last day of the Subscription Offering, unless extended by the Holding Company
with the approval of the Commissioner. In the event the Subscription
Offering and Community Offering are commenced prior to the date of the
Special Meeting, the offer and sale of Conversion Stock pursuant thereto
shall be conditioned upon approval of this Plan by the Voting Members.
SECTION 4.5 METHOD OF PAYMENT
Payment for all shares of Conversion Stock may be made in cash, by check
or by money order, or if a subscriber has a Deposit Account in the Savings
Bank such subscriber may authorize the Savings Bank to charge the
subscriber's Deposit Account. The Holding Company shall pay interest at not
less than the passbook rate on all amounts paid in cash or by check or money
order to purchase shares of Conversion Stock from the date payment is
received until the Conversion is completed or terminated. The Savings Bank
is not permitted knowingly to loan funds or otherwise extend any credit to
any person for the purpose of purchasing Conversion Stock.
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If a subscriber authorizes the Savings Bank to charge his Deposit
Account, the funds shall remain in the subscriber's Deposit Account and shall
continue to earn interest, but may not be used by such subscriber until the
Conversion is completed or terminated, whichever is earlier. The withdrawal
shall be given effect only concurrently with the sale of all shares of
Conversion Stock proposed to be sold in the Conversion and only to the extent
necessary to satisfy the subscription at a price equal to the Purchase Price.
The Savings Bank shall allow subscribers to purchase shares of Conversion
Stock by withdrawing funds from certificate accounts held with the Savings
Bank without the assessment of early withdrawal penalties, subject to the
approval of the applicable regulatory authorities. In the case of early
withdrawal of only a portion of such account, if the remaining balance of the
account is less than the applicable minimum balance requirement then the
remaining balance shall earn interest at the passbook rate. This waiver of
the early withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Conversion Stock under the Plan.
Employee Stock Benefit Plans may subscribe for shares by submitting an
Order Form, along with evidence of a loan commitment from a financial
institution or the Holding Company for the purchase of shares, during the
Subscription Offering and by making payment for the shares on the date of the
closing of the Conversion.
SECTION 4.6 UNDELIVERED, DEFECTIVE OR LATE ORDER FORMS: INSUFFICIENT
PAYMENT
If an Order Form (a) is not delivered and is returned to the Holding
Company or the Savings Bank by the United States Postal Service (or the
Holding Company or the Savings Bank is unable to locate the addressee); (b)
is not received back by the Holding Company or the Savings Bank, or is
received by the Holding Company or the Savings Bank after expiration of the
date specified thereon; (c) is defectively completed or executed; (d) is not
accompanied by the total required payment for the shares of Conversion Stock
subscribed for (including cases in which the Subscribers' Deposit Accounts
are insufficient to cover the authorized withdrawal for the required
payment); or (e) is submitted by or on behalf of a Person whose
representations the Boards of Directors of the Savings Bank or the Holding
Company believe to be false or 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 this Plan, the
Subscription Rights of the Person to whom such rights have been granted will
not be honored and will be treated as though such person failed to return the
completed Order Form within the period specified therein. The Subscription
Rights of the person to whom such rights have been granted shall not be
honored and shall be treated as though such person failed to return the
completed Order Form within the time period specified therein.
Alternatively, the Holding Company or the Savings Bank may, but shall not be
required to, waive any irregularity relating to any Order Form or require the
submission of a corrected Order Form or the remittance of full payment for
the shares of Conversion Stock subscribed for by such date as the Holding
Company or the Savings Bank may specify. Subscription orders, once tendered,
shall not be revocable. The Holding Company's and the Savings Bank's
interpretation of the terms and conditions of the Plan and of the Order Forms
shall be final.
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SECTION 4.7 MEMBERS IN NON-QUALIFIED STATES OR IN FOREIGN COUNTRIES
The Holding Company shall make reasonable efforts to comply with the
securities laws of all states of the United States in which persons entitled
to subscribe for shares of Conversion Stock pursuant to the Plan reside.
However, no such person shall be offered or receive any such shares under the
Plan who resides in a foreign country or who resides in a state of the United
States with respect to which all of the following apply: (a) a small number
of persons otherwise eligible to subscribe for shares of Conversion Stock
reside in such state; (b) the granting of Subscription Rights or offer or
sale of shares of Conversion Stock to such persons would require the Holding
Company to register, under the securities laws of such state, as a broker or
dealer or to register or otherwise qualify its securities for sale in such
state; and (c) such registration or qualification would be impractical for
reasons of cost or otherwise.
SECTION 4.8 RESTRICTIONS ON AND OTHER CHARACTERISTICS OF STOCK BEING
SOLD
(a) TRANSFERABILITY. Conversion Stock purchased by persons other than
Officers and Directors shall be transferable without restriction. Conversion
Stock purchased by Officers and Directors shall not be sold or otherwise
disposed of for value for a period of one year from the date of Conversion,
except for any disposition following the death of the original purchaser.
The Conversion Stock issued by the Holding Company to Officers and
Directors shall bear a legend giving appropriate notice of the one year
holding period restriction. Said legend shall state as follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this certificate pursuant
to Regulations of the Commissioner of Savings and Residential Finance for the
State of Illinois. These shares may not be transferred prior thereto without
a legal opinion of counsel that said transfer is permissible under the
provisions of applicable laws and regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent of the Holding Company's stock with
respect to the foregoing restrictions. Any shares of Holding Company Stock
subsequently issued as a stock dividend, stock split or otherwise, with
respect to any such restricted stock, shall be subject to the same holding
period restrictions for Officers and Directors as may then be applicable to
such restricted stock.
Without prior approval of the Commissioner, Officers and Directors,
and their associates, shall be prohibited for a period of three years
following completion of the Conversion from purchasing outstanding shares of
Holding Company Stock, except from a broker or dealer registered with the SEC
Notwithstanding this restriction, purchases involving more than one percent
of the total outstanding shares of Holding Company Stock and purchases made
and shares held by an Employee Stock Benefit Plan (whether or not the plan is
tax-qualified) which may be attributable to Officers or Directors may be made
in negotiated transactions without the Commissioner's permission or the use
of a broker or dealer.
21
<PAGE>
(b) STOCK REPURCHASES AND DIVIDEND RIGHTS. Pursuant to the FDIC
Conversion Regulation, the Holding Company may not, for a period of one year
after the Conversion, repurchase its stock from any person except when
compelling and valid business reasons are established. Thereafter, stock
repurchases would be considered by the FDIC on a case-by basis under Section
18(i)(1) of the FDI Act (12 U.S.C 1828(i)(1)) which prohibits state nonmember
banks from reducing or retiring capital without the prior consent of the
FDIC. Although the Commissioner's Conversion Regulations would permit the
Holding Company to repurchase its stock under certain circumstances during
the one year period after the Conversion, the FDIC Conversion Regulations
would supersede this authority, however, during the second and third year
after the Conversion, the Holding Company may repurchase its stock according
to the Commissioner's Conversion Regulations (but also subject to FDIC
approval) subject to approval by the Commissioner. The Commissioner's
Conversion Regulations permit the Holding Company to repurchase its stock
under the following circumstances: (i) an offer by the Holding Company to all
stockholders on a pro rata basis which is approved by the Commissioner, (ii)
the repurchase of qualifying shares of a Director, (iii) a purchase in the
open market by an Employee Stock Benefit Plan (whether or not the plan is
tax-qualified) of the Savings Bank, and open market repurchases of its
outstanding stock, provided that no more than 10 percent of the Holding
Company's outstanding stock is to be purchased during any six month period,
and the Converted Savings Bank's regulatory capital would not be reduced
below the amount required under applicable law, and the repurchases would not
adversely affect the financial condition of the Savings Bank.
Present regulations also provide that after the Conversion the
Savings Bank may not declare or pay a cash dividend on or repurchase any of
its Capital Stock if the result thereof would be to reduce the capital of the
Savings Bank below (a) the amount required for the liquidation account
described below, (b) the amount required by the Commissioner, or (c) the
amount required by federal law.
The above limitations shall not preclude payments of dividends or
repurchases of Holding Company Stock in the event applicable federal
regulatory limitations are liberalized subsequent to the Conversion.
(c) VOTING RIGHTS. After the Conversion, Members shall not have voting
rights in the Savings Bank or the Holding Company. Exclusive voting rights
with respect to the Holding Company shall be vested in the holders of the
stock issued by the Holding Company and the Holding Company will have
exclusive voting rights with respect to the Savings Bank's Capital Stock.
Each stockholder of the Holding Company shall be entitled to vote on any
matters coming before the stockholders of the Holding Company for
consideration, and holders of Holding Company Stock shall be entitled to one
vote for each share of stock owned by such stockholders.
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<PAGE>
ARTICLE V.
LIQUIDATION ACCOUNT
(a) After the Conversion, holders of Deposit Accounts shall not be
entitled to share in any residual assets in the event of liquidation of the
Savings Bank. However, pursuant to the Commissioner's Conversion Regulations,
the Savings Bank shall at the time of the Conversion, establish a liquidation
account in an amount equal to its total net worth as of the date of the
latest statement of financial condition contained in the final Prospectus.
The function of the liquidation account shall be to establish a priority on
liquidation, and the existence of the liquidation account shall not operate
to restrict the use or application of any of the net worth accounts of the
Savings Bank.
(b) The liquidation account shall be maintained by the Savings Bank
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Deposit Accounts in
the Savings Bank. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to each Deposit Account held, have a
related inchoate interest in a portion of the liquidation account balance
("subaccount").
(c) The initial subaccount balance for a Deposit Account held by an
Eligible Account Holder and/or a Supplemental Eligible Account Holder shall
be determined by multiplying the opening balance in the liquidation account
by a fraction of which the numerator is the amount of such holder's
Qualifying Deposit in the Deposit Account and the denominator is the total
amount of the Qualifying Deposits of all Eligible Account Holders and
Supplemental Eligible Account Holders. Such initial subaccount balance shall
not be increased, and it shall be subject to downward adjustment as provided
below.
(d) If the deposit balance in any Deposit Account of an Eligible
Account Holder or Supplemental Eligible Account Holder at the close of
business on any annual closing date subsequent to the Eligibility Record Date
or Supplemental Eligibility Record Date is less than the lesser of (a) the
deposit balance in such Deposit Account at the close of business on any other
annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (b) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Deposit Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event
of a downward adjustment, such subaccount balance shall not be subsequently
increase notwithstanding any increase in the deposit balance of the related
Deposit Account. If any such Deposit Account is closed, the related
subaccount balance shall be reduced to zero.
(e) In the event of a complete liquidation of the Savings Bank (and
only in such event) each Eligible Account Holder and Supplemental Eligible
Account Holder shall be entitled to receive a liquidation distribution from
the liquidation account in the amount of the then current adjusted subaccount
balance(s) for Deposit Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger,
consolidation, bulk purchase
23
<PAGE>
of assets with assumptions of Deposit Accounts and other liabilities or
similar transactions with another federally insured institution in which the
Savings Bank is not the surviving institution shall be considered to be a
complete liquidation. In any such transaction, the liquidation account shall
be assumed by the surviving institution.
ARTICLE VI.
CONSUMMATION OF CONVERSION
SECTION 6.1 CONSUMMATION OF CONVERSION. Subject to satisfaction of
the terms and conditions of this Plan, the Conversion shall be
consummated as promptly as practicable following the completion of the
offering of Conversion Stock contemplated by Article VI of this Plan, as
follows:
(a) the Savings Bank shall take such actions as may be necessary or
appropriate under applicable law and regulations to adopt stock savings bank
articles of incorporation and bylaws;
(b) the Converted Savings Bank shall issue and sell the Capital Stock
to the Holding Company;
(c) the Holding Company shall issue and sell the Conversion Stock to
the Subscribers whose subscriptions were accepted by the Savings Bank and the
Holding Company; and
(d) the Holding Company shall pay to the Converted Savings Bank, as
consideration for the issuance of the Capital Stock, 50 percent of the Net
Proceeds (or such other amount as may be authorized by the Commissioner in
approving the Conversion.)
SECTION 6.2 EFFECTIVE TIME OF CONVERSION. The Conversion shall be
deemed to occur and shall be effective upon completion of all actions
necessary or appropriate under applicable federal and state statutes and
regulations and the policies of the Commissioner for the adoption by the
Savings Bank of stock savings bank articles of incorporation and the issuance
and sale by the Holding Company of all shares of the Conversion Stock.
ARTICLE VII.
POST-CONVERSION MATTERS
SECTION 7.1 POST CONVERSION FILING AND MARKET MAKING
(a) In connection with the Conversion, the Holding Company shall
register its Conversion Stock with the SEC pursuant to the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister such
Conversion Stock for a period of three years thereafter.
24
<PAGE>
(b) The Holding Company shall use its best efforts to encourage and
assist various Market Makers to establish and maintain a market for the
shares of its stock. The Holding Company shall also use its best efforts to
list its stock through the National Association of Securities Dealers
Automated Quotation System or on a national or regional securities exchange.
SECTION 7.2 STATUS OF DEPOSIT ACCOUNTS AND LOANS SUBSEQUENT TO
CONVERSION
All Deposit Accounts in the Savings Bank shall retain the same status
after Conversion as these accounts had prior to Conversion. Each Deposit
Account holder shall retain, without payment, a withdrawable Deposit Account
or accounts in the Savings Bank after the Conversion, equal in amount to the
withdrawable value of such holder's Deposit Account or accounts prior to
Conversion. All Deposit Accounts will continue to be insured by the Savings
Association Insurance Fund of the FDIC up to the applicable limits of
insurance coverage. All loans shall retain the same status after the
Conversion as they had prior to the Conversion.
SECTION 7.3 DIRECTORS AND OFFICERS OF THE CONVERTED SAVINGS BANK
Each person serving as a Director of the Savings Bank at the time of
Conversion shall continue to serve as a member of the Converted Savings
Bank's Board of Directors, subject to the Converted Bank's articles of
incorporation and bylaws. The persons serving as Officers immediately prior
to the Conversion will continue to serve at the discretion of the Board of
Directors in their respective capacities as Officers of the Converted Savings
Bank. In connection with the Conversion, the Savings Bank may enter into
employment and/or severance agreements on such terms and with such Officers
as shall be determined by the Board of Directors of the Savings Bank.
SECTION 7.4 EXECUTIVE COMPENSATION
The Savings Bank may adopt, subject to any required approvals, executive
compensation or other benefit programs including but not limited to
compensation plans involving stock options, stock appreciation rights,
restricted stock grants, employee recognition programs and the like.
SECTION 7.5 OTHER EFFECTS OF THE CONVERSION
The reserves, surplus and creditor obligations of the Savings Bank shall
be assumed by the Converted Savings Bank. The Savings Bank shall continue to
maintain its home office at 229 East South Street, Cerro Gordo, Illinois.
Upon completion of the Conversion, the Savings Bank will operate as an
Illinois stock savings bank as a wholly-owned subsidiary of the Holding
Company.
25
<PAGE>
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1 EXPENSES OF THE CONVERSION
The Holding Company and the Savings Bank shall use their best efforts to
ensure that expenses incurred in connection with the Conversion shall be
reasonable.
SECTION 8.2 EMPLOYEE PLAN MATTERS
The Holding Company and the Savings Bank are authorized to adopt an
Employee Stock Benefit Plan or Plans in connection with the Conversion,
including without limitation an employee stock ownership plan. Subsequent to
the Conversion, the Holding Company and the Savings Bank are authorized to
adopt non-tax qualified employee stock benefit plans, including without
limitation, MRPs and Stock Option Plans for directors, officers and
employees, provided however that, with respect to any such plan implemented
during the one-year period subsequent to the date of the Conversion, any such
plan (i) shall be disclosed in the proxy solicitation materials for the
Special Meeting and in the Prospectus; (ii) in the case of stock option
plans, shall have a total number of shares of common stock for which options
may be granted of not more than 10% of the amount of shares issued in the
Conversion; (iii) in the case of MRPs, shall have a total number of shares of
common stock of not more than 4% of the amount of shares issued in the
Conversion; (iv) shall be submitted for approval by the holders of the common
stock of the Holding Company no earlier than six months following
consummation of the Conversion; and (v) shall comply with all other
applicable requirements of the Commissioner.
SECTION 8.3 INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the
Savings Bank shall be final, subject to the authority of the Commissioner and
the FDIC.
ARTICLE IX.
AMENDMENT OR TERMINATION OF PLAN
(a) If necessary or desirable, the Plan may be amended by a two-thirds
vote of the Savings Bank's Board of Directors at any time prior to submission
of the Plan and proxy solicitation materials to the Members. At any time
after submission of the Plan and proxy solicitation materials to the Members,
the Plan may be amended by a two-thirds vote of the Board of Directors only
with the concurrence of the Commissioner. The Plan may be terminated by a
two-thirds vote of the Board of Directors at any time prior to the Special
Meeting, and at any time following such Special Meeting with the concurrence
of the Commissioner. In its discretion, the Board of Directors may modify or
terminate the Plan upon
26
<PAGE>
the order of the regulatory authorities without a resolicitation of proxies
or another meeting of the Members.
(b) 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.
(c) In the event that mandatory new regulations pertaining to
conversions are adopted by the Commissioner and/or the FDIC prior to the
completion of the Conversion, the Plan shall be amended to conform to the new
mandatory regulations without a resolicitation of proxies or another meeting
of Members. In the event that new conversion regulations adopted by the
Commissioner and/or the FDIC prior to completion of the Conversion contain
optional provisions, the Plan may be amended to utilize such optional
provisions at the discretion of the Board of Directors without a
resolicitation of proxies or another meeting of Members.
(d) By adoption of the Plan, the Members authorize the Board of
Directors to amend and/or terminate the Plan under the circumstances set
forth above.
27
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CGB&L FINANCIAL GROUP, INC.
ARTICLE I
The name of the Corporation is: CGB&L Financial Group, Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The
name of its registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
the State of Delaware.
ARTICLE IV
The total number of shares of all classes of capital stock which the
Corporation has the authority to issue is 1,000,000 shares, which are
divided into two classes as follows:
(a) 100,000 shares of Preferred Stock with a par value of $0.01 per share
(the "Preferred Stock"); and
(b) 900,000 shares of Common Stock with a par value of $0.01 per share
(the "Common Stock").
The designations, voting powers, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of the above classes of stock are as follows:
SECTION 1. PREFERRED STOCK. The board of directors is authorized, at
any time and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series with such designations, preferences,
voting powers and relative, participating, optional or other special rights
and qualifications, limitations or restrictions thereof as are stated and
expressed in the resolution or resolutions providing for the issuance of such
Preferred Stock adopted by the board of directors, including, but not limited
to, determination of any of the following:
<PAGE>
(a) the distinctive serial designation and the number of shares
constituting a series;
(b) the dividend rate or rates, whether dividends are cumulative (and
if so on what terms and conditions), the payment date or dates for dividends
and the participating or other special rights, if any, with respect to
dividends;
(c) the voting rights, full or limited, if any, of the shares of the
series, which could include the right to elect a specified number of
directors in any case if dividends on the series are not paid for in a
specified period of time;
(d) whether the shares of the series are redeemable and, if so, the
price or prices at which, and the terms and conditions on which, the shares
may be redeemed, which prices, terms and conditions may vary under different
conditions and at different redemption dates;
(e) the amount or amounts, if any, payable upon the shares of the
series in the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation prior to any payment or distribution of the
assets of the Corporation to any class or classes of stock of the Corporation
ranking junior to the series;
(f) whether the shares of the series are entitled to the benefit of a
sinking or retirement fund to be applied to the purchase or redemption of
shares of the series and the amount of the fund and the manner of its
application, including the price or prices at which the shares of the series
may be redeemed or purchased through the application of the fund;
(g) whether the shares are convertible into, or exchangeable for,
shares of any other class or classes or of any other series of the same or
any other class or classes of stock of the Corporation and the conversion
price or prices, or the rates of exchange, and the adjustments hereof, if
any, at which the conversion or exchange may be made, and any other terms and
conditions of the conversion or exchange; and
(h) any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of a series, as a board of directors may deem
advisable and as are not inconsistent with the provisions of this Certificate
of Incorporation
SECTION 2. COMMON STOCK.
A. DIVIDENDS. Subject to the preferential rights of the Preferred
Stock, the holders of the Common Stock are entitled to receive, to the extent
permitted by law, such dividends as may be declared from time to time by the
board of directors.
B. LIQUIDATION. In event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of Preferred Stock,
2
<PAGE>
holders of Common Stock shall be entitled to receive all of the remaining
assets of the Corporation of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common Stock
held by them respectively. The board of directors may distribute in kind to
the holders of Common Stock such remaining assets of the Corporation or may
sell, transfer or otherwise dispose of all or any part of such remaining
assets to any other corporation, trust or other entity and receive payment
therefor in cash, stock or obligations of such other corporation, trust or
other entity, or other entity, or any combination hereof, and may sell all or
any part of the consideration so and received and distribute any balance
thereof in kind to holders of Common Stock. Neither the merger or
consolidation of the Corporation into or with any other corporation or
corporations, nor the purchase or redemption of shares of stock of the
Corporation of any class, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reorganization or recapitalization of the
Corporation, shall be deemed to be a dissolution, liquidation or winding up
of the Corporation for the purposes of this paragraph.
C. VOTING RIGHTS. Except as may be otherwise required by law or this
Certificate of Incorporation, each holder of Common Stock has one vote in
respect of each share of stock held by the holder of record on the books of
the Corporation on all matters voted upon by the stockholders.
SECTION 3. OTHER PROVISIONS.
A. NO PREEMPTIVE RIGHTS. No stockholder shall have any preemptive
right to subscribe to an additional issue of stock, whether now or hereafter
authorized, of any class or series or to any securities of the Corporation
convertible into such stock.
B. CHANGES IN AUTHORIZED CAPITAL STOCK. Subject to the protective
conditions and restrictions of any outstanding Preferred Stock, any amendment
to this Certificate of Incorporation which increases or decreases the
authorized capital stock of any class or classes may be made only by the
affirmative vote of the holders of a majority of the outstanding shares of
all classes of stock of the corporation generally entitled to vote in the
election of directors, considered for purposes of this Section 3.B of Article
IV as one class.
C. UNCLAIMED DIVIDENDS. Any and all right, title, interest and claim
in or to any dividends declared by the Corporation, whether in cash, stock,
or otherwise, which are unclaimed by the stockholder entitled thereto for a
period of six years after the close of business on the payment date, shall be
and be deemed to be extinguished and abandoned; and such unclaimed dividends
in the possession of the Corporation, its transfer agents or other agents or
depositaries shall at such time become the absolute property of the
Corporation, free and clear of any and all claims of any persons whatsoever.
ARTICLE V
SECTION 1. NUMBER, ELECTION AND TERMS OF DIRECTORS. The business and
affairs of the Corporation shall be managed by or under the direction of a board
of directors consisting of not
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<PAGE>
less than five (5) nor more than nine (9) persons. The exact number of
directors within the minimum and maximum limitations specified in the
preceding sentence shall be fixed from time to time by the board of directors
pursuant to a resolution adopted by a majority of the entire board of
directors. The board of directors shall be divided into three classes as
nearly equal in number as possible. The initial term of office of Class I
directors shall expire at the annual meeting of stockholders to be held in
1999; the initial term of office of Class II directors shall expire at the
annual meeting of stockholders to be held in 2000; and the initial term of
office of Class III directors shall expire at the annual meeting of
stockholders to be held in 2001, and in each case until their respective
successors are elected and qualified. At each annual meeting of
stockholders, directors shall be chosen to succeed those whose terms then
expire, shall be elected for a term of office expiring at the third
succeeding annual meeting of stockholders after their election, and in each
case until their respective successors are elected and qualified.
The names and mailing addresses of the persons who are to serve as the
initial directors of each class of directors of the Corporation until their
successors are elected and qualified or until their earlier resignation or
removal are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS CLASS DESIGNATION
- ----------------------- ----------------------- -----------------
<S> <C> <C>
Lester W. Crandall 229 East South Street I
Cerro Gordo, IL 61818
C. Russell York 229 East South Street I
Cerro Gordo, IL 61818
Noel R. Buckley 229 East South Street II
Cerro Gordo, IL 61818
Larry D. Gaitros 229 East South Street II
Cerro Gordo, IL 61818
John A. Sochor, DDS 229 East South Street II
Cerro Gordo, IL 61818
Dale C. Born 229 East South Street III
Cerro Gordo, IL 61818
Maralyn F. Heckman 229 East South Street III
Cerro Gordo, IL 61818
</TABLE>
SECTION 2. NEWLY CREATED DIRECTORSHIP AND VACANCIES. Newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the board of directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by a majority vote of the directors then in office, although less than a quorum,
or by a sole remaining director. Directors so chose shall hold office for a
term expiring at the annual meeting of stockholders at which the term of the
class to which they have
4
<PAGE>
been elected expires. No decrease in the number of directors constituting
the board of directors shall shorten the term of any incumbent director.
Newly created directorships shall be allocated among the classes of directors
so that each class of directors shall consist, as nearly as possible, of
one-third of the total number of directors.
SECTION 3. REMOVAL. Any director, or the entire board of directors,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally
entitled to vote in the election of directors, considered for purposes of
this Section 3 of Article V as one class.
SECTION 4. ADVANCE NOTICE OF NOMINATIONS FOR DIRECTORS. (a) Nominations
of persons for election to the board of directors shall be brought before an
annual meeting (i) pursuant to the Corporation's notice of meeting (ii) by or
at the direction of the board of directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this Section 4(a), who is entitled to vote with respect
thereto and who complies with the notice procedures set forth in this Section
4(a). For nominations to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice
must be delivered to or mailed to and received by the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 60th day nor earlier than the close of business on the 90th
day prior to the first anniversary of the preceding year's annual meeting.
In no event shall the public or other announcement of an adjournment of an
annual meeting or the adjournment thereof commence a new time period for the
giving of a stockholder's notice as described above. Such stockholders
notice to the Secretary shall set forth (i) as to each person whom such
stockholder proposes to nominate for election or reelection as a director,
all information relating to such person that would be required to be
disclosed in solicitations of proxies for election of directors in an
election contest, or otherwise required, if such solicitations of proxies
were subject to Regulation 14A under the Securities Exchange Act of 1934 and
Rule 14a-11 thereunder (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director, if
elected), and (ii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf of nomination is made, (A) the name and
address of such stockholder, as they appear on the Corporation's books, and
the name and address of such beneficial owner and (B) the class, series (if
applicable) and number of shares of the Corporation's capital stock that are
owned beneficially and of record by such stockholder and such beneficial
owner.
Notwithstanding anything in the third sentence of the preceding paragraph
of this Section 4 to the contrary, in the event that the number of directors to
be elected to the board of directors of the Corporation is increased and there
is no public disclosure by the Corporation naming all of the nominees for
director or specifying the size of the increased board of directors at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 4 shall also be considered timely,
but only with respect to nominees for
5
<PAGE>
any new positions created by such increase, if it shall be delivered to or
mailed to and received by the Secretary at the principal executive offices of
the Corporation not later than the close of business on the 10th day
following the day on which such public disclosure is first made by the
Corporation.
(b) Nominations of persons for election to the board of directors of
the Corporation may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting
(i) by or at the direction of the board of directors or, (ii) provided that
the board of directors has determined that directors shall be elected at such
special meeting, by any stockholder of the Corporation who is a stockholder
of record at the time of the giving of notice provided for in this Section 4,
who is entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in this Section 4, who is
entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in this Section 4. In the
event the Corporation calls a special meeting of stockholders for the purpose
of electing one or more directors to the board, any such stockholder may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation's notice of meeting if the
stockholder's notice required by Section 4(a) shall be delivered to the
Secretary at the principal executive offices of the Corporation not later
than the close of business on the 14th day following (i) the date on which
public disclosure of the date of such meeting and of the nominees proposed by
the board of directors to be elected at such meeting is first made by the
Corporation or (ii) the date on which notice of such meeting is mailed to the
stockholders, whichever is earlier; provided, however, that if such public
disclosure is not made by the Corporation or notice of such meeting is not
mailed to the stockholders more than 21 days before the date of such special
meeting, the stockholder's notice required by Section 4(a) shall be delivered
to the Secretary at the principal executive offices of the Corporation not
later than the close of business on the 7th day following the date on which
such public disclosure is first made by the Corporation or notice of such
meeting is mailed to the stockholders, whichever is earlier. In no event
shall the public or other announcement of an adjournment of a special meeting
or the adjournment thereof commence a new time period for the giving of a
stockholder's notice as described above.
(c) (i) Notwithstanding anything in this Certificate of Incorporation
to the contrary, only such persons who are nominated in accordance with the
procedures set forth in this Section 4 shall be eligible for election as
directors. The officer of the Corporation or other person presiding over the
meeting shall, if the facts so warrant, determine and declare to the meeting
that a nomination was not made in accordance with the provisions of this
Section 4 and, if such presiding officer should so determine, he or she shall
so declare to the meeting and any such defective nomination shall be
disregarded.
(ii) Nothing in this Section 4 shall be deemed to affect any rights
of the holders of any class or series of Preferred Stock to elect directors
under specified circumstances.
SECTION 5. AMENDMENT, ALTERATION OR REPEAL. In addition to any
affirmative vote that may be otherwise required, the affirmative vote of the
holders of at least eighty percent (80%)
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of the outstanding shares of all classes of stock of the Corporation
generally entitled to vote in the election of directors, considered for
purposes of this Section as one class, shall be required to amend, alter or
repeal in any respect, or adopt any provision inconsistent with, this Article
V.
ARTICLE VI
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
Special meetings of stockholders of the Corporation may be called only
by the Chairman, by the President or by the board of directors pursuant to a
resolution approved by a majority of the entire board of directors, upon not
less than 10 nor more than 60 days' written notice.
In addition to any affirmative vote which may be otherwise required, the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally
entitled to vote in the election of directors, considered for purposes of
this Article VI as one class, shall be required to amend, alter or repeal in
any respect, or adopt any provision inconsistent with, this Article VI.
ARTICLE VII
They By-laws of the Corporation shall be amended, altered or repealed
and new By-laws not inconsistent with any provisions of this Certificate of
Incorporation may be made only (1) by the affirmative vote of a majority of
the members of the board of directors then in office, or (2) by the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally
entitled to vote in the election of directors, considered for purposes of
this Article VII as one class.
In addition to any affirmative vote which may be otherwise required, the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally
entitled to vote in the election of directors, considered for purposes of
this Article VII as one class, shall be required to amend, alter or repeal in
any respect, or adopt any provision inconsistent with, this Article VII.
ARTICLE VIII
The name and mailing address of the incorporator of this Corporation are
as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Maralyn F. Heckman 229 East South Street
Cerro Gordo, Illinois 61818
</TABLE>
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ARTICLE IX
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation so provide.
ARTICLE X
Except as otherwise provided in the Certificate of Incorporation, the
board of directors shall have authority to authorize the issuance, from time
to time without any vote or other action by the shareholders, of any or all
shares of stock of the Corporation of any class at any time authorized, any
securities convertible into or exchangeable for any such shares so
authorized, and any warrant, option or right to purchase, subscribe for or
otherwise acquire, shares of stock of the Corporation of any class at any
time authorized, in each case to such persons and for such consideration and
on such terms as the board of directors from time to time in its discretion
lawfully may determine. Stock so issued, for which the consideration has
been paid to the Corporation, shall be fully paid stock, and the holders of
such stock shall not be liable to any further call or assessments thereon.
ARTICLE XI
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof, or
on the application of any receiver or receivers appointed for this
Corporation under Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders to this
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
ARTICLE XII
Each person who is or was a director or officer of the Corporation and
each person who is or was a director or officer of the Corporation and serves
or served at the request of the Corporation as a director or officer of
another enterprise, shall be indemnified by the Corporation in accordance
with, and to the fullest extent authorized by, the General Corporation Law of
the State of Delaware as it may be in effect from time to time.
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In addition to any affirmative vote which may be otherwise required, the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally
entitled to vote in the election of directors, considered for purposes of
this Article XII as one class, shall be required to amend, alter or repeal in
any respect, or adopt any provision inconsistent with, this Article XII.
ARTICLE XIII
No person who was at any time a director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty by such person as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law of the State of Delaware is hereafter
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
In addition to any affirmative vote which may be otherwise required, the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally
entitled to vote in the election of directors, considered for purposes of
this Article XIII as one class, shall be required to amend, alter or repeal
in any respect, or adopt any provision inconsistent with, this Article XIII.
ARTICLE XIV
SECTION 1. VOTE REQUIRED FOR CERTAIN BUSINESS TRANSACTIONS. In
addition to any affirmative vote which may be otherwise required, no Business
Transaction, except as otherwise expressly provided in this Article XIV,
shall be effected or consummated, unless such Business Transaction has been
approved by the affirmative vote of the holders of at least that number of
the Voting Shares which equals the sum of (a) the number of Voting Shares
beneficially owned by all Interested Parties with respect to the Business
Transaction, plus (b) eighty percent (80%) of the remaining number of Voting
Shares that are not beneficially owned by any such Interested Party.
SECTION 2. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of this
Article XIV shall not apply to any Business Transaction if:
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A. Prior to the acquisition of beneficial ownership of ten
percent (10%) or more of the Voting Shares by all Interested Parties
with respect to the Business Transaction, the Business Transaction has
been approved by a resolution adopted by a majority of the board of
directors holding office at the time such resolution is adopted; or
B. The Business Transaction has been approved by a resolution
adopted by sixty-six and two-thirds percent (66 2/3%) of those members
of the board of directors holding office at the time such resolution is
adopted who are not themselves Interested Directors with respect to the
Business Transaction; or
C. All of the following conditions have been met:
(1) the aggregate amount of the cash and the fair market value (as
determined by the investment banking firm referred to in subsection (4)
below) of consideration other than cash to be received for each share of
Common Stock in the Business Transaction by holders thereof is not less
than the highest of (i) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealer's fees,
dealer-management compensation and similar expenses) paid or payable by
the Interested Party with respect to the Business Transaction to acquire
beneficial ownership of any shares of Common Stock within the five-year
period immediately prior to the record date for the determination of
stockholders entitled to vote on the proposed Business Transaction, (ii)
the per share book value of Common Stock (computed in accordance with
generally accepted accounting principles) at the end of the fiscal
quarter of the Corporation immediately preceding the record date for the
determination of stockholders entitled to vote on the proposed Business
Transaction, and (iii) the highest market price per share of Common
Stock during the two-year period ending immediately prior to the first
public announcement of the proposal of the Business Transaction;
(2) the consideration to be received in the Business Transaction
by holders of Common Stock other than an Interested Party with respect
to the Business Transaction shall be either in cash or in the same form
used by an Interested Party with respect to the Business Transaction to
acquire the largest number of shares of Common Stock acquired by all
Interested Parties with respect to the Business Transaction from a
person who is not an Interested Party with respect to the Business
Transaction;
(3) at a record date for the determination of stockholders
entitled to vote on the Business Transaction, there shall be one or more
directors of the Corporation who are not Interest Directors with respect
to the Business Transaction; and
(4) a proxy or information statement describing the Business
Transaction and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations) shall be
mailed to the holders of Voting Shares as of the record date for the
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<PAGE>
determination of stockholders entitled to vote on the Business
Transactions, at least thirty (30) days prior to the consummation of
such Business Transaction (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions), and such proxy or information statement shall contain in a
prominent place (i) any recommendations as to the advisability (or
inadvisability) of the Business Transaction that those members of the
board of directors who are not themselves Interested Directors with
respect to the Business Transaction may choose to state, and (ii) the
opinion of an investment banking firm as to both (x) the fair market
value of any consideration other than cash to be received in the
Business Transaction from a financial point of view to the holders of
Common Stock, and (y) the fairness (or not) of the terms of the Business
Transaction from a financial point of view to the holders of Common
Stock other than Interested Parties with respect to the Business
Transaction. Such investment banking firm shall be engaged solely on
behalf of the holders of Common Stock other than Interested Parties with
respect to the Business Transaction, shall be selected by a majority of
the directors of the Corporation who are not themselves Interested
Directors with respect to the Business Transaction, shall be paid a
reasonable fee for its services by the Corporation upon receipt of such
opinion and shall be one of the national major bracket investment
banking firms that has not previously been associated with any
Interested Party with respect to the Business Transaction. For purposes
of subsection (1) above, the term "consideration other than cash to be
received" shall include Common Stock retained by the Corporation's
stockholders in the event of a Business Transaction in which the
Corporation is the surviving corporation.
SECTION 3. DEFINITIONS. For purpose of this Article XIV,
A. An "Associate" of a specified person is (1) a person that,
directly or indirectly, (i) controls, or is controlled by, or is under
common control with, the specified person, (ii) is a beneficial owner of
ten percent (10%) or more of any class of equity securities of the
specified person, or (iii) has ten percent (10%) or more of any class of
its equity securities beneficially owned, directly or indirectly, by the
specified person; (2) any person (other than the Corporation or a
Subsidiary) of which the specified person is an officer, director,
partner or other official and any officer, director, partner or other
official of the specified person; (3) any trust or estate in which the
specified person serves as trustee or in a similar fiduciary capacity,
or any trustee or similar fiduciary of the specified person; and (4) any
relative or spouse of the specified person, or any relative of such
spouse, who has the same home as a specified person or who is an officer
or director of any person (other than the Corporation or a Subsidiary),
directly or indirectly, controlling, controlled by or under common
control with the specified person. No director of the Corporation,
however, shall be deemed to be an Associate of any other director of the
Corporation by reason of such service as a director or by concurrence in
any action of the board of directors.
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B. "Beneficial ownership" of any Voting Shares shall be
determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934 as in effect on January 1, 1994; provided, however, that a person
shall, in any event, be the beneficial owner of any Voting Shares: (1)
which such person, or any of such person's Associates, beneficially
owns, directly or indirectly; (2) which such person or any of such
person's Associates, directly or indirectly; (i) has the right to
acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding; or upon the exercise of conversion rights, exchange
rights, warrants or options; or pursuant to the power to revoke a trust,
discretionary account or other arrangement; or otherwise; or (ii) has or
shares the power, or has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) the exclusive
or shared power, to vote or direct the vote pursuant to any agreement,
arrangement, relationship or understanding; or pursuant to the power to
revoke a trust, discretionary account or other arrangement; or
otherwise; or (3) which are beneficially owned, directly or indirectly,
by any other person with which such first-mentioned person or any of its
Associates has any agreement, arrangement or understanding, or is acting
in concert, with respect to acquiring, holding, voting or disposing of
any Voting Shares; provided, however, that no director of the
Corporation shall be deemed to be acting in concert with any other
director of the Corporations by reason of such service as a director or
by concurrence in any action of the board of directors.
C. "Business Transaction" shall mean: (1) any merger or
consolidation of the Corporation or any Subsidiary with or into any
Interested Party or any Associate of an Interested Party; (2) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition (in one
or a series of related transactions) of all or any Substantial Part of
the Consolidated Assets of the Corporation to or with any Interested
Party or any Associate of an Interested Party; (3) any issuance, sale,
exchange, transfer or other disposition by the Corporation or any
Subsidiary (in one or a series of related transactions) of any
securities of the Corporation or any Subsidiary to or with any
Interested party or any Associate of an Interested Party (except any
such issuance, sale, exchange, transfer or disposition made to security
holders generally); (4) any spin-off, split-up, reclassification of
securities (including any reverse stock split), recapitalization or
reorganization of the Corporation or any Subsidiary, or any merger or
consolidation of the Corporation with any Subsidiary (whether or not
with or into or otherwise involving an Interested Party) which has the
effect, directly or indirectly, of increasing the proportionate interest
of any Interested Party or any Associate of an Interested Party in the
equity securities of the Corporation; (5) any liquidation or dissolution
of the Corporation or any Subsidiary proposed by or on behalf of the
Interested Party or any Associate of an Interested Party; (6) any other
transaction involving the Corporation or any Subsidiary (whether or not
with or otherwise involving an Interested Party) which has the effect,
directly or indirectly, of increasing the proportionate interest of any
Interested Party or any Associate of an Interested Party in the equity
securities or assets of the Corporation or any Subsidiary, or (7)
adoption of any plan or proposal with respect to any of the foregoing.
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D. "Interested Director" shall mean each director of the
Corporation who (1) is an Interested Party or an Associate of an
Interested Party; (2) has an Associate who is an Interested Party or an
Associate of an Interested Party: (3) was nominated or proposed to be
elected as a director of the Corporation by an Interested Party or an
Associate of an Interested Party; or (4) is, or has been nominated or
proposed to be elected as, an officer, director or employee of an
Interested Party or an Associate of an Interested Party.
E. "Interested Director with respect to Business Transaction"
shall mean any Interested Director who is an Interested Director as a
result of his relationship with an Interested Party with respect to the
Business Transaction.
F. "Interested Party" shall mean any person (other than the
Corporation or a Subsidiary) who or which is the beneficial owner of ten
percent (10%) or more of the Voting Shares: (1) in connection with
determining the required vote by stockholders on any Business
Transaction, as of any of the following dates: the record date for the
determination of stockholders entitled to notice of or to vote on such
Business Transaction or immediately prior to the consummation of any
such transaction or the adoption by the Corporation of any plan or
proposal with respect thereto; (2) in connection with determining the
required vote by stockholders on any amendment, alteration or repeal of
this Article XIV pursuant to subsections (a) and (b) of Section 5 of
this Article XIV, as of the record date for the determination of
stockholders entitled to notice of and to vote on such amendment,
alteration or repeal; and (3) in connection with determining whether a
person who is a director is an "Interested Director" in respect of any
approval by the board of directors of the amendment, alteration or
repeal of this Article XIV pursuant to Section 5 of this Article XIV or
in respect of any determination made by the board of directors pursuant
to Section 4 of this Article XIV, as of the date at which the vote on
such recommendation or determination is being taken, or as close as is
reasonably practicable to such date.
G. "Interested Party with respect to the Business Transaction"
shall mean any Interested Party who has, or whose Associates have, and
interest in the Business Transaction of the nature described in
Section 3.C of this Article XIV.
H. "Market Price" shall mean the closing sales price of a share
of Common Stock on the Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such stock is not quoted on the Composite Tape, on the
New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock is listed,
or, if such stock is not listed on any such exchange, the closing sales
price or the average of the bid and asked prices reported with respect
to a share of such stock on the National Association of Securities
Dealers, Inc. Automated Quotation System or any system then in use.
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I. A "person" shall include any individual, firm, corporation,
partnership, group, trust or other entity, organization or association.
J. "Subsidiary" shall mean any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for purposes of Section 3.F of this
Article XIV, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
K. "Substantial Part of the Consolidated Assets" of the
Corporation shall mean assets of the Corporation and/or any Subsidiary
having a book value (determined in accordance with generally accepted
accounting principles) in excess of ten percent (10%) of the book value
(determined in accordance with generally accepted accounting principles)
of the total consolidated assets of the Corporation and all Subsidiaries
which are consolidated for public financial reporting purposes, at the
end of its most recent quarterly fiscal period ending prior to the time
the determination is made for which financial information is available.
L. "Voting Shares" shall mean the outstanding shares of all
classes of stock of the Corporation generally entitled to vote in the
election of directors, considered for purposes of this Article XIV as
one class. "Voting Shares" shall include shares beneficially owned by
any Interested party through application of Section 3.B of this
Article XIV, but shall not include any other shares which may be issuable
based upon a right to acquire any other shares (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, warrants or options, or pursuant to
the power to revoke a trust, discretionary account or other arrangement,
or otherwise.
SECTION 4. DETERMINATIONS OF THE BOARD OF DIRECTORS. Sixty-six and
two-thirds percent (66 2/3%) of those members of the board of directors who
are not themselves Interested Directors with respect to a Business
Transaction shall have the power and duty to make all determinations to be
made under this Article XIV, including whether (a) a transaction is a
Business Transaction; (b) a person is an Interested Party or is an Interested
Director; (c) a person is an Associate of another person; (d) a person is an
Interested Party with respect to the Business Transaction or is an Interested
Director with respect to the Business Transaction; (e) the assets subject to
any Business Transaction constitute a Substantial Part of the Consolidated
Assets of the Corporation; (f) a transaction has the effect of increasing the
proportionate interest of any Interested Party or any Associate of an
Interested Party in the equity securities or assets of the Corporation or any
Subsidiary; (g) a person beneficially owns any Voting Shares; (h) a person
has an agreement, arrangement, relationship or understanding, or is acting in
concert, with another as to the matters referred to in Section 3.B of this
Article XIV; (i) shares of stock of the Corporation are included within the
term Voting Shares; (j) an amount equals or exceeds the highest per share
price paid or payable for Common Stock by an Interested Party with respect to
the Business Transaction; (k) an amount equals or exceeds the per share book
value
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of Common Stock; (l) an amount equals or exceeds the highest market price per
share of Common Stock; (m) the aggregate amount of the cash and the fair
market value of consideration other than cash to be received for each share
of Common Stock in the Business Transaction is not less than the highest of
the amounts referred to in clauses (i), (ii) and (iii) of Section 2.C(a) of
this Article XIV; (n) a form of consideration other than cash is of the same
type used by an Interested Party with respect to the Business Transaction to
acquire the largest number of shares of Common Stock previously acquired by
all Interested Parties with respect to the Business Transaction from a person
not an Interested Party with respect to the Business Transaction; (o) an
investment banking firm is a national major bracket firm; (p) a fee to be
paid an investment banking firm is reasonable; (q) an investment banking firm
has been previously associated with an Interested Party with respect to the
Business Transaction; or (r) the most recent quarterly fiscal period of which
financial information is available. Any such determination shall be
conclusive and binding for all purposes of this Article XIV.
SECTION 5. AMENDMENT, ALTERATION OR REPEAL. In addition to any
affirmative vote which may be otherwise required, the affirmative vote of the
holders of at least that number of the Voting Shares which equals the sum of
(a) the number of all the Voting Shares beneficially owned by all Interested
Parties, plus (b) eighty Percent (80%) of the remaining number of Voting
Shares that are not beneficially owned by any Interested Party, shall be
required to amend, alter or repeal in any respect, or adopt any provisions
inconsistent with, this Article XIV; provided that this Section 5 shall not
apply to, and such vote shall not be required for, any such amendment,
alterations, repeal or adoption approved by a resolution adopted by at least
sixty-six and two-thirds percent (66 2/3%) of those members of the board of
directors holding office at the time such resolution is adopted who are not
themselves Interested Directors.
SECTION 6. NO EFFECT ON FIDUCIARY OBLIGATIONS. Nothing contained in
this Article XIV shall be construed to relieve an Interested party or any
Associate of an Interested Party from any fiduciary obligation imposed by law.
ARTICLE XV
In discharging the duties of their respective positions, the board of
directors, committee of the board, individual directors and individual
officers may, in considering the best long term or short term interests of
the corporation, consider the effects of any action involving or relating to
a sale, takeover or change in control or a potential sale, takeover or change
in control of the Corporation upon employees, suppliers, and customers of the
Corporation and its subsidiaries, communities in which offices or other
establishments of the Corporation or its subsidiaries are located and all
other pertinent factors.
In addition to any affirmative vote which may be otherwise required, the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally
entitled to vote in the election of directors, considered for purposes of
this Article XV as one class, shall be required to amend, alter or repeal in
any respect, or adopt any provision inconsistent with, this Article XV.
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ARTICLE XVI
SECTION 1. DEFINITIONS. The following definitions shall be used for
purposes of this Article XVI:
(a) "Person" shall mean an individual, a group acting in concert, a
corporation, a partnership, an association, a joint stock company, a trust,
an incorporated organization or similar company, a syndicate or any other
group acting in concert formed for the purpose of acquiring, holding or
disposing of securities of the Corporation.
(b) "Acquire" shall include every type of acquisition, whether effected
by purchase, exchange, operation of law or otherwise.
(c) "Group acting in concert" shall include (i) knowing participation
in a joint activity or conscious parallel action towards a common goal
whether or not pursuant to an express agreement, and (ii) a combination or
pooling of voting or other interest in the Corporation's outstanding shares
for a common purpose, pursuant to any contract, understanding, relationship,
agreement or other arrangement, whether written or otherwise.
(d) "Beneficial ownership" shall have the meaning defined in Rule 13d-3
under the Securities Exchange Act of 1934 as in effect on January 1, 1994.
SECTION 2. LIMITATIONS ON BENEFICIAL OWNERSHIP. For a period of five
years from the effective date of the completion of the conversion of Cerro
Gordo Building & Loan, s.b. from mutual to stock form (which entity shall
become a wholly-owned subsidiary of the Corporation upon completion of the
holding company formation), no person shall directly or indirectly acquire
beneficial ownership of more than 10% of any class of equity security of the
Corporation. This limitation shall not apply to the purchase of shares by
underwriters in connection with a public offering, or the purchase of shares
by a tax-qualified employee stock benefit plan.
For a period of five years from the completion of the conversion of
Cerro Gordo Building & Loan, s.b., from mutual to stock form and
notwithstanding any provision to the contrary in this Certificate of
Incorporation or in the By-laws of the Corporation, where any person directly
or indirectly acquires beneficial ownership of more than 10% of any class of
equity security if the Corporation, the securities beneficially owned in
excess of 10% shall not be counted as shares entitled to vote, shall not be
voted by any person or counted as voting shares in connection with any matter
submitted to the shareholders for a vote, and shall not be counted as
outstanding for purposes of determining a quorum or the affirmative vote,
necessary to approve any matter submitted to the shareholders for a vote.
The provisions of this Article XVI shall not be applicable to the
acquisition of more than 10% of any class of equity security of the
Corporation if such acquisition has been approved by a majority of the
disinterested directors; provided, however, that such approval shall only be
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effective if obtained at a meeting at which a quorum of disinterested
directors is present and such disinterested directors (provided a quorum of
disinterested directors is presented) shall have the power to construe and
apply the provisions of the Article and to make all determinations necessary
or desirable to implement such provisions, including but not limited to
matters with respect to (i) the number of shares beneficially owned by any
person, (ii) whether a person has an agreement, arrangement, or understanding
with another as to the matters referred to in the definition of beneficial
ownership, (iii) the application of any other material fact relating to the
applicability or effect of this Article XVI. Any construction, application,
or determination made by the disinterested directors pursuant to this Article
XVI in good faith on this basis of such information and assistance as was
then reasonably available for such purpose shall be conclusive and binding
upon the Corporation and its shareholders. This Article XVI is in addition
to, and it not intended to make inapplicable, section 218 of the General
Corporation Law of the State of Delaware, or any successor section relation
to voting agreements.
ARTICLE XVII
The Corporation reserves the right to amend, alter or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute or by this Certificate of Incorporation,
and all rights conferred upon stockholders herein are granted subject to this
reservation.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are
true, and accordingly, has hereunto set his hand this 19th day of May, 1998.
/s/ Maralyn F. Heckman
--------------------------------
Maralyn F. Heckman
17
<PAGE>
BYLAWS
OF
CGB&L FINANCIAL GROUP, INC.
As Adopted on May 26, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
Section 1.1 REGISTERED OFFICE . . . . . . . . . . . . . . . . . .-1-
Section 1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . .-1-
ARTICLE II STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . .-1-
Section 2.1 ANNUAL MEETING. . . . . . . . . . . . . . . . . . . .-1-
Section 2.2 SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . .-1-
Section 2.3 PLACE OF MEETING. . . . . . . . . . . . . . . . . . .-1-
Section 2.4 NOTICE OF MEETINGS. . . . . . . . . . . . . . . . . .-2-
Section 2.5 STOCKHOLDER LIST. . . . . . . . . . . . . . . . . . .-2-
Section 2.6 QUORUM. . . . . . . . . . . . . . . . . . . . . . . .-2-
Section 2.7 PROXIES.. . . . . . . . . . . . . . . . . . . . . . .-2-
Section 2.8 VOTING. . . . . . . . . . . . . . . . . . . . . . . .-2-
Section 2.9 VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS .-3-
Section 2.10 VOTING OF CERTAIN SHARES. . . . . . . . . . . . . . .-3-
Section 2.11 INSPECTORS. . . . . . . . . . . . . . . . . . . . . .-3-
Section 2.12 ACTION WITHOUT MEETING. . . . . . . . . . . . . . . .-4-
Section 2.13 TREASURY STOCK. . . . . . . . . . . . . . . . . . . .-4-
Section 2.14 BUSINESS TO BE CONSIDERED BY STOCKHOLDERS . . . . . .-4-
ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . .-5-
Section 3.1 NUMBER AND ELECTION . . . . . . . . . . . . . . . . .-5-
Section 3.2 RESIGNATIONS AND VACANCIES. . . . . . . . . . . . . .-6-
Section 3.3 NOMINATIONS FOR DIRECTORS . . . . . . . . . . . . . .-6-
Section 3.4 MANAGEMENT OF AFFAIRS OF CORPORATION. . . . . . . . .-6-
Section 3.5 DIVIDENDS AND RESERVES. . . . . . . . . . . . . . . .-7-
Section 3.6 REGULAR MEETINGS. . . . . . . . . . . . . . . . . . .-7-
Section 3.7 SPECIAL MEETING . . . . . . . . . . . . . . . . . . .-7-
Section 3.8 NOTICE OF SPECIAL MEETINGS. . . . . . . . . . . . . .-7-
Section 3.9 QUORUM. . . . . . . . . . . . . . . . . . . . . . . .-7-
Section 3.10 PRESUMPTION OF ASSENT . . . . . . . . . . . . . . . .-7-
Section 3.11 ACTION WITHOUT MEETING. . . . . . . . . . . . . . . .-8-
Section 3.12 PRESIDING OFFICER . . . . . . . . . . . . . . . . . .-8-
Section 3.13 EXECUTIVE COMMITTEE . . . . . . . . . . . . . . . . .-8-
Section 3.14 OTHER COMMITTEES. . . . . . . . . . . . . . . . . . .-8-
Section 3.15 ALTERNATES. . . . . . . . . . . . . . . . . . . . . .-8-
Section 3.16 QUORUM AND MANNER OF ACTING-COMMITTEES. . . . . . . .-8-
Section 3.17 COMMITTEE CHAIRMAN, BOOKS AND RECORDS, ETC. . . . . .-9-
Section 3.18 FEES AND COMPENSATION OF DIRECTORS. . . . . . . . . .-9-
Section 3.19 RELIANCE UPON RECORDS . . . . . . . . . . . . . . . .-9-
ARTICLE IV NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . .-9-
<PAGE>
Section 4.1 MANNER OF NOTICE. . . . . . . . . . . . . . . . . . .-9-
Section 4.2 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . -10-
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . -10-
Section 5.1 OFFICES AND OFFICIAL POSITIONS. . . . . . . . . . . -10-
Section 5.2 ELECTION AND TERM OF OFFICE . . . . . . . . . . . . -10-
Section 5.3 REMOVAL AND RESIGNATION . . . . . . . . . . . . . . -11-
Section 5.4 VACANCIES . . . . . . . . . . . . . . . . . . . . . -11-
Section 5.5 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . -11-
Section 5.6 PRESIDENT . . . . . . . . . . . . . . . . . . . . . -11-
Section 5.7 VICE PRESIDENTS . . . . . . . . . . . . . . . . . . -11-
Section 5.8 SECRETARY . . . . . . . . . . . . . . . . . . . . . -12-
Section 5.9 TREASURER . . . . . . . . . . . . . . . . . . . . . -12-
Section 5.10 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. . . -13-
Section 5.11 SALARIES. . . . . . . . . . . . . . . . . . . . . . -13-
ARTICLE VI DIVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . -13-
Section 6.1 DIVISIONS OF THE CORPORATION. . . . . . . . . . . . -13-
Section 6.2 OFFICIAL POSITIONS WITHIN A DIVISION. . . . . . . . -13-
ARTICLE VII CONTRACTS, LOANS, CHECKS AND DEPOSITS . . . . . . . . . . -13-
Section 7.1 CONTRACTS AND OTHER INSTRUMENTS . . . . . . . . . . -13-
Section 7.2 LOANS . . . . . . . . . . . . . . . . . . . . . . . -13-
Section 7.3 CHECKS, DRAFTS, ETC . . . . . . . . . . . . . . . . -14-
Section 7.4 DEPOSITS. . . . . . . . . . . . . . . . . . . . . . -14-
ARTICLE VIII CERTIFICATES OF STOCK AND THEIR TRANSFER . . . . . . . . -14-
Section 8.1 CERTIFICATES OF STOCK . . . . . . . . . . . . . . . -14-
Section 8.2 LOST, STOLEN OR DESTROYED CERTIFICATES. . . . . . . -14-
Section 8.3 TRANSFERS OF STOCK. . . . . . . . . . . . . . . . . -15-
Section 8.4 RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . -15-
Section 8.5 NO FRACTIONAL SHARE CERTIFICATES. . . . . . . . . . -15-
Section 8.6 STOCKHOLDER OF RECORD . . . . . . . . . . . . . . . -15-
ARTICLE IX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . -16-
ARTICLE X GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . -18-
Section 10.1 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . -18-
Section 10.2 SEAL. . . . . . . . . . . . . . . . . . . . . . . . -18-
ARTICLE XI AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . -19-
<PAGE>
BYLAWS
OF
CGB&L FINANCIAL GROUP, INC.
ARTICLE I
OFFICES
SECTION 1.1 REGISTERED OFFICE. The registered office of the
Corporation in the State of Delaware shall be located at 1209 Orange Street
in the City of Wilmington, County of New Castle, and the name of the
Corporation's registered agent, located at such address, is The Corporation
Trust Company.
SECTION 1.2 OTHER OFFICES. The Corporation may also have offices at
such other places both within or without the State of Delaware as the Board
of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. The annual meeting of the stockholders
shall be held at 8:00 p.m. on the last Tuesday in May in each year, beginning
in 1999, if not a legal holiday, or, if a legal holiday, then on the next
succeeding business day, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
election of directors shall not be held on the day hereinbefore designated
for the annual meeting, or at any adjournment thereof, the Board of Directors
shall cause such election to be held at a special meeting of stockholders as
soon thereafter as convenient.
SECTION 2.2 SPECIAL MEETINGS. Except as otherwise prescribed by
statute, special meetings of the stockholders for any purpose or purposes may
be called and the location thereof designated by the Chairman of the Board or
the President, and shall be called and the location thereof designated by the
Secretary at the direction of a majority of the entire Board of Directors.
SECTION 2.3 PLACE OF MEETING. Each meeting of the stockholders for the
election of directors shall be held at the office of the Corporation in Cerro
Gordo, Illinois, unless the Board of Directors shall, by resolution,
designate any other place, within or without the State of Delaware, as the
place of such meeting. Meetings of stockholders for any other purpose may be
held at such place, within or without the State of Delaware, and at such time
as shall be determined pursuant to Section 2.2, SPECIAL MEETINGS, and stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
<PAGE>
SECTION 2.4 NOTICE OF MEETINGS. Written or printed notice stating the
place, date and hour of each annual or special meeting of the stockholders
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given not less than ten (10) days nor more than
sixty (60) days before the date of the meeting to each stockholder entitled
to vote at such meeting.
When a meeting is adjourned to another time or place, no notice of the
adjourned meeting other than an announcement at the meeting as to the time
and place of the adjourned meeting need be given unless the adjournment is
for more than thirty (30) days or a new record date is fixed for the
adjourned meeting after such adjournment.
SECTION 2.5 STOCKHOLDER LIST. At least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at such meeting, arranged in alphabetical order, and showing the address of
each such stockholder and the number of shares registered in the name of each
such stockholder, shall be prepared by the Secretary. Such list shall be
open to examination of any stockholder of the Corporation during ordinary
business hours, for any purpose germane to the meeting, for a period of at
least ten (10) days prior to the meeting, at a place within the city where
the meeting is to be held, which place shall be specified in the notice of
meeting, and the list shall be produced and kept at the time and place of
meeting during the whole time thereof, and subject to the inspection for any
purpose germane to the meeting of any stockholder who is present.
SECTION 2.6 QUORUM. A majority of the shares entitled to vote, present
in person or represented by proxy, shall be requisite for, and shall
constitute, a quorum at all meetings of the stockholders of the Corporation
for the transaction of business, except as otherwise provided by statute, the
Certificate of Incorporation or these Bylaws. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat present in person or represented by
proxy shall have power to adjourn the meeting from time to time until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
SECTION 2.7 PROXIES. At every meeting of the stockholders, each
stockholder having the right to vote thereat shall be entitled to vote in
person or by proxy. Such proxy shall be appointed by an instrument in
writing subscribed by such stockholder and bearing a date not more than three
(3) years prior to such meeting, unless such proxy provides for a longer
period; and it shall be filed with the Secretary of the Corporation before,
or at the time of, the meeting.
SECTION 2.8 VOTING. Unless the Certificate of Incorporation provides
otherwise, at every meeting of stockholders, each stockholder shall be
entitled to one (1) vote for each share of stock of the Corporation entitled
to vote thereat and registered in the name of such stockholder on the books
of the Corporation on the corresponding record date. When a quorum is
present at any meeting of the stockholders, the vote of the holders of a
majority of the stock having voting power which is present in person or
represented by proxy shall decide any
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<PAGE>
question brought before such meeting, unless the question is one upon which,
by provision of the statutes, the Certificate of Incorporation or these
Bylaws, a different vote is required, in which case such provision shall
govern and control the decision of such question. If the Certificate of
Incorporation provides for more or less than one vote for any share on any
matter, every reference in these Bylaws to a majority or other proportion of
stock shall refer to such majority or other proportion of the votes of such
stock.
SECTION 2.9 VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. If
shares or other securities having voting power stand of record in the names
of two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety or otherwise, or if two
or more persons have the same fiduciary relationship respecting the same
shares, unless the secretary of the Corporation is given written notice to
the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, their
acts with respect to voting shall have the following effect:
(1) If only one votes, his or her act binds all;
(2) If more than one votes, the act of the majority so voting binds all;
(3) If more than one votes, but the vote is evenly split on any particular
matter, each faction may vote the securities in question
proportionally, or any person voting the shares, or a beneficiary, if
any, may apply to the Court of Chancery or such other court as may
have jurisdiction to appoint an additional person to act with the
persons so voting the shares, which shall then be voted as determined
by a majority of such persons and the person appointed by the Court.
If the instrument so filed shows that any such tenancy is held in
unequal interests, a majority or even split for the purpose of this
subsection shall be a majority or even split in interest.
SECTION 2.10 VOTING OF CERTAIN SHARES. Shares standing in the name of
another corporation, domestic or foreign, and entitled to vote may be voted
by such officer, agent, or proxy as the bylaws of such corporation may
prescribe or, in the absence of such provisions, as the board of directors of
such corporation may determine. Shares standing in the name of a deceased
person, a minor or an incompetent and entitled to vote may be voted by the
administrator, executor, guardian or conservator, as the case may be, either
in person or by proxy. Shares standing in the name of a trustee, receiver or
pledgee and entitled to vote may be voted by such trustee, receiver or
pledgee either in person or by proxy as provided by Delaware law.
SECTION 2.11 INSPECTORS. (a) The Corporation shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of
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<PAGE>
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability.
(b) The inspectors shall:
(i) ascertain the number of shares outstanding and the voting
power of each;
(ii) determine the shares represented at a meeting and the
validity of proxies and ballots;
(iii) count all votes and ballots;
(iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by
the inspectors; and
(v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and
ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
SECTION 2.12 ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the stockholders of the Corporation must be effected at an
annual or special meeting of stockholders and may not be effected without a
meeting by a consent in writing by such stockholders.
SECTION 2.13 TREASURY STOCK. Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held,
directly or indirectly, by the Corporation, shall not be voted at any meeting
and shall not be counted in determining the total number of outstanding
shares for the purpose of determining whether a quorum is present. Nothing
in this Section 2.13 shall be construed to limit the right of the Corporation
to vote shares of its own stock held by it in a fiduciary capacity.
SECTION 2.14 BUSINESS TO BE CONSIDERED BY STOCKHOLDERS. (a) Business to
be considered by the stockholders shall be brought before an annual meeting
(i) pursuant to the Corporation's notice of meeting,(ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided in subsection (a) of this Section 2.14, who is entitled to vote with
respect thereto and who complies with the notice procedures set forth in
subsection (a) of this Section 2.14. For business to be properly brought
before an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation and such
proposed business must otherwise be a proper matter for stockholder action.
To be timely, a stockholder's notice must be delivered to or mailed to and
received by the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of
the
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<PAGE>
preceding year's annual meeting. In no event shall the public or other
announcement of an adjournment of an annual meeting or the adjournment
thereof commence a new time period for the giving of a stockholder's notice
as described above. Such stockholder's notice to the Secretary shall set
forth (i) as to any business the stockholder proposes to bring before the
annual meeting, (A) a brief description of the business desired to be brought
before the annual meeting, (B) the reasons for conducting such business at
the annual meeting, (C) any material interest in such business to such
stockholder and (D) the beneficial owner, if any, on whose behalf the
proposed business is made, and (ii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the proposed business is to
be brought, (A) the name and address of such stockholder, as they appear on
the Corporation's books, and the name and address of such beneficial owner
and (B) the class and number of shares of the Corporation's capital stock
that are owned beneficially and of record by such stockholder and such
beneficial owner.
(b) At any special meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting pursuant to
the Corporation's notice of meeting.
(c) Notwithstanding anything in the Bylaws of the Corporation to the
contrary, only such business shall be brought before or conducted at a
meeting of stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 2.14. The officer of
the Corporation or other person presiding over the meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
brought before the meeting in accordance with the provisions of this
Section 2.14 and, if such person should so determine, such person shall so
declare to the meeting and any such business so determined not to be properly
before the meeting shall be disregarded.
(d) Notwithstanding the foregoing provisions of this Section 2.14, if
applicable, a stockholder shall also comply with all applicable requirements
of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder with respect to the matters set forth in this Section
2.14. Nothing in this Section 2.14 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act, if applicable.
ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER AND ELECTION. Except for vacancies filled pursuant to
Section 3.2, RESIGNATIONS AND VACANCIES, the directors shall be elected by the
stockholders of the Corporation, and at each election the persons receiving the
greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating
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<PAGE>
thereto, including any provisions for a classified board. Directors need not
be residents of the state of Delaware or the state of Illinois.
SECTION 3.2 RESIGNATIONS AND VACANCIES. Any director may resign at any
time by giving written notice to the Board of Directors, to the Chairman or
to the President. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the directors
then in office, although less than a quorum, or by a sole remaining director.
Directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of the class to which they have
been elected expires. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
Newly created directorships shall be allocated among the classes of directors
so that each class of directors shall consist, as nearly as possible, of
one-third of the total number of directors.
Any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only by the affirmative vote of
the holders of at least eighty percent (80%) of the outstanding shares of all
classes of stock of the Corporation generally entitled to vote in the
election of directors, considered for purposes of this paragraph of
Section 3.2 as one class.
SECTION 3.3 NOMINATIONS FOR DIRECTORS. Nominations for the election of
directors may be made by the Board of Directors or by any stockholder
entitled to vote for the election of directors who complies with the
requirements provided in the Certificate of Incorporation.
SECTION 3.4 MANAGEMENT OF AFFAIRS OF CORPORATION. The property,
business and affairs of the Corporation shall be managed by and under the
direction of its Board of Directors, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by stockholders. In case the Corporation
shall transact any business or enter into any contract with a director or
officer, or with any organization in which one or more of its directors or
officers, are directors or officers, or have a financial interest, the
officers of the Corporation and directors in question shall be severally
under the duty of disclosing all material facts as to their interest to the
remaining directors promptly if and when such interested officers or such
interested directors in question shall become advised of the circumstances.
In the case of continuing relationships in the normal course of business such
disclosure shall be deemed effective, when once given, as to all transactions
and contracts subsequently entered into.
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<PAGE>
SECTION 3.5 DIVIDENDS AND RESERVES. Dividends upon stock of the
Corporation may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in
property, in shares of stock or otherwise in the form, and to the extent,
permitted by law. The Board of Directors may set apart, out of any funds of
the Corporation available for dividends, a reserve or reserves for working
capital or for any other lawful purpose, and also may abolish any such
reserve in the manner in which it was created.
SECTION 3.6 REGULAR MEETINGS. An annual meeting of the Board of
Directors shall be held, without other notice than these bylaws, immediately
after, and at the same place as, the annual meeting of the stockholders. The
Board of Directors may provide, by resolution, the time and place, either
within or without the State of Delaware, for the holding of additional
regular meetings without other notice than such resolution.
SECTION 3.7 SPECIAL MEETING. Special meetings of the Board of
Directors may be called by the Chairman or the President and shall be called
by the Secretary at the request of any two (2) directors, to be held at such
time and place, either within or without the State of Delaware, as shall be
designated by the call and specified in the notice of such meeting; and
notice thereof shall be given as provided in Section 3.8, NOTICE OF SPECIAL
MEETINGS, of these Bylaws.
SECTION 3.8 NOTICE OF SPECIAL MEETINGS. Except as otherwise prescribed
by statute, written or actual oral notice of the time and place of each
special meeting of the Board of Directors shall be given at least two (2)
days prior to the time of holding the meeting or within such shorter period
before the meeting as the person or persons calling such meeting deem
appropriate in the circumstance. Any director may waive notice of any
meeting.
SECTION 3.9 QUORUM. At each meeting of the Board of Directors, the
presence of not less than a majority of the whole board shall be necessary
and sufficient to constitute a quorum for the transaction of business, and
the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute, the Certificate of Incorporation
or these Bylaws. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any member of the Board of Directors or of any committee designated
by the Board may participate in a meeting of the directors or any committee
thereof by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, and participation in a meeting by means of such equipment shall
constitute presence in person at such meeting.
SECTION 3.10 PRESUMPTION OF ASSENT. Unless otherwise provided by
statute, a director of the Corporation who is present at a meeting of the
Board of Directors at which action is taken
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<PAGE>
on any corporate matter shall be presumed to have assented to the action
taken unless such director's dissent shall be entered in the minutes of the
meeting or unless such director shall, file a written dissent to such action
with the person acting as secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
SECTION 3.11 ACTION WITHOUT MEETING. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if a written consent
thereto is signed by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of
proceedings of the Board or committee.
SECTION 3.12 PRESIDING OFFICER. The presiding officer at any meeting
of the Board of Directors shall be the Chairman of the Board or, in the
Chairman's absence, the President or, in the President's absence, any other
director elected chairman by vote of a majority of the directors present at
the meeting.
SECTION 3.13 EXECUTIVE COMMITTEE. The Board of Directors may, by
resolution passed by two-thirds of the total number of directors, designate
two or more directors of the Corporation to constitute an executive
committee, which, to the extent provided in the resolution and by Delaware
law, shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers
which may require it.
SECTION 3.14 OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the number of directors fixed by these
Bylaws, designate such other committees as it may from time to time
determine. Each such committee shall consist of such number of directors,
shall serve for such term and shall have and may exercise, during intervals
between meetings of the Board of Directors, such duties, functions and powers
as the Board of Directors may from time to time prescribe.
SECTION 3.15 ALTERNATES. The Board of Directors may from time to time
designate from among the directors alternates to serve on one or more
committees as occasion may require. Whenever a quorum cannot be secured for
any meeting of any committee from among the regular members thereof and
designated alternates, the member or members of such committee present at
such meeting and not disqualified from voting, whether or not the member or
members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of such absent or
disqualified member.
SECTION 3.16 QUORUM AND MANNER OF ACTING-COMMITTEES. The presence of a
majority of members of any committee shall constitute a quorum for the
transaction of business at any meeting of such committee, and the act of a
majority of those present shall be necessary for the
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taking of any action thereat, provided that no action may be taken by any
such committee without the favorable vote of members of the committee who are
not officers or full-time employees of the Corporation at least equal to the
favorable vote of members of such committee who are officers or full-time
employees of the Corporation.
SECTION 3.17 COMMITTEE CHAIRMAN, BOOKS AND RECORDS, ETC. The chairman
of each committee shall be selected from among the members of the committee
by a majority of the committee. Each committee shall keep a record of its
acts and proceedings, and all actions of each committee shall be reported to
the Board of Directors at its next meeting. Each committee shall fix its own
rules of procedure not inconsistent with these Bylaws or the resolution of
the Board of Directors designating such committee and shall meet at such
times and places and upon such call or notice as shall be provided by such
rules.
SECTION 3.18 FEES AND COMPENSATION OF DIRECTORS. Directors shall not
receive any stated salary for their services as such; but, by resolution of
the Board of Directors, a fixed fee, with or without expenses of attendance,
may be allowed for attendance at each regular or special meeting of the
Board. Members of the Board shall be allowed their reasonable traveling
expenses when actually engaged in the business of the Corporation. Members
of any committee may be allowed like fees and expenses for attending
committee meetings. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 3.19 RELIANCE UPON RECORDS. Every director of the Corporation,
or member of any committee designated by the Board of Directors, shall, in
the performance of such person's duties, be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board of Directors,
or by any other person as to matters the director or member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
ARTICLE IV
NOTICES
SECTION 4.1 MANNER OF NOTICE. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these Bylaws notice is required
to be given to any stockholder, director or member of any committee
designated by the Board of Directors, it shall not be construed to require
personal delivery and such notice may be given in writing by depositing it,
in a sealed envelope, in the United States mails, air mail or first class,
postage prepaid, addressed (or by delivering it to a telegraph company,
charges prepaid, for transmission or by facsimile) to such stockholder,
director or member either at the address of such stockholder, director or
member as it appears on the books of the Corporation or, in the case of such
a director or member, at such person's business address; and such notice
shall be deemed to be
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given at the time when it is thus deposited in the United States mails (or
delivered to the telegraph company or the facsimile transmission is
acknowledged). Such requirement for notice shall be deemed satisfied, except
in the case of stockholder meetings with respect to which written notice is
mandatorily required by law, if actual notice is received orally or in
writing by the person entitled thereto as far in advance of the event with
respect to which notice is given as the minimum notice period required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 4.2 WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes, the Certificate of Incorporation,
or these Bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before, at or after the time stated therein,
shall be deemed equivalent thereto. Attendance by a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the stockholders, directors
or committee of directors need be specified in any written waiver of notice
unless so required by statute, the Certificate of Incorporation or these
Bylaws.
ARTICLE V
OFFICERS
SECTION 5.1 OFFICES AND OFFICIAL POSITIONS. The officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such Assistant Secretaries,
Assistant Treasurers, and other officers as the Board of Directors shall
determine. Any two or more offices may be held by the same person. Except
for the Chairman of the Board, none of the officers need be a director, a
stockholder of the Corporation or a resident of the State of Delaware. The
Board of Directors may from time to time establish, and abolish, official
positions within the divisions into which the business and operations of the
Corporation may be divided, pursuant to Section 6.1, DIVISIONS OF THE
CORPORATION, of these Bylaws, and assign titles and duties to such positions.
Those appointed to official positions within divisions may, but need not, be
officers of the Corporation. The Board of Directors shall appoint officers to
official positions within a division and may with or without cause remove
from such a position any person appointed to it. In any event, the authority
incident to an official position within a division shall be limited to acts
and transactions within the scope of the business and operations of such
division.
SECTION 5.2 ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected annually by the Board of Directors at their
first meeting held after each regular annual meeting of the stockholders. If
the election of officers shall not be held at such meeting of the Board, such
election shall be held at a regular or special meeting of the Board of
Directors as soon thereafter as may be convenient. Each officer shall hold
office until such officer's successor is elected and qualified or until such
officer's death or resignation or until such officer shall have been removed
in the manner hereinafter provided.
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SECTION 5.3 REMOVAL AND RESIGNATION. Any officer may be removed,
either with or without cause, by a majority of the directors then in office
at any regular or special meeting of the Board; but such removal shall be
without prejudice to the contract rights, if any, of such person so removed.
Any officer may resign at any time by giving written notice to the Board of
Directors, to the Chairman, to the President or to the Secretary of the
Corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 5.4 VACANCIES. A vacancy in any office because of death,
resignation, removal, or any other cause may be filled by the Board of
Directors.
SECTION 5.5 CHAIRMAN OF THE BOARD. The Board of Directors shall elect
a Chairman of the Board from among the directors. The Chairman of the Board
shall preside at all meetings of the stockholders and directors, and shall
have such other powers and duties as the Board of Directors may from time to
time prescribe.
SECTION 5.6 PRESIDENT. The President shall be the chief executive
officer of the Corporation. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the stockholders and, if a member,
at all meetings of the Board of Directors. The President shall have the
overall supervision of the business of the Corporation and shall direct the
affairs and policies of the Corporation, subject to such policies and
directions as may be provided by the Board of Directors. The President shall
have authority to designate the duties and powers of other officers and
delegate special powers and duties to specified officers, so long as such
designation shall not be inconsistent with the statutes, these Bylaws or
action of the Board of Directors. The President shall also have power to
execute, and shall execute, deeds, mortgages, bonds, contracts or other
instruments of the Corporation except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by the
President to some other officer or agent of the Corporation. The President
may sign with the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, certificates for shares of stock of the Corporation the
issuance of which shall have been duly authorized by the Board of Directors,
and shall vote, or give a proxy to any other person to vote, all shares of
the stock of any other Corporation standing in the name of the Corporation.
The President in general shall have all other powers and shall perform all
other duties which are incident to the chief executive office of a
Corporation or as may be prescribed by the Board of Directors from time to
time.
SECTION 5.7 VICE PRESIDENTS. In the absence of the President, or in
the event of the President's inability or refusal to act, the Vice Presidents
in order of their rank as fixed by the Board of Directors or, if not ranked,
the Vice President designated by the Board of Directors or the President,
shall perform all duties of the President and, when so acting, shall have all
the powers of, and be subject to all the restrictions upon, the President.
The Vice Presidents shall have such other powers and perform such other
duties, not inconsistent with the statutes, these Bylaws, or action of the
Board of Directors, as from time to time may be prescribed for them,
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respectively, by the Board of Directors or the President. Any Vice President
may sign, with the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer, certificates for shares of stock of the Corporation
the issuance of which shall have been duly authorized by the Board of
Directors.
SECTION 5.8 SECRETARY. The Secretary shall:(i) keep the minutes of the
meetings of the stockholders, the Board of Directors and committees of
directors, in one or more books provided for that purpose;(ii) see that all
notices are fully given in accordance with the provisions of these Bylaws or
as required by law;(iii) have charge of the corporate records and of the seal
of the Corporation;(iv) affix the seal of the Corporation or a facsimile
thereof, or cause it to be affixed, to all certificates for shares prior to
the issuance thereof and to all documents the execution of which on behalf of
the Corporation under its seal is duly authorized by the Board of Directors
or otherwise in accordance with the provisions of these Bylaws;(v) keep a
register of the post office address of each stockholder, director and
committee member which shall from time to time be furnished to the Secretary
by such stockholder, director or member;(vi) sign with the President, or a
Vice President, certificates for shares of stock of the Corporation, the
issuance of which shall have been duly authorized by resolution of the Board
of Directors;(vii) have general charge of the stock transfer books of the
Corporation; and (viii)in general, perform all duties incident to the office
of Secretary and such other duties as from time to time may be assigned by
the President or by the Board of Directors. The Secretary may delegate such
details of the performance of duties of the office as may be appropriate in
the exercise of reasonable care to one or more persons in his or her stead,
but shall not thereby be relieved of responsibility for the performance of
such duties.
SECTION 5.9 TREASURER. The Treasurer shall:(i) be responsible to the
Board of Directors for the receipt, custody and disbursements of all funds
and securities of the Corporation;(ii) receive and give receipts for moneys
due and payable to the Corporation from any source whatsoever and deposit all
such moneys in the name of the Corporation in such banks, trust companies or
other depositories as shall from time to time be selected in accordance with
the provisions of Section 7.4, DEPOSITS, of these Bylaws;(iii) disburse the
funds of the Corporation as ordered by the Board of Directors or the
President or as otherwise required in the conduct of the business of the
Corporation;(iv) render to the President or Board of Directors, upon request,
an account of all transactions as Treasurer and on the financial condition of
the Corporation; and (v) in general, perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be
assigned by the President, by the Board of Directors or these Bylaws. The
Treasurer may sign, with the President, or a Vice President, certificates for
shares of stock of the Corporation, the issuance of which shall have been
duly authorized by resolution of the Board of Directors. The Treasurer may
delegate such details of the performance of duties of the office as may be
appropriate in the exercise of reasonable care to one or more persons in his
or her stead, but shall not thereby be relieved of responsibility for the
performance of such duties. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his or her duties
in such sum, and with such surety or sureties, as the Board of Directors
shall determine.
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SECTION 5.10 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
Assistant Treasurers and Assistant Secretaries shall perform all functions
and duties which the Secretary or Treasurer, as the case may be, may assign
or delegate; but such assignment or delegation shall not relieve the
principal officer from the responsibilities and liabilities of his or her
office. In addition, an Assistant Secretary or an Assistant Treasurer, as
thereto authorized by the Board of Directors, may sign with the President, or
a Vice President, certificates for shares of the Corporation, the issuance of
which shall have been duly authorized by resolution of the Board of
Directors; and the Assistant Secretaries and Assistant Treasurers shall, in
general, perform such duties as shall be assigned to them by the Secretary or
the Treasurer, respectively, or by the President or by the Board of
Directors. The Assistant Treasurers shall, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such
sums, and with such surety or sureties, as the Board of Directors shall
determine.
SECTION 5.11 SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors or by such officer as the Board
of Directors may designate for such purpose or as the Board of Directors may
otherwise direct. No officer shall be prevented from receiving a salary or
other compensation by reason of the fact that he or she is also a director of
the Corporation.
ARTICLE VI
DIVISIONS
SECTION 6.1 DIVISIONS OF THE CORPORATION. The Board of Directors shall
have the power to create and establish such operating divisions of the
Corporation as it may from time to time deem advisable.
SECTION 6.2 OFFICIAL POSITIONS WITHIN A DIVISION. The President may
appoint individuals, whether or not they are officers of the Corporation, to,
and may, with or without cause, remove them from, official positions
established within a division, but not filled by the Board of Directors. (See
also Section 5.1, OFFICES AND OFFICIAL POSITIONS, of these Bylaws.)
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 7.1 CONTRACTS AND OTHER INSTRUMENTS. The Board of Directors
may authorize any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf
of the Corporation, or of any division thereof, and such authority may be
general or confined to specific instances.
SECTION 7.2 LOANS. No loans shall be contracted on behalf of the
Corporation, or any division thereof, and no evidence of indebtedness shall
be issued in the name of the Corporation,
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or any division thereof, unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to specific instances.
SECTION 7.3 CHECKS, DRAFTS, ETC. All checks, demands, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation, or any division thereof, shall be
signed by such officer or officers, agent or agents of the Corporation; and
in such manner, as shall from time to time be authorized by the Board of
Directors.
SECTION 7.4 DEPOSITS. All funds of the Corporation, or any division
thereof, not otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies or other
depositories as the Board of Directors may select.
ARTICLE VIII
CERTIFICATES OF STOCK AND THEIR TRANSFER
SECTION 8.1 CERTIFICATES OF STOCK. The certificates of stock of the
Corporation shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the holder's name and
number of shares and shall be signed by the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary. If any stock certificate is signed (i) by a transfer agent or an
assistant transfer agent or (ii) by a transfer clerk acting on behalf of the
Corporation and a registrar, the signature of any officer of the Corporation
may be facsimile. In case any such officer whose facsimile signature has
thus been used on any such certificate shall cease to be such officer,
whether because of death, resignation or otherwise, before such certificate
has been delivered by the Corporation, such certificate may nevertheless be
delivered by the Corporation, as though the person whose facsimile signature
has been used thereon had not ceased to be such officer. All certificates
properly surrendered to the Corporation for transfer shall be canceled and no
new certificate shall be issued to evidence transferred shares until the
former certificate for at least a like number of shares shall have been
surrendered and canceled and the Corporation reimbursed for any applicable
taxes on the transfer, except that in the case of a lost, destroyed or
mutilated certificate a new certificate may be issued therefor upon such
terms, and with such indemnity (if any) to the Corporation, as the Board of
Directors may prescribe specifically or in general terms or by delegation to
a transfer agent for the Corporation.
SECTION 8.2 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of
Directors in individual cases, or by general resolution or by delegation to
the transfer agent, may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock
to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the
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owner of such lost, stolen or destroyed certificates, or such owner's legal
representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 8.3 TRANSFERS OF STOCK. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and upon payment of applicable taxes with respect to
such transfer, and in compliance with any restrictions on transfer applicable
to the certificate or shares represented thereby of which the Corporation
shall have notice and subject to such rules and regulations as the Board of
Directors may from time to time deem advisable concerning the transfer and
registration of certificates for shares of capital stock of the Corporation,
the Corporation shall issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Transfers of shares shall be made only on the books of the Corporation by the
registered holder thereof or by such holder's attorney or successor duly
authorized as evidenced by documents filed with the Secretary or transfer
agent of the Corporation.
SECTION 8.4 RESTRICTIONS ON TRANSFER. Any stockholder may enter into
an agreement with other stockholders or with the Corporation providing for
reasonable limitation or restriction on the right of such stockholder to
transfer shares of capital stock of the Corporation held by such stockholder,
including, without limiting the generality of the foregoing, agreements
granting to such other stockholders or to the Corporation the right to
purchase for a given period of time any of such shares on terms equal to
terms offered such stockholders by any third party. Any such limitation or
restriction on the transfer of shares of the Corporation may be set forth on
certificates representing shares of capital stock or notice thereof may be
otherwise given to the Corporation or the transfer agent, in which case the
Corporation or the transfer agent shall not be required to transfer such
shares upon the books of the Corporation without receipt of satisfactory
evidence of compliance with the terms of such limitation or restriction.
SECTION 8.5 NO FRACTIONAL SHARE CERTIFICATES. Certificates shall not
be issued representing fractional shares of stock.
SECTION 8.6 STOCKHOLDER OF RECORD. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder
in fact thereof and accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE IX
INDEMNIFICATION
(a) 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, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation),
by reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation 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 if such person acted in good
faith and in a manner such person reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contenders or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that his or her conduct was unlawful.
(b) 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 or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
(c) The Corporation may indemnify any person who is or was an employee
or agent of the Corporation, or is or was an employee or agent of the
Corporation serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust
or other enterprise to the extent and under the circumstances provided by
subsections (a) and (b) of this ARTICLE IX with respect to a person who is or
was a director or officer of the Corporation. To the extent that an employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred
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to in subsections (a) and (b) of this ARTICLE IX, or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person
in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this ARTICLE
IX (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because such person
has met the applicable standard of conduct set forth in subsections (a) and
(b) of this ARTICLE IX. Such determination shall be made (i) by a majority
vote of the directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (ii) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion,
or (iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this ARTICLE IX. Such
expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this ARTICLE IX shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such
liability under this ARTICLE IX or otherwise.
(h) For purposes of this ARTICLE IX, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint
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venture, trust or other enterprise, shall stand in the same position under
this ARTICLE IX with respect to the resulting or surviving corporation as
such person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this ARTICLE IX, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "serving at the request of the Corporation" shall include
any service as a director or officer of the Corporation which imposes duties
on, or involves services by, such director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this ARTICLE IX.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this ARTICLE IX 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 a person.
(k) The Delaware Court of Chancery is vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this ARTICLE IX. The Delaware Court of
Chancery may summarily determine the Corporation's obligation to advance
expenses (including attorneys' fees).
(l) Notwithstanding any other Section of these Bylaws, no amendment,
modification, restatement or repeal of the Bylaws shall limit or impair in
any manner the rights of any person to indemnification or advancement of
expenses under this ARTICLE IX in respect of any action or failure to act
occurring prior to such amendment, modification, restatement or repeal.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 FISCAL YEAR. The fiscal year of the Corporation shall
begin on April 1 of each year and end on March 31 of each year.
SECTION 10.2 SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, and the words "CORPORATE SEAL" and "DELAWARE;" and
it shall otherwise be in the form approved by the Board of Directors. Such
seal may be used by causing it, or a facsimile thereof, to be impressed or
affixed or otherwise reproduced.
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ARTICLE XI
AMENDMENTS
Subject to any contrary or limiting provisions contained in the
Certificate of Incorporation, these Bylaws may be amended or repealed, or new
Bylaws may be adopted (i) by the affirmative vote of the holders of at least
eighty percent (80%) of the outstanding shares of all classes of stock of the
Corporation generally entitled to vote in the election of directors,
considered for purposes of this ARTICLE XI as one class, or (ii) the
affirmative vote of a majority of the members of the Board of Directors then
in office at any regular or special meeting. Any Bylaws adopted or amended
by the stockholders may be amended or repealed by the Board of Directors or
the stockholders.
-19-
<PAGE>
(LETTERHEAD)
June 3, 1998
BOARD OF DIRECTORS
CGB&L FINANCIAL GROUP, INC.
229 East South Street
P.O. Box 680
Cerro Gordo, Illinois 61818
RE: REGISTRATION STATEMENT ON FORM SB-2
Ladies and Gentlemen:
We have acted as counsel to CGB&L Financial Group, Inc., a Delaware
corporation (the "Company") in connection with the Company's filing with the
Securities and Exchange Commission of a Registration Statement on Form SB-2 (the
"Registration Statement")relating to the proposed subscription offering,
community offering and syndicated community offering (the "Offerings") of up to
126,500 shares of the Company's common stock, par value $.01 per share (the
"Shares"), (145,475 shares if the Estimated Valuation Range is increased up to
15% to reflect changes in market and financial conditions following commencement
of the Offerings).
As counsel to the Company, we have examined such corporate records,
certificates and other documents of the Company, and made such examinations of
law and inquiries of such officers of the Company, as we have deemed necessary
or appropriate for purposes of this opinion. Based upon such examinations we
are of the opinion that the Shares, when sold in the manner set forth in the
Registration Statement, will be duly authorized, validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm contained therein under
"Legal and Tax Opinions."
Sincerely,
HOWARD & HOWARD ATTORNEYS, P.C.
THEODORE L. EISSFELDT
TLE/pw
<PAGE>
[LETTERHEAD]
June 2, 1998
Board of Directors
CGB&L Financial Group, Inc.
229 East South Street
Cerro Gordo, Illinois 61818
Ladies & Gentlemen:
You have requested our opinion as to certain Federal and State of Illinois
income tax consequences of the proposed conversion of Cerro Gordo Building and
Loan, s.b. (Bank) from an Illinois-chartered mutual savings bank to an
Illinois-chartered stock savings bank and the acquisition of the Bank's capital
stock by CGB&L Financial Group, Inc., a Delaware Corporation ("Holding
Company"), pursuant to the plan of conversion. Our opinion is based solely upon
the information contained in Form SB-2, Registration Statement under the
Securities Act of 1933 and the representations and additional information
provided us as set forth in the sections of this letter entitled, Facts and
Representations.
SCOPE OF OPINION
You have advised us that the SB-2 and other statements and representations
provide an accurate, complete description of the facts and circumstances
concerning the proposed transactions, and we have made no independent inquiry
into them.
The opinions expressed herein are rendered only with respect to the specific
matters discussed, and we express no opinion with respect to any of the legal
aspects of the transaction. If any of the facts, circumstances, or
representations contained in the Prospectus or the Opinion Letter are not
entirely complete or accurate, it is imperative we be informed immediately, as
such an inaccuracy could have a material effect upon our conclusions. In
rendering our opinion, we are relying upon the relevant provisions of the
Internal Revenue Code ("IRC") of 1986, as amended, the regulations thereunder,
and judicial and administrative interpretations thereof, which are subject to
change or modification by subsequent legislative, regulatory, administrative, or
judicial decisions. Such a change could also have an effect on the validity of
our opinion. It is possible that the Internal Revenue Service could take a
position contrary to the conclusions we reach herein, and that a court might
uphold such a contrary position.
NO OPINION IS EXPRESSED WITH RESPECT TO ISSUES NOT SPECIFICALLY DISCUSSED
HEREIN.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 2
FACTS
Savings Bank is a mutual savings bank chartered under the laws of the State of
Illinois. As a mutual savings institution, Savings Bank has no authorized
stock. Instead, Savings Bank, in mutual form, has a unique equity structure. A
depositor of Savings Bank is entitled to interest on his/her account balance as
declared and paid by Savings Bank. A depositor has no right to a distribution
of any earnings of Savings Bank; rather, these amounts become retained earnings
of Savings Bank. However, a depositor has a right to share pro rata, with
respect to the withdrawal value of his/her respective savings account, in any
liquidation proceeds distributed in the event Savings Bank is ever liquidated.
Voting rights in Savings Bank are held by the depositors (collectively, the
"Members"). All of the interests held by a depositor in Savings Bank cease when
such depositor closes his account with Savings Bank. For federal income tax
purposes, Savings Bank constitutes a "domestic building and loan association"
within the meaning of IRC Section 7701(a)(19). Savings Bank prepares its income
tax returns on a fiscal year March 31 basis, utilizing the cash accounting
method. Savings Bank does not have a net operating loss or other tax attribute
carryforward.
Bank Holding Company is a newly-organized State of Delaware corporation and will
operate as a bank holding company. Holding Company has one share of stock
outstanding, but has 900,000 shares of authorized common stock with $.01 par
value and 100,000 shares of preferred stock with $.01 par value. Holding
Company currently has no assets or liabilities and has not yet conducted
business activities whatsoever.
The Board of Directors of Savings Bank determined that in order to facilitate
the growth and expansion of Savings Bank through the raising of additional
capital, it is in the best interest of Savings Bank to convert from a mutual to
stock form of organization. Further, the Board of Directors decided that
restructuring Savings Bank as a wholly-owned subsidiary of Holding Company would
provide organizational and economic strength to Savings Bank.
Savings Bank's Board of Directors unanimously adopted the Plan of Conversion
(the "Plan") on March 11, 1998, which was amended on May 26, 1998. Under the
Plan, Savings Bank's charter to operate as a mutual savings bank will be amended
to permit it to continue its operation in the form of a State of Illinois
chartered stock savings bank, which will be a wholly-owned subsidiary of Holding
Company. The Plan must be approved by the affirmative vote of at least
two-thirds of the votes eligible to be cast by the Members of Savings Bank at a
special meeting called for such purpose. Savings Bank anticipates that the
Illinois Office of Banks and Real Estate (the "Commissioner") and the Federal
Deposit Insurance Corporation (the "FDIC") will approve the Plan, subject to
Member approval and satisfaction of
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 3
certain other conditions, including certification by JMP Financial, Inc. (the
"Appraiser") that the price of the common stock to be issued conforms to the
estimated range of the pro forma market values at the close of the proposed
conversion transaction. Savings Bank further believes that the Commissioner and
the Federal Reserve will also approve Holding Company's application to acquire
all of the capital stock of Stock Bank, and thereby become the parent of Stock
Bank. Under the Plan, Holding Company will issue a specified number of shares
of common stock (the "Conversion Stock"). The total dollar amount, for which
all shares of Conversion Stock will be sold, shall be equal to the estimated
total pro forma market value of Savings Bank and Holding Company, after the
proposed conversion transaction, as determined by the Appraiser. Pursuant to
the Plan, all such shares will be sold at a uniform price per share.
Under current law, the proposed conversion transaction is subject to the
regulations of the Commissioner and the FDIC, and (as previously noted) Savings
Bank anticipates that the Commissioner and the FDIC will approve the
conversion, subject to the approval by the Members of Savings Bank entitled to
vote at a special meeting.
Under existing law, as required by the Commissioner's and the FDIC's
regulations, shares of Conversion Stock will be offered pursuant to
nontransferable subscription rights on the basis of preference categories.
Conversion Stock will be offered to the following persons in the following order
of priority:
1. Depositors with aggregate deposits of $50 or more in Savings Bank on
December 31, 1996 (the "Eligible Account Holders");
2. An Employee Stock Ownership Plan ("ESOP");
3. Depositors with aggregate deposits of $ 50 or more in Savings Bank on
June 30, 1998, (Supplemental Eligible Account Holders), excluding
directors and officers of the Savings Bank and their associates, and
4. Other members, constituting Savings Bank depositors as of a yet to be
determined date that do not constitute Eligible Account Holders, or
Supplemental Eligible Holders and who continue to be depositors as of
the voting record date for the special meeting of members of the Bank
called for the purpose of considering the approval of the Plan of
Conversion. (the "Other Members")
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 4
Any shares of Conversion Stock not subscribed for under the foregoing preference
categories will be offered in a community offering to other purchasers (the
"Community Offering to Other Purchasers"), with a preference to natural persons
residing in Piatt County, Illinois (the "Preferred Other Purchasers"). Further,
in the event the Conversion Stock is not fully subscribed for after the
Community Offering to Other Purchasers, it is expected that remaining shares
will be offered to the general public on a best efforts basis through a selling
group of broker-dealers in a syndicated community offering. Pursuant to the
Prospectus, no subscriber will be allowed to purchase less than twenty-five
shares of Conversion Stock, provided sufficient shares are available.
All purchases of Conversion Stock by any person or entity, other than the ESOP
in connection with the proposed conversion transaction, are subject to the
following maximum purchase limitations:
- The maximum number of shares of Conversion Stock which may be
purchased in the proposed transaction by any person, together with all
associates of such person, or group of persons otherwise acting in
concert, is 5 percent of the total number of shares of Conversion
Stock offered in the proposed transaction.
- The maximum number of shares of Conversion Stock purchased by all
directors/officers of Savings Bank (together with certain associates
and other attributed shares) may not exceed 35 percent of the total
number of shares issued in the proposed transaction.
Notwithstanding the foregoing limits:
- The ESOP will be permitted, and is expected, to subscribe for the
purchase of 8 percent of the total number of shares of Conversion
Stock issued in the proposed transaction; and
The Plan also permits Holding Company and Savings Bank, in their sole
discretion, to increase the maximum number of shares of Conversion Stock which
may be purchased by any one person, together with all associates of such person
or group of persons otherwise acting in concert, above the generally applicable
5 percent limit.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 5
SPECIFIC CONVERSION STOCK PRIORITIES AND OTHER STOCK MATTERS
Subject to the maximum and minimum purchase limitations set forth in the Plan,
each Eligible Account Holder has been granted, without payment therefor,
non-transferable subscription rights to purchase Conversion Stock up to an
amount which, when added to the stock purchased by all of his or her associates
and/or other persons acting in concert with such Eligible Account Holder, equals
5 percent of the shares of Conversion Stock offered in the proposed transaction.
The ESOP will be granted, without payment therefor, nontransferable subscription
rights to purchase up to 8 percent of the Conversion Stock issued in the
proposed transaction on a second priority basis. Pursuant to the Plan,
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 proposed transaction, including subscriptions of any of the
Bank's directors, officers, employees or associates thereof.
Subject to the maximum and minimum purchase limitations detailed in the Plan,
each Supplemental Eligible Account Holder has been granted, without payment
therefore, nontransferable Conversion Stock subscription rights to purchase
Conversion Stock up to an amount which, when added to the stock purchased by all
of his or her associates and/or other persons acting in concert with such
Supplemental Eligible Account Holder, equals 5 percent of the shares of
Conversion Stock offered in the proposed transaction. The subscription rights
of each Supplemental Eligible Account Holder will be reduced by any subscription
rights received by such person as an Eligible Account Holder.
Subject to the maximum and minimum purchase limitations set forth in the Plan of
Conversion, each Other Member will be granted, without payment therefor,
nontransferable subscription rights to purchase Conversion Stock up to an amount
which, when added to the Conversion Stock purchased by all of his or her
associates and any persons acting in concert with such Other Member, equals 5%
of the Conversion Stock offered in the Conversion, to the extent that shares
remain available for purchase after satisfaction of all subscriptions of
Eligible Account Holders, with ESOP and Supplemental Eligible Account Holders.
Subscriptions from Other Members will be filled after those of Eligible Account
Holders, the ESOP and Supplemental Eligible Account Holders. In the event of an
oversubscription by Other Members, shares of Conversion Stock will be allocated
among the subscribing Other Members in the proportion that the number of shares
subscribed for by each such subscriber bears to the total number of shares
subscribed for by all such Other Members.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 6
After the foregoing, to the extent that shares of the Conversion Stock remain
available for purchase after satisfaction of all subscriptions of Eligible
Account Holders, the ESOP, Supplemental Eligible Account Holders and Other
Members the remaining shares of the Conversion Stock will be offered in the
Community Offering, with preference to natural persons residing in Piatt County,
Illinois in a manner designed to achieve the widest possible distribution of
Conversion Stock.
No individual Conversion Stock purchaser (in the Community Offering), directly
or indirectly, or together with his/her associates or other persons with whom
such purchaser is acting in concert, may subscribe for an amount of Conversion
Stock which would exceed 5 percent of the shares of Conversion Stock offered in
the proposed transaction. Further, Holding Company and Savings Bank have
reserved the absolute right to reject any orders in the Community Offering in
whole or in part. To the extent the aforementioned purchasers subscribe for
more shares of Conversion Stock than remain available for purchase, and to the
extent such orders are not rejected by Holding Company/Savings Bank, the shares
remaining after satisfaction of the subscriptions of the Eligible Account
Holders, the ESOP, Supplemental Eligible Account Holders and Other Members will
be allocated first among the Purchasers of the community offering in a manner
which permits each Purchaser of the community offering, to the extent possible,
to purchase the number of shares subscribed for by such Purchasers in the
community offering up to a maximum of 2% of the common stock offered in the
subscription and thereafter remaining shares shall be allocated on an equal
number of shares per order until all orders of such purchasers have been filled.
In connection with the proposed transaction, Holding Company's Board of
Directors is considering the adoption of the Holding Company Stock Option Plan
(the "Stock Option Plan"), subject to stockholder approval. The Stock Option
Plan is intended to promote stock ownership by directors and select
officers/employees of Holding Company and Stock Bank to increase their
proprietary interest in the success of Holding Company and encourage them to
remain in the employ of Holding Company or Stock Bank.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 7
The Stock Option Plan provides for the grant of so-called incentive stock
options ("ISOs") as defined under IRC Section 422(b), and for options that do
not so qualify ("NQSOs"). Holding Company's Board of Directors intends to
reserve an amount of stock equal to 10 percent of the Conversion Stock issued in
the proposed transaction for issuance under the Stock Option Plan.
All full-time employees, including officers of Holding Company and Stock Bank
(and any future subsidiaries), are eligible to receive grants under the Stock
Option Plan. Any such options will vest and become exercisable over a five-year
period or upon a change in control as defined under the Stock Option Plan.
The Stock Option Plan also provides that each non-employee director of Holding
Company (as of the time the proposed transaction is completed) will receive,
subject to stockholder approval of the Stock Option Plan, a one-time
nondiscretionary grant of ten year NQSOs to purchase shares of Conversion Stock,
effective as of the date of the completion of the proposed transaction. The
aggregate number of shares of Conversion Stock subject to options granted to
non-employee directors may not exceed 30 percent of the shares reserved for
issuance under the Stock Option Plan.
As required by the Commissioner's regulations, the Plan provides that, upon
completion of the proposed transaction, a Liquidation Account will be
established on the Stock Bank's books, for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders who continue to maintain their
deposit accounts at the Stock Bank. The amount of the Liquidation Account will
be equal to the regulatory capital of Savings Bank as of the last practical date
prior to consummation of the proposed transaction. Under applicable regulations
of the Commissioner, the Stock Bank will not be permitted to pay dividends on
its common stock if its regulatory capital would thereby be reduced below the
aggregate amount then required for the Liquidation Account. After the proposed
transaction, Eligible Account Holders and Supplemental Eligible Account Holders
will be entitled, in the event of liquidation of the Stock Bank, to receive
liquidating distributions of any assets remaining after payment of all valid
creditor claims (including the claims of all depositors to the withdrawal values
of their deposit accounts, plus accrued interest), but before any distributions
are made on the Stock Bank's common stock, equal to their proportionate
interests at the time in the Liquidation Account.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 8
Each Eligible Account Holder and Supplemental Eligible Account Holder will have
an initial interest (a "Subaccount Balance") in the Liquidation Account for each
deposit account as of the eligibility record date. Each initial Subaccount
Balance will equal the amount determined by multiplying the total opening
balance in the Liquidation Account by a fraction, the numerator of which is the
qualified deposit of such deposit account, and the denominator of which is the
total of all qualified deposits of all Eligible Account Holders and Supplemental
Eligible Account Holders. If the amount of the deposit account on any
subsequent annual closing date (i.e., each March 31, commencing March 31, 1999)
of the Stock Bank is less than the balance in such deposit account on any other
annual closing date (or the balance in such account on the eligibility record
date), this interest in the Liquidation Account will be reduced by an amount
proportionate to any such reduction and will not thereafter be increased despite
any subsequent increase in the related deposit account. An Eligible Account
Holder's or Supplemental Eligible Account Holder's interest in a Liquidation
Account will cease to exist if the Eligible Account Holder or Supplemental
Eligible Account Holder ceases to maintain an account at Stock Bank. The
Liquidation Account will never increase and will be correspondingly reduced as
the Subaccount Balances in the Liquidation Account are reduced or cease to
exist. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to Holding Company, as sole stockholder of Stock Bank.
Following the proposed transaction, voting rights in Stock Bank will rest
exclusively with Holding Company, the sole stockholder of Stock Bank. Voting
rights in Holding Company will rest exclusively with the holders of Conversion
Stock. The proposed transaction will not interrupt the business of Savings
Bank, and its business will be continued as usual by Stock Bank after the
proposed transaction. Each depositor will retain a withdrawable account or
accounts in the same dollar amount and on the same terms as the accounts they
held at the time of the proposed transaction. Loans of Savings Bank will remain
unchanged and retain their same characteristics after the proposed transaction.
Membership in the Savings Association Insurance Fund will be continued by Stock
Bank, and Stock Bank will remain subject to the regulatory authority of the
Commissioner as well as the Federal Deposit Insurance Corporation.
REPRESENTATIONS
In addition to the facts as set forth above, the following representations have
been made by Holding Company, Savings Bank, and Stock Bank in connection with
the proposed transaction:
1. Holding Company and Stock Bank each have no current plan or intention
to redeem or otherwise acquire any of the Conversion Stock issued in
the proposed transaction.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 9
2. Immediately following the consummation of the proposed transaction,
Stock Bank will possess the same assets and liabilities as Savings
Bank held immediately prior to the proposed transaction, plus
substantially all of the net proceeds from the sale of its stock to
Holding Company, except for assets used to pay the expenses of the
reorganization transaction. The liabilities transferred to Stock Bank
were incurred by Savings Bank in the ordinary course of its business.
3. No cash or other property will be given to eligible Account Holders or
to the Others in lieu of nontransferable subscription rights or an
interest in the Liquidation Account of Stock Bank.
4. Following the proposed transaction, Stock Bank will continue to engage
in business in substantially the same manner as Savings Bank engaged
in business prior to the conversion, and it has no plan or intention
to sell or otherwise dispose of any of its assets, except in the
ordinary course of business. There is no plan or intention for Stock
Bank to be liquidated or merged with another corporation following
consummation of the proposed transaction.
5. The fair market value of each Stock Bank deposit account plus an
interest in the Liquidation Account will, in each instance, be
approximately equal to the fair market value of each deposit account
of Savings Bank plus the interest in the residual equity of Savings
Bank surrendered in exchange therefore. All proprietary rights in
Savings Bank form an integral part of the withdrawable savings account
being surrendered in the exchange. The deposit account holder's
proprietary interest in Savings Bank arises solely by virtue of the
fact that they are deposit account holders in Savings Bank.
6. None of the compensation to be received by any deposit account
holder-employee of Savings Bank or Holding Company will be separate
consideration for, or allocable to, any of their deposits in Savings
Bank. No interest in the Liquidation Account of Stock Bank will be
received by any deposit account holder-employee as separate
consideration for, or will otherwise be allocable to, any employment
agreement, and the compensation paid to each deposit account
holder-employee during the twelve-month period preceding or subsequent
to the conversion, will be for services actually rendered, and will be
commensurate with amounts paid to third parties bargaining at arm's
length for similar services. No shares of Conversion Stock will be
issued to or purchased by any deposit account holder-employee of
Savings Bank or Holding Company at a discount or as compensation in
the proposed transaction.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 10
7. Savings Bank has received or will receive an opinion from the
Appraiser which concludes that the subscription rights to purchase
shares of Conversion Stock have no economic value on the date of
distribution or at the time of exercise, whether or not a syndicated
community, public offering, or other purchase arrangement takes place.
8. Holding Company, Savings Bank, and Stock Bank constitute corporations
within the meaning of IRC Section 7701(a)(3). Savings Bank and Stock
Bank constitute domestic building and loan associations within the
meaning of IRC Section 7701(a)(19).
9. At the time of the proposed transaction, the fair market value of the
assets of savings Bank on a going-concern basis will equal or exceed
the amount of its liabilities plus the amount of liabilities to which
the assets are subject, and Savings Bank will have a positive
regulatory capital balance.
10. Holding Company has no plan or intention to sell or otherwise dispose
of the stock of Stock Bank received by it in the proposed transaction.
11. No amount of savings accounts or deposits of Eligible Account Holders
and Supplemental Account Holders as of the eligibility record date
will be excluded from participation in the Liquidation Account.
12. Both Stock Bank and Holding Company have no plan or intention, either
currently or at the time of the proposed transaction, to issue
additional shares of common stock following the proposed transaction,
other than shares that may be issued to employees and/or directors
pursuant to the ESOP, Management Recognition Plan and Stock Option
Plan.
13. Based on a report by the Appraiser, on a per-share basis, the exercise
price of the subscription rights to purchase the Conversion Stock will
be equal to the fair market value of the Conversion Stock at the time
of the completion of the proposed transaction.
14. Savings Bank will not have any net operating losses, capital loss
carryovers, or built-in losses at the time of the proposed
transaction.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 11
15. Savings Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of IRC Section 368(a)(3)(A).
16. Holding Company does not constitute an investment company as described
in U.S. Treasury Regulation Section 1.351-1(c).
17. Savings Bank's depositors will pay expenses of the proposed
transaction solely attributable to them, if any.
18. The proposed transaction does not involve a receivership, foreclosure,
or similar proceeding before a federal or state agency involving a
financial institution to which IRC Sections 581 or 591 apply.
19. The principal amount, interest rate and maturity date of each deposit
account in the Stock Bank will be identical to those of the
corresponding deposit account held by the account holder in the
Savings Bank immediately prior to the conversion.
20. The Bank utilizes a reserve for bad debts in accordance with Section
585 and, following the conversion, the Stock Bank shall also utilize a
reserve for bad debts in accordance with Section 585.
21. The Eligible Account Holders' and Supplemental Eligible Account
Holders' proprietary interests in Bank arise solely by virtue of the
fact that they are account holders in the bank.
22. The Stock Bank has no plan or intention to redeem or otherwise
reacquire any of its stock issued to CGB&L Financial Group, Inc. in
the proposed transaction.
23. The liabilities of the Bank assumed by the Stock Bank plus the
liabilities, if any, to which the transferred assets are subject were
incurred by the Bank in the ordinary course of business and are
associated with the assets transferred.
24. The aggregate fair market value of the deposit accounts held by all
Eligible Account Holders as of the close of business on December 31,
1996 equaled 100% of the aggregate fair market value of all deposit
accounts in the Bank as of the close of business on such date.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 12
BUSINESS PURPOSE
Savings Bank's Board of Directors believes that the proposed transaction
(resulting in the conversion of Savings Bank into a stock association, along
with the formation of Holding Company) is in the best interests of Savings Bank,
its Members, and the community served by Savings Bank, for the following
reasons:
- Conversion to the stock form of organization and creation of a holding
company in connection therewith offers numerous advantages not
available to Savings Bank in its present mutual form, which may be
important to the future growth/performance of Savings Bank, including:
(i) a larger capital base, (ii) enhanced future access to capital
markets, and (iii) an opportunity for depositors of Savings Bank and
residents of Piatt County to enjoy the benefits of stock ownership in
Holding Company.
- Holding Company will have greater flexibility to diversify its
business activities through newly-formed subsidiaries or through
acquisitions of other financial institutions (and other companies)
than Savings Bank has in its present form.
OPINION
Based solely upon the proposed transaction as delineated in the Prospectus,
the "FACTS", "REPRESENTATIONS", and "BUSINESS PURPOSE" as stated above, the
federal and State of Illinois consequences of the proposed transaction in our
view are as follows:
1. The conversion of Savings Bank from a State of Illinois mutual savings
bank to a State of Illinois chartered stock savings bank will
constitute a reorganization transaction within the meaning of IRC
Section 368(a)(1)(F). Accordingly, neither Savings Bank nor Stock
Bank will recognize any gain/loss as a result of the conversion (REV.
RUL. 80-105, 1980-1 C.B. 78). Savings Bank and Stock Bank will each
be a party to a reorganization within the meaning of IRC Section
368(b).
2. Stock Bank will not recognize gain/loss upon the receipt of money and
other property, if any, in exchange for shares of its common stock
(IRC Section 1032(a)).
3. No gain or loss will be recognized by Holding Company upon the receipt
of money for Conversion Stock (IRC Section 1032(a)).
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 13
4. The basis of Savings Bank's assets in the hands of Stock Bank will be
the same as the basis of those assets in the hands of Savings Bank
immediately prior to the transaction (IRC Section 362(b)).
5. Stock Bank's holding period of the assets of Savings Bank will include
the period during which such assets were held by Savings Bank prior to
the proposed conversion transaction (IRC Section 1223(2)).
6. The creation of the Liquidation Account on the records of Stock Bank
will have no effect on Savings Bank's or Stock Bank's taxable income.
7. Pursuant to IRC Sections 381(c)(4) and 593(g)(4) and U.S. Treasury
Regulation Section 1.381(c)(4)-1(a)(1)(ii), Stock Bank will succeed to
and take into account, immediately after the reorganization, the
dollar amounts of those accounts of Savings Bank which represent bad
debt reserves in respect of which Savings Bank has taken a bad debt
deduction for taxable years ending on or before the date of
reorganization. The bad debt reserves will not be required to be
restored to the gross income of either Savings Bank or Stock Bank for
the taxable year of the reorganization, and such bad debt reserves
will have the same character in the hands of Stock Bank as they would
have had in the hands of Savings Bank, had no reorganization
transaction occurred.
8. Stock Bank for purposes of IRC Section 381, will be treated as if
there had been no reorganization. The tax attributes of Savings Bank
enumerated in IRC Section 381(a) will be taken into account by Stock
Bank as if there had been no reorganization. Accordingly, the tax
year of Savings Bank will not end on the effective date of the
conversion transaction. The part of the tax year of Savings Bank
before the conversion will be includable in the tax year of the Stock
Bank after the proposed transaction. Therefore, Stock Bank will not
be required to make a federal income tax return for the portion of the
tax year prior to the proposed conversion transaction (REV. RUL.
57-276, 1957-1 C.B. 126).
9. Depositors will realize gain, if any, upon the constructive issuance
to them of withdrawable deposit accounts of Stock Bank,
nontransferable subscription rights to purchase Conversion Stock,
and/or interests in the Liquidation Account of Stock Bank. Any gain
resulting therefrom, will be recognized, but only in an amount not in
excess of the fair market value of the subscription rights and
Liquidation Accounts received. The Liquidation Accounts will have
nominal, if any, fair market value.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 14
Based solely on the accuracy of the conclusions reached in the
Appraiser's valuation opinion, and our reliance on such opinion, that
the subscription rights have no economic value at the time of
distribution or exercise, no gain or loss will be required to be
recognized by the depositors upon receipt or distribution of
subscription rights (IRC Section 1001; see PAULSON V. COMMISSIONER,
469 U.S. 131, 139 (1985), (quoting, SOCIETY FOR SAVINGS V. BOWERS, 349
U.S. 143 (1955)); but also see REV. RUL. 69-3, 1969-1 C.B. and REV.
RUL. 1969-646, 1969-2 C.B. 54 (where the interest received rises to
the level of "stock"and thus, in some circumstances, IRC Section 354
applies and therefore, no gain/loss shall be recognized)). Likewise,
based solely on the accuracy of the aforesaid conclusion reached in
the Appraiser's valuation, we give the following opinions: (a) no
taxable income will be realized by the depositors of Savings Bank as a
result of the exercise of the nontransferable subscription rights to
purchase Conversion Stock at fair market value (REV. RUL. 56-572,
1956-2 C.B. 182); and (b) no taxable income will be realized by Stock
Bank, Savings Bank, or Holding Company on the issuance or distribution
of subscription rights to depositors of Savings Bank to purchase
shares of Conversion Stock at fair market value (IRC Section 311).
10. A depositor's basis in the deposit accounts of Stock Bank will be the
same as the basis of their deposit accounts in Savings Bank (IRC
Section 1012). Based upon our opinion, #9 above, the basis of the
nontransferable subscription rights received to acquire Conversion
Stock will be zero. Further, the basis of the interest in the
Liquidation Account of Stock Bank received by Eligible Account Holders
and Supplemental Eligible Account Holders will be equal to the cost of
such property (i.e., assumed to be zero in this transaction).
11. Each account holder will not recognize gain or loss upon the deemed
exchange of their deposit accounts in the conversion.
12. The basis of the Conversion Stock to its shareholders will equal the
purchase price thereof (IRC Section 1012).
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 15
13. A shareholder's holding period for Conversion Stock acquired through
the exercise of the nontransferable subscription rights shall begin on
the date on which the subscription rights are exercised (IRC Section
1223(6)). The holding period for the conversion Stock purchased
pursuant to the community offering or under other purchase
arrangements will commence on the date following the date on which
such stock is purchased (REV. RUL. 70-598, 1970-2 C.B. 168).
14. Regardless of any financial accounting entries that are made for the
establishment of a Liquidation Account, the reorganization will not
diminish the accumulated earnings and profits of Stock Bank available
for subsequent distribution of dividends within the meaning of IRC
Section 316 (U.S. Treasury Regulation Sections 1.312-11(b) and (c)).
Stock Bank will succeed to and take into account the earnings and
profits or deficit in earnings and profits of Savings Bank as of the
date of the proposed conversion transaction.
15. Section 102 of the State of Illinois Income Tax Act (the "Act")
provides that, except as otherwise expressly stated or clearly
appearing from the context, any term used in the Act shall have the
same meaning as when used in a comparable context in the United States
Internal Revenue Code of 1986 (the "IRC") or any successor law or laws
relating to federal income taxes in effect for such taxable year.
Further, Section 403 of the Act states, "To the extent not
inconsistent with the provisions of this Act. . . .each person making
a return under this Act shall take into account the items of income,
deduction, and exclusion on such return in the same manner and amounts
as reflected in such person's federal income tax return for the same
taxable year." Based on the foregoing, the State of Illinois
consequences of the proposed transaction will be consistent with the
federal tax results as articulated above.
The foregoing highlights select income tax consequences to Holding Company,
Savings Bank, and Stock Bank in connection with the proposed transaction. The
opinion is rendered solely for the benefit of Savings Bank's Board of Directors,
and for reference in the Prospectus. This opinion may not be used for any other
purpose, or issued to other outside parties without our express written consent.
We would be pleased to discuss our conclusions further with the Board of
Directors at a mutually convenient time.
<PAGE>
Board of Directors
CGB&L Financial Group, Inc.
June 2, 1998
Page 16
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement filed with the Securities and Exchange Commission
relating to the offering of the Conversion Stock and as an exhibit to the
Conversion Application of the Bank filed with the Illinois Office of Banks and
Real Estate.
Sincerely,
OLIVE
/s/ Gary G. Genenbacher
Gary G. Genenbacher, CPA
Tax Manager
ggg/vac/cgblfed
<PAGE>
JMP FINANCIAL, INC.
753 Grand Marais
Grosse Pointe Park, MI 48230
(313) 824-1711
May 27, 1998
Board of Directors
Cerro Gordo Building and Loan s.b.
229 East South Street
Cerro Gordo, Illinois
Dear Sirs and Madam:
Terms used in this letter not otherwise defined herein have the same
meanings for such terms in the Plan of Conversion adopted by the Board of
Directors of Cerro Gordo Building and Loan Bank, s.b., Cerro Gordo, Illinois
("Cerro Gordo Building and Loan" or the "Bank"), under which the Bank will
convert from a mutual savings bank to a stock savings bank and issue all of the
Bank's stock to CGB&L Financial Group, Inc. (the "Holding Company").
Simultaneously, the Holding Company will issue shares of common stock (the
"Common Stock").
We understand that in accordance with the Plan of Conversion, subscription
rights to purchase shares of Common Stock in the Holding Company are to be
issued to (1) Eligible Account Holders, (2) the bank's tax qualified employee
stock ownership plan, (3) Supplemental Eligible Account Holders, and (4) Other
Members. Based solely upon our observation that the subscription rights will be
available to such parties without cost, will be legally non-transferable and of
short duration, and will afford such parties the right only to purchase shares
of Common Stock at the same price to be paid by members of the general public
in the Community Offering, but without undertaking any independent
investigation of estate or federal laws or the position of the Internal Revenue
Service with respect to such issue, we are of the belief that:
(1) the subscription rights have no ascertainable market value; and
(2) the price at which the subscription rights are exercisable will not
be more or less than the pro forma market value of the shares upon issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates and other external forces (e.g.,
natural disasters or significant global events) occur from time to time and may
materially affect the value of thrift stocks as a whole or the Holding
Company's value. Accordingly, no assurance can be given that persons who
subscribe to shares of Common Stock of the Conversion will thereafter be able
to sell such shares at the same price paid in the Subscription Offering.
Sincerely,
/s/ John M. Palffy
-----------------------------------
John M. Palffy
President
JMP Financial, Inc.
<PAGE>
CGB&L FINANCIAL GROUP, INC.,
199____ STOCK OPTION AND INCENTIVE PLAN
(FORM OF PLAN IF ADOPTED WITHIN ONE YEAR FOLLOWING CONVERSION)
SECTION 1. PURPOSE.
The purpose of the CGB&L Financial Group, Inc., 199____ Stock Option and
Incentive Plan (the "Plan") is to benefit CGB&L Financial Group, Inc., (the
"Company") and its Subsidiaries (as defined in Section 2) by recognizing the
contributions made to the Company by officers and other key employees
(including Directors of the Company who are also employees) of the Company
and its Subsidiaries, to provide such persons with additional incentive to
devote themselves to the future success of the Company, and to improve the
ability of the Company to attract, retain and motivate individuals, by
providing such persons with a favorable opportunity to acquire or increase
their proprietary interest in the Company over a period of years through
receipt of options to acquire common stock of the Company. In addition, the
Plan is intended as an additional incentive to members of the Board of
Directors of the Company who are not employees of the Company ("Non-Employee
Directors") to serve on the Board of Directors of the Company (the "Board")
and to devote themselves to the future success of the Company by providing
them with a favorable opportunity to acquire or increase their proprietary
interest in the Company through receipt of options to acquire common stock of
the Company.
The Company may grant stock options that constitute "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or stock options which do not
constitute ISOs ("NSOs") (ISOs and NSOs being hereinafter collectively
referred to as "Options").
SECTION 2. ELIGIBILITY.
Non-Employee Directors shall participate in the Plan only in accordance
with the provisions of Section 5 of the Plan. The Committee (as defined in
Section 3) shall initially, and from time to time thereafter, select those
officers and other key employees (including Directors of the Company who are
also employees) (collectively referred to herein as "Key Employees") of the
Company or any other entity of which the Company is the direct or indirect
beneficial owner of not less than fifty percent (50%) of all issued and
outstanding equity interests ("Subsidiaries"), to participate in the Plan on
the basis of the special importance of their services in the management,
development and operations of the Company or its Subsidiaries (each such
Director and Key Employee receiving Options granted under the Plan is
referred to herein as an "Optionee").
SECTION 3. ADMINISTRATION.
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). The Committee shall be comprised
of two (2) or more members of the Board. All members of the Committee shall
satisfy the "disinterested" administration requirements set forth in Rule
16b-3 promulgated under the
<PAGE>
Securities Exchange Act of 1934, as amended (the "1934 Act"), or any
successor rule or regulation. If at any time any member of the Committee
does not satisfy such disinterested administration requirements, no Options
shall be granted under this Plan to any person until such time as all members
of the Committee satisfy such requirements. No person who is an officer or
employee of the Company or any Subsidiary shall be a member of the Committee.
3.2 AUTHORITY OF THE COMMITTEE. No person, other than members of the
Committee, shall have any authority concerning decisions regarding the Plan.
Subject to the express provisions of this Plan, including but not limited to
Section 5, the Committee shall have sole discretion concerning all matters
relating to the Plan and Options granted hereunder. The Committee, in its
sole discretion, shall determine the Key Employees of the Company and its
Subsidiaries to whom, and the time or times at which Options will be granted,
the number of shares to be subject to each Option, the expiration date of
each Option, the time or times within which the Option may be exercised, the
cancellation of the Option (with the consent of the holder thereof) and the
other terms and conditions of the grant of the Option. The terms and
conditions of the Options need not be the same with respect to each Optionee
or with respect to each Option.
The Committee may, subject to the provisions of the Plan, establish such
rules and regulations as it deems necessary or advisable for the proper
administration of the Plan, and may make determinations and may take such
other action in connection with or in relation to the Plan as it deems
necessary or advisable. Each determination or other action made or taken
pursuant to the Plan, including interpretation of the Plan and the specific
terms and conditions of the Options granted hereunder by the Committee shall
be final and conclusive for all purposes and upon all persons including, but
without limitation, the Company, its Subsidiaries, the Committee, the Board,
officers and the affected employees of the Company and/or its Subsidiaries
and their respective successors in interest.
No member of the Committee shall, in the absence of bad faith, be liable
for any act or omission with respect to service on the Committee. Service on
the Committee shall constitute service as a Director of the Company so that
members of the Committee shall be entitled to indemnification pursuant to the
Company's Certificate of Incorporation and By-Laws.
SECTION 4. SHARES OF COMMON STOCK SUBJECT TO PLAN.
4.1 INITIAL SHARES SUBJECT TO PLAN. The total number of shares of
common stock of the Company, no par value (the "Common Stock"), that may be
issued and sold under the Plan initially shall be ______________,000. The
total number of shares of Common Stock that may be available for Options
under the Plan shall be adjusted on January 1 of each calendar year, within
the Applicable Period (as defined below), so that the total number of shares
of Common Stock that may be issued and sold under the Plan as of January 1 of
each calendar year within the Applicable Period shall be equal to ten percent
(10%) of the
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<PAGE>
outstanding shares of Common Stock of the Company on such date; provided,
however, that no such adjustment shall reduce the total number of shares of
Common Stock that may be issued and sold under the Plan below
____________,000. For purposes of the preceding sentence, Applicable Period
shall be the ten-year period commencing on ______________ 1, 199 and ending
on ______________ 31, 200 . The aforementioned total number of shares of
Common Stock shall be adjusted in accordance with the provisions of Section
4.2 hereof. Notwithstanding the foregoing, the total number of shares of
Common Stock that may be subject to ISOs under the Plan shall be
____________________,000 shares of Common Stock, adjusted in accordance with
the provisions of Section 4.2 hereof. With respect to Options granted to
Optionees who are not subject to Section 16 of the 1934 Act, the number of
shares of Common Stock delivered by any such Optionee or withheld by the
Company on behalf of any such Optionee pursuant to Sections 8.2 or 8.3 of the
Plan shall once again be available for issuance pursuant to subsequent
Options. Any shares of Common Stock subject to issuance upon exercise of
Options but which are not issued because of a surrender (other than pursuant
to Sections 8.2 or 8.3 of the Plan), forfeiture, expiration, termination or
cancellation of any such Option, to the extent consistent with applicable
law, rules and regulations, shall once again be available for issuance
pursuant to subsequent Options.
4.2 ADJUSTMENTS TO SHARES SUBJECT TO PLAN. The number of shares of
Common Stock subject to the Plan and to Options granted under the Plan shall
be adjusted as follows: (a) in the event that the number of outstanding
shares of Common Stock is changed by any stock dividend, stock split or
combination of shares, the number of shares subject to the Plan and to
Options previously granted thereunder shall be proportionately adjusted; (b)
in the event of any merger, consolidation or reorganization of the Company
with any other corporation or corporations, there shall be substituted on an
equitable basis as determined by the Board of Directors, in its sole
discretion, for each share of Common Stock then subject to the Plan and for
each share of Common Stock then subject to an Option granted under the Plan,
the number and kind of shares of stock, other securities, cash or other
property to which the holders of Common Stock of the Company are entitled
pursuant to the transaction; and (c) in the event of any other change in the
capitalization of the Company, the Committee, in its sole discretion, shall
provide for an equitable adjustment in the number of shares of Common Stock
then subject to the Plan and to each share of Common Stock then subject to an
Option granted under the Plan. In the event of any such adjustment, the
exercise price per share shall be proportionately adjusted.
SECTION 5. GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS.
5.1 GRANTS. All grants of Options to Non-Employee Directors shall be
automatic and non-discretionary. Each individual who is a Non-Employee
Director on the effective date of the Plan shall be granted automatically a
NSO to purchase ______________ shares of Common Stock on the effective date
on the Plan.
5.2 EXERCISE PRICE AND PERIOD. The per share Option exercise price of
each such NSO granted to a Non-Employee Director shall be the "Fair Market
Value," on the date on
-3-
<PAGE>
which the Option is granted, of the Common Stock subject to the Option. If
the Common Stock is listed on a national securities exchange (including the
NASDAQ National Market System) on the date in question, then the Fair Market
Value per share shall be not less than the average of the highest and lowest
selling price on such exchange on such date,or if there were no sales on such
date, then the Fair Market Value per share shall be equal to the average
between the bid and asked price on such date. If the Common Stock is traded
otherwise than on a national securities exchange on the date in question,
then the Fair Market Value per share shall be equal to the average between
the bid and asked price on such date, or, if there is no bid and asked price
on such date, then on the next prior business day on which there was a bid
and asked price. If no such bid and asked price is available, then the Fair
Market Value per share shall be its value as determined by the Committee, in
its sole and absolute discretion. The Committee shall maintain a written
record of its method of determining such value.
Each such NSO shall become exercisable with respect to one-fifth of the
total number of shares of Common Stock subject to the Option on the date
twelve months after the date of its grant and with respect to an additional
one-fifth of the total number of shares of Common Stock subject to the Option
at the end of each twelve-month period thereafter during the succeeding four
years. Each NSO shall expire on the date ten years after the date of grant.
SECTION 6. GRANTS OF OPTIONS TO EMPLOYEES.
6.1 GRANT. Subject to the terms of the Plan, the Committee may from
time to time grant Options, which may be ISOs or NSOs, to Key Employees of
the Company or any of its Subsidiaries. Unless otherwise expressly provided
at the time of the grant, Options granted under the Plan to Key Employees
will be ISOs.
6.2 OPTION AGREEMENT. Each Option shall be evidenced by a written
Option Agreement specifying the type of Option granted, the Option exercise
price, the terms for payment of the exercise price, the expiration date of
the Option, the number of shares of Common Stock to be subject to each Option
and such other terms and conditions established by the Committee, in its sole
discretion, not inconsistent with the Plan.
6.3 EXPIRATION. Except to the extent otherwise provided in or pursuant
to Section 7, each Option shall expire, and all rights to purchase shares of
Common Stock shall expire, on the tenth anniversary of the date on which the
Option was granted.
6.4 EXERCISE PERIOD. Except to the extent otherwise provided in or
pursuant to Section 7 or in the proviso to this sentence, Options shall
become exercisable pursuant to the following schedule: with respect to
one-fifth of the total number of shares of Common Stock subject to Option on
the date twelve months after the date of its grant and with respect to an
additional one-fifth of the total number of shares of Common Stock subject to
the Option at the end of each twelve-month period thereafter during the
succeeding four
-4-
<PAGE>
years; provided, however, that the Committee, in its sole discretion, shall
have the authority to shorten or lengthen the exercise schedule with respect
to any or all Options, or any part thereof, granted to Key Employees under
the Plan.
6.5 REQUIRED TERMS AND CONDITIONS OF ISOS. Each ISO granted to a Key
Employee shall be in such form and subject to such restrictions and other
terms and conditions as the Committee may determine, in its sole discretion,
at the time of grant, subject to the general provisions of the Plan, the
applicable Option Agreement, and the following specific rules:
(a) Except as provided in Section 6.5(d), the per share exercise
price of each ISO shall not be less than the Fair Market Value of the shares
of Common Stock on the date such ISO is granted.
(b) The aggregate Fair Market Value (determined with respect to
each ISO at the time such Option is granted) of the shares of Common Stock
with respect to which ISOs are exercisable for the first time by an
individual during any calendar year (under all incentive stock option plans
of the Company and its parent and subsidiary corporations) shall not exceed
$100,000. If the aggregate Fair Market Value (determined at the time of
grant) of the Common Stock subject to an Option, which first becomes
exercisable in any calendar year exceeds the limitation of this Section
6.5(b), so much of the Option that does not exceed the applicable dollar
limit shall be an ISO and the remainder shall be a NSO; but in all other
respects, the original Option Agreement shall remain in full force and effect.
(c) As used in this Section 5.2, the words "parent" and
"subsidiary" shall have the meanings given to them in Section 424(e) and
424(f) of the Code.
(d) Notwithstanding anything herein to the contrary, if an ISO is
granted to an individual who owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporations, within the meaning of
Section 422(b)(6) of the Code, (i) the purchase price of each share of Common
Stock subject to the ISO shall be not less than one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the date the ISO is
granted, and (ii) the ISO shall expire and all rights to purchase shares
thereunder shall cease no later than the fifth anniversary of the date the
ISO was granted.
(e) No ISOs may be granted under the Plan after ___________ 31,
2005.
(f) For purposes of this Section 5.2, the term "Fair Market Value"
shall have the same meaning as is set forth in Section 5.2, 6.
6.6 REQUIRED TERMS AND CONDITIONS OF NSOS. Each NSO granted to Key
Employees shall be in such form and subject to such restrictions and other
terms and conditions as the Committee may determine, in its sole discretion,
at the time of grant,
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<PAGE>
subject to the general provisions of the Plan and the applicable Option
Agreement, but in no event shall the per share exercise price of each NSO be
less than the Fair Market Value of the shares of Common Stock on the date the
NSO is granted.
SECTION 7. EFFECT OF TERMINATION OF EMPLOYMENT.
7.1 TERMINATION GENERALLY. Except as provided in Sections 7.2 and 7.3,
or by the Committee, in its sole discretion, any Option shall terminate on
the date of the Optionee's termination of employment with the Company and its
Subsidiaries or termination of service on the Board for any reason. An
Optionee's transfer of employment from the Company to a Subsidiary, or from a
Subsidiary to the Company, or from a Subsidiary to another Subsidiary, shall
not constitute a termination of employment for purposes of the Plan. Options
granted under the Plan shall not be affected by any change of duties in
connection with the employment of the Optionee or by leave of absence
authorized by the Company or a Subsidiary.
7.2 DEATH AND DISABILITY. In the event of an Optionee's death or
Disability (as defined below) during employment with the Company or any of
its Subsidiaries or during service on the Board, all Options held by the
Optionee shall become fully exercisable on such date of death or Disability.
Each of the Options held by such an Optionee shall expire on the earlier of:
(a) the first anniversary of the date of the Optionee's death or Disability;
and (b) the date that such Option expires in accordance with its terms. For
purposes of this Section 7.2, "Disability" shall mean the inability of an
individual to engage in any substantial gainful activity by reason of any
medical determinable physical or mental impairment which is expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. The Committee, in its
sole discretion, shall determine the date of any Disability.
7.3 RETIREMENT OF EMPLOYEES.
(a) NON-EMPLOYEE DIRECTORS. In the event the service of a
Non-Employee Director on the Board shall be terminated by reason of the
retirement of such Non-Employee Director of the Company in accordance with
the Company's retirement policy for Directors, any Options granted to such
Non-Employee Director shall continue to vest and remain exercisable pursuant
to Section 5, in the same manner and to the same extent as if such Director
had continued his or her service on the Board during such period.
(b) KEY EMPLOYEES. A Key Employee, who is also a Director, and
who terminates employment, shall continue to become vested in any Options,
provided that the service of such Key Employee on the Board continues after
such termination, and Section 7.3(a) shall be applicable to such Key Employee
upon the subsequent termination of service as a Director. A Key Employee,
who terminates employment due to Retirement shall be continue to become
vested in any Options in the same manner and to the same extent as if such
Key Employee had continued his or her employment with the Company. For
-6-
<PAGE>
purposes of this subsection, the term "Retirement" shall mean the termination
of employment on or after the attainment of the Key Employee's Normal or
Early Retirement Date, as defined in the Company's Employee Stock Ownership
Plan. Any ISO granted to a Key Employee shall convert to an NSO if exercised
more than three months after Retirement.
SECTION 8. EXERCISE OF OPTIONS.
8.1 NOTICE. A person entitled to exercise an Option may do so by
delivery of a written notice to that effect specifying the number of shares
of Common Stock with respect to which the Option is being exercised and any
other information the Committee may prescribe. The notice shall be
accompanied by payment as described in Section 8.2. The notice of exercise
shall be accompanied by the Optionee's copy of the writing or writings
evidencing the grant of the Option. All notices or requests provided for
herein shall be delivered to the Secretary of the Company.
8.2 EXERCISE PRICE. Except as otherwise provided in the Plan or in any
Option Agreement, the Optionee shall pay the purchase price of the shares of
Common Stock upon exercise of any Option: (a) in cash; (b) in cash received
from a broker-dealer to whom the Optionee has submitted an exercise notice
consisting of a fully endorsed Option (however, in the case of an Optionee
subject to Section 16 of the 1934 Act, this payment option shall only be
available to the extent such insider complies with Regulation T issued by the
Federal Reserve Board); (c) by delivering shares of Common Stock having an
aggregate Fair Market Value on the date of exercise equal to the Option
exercise price; (d) by directing the Company to withhold such number of
shares of Common Stock otherwise issuable upon exercise of such Option having
an aggregate Fair Market Value on the date of exercise equal to the Option
exercise price, provided that the Optionee supplies such attestation of
previously acquired shares as the Committee may, in its discretion, require;
(e) in the case of a Key Employee, by such other medium of payment as the
Committee, in its discretion, shall authorize at the time of grant; or (f) by
any combination of (a), (b), (c), (d) and (e). In the case of an election
pursuant to (a) or (b) above, cash shall mean cash or a check issued by a
federally insured bank or savings and loan, and made payable to the Company.
In the case of payment pursuant to (b), (c) or (d) above, the Optionee's
election must be made on or prior to the date of exercise and shall be
irrevocable. In the case of an Optionee who is subject to Section 16 of the
1934 Act and who elects payment pursuant to (d) above, the election must be
made in writing either: (i) within the ten (10) business days beginning on
the third business day following release of the Company's quarterly or annual
summary of earnings and ending on the twelfth business day following such
day; or (ii) at least six (6) months prior to the date of exercise of such
Option. In lieu of a separate election governing each exercise of an Option,
an Optionee may file a blanket election with the Committee which shall govern
all future exercises of Options until revoked by the Optionee. The Company
shall issue, in the name of the Optionee, stock certificates representing the
total number of shares of Common Stock issuable pursuant to the exercise of
any Option as soon as reasonably practicable after such exercise, provided
that any shares
-7-
<PAGE>
of Common Stock purchased by an Optionee through a broker-dealer pursuant to
clause (b) above shall be delivered to such broker-dealer in accordance with
12 C.F.R. Section 220.3(e)(4) or other applicable provision of law.
8.3 TAXES GENERALLY. At the time of the exercise of any Option, as a
condition of the exercise of such Option, the Company may require the
Optionee to pay the Company an amount equal to the amount of the tax the
Company or any Subsidiary may be required to withhold to obtain a deduction
for federal and state income tax purposes as a result of the exercise of such
Option by the Optionee or to comply with applicable law.
8.4 PAYMENT OF TAXES. At any time when an Optionee is required to pay
an amount required to be withheld under applicable income tax or other laws
in connection with the exercise of an Option the Optionee may satisfy this
obligation in whole or in part by: (a) directing the Company to withhold
such number of shares of Common Stock otherwise issuable upon exercise of
such Option having an aggregate Fair Market Value on the date of exercise
equal to the amount of tax required to be withheld; or (b) delivering shares
of Common Stock of the Company having an aggregate Fair Market Value equal to
the amount required to be withheld. In the case of payment of taxes pursuant
to (a) or (b) above, the Optionee's election must be made on or prior to the
date of exercise and shall be irrevocable. The Committee may disapprove any
election or delivery or may suspend or terminate the right to make elections
or deliveries. In the case of an Optionee who is subject to Section 16 of
the 1934 Act, an election to withhold shares of Common Stock must be made in
writing either: (a) six months prior to the exercise date; (b) during a
period beginning on the third business day following the date of release for
publication of the Company's quarterly or annual summary consolidated
statements of revenue and income and ending on the twelfth business day
following such date; or (c) more than six months and one day from the later
of the date of the grant of the Option hereunder to such person or the date
of the most recent transaction by such person which is treated as a purchase
of the Common Stock of the Company pursuant to the 1934 Act and the rules and
regulations thereunder, and which is not exempt from Section 16(b) of the
1934 Act. In lieu of a separate election governing each exercise of an
Option, an Optionee may file a blanket election with the Committee which
shall govern all future exercises of Options until revoked by the Optionee.
SECTION 9. TRANSFERABILITY OF OPTIONS.
No Option granted pursuant to the Plan shall be transferable otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code. Notwithstanding
the preceding sentence, an Option Agreement for NSOs may provide that the
Optionee, at any time prior to his death, may assign all or any portion of an
Option granted to him to (i) his spouse or lineal descendant, (ii) the
trustee of a trust for the primary benefit of his spouse or lineal
descendant, (iii) a partnership of which his spouse and lineal descendants
are the only partners, or (iv) a tax exempt organization as described in Code
Section 501(c)(3). In such event, the spouse, lineal
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<PAGE>
descendant, trustee, partnership or tax exempt organization will be entitled
to all of the rights of the Optionee with respect to the assigned portion of
such Option, and such portion of the Option will continue to be subject to
all of the terms, conditions and restrictions applicable to the Option, as
set forth herein and in the related Option Agreement immediately prior to the
effective date of the assignment. Any such assignment will be permitted only
if: (i) the Optionee does not receive any consideration therefore; and (ii)
the assignment is expressly permitted by the applicable Agreement as approved
by the Committee. Any such assignment shall be evidenced by an appropriate
written document executed by the Optionee, and a copy thereof shall be
delivered to the Company on or prior to the effective date of the assignment.
SECTION 10. RIGHTS AS STOCKHOLDER.
An Optionee or a transferee of an Optionee pursuant to Section 9 shall
have no rights as a stockholder with respect to any Common Stock covered by
an Option or receivable upon the exercise of an Option until the Optionee or
transferee shall have become the holder of record of such Common Stock, and
no adjustments shall be made for dividends in cash or other property or other
distributions or rights in respect to such Common Stock for which the record
date is prior to the date on which the Optionee shall have in fact become the
holder of record of the shares of Common Stock acquired pursuant to the
Option.
SECTION 11. POSTPONEMENT OF EXERCISE.
The Committee may postpone any exercise of an Option for such time as
the Committee in its sole discretion may deem necessary in order to permit
the Company (a) to effect, amend or maintain any necessary registration of
the Plan or the shares of Common Stock issuable upon the exercise of an
Option under the Securities Act of 1933, as amended, or the securities laws
of any applicable jurisdiction, (b) to permit any action to be taken in order
to (i) list such shares of Common Stock on a stock exchange if shares of
Common Stock are then listed on such exchange or (ii) comply with
restrictions or regulations incident to the maintenance of a public market
for its shares of Common Stock, including any rules or regulations of any
stock exchange on which the shares of Common Stock are listed, or (c) to
determine that such shares of Common Stock and the Plan are exempt from such
registration or that no action of the kind referred to in (b)(ii) above needs
to be taken; and the Company shall not be obligated by virtue of any terms
and conditions of any Option or any provision of the Plan to recognize the
exercise of an Option or to sell or issue shares of Common Stock in violation
of the Securities Act of 1933 or the law of any government having
jurisdiction thereof. Any such postponement shall not extend the term of an
Option and neither the Company nor its directors or officers shall have any
obligation or liability to an Optionee, to the Optionee's successor or to any
other person with respect to any shares of Common Stock as to which the
Option shall lapse because of such postponement.
SECTION 12. TERMINATION OR AMENDMENT OF PLAN.
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The Board or the Committee may terminate, suspend, or amend the Plan, in
whole or in part, from time to time, without the approval of the stockholders
of the Company to the extent allowed by law, provided, however, that (a) no
Plan amendment shall be effective until approved by the stockholders of the
Company insofar as stockholder approval thereof is required in order for the
Plan to continue to satisfy the requirements of Rule 16b-3 under the 1934
Act, and (b) the provisions of the Plan applicable to Non-Employee Directors
may not be amended more than once every six (6) months, except to comply with
changes in the , or the rules and regulations promulgated thereunder.
The Committee may correct any defect or supply an omission or reconcile
any inconsistency in the Plan or in any Option granted hereunder in the
manner and to the extent it shall deem desirable, in its sole discretion, to
effectuate the Plan.
No amendment or termination of the Plan shall in any manner affect any
Option theretofore granted without the consent of the Optionee, except that
the Committee may amend the Plan in a manner that does affect Options
theretofore granted upon a finding by the Committee that such amendment is in
the best interest of holders of outstanding Options affected thereby.
This Plan is intended to comply with all applicable requirements of Rule
16b-3 or its successors under the 1934 Act, insofar as participants subject
to Section 16 of the 1934 Act are concerned. To the extent any provision of
the Plan does not so comply, the provision shall, to the extent permitted by
law and deemed advisable by the Committee, be deemed null and void with
respect to such participants.
SECTION 13. EFFECTIVE DATE.
The Plan shall be effective upon the date of its adoption by the Board,
subject to the approval of the Plan by an affirmative vote of a majority of
the shares of the voting stock of the Company entitled to be voted by the
holders of stock represented at a duly held stockholders' meeting, within 12
months before or after the date of adoption. Options may be granted under
the Plan prior, but subject, to approval of the Plan by stockholders of the
Company and, in each such case, the date of grant shall be determined without
reference to the date of approval of the Plan by the stockholders of the
Company.
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(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed
a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
15. SEVERABILITY. If, for any reason, any provision of this Agreement,
or any part of any provision, is held invalid, such invalidity shall not
affect any other provision of this Agreement or any part of such provision
not held so invalid, and each such other provision and part thereof shall to
the full extent consistent with law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY. The headings of sections and paragraphs
herein are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware, unless otherwise specified herein.
18. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators sitting in a location selected
by the executive within fifty (50) miles from the location of the
Institution, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that Executive
shall be entitled to seek specific performance of her right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
19. PAYMENT OF COSTS AND LEGAL FEES AND REINSTATEMENT OF BENEFITS. In
the event any dispute or controversy arising under or in connection with
Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the
payment of: (1) all legal fees incurred by Executive in resolving such
dispute or controversy, and (2) any back-pay, including salary, bonuses and
any other cash compensation, fringe benefits and any compensation and
benefits due Executive under this Agreement.
20. INDEMNIFICATION. The Holding Company shall provide Executive
(including her heirs, executors and administrators) with coverage under a
standard directors' and officers' liability insurance policy at its expense
and shall indemnify Executive (and her heirs, executors and administrators)
to the fullest extent permitted under Delaware law against all expenses and
liabilities reasonably incurred by her in connection with or arising out of
any action, suit or proceeding in which she may be involved by reason of her
having been a director or officer of the Holding Company (whether or not she
continues to be a director
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or officer at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments, court
costs and attorneys' fees and the cost of reasonable settlements.
21. SUCCESSOR TO THE HOLDING COMPANY. The Holding Company shall require
any successor or assignee, whether direct or indirect, by purchase, merger,
consolidation or otherwise, to all or substantially all the business or
assets of the Institution or the Holding Company, expressly and
unconditionally to assume and agree to perform the Holding Company's
obligations under this Agreement, in the same manner and to the same extent
that the Holding Company would be required to perform if no such succession
or assignment had taken place.
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SIGNATURES
IN WITNESS WHEREOF, CGB&L Financial Group, Inc., has caused this
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer and its directors, and Executive has signed this
Agreement, on the _______ day of _____________________, 1998.
ATTEST: CGB&L FINANCIAL GROUP, INC.
__________________________________ By:_______________________________
(Name) (Name)
Secretary For the Board of Directors
(SEAL)
WITNESS:
__________________________________ By:_______________________________
MARALYN F. HECKMAN
Executive
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CGB&L FINANCIAL GROUP, INC.
MANAGEMENT DEVELOPMENT AND RECOGNITION
PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.1 CGB&L Financial Group, Inc., (the "Company") hereby establishes the
Management Development and Recognition Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this Management
Development and Recognition Plan and Trust Agreement (the "Agreement").
1.2 The Trustees hereby accept this Trust and agree to hold the Trust
assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.1 The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing such key employees with a proprietary
interest in the Company as compensation for their contributions to the
Company and its Subsidiaries and as an incentive to make such contributions
in the future.
ARTICLE III
DEFINITIONS
The following words and phrases, when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have
the meanings set forth below. Whenever appropriate, the masculine pronoun
shall include the feminine pronoun and the singular shall include the plural.
3.1 "Bank" means Cerro Gordo Building and Loan, s.b., an Illinois
state-chartered savings bank, and its successors and assigns. The Bank, with
the consent of the Board, has agreed to participate in this Plan.
3.2 "Beneficiary" means the person or persons designated by a Recipient
to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time
to time by similar written notice to the Committee. In the absence of a
written designation, the Beneficiary shall be the Recipient's surviving
spouse, if any, or if none, the Recipient's estate.
<PAGE>
3.3 "Board" means the Board of Directors of the Company.
3.4 "Committee" means the Committee appointed by the Board pursuant to
Article IV hereof.
3.5 "Common Stock" means shares of the common stock, $.01 par value per
share, of the Company.
3.6 "Company" means CGB&L Financial Group, Inc., a Bank Holding Company
registered under Section 3(a)(1) of the Bank Holding Company Act of 1956, as
amended, that owns 100% of the Capital Stock of Cerro Gordo Building and
Loan, s.b.
3.7 "Director" means a member of the Board of Directors of the Company
or the Bank.
3.8 "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of a Recipient to perform the work
customarily assigned to him. A medical doctor selected or approved by the
Board must advise the Committee that it is either not possible to determine
when such Disability will terminate or that it appears probable that such
Disability will be permanent during the remainder of the Recipient's lifetime.
3.9 "Effective Date" means the date shareholders of the Company approve
the Plan.
3.10 "Employee" means any person who is currently employed by the
Company, the Bank or a Subsidiary, including officers.
3.11. "Plan Shares" means shares of Common Stock held in the Trust and
issued or issuable to a Recipient pursuant to the Plan.
3.12. "Plan Share Award" means a right granted under this Plan to earn
Plan Shares.
3.13. "Recipient" means an Employee who receives a Plan Share Award
under the Plan.
3.14. "Retirement" means retirement at the Normal or Early Retirement
Date as set forth in the Cerro Gordo Building and Loan, s.b., Employee Stock
Ownership Plan.
3.15. "Subsidiary" means any other entity of which the Company is the
direct or indirect beneficial owner of not less than fifty percent (50%) of
all issued and outstanding equity interests. A Subsidiary may, with the
consent of the Board, agree to participate in this Plan.
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3.16. "Trustee" means those persons (normally members of the Committee)
nominated by the Committee and approved by the Board pursuant to Sections 4.1
and 4.2 to hold legal title to the Plan assets for the purposes set forth
herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.1 ROLE OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, which shall have all of the powers allocated to
it in this and other Sections of the Plan. Members of the Committee shall
not be eligible to receive a Plan Share Award. The Committee shall have the
power to interpret and construe the terms and provisions of the Plan or of
any Plan Share Award granted hereunder, and all such interpretations and
constructions by the Committee shall be final and binding. The Committee
shall act by vote or written consent of a majority of its members. Subject
to the express provisions and limitations of the Plan, the Committee may
adopt such rules, regulations and procedures as it deems appropriate for the
conduct of its affairs. The Committee shall report its actions and decisions
with respect to the Plan to the Board at appropriate times, but in no event
less than one time per calendar year. The Committee shall appoint one or
more individuals (normally from among its members) to act as Trustees in
accordance with the provisions of this Plan and Trust and the terms of
Article VIII hereof.
4.2 ROLE OF THE BOARD. The members of the Committee and the Trustee or
the Trustees shall be appointed or approved by the Board. The Board may, in
its discretion, from time to time, remove members from or add members to the
Committee and may remove, replace or add Trustees. The Board may not revoke
any Plan Share Award already made. Members of the Board who are eligible
for, or who have been granted, Plan Share Awards may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the
existence of the quorum at any meeting of the Board during which actions with
regard thereto are taken).
4.3 LIMITATION ON LIABILITY. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards it grants. If a member of the
Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Company
and its Subsidiaries shall indemnify such member against expense (including
attorney's fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such member in connection with such action, suit
or proceeding if the member acted in good faith and in the manner he
reasonably believed to be in the best interests of the Company and its
Subsidiaries and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
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<PAGE>
ARTICLE V
CONTRIBUTIONS
5.1 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company and its Subsidiaries to the Trust established under this Plan. Such
amounts shall be paid to the Trust at the time of contribution. No
contributions by Employees or Recipients shall be permitted.
5.2 INVESTMENT OF TRUST ASSETS AFTER CONVERSION. The Trustee shall
invest the Trust's assets exclusively in the Company's Common Stock PROVIDED,
HOWEVER, that the Trust shall not purchase more than 4% of the total shares
of Common Stock issued. Any earnings received with respect to Common Stock
held by the Plan shall be held in an interest bearing account. Any earnings
received with respect to Common Stock subject to a Plan Share Award shall be
held in an interest bearing account on behalf of the individual Recipient.
ARTICLE VI
ELIGIBILITY AND ALLOCATIONS
6.1 ELIGIBILITY. Officers and key management Employees of the Company,
the Bank and its Subsidiaries are eligible to receive Plan Share Awards.
Non-employee Directors may receive Plan Share Awards only pursuant to Article
XI hereof.
6.2 ALLOCATIONS. The Committee shall determine which of the Employees
referenced in 6.1 above will be granted Plan Share Awards and the number of
Shares covered by each Award, PROVIDED, HOWEVER, that the number of Shares
covered by such Awards may not exceed the number of shares purchased by the
Trustee prior to the grant of such Awards, and PROVIDED FURTHER that in no
event shall any Awards be made which will violate the Certificate of
Incorporation or Bylaws of the Company, the Federal Stock Charter or Bylaws
or Plan of Conversion of the Bank, or any applicable federal or state law or
regulation. In the event Plan Shares are forfeited for any reason, the
Committee may determine which of the Employees will be granted additional
Plan Shares to be awarded from forfeited Plan Shares. In selecting those
Employees to whom Plan Share Awards will be granted and the number of Shares
covered by such Awards, the Committee shall consider the position and
responsibilities of the eligible Employees, the value of their services to
the Company and the Bank and its Subsidiaries, and any other factors the
Committee may deem relevant, including the recommendations of the Chairman of
the Board.
6.3 FORM OF ALLOCATION. As promptly as practicable after a
determination is made pursuant to Section 6.2 that a Plan Share Award is to
be issued, the Committee shall notify the Recipient in writing of the grant
of the Award, the number of Plan Shares covered by the Award and the terms
upon which the Plan Shares subject to the Award may be earned. The date on
which the Committee so notifies the Recipient shall be considered the date of
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<PAGE>
grant of the Plan Share Award. The Committee shall maintain records as to
all grants of Plan Share Awards under the Plan.
6.4 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary
in Sections 6.1 and 6.2, no Employee shall have any right or entitlement to
receive a Plan Share Award hereunder, such Awards being at the total
discretion of the Committee, nor shall the salaried Employees as a group have
such a right.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES
VOTING RIGHTS
7.1 EARNING PLAN SHARES; FORFEITURES. Unless the Committee shall
specifically state to the contrary at the time a Plan Share Award is granted,
Plan Shares subject to an Award shall be earned by a Recipient in five equal
annual installments over the first five years after the date of grant, if the
Employee remains employed with the Company or a Subsidiary continuously
throughout such period, PROVIDED, HOWEVER, that the Committee may provide for
a less rapid earnings rate than that set forth herein for all Awards or for
any given Award. If the employment of a Recipient is terminated prior to the
fifth anniversary (or such later date as the Committee shall determine) of
the date of grant of an Award for any reason (except as specifically provided
in subsections 7.1(a) and 7.1(b) below), the Recipient shall forfeit the
right to earn any shares subject to the Award which have not theretofore been
earned. No fractional shares shall be issued.
(a) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY.
Notwithstanding the general rule contained in this Section, Plan Shares
subject to a Plan Share Award held by a Recipient whose employment with the
Company or a Subsidiary terminates due to Death or Disability, or any part of
such Award that has not theretofore been earned, shall be deemed earned as of
the Recipient's last day of employment with the Company or a Subsidiary.
(b) REVOCATION FOR MISCONDUCT. Notwithstanding anything herein to
the contrary, the Board may, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to
the Recipient, whether or not yet earned, in the case of an Employee or
Director who is discharged from the Company or a Subsidiary for cause (as
hereinafter defined), or who is discovered after termination of employment to
have engaged in conduct that would have justified termination for cause.
"Cause" is defined as personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties, or the willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) which results in a material loss
to the Company or its Subsidiaries, or final cease and desist order.
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7.2 DISTRIBUTION OF PLAN SHARES. Plan Shares shall be distributed to
the Recipient or his Beneficiary, as the case may be, as soon as is
practicable after a Plan Share Award is earned pursuant to Section 7.1. All
Plan Shares shall be distributed in the form of Common Stock. One share of
Common Stock shall be given for each Plan Share earned and payable.
7.3 VOTING AND DIVIDEND RIGHTS. No Recipient shall have any voting or
dividend rights or other rights of a stockholder with respect to any Plan
Shares covered by a Plan Share Award prior to the time said Plan Shares are
actually distributed to him. When cash dividends are paid with respect to
Plan Shares allocated to a Recipient, such Recipient shall be entitled to
receive an amount equal to such cash dividend. Stock dividends with respect
to shares allocated to a Recipient shall be distributed when the Plan Shares
with respect to which they are declared are so distributable.
ARTICLE VIII
TRUST
8.1 TRUST. The Trustees shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.2 MANAGEMENT OF TRUST. It is the intent of this Plan and Trust that
the Trustees shall have complete authority and discretion with respect to the
management, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustees determined that the
holding of monies in cash or cash equivalents is necessary to meet the
obligations of the Trust. In performing their duties, the Trustees shall
have the power to do all things and execute such instruments as may be deemed
necessary or proper, including the following powers:
(a) To invest up to 100% of all Trust assets in Common Stock of
the Company without regard to any law now or hereafter in force limiting
investments for trustees or other fiduciaries. The investment authorized
herein may constitute the only investment of the Trust and Common Stock shall
be newly issued shares, Treasury shares or shares purchased by the Plan in
the open market.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above in such savings accounts, deposits and certificates
of deposit (including those issued by the Company or a Subsidiary),
obligations of the United States government or its agencies or such other
investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
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(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be, in
the opinion of the Trustees, reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representations as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed, to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in
common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustees
shall not be required to make any inventory, appraisal or settlement or
report to any court, or to secure any order of court for the exercise of any
power herein contained, or give bond.
8.3 RECORDS AND ACCOUNTS. The Trustees shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall
be available at all reasonable times for inspection by any legally entitled
person or entity to the extent required by applicable law, or any other
person determined by the Committee.
8.4 EARNINGS. All earnings, gains and losses with respect to Trust
assets shall be allocated, in accordance with a reasonable procedure adopted
by the Committee, to bookkeeping accounts for Recipients or to the general
account of the Trust, depending on the nature and allocation of the assets
generating such earnings, gains and losses. In particular, any earnings on
cash dividends received with respect to shares of Common Stock shall be
allocated to accounts for Recipients, if such shares are the subject of
outstanding Plan Share Awards, or, otherwise to a reserve established by the
Plan.
8.5 EXPENSES. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Company and its
Subsidiaries.
8.6 INDEMNIFICATION. The Company and its Subsidiaries shall indemnify,
defend and hold the Trustees harmless against all claims, expenses and
liabilities arising out of or related to the exercise of the Trustees' powers
and the discharge of their duties hereunder, unless the same shall be due to
their gross negligence or willful misconduct.
ARTICLE IX
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COMPANY INSOLVENCY
9.1 PAYMENT CESSATION. The Trustee shall cease payment of benefits to
Plan Recipients and their beneficiaries if the Company is Insolvent. The
Company shall be considered "Insolvent" for purposes of the Trust if: (i)
the Company is unable to pay its debts as they become due, or (ii) the
Company is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
9.2 GENERAL CREDITORS. At all times during the continuance of the
Trust, the principal and income of the Trust shall be subject to claims of
general creditors of the Holding Company under federal and state law as set
forth below.
(a) The Board shall have the duty to inform the Trustee in writing
of the Company's Insolvency. If a person claiming to be a creditor of the
Company alleges in writing to the Trustee that the Company has become
Insolvent, the Trustee shall determine whether the Company is Insolvent and,
pending such determination, the Trustee shall discontinue payment of benefits
to Plan Recipients or their beneficiaries.
(b) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to
be a creditor alleging that the Company is Insolvent, the Trustee shall have
no duty to inquire whether the Company is Insolvent. The Trustee may in all
events rely on such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a reasonable
basis for making a determination concerning the Company's solvency.
(c) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan Recipients or their
beneficiaries and shall hold the assets of the Trust for the benefit of the
Company's general creditors. Nothing in this Trust shall in any way diminish
any rights of Plan Recipients or their beneficiaries to pursue their rights
as general creditors of the Company with respect to benefits due under the
Plan or otherwise.
(d) The Trustee shall resume the payment of benefits to Plan
Recipients or their beneficiaries only after the Trustee has determined that
the Company is not Insolvent (or is no longer Insolvent).
9.3 PAYMENT RESUMPTION. Provided that there are sufficient assets, if
the Trustee discontinues the payment of benefits from the Trust pursuant to
Section 9.1 and subsequently resumes such payments, the first payment
following the discontinuance shall include the aggregate amount of all
payments due to Plan Recipients or their beneficiaries under the terms of the
Plans for the period of the discontinuance, less the aggregate amount of any
payments made to Plan Recipients or their beneficiaries by the Company in
lieu of the payments provided for hereunder during the period of
discontinuance.
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ARTICLE X
MISCELLANEOUS
10.1 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution,
at any time, amend or terminate the Plan. The power to amend or terminate
shall include the power to direct the Trustees to return to the Company or
the Bank all or any part of the assets of the Trust, as well as shares of
Common Stock and other assets subject to Plan Share Awards but not yet earned
by the Employees to whom they are allocated.
10.2 NONTRANSFERABLE. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Recipient and, during the lifetime of the Recipient,
Plan Shares may only be earned by and paid to the Recipient who was notified
in writing of the Award by the Committee pursuant to Section 6.3. No
Recipient or Beneficiary shall have any right in or claim to any assets of
the Plan or Trust, nor shall the Company or any Subsidiary be subject to any
claim for benefits hereunder.
10.3 EMPLOYMENT RIGHTS. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustees, the
Committee or the Board in connection with the Plan shall create any right on
the part of any Employee to continue in the employ of the Company, the Bank
or a Subsidiary.
10.4 GOVERNING LAW. The Plan and Trust shall be governed by the laws of
the State of Illinois.
10.5 TERM OF PLAN. This Plan shall remain in effect until the earlier
of: (1) termination by the Board of Directors; (2) the distribution to
Recipients, Beneficiaries, the Company or the Bank of all assets of the
Trust; or (3) 21 years from the Effective Date. Termination of the Plan
shall not, unless expressly specified, affect any Plan Share Awards
previously granted, and such Awards shall remain valid and in effect until
they have been paid, or by their terms expire or are forfeited.
ARTICLE XI
OUTSIDE DIRECTOR AWARDS
Each non-Employee Director on the Effective Date shall be granted a Plan
Share Award equal to ______________ shares, subject to availability, to vest
in five equal annual installments beginning with the first anniversary of the
Effective Date.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers and the corporate seal to be affixed and duly
attested, all on this ______ day of _________________________, 199____.
CGB&L FINANCIAL GROUP, INC.
By: ________________________________
Its: ________________________________
ATTEST:
___________________________
Its: Secretary
IN WITNESS WHEREOF, the following members of the Committee execute this
Agreement, in their individual capacities, as Trustees, accepting and binding
themselves to undertake and perform the obligations and duties of the
Trustees hereunder and consenting to the foregoing Plan and Trust Agreement.
By: ________________________________
(Member)
By: ________________________________
(Member)
By: ________________________________
(Member)
-10-
<PAGE>
FORM OF
CGB&L FINANCIAL GROUP, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made effective as of _____________, by and
between CGB&L Financial Group, Inc., (the "Holding Company"), a corporation
organized under the laws of Delaware, with its principal offices at 229 East
South Street, Cerro Gordo, Illinois 61818, and Maralyn F. Heckman("Executive").
Any reference to "Institution" herein shall mean Cerro Gordo Building and Loan,
s.b., or any successor thereto.
WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the Holding
Company on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES. During the period of Executive's
employment hereunder, Executive agrees to serve as the President of the Holding
Company. The Executive shall render administrative and management services to
the Holding Company such as are customarily performed by persons in a similar
executive capacity. During said period, Executive also agrees to serve, if
elected, as an officer and director of any subsidiary of the Holding Company.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written and shall
continue for a period of thirty-six (36) full calendar months thereafter.
Commencing on the date of the execution of this Agreement, the term of this
Agreement shall be extended for one day each day until such time as the board of
directors of the Holding Company (the "Board") or Executive elects not to extend
the term of the Agreement by giving written notice to the other party in
accordance with Section 8 of this Agreement, in which case the term of this
Agreement shall be fixed and shall end on the third anniversary of the date of
such written notice.
(b) During the period of Executive's employment hereunder, except for
periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all her
business time, attention, skill and efforts to the faithful performance of her
duties hereunder including activities and services related to the organization,
operation and
<PAGE>
management of the Holding Company and its direct or indirect subsidiaries
("Subsidiaries") and participation in community and civic organizations;
provided, however, that, with the approval of the Board, as evidenced by a
resolution of such Board, from time to time, Executive may serve, or continue to
serve, on the boards of directors of, and hold any other offices or positions
in, companies or organizations, which, in such Board's judgment, will not
present any conflict of interest with the Holding Company or its Subsidiaries,
or materially affect the performance of Executive's duties pursuant to this
Agreement.
(c) Notwithstanding anything herein contained to the contrary,
Executive's employment with the Holding Company may be terminated by the Holding
Company or Executive during the term of this Agreement, subject to the terms and
conditions of this Agreement. However, Executive shall not perform, in any
respect, directly or indirectly, during the pendency of her temporary or
permanent suspension or termination from the Institution, duties and
responsibilities formerly performed at the Institution as part of her duties and
responsibilities as President of the Holding Company.
3. COMPENSATION AND REIMBURSEMENT.
(a) The Executive shall be entitled to a salary from the Holding
Company or its Subsidiaries of $40,000 per year ("Base Salary"). Base Salary
shall include any amounts of compensation deferred by Executive under any
qualified or unqualified plan maintained by the Holding Company and its
Subsidiaries. Such Base Salary shall be payable monthly. Pursuant to Section
11.(b) of this Agreement, the Holding Company and the Association may allocate
Base Salary payments between the Holding Company and its Subsidiaries based on
the Executive's activities for each organization. During the period of this
Agreement, Executive's Base Salary shall be reviewed at least annually; the
first such review will be made no later than one year from the date of this
Agreement. Such review shall be conducted by the Board or by a Committee of the
Board delegated such responsibility by the Board. The Committee or the Board
may increase Executive's Base Salary. Any increase in Base Salary shall become
the "Base Salary" for purposes of this Agreement. In addition to the Base
Salary provided in this Section 3.(a), the Holding Company shall also provide
Executive, at no premium cost to Executive, with all such other benefits as
provided uniformly to permanent full-time employees of the Holding Company and
its Subsidiaries.
(b) The Executive shall be entitled to participate in any employee
benefit plans, arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, and the Holding Company
and its Subsidiaries will not, without Executive's prior written consent, make
any changes in such plans, arrangements or perquisites which would materially
adversely affect Executive's rights or benefits thereunder, except to the extent
that such changes are made applicable to all Holding Company and Institution
employees eligible to participate in such plans, arrangements and perquisites on
a non-discriminatory basis. Without limiting the generality of the foregoing
provisions of this Subsection 3.(b), Executive shall be entitled to participate
in or receive benefits under any employee benefit plans, including, but not
limited to, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, stock or option plans, health-and-accident plans, medical
coverage or any other employee benefit plan or arrangement made available by the
Holding Company and its Subsidiaries in the future to its senior executives and
key management employees, subject to and on a basis consistent with the terms,
<PAGE>
conditions and overall administration of such plans and arrangements. Executive
shall be entitled to incentive compensation and bonuses as provided in any plan
or arrangement of the Holding Company and its Subsidiaries in which Executive is
eligible to participate. Nothing paid to the Executive under any such plan or
arrangement will be deemed to be in lieu of other compensation to which the
Executive is entitled under this Agreement.
(c) In addition to the Base Salary provided for by paragraph 3.(a)
and other compensation provided for by paragraph 3.(b), the Holding Company
shall pay or reimburse Executive for all reasonable travel and other reasonable
expenses incurred in the performance of Executive's obligations under this
Agreement and may provide such additional compensation in such form and such
amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any of the following: (i) the termination by
the Holding Company of Executive's full-time employment hereunder for any reason
other than termination governed by Section 5.(a) hereof, or for Cause, as
defined in Section 7 hereof (ii) Executive's resignation from the Holding
Company's employ, upon, any (A) unless consented to by the Executive, failure to
elect or reelect or to appoint or reappoint Executive as President or failure to
nominate or renominate Executive as a Director of the Institution or Holding
Company to the extent Executive was serving as a Director as of the date of this
Agreement, (B) a material change in Executive's function, duties, or
responsibilities with the Holding Company or its Subsidiaries, which change
would cause Executive's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Section 1, above, unless consented to by the Executive, (C) a reduction in the
benefits and perquisites to the Executive from those being provided as of the
effective date of this Agreement, unless consented to by the Executive, (D) a
relocation of Executive's principle place of employment by more than 25 miles
from her location immediately prior to the Event of Termination, (E) a
liquidation or dissolution of the Holding Company or the Institution, or (F)
breach of this Agreement by the Holding Company. Upon the occurrence of any
event described in clauses (A), (B), (C), (D), (E) or (F), above, Executive
shall have the right to elect to terminate her employment under this Agreement
by resignation upon not less than sixty (60) days prior written notice given
within six full calendar months after the event giving rise to said right to
elect.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Holding Company shall be obligated to
pay Executive, or, in the event of her subsequent death, her beneficiary or
beneficiaries, or her estate, as the case may be, a sum equal to the sum of: (i)
the amount of the remaining payments that the Executive would have earned if she
had continued her employment with the Institution during the remaining term of
this Agreement at the Executive's Base Salary at the Date of Termination; and
(ii) the amount equal to the annual contributions or payments that would have
been made on Executive's behalf to any employee benefit plans of the Institution
or the Holding Company during the remaining term of this Agreement based on
contributions or payments made (on an annualized basis) at the Date of
Termination. At the election of the Executive, which election is to be made
prior to a Change in Control, such payment shall be made: (a) in a lump sum as
of the Executive's Date of Termination, (b) on a bi-weekly basis in
approximately equal installments during the remaining term of the Agreement, or
(c) on an annual basis in approximately equal installments during the remaining
term of the Agreement. Such payments shall not be reduced in the event the
Executive obtains other employment following termination of employment.
<PAGE>
(c) Upon the occurrence of an Event of Termination, the Holding
Company will cause to be continued life, medical, dental and disability coverage
substantially equivalent to the coverage maintained by the Holding Company or
its Subsidiaries for Executive prior to her termination at no premium cost to
the Executive. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of the
Holding Company or the Institution shall mean an event of a nature that: (i)
would be required to be reported in response to Item l(a) of the current report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a
Change in Control of the Bank or the Holding Company within the meaning of the
Change in Bank Control Act and the Rules and Regulations promulgated by the
Federal Deposit Insurance Corporation ("FDIC") at 12 C.F.R. Section 303.4(a),
with respect to the Institution, and the Rules and Regulations promulgated by
the Board of Govenors of the Federal Reserve Board ("FRB"), with respect to the
Holding Company, as in effect on the date of this Agreement; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of voting securities of the
Institution or the Holding Company representing 20% or more of the Institution's
or the Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Institution purchased by the
Holding Company and any voting securities purchased by any employee benefit plan
of the Holding Company or its Subsidiaries, or (B) individuals who constitute
the Board on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by a
Nominating Committee solely composed of members which are Incumbent Board
members, shall be, for purposes of this clause (B), considered as though she
were a member of the Incumbent Board, or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Institution or
the Holding Company or similar transaction occurs or is effectuated in which the
Institution or Holding Company is not the resulting entity, or (D) a proxy
statement has been distributed soliciting proxies from stockholders of the
Holding Company by someone other than the current management of the Holding
Company, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Institution with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Institution or
the Holding Company shall be distributed, or (E) a tender offer is made for 20
or more of the voting securities of the Institution or Holding Company then
outstanding.
(b) If a Change in Control has occurred pursuant to Section 5.(a) or
the Board has determined that a Change in Control has occurred, Executive shall
be entitled to the benefits provided in paragraphs 5.(c) and 5.(d) upon her
subsequent termination of employment at any time during the term of this
Agreement due to (i) Executive's dismissal, or (ii) Executive's voluntary
resignation following any demotion, loss of title, office or significant
authority or responsibility,reduction in the annual compensation or material
reduction in benefits or relocation of her principal place of employment by more
than 25 miles from its location immediately prior to the change in control,
unless such termination is because of her death or termination for Cause.
(c) Upon the Executive's entitlement to benefits pursuant to
Section 5.(b), the Holding Company shall
<PAGE>
pay Executive, or in the event of her subsequent death, her beneficiary or
beneficiaries, or her estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the greater of: (i) the payments due for the
remaining term of the Agreement; or (ii) three (3) times Executive's annual
compensation for the most recently completed year. Such annual compensation
shall include Base Salary, commissions, bonuses, contributions or accruals on
behalf of Executive to any pension and profit sharing plan, any benefits to be
paid or received under any stock-based benefit plan, severance payments,
directors or committee fees and fringe benefits paid or to be paid to the
Executive during such years. At the election of the Executive, which election
is to be made prior to a Change in Control, such payment shall be made: (a) in a
lump sum, (b) on a bi-weekly basis in approximately equal installments over a
period of thirty-six (36) months following the Executive's termination, or (c)
on an annual basis in approximately equal installments over a period of
thirty-six (36) months following the Executive's termination. Such payments
shall not be reduced in the event Executive obtains other employment following
termination of employment.
(d) Upon the Executive's entitlement to benefits pursuant to
Section 5.(b), the Company will cause to be continued life, medical, dental and
long-term or other disability coverage substantially equivalent to the coverage
maintained by the Institution for Executive at no premium cost to Executive
prior to her severance. Such coverage and payments shall cease upon the
expiration of thirty-six (36) months following the Change in Control.
6. CHANGE OF CONTROL RELATED PROVISIONS. In each calendar year that
Executive is entitled to receive payments or benefits under the provisions of
this Employment Agreement, the Holding Company shall determine if an excess
parachute payment (as defined in Section 4999 of the Internal Revenue Code of
1986, as amended, and any successor provision thereto, (the "Code") exists.
Such determination shall be made after taking any reductions permitted pursuant
to Section 280G of the Code and the regulations thereunder. Any amount
determined to be an excess parachute Payment after taking into account such
reductions shall be hereafter referred to as the "Initial Excess Parachute
Payment". As soon as practicable after a Change in Control, the Initial Excess
Parachute Payment shall be determined. Upon the Date of Termination following a
Change in Control, the Holding Company shall pay Executive, subject to
applicable withholding requirements under applicable state or federal law, an
amount equal to:
(a) twenty (20) percent of the Initial Excess Parachute Payment (or
such other amount equal to the tax imposed under Section 4999 of the Code); and
(b) such additional amount (tax allowance) as may be necessary to
compensate Executive for the payment by Executive of state and federal income
and excise taxes on the payment provided under clause (a) and on any payments
under this Clause (b). In computing such tax allowance, the payment to be made
under Clause (a) shall be multiplied by the "gross up percentage" ("GUP"). The
GUP shall be determined as follows:
Tax Rate
GUP = -------------
1 - Tax Rate
The "Tax Rate" for purposes of computing the GUP shall be the sum of the highest
marginal federal and state income and employment-related tax rates, including
any applicable excise tax rates, applicable to the Executive in the year in
which the payment under Clause (1) is made
<PAGE>
(c) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the Initial Excess Parachute Payment (such different amount being hereafter
referred to as the "Determinative Excess Parachute Payment") then the Holding
Company's independent accountants shall determine the amount (the "Adjustment
Amount") the Holding Company must pay to the Executive in order to put the
Executive in the same position as the Executive would have been if the Initial
Excess Parachute Payment had been equal to the Determinative Excess Parachute
Payment. In determining the Adjustment Amount, independent accountants of the
Holding Company shall take into account any and all taxes (including any
penalties and interest) paid by or for Executive or refunded to Executive or for
Executive's benefit. As soon as practicable after the Adjustment Amount has
been so determined, the Holding Company shall pay the Adjustment Amount to
Executive. In no event however, shall Executive make any payment under this
paragraph to the Holding Company.
7. TERMINATION FOR CAUSE. The term "Termination for Cause" shall mean
termination because of: 1) Executive's personal dishonesty, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule, regulation (other
than traffic violations or similar offenses), final cease and desist order or
material breach of any provision of this Agreement which results in a material
loss to the Institution or the Holding Company, or 2) Executive's conviction of
a crime or act involving moral turpitude or a final judgement rendered against
Executive based upon actions of Executive which involve moral turpitude. For
the purposes of this Section, no act, or the failure to act, on Executive's part
shall be "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that the action or omission was in the best interests
of the Bank or its affiliates. Notwithstanding the foregoing, Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to her a Notice of Termination which shall include a copy of
a resolution duly adopted by the affirmative vote of not less than three-fourths
of the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for her,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. During the period beginning on the date
of the Notice of Termination for Cause pursuant to Section 8 hereof through the
Date of Termination, stock options and related limited rights granted to
Executive under any stock option plan shall not be exercisable nor shall any
unvested awards granted to Executive under any stock benefit plan of the
Institution, the Holding Company or any subsidiary or affiliate thereof, vest.
At the Date of Termination, such stock options and related limited rights and
any such unvested awards shall become null and void and shall not be exercisable
by or delivered to Executive at any time subsequent to such Termination for
Cause.
8. NOTICE.
(a) Any purported termination by the Holding Company or by Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
(b) "Date of Termination" shall mean the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of
<PAGE>
Termination is given); provided, however, that if a dispute regarding the
Executive's termination exists, the "Date of Termination" shall be determined in
accordance with Section 8.(c) of this Agreement.
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and; provided, further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Holding
Company will continue to pay Executive her full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue her as a participant in all compensation, benefit and
insurance plans in which she was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
9. POST-TERMINATION OBLIGATIONS. All payments and benefits to Executive
under this Agreement shall be subject to Executive's compliance with this
Section 9 for one (1) full year after the earlier of the expiration of this
Agreement or termination of Executive's employment with the Holding Company.
Executive shall, upon reasonable notice, furnish such information and assistance
to the Holding Company as may reasonably be required by the Holding Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is or may become, a party.
10. NON-COMPETITION AND NON-DISCLOSURE.
(a) Upon any termination of Executive's employment hereunder pursuant
to Section 4 hereof, Executive agrees not to compete with the Holding Company or
its Subsidiaries for a period of one (1) year following such termination in any
city, town or county in which the Executive's normal business office is located
and the Holding Company or any of its Subsidiaries has an office or has filed an
application for regulatory approval to establish an office, determined as of the
effective date of such termination, except as agreed to pursuant to a resolution
duly adopted by the Board. Executive agrees that during such period and within
said cities, towns and counties, Executive shall not work for or advise, consult
or otherwise serve with, directly or indirectly, any entity whose business
materially competes with the depository, lending or other business activities of
the Holding Company or its Subsidiaries. The parties hereto, recognizing that
irreparable injury will result to the Holding Company or its Subsidiaries, its
business and property in the event of Executive's breach of this
Subsection 10.(a), agree that in the event of any such breach by Executive, the
Holding Company or its Subsidiaries, will be entitled, in addition to any other
remedies and damages available, to an injunction to restrain the violation
hereof by Executive, Executive's partners, agents, servants, employees and all
persons acting for or under the direction of Executive. Executive represents
and admits that in the event of the termination of her employment pursuant to
Section 7 hereof, Executive's experience and capabilities are such that
Executive can obtain employment in a business engaged in other lines and/or of a
different nature than the Holding Company or its Subsidiaries, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood. Nothing herein will be construed as prohibiting the
holding Company or its Subsidiaries from pursuing
<PAGE>
any other remedies available to the Holding Company or its Subsidiaries for such
breach or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Holding Company and
its Subsidiaries as it may exist from time to time, is a valuable, special and
unique asset of the business of the Holding Company and its Subsidiaries.
Executive will not, during or after the term of her employment, disclose any
knowledge of the past, present, planned or considered, business activities of
the Holding Company and its Subsidiaries thereof to any person, firm,
corporation, or other entity for any reason or purpose whatsoever unless
expressly authorized by the Board of Directors or required by law.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Holding
Company. Further, Executive may disclose information regarding the business
activities of the Bank or Holding Company to the Commissioner of Banks and Real
Estate of the State of Illinois ("Commissioner"), FRB and the Federal Deposit
Insurance Corporation ("FDIC") pursuant to a formal regulatory request. In the
event of a breach or threatened breach by the Executive of the provisions of
this Section, the Holding Company will be entitled to an injunction restraining
Executive from disclosing, in whole or in part, the knowledge of the past,
present, planned or considered business activities of the Holding Company or its
Subsidiaries or from rendering any services to any person, firm, corporation,
other entity to whom such knowledge, in whole or in part, has been disclosed or
is threatened to be disclosed. Nothing herein will be construed as prohibiting
the Holding Company from pursuing any other remedies available to the Holding
Company for such breach or threatened breach, including the recovery of damages
from Executive.
11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid in
cash or check from the general funds of the Holding Company subject to
Section 11.(b).
(b) Notwithstanding any provision herein to the contrary, to the
extent that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement dated as of ______________,
between Executive and the Institution (the "Institution Agreement"), such
compensation payments and benefits paid by the Institution will be subtracted
from any amount due simultaneously to Executive under similar provisions of this
Agreement. Payments pursuant to this Agreement and the Institution Agreement
shall be allocated in proportion to the level of activity and the time expended
on such activities by the Executive as determined by the Holding Company and the
Institution on a quarterly basis.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS. This
Agreement contains the entire understanding between the parties hereto and
supersedes any prior employment agreement between the Holding Company or any
predecessor of the Holding Company and Executive, except for the provisions of
the Institution Agreement, and except that this Agreement shall not affect or
operate to reduce any benefit or compensation inuring to the Executive of a kind
elsewhere provided. No provision of this Agreement shall be interpreted to mean
that Executive is subject to receiving fewer benefits than those available to
her without reference to this Agreement.
13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under
this Agreement shall be
<PAGE>
subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation, or to execution, attachment, levy, or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to affect any such action shall be null, void and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit
of, Executive and the Holding Company and their respective successors and
assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
15. SEVERABILITY. If, for any reason, any provision of this Agreement, or
any part of any provision, is held invalid, such invalidity shall not affect any
other provision of this Agreement or any part of such provision not held so
invalid, and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY. The headings of sections and paragraphs
herein are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware, unless otherwise specified herein.
18. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators sitting in a location selected by
the executive within fifty (50) miles from the location of the Institution, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of her right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
19. PAYMENT OF COSTS AND LEGAL FEES AND REINSTATEMENT OF BENEFITS. In the
event any dispute or controversy arising under or in connection with Executive's
termination is resolved in favor of the Executive, whether by judgment,
arbitration or settlement, Executive shall be entitled to the payment of: (1)
all legal fees incurred by Executive in resolving such dispute or controversy,
and (2) any back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.
<PAGE>
20. INDEMNIFICATION. The Holding Company shall provide Executive
(including her heirs, executors and administrators) with coverage under a
standard directors' and officers' liability insurance policy at its expense and
shall indemnify Executive (and her heirs, executors and administrators) to the
fullest extent permitted under Delaware law against all expenses and liabilities
reasonably incurred by her in connection with or arising out of any action, suit
or proceeding in which she may be involved by reason of her having been a
director or officer of the Holding Company (whether or not she continues to be a
director or officer at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments, court
costs and attorneys' fees and the cost of reasonable settlements.
21. SUCCESSOR TO THE HOLDING COMPANY. The Holding Company shall require
any successor or assignee, whether direct or indirect, by purchase, merger,
consolidation or otherwise, to all or substantially all the business or assets
of the Institution or the Holding Company, expressly and unconditionally to
assume and agree to perform the Holding Company's obligations under this
Agreement, in the same manner and to the same extent that the Holding Company
would be required to perform if no such succession or assignment had taken
place.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, CGB&L Financial Group, Inc., has caused this Agreement
to be executed and its seal to be affixed hereunto by its duly authorized
officer and its directors, and Executive has signed this Agreement, on the
______ day of ____________, 1998.
ATTEST: CGB&L FINANCIAL GROUP, INC.
By:
[Name] [Name]
Secretary For the Board of Directors
[SEAL]
WITNESS:
By:
MARALYN F. HECKMAN
Executive
<PAGE>
FORM OF
CERRO GORDO BUILDING AND LOAN, S.B.
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made effective as of _____________________,
1998 by and among Cerro Gordo Building and Loan, s.b. (the "Institution"), a
state chartered savings institution, with its principal administrative office at
229 East South Street, Cerro Gordo, Illinois 61818, CGB&L Financial Group, Inc.,
a corporation organized under the laws of the State of Delaware, the holding
company for the Institution (the "Holding Company," Maralyn F. Heckman
("Executive").
WHEREAS, the Institution wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Institution,
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES. During the period of her employment
hereunder, Executive agrees to serve as President of the Institution. Executive
shall render administrative and management services to the Institution such as
are customarily performed by persons situated in a similar executive capacity.
During said period, Executive also agrees to serve, if elected, as an officer
and director of the Holding Company or any subsidiary of the Institution.
2. TERMS AND DUTIES.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written and shall
continue for a period of thirty-six (36) full calendar months thereafter.
Commencing on the effective date of this Agreement, the term of this Agreement
shall be extended for one day each day until such time as the disinterested
members of the board of directors of the Institution ("Board") or Executive
elects not to extend the term of this Agreement by giving written notice in
accordance with Section 8 of this Agreement. The Board will review the
Agreement and Executive's performance annually for purposes of determining
whether to extend the Agreement and the rationale and results thereof shall be
included in the minutes of the Board's meeting. The Board shall give notice to
the Executive as soon as possible after such review as to whether the Agreement
is to be extended.
(b) During the period of Executive's employment hereunder, except for
periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves
<PAGE>
of absence, Executive shall devote substantially all business time, attention,
skill, and efforts to the faithful performance of her duties hereunder including
activities and services related to the organization, operation and management of
the Institution and participation in community and civic organizations;
provided, however, that, with the approval of the Board, as evidenced by a
resolution of such Board, from time to time, Executive may serve, or continue to
serve, on the boards of directors of, and hold any other offices or positions
in, companies or organizations, which, in such Board's judgment, will not
present any conflict of interest with the Institution, or materially affect the
performance of Executive's duties pursuant to this Agreement.
(c) Notwithstanding anything herein to the contrary, Executive's
employment with the Institution may be terminated by the Institution or the
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The Institution shall pay Executive as compensation a salary
of $40,000 per year ("Base Salary"). Base Salary shall include any amounts
of compensation deferred by Executive under any qualified or unqualified plan
maintained by the Institution. Such Base Salary shall be payable monthly.
Pursuant to Section 11.(b) of this Agreement, the Holding Company and the
Association may allocate Base Salary payments between the Holding Company and
its Subsidiaries based on the Executive's activities for each organization.
During the period of this Agreement, Executive's Base Salary shall be
reviewed at least annually; the first such review will be made no later than
one year from the date of this Agreement. Such review shall be conducted by
the Board or by a Committee of the Board, delegated such responsibility by
the Board. The Committee or the Board may increase Executive's Base Salary.
Any increase in Base Salary shall become the "Base Salary" for purposes of
this Agreement. In addition to the Base Salary provided in this Section
3.(a), the Institution shall also provide Executive, at no premium cost to
Executive, with all such other benefits as are provided uniformly to
full-time employees of the Institution.
(b) The Executive shall be entitled to participate in any employee
benefit plans, arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, and the Institution will
not, without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would materially adversely affect Executive's
rights or benefits thereunder; except to the extent such changes are made
applicable to all Institution employees on a non-discriminatory basis. Without
limiting the generality of the foregoing provisions of this Subsection 3.(b),
Executive shall be entitled to participate in or receive benefits under any
employee benefit plans, including, but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans, stock or
option plans, health-and-accident plans, medical coverage or any other employee
benefit plan or arrangement made available by the Institution in the
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future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive shall be entitled to incentive compensation
and bonuses as provided in any plan or arrangement of the Institution in which
Executive is eligible to participate. Nothing paid to the Executive under any
such plan or arrangement will be deemed to be ln lieu of other compensation to
which the Executive is entitled under this Agreement.
(c) In addition to the Base Salary provided for by Section 3.(a) and
other compensation provided for by Section 3.(b), the Institution shall pay or
reimburse Executive for all reasonable travel and other reasonable expenses
incurred by Executive performing her obligations under this Agreement and may
provide such additional compensation in such form and such amounts as the Board
may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Institution or the Holding Company of Executive's full-time
employment hereunder for any reason other than a termination governed by
Section 5.(a) hereof or Termination for Cause, as defined in Section 7 hereof;
(ii) Executive's resignation from the Institution's employ upon any of the
following: (A) unless consented to by the Executive, failure to elect or
reelect or to appoint or reappoint Executive as President or failure to nominate
or re-nominate Executive as a Director of the Institution or Holding Company to
the extent Executive was serving as a Director as of the effective date of this
Agreement, (B) a material change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, unless consented to by Executive, (C) a
reduction in the benefits and perquisites to the Executive from those being
provided as of the effective date of this Agreement, unless consented to by the
Executive, (D) a relocation of Executive's principal peace of employment by more
than 25 miles from her location immediately prior to the Event of Termination,
(E) a liquidation or dissolution of the Institution or Holding Company, or
(F) breach of this Agreement by the Institution. Upon the occurrence of any
event described in clauses (A), (B), (C), (D), (E) or (F), above, Executive
shall have the right to elect to terminate her employment under this Agreement
by resignation upon not less than sixty (60) days prior written notice given
within six full months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Institution shall be obligated to pay
Executive, or, in the event of her subsequent death, her beneficiary or
beneficiaries, or her estate, as the case may be a sum equal to the sum of:
(i) the amount of the remaining payments that the
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Executive would have earned if she had continued her employment with the
Institution during the remaining term of this Agreement at the Executive's Base
Salary at the Date of Termination; and (ii) the amount equal to the annual
contributions or payments that would have been made on Executive's behalf to any
employee benefit plans of the Institution or the Holding Company or for any
benefit or perquisite which would have been provided to Executive during the
remaining term of this Agreement based on contributions or payments made (on an
annualized basis) at the Date of Termination; provided, however, that any
payments pursuant to this Section 4.(b) and Section 4.(c) below shall not, in
the aggregate, exceed three times Executive's average annual compensation for
the five most recent taxable years that Executive has been employed by the
Institution or such lesser number of years in the event that Executive shall
have been employed by the Institution for less than five years. In the event
the Institution is not in compliance with its minimum capital requirements or if
such payments pursuant to this Section 4.(b) would cause the Institution's
capital to be reduced below its minimum regulatory capital requirements, such
payments shall be deferred until such time as the Institution or successor
thereto is in capital compliance. At the election of the Executive, which elect
on is to be made prior to an Event of Termination, such payments shall be made
(a) in a lump sum as of the Executive's Date of Termination, (b) on a bi-weekly
basis in approximately equal installments during the remaining term of the
Agreement or (c) on an annual basis in approximately equal installments during
the remaining term of the Agreement. Such payments shall not be reduced in the
event the Executive obtains other employment following termination of
employment.
(c) Upon the occurrence of an Event of Termination, the Institution
will cause to be continued life, medical, dental and long-term or other
disability coverage substantially identical to the coverage maintained by the
Institution or the Holding Company for Executive prior to her termination at no
premium cost to the Executive, except to the extent such coverage may be changed
in its application to all Institution or Holding Company employees. Such
coverage shall cease upon the expiration of the remaining term of this
Agreement.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of the
Institution or Holding Company shall mean an event of a nature that: (i) would
be required to be reported in response to Item 1 of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); or
(ii) results in a Change in Control of the Institution or the Holding Company
within the meaning of the Change in Bank Control Act and the Rules and
Regulations promulgated by the Federal Deposit Insurance Corporation ("FDIC") at
12 C.F.R. Section 303.4(a), with respect to the Institution, and the Rules and
Regulations promulgated by the Board of Govenors for the Federal Reserve Board
("FRB"), with respect to the Holding Company, as in effect on the date of this
Agreement; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as
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(A) any person" (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of voting securities of the Institution
or the Holding Company representing 20% or more of the Institution's or the
Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Institution purchased by the
Holding Company and any voting securities purchased by any employee benefit plan
of the Institution or the Holding Company, or (B) individuals who constitute the
Board on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Holding Company's stockholders was approved
by the same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this clause (B), considered as though she were member of the
Incumbent Board, or (C) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Institution or the Holding Company or
similar transaction occurs in which the Institution or Holding Company is not
the resulting entity, or (D) a proxy statement has been distributed soliciting
proxies from stockholders of the Holding Company, by someone other than the
current management of the Holding Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Holding Company or
Institution or similar transaction with one or more corporations as a result of
which the outstanding shares of the class of securities then subject to such
plan or transaction are exchanged for or converted into cash or property or
securities not issued by the Institution or the Holding Company, or (E) a tender
offer is made for 20% or more of the voting securities of the Stock Institution
or Holding Company then outstanding.
(b) If a Change in Control has occurred pursuant to Section 5.(a) or
the Board has determined that a Change in Control has occurred, Executive shall
be entitled to the benefits provided in Sections 5.(c) and 5.(d) upon her
subsequent termination of employment at any time during the term of this
Agreement due to: (1) Executive's dismissal or (2) Executive's voluntary
resignation following any demotion, loss of title, office or significant
authority or responsibility, material reduction in annual compensation or
benefits or relocation of her principal place of employment by more than 25
miles from its location immediately prior to the Change in Control, unless such
termination is because of her death disability, retirement or termination or
Cause.
(c) Upon Executive's entitlement to benefits pursuant to
Section 5.(b), the Institution shall pay Executive, or in the event of her
subsequent death, her beneficiary or beneficiaries, or her estate, as the case
may be, a sum equal to the greater of: (i) the payments due for the remaining
term of the Agreement; or (ii) three (3) times Executive's average annual
compensation for the five (5) most recent taxable years that Executive has been
employed by the Institution or such lesser number of years in the event that
Executive shall have been employed by the Institution for less than five (5)
years. Such average annual compensation shall include Base Salary, commissions,
bonuses, contributions on Executive's behalf to any pension and/or profit
sharing plan, severance payments, retirement payments,
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directors or committee fees and fringe benefits paid or to be paid to the
Executive in any such year and payment of any expense items without
accountability or business purpose or that do not meet the Internal Revenue
Service requirements for deductibility by the Institution, provided, however,
that any payment under this provision and Section 5.(d) below shall not exceed
three (3) times the Executive's average annual compensation. In the event the
Institution is not in compliance with its minimum capital requirements or if
such payments would cause the Institution's capital to be reduced below its
minimum regulatory capital requirements, such payments shall be deferred until
such time as the Institution or successor thereto is in capital compliance. At
the election of the Executive, which election is to be made prior to a Change in
Control, such payment shall be made: (a) in a lump sum as of the Executive's
Date of Termination, (b) on a bi-weekly basis in approximately equal
installments over a period of thirty-six (36) months following the Executive's
termination, or (c) on an annual basis in approximately equal installments over
a period of thirty-six (36) months following the Executive's termination. Such
payments shall not be reduced in the event Executive obtains other employment
following termination of employment.
(d) Upon the Executive's entitlement to benefits pursuant to
Section 5.(b), the Institution will cause to be continued life, medical, dental
and long-term or other disability coverage substantially identical to the
coverage maintained by the Institution for Executive prior to her severance at
no premium cost to the Executive, except to the extent that such coverage may be
changed in its application for all Institution employees on a non-discriminatory
basis. Such coverage and payments shall cease upon the expiration of thirty-six
(36) months following the Date of Termination.
6. CHANGE OF CONTROL RELATED PROVISIONS.
Notwithstanding the provisions of Section 5, in no event shall the
aggregate payments or benefits to be made or afforded to Executive under said
paragraphs (the "Termination Benefits") constitute an "excess parachute payment"
under Section 280G of the Internal Revenue Code of 1986, as amended, or any
successor thereto, and in order to avoid such a result, Termination Benefits
will be reduced, if necessary, to an amount (the "Non-Triggering Amount"), the
value of which is one dollar ($1.00) less than an amount equal to three (3)
times Executive's "base amount", as determined in accordance with said
Section 280G. The allocation of the reduction required hereby among the
Termination Benefits provided by Section 5 shall be determined by Executive.
7. TERMINATION FOR CAUSE. The term "Termination for Cause" shall mean
termination because of: (1) Executive's personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, regulation
(other than traffic violations or similar offenses), final cease and desist
order or material breach of any provision of this Agreement which results in a
material loss to the Institution or the Holding Company, or (2) Executive's
conviction of a crime or act involving moral turpitude or a final judgement
rendered against Executive based upon actions of Executive which involve moral
turpitude. For the purposes of this
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Section 7, no act, or failure to act, on Executive's part shall be "willful"
unless done, or omitted to be done, not in good faith and without reasonable
belief that the action or omission was in the best interests of the Institution
or its affiliates. Notwithstanding the foregoing, Executive shall not be deemed
to have been Terminated for Cause unless and until there shall have been
delivered to her a Notice of Termination which shall include a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the members of the Board at meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for her,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after the Date of Termination for Cause. During the period beginning
on the date of the Notice of Termination for Cause pursuant to Section 8 hereof
through the Date of Termination for Cause, stock options and related limited
rights granted to Executive under any stock option plan shall not be exercisable
nor shall any unvested awards granted to Executive under any stock benefit plan
of the Institution, the Holding Company or any subsidiary or affiliate thereof,
vest. At the Date of Termination for Cause, such stock options and related
limited rights and any unvested awards shall become null and void and shall not
be exercisable by or delivered to Executive at any time subsequent to such
Termination for Cause.
8. NOTICE.
(a) Any purported termination by the Institution or by Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
(b) "Date of Termination" shall mean the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty days from the date such Notice of Termination is given); provided,
however, that if a dispute regarding the Executive's termination exists, the
"Date of Termination" shall be determined in accordance with Section 8.(c) of
this Agreement.
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and,
provided further, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues
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the resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, in the event the Executive is terminated for
reasons other than Termination for Cause, the Institution will continue to pay
Executive her Base Salary in effect when the notice giving rise to the dispute
was given until the earlier of: (1) the resolution of the dispute in accordance
with this Agreement or (2) the expiration of the remaining term of this
Agreement as determined as of the Date of Termination. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.
9. POST-TERMINATION OBLIGATIONS.
All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Institution. Executive shall, upon reasonable
notice, furnish such information and assistance to the Institution as may
reasonably be required by the Institution in connection with any litigation in
which it or any of its subsidiaries or affiliates is, or may become, a Party.
10. NON-COMPETITION AND NON-DISCLOSURE.
(a) Upon any termination of Executive's employment hereunder pursuant
to Section 4 hereof, Executive agrees not to compete with the Institution for a
period of one (1) year following such termination in any city, town or county in
which the Executive's normal business office is located and the Institution has
an office or has filed an application for regulatory approval to establish an
office, determined as of the effective date of such termination, except as
agreed to pursuant to a resolution duly adopted by the Board. Executive agrees
that during such period and within said cities, towns and counties, Executive
shall not work for or advise, consult or otherwise serve with, directly or
indirectly, any entity whose business materially competes with the depository,
lending or other business activities of the Institution. The parties hereto,
recognizing that irreparable injury will result to the Institution, its business
and property in the event of Executive's breach of this Section 10.(a), agree
that in the event of any such breach by Executive, the Institution, will be
entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive, Executive's partners,
agents, servants, employees and all persons acting for or under the direction of
Executive. Nothing herein will be construed as prohibiting the Institution from
pursuing any other remedies available to the Institution for such breach or
threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Institution and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the Institution. Executive will not, during
or after the term of her employment, disclose any knowledge of the past,
present, planned or considered business activities of the Institution
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or affiliates thereof to any person, firm, corporation, or other entity for any
reason or purpose whatsoever. Notwithstanding the foregoing, Executive may
disclose any knowledge of banking, financial and/or economic principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Institution. Further, Executive may disclose
information regarding the business activities of the Institution to the
Commissioner of Banks and Real Estate of the State of Illinois ("Commissioner"),
FRB and the FDIC pursuant to a formal regulatory request. In the event of a
breach or threatened breach by Executive of the provisions of this Section, the
Institution will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Institution or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the Institution from
pursuing any other remedies available to the Institution for such breach or
threatened breach, including the recovery of damages from Executive.
11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid in
cash or check from the general funds of the Institution. The Holding Company,
however, unconditionally guarantees payment and provision of all amounts and
benefits due hereunder to Executive and, if such amounts and benefits due from
the Institution are not timely paid or provided by the Institution, such amounts
and benefits shall be paid or provided by the Holding Company.
(b) Notwithstanding any provision herein to the contrary, to the
extent that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement effective as of
____________, 1998, between Executive and the Holding Company (the "Holding
Company Agreement"), such compensation payments and benefits paid by the Holding
Company will be subtracted from any amounts due simultaneously to Executive
under similar provisions of this Agreement. Payments pursuant to this Agreement
and the Holding Company Agreement shall be allocated in proportion to the
services rendered and time expended on such activities by Executive as
determined by the Holding Company and the Institution on a quarterly basis.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
Ther Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Institution or any
predecessor of the Institution and Executive, except for the provisions of the
Holding Company Agreement, and except that this Agreement shall not affect or
operate to reduce any benefit or compensation inuring to executive of a kind
elsewhere provided. No provision of this Agreement shall be interpreted to mean
that Executive is subject to receiving fewer benefits than those available to
her without reference to this Agreement.
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13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under her
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon and inure to the benefit of
Executive and the Institution and their respective successors and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
15. REQUIRED PROVISIONS.
(a) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any rules and regulations promulgated thereunder, including
12 C.F.R. Part 359.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
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This Agreement shall be governed by the laws of the State of Illinois,
unless otherwise stated herein.
19. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Executive within fifty
(50) miles from the location of the Institution, in accordance with the rules of
the American Arbitration Institution then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of her right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
20. PAYMENT OF COSTS AND LEGAL FEES.
In the event any dispute or controversy arising under or in connection with
Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of: (1) all legal fees incurred by Executive in resolving such dispute or
controversy, and (2) any back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
21. INDEMNIFICATION.
(a) The Institution shall provide Executive (including her heirs,
executors and administrators) with coverage under a standard directors' and
officers' liability insurance policy at its expense and shall indemnify
Executive (and her heirs, executors and administrators) to the fullest extent
permitted under Illinois law against all expenses and liabilities reasonably
incurred by her in connection with or arising out of any action, suit or
proceeding in which she may be involved by reason of her having been a director
or officer of the Institution (whether or not she continues to be a director or
officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements.
22. SUCCESSOR TO THE INSTITUTION.
The Institution shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Institution or the Holding
Company, expressly and unconditionally to assume and agree to perform the
Institution's obligations under this Agreement, in the same manner and to the
same extent that the Institution would be required to perform if no such
succession or assignment had taken place.
-11-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, Cerro Gordo Building and Loan, s.b. and CGB&L Financial
Group, Inc., have caused this Agreement to be executed and their seals to be
affixed hereunto by their duly authorized officers and directors, and Executive
has signed this Agreement, on the ______ day of ___________________, 1998.
ATTEST: CERRO GORDO BUILDING AND
LOAN, s.b.
By:
- ------------------------------- ------------------------------
[Name] [Name]
Secretary For The Board of Directors
[SEAL]
ATTEST: CGB&L FINANCIAL GROUP, INC.
(Guarantor)
By:
- ------------------------------- ------------------------------
[Name] [Name]
Secretary For The Board of Directors
[SEAL]
WITNESS:
- ------------------------------- ----------------------------------
MARALYN F. HECKMAN
Executive
-12-
<PAGE>
[LETTERHEAD]
Consent of Independent Public Accountants
We consent to the use of our report dated April 10, 1998, on the financial
statements of Cerro Gordo Building & Loan, s.b. (the "Bank") and to reference
made to us under the captions "Cerro Gordo Building & Loan, s.b. Statement of
Income," "Legal and Tax Opinions" and "Experts" in the Application for
Conversion filed by the Bank with the Office of Banks and Real Estate of the
State of Illinois and in the Registration Statement filed by C G B & L Financial
Group, Inc., with the United States Securities and Exchange Commission.
/s/ Geo. S. Olive & Co. LLC
Decatur, Illinois
May 29, 1998
<PAGE>
JMP FINANCIAL, INC.
753 Grand Marais
Grosse Pointe Park, MI 48230
(313) 824-1711
May 27, 1998
Board of Directors
Cerro Gordo Building and Loan s.b.
229 East South Street
Cerro Gordo, Illinois
Dear Sirs and Madam:
We hereby consent to the use of our firm's name in the applications for
conversion of Cerro Gordo Building and Loan s.b., Cerro Gordo, Illinois, and
any amendments thereto, filed with the Illinois Office of Banks and Real
Estate (the "Commissioner"), in the Form SB-2 Registration Statement, and any
amendments thereto, and in the Acquisition Application and the Holding
Company Application of CGB&L Financial Group, Inc., as filed with the U.S.
Securities and Exchange Commission, Commissioner, and the Federal Reserve
Board, respectively. We also hereby consent to the inclusion of, a summary
of, and references to our appraisal report, including updates, and our
opinion concerning subscription rights in such filings including the
Prospectus of CGB&L Financial Group, Inc., and the Proxy Statement of Cerro
Gordo Building and Loan, s.b.
Sincerely,
/s/ JMP Financial, Inc.
-----------------------------
JMP Financial, Inc.
<PAGE>
[LETTERHEAD]
March 27, 1998
Ms. Maralyn F. Heckman
President
Cerro Gordo Building & Loan S.B.
229 East South Street
Cerro Gordo, ILL 61818
Dear Ms. Heckman:
JMP Financial, Inc. ("JMP") is pleased to present this Agreement to
Cerro Gordo (the "Bank" or "Cerro Gordo") to act as appraiser in its
mutual-to-stock conversion and to prepare a business plan for the Bank in
accordance with state and federal regulations. JMP is pleased to have the
opportunity to associate itself with Cerro Gordo and believes that it is
uniquely suited to serve the needs of Cerro Gordo.
SERVICES PROVIDED
JMP Financial will provide an initial appraisal of the fair market value
of Cerro Gordo and will update this appraisal as required by Cerro Gordo or
its regulators according to the terms of this agreement.
JMP Financial will also prepare a business plan for Cerro Gordo in
compliance with federal regulations for filing with its application for
conversion.
FEES
JMP's fees for the initial appraisal and for the business plan will be
$12,500. Cerro Gordo shall also reimburse JMP for JMP's reasonable expenses
as they are accrued.
Fees shall be payable according to the following schedule:
- - Upon execution of this Agreement -- $5,000
- - Upon filing of the Appraisal -- $2,500
- - Upon filing of the Business Plan -- $2,500
- - Upon the earlier of closing of conversion to stock form or one year after
execution of this Agreement -- All remaining fees and expenses.
<PAGE>
Page Two
Ms. Heckman
March 27, 1998
Cerro Gordo agrees to pay to JMP a fee of $1750 for each written opinion
or update required by the Bank or its regulators on behalf of the Bank
pursuant to its mutual-to-stock conversion and performed by JMP after the
filing of the original appraisal, but not including the final "bring-down"
letter to the FDIC.
INDEMNIFICATION
The Bank agrees to indemnify and hold harmless JMP and each of its
officers, directors, employees and agents, and each person who controls JMP
within the meaning of Section 15 of the Securities Act of 1933, against any
and all loss, claim, damage, liability and expense (including reasonable
attorney's fees) arising in connection with the performance of JMP's
responsibilities thereunder, including any litigation arising from this
Agreement or involving the subject matter hereof. Provided, however, that
the Bank shall have no liability to JMP to the extent that any loss, claim,
damage liability, or expense is found by a court of proper jurisdiction to
have resulted from the willful misconduct, bad faith or gross negligence of
JMP or any of its agents. Further, JMP shall notify the Bank promptly of the
assertion of any claim against its in connection with the he performance of
JMP's responsibilities in connection with the he conversion of the Bank from
mutual-to-stock form or arising under this Agreement or involving the subject
matter hereof. The Bank agrees that the indemnification and reimbursement
commitment set forth in this agreement shall apply upon written notice to the
Bank and regardless of whether JMP is a formal party to any such lawsuits or
other proceedings; that JMP is entitled to separate counsel of its choice in
connection with any of the matters to which such commitment relate; and that
such commitments shall extend upon the same terms set forth in this
agreement, to any controlling person, director, officer, employee or agent of
JMP and shall survive any termination of this Agreement.
CONFIDENTIALITY
As part of this Agreement JMP agrees to hold all information provided by
the Bank and to conduct all discussions with others in the strictest
confidence possible in keeping with the performance of its services
contemplated hereby.
RELIANCE UPON INFORMATION PROVIDED BY CERRO GORDO
Cerro Gordo understands that all analysis, opinions, conclusions and
recommendations which are to be proffered by JMP will rely on the accuracy of
information from and representations made by the bank and its employees and
officers and that presentation of the business plan will require the Bank to
provide JMP with historical and projected loan and deposit composition on a
timely and complete basis.
<PAGE>
Page Three [LETTERHEAD]
Ms. Heckman
March 27, 1998
NOTICES
All notices required or permitted hereunder shall be in writing and
shall be deemed delivered when personally served, or, three days, after being
deposited in the United States mail, registered or certified, return receipt
requested, as addressed as follows:
IF TO JMP FINANCIAL, INC.
JMP Financial, Inc.
753 Grand Marais
Grosse Pointe Park, Mi. 48230
Attn: Mr. John M. Palffy
IF TO CERRO GORDO BANK, SSB
Cerro Gordo Building & Loan s.b.
229 East South Street - P. O. Box 680
Cerro Gordo, ILL 61818
Mrs. Maralyn F. Heckman
COMPLETE AGREEMENT
This Agreement sets forth the entire understanding among the parties as
to the subject matter hereof and supersedes any other understanding or
arrangement, written or oral, express or implied, between the parties.
EFFECTIVENESS OF AGREEMENT - SEPARABILITY
If any provision of this Agreement is held to be void, unenforceable,
unlawful or invalid, all of the other provisions hereof nevertheless continue
in full force and effect as if such void, unenforceable, unlawful or invalid
provisions were omitted. If any provision hereof shall be held to be void,
unenforceable, or invalid by reason of the scope thereof, then such provision
shall be construed and enforced to the extent of the fullest valid and
enforceable scope thereof.
AMENDMENTS
This Agreement may not be amended except by written instrument signed by
an officer or all parties at the time of the amendment, any other attempted
amendments or supplements shall have no force or effect.
<PAGE>
Page Four
Ms. Heckman
March 27, 1998
We look forward to working with you and are prepared to proceed as soon
as you deem it appropriate. If this Agreement meets with your approval
please indicate so by executing below.
Very truly yours,
JMP FINANCIAL, INC.
/s/ John Michael Palffy
--------------------------------
John Michael Palffy
President
ACKNOWLEDGEMENT AND ACCEPTANCE
Cerro Gordo Bank SSB Cerro Gordo Building and Loan, s.b.
By: /s/ Maralyn F. Heckman
--------------------------
Maralyn F. Heckman
Its: C.E.O. and Secretary-Treasurer
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
PREPARED FOR:
CERRO GORDO BUILDING & LOAN S.B.
AND
CGBL GROUP INC.
Cerro Gordo, Illinois
PREPARED IN ACCORDANCE WITH
FEDERAL DEPOSIT INSURANCE CORPORATION REGULATIONS
MAY 27, 1998
By:
JMP FINANCIAL, INC.
753 Grand Marais
Grosse Pointe Park, Michigan 48230
(313) 824-1711
<PAGE>
JMP FINANCIAL, INC.
753 GRAND MARAIS
GROSSE POINTE PARK, MI 48230
(313) 824-1711
May 27, 1998
Board of Directors
Cerro Gordo Building & Loan s.b.
229 East South Street
Cerro Gordo, Illinois
Gentlemen:
At your request, JMP Financial, Inc. ("JMP") hereby provides an
independent appraisal of the estimated pro forma market value of the Common
Stock ("the Stock") of Cerro Gordo Building & Loan s.b. ("the Bank"). The
Stock will be distributed in connection with the conversion of the Bank from
the mutual to the stock form of organization. This appraisal is furnished
pursuant to the Plan of Conversion adopted by the Bank's Board of Directors
and is prepared pursuant to the requirements of Federal Deposit Insurance
Corporation regulations.
In preparing our appraisal, we conducted an analysis of the Bank
which included discussions with the Bank's management, their independent
auditors, and their conversion counsel. In addition, where appropriate, we
considered information based on other available published sources that we
believe are reliable. However, we can not guarantee the accuracy and
completeness of such information.
In making our evaluation, we have reviewed, among other things, the
economy in the Bank's primary market area and compared its financial
condition and operating performance with that of select publicly traded
thrift institutions. We reviewed conditions in the securities markets in
general and for thrift institution equities in particular. We have also
considered the expected market for the Bank's to-be-outstanding common stock
after the conversion.
Our appraisal is based on the Bank's representation that the
financial data and information contained in the Preliminary Subscription
Offering Prospectus and additional evidence furnished to us by the Bank are
truthful, accurate, and complete. We did not independently verify such
financial data and other information provided by the Bank nor did we
independently value the assets or liabilities of the Bank, nor did we obtain
any appraisal of the assets or liabilities of the Bank.
<PAGE>
Board of Directors
Cerro Gordo Building & Loan s.b.
May 27, 1998
Page 2
It is our opinion that, as of May 27, 1998 the estimated pro forma
market value of the Bank's to-be-outstanding common stock is $1,100,000 which
yields an effective valuation range of $935,000 to $1,265,000 at the maximum
and $1,454,750 at the super maximum. The Bank will issue a minimum of 93,500
shares and a maximum of 145,475 shares at a uniform price of $10.00.
Our valuation is not intended, and must not be construed as, a
recommendation of any kind as to the advisability of purchasing shares of
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to sell such
shares at prices related to the foregoing valuation of the pro forma market
value thereof.
The valuation will be updated as required under the normal
conversion process. Any updates will consider, among other factors, any
developments or changes in the Bank's policies, and current conditions in the
equities markets for thrift institutions' common stock. Should any such new
developments or changes be material, in our opinion, to the valuation of the
Bank's common stock, appropriate adjustments to the estimated pro forma
market value will be made at these times.
JMP Financial, Inc. is an independent Investment Banking Company
incorporated in the State of Michigan specializing in financial advisory
services and capital placement for regional financial institutions.
Principals of JMP have extensive experience in the valuation and appraisal of
savings and loan conversions. More information on JMP is included in the
exhibits to the appraisal.
Respectfully,
JMP FINANCIAL, INC.
John Michael Palffy
President
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION 1
SECTION ONE - DESCRIPTION OF CERRO GORDO BUILDING & LOAN S.B. 2
OVERVIEW 2
HISTORY 2
MARKET AREA 2
REGULATION 2
ASSET COMPOSITION 3
DEPOSIT COMPOSITION 3
FINANCIAL PERFORMANCE AND GROWTH 3
BALANCE SHEET 4
FINANCIAL PERFORMANCE 5
INTEREST RATE SENSITIVITY 6
LENDING ACTIVITIES 8
GENERAL 8
COMPOSITION OF LOAN PORTFOLIO 8
ONE-TO-FOUR FAMILY MORTGAGE REAL ESTATE LOANS 8
COMMERCIAL REAL ESTATE LOANS 9
MULTI-FAMILY REAL ESTATE LOANS 9
CONSTRUCTION LOANS 10
HOME EQUITY LOANS 10
CONSUMER LOANS 10
UNDERWRITING 10
ORIGINATION, PURCHASES, AND SALES 11
DELINQUENCIES AND NON-PERFORMING ASSETS 11
INVESTMENT ACTIVITIES 12
SOURCES OF FUNDS 13
DEPOSITS 13
BORROWED FUNDS 13
SUBSIDIARIES 13
PROPERTY AND EQUIPMENT 13
MANAGEMENT 13
OFFICERS AND DIRECTORS 13
OFFICERS AND STAFF 14
SECTION TWO - MARKET AREA ANALYSIS 15
NATIONAL ECONOMIC FACTORS 15
MARKET AREA DEMOGRAPHICS 17
COMPETITION 21
<PAGE>
TABLE OF CONTENTS (CONTINUED)
SECTION THREE - PUBLICLY-HELD THRIFT INSTITUTION COMPARISON 23
SELECTION CRITERIA 23
AVERAGE PRICING RATIOS BY STOCK EXCHANGE 23
AVERAGE PRICING RATIOS BY GEOGRAPHIC REGION 24
SELECTION PROCEDURE 25
REVIEW OF COMPARATIVE GROUP 26
COMPARATIVE GROUP COMPOSITE PERFORMANCE 28
PERFORMANCE OF RECENTLY CONVERTED THRIFTS 30
SECTION FOUR - MARKET VALUE ADJUSTMENTS 31
INTRODUCTION 31
FINANCIAL CONDITION 31
ASSET QUALITY 31
PROFITABILITY LEVELS 32
RETURN ON AVERAGE EQUITY 32
CORE EARNINGS 33
GROWTH AND PREDICTABILITY OF EARNINGS 33
MANAGEMENT 34
DIVIDEND PAYMENTS 34
LIQUIDITY OF THE ISSUE 34
MARKETING OF THE ISSUE 35
MARKET AREA 36
SUMMARY OF DISCOUNTS 37
SECTION FIVE - VALUATION METHODS 38
PRICE\EARNINGS 38
PRICE\CORE EARNINGS 39
PRICE TO BOOK VALUE 40
PRICE TO ASSETS 41
VALUATION CONCLUSION 41
<PAGE>
LIST OF EXHIBITS
EXHIBIT #
1. Market Area Map
2. Audited Financial Statements
3. Selected Consolidated Financial and Operations Data
4. Selected Consolidated Financial Ratios and Other Data
5. Interest Rate GAP Analysis
6. Market Value of Portfolio Equity
7. Yield and Cost Trends
8. Volume\Rate Analysis
9. Loan Portfolio Composition
10. Loan Portfolio Maturity Schedule
11. Loan Originations, Purchases, Sales, and Repayments
12. Non-performing Assets
13. Charge-offs and Recoveries
14. Distribution of Loss Allowances
15. Composition of Securities Portfolio
16. Maturity Schedule and Yield Analysis, Securities
17. Flow of Deposits
18. Composition and Average Rate Paid for Deposits
19. Composition and Average Rate Paid for Certificates
20. All Publicly Traded Thrifts - Market and Financial Information
21. Comparative Group - General Data
22. Comparative Group - Financial Performance
23. Comparative Group - Capital Ratios
24. Comparative Group - Loan Portfolio Composition
25. Comparative Group - Balance Sheet Ratios
26. Comparative Group - Growth Rates
27. Comparative Group - Asset and Risk Ratios
28. Comparative Group - Yield-Cost Spread Analysis
29. Comparative Group - Capital Market Issues
<PAGE>
LIST OF EXHIBITS (CONTINUED)
30. Comparative Group - Pricing Ratios
31. Recently Converted Thrifts
32. Pro Forma Analysis
33. Pro Forma Effect of Conversion Proceeds
34. Summary of Valuation Premium or Discount
APPENDIX
JMP Financial, Inc. -- Background and Qualifications
<PAGE>
INTRODUCTION
Set forth herein is the independent appraisal by JMP Financial, Inc.
("JMP") of the estimated proforma fair market value of the common stock of CGBL
Financial Group, Inc. to be sold pursuant to the Application for Conversion of
Cerro Gordo Building & Loan, s.b., filed with the Federal Deposit Insurance
Corporation ("FDIC") and which has been reviewed by us with Bank's management.
This appraisal was prepared in accordance with FDIC application requirements and
the FDIC's guidelines for appraisal reports and represents a full appraisal
report.
Pro forma market value is defined as the estimated price at which the
Bank's common stock after conversion would change hands between a willing buyer
and a willing seller, neither being under any compulsion to buy or sell and both
having reasonable knowledge of the relevant facts.
In the course of preparing this appraisal, we reviewed and discussed with
the Bank's management the audited financial statements of the Bank's operation
for the fiscal years ended April 1994 through March 1998. We also reviewed and
discussed with management other financial matters of the Bank.
Where appropriate, we considered information based upon other available
public sources, which we believed to be reliable. However, we cannot guarantee
the accuracy or completeness of such information. We visited the Bank's primary
market area and examined the prevailing economic conditions and compared them
with national economic conditions. We also examined the competitive environment
within which the Bank operates and assessed the Bank's relative strengths and
weaknesses.
Our valuation is not intended and must not be construed as a recommendation
of any kind as to the advisability of purchasing shares of common stock.
Moreover, because such valuation is necessarily based upon estimates and
projection of a number of matters, all of which are subject to change from time
to time, no assurance can be given that persons who purchase shares of common
stock in the conversion will thereafter be able to sell such shares at prices
related to the foregoing valuation of the pro forma market value thereof.
<PAGE>
SECTION I
DESCRIPTION OF CERRO GORDO BUILDING & LOAN, S.B.
OVERVIEW
HISTORY
Cerro Gordo Building & Loan, s.b. has served its customers and market area
for over 110 years, having been founded in Cerro Gordo on May 13, 1886 as Cerro
Gordo Building and Loan Association. The institution became a member of the
Federal Home Loan Bank System ("FHLB") and the Federal Savings & Loan Insurance
Corporation in 1963 and changed its name to Cerro Gordo Building & Loan, s.b. on
December 31, 1992, pursuant to its conversion to a state chartered savings bank.
As of March 31, 1998, the Bank had assets of $6.9 million, deposits of $5.3
million and retained earnings of $986 thousand. The Bank reported net income of
$41.9 thousand for the twelve months ended March 31, 1998 and $18.0 thousand for
the eleven months ended March 31, 1997.
MARKET AREA
The main, and only office of the institution is located at 229 East South
Street, Cerro Gordo, Illinois in western Piatt County. The Bank's primary
deposit and lending area consists of roughly a ten mile radius surrounding Cerro
Gordo. Exhibit 1 portrays the Bank's market area in perspective to the state of
Illinois.
REGULATION
The Bank is a member of the FHLB of Chicago and its deposits are insured up
to the applicable limits by the Savings Association Insurance Fund ("SAIF") of
the FDIC. The FDIC is the Bank's primary federal regulator. The Bank is
supervised at the state level by the Illinois Office of the Commissioner of
Banks and Real Estate.
On September 30, 1996 the Deposit Insurance Funds Act of 1996 was signed
into law. The legislation included a special assessment to recapitalize the SAIF
insurance fund up to its statutory goal of 1.25 percent of insured deposits. The
assessment was approximately equal to 65 basis points of the assessable base of
the institution as of March 31, 1995.
The U.S. Congress is expected to consider legislation that may
eliminate the thrift industry as a separate industry. The Deposit Insurance
Funds Act of 1996 ("DIF Act") provides that the Savings Association Insurance
Fund ("SAIF") will be merged with the Bank Insurance Fund ("BIF") on January 1,
1999, but only if there are no thrift institutions in existence. The DIF Act
requires the Treasury Department to study the development of a common charter
for banks and thrifts and to submit a report of its
- --------------------------------------------------------------------------------
2
<PAGE>
finding to Congress. If developed, the common charter may not offer all the
advantages that the Bank now enjoys or that the Company, as a bank holding
company, will enjoy upon consummation of the Conversion
ASSET COMPOSITION
Cerro Gordo Savings is a community oriented institution principally engaged
in the business of attracting deposits from the general public and using such
deposits primarily to originate one-to-four family residential real estate
loans.
At March 31, 1998 approximately 94 percent of the Bank's net loan portfolio
was comprised of 1-4 family mortgages, (all of which were with fixed interest
rates) approximately 3 percent were commercial real estate loans, approximately
2 percent were multi-family residential loans and approximately 1 percent were
loans secured by savings accounts. The bank retains all loans in its portfolio.
The Bank's investment portfolio of approximately $765 thousand consisted
primarily of interest-earning deposits in other financial institutions, and
stock of the Federal Home Loan Mortgage Corporation and Federal Home Loan Bank
of Chicago.
DEPOSIT COMPOSITION
As of March 31, 1998 the Bank held approximately $5.25 million in deposits.
Of these deposits approximately 91 percent consisted of certificates of deposits
and all the remainder were passbook savings accounts. Approximately 2 percent of
the Bank's deposits consisted of jumbo deposits of $100,000 or more.
FINANCIAL PERFORMANCE AND GROWTH
Exhibit 2 presents the summary audited financial statements of the Bank for
the twelve months ended March 31, 1998 and for the eleven months ended March
1997. Audited financial statements for the twelve months ended April 1996, 1995,
and 1994 are incorporated by reference to the Registration Statement. Exhibits 3
and 4 present Selected Financial Condition and Operations Data and Ratios for
the same periods.
- --------------------------------------------------------------------------------
3
<PAGE>
BALANCE SHEET
Tables I.1 through I.5 present summary financial condition and performance
parameters and rates of change in those parameters for the Bank since April 30,
1994.
Asset growth has been essentially flat since 1994, increasing at an
annualized rate of only 0.4 percent and 1.6 percent in the aggregate from April
30, 1994 to March 31, 1998. Net loans have exhibited substantial growth during
the same period, increasing at an annualized rate of 8.4 percent and 38.1
percent over the entire period. Investments declined commensurate with the
Bank's increase in loans and stagnant assets base. Deposits have declined an
aggregate of 12.4 percent since April 30, 1994, an annualized decline of 3.2
percent. Equity has increased 6.8 percent per year on annualized basis and 30.3
percent in the aggregate between April 30, 1994 and March 31, 1998. As a result,
the loan-to-asset ratio of the Bank increased from 59 to 80 percent and the
loan-to-deposit ratio increased from 67 to 105 percent during the same periods.
TABLE I.1
SUMMARY OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT MARCH 31, AT APRIL 30
----------------------- -----------------------------------
1998 1997 1996 1995 1994
------------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS 6935.0 6288.6 6428.3 6402.9 6826.3
INVESTMENTS 765.3 1379.3 1552.4 1,932.3 2423.2
LOANS RCVBLE, NET 5526.2 4705.3 4405.9 4328.7 4000.6
DEPOSITS 5250.3 5308.5 5482.6 5512.5 5991.0
BORROWINGS 600.0 0 0 0 0
EQUITY 986.0 894.9 861.5 813.0 757.0
</TABLE>
TABLE I.2
SUMMARY OF FINANCIAL PERFORMANCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE TWELVE MONTHS ENDED
TWELVE ELEVEN ELEVEN APRIL 30,
MONTHS MONTHS MONTHS
ENDED ENDED ENDED,
MARCH 31, APRIL 30 APRIL
(ANNLZD) 30
---------------- ------------ ----------- --------- --------- -------------
1998 1997 1997 1996 1995 1994
---------------- ------------ ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET INTEREST INCOME 250.3 220.4 202.0 207.5 209.5 231.6
NON-INTEREST INCOME 6.7 7.1 6.5 7.7 20.8 31.8
NON-INTEREST EXPENSE 177.9 206.4 189.2 167.1 165.9 155.0
INCOME BEFORE TAXES 52.6 21.1 19.3 48.1 64.3 108.3
NET INCOME AFT TAXES 41.9 19.6 18.0 38.8 51.0 76.4
NET INC BEFORE PROVISION FOR 80.1 59.3 54.4 48.1 64.3 71.1
LOAN LOSSES AND TAXES
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
TABLE I.3
PERCENTAGE CHANGE IN FINANCIAL CONDITION FROM PREVIOUS PERIOD
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED PERIOD ENDED APRIL
MARCH 31, MARCH 31, 30,
------------ ------------- ---------------------
1998 1997 1996 1995
------------ ------------- ---------- ---------
<S> <C> <C> <C> <C>
TOTAL ASSETS 10.3% -2.2% 0.4% -6.2%
INVESTMENTS -44.5% -11.2% -19.7% -20.3%
LOANS RCVBLE, NET 17.4% 6.8% 1.8% 8.2%
DEPOSITS -1.1% -3.2% -0.5% -8.0%
BORROWINGS N/A N/A N/A N/A
EQUITY 10.2% 3.9% 6.0% 7.4%
</TABLE>
TABLE I.4
ANNUALIZED PERCENTAGE CHANGE IN FINANCIAL PERFORMANCE FROM PREVIOUS PERIOD
<TABLE>
<CAPTION>
FOR THE TWELVE FOR THE ELEVEN
MONTHS ENDED, MONTHS ENDED FOR THE TWELVE MONTHS
MARCH 31, (ANNLZD) APRIL 30, ENDED APRIL 30,
-------------------------- ------------------------- -------------------------------
1998 1997 1996 1995
-------------------------- ------------------------- ---------------- --------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME 13.6% 6.2% -1.0% -9.5%
NON-INTEREST INCOME -5.5% -7.9% -63.0% -34.6%
NON-INTEREST EXPENSE -13.8% 23.5% 0.7% 7.0%
INCOME BEFORE TAXES 149.8% -56.2% -25.2% -40.6%
NET INCOME AFT TAXES 113.4% -49.4% -23.9% -33.2%
CORE INCOME 35.0% 23.4% -25.2% -9.6%
</TABLE>
TABLE I.5
RATE OF CHANGE IN FINANCIAL CONDITION
SINCE APRIL 1994
<TABLE>
ANNUALIZED CUMULATIVE
---------- ----------
<S> <C> <C>
TOTAL ASSETS 0.4% 1.6%
INVESTMENTS -25.0% -68.4%
LOANS RCVBLE, NET 8.4% 38.1%
DEPOSITS -3.2% -12.4%
BORROWINGS NA NA
EQUITY 6.8% 30.3%
</TABLE>
FINANCIAL PERFORMANCE
Tables I.2 and I.4 illustrate the growth in key income and expense areas of
the Bank. Net interest income has increased from $231.6 thousand for the twelve
months ended April 30, 1994 to $250.3 for the twelve months ended March 31,
1998, an annualized rate of increase of 2.0 percent. Non-interest income
decreased from $31.8 thousand to $6.7 thousand during the same period;
non-interest expense increased from
- --------------------------------------------------------------------------------
5
<PAGE>
$155.0 thousand to $177.9 thousand, an annualized 3.5 percent increase;
income before taxes decreased from $108.3 thousand to $52.6 thousand; and net
income after taxes decreased from $76.4 thousand to $41.9 thousand during the
same period. The primary reason for the difference in the Bank's financial
performance between 1994 and 1998 is an increase in loan loss provisions from
$0 in 1994 to $26,500 in 1998 and the deferral of loan fee income. Increases
in net interest income, primarily attributable to a shift from investments to
higher rate loans, was offset by an increase in operating expenses.
Net interest income increased $30 thousand on an annualized basis from
fiscal year 1997 to 1998. Non-interest income declined approximately $400
during the period. Non-interest expense declined approximately $30 thousand,
substantially all of which was due to the special SAIF assessment against the
Bank in FY1997. The Bank made a $26,500 provision for loan losses in FY 1998
and none for FY1997. As a result of these factors net income after taxes (on
an annualized basis) increased from $19.6 thousand to $40.9 thousand from FY
1997 to FY1998. Core earnings (net income before taxes, provisions and the
SAIF assessment) increased from $59.3 thousand to $80.1 thousand. The $20
thousand increase is primarily due to an increase in net interest income,
partially offset by a variety of other lesser factors.
TABLE I.6
SUMMARY FINANCIAL RATIOS
(PERCENT)
<TABLE>
<CAPTION>
FOR TWELVE FOR THE TWELVE MONTHS ENDED
MONTHS ENDED APRIL 30,
MARCH 31,
------------------------ ---------------------------------------
1998 1997 1996 1995 1994
---------- ------------ --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
RETURN ON AVERAGE ASSETS 0.63 0.31 0.60 0.77 1.12
RETURN ON AVERAGE EQUITY 4.60 2.27 4.63 6.50 10.09
</TABLE>
Commensurate with declining income the Bank's return on average assets has
declined from 1.12 percent for the year ended April 30, 1994 to 0.63 percent for
the twelve months ended March 31, 1998. Return on average equity decreased from
10.09 percent to 4.60 percent during the same period due to declining income and
increasing capital.
INTEREST RATE SENSITIVITY
INTEREST RATE RISK
In recent years the Bank has measured its interest rate sensitivity by
computing the "GAP" between the assets and liabilities which were expected to
mature or reprice within certain periods, based on assumptions regarding loan
prepayment and deposit decay. Recently the Bank has also placed emphasis on
reviewing the amounts by which the net present value of the institution's cash
flow from assets, liabilities and off balance sheet items (the institution's net
portfolio value, or "NPV") would change in the event of an instantaneous change
in market interest rates. The FHLB also requires the computation of estimated
changes in net interest income over a four quarter period. These
- --------------------------------------------------------------------------------
6
<PAGE>
computations estimate the effect of an institution's NPV and net interest
income from an instantaneous and permanent 1 to 4 percentage point increase
or decrease in market interest rates.
SENSITIVITY OF MARKET VALUE OF PORTFOLIO EQUITY
<TABLE>
<CAPTION>
INTEREST RATE MARKET VALUE
SCENARIO (5,000)
- ---------------------- --------------------
<S> <C>
Down 400 963
200 1116
Base 1346
Up 200 1145
400 901
</TABLE>
SENSITIVITY OF NET INCOME
<TABLE>
<CAPTION>
INTEREST RATE RETURN ON ASSETS
SCENARIO
- ---------------------- --------------------
<S> <C>
Down 400 0.203%
200 0.366%
Base 0.438%
Up 200 0.403%
400 0.350%
SOURCE: FHLB
</TABLE>
Management intends to seek an acceptable balance between maximizing yield
potential and limiting exposure to changing interest rates. It acknowledges the
inherent risks of a portfolio with unmatched maturities, but has determined that
this risk is tolerable and profitable if credit risk is managed and the Bank can
keep operating expenses low and interest rate spreads high. As a result of this
strategy the Bank can expect higher than normal returns in periods of stable or
decreasing rates and lower than normal returns in periods of increasing rates.
In order to minimize and manage interest rate risk, management has adopted
the following policies:
- investing excess liquidity in short term certificates of deposits
and government securities with maturities or repricing periods of
three years or less.
- promoting longer term CDs.
- increasing our capital ratio, which provides us with a favorable
level of interest-earning assets relative to interest-bearing
liabilities.
- limiting loan maturities to 20 years or less.
- Borrowing long term from the FHLB.
- --------------------------------------------------------------------------------
7
<PAGE>
Exhibit 5 illustrates that at March 31, 1998 the Bank's one-year interest
rate gap was negative 12 percent. Exhibit 6 provides the Bank's NPV as of March
31, 1998 and the change in the Bank's NPV under rising and declining interest .
Exhibit 7 presents the Bank's weighted average yields and costs on interest
earning assets and interest bearing liabilities for the periods ended March 31,
1998 and 1997. The Bank's yield on interest-earning assets increased from 7.19
to 8.11 percent from FY1997 to FY1998, primarily attributable to an increase in
loan yield from 8.06 percent to 8.81 percent. The cost of interest-bearing
liabilities increased from 5.38 percent to 5.44 percent primarily due to the
Bank's $600 thousand borrowing from the FHLB. As a result the Bank's interest
rate spread increased from 1.81 percent to 2.67 percent and the Bank's net
interest margin increased from 2.97 percent to 3.47 percent. Income was also
buffeted by an increase in the ratio of interest-earning assets to
interest-bearing liabilities from 116.96 percent to 117.29 percent.
Exhibit 8 reflects the changes in interest income and expense due to
rate and volume changes. Approximately 60 percent of the increase in the Bank's
interest income for the period ending March 1998 was due to increases in loan
and investment volume and 40 percent was due to an overall increase in product
rates. Approximately 55 percent of the increase in interest costs was due to
increases in rates on savings and 45 percent was due to an increased
liabilities, substantially all of which were due to FHLB borrowings.
LENDING ACTIVITIES
GENERAL
The principal lending activity of the Bank is the origination of
conventional loans for the purpose of constructing, purchasing or refinancing
owner-occupied 1-4 family residential properties in its primary market area. To
a lesser extent the Bank also originates commercial real estate, construction
loans, multi-family residential, and draft consumer loans. Approximately 99
percent of the Bank's loan portfolio is secured by real estate. The remaining
loans are secured by savings accounts.
The Bank has six loans in excess of $100,000. One is a $108 thousand
commercial real estate loan and the remainder are residential mortgages. The
largest single loan balance is $137 thousand, but the Bank has a series of loans
to one borrower aggregating to $198 thousand.
COMPOSITION OF LOAN PORTFOLIO
As of March 31, 1998 the Bank's net loan portfolio totaled $5.5 million or
approximately 80 percent of total assets. Nearly 94 percent of the Bank's loan
portfolio was comprised of 1-4 family residential mortgage loans, approximately
3 percent were commercial real estate loans, 2 percent were multi-family
residential mortgage loans and
- --------------------------------------------------------------------------------
8
<PAGE>
1 percent were loans against savings deposits. All of the Bank's loans are
fixed rate and of maturities twenty years or less.
Exhibit 9 details loans held in portfolio by the Bank for the appropriate
dates. Exhibit 10 presents the Loan Portfolio Maturity Schedule of the Bank as
of March 31, 1998.
ONE-TO-FOUR FAMILY RESIDENTIAL REAL ESTATE LOANS
The primary emphasis of the Bank's lending activity is the origination of
loans secured by fixed rate first mortgages on owner-occupied, 1-4 family
residential properties. At March 31, 1998 approximately 95 percent of the Bank's
real estate loan portfolio consisted of one-to-four family residential real
estate loans, primarily located in Piatt County.
The Bank originates loans with the intention that they will not be sold in
the secondary market. Although management believes that many of these loans
could be saleable in the secondary market, some of the loans could be sold only
after incurring certain costs and/or discounting the purchase price.
The Bank's lending policies generally limit the maximum loan-to-value ratio
on mortgage loans secured by owner-occupied properties to 80 percent of the
value of the property. While the Banks does not offer adjustable rate loans it
does limit its loan maturities to twenty years or less.
COMMERCIAL REAL ESTATE LOANS
The Bank has a portfolio of approximately $185 thousand of non-residential
real estate loans, three of four are to businesses in the village, and one to a
business in Decatur. These loans do not exceed 70 percent of the appraised value
of the real estate securing the loans and generally have terms up to 15 years
and are all fixed rate.
The Bank generally requires title insurance in connection with its
non-residential real estate loans as well as fire and extended coverage casualty
insurance (and, if appropriate, flood insurance) be maintained in an amount at
least equal to the loan amount or the replacement cost of the improvements on
the property securing the loans, whichever is greater.
MULTI-FAMILY RESIDENTIAL
The Bank has one loan with a balance of approximately $30 thousand of
multi-family housing, secured by property in its immediate market area. These
loans generally do no exceed 80 percent of the appraised value of the real
estate securing the loans and generally have terms up to 15 years and fixed
rates.
- --------------------------------------------------------------------------------
9
<PAGE>
The Bank generally requires title insurance in connection with its
multi-family residential loans as well as fire and extended coverage casualty
insurance (and, if appropriate, flood insurance) be maintained in an amount at
least equal to the loan amount or the replacement cost of the improvements on
the property securing the loans, whichever is greater.
CONSTRUCTION LOANS
The Bank originates construction loans to build single and multi-family
residential properties in the Bank's immediate market area. Construction
loans for one-to-four family real estate to be occupied by the borrower
generally have a maximum loan-to-value ratio of 80 percent of the property
and are originated as permanent loans, but generally provide for the payment
of interest only during a construction period of six months, after which the
loans convert to a permanent loan.
HOME EQUITY AND SECOND MORTGAGE LOANS
The Bank does not originate home equity loans. The Bank originates
second mortgages only on homes for which it already holds a first mortgage
and therefore such loans are classified for regulatory purposes as first
mortgage loans. Such loans are originated under the same terms as first
mortgage loans.
CONSUMER LOANS
The only consumer loans Cerro Gordo offers are loans secured by savings
accounts held by the Bank. Such loans are originated for the maturity of the
underlying certificate and at the same fixed rate as fixed rate mortgages,
provided such rate is at least 150 basis points over the rate being paid on
the underling security.
UNDERWRITING
The Bank has ongoing reviews of the loan portfolio and in particular
conducts quarterly reviews to determine the adequacy of the specific and
general loan provision. This review takes into consideration trends in
delinquency, current economic conditions and competitive aspects of the
industry.
The Bank's underwriting for real estate reflect: the capacity of the
borrower or income from the underlying property to adequately service the
debt; the value of the mortgaged property; the overall credit worthiness of
the borrower; the level of equity invested in the property; any secondary
sources of repayment; and, any additional collateral or credit enhancements
(such as guarantees, mortgage insurance or take-out commitments).
The Bank originates loans with the intention that they will not be sold in
the secondary market. Although management believes that many of these loans
could be
- --------------------------------------------------------------------------------
10
<PAGE>
saleable in the secondary market, some of the loans could be sold only after
incurring certain costs and/or discounting the purchase price.
All loans are approved by the CEO, the Loan Committee, and the full Board.
ORIGINATIONS, PURCHASES, AND SALES
As a portfolio lender the Bank generally retains all its originated
loans and therefore is not in the business of purchasing or selling loans.
Total loan originations have increased from $1.33 million for the twelve
months ended March 31, 1997 to $1.98 million for the twelve months ended
March 31, 1998. Exhibit 11 provides a schedule of loan originations,
purchases, sales and repayments.
DELINQUENCIES AND NON-PERFORMING ASSETS
Exhibit 12 presents the non-performing assets of the bank for the
periods ending March 31, 1997 to 1998 as well as the Bank's aggregate
carrying value of assets listed as substandard, doubtful, loss or "special
mention" as of March 31, 1998. Exhibit 13 and Exhibit 14 illustrates the
Bank's historical Distribution of Loan Loss Allowances.
The Bank has not recorded a loan loss in over five years and has had
only one "problem" loan in recent history, a loan with an $11 thousand
balance currently non-performing but secured by an insured property valued in
excess of $52 thousand.
Management reviews the Bank's loans on a regular basis. When a
borrower fails to make a required payment on a loan and does not cure the
delinquency promptly, the loan is classified as delinquent. In this event,
the normal procedure is to make contact with the borrower at prescribed
intervals in an effort to bring the loan to current status and late charges
are assessed as permitted by law. If a delinquency is not cured the Bank
normally commences foreclosure proceedings. If the loan is not reinstated
within the time permitted, or the property is not redeemed prior to sale, the
property may be sold at a foreclosure sale. Any property acquired as a result
of foreclosure or by foreclosure is classified as real estate owned until
such time as it is sold or otherwise disposed of by the Bank to recover its
investment.
At March 31, 1998 the Bank had no real estate owned. Real estate owned
is initially recorded at the lower of cost or fair value minus cost or fair
value at the date of foreclosure, establishing a new cost basis. After
foreclosure, valuations are periodically performed by management and the real
estate is carried at lower of cost or fair value less selling costs. Costs
related to the development and improvement of real estate owned are
capitalized and costs relating to holding the property are charged to
expenses. Accrual on interest of delinquent loans is suspended when, in
management's judgment, doubt exists as to the collectability of additional
interest. Interest on loans placed on nonaccrual status is generally charged
off.
- --------------------------------------------------------------------------------
11
<PAGE>
The Bank's non-performing assets increased from zero historically to
$11,000 or 0.16 percent of total assets at March 31, 1998. At March 31, 1998
the Bank had total assets of $11 thousand of loans listed substandard.
At March 31, 1998 the Bank's allowance for loan losses was $32.7
thousand or approximately 297 percent of non-performing assets and 0.58
percent of total loans.
INVESTMENT ACTIVITIES
Exhibit 15 presents the composition of the Bank's securities portfolio
and Exhibit 16 summarizes the maturity schedule and yield analysis of those
securities as of March 31, 1998. The Bank's investment portfolio of
approximately $765.3 thousand consisted of interest-earning deposits in other
financial institutions and stock of the Federal Home Loan Mortgage
Corporation and Federal Home Loan Bank of Chicago.
Exhibit 16 presents the maturity schedule of the Bank's investment
portfolio. All of the investment portfolio, except for FHLMC and FHLB stock,
matures in five years or less and consist of approximately $590 thousand of
interest-bearing deposits and $175 thousand of FHLMC stock. As a member of
the FHLB of Chicago, the Bank is required to maintain an investment in stock
of the FHLB equal to the greater of 1 percent of the Bank's outstanding home
loans or 5 percent of the outstanding advances. At March 31, 1998 the Bank
held $46.2 thousand of stock in the FHLB of Chicago.
SOURCES OF FUNDS
DEPOSITS
Exhibit 17 presents a summary flow of deposits at the Bank for the
periods ending March 31, 1997 through 1998. Exhibit 18 presents the
composition and average rate paid of the Bank's deposits by type of account
for the same periods. Exhibit 19 shows composition and average rate paid
information for the Bank's certificates of deposit as of March 31, 1998.
The Bank attracts short term and intermediate term deposits from the
Bank's primary market area. The Bank only offers passbook savings accounts,
and certificates of deposits ranging in maturity from three months to six
years. The Bank does not solicit or accept brokered deposits.
At March 31, 1998 approximately 92 percent of the Bank's deposits
consisted of certificates of deposit and 12 percent of the Bank's deposits
consisted of passbook savings accounts. Approximately 2 percent of the Bank's
deposits consisted of Jumbo ($100,000 or more) certificates of deposit.
Nearly 45 percent of the Bank's certificates of deposit mature in less
then one year as of March 31, 1998 and 18 percent matured in more than three
years. Savings deposits increased from $409 thousand to $461 thousand from FY
1997 to FY1998, but certificates of deposits decreased from $5.31 million to
$5.25 million.
- --------------------------------------------------------------------------------
12
<PAGE>
BORROWED FUNDS
The Bank is a member of the FHLB of Chicago with borrowing privileges from
that institution. The Bank borrowed long term for the first time March 31, 1998
borrowing $600,000
SUBSIDIARIES
The Bank does not currently have any active service corporations.
PROPERTY AND EQUIPMENT
The Bank currently operates out of a single office, which is owned by the
Bank and located in downtown Cerro Gordo.
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
NET BOOK
VALUE MARKET VALUE SQUARE FEET YEAR IN PLACE
------------------- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Bank Building $5,554 $30,000 1440 1884/1966
Furniture, Fixture & $10,171 $7500
Equipment
TOTAL $15,726 $37,500 NA NA
</TABLE>
MANAGEMENT
OFFICERS AND DIRECTORS
DIRECTORS
The Bank has a seven member Board of Directors, which includes one inside
director (CEO Maralyn Heckman). The Board is also served by two Director Emeriti
who function as, and are paid as, all other board members except they do not
have voting power. The Board has extensive and valuable business experience and
relationships in the community. Individual members of the Board and their vitaes
are:
- Maralyn F. Heckman, 57. Mrs. Heckman is CEO of Cerro Gordo s.b., having
served in this capacity since 1977, six months after joining the
institution. She has been a Director of the Bank since 1977. Mrs.
Heckman has served on the board of the Illinois League of Savings.
- John A. Sochor, DDS, 51. Dr. Sochor has been a director since 1981 and
has served as President of the Board since 1997. He is a dentist in
Cerro Gordo.
- --------------------------------------------------------------------------------
13
<PAGE>
- C. Russell York, 57. Mr. York has been a director since 1983, and Vice
President of the board since 1997. He is employed with a Decatur heating
and cooling company.
- Lester W. Crandall was named to the board on May 28, 1998. He is Meat
Department Manager for Eagles Food Center in Decatur.
- Dale C. Born, 66. Mr. Born has been a director since 1993. He is retired
from A.E. Staley Co. and is a farmer.
- Noel R. Buckley, 63. Mr. Buckley has been a director since 1995. He is
retired from Firestone.
- Larry D. Gaitros, 38. Mr. Gaitros has been a director since 1997. He is
a millwright with Archer Daniels Midland.
- Francis L. Beery, 86, is a Director Emeritus since 1995 after 34 years
on the Board of the Bank and serving as President of the Board from
1981-95.
- Quinter D. Miller, 86, is a Director Emeritus since 1997 after 16 years
on the Board of the Bank, including as President of the Board from
1996-97.
OFFICERS AND STAFF
CEO Heckman is the only staff member who is also an officer of the Bank.
The staff is comprised of the following individuals and responsibilities:
- Maralyn F. Heckman, CEO, 57, Managing officer, Secretary-Treasurer
of the Company, Loan Officer, Payroll and Compliance Officer.
- Ellen K. Bell, 56, Financial records and reports, computer systems.
Part-time with the Bank since 1966 and full time since 1980.
- Sharon J. McCarty, 60, savings accounts and loan processing.
Part-time with the bank since 1985 and full-time since 1987.
- Michelle M. Shively, 39, part time since 1996 and full-time since
April 1998 is in charge of clerical duties and daily operations and
is learning all facets of the business.
- --------------------------------------------------------------------------------
14
<PAGE>
SECTION II
MARKET AREA ANALYSIS
ECONOMIC ENVIRONMENT AND BACKGROUND
NATIONAL ECONOMIC FACTORS
At the present time the national economy continues to record moderate, but
stable, growth. Real Gross Domestic Product ("GDP") has been increasing at a 2.0
to 4.9 percent annual rate for two years with no significant change widely
forecasted in the immediate future.
<TABLE>
<CAPTION>
REAL ANNUAL CHANGE IN GDP
-------------------------
<S> <C>
1994 3.5%
1995 2.0%
1996 2.8%
1997 3.8%
1997.1 4.9%
1997.2 3.3%
1997.3 3.1%
1997.4 3.9%
1998.1 4.2%
</TABLE>
Our financial projections assume that interest rates will retain their
current level and term structure through the forecasting period. The economy is
expected to continue slow to moderate growth.
- --------------------------------------------------------------------------------
15
<PAGE>
RECENT INTEREST RATE TRENDS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
3 MO. 3 YR. PRIME FHLB DISCOUNT
T-BILLS T-NOTES RATE MORTGAGES RATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 4.29 6.27 7.15 7.49 3.60
1995 5.51 6.25 8.83 7.87 5.21
1996 5.02 5.99 8.25 7.80 5.00
1997 5.07 6.10 8.50 7.71 5.00
Latest 5.04 5.56 8.50 7.17 5.00
January 1996 5.02 5.20 8.25 7.32 5.00
February 1996 4.87 5.14 8.25 7.20 5.00
March 1996 4.96 5.79 8.25 7.49 5.00
April 1996 4.99 6.11 8.25 7.76 5.00
May 1996 5.00 6.24 8.25 7.80 5.00
June 1996 5.11 6.35 8.25 8.05 5.00
July 1996 5.17 6.45 8.25 8.01 5.00
August 1996 5.09 6.21 8.25 8.08 5.00
September 1996 5.15 6.41 8.25 7.98 5.00
October 1996 5.01 6.08 8.25 7.95 5.00
November 1996 5.03 5.82 8.25 7.80 5.00
December 1996 4.87 5.91 8.25 7.79 5.00
January 1997 5.05 6.16 8.25 7.81 5.00
February 1997 5.00 6.03 8.25 7.78 5.00
March 1997 5.14 6.38 8.50 7.88 5.00
April 1997 5.17 6.61 8.50 8.03 5.00
May 1997 5.13 6.42 8.50 8.01 5.00
June 1997 4.92 6.24 8.50 7.95 5.00
July 1997 5.07 6.00 8.50 7.78 5.00
August 1997 5.13 6.06 8.50 7.59 5.00
September 1997 4.97 5.98 8.50 7.61 5.00
October 1997 5.15 5.84 8.50 7.54 5.00
November 1997 5.16 5.76 8.50 7.40 5.00
December 1997 5.09 5.74 8.50 7.40 5.00
January 1998 5.09 5.38 8.50 7.27 5.00
February 1998 5.11 5.43 8.50 7.17 5.00
March 1998 5.03 5.57 8.50 7.13 5.00
April 1998 5.04 5.56 8.50 7.17 5.00
May 1998 4.94 5.62 8.50 5.00
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Interest rates have been very stable by historical standards for a
number of years. Three month Treasuries troughed in July 1997 at 4.92 percent
and peaked in December 1997, only 24 basis points higher, at 5.16 percent.
Three year treasuries peaked at 6.61 percent in April 1998 and troughed this
past January at 5.38 percent, meaning that the short end of the yield curve
has flattened considerably in the past year. Longer term rates have been much
more consistent then intermediate rates, however. Ten year treasuries have
remained within a 60 basis point range for well over a year. Mortgage rates
have
- -------------------------------------------------------------------------------
16
<PAGE>
maintained a fairly constant approximate 200 point spread over the more
volatile three year treasury rate. It is believed that the Federal Reserve is
generally comfortable with the current level and term structure of interest
rates and the rate of GDP growth and it is anticipated that the Fed will not
undertake to achieve a material change in interest rates in the near future.
MARKET AREA DEMOGRAPHICS
The enclosed tables provide a summary of the Bank's market demographics.
The Bank's primary market area is comprised of roughly a 10 mile radius
emanating from its office in Cerro Gordo in western Piatt County in central
Illinois.
Cerro Gordo is located 140 miles east of St. Louis, 150 miles south of
Chicago and 150 miles west of Indianapolis. It is a small rural community
located 10 miles east of Decatur, 60 miles south of Bloomington, and 35 miles
southwest of Champaign-Urbana on the Norfolk Railroad. The village is surrounded
by rich agricultural land which is sparsely populated. Most employment supports
agricultural or its related industry though there is some sparse light
manufacturing in the Bank's market area and the western edge of the township
serves as a bedroom community to Decatur which has a population of just under
100,000.
POPULATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PROJECTED
POPULATION POPULATION
POPULATION POPULATION 1995 GROWTH
1980 (,000) 1990 (,000) (,000S) TO 2000
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. 226,542.2 248,709.9 262,755.3 274,635.0
Illinois 11,427.4 12,051.4 11,829.9 12,051.0
Piatt County 16.581 15.548 16.198 15.560
Cerro Gordo 1.553 1.436 1.448 1.481
- -------------------------------------------------------------------------------------------
</TABLE>
HOUSEHOLDS AND PROJECTED GROWTH
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
TOTAL NUMBER TOTAL NUMBER PROJECTED
OF OF GROWTH IN
HOUSEHOLDS HOUSEHOLDS NUMBER OF
(1990) (,000) (1995) (,000) HOUSEHOLDS
TO 2000
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. 91,947 97,061 102,885
Illinois 4,202.2 4,443.4 N/A
Piatt County 5.952 N/A N/A
Cerro Gordo .551 .555 .568
- ---------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
17
<PAGE>
Cerro Gordo has a village population of approximately 1500 and Piatt
County a population of approximately 16,000 with approximately 6000
households. Both Cerro Gordo and Piatt County have experienced periods of
stagnant or marginally declining population endemic to rural agricultural
areas, and population is not expected to increase significantly in the future.
<TABLE>
<CAPTION>
EMPLOYMENT BY INDUSTRY
PIATT COUNTY
1997
<S> <C>
Manufacturing 19.3%
Retail Trade 14.1%
Services 10.5%
Government 2.8%
Construction 7.1%
Wholesale Trade 3.7%
Transportation 4.9%
Communication/Utilities 3.2%
Finance, Ins, Real Estate 6.2%
Agriculture 8.0%
Health Services 8.0%
Education 12.2%
Mining < 1%
</TABLE>
Most large employers in the county are located in Monticello, the county
seat 20 miles to the north. Cerro Gordo public schools are one of the largest
employers in the county. The downtown village of Cerro Gordo includes about a
dozen small businesses. The largest employers in the county, the number of
employers, their industry and their location are referenced below:
MAJOR EMPLOYERS IN PIATT COUNTY (1996)
<TABLE>
<CAPTION>
EMPLOYER EMPLOYEES INDUSTRY LOCATION
- -------- --------- -------- --------
<S> <C> <C> <C>
Monticello Public Schools 180 Education Monticello
Piatt County Nursing Home 140 Health Monticello
City of Monticello 130 Government Monticello
General Cable Corp 130 Cable Mfg Monticello
Central Illinois Mfg Co. 120 Filter Mfg Bement
Cerro Gordo Public School 100 Education Cerro Gordo
Cherrydale 100 Mfg Monticello
John Kirby Hospital 100 Health Monticello
Piatt County 90 Government Monticello
Viabin Corp 60 Pharmaceutical Monticello
</TABLE>
Employment opportunities in Piatt County have declined in the 1990's
despite the state of the national economy. Unemployment in the area is not
increasing at the same rate that labor is decreasing due to marginal declines in
population. Earnings by persons
- -------------------------------------------------------------------------------
18
<PAGE>
employed is also declining in Piatt County, having decreased 12.2 percent from
1994 to 1995.
LABOR FORCE (THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Illinois 5999 5991 6061 6104 6130 6125
Piatt County 8.452 8.150 7.814 7.432 N/A 7.577
- ----------------------------------------------------------------------------------
</TABLE>
UNEMPLOYMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 LATEST
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. 7,1% 6.6% 5.4% 5.5% 5.2% 5.0%
Illinois 7.5% 5.7% 5.2% 5.3% 4.7% 5.2%
Piatt County 7.4% 5.9% 5.6% 6.0% N/A 5.4%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Per capita and aggregate income levels for individuals and households in Cerro
Gordo are below those of Piatt County, the state and nation.
MEDIAN HOUSEHOLD INCOME DATA
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
MEDIAN MEDIAN ESTIMATED
HOUSEHOLD HOUSEHOLD GROWTH MEDIAN
INCOME (1989) INCOME (1997) HOUSEHOLD
INCOME TO 2002
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $30,056 $36,961 $42,042
Illinois $32,252 $40,853 $47,507
Piatt County $31,369 $39,627 $46,080
Cerro Gordo $30,817 $36,250 $41,102
- ---------------------------------------------------------------------------
</TABLE>
HOUSEHOLD INCOME DISTRIBUTION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
POVERTY POVERTY HOUSEHOLD HOUSEHOLD
RATE RATE INCOME < INCOME >
(1989) (1995) $25,000 $100,000
(PRCNT) (PRCNT)
(1997) (1997)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. 13.1% 13.8% 41.8 8.1
Illinois 11.9% 12.4% 27.7 9.8
Piatt County 6.1% 6.4% 37.7 5.5
Cerro Gordo N/A N/A 29.1 3.9
- ----------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
19
<PAGE>
INCOME DATA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Per Capita Income (1989) Per Capita Income (1995)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
U.S. $14,420 $23,200
Illinois $15,201 $25,225
Piatt County $13,690 $23,297
Cerro Gordo $12,754 $20,146
- ----------------------------------------------------------------------------------------
</TABLE>
Cerro Gordo and Piatt County have a sizable elderly population.
Approximately 15 percent of its residents are over 65, compared to state and
national averages of approximately 13 percent. The median age of the community
is 37 compared to a statewide and national average of approximately 34.8
Cerro Gordo and Piatt County residents have a higher proportion of high
school graduates as a percent of total population, then does the state and
nation in general, probably attributable to the excellent quality of its local
schools. However, the percentage of college graduates is significantly below
state and national averages.
DEMOGRAPHIC DATA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
POPULATION OVER 65 MEDIAN AGE HIGH SCHOOL BA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. 12.7% 34.8 75.2 20.3
Illinois 12.9% 34.7 76.2 21.0
Piatt County 15.4% N/A 83.0 15.9
Cerro Gordo 14.8% 36.8 83.7 9.7
- ----------------------------------------------------------------------------------------------------
</TABLE>
The housing stock in the Cerro Gordo is characterized mostly by traditional
older smaller homes typical of an old farming community. Though there are few
subdivisions in the bank's market area there are some newer and larger homes
spread throughout the township. In general the median value of Piatt County and
Cerro Gordo homes is substantially below state and national averages, but home
ownership is significantly higher.
HOME OWNERSHIP
<TABLE>
<CAPTION>
- ---------------------------------------------------------
MEDIAN HOME PRCNT HOMES
VALUE OWNER OCCUPIED
(1990) (1990)
- ---------------------------------------------------------
<S> <C> <C>
US $79,100 64.2%
Illinois $80,900 64.2%
Piatt County $51,200 76.5%
Cerro Gordo $41,700 80.1%
- ---------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
20
<PAGE>
HOUSING STOCK
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Total Housing Detached Homes as a Median Year of Prcnt Units Prcnt Units
Units Prcnt of Total Construction Constructed Constructed
prior to 1939 1980-90
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United States 91,947,410 59.0 1965 18.4 20.7
Illinois 4,506,275 1958 27.1 14.6
Piatt County 6,227 1958 33.4 25.6
Cerro Gordo 569 1957 35.7 2.6
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Commensurate with household and population figures residential housing
construction in the Cerro Gordo area has been relatively low. Only one to four
new permits are reported in the township annually and only up to 77 in the
entire county.
RESIDENTIAL HOUSING CONSTRUCTION (# OF UNITS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United States 1,151,847 1,299,078 1,285,650 1,353,176 1,367,120
Illinois 42,286 46,483 44,219 47,829 44,123
Piatt County 59 75 77 75 71
Cerro Gordo 2 1 4 1 3
- -------------------------------------------------------------------------------------------
</TABLE>
COMPETITION
As larger institutions compete for market share to achieve economies of
scale and extend their markets beyond traditional geographic boundaries, the
market environment for the Bank's products and services is expected to become
increasingly competitive. Smaller institutions, such as Cerro Gordo, will be
forced to either compete with larger institutions on pricing or to identify and
operate niches that will allow operating margins to be maintained at profitable
levels.
COUNTY AND STATE DEPOSIT SHARE ANALYSIS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PIATT COUNTY
Deposits (,000,000) $253,133 $248,771 $255,657 $273,596 $282,430
Banks 9 9 8 8 8
Branches 12 12 11 11 11
Deposits/Branch $21,094 $20,731 $23,242 $24,872 $25,675
Cerro Gordo Market Share 2.2% 2.3% 2.2% 2.02% 1.9%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
21
<PAGE>
The Bank faces strong competition for deposits in Cerro Gordo and the
surrounding county. There are eight depository institutions with 11 branches
located in Piatt County. Though the total county deposit base is only $282
million Cerro Gordo owns less than a 2 percent market share. County deposits
have increased at an annualized rate of approximately 2.5 percent year recently.
Though the Bank's county market share has declined in recent years Management
believes that with the adoption of this new business plan and the energy of
conversion that it can achieve significant market share growth. In essence the
Bank can double its asset base with only a 2 percentage point increase in market
share.
In the village of Cerro Gordo the only other financial institution is a
commercial bank with over $13 million in deposits. The combined deposit base of
the two institutions has declined marginally since 1993. The Bank's deposits
have declined at an annualized rate of 1.3 percent and its competitor's at a
rate of 1.5 percent. The Bank's market share of village deposits has remained
essentially stable recently at approximately 28.7 percent since 1993, but has
declined from a peak of 30.5 percent in 1994.
While the village and county deposit bases are relatively small the average
branch is still nearly five times larger than the Bank's, meaning that the Bank
faces significant disadvantages in economies of scale.
In addition to commercial banking operations in Cerro Gordo and
surrounding areas the bank faces increasing and significant competition for
funds and lending customers from non-depository institutions, most of which
operate out of Decatur, Bloomington or Champaign, but which offer investment
and mortgage opportunities to Cerro Gordo residents.
DEPOSITORY INSTITUTIONS, BRANCHES AND DEPOSITS IN CERRO GORDO (,000)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ANNLZD
1993 1994 1995 1996 1997 GROWTH
1993-97
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CERRO GORDO S.B. $5,622 $5,774 $5,601 $5,532 $5,340 -1.3%
The American Bank $14,084 $13,134 $13,627 $13,591 $13,284 -1.5%
TOTAL BRANCHES 2 2 2 2 2
TOTAL BANKS 2 2 2 2 2
TOTAL DEPOSITS $19,706 $18,908 $18,868 $19,123 $18,624 -1.4%
DEPOSITS/BRANCH (COMPETITION) $14,084 $13,134 $13,627 $13,591 $13,284
CERRO GORDO MARKET SHARE 28.5% 30.5% 29.7% 28.9% 28.7%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
22
<PAGE>
SECTION III
PUBLICLY-HELD THRIFT INSTITUTION COMPARISONS
In determining the fair market value of the Bank's common stock it is
necessary to compare the financial, operating, and other characteristics of the
Bank to comparable publicly traded thrift institutions. This section compares
Cerro Gordo B&L with three select groups; the universe of publicly traded
thrifts (excluding mutual holding companies), a smaller select group of publicly
traded thrifts (the "Comparative Group"), and recently converted thrifts. While
the prices of comparable institutions are useful in determining the pro forma
market value of the Bank, considerable adjustments may be required in the
pricing of Cerro Gordo B&L's to-be-issued common stock due to differences in
such factors including, but not limited to, size, market area, financial
strength, operating strategy, liquidity and stock market environment. The
selection of the Comparative Group is equal in importance to the subsequent
adjustments that will be made to the Bank's pro forma market value. The
selection criteria used and the companies selected are discussed below.
SELECTION CRITERIA
The most general relevant comparables for the Bank are thrift institutions
listed on the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX)
and those traded on the national over-the-counter (NASDAQ) markets. Selection of
the Comparative Group is limited to these thrifts because the existence of an
active and regular trading market is imperative if the common stock is to be
used as a basis for comparison. The reliability of share price data of thinly
traded stocks is sometimes difficult to assess due to infrequent trades or
widely varying transaction prices.
AVERAGE PRICING RATIOS BY STOCK EXCHANGE
Table III.1 presents a summary of the average and median pricing for all
thrifts listed in Exhibits 20-A and 20-B. Trading prices for NASDSAQ thrifts are
presented vis-a-vis the industry average. Since approximately 90 percent of all
public thrifts are NASDAQ listed, NASDAQ pricing ratios are generally comparable
to all public thrift averages.
- -------------------------------------------------------------------------------
23
<PAGE>
TABLE III.1
PRICING RATIOS BY TRADING EXCHANGE
(PRICES AS OF MAY 19, 1998)
<TABLE>
<CAPTION>
Price Divided By
- -------------------------------------------------------------------------------------------------
Earnings Core Book Tang BV Assets
Earnings Value
- -------------------------------------------------------------------------------------------------
ALL PUBLIC THRIFTS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average 23.8 23.3 175.2 182.6 21.0
Median 20.9 20.7 165.1 166.2 19.1
NASDAQ
Average 23.8 23.3 176.4 182.4 21.3
Median 20.3 19.7 159.6 162.7 19.1
- -------------------------------------------------------------------------------------------------
</TABLE>
Given the size of the prospective conversion offering it is not anticipated
that the Bank's stock will be eligible to be quoted on any of the exchanges. In
the likely event the common stock does not qualify for quotation on the Nasdaq
National Market system the Bank intends to list the common stock
over-the-counter through the National Daily Quotation System "Pink Sheets" and
request Trident Securities to match buy and sell orders for the common stock.
Because price quotations on the Pink Sheets may not be updated or available on a
timely basis and because it is anticipated that very few shares of the common
stock of the Company will be available for sale it is anticipated that the
liquidity of this issue will be extremely limited which such liquidity could be
reflected in the trading price of the Stock.
AVERAGE PRICING RATIOS BY GEOGRAPHIC REGION
Further consideration must be given to geographic location given that the
operating and competitive environment and equity market valuation for
institutions varies from state to state or region to region as a result of
different economic, legal and regulatory factors. Table III.2 summarizes the
average and median pricing ratios for publicly traded thrifts in the Midwest and
the thrift industry.
- -------------------------------------------------------------------------------
24
<PAGE>
TABLE III.2
PRICING RATIOS BY GEOGRAPHICAL REGION
(PRICES AS OF MAY 19, 1998)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Earnings Core Book Tang BV Assets
Earnings Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALL PUBLIC THRIFTS
Average 23.8 23.3 175.2 182.6 21.0
Median 20.9 20.7 165.1 166.2 19.1
MIDWEST
Average 25.5 23.1 167.0 171.3 21.4
Median 20.4 19.5 146.3 152.4 19.5
- -----------------------------------------------------------------------------------------------------
</TABLE>
As illustrated in Table III.2, the pricing ratios of Midwest thrifts are
comparable to the industry average. Midwest price-to-earnings and price-to-asset
ratios are very similar to the industry average. Price-to-book ratios are
slightly lower than the Comparative Group, in part a function of slightly higher
capitalization in Midwest thrifts.
SELECTION PROCEDURE
From the universe of publicly traded thrifts a more select group of
comparable companies was chosen based on further criterion. In screening to
develop the appropriate comparative group the first criterion tested were asset
size and market value. Only firms with assets under $150 million and a market
value below $50 million were considered. Asset and market size were determined
to be important because they reflect not only the earnings capacity of the
institution, but also its limited liquidity.
Also considered of principal importance in selecting a comparative group
were key financial condition and financial performance ratios; primarily the
capital to asset, return on average asset, and return on average equity ratios.
After consideration of conversion proceeds and pro forma earnings Cerro Gordo
B&L will have exceptionally strong capital ratios, below average return on
average assets, and a very low return on equity. Only those institutions with
capital/asset ratios in excess of 9 percent and return on average equity ratios
less than 8 percent were considered further.
Cerro Gordo Building & Loan, s.b. serves a midwestern rural market and its
limited market value and liquidity will make it most attractive to stockholders
in the Bank's general geographic region. Consequently, the Comparative Group was
further narrowed down by eliminating first those institutions outside of the
Bank's broad geographic region. As a result, all of the thrifts considered,
except two in Kentucky, were in the Midwest region.
A final consideration for inclusion in the Comparative Group was the
composition of an institution's lending portfolio. Cerro Gordo B&L is a
traditional one-to-four family
- -------------------------------------------------------------------------------
25
<PAGE>
portfolio lender. The thrifts chosen for the Comparative Group are also
primarily traditional portfolio lenders with low concentrations of
non-mortgage lending.
As previously stated the Comparable Group was selected only from publicly
traded (NASDAQ, NYSE, AMEX) companies because these companies have established
trading markets which, for larger or more frequently traded thrifts, are
presumed to be accurate reflections of the Bank's market value.
Institutions whose market prices are believed to be affected by proposed
mergers or acquisition were not considered as part of the Comparative Group
because these institution's prices tend to be distorted by speculative
considerations and therefore, are unreliable indicators of the market's
valuation.
The selection criterion discussed above were employed in identifying
thrifts, which, by virtue of location, size and operating characteristics and
financial condition and performance are deemed to be most comparable in nature
to the Bank. These thrifts, their location, asset size, and other summary data
are presented in Exhibit 21 and detailed information on the Comparative Group is
presented in Exhibits 21 through 30.
Composing a Comparative Group for Cerro Gordo is extremely difficult given
its extraordinary small size of $7 million. There are no publicly traded
institutions of similar, even nearly similar size. Also, given its small size
the institution has other characteristics shared by only a few public
institutions. Most dramatically the Bank's asset and deposit product basis are
extremely limited. The average asset size of the Comparative Group is $91
million, the average capital-to-asset ratio is 20 percent, the average market
capitalization was $21 million, and the average ROAA and ROAE were 0.90 percent
and 4.63 percent respectively.
REVIEW OF COMPARATIVE GROUP
AMB FINANCIAL GROUP, INC., Munster, Indiana, is the holding company for
American Savings, FSB which operates four offices with 29 employees in northern
Indiana. As of the most recently available date, AMB had approximately $106
million in assets and a market capitalization of $18 million. AMB is a portfolio
lender with over 90 percent of its loans secured by real estate. AMB converted
in April 1996.
FIRST INDEPENDENCE CORPORATION, Independence, Kansas, is the holding
company for First FS&LA which operates two offices with 27 employees. The Bank
has assets of $124 million and nearly 97 percent of its loan portfolio is
secured by real estate. First Independence converted in October 1993.
FIRST LANCASTER BANCSHARES, Lancaster, Kentucky, is the holding company for
First Lancaster Federal Savings Bank with eleven employees in one office. First
Lancaster has only $53 million in assets and a capital-to-asset ratio of 26.7
percent. It's return on average equity is only 3.46 percent and 99 percent of
its loans are secured by real estate. First Lancaster converted to stock form in
July 1996.
- -------------------------------------------------------------------------------
26
<PAGE>
HARRODSBURG FIRST FINANCIAL BANCORP, INC., Harrodsburg, Kentucky, is
the holding company for First Federal Savings Bank of Harrodsburg which operates
two local offices with 15 full time employees. As of the most recently available
date, Harrodsburg had $108 million assets. Harrodsburg is well capitalized with
a capital/asset ratio of 26.7 percent. It's 1.36 percent ROAA yielded a 5.06
percent return on average equity. Harrodsburg is traditional thrift lender with
only 4 percent non-mortgage loan balances and zero noon-performing loans.
Harrodsburg has exhibited asset, loan and deposit growth trends similar to the
Bank. Harrodsburg converted in October 1995.
HOME FINANCIAL BANCORP, Spencer, Indiana, is the holding company for Owen
Community Bank which operates out of a single office. Home is the smallest
institution in the Comparative Group with only $41 million in assets. It has an
18 percent capital-to-asset ratio, a 0.93, and a return on average equity of
5.32 percent. Home converted in July 1996.
MARKET FINANCIAL CORPORATION, Mount Healthy, Ohio is the holding company
for Market Building & Savings Company which operates two offices. The $57
million asset institution has a 35.3 percent capital-to-asset ratio, a 1.12
percent return on average assets and a 3.18 percent return on average equity.
Over 99 percent of its loans are secured by real estate and the Bank has no
non-performing loans. Market converted to stock form in March 1997.
NORTH BANCSHARES, Chicago, Illinois, is the holding company for North
Federal Savings Bank with 37 employees in two offices. North Bancshares has $118
million of assets and a 3.43 percent return on average equity. Nearly 99 percent
of the Bank's loans are secured by real estate and North has exhibited similar
asset, loan and deposit growth trends similar to the Bank's. North converted in
December 1993.
NS & L BANCORP, INC, Neosho, Missouri is the holding company for Neosho
Savings and Loan Association which operates two offices. NS & L has $61 million
in assets with a capital-to-assets ratio of 18.8 percent, return on average
assets of 0.69 percent and a return on average equity of 3.51 percent. The Bank
has a ratio of non-performing loans to assets of 0.01 percent. NS & L converted
to stock form in June 1995.
PEOPLES FINANCIAL CORPORATION, Massillon, Ohio, is the holding company
for Peoples Federal Savings and Loan Association with two full service offices
and $82 million in assets. Peoples has a capital-to-asset ratio of 19 percent, a
return on average assets of 1.06 percent and a return on average equity of 4.79
percent. Peoples is exclusively a real estate portfolio lender with outstanding
credit. Peoples converted to stock form in September.
PEOPLES-SIDNEY FINANCIAL CORPORATION, Sidney, Ohio is the holding company
for Peoples Federal Savings & Loan Assn. which operate one office. Peoples has
$105 million in assets with 25.2 percent capitalization. Peoples has a return on
average assets of 1.23 percent and return on average equity of 5.2 percent. Over
99 percent of its loans are secured by real estate and it converted to stock
form in September 1996.
- -------------------------------------------------------------------------------
27
<PAGE>
SOBIESKI BANCORP, INC., South Bend, Indiana is the holding company for
Sobieksi FS&LA which operates three offices with $90 million in assets. Sobieski
has a return on average assets of 0.58 percent and a return on average equity of
3.93 percent. It converted to stock form in March 1995.
THREE RIVERS FINANCIAL CORP, Three Rivers, Michigan is the holding company
for First Savings Association with 22 employees in two offices. Three Rivers has
assets of $98 million and is located in a community with similar demographics to
Cerro Gordo. Three Rivers has a 23 percent capital-to-asset ratio and converted
in August 1995.
WESTWOOD HOMESTEAD FINANCIAL, Cincinnati, Ohio is the holding company for
Westwood Homestead Savings Bank which operates two full service offices with
$130 million in assets. Westwood is highly capitalized with a capital-to-assets
ratio of 23 percent. With a return on average assets of 0.61 percent its return
on average equity is only 2.25 percent. Westwood is almost exclusively a real
estate lender with excellent credit quality. Westwood has had substantial loan
growth since its conversion in September 1996, with marginal deposit growth and
negligible asset decay.
COMPARATIVE GROUP COMPOSITE PERFORMANCE
All but two of the Comparative Group companies are located in the Midwest.
Four are located in Ohio, three in Indiana, two in Kentucky and one each in
Missouri, Illinois, Kansas and Michigan. Generally, these thrifts operate in
suburban to rural moderate or low growth areas. All of the thrifts converted
since 1993 and two after 1996.
Exhibits 22 and 23 present summary ratios detailing the financial
performance and capital condition, respectively, of the Comparative Group,
Illinois thrifts, Midwest thrifts and Cerro Gordo B & L.
All of the comparative group thrifts are highly capitalized institutions
with capital to asset ratios ranging from 9.3 percent for First Independence
Corporation to 35.3 percent for Market Financial Corporation with an average
ratio of 19.6 percent. Each of the 13 thrifts in the Comparative Group generates
a reasonable return on average assets, ranging from a low of 0.46 percent for
North Bancshares to a high of 1.36 percent for Harrodsburg First Financial
Corporation, with an average of 0.90 percent. Because of the high capital levels
the average return on average equity for the Comparative Group is only 4.63
percent, ranging from a low of 2.25 percent for Westwood Financial Corporation
to a high 6.94 percent for AMB Financial. On a pro forma basis Cerro Gordo B&L
has a capital to asset ratio of 22.3 percent. The Bank's pro forma return on
average assets was 0.68 percent and it's return on average equity of 3.08
percent, are both below the Comparative Group, but its pro forma core return on
average assets of 0.90 percent and return on average equity of 4.06 percent are
comparable to the Comparative Group.
The Comparative Group is generally small in asset size and market value.
Seven of the institutions have asset bases below $100 million and only Westwood
Financial, with $129 million is larger than $125 million. Home Financial
Bancorp, with $41.5 million in assets is the only member of the Comparative
Group with assets below $50
- -------------------------------------------------------------------------------
28
<PAGE>
million. The average total asset size for the Comparative Group is $91
million. Westwood Financial is the only institution in the Comparative Group
with over $40 million in market capitalization. The smallest market
capitalized thrift is Home Financial Corp with only $8.3 million. The average
market capitalization for the Comparative Group is $20.7 million. On a pro
forma basis Cerro Gordo B&L had approximately $7.6 million total assets at
March 31, 1998.
Exhibit 24 presents the loan portfolio composition of the Comparative
Group. The Comparative Group is composed of primarily thrift lenders
concentrating in real estate mortgage lending. The average and median volume
of loan originations for the Comparative Group is $25 million, significantly
above the Bank's volume of $1.9 million. All of the institutions are
primarily portfolio lenders. On average 81 percent of the Comparative Group's
lending portfolio are invested in 1-4 family mortgages compared to 94 percent
for Cerro Gordo B&L. Only one of the Comparative Group companies have
non-mortgage loan portfolios exceeding 10 percent of assets and the average
ratio of non-mortgage loans to assets is 4.8 percent compared to less than
one percent for Cerro Gordo B&L.
Exhibit 25 presents additional balance sheet composition data for the
Comparative Group and Cerro Gordo B&L. The average loan to deposit ratio of
the Comparative Group is 114 percent, higher than the Bank's 105 percent
ratio. If depositors convert deposits to shares in the conversion, however,
the Bank's loan to deposit ratio will increase closer to the Comparative
Group's. The average loan-to-asset ratio of the Comparative Group is 77
percent, less then the Bank's ratio of 88 percent. The Comparative Group's
deposit to asset ratio is approximately 68 percent compared to the Bank's 76
percent. On most other key balance sheet ratios such as REO, capitalized
servicing and intangibles the composite balance sheet of the Comparative
Group is similar to the Bank's.
Exhibit 26 illustrates the recent growth of assets, loans and deposits
of the Comparative Group and Cerro Gordo B&L. Both the Bank and the
Comparative Group have exhibited significant loan growth and modest or
negative deposit growth. The Bank's loan portfolio increased 18 percent
compared to the Comparative Group's increase of 16.4 percent. While the
Comparative Group's deposit base increased only 5.0 percent, the Bank's
actually shrunk 1.1 percent. For both the Comparative Group and the Bank,
asset growth was more moderate.
Exhibit 27 addresses some of the risk ratios of the Comparative Group
and Cerro Gordo B&L. The Bank has only one small bad loan in its portfolio so
its non-performing assets to total assets ratio is extremely neglible, only
0.16 perecent, and its reserves-to-NPA's very high at 292 percent. The
Comparative Group ratios are excellent, but not nearly as favorable.
Exhibit 28 presents yield-cost spread analysis for the Comparative Group
and Cerro Gordo B&L. The Bank and the Comparative Group exhibited similar
yield-cost spreads, 2.67 percent for the Bank versus 2.64 percent for the
Comparative Group, and similar net interest margins of 3.47 percent for the
Bank and 3.67 percent for the
29
<PAGE>
Comparative Group. The Bank had slightly higher deposits costs, largely
because it does not have any non-interest bearing accounts or other low yield
transaction accounts, as do many of the Comparative Group.
Exhibit 29 presents some of the capital issues of the Comparative Group.
On average 1.09 percent of the Comparative Group's total common shares trade
each week representing a trading volume equal to about 80 percent of the all
public thrift average of 1.23 percent. The Comparative Group has
institutional ownership of 13.4 percent and insider ownership of 8.7 percent.
The average current dividend yield is approximately 2.2 percent.
PERFORMANCE OF RECENTLY CONVERTED THRIFTS
An important factor bearing on the likely reception of Cerro Gordo B&L's
initial stock offering is the market reception of recently converted
institutions. Exhibit 31-A shows the original offering price and pro forma
pricing ratios of all thrifts which converted from mutual-to-stock form since
June 1, 1997. The average and median amount of gross proceeds were $98 and
$49 million. The average offering price to pro forma book value was 77
percent, the average price to pro forma earnings ratio was 17.1, and the
price to assets ratio was 18.9 percent. These figures represent pro forma
pricing ratios upon conversion, which generally reflect offerings completed
at the "super max" or 32 percent above the midpoint.
Thrift conversions in the past year have appreciated an average 56
percent on the first day of trading, effectively eliminating any "new issue
discount" immediately. Converting thrifts tended to continue to appreciate,
albeit at a much more modest pace, for three months or more thereafter,
reaching an average price 72 percent then its' offering price.
30
<PAGE>
SECTION IV
MARKET VALUE ADJUSTMENTS
INTRODUCTION
In order to determine the estimated pro forma market value of the Bank,
certain adjustments are required to reflect the differences between the Bank
and the public thrift Comparative Group. The market value adjustments made
are based upon certain financial and other criterion, some of which were
discussed in the previous chapter and include, among other factors; financial
condition and performance, earnings quality and predictability, management,
market area, expected dividend payments, and the liquidity and marketability
of the to-be-issued common stock.
FINANCIAL CONDITION
The Bank and its Comparative Group are both characterized by similar
levels of excess capital. The Bank intends to leverage some of its additional
capital towards modest growth and exercise cash and special cash dividends
and stock buy-backs, where appropriate, to reduce its capital to asset ratio
to more manageable levels. However, it is expected that the Bank will remain
overcapitalized for some time to come. The average capital to asset ratio of
the Comparative Group is 19.6 percent compared to a pro forma capital to
asset ratio of approximately 22.3 percent for the Bank. In light of the
similar capital ratios to the Comparative Group, no adjustment was made for
this factor.
<TABLE>
<CAPTION>
- ----------------------------------------------------
AVERAGE EQUITY/ASSETS
- ------- -------------
<S> <C>
COMPARATIVE GROUP 19.61
ILLINOIS THRIFTS 12.73
INDUSTRY 13.12
CERRO GORDO B&L PRO FORMA 22.25
- ----------------------------------------------------
</TABLE>
ASSET QUALITY
In general the loan quality of all the Comparative Group is excellent,
reflecting the traditional nature of the chosen thrifts. Still, the Bank's
non-performing asset to total asset ratio of 0.16 percent is significantly
less than the Comparative Group average of 0.46 percent and of most other
relative indices. With the recent addition of reserves the Bank now has ample
reserves relative to its existing non-performing assets. It must be
remembered, however, that the Bank recently originated a relatively
significant amount of commercial real estate loans, that the absolute amount
of its reserves is still very low, and, as a result, any one loan has the
potential to significantly alter these ratios. In consideration of these
issues no adjustment has been made to the Bank's pro forma market value.
31
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
AVERAGE NPA/ASSETS RESERVES/NPA
- ------- ---------- ------------
<S> <C> <C>
COMPARATIVE GROUP 0.46% 74%
INDUSTRY 0.59% 84%
ILLINOIS THRIFTS 0.32% 141%
CERRO GORDO B&L 0.16% 292%
- ---------------------------------------------------------------------
</TABLE>
PROFITABILITY LEVELS
Cerro Gordo Savings pro forma return on average assets of 0.68 percent
is significantly below the 0.90 percent average return on average assets of
the Comparative Group. However, this ratio reflects certain non-recurring
expenses of the Bank and may not be the best indicator of sustained
profitability.
On most key profitability ratios the Bank has ratios very similar to the
Comparative Group. The Bank's interest rate spread is only 2 basis points
higher than the Comparative Group, it's non-interest expense ratio is only 4
basis points less and it's interest earnings assets to interest bearing
liabilities ratio of 117 percent will be much closer to the Comparative Group
average of 125 percent after the conversion.
As a result, no adjustment was made for this factor.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AVERAGE SPREAD IEA/IBL INTEXP/ASSETS ROAA*
- ------- ------ ------- ------------- -----
<S> <C> <C> <C> <C>
COMPARATIVE GROUP 2.65% 125% 2.42% 0.90%
INDUSTRY 2.88% 115% 2.24% 0.94%
ILLINOIS THRIFTS 2.76% 114% 2.30% 0.71%
CERRO GORDO B&L EXISTING 2.67% 117% 2.38% 0.68%
- -----------------------------------------------------------------------------------------
</TABLE>
RETURN ON AVERAGE EQUITY
Due to its moderate return and high capitalization the Bank's pro forma
return on average assets is significantly lower than the industry average.
Its pro forma return on average equity of 3.08 percent is also significantly
lower than the Comparative Group average of 4.63 percent. However, after
adjustment for non-recurring expenses much of this difference is eliminated.
Despite the low return on average equity relative to the entire market we
have not assigned a discount for this factor due to its similarity with the
Comparative Group.
<TABLE>
<CAPTION>
- -------------------------------------
AVERAGE ROAE
- ------- ----
<S> <C>
COMPARATIVE GROUP 4.63%
INDUSTRY 8.75%
ILLINOIS THRIFTS 4.91%
CERRO GORDO B&L PRO FORMA 3.08%
- --------------------------------------
</TABLE>
32
<PAGE>
CORE EARNINGS
Earnings of any company are sometimes distorted by extraordinary or
non-recurring events or adjustments. In FY1998 the Bank increased its
reserves for loan loss reserves by $26,500, compared to no such allowance the
previous year. Likewise members of the Comparative Group experienced their
own reporting vagaries. In order to compare "core" earnings of the Bank with
those of the Comparative Group we adjusted the reported earnings of the Bank
to reflect a "normalized" loan loss provision for FY1998. Specifically, we
determined that the median provision for loan losses of the Comparative Group
as a percentage of Comparative Group net income before such provisions and
before taxes was 2.91 percent. Based on this calculation the imputed
provision for loan losses for the Bank should be $2303. After adjustment for
taxes the core earnings of the Bank are computed to be $58,568. As a result,
the "core" earnings of the Bank yields a return on average assets of 0.90
percent and a return on average equity of 4.06 percent.
The Bank's core return on average assets is marginally higher and
its core return on average equity is marginally lower than the Comparative
Group. As a result, we have not assigned a discount for this factor.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
AVERAGE CORE ROAA CORE ROAE
- ------- --------- ---------
<S> <C> <C>
COMPARATIVE GROUP 0.84% 4.32%
INDUSTRY 0.93% 8.66%
ILLINOIS THRIFTS 0.75% 5.19%
CERRO GORDO B&L PRO FORMA 0.90% 4.06%
- -------------------------------------------------------------
</TABLE>
GROWTH AND PREDICTABILITY OF EARNINGS
The Bank has exhibited substantial loan growth, but modest asset and
deposit decay over the past year, similar to the Comparative Group's pattern
with the critical difference that the Comparative Group's deposit base
actually is increasing.
The Bank has seen a steady decline in net income over the past several
years. However, after adjusting for the special FDIC assessment and a recent
increase in loan loss provisions, core income has actually increased the last
two years and its interest rate sensitivity is not inconsistent with most
thrifts of similar size and composition. The Bank still relies almost solely
on net interest income for revenue; non-interest income, which has the
ability to offset fluctuations in interest income is essentially negligible.
The Bank's continued profitable growth may be hindered by its lack of
deposit base and deposit growth potential. Likewise, in periods of
fluctuating interest rates its lack of non-interest income would make net
income very volatile. As a result, we have assigned a modest discount for
this factor.
33
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
NONINTINC/ ASSET LOAN DEPOSIT
AVERAGE GAP ASSETS GROWTH GROWTH GROWTH
- ------- ------ ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
COMPARATIVE GROUP -8.84% 0.23% 7.4% 16.4% 5.0%
INDUSTRY -5.69% 0.52% 13.6% 14.4% 9.5%
ILLINOIS THRIFTS 1.07% 0.32% 3.6% 5.8% 2.0%
CERRO GORDO B&L 0.01% 10.3% 18.0% -1.1%
- -----------------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT/STAFF DEPTH
Existing management and staff is loyal and tenured and qualified to
perform all functions necessary and prospective functions required at the
Bank. However, the depth and breadth of the management team, especially as it
relates to commercial lending and secondary marketing is extremely limited,
even compared to the traditional nature of the Comparative Group.
Accordingly, we have made a negative adjustment value for this factor.
DIVIDEND PAYMENTS
The payment of a cash dividend in the future will be dependent upon such
factors as earnings performance, capital position, growth, and regulatory
limitations. The Bank has declared its intention to pay a cash dividend of
approximately 2 percent which is consistent with the Comparative Group.
Though management has postponed the payment of cash dividends for several
quarters the Bank's high capital provides relative assurance that the modest
dividends planned will be forthcoming and sustained. All of the Comparative
Group institutions pay cash dividends with an average yield of 2.24 percent.
As a result, we believe no adjustment for this factor is warranted.
LIQUIDITY OF THE ISSUE
The Comparative Group contains only companies that are listed by the
AMSE or NASDAQ and trade in the OTC market. The average market capitalization
of the Comparative Group is $21 million, the median is approximately $18
million, and only three of the Comparative Group have a market capitalization
in excess of $30 million.
The average and median ratio of shares traded to shares outstanding over
a weekly period for the Comparative Group is similar to that of the entire
industry. The actual number, and market value, of shares traded is
considerably below the industry average due to the smaller market
capitalization of the Comparative Group. As a result, the overall liquidity
of the Comparative Group, and prospectively of Cerro Gordo B&L, is quite low.
- -------------------------------------------------------------------------------
34
<PAGE>
The Bank's prospective market value and liquidity are substantially
below even all of the Comparative Group and is likely to be virtually
nonexistent. Even if the stock is listed on the Pink Sheets price quotations
may not be updated or available on a timely basis and it is anticipated that
very few shares of the common stock of the Company will be available for
sale. As a result, it is anticipated that the liquidity of this issue will be
negligible, which such liquidity could be reflected in the trading price of
the stock. As a result, of these factors it is anticipated that the stock
will lack consistent liquidity and a significant discount is assigned for
this factor.
MARKETING OF THE ISSUE
The Bank's stock will be offered through a subscription and community
offering by Trident Securities, Inc. The overall interest in thrift
subscriptions has been varied over recent periods. In response to higher
market interest rates and higher thrift appraisals usually strong demand for
thrift conversion stock waned in the latter part of 1994 and several
institutions, were forced to pare back their proposed initial public
offerings. The market revived in 1995 and remained moderately strong through
1996 and the first half of 1997 despite an increase in pricing ratios. In the
past year the deal flow and pricing ratios of converting thrifts have been
fairly stable with most thrifts converting at the supermaximum value with
excess demand.
As seen in Table IV.1 below the equity bull market continues to thrive.
Overall, equities have appreciated approximately 15 percent since the
beginning of the year and 30 percent over the last twelve months. Thrift
equities exhibited exemplary growth in the last half of 1997, but have
trailed the overall market in 1998. The SNL All Publicly Traded Thrift Index
increased 64.19 percent over the past twelve months, but only 8.35 percent
since the beginning of the year. Smaller institutions, under $250 million of
assets, have trailed thrifts in general for over a year, displaying only
about two-thrids of the appreciation seen in larger thrifts.
TABLE IV.1
SNL THRIFT INDICES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
30-APRIL- 1-DEC- 31-DEC- 30-DEC- PERCENT CHANGE SINCE
1998 1997 1996 1995 DEC-1997
--------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
ALL PUBLICLY TRADED 882.1 814.1 483.6 376.5 8.35
SAIF 827.9 764.4 555.0 356.8 8.30
AMEX 272.9 255.4 192.7 137.7 6.86
NYSE 566.1 521.3 277.3 257.6 8.59
OTC 987.3 911.5 569.7 449.5 8.31
ASSETS LESS THAN $250 M 915.8 869.9 586.6 538.4 5.27
DJIA 9063.4 7908.3 6448.3 5117 14.61
S & P 1111.8 970.4 740.7 615.9 14.56
- ---------------------------------------------------------------------------------------------
</TABLE>
In order to assure successful reception of an initial public offering it
is necessary to offer the new purchaser a substantial new issue discount to
offset the many
- -------------------------------------------------------------------------------
35
<PAGE>
uncertainties faced by the investor as to the liquidity and future
performance of the "untested" company.
While the overall equity market and conversion market remain strong,
the aftermarket in thrifts is not as strong as the overall market. We have
not made an adjustment for market conditions except for a new issue discount.
MARKET AREA
The Bank's market area consists primarily of the rural Cerro Gordo
community and surrounding rural Piatt County. Despite the robust health of
the national economy the local economy, which is predominately agriculturally
based, is stagnant or exhibiting modest growth, and there is minimal new
housing being built or projected in the Bank's immediate market area.
Accordingly a negative adjustment was made for this factor.
SUMMARY OF DISCOUNTS
The table below summarizes the discounts applied to Cerro Gordo B&L
vis-a-vis the Comparative Group. We have made no adjustments to the
Comparative Group based on the similarity of Financial Condition, Asset
Quality, Profitability, Return on Average Equity, Core Earnings, and Dividend
Payments. However, it was determined that modest discounts were justified due
to Growth and Predictability of Earnings, Management Depth, and Marketing/New
Issue Discount. More significant discounts were attributed to Market Area and
Liquidity.
- -------------------------------------------------------------------------------
36
<PAGE>
SUMMARY OF DISCOUNTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NO MARGINAL
PREMIUM ADJUSTMENT DISCOUNT DISCOUNT
------- ---------- -------- --------
<S> <C> <C> <C> <C>
FINANCIAL CONDITION X
ASSET QUALITY X
PROFITABILITY LEVELS X
RETURN ON EQUITY X
CORE EARNINGS X
GROWTH, PREDICTABILITY X
MANAGEMENT X
DIVIDEND PAYMENTS X
LIQUIDITY X
MARKETING OF ISSUE/NEW X
ISSUE DISCOUNT
MARKET AREA X
- ------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
37
<PAGE>
SECTION V
VALUATION METHODS
VALUATION METHOD
Traditional guidelines identify three appropriate valuation methods to
use in determining the pro forma market valuation of a converting thrift;
price\earnings, price\assets and price\book value. The preferred method of
valuation is a price\earnings approach.
The true financial value of any financial asset is derived from the
earnings generated from that asset. As a result, the price\earnings method
has become accepted as the preferred and most reliable valuation method for
on-going concerns. However, given the historic volatility of interest income
in financial institutions the price\book value approach carries considerably
more weight in this industry then it does in most other industries. Finally,
the franchise value of many institutions is reflected in their deposit base
and accordingly the price\asset ratio also has added significance in
considering pricing for this industry.
Exhibit 30 presents the relevant pricing parameters for the Comparative
Group.
PRICE TO EARNINGS METHOD
The price\earnings approach is the standard method of stock valuation
and assumes that the value of a company's stock is a function of the
discounted value of its future earnings stream. The trailing twelve months
reported net income after taxes for Cerro Gordo B&L was $41,872 thousand as
of March 31, 1998.
The subject's earnings base is then multiplied by a price\earnings ratio
to determine the subject valuation. In determining the appropriate
price\earnings ratio we reviewed the ratios of all publicly traded thrift
institutions and those of the Comparative Group in particular. The
price\reported earnings ratios of the Comparative Group ranged from a low of
16.9 for AMB Financial to a high of 42.5 for North Bancshares, Inc. The
average ratio was 25.1 and the median was 23.8. The average price\earnings
ratio for all publicly traded thrifts was 23.8 and the median was 20.8.
Based on the above analysis we have determined that the appropriate
price\earnings ratio for Cerro Gordo B&L is 20.2 which, when multiplied by
the Bank's pro forma earnings (adjusted to reflect earnings on net conversion
proceeds) of $54,479 yields a pro forma market valuation of $1.1 million at
the midpoint. The price\earnings multiplies range from a low of 18.2 at the
minimum of the offering range to 21.9 at the maximum and 23.7 at the super
maximum of the offering range.
- -------------------------------------------------------------------------------
38
<PAGE>
PRICE TO CORE EARNINGS METHOD
The price\core earnings ratios of the Comparative Group ranged from a
low of 13.1 for Peoples Financial to a high of 35.4 for North Bancshares,
Inc. The average ratio was 23.8 and the median was 24.1. The average
price\earnings ratio for all publicly traded thrifts was 23.3 and the median
was 20.7.
Based on the above analysis we have determined that the appropriate
price\core earnings ratio for Cerro Gordo B&L is 15.5 which, when multiplied
by the Bank's pro forma core earnings (adjusted to reflect earnings on net
conversion proceeds) of $71,175 yields a pro forma market valuation of $1.1
million at the midpoint. The price\core earnings multiplies range from a low
of 13.8 at the minimum of the offering range to 17.0 at the maximum and 18.6
at the super maximum of the offering range.
PRICE TO BOOK VALUE METHOD
Historically, the financial markets have placed significant weight on
price\book value methods for valuing financial institutions. As thrifts
diversify it is becoming more apparent that the real earnings power of each
bank's book value (return on equity) can vary significantly depending on the
risk and return of these particular assets, thereby shifting emphasis away
from the price\book value method towards more traditional price\earnings
methods. As a consequence, our valuation has been heavily weighted towards
the latter valuation method. Nevertheless, this valuation approach retains
significance for this industry.
The basis of the price\book value approach is the subject's current GAAP
or tangible book value. At March 31, 1998 the Bank's tangible book value was
$986,014.
The subject's book value is then multiplied by a price\book value ratio
in order to arrive at the subject valuation. In determining the appropriate
price\book value ratio we reviewed the ratios of all publicly traded thrift
institutions and those of Comparative Group in particular. The price\tangible
book value ratios of the Comparative Group ranged from a low of 95.1 percent
for Market Financial Corporation to a high of 160.4 percent for North
Bancshares. The median ratio was 115.8 percent and the average ratio was
119.0 percent. The average price\book value ratio for all publicly traded
thrifts was 182.6 percent and the median ratio was 166.1 percent.
Based on the above analysis we have determined that the appropriate
price\book value ratio for Cerro Gordo B&L is 64.7 percent. Based on
adjustments to historical book value for proceeds, expenses, and incentive
plans, which would increase the Bank's pro forma book value to $1.7 million
at the midpoint, we have determined that the pro forma market value of Cerro
Gordo B&L based on the price\earnings approach is $1.1 million.
- -------------------------------------------------------------------------------
39
<PAGE>
The price\book value multiplies range from 60.2 percent at the minimum
of the offering range to 68.6 percent at the maximum and 72.3 percent at the
super maximum of the offering range.
PRICE TO ASSETS METHOD
The price to assets ratio of the Comparative Group range from 10.8
percent for First Independence to 33.5 percent for Market Financial. The
average price\asset ratio of the Comparative Group is 23.2 percent and the
median ratio is 19.9 percent. The average price\asset ratio for all publicly
traded thrifts is 21.0 and the median pricing ratio is 19.1. While thrift
pricing methodology gives significantly more weight to the price\asset ratio
than do other industries neither the market nor this valuation give it
significant weighting relative to their pricing methodologies.
We have used a price\asset ratio of 14.4 percent to develop the pro
forma market value of the Bank. At the minimum of the offering range the
price to asset ratio is 12.5 percent, at the maximum it is 16.2 percent and
at the super maximum it is 18.3 percent.
VALUATION CONCLUSION
Exhibit 34 provides a summary of the valuation premium or discount for
each of the valuation ranges when compared to the Comparative Group on each
of the valuation approaches.
It is most appropriate to compare the prospective discounts at the
supermaximum since substantially all mutual-to-stock conversions are
consummated at the supermaximum. At the SUPERMAXIMUM the Bank is priced on a
par with - at substantially no discount to - the Comparative Group. The
average price-to-earnings discount is 5.7 percent and the median discount is
only 0.7 percent.
From a price-to-core earnings perspective the Bank is priced at
approximately a 22 percent discount to the Comparative Group. On a book value
basis the Bank is priced at approximately a 36 percent discount. The Bank is
priced at a 21 percent discount to the average of the Comparative Group on a
price-to-assets basis, but only a 8 percent discount to the median. We
believe that on aggregate these discounts are consistent with the discounts
accorded to the Bank in this previous section.
It is therefore our opinion that as of May 27, 1998 the estimated pro
forma market value of Cerro Gordo B&L's to-be-issued common stock was
$1,100,000. This represents 110,000 shares of common stock at $10.00 per
share. The resultant valuation range is $935,000 to $1,454,750.
- -------------------------------------------------------------------------------
40
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I
[MARKET MAP]
<PAGE>
EXHIBIT II
CERRO GORDO BUILDING AND LOAN, S.B.
Financial Statements
March 31, 1998 and
Eleven Months Ended March 31, 1997
With Other Information
<PAGE>
(F-15)
CERRO GORDO BUILDING AND LOAN, S.B.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
PAGE
- ------------------------------------------------------------- ----------------
<S> <C>
INDEPENDENT AUDITOR'S REPORT F-2
FINANCIAL STATEMENTS
Balance sheet F-3
Statement of income 26
Statement of equity capital F-4
Statement of cash flows F-5
Notes to financial statements F-6
</TABLE>
The financial statements of CGB&L Financial Group, Inc. ("CGB&L") have
been omitted because CGB&L had not yet issued any stock, has no assets or
liabilities, and has not conducted any business other than of an
organizational nature.
All schedules are omitted as the required information is not applicable
or the information is presented in the Financial Statements.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Cerro Gordo Building and Loan, s.b.
Cerro Gordo, Illinois
We have audited the accompanying balance sheet of Cerro Gordo Building and
Loan, s.b. as of March 31, 1998 and 1997, and the related statements of
income, equity capital, and cash flows for the year ended March 31, 1998
and eleven month period ended March 31, 1997. These financial statements
are the responsibility of the Institution'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 described above present fairly, in
all material respects, the financial position of Cerro Gordo Building and
Loan, s.b. as of March 31, 1998 and 1997, and the results of its operations
and its cash flows for the year ended March 31, 1998 and eleven month
period ended March 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Geo. S. Olive & Co. LLC
Decatur, Illinois
April 10, 1998
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 524,845 $ 109,912
Interest-bearing time deposits 590,000 1,279,000
Investment securities available for sale 175,329 100,716
Loans 5,558,889 4,711,487
Allowance for loan losses (32,700) (6,200)
---------------------------------------
Net loans 5,526,189 4,705,287
Premises and equipment 15,726 9,438
Federal Home Loan Bank stock 46,200 43,000
Other assets 56,692 41,293
---------------------------------------
Total assets $ 6,934,981 $ 6,288,646
---------------------------------------
---------------------------------------
LIABILITIES
Interest-bearing deposits $ 5,250,307 $ 5,308,464
Long-term debt 600,000
Other liabilities 98,660 85,285
---------------------------------------
Total liabilities 5,948,967 5,393,749
---------------------------------------
EQUITY CAPITAL
Retained earnings 872,685 830,813
Net unrealized gain on securities available for sale 113,329 64,084
---------------------------------------
Total equity capital 986,014 894,897
---------------------------------------
Total liabilities and equity capital $ 6,934,981 $ 6,288,646
---------------------------------------
---------------------------------------
</TABLE>
See notes to financial statements.
(2)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED Eleven Months
MARCH 31, Ended
1998 March 31, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Loans receivable $466,389 $373,424
Investment securities 4,680 4,267
Deposits with financial institutions 70,915 82,277
----------------------------
Total interest income 541,984 459,968
INTEREST EXPENSE
Deposits 289,130 270,470
FHLB advances 20,633
----------------------------
Total interest expense 309,763 270,470
----------------------------
NET INTEREST INCOME 232,221 189,498
Provision for loan losses 26,500 0
----------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 205,721 189,498
----------------------------
NONINTEREST INCOME 6,708 6,510
----------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 115,617 98,964
Net occupancy and equipment expenses 4,922 3,786
Deposit insurance expense 3,436 42,219
Insurance expense 4,936 4,512
Other expenses 30,944 27,190
----------------------------
Total noninterest expense 159,855 176,671
----------------------------
INCOME BEFORE INCOME TAX 52,574 19,337
Income tax expense 10,702 1,378
----------------------------
NET INCOME $ 41,872 $ 17,959
----------------------------
----------------------------
</TABLE>
See notes to financial statements.
(3)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
STATEMENT OF EQUITY CAPITAL
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN ON
SECURITIES
RETAINED AVAILABLE
EARNINGS FOR SALE TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCES, MAY 1, 1996 $ 812,854 $ 48,686 $ 861,540
Net income for the eleven months ended
March 31, 1997 17,959 17,959
Net change in unrealized gain on securities
available for sale 15,398 15,398
----------------------------------------------------------
BALANCES, MARCH 31, 1997 830,813 64,084 894,897
Net income 41,872 41,872
Net change in unrealized gain on securities
available for sale 49,245 49,245
----------------------------------------------------------
BALANCES, MARCH 31, 1998 $ 872,685 $ 113,329 $ 986,014
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
See notes to financial statements.
(4)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED Eleven Months
MARCH 31, Ended
1998 March 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 41,872 $ 17,959
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan loss 26,500
Depreciation 1,344 891
Deferred income tax benefit (12,780) (6,709)
Change in
Other liabilities 789 (105)
Other assets (15,399) (1,557)
---------------------------------------
Net cash provided by operating activities 42,326 10,479
---------------------------------------
INVESTING ACTIVITIES
Net change in interest-bearing deposits 689,000 196,000
Net change in loans (847,404) (299,367)
Purchase of premises and equipment (7,632) (658)
Purchase of FHLB stock (3,200)
---------------------------------------
Net cash used by investing activities (169,236) (104,025)
---------------------------------------
FINANCING ACTIVITIES
Net change in
Savings deposits (6,239) (23,041)
Certificates of deposit (51,918) (151,125)
Proceeds from long-term debt 600,000
---------------------------------------
Net cash (used) provided by financing activities 541,843 (174,166)
---------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 414,933 (267,712)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 109,912 377,624
---------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 524,845 $ 109,912
---------------------------------------
---------------------------------------
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 306,925 $ 273,274
Income tax paid 25,500 5,438
</TABLE>
See notes to financial statements.
(5)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Cerro Gordo Building and Loan, s.b.
("Bank") conform to generally accepted accounting principles and reporting
practices followed by the thrift industry. The more significant of the
policies are described below.
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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
The Bank operates under a state thrift charter and provides full banking
services. As a state-chartered thrift, the Bank is subject to regulation by
the Illinois Office of Banks and Real Estate and the Federal Deposit
Insurance Corporation.
The Bank generates mortgage and share loans and receives deposits from
customers located primarily in Piatt County. The Bank's loans are generally
secured by specific items of collateral including real property and consumer
assets. Although the Bank has a diversified loan portfolio, a substantial
portion of its debtors' ability to honor their contracts is dependent upon
economic conditions in Piatt County and the surrounding communities.
CASH AND CASH EQUIVALENTS consist of cash on hand and deposits at the Federal
Home Loan Bank. The Bank considers all liquid debt instruments with original
maturities of 3 months or less to be cash equivalents.
INVESTMENT SECURITIES -- Marketable equity securities are classified as
available for sale. Securities available for sale are carried at fair value
with unrealized gains and losses reported separately in equity capital, net
of tax.
Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net
security gains (losses). Gains and losses on sales of securities are
determined on the specific-identification method.
LOANS are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans. The accrual of interest on
impaired loans is discontinued when, in management's opinion, the borrower
may be unable to meet payments as they become due. When interest accrual is
discontinued, all unpaid accrued interest is reversed. Interest income is
subsequently recognized only to the extent cash payments are received.
Certain loan fees and direct costs are being deferred and amortized as an
adjustment of yield on the loans. Escrow accounts for borrowers are not
maintained, but rather tax and insurance payments are charged to the mortgage
loan balance. Monthly payments are allocated first to interest income with
the remainder credited to the unpaid balance of the loan.
ALLOWANCE FOR LOAN LOSSES is maintained to absorb loan losses based on
management's continuing review and evaluation of the loan portfolio and its
judgment as to the impact of economic conditions on the portfolio. The
evaluation by management includes consideration of past loss experience,
changes in the composition of the portfolio, the current condition and amount
of loans outstanding, and the probability of collecting all amounts due.
Impaired loans are measured by the present value of expected future cash
flows, or the fair value of the collateral of the loan, if collateral
dependent.
(6)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
The determination of the adequacy of the allowance for loan losses is based
on estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. Management believes that as of
March 31, 1998, the allowance for loan losses is adequate based on
information currently available. A worsening or protracted economic decline
in the area within which the Bank operates would increase the likelihood of
additional losses due to credit and market risks and could create the need
for additional loss reserves.
PREMISES AND EQUIPMENT are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method based on the
estimated useful lives of the assets. Maintenance and repairs are expensed as
incurred while major additions and improvements are capitalized. Gains and
losses on dispositions are included in current operations.
FEDERAL HOME LOAN BANK STOCK is a required investment for institutions that
are members of the Federal Home Loan Bank (FHLB) system. The required
investment in the common stock is based on a predetermined formula.
INCOME TAX in the statement of income includes deferred income tax provisions
or benefits for all significant temporary differences in recognizing income
and expenses for financial reporting and income tax purposes.
RECLASSIFICATIONS
Reclassifications of certain amounts in the 1997 financial statements have
been made to conform to the 1998 presentation.
CHANGE IN FISCAL YEAR END
During fiscal 1997, the Bank's Board of Directors approved a change in the
fiscal year end of the Bank from April 30 to March 31. Accordingly, the
statements of income, equity, and cash flows included in these financial
statements for fiscal 1997 are for the eleven-month period ended March 31,
1997.
PLAN OF CONVERSION
On March 11, 1998, the Board of Directors adopted a Plan of Conversion (the
"Plan)" whereby the Bank will convert from a state chartered mutual savings
bank to a state chartered stock savings bank. The Plan is subject to approval
of regulatory authorities and members at a special meeting. The stock of the
Bank will be issued to a holding company formed in connection with the
conversion. Pursuant to the Plan, shares of capital stock of the holding
company are expected to be offered initially for subscription to eligible
members of the Bank and certain other persons as of specified dates subject
to various subscription priorities as provided in the Plan. The capital 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 subscription price. 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 to be commenced simultaneously with the subscription offering.
(7)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
The Plan provides that when the conversion is completed, a liquidation
account will be established in an amount equal to the retained income of the
Bank as of the date of the most recent financial statements contained in the
final conversion prospectus. The liquidation account is established to
provide a limited priority claim to the assets of the Bank of qualifying
depositors at December 31, 1996, who continue to maintain deposits in the
Bank after conversion. In the unlikely event of a complete liquidation of the
Bank, and only in such event, 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 the Bank 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 the Bank'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 its capital level and
supervisory condition.
At March 31, 1998, a $10,000 retainer had been paid to the underwriter which
was recorded as an other asset.
INVESTMENT SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
MARCH 31 COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation common stock $ 3,619 $ 171,710 $ 0 $ 175,329
-----------------------------------------------------------------------
-----------------------------------------------------------------------
<CAPTION>
1997
-----------------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
MARCH 31 COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation common stock $ 3,619 $ 97,097 $ 0 $ 100,716
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
There were no pledged securities at March 31, 1998 or 1997.
There were no sales of securities available for sale during 1998 or 1997.
(8)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
LOANS AND ALLOWANCE
<TABLE>
<CAPTION>
MARCH 31, 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
Real estate mortgage loans
One-to-four family $ 5,303,917 $ 4,680,155
Multi-family 87,348 95,128
Commercial 185,060 24,098
Share loans 79,534 133,586
--------------------------------
Total loans 5,655,859 4,932,967
Less
Undisbursed portion of loans (23,555) (156,598)
Deferred loan fees (73,415) (64,882)
--------------------------------
$ 5,558,889 $ 4,711,487
--------------------------------
--------------------------------
<CAPTION>
MARCH 31, 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for loan losses
Balances, January 1 $ 6,200 $ 6,200
Provision for losses 26,500
Recoveries on loans
Loans charged off
-----------------------------------
Balances, March 31 $ 32,700 $ 6,200
-----------------------------------
-----------------------------------
</TABLE>
There were no impaired loans as of or during the periods ending March 31,
1998 and 1997.
The Bank has entered into transactions with certain directors, employees, and
their affiliates or associates (related parties). Such transactions were made
in the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at
the same time for comparable transactions with other customers, and did not,
in the opinion of management, involve more than normal credit risk or present
other unfavorable features. The aggregate amount of loans, as deferred, to
such related parties were as follows:
<TABLE>
<CAPTION>
1998
- -------------------------------------------------------------------------------------
<S> <C>
Balances, April 1, 1997 $ 254,065
Changes in composition of related parties 93,000
New loans, including renewals
Payments, including renewals (74,986)
---------------
Balances, March 31, 1998 $ 272,079
---------------
---------------
</TABLE>
(9)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 500 $ 500
Buildings and land improvements 21,382 21,382
Furniture and equipment 52,458 44,827
------------------------------------
Total cost 74,340 66,709
Accumulated depreciation (58,614) (57,271)
------------------------------------
Net $ 15,726 $ 9,438
------------------------------------
------------------------------------
</TABLE>
OTHER ASSETS AND OTHER LIABILITIES
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Other assets
Interest receivable
Investment securities $ 2,855 $ 5,174
Loans 16,594 12,191
Prepaid expenses and other 37,243 23,605
------------------------------------
Total $ 56,692 $ 41,293
------------------------------------
------------------------------------
Other liabilities
Interest payable
Deposits $ 51,219 $ 51,667
Long-term debt 3,286
Accrued expenses payable 10,501 12,550
Deferred tax liability 33,654 21,068
------------------------------------
Total $ 98,660 $ 85,285
------------------------------------
------------------------------------
</TABLE>
DEPOSITS
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Savings deposits $ 461,384 $ 409,467
Certificates of deposit of $100,000 or more 100,000 100,000
Other certificates of deposits 4,688,923 4,798,997
------------------------------------
Total deposits $ 5,250,307 $ 5,308,464
------------------------------------
------------------------------------
</TABLE>
(10)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CERTIFICATES MATURING IN YEARS ENDING MARCH 31,
- ----------------------------------------------------------------------------------------------------
<S> <C>
1999 $ 2,190,214
2000 1,469,142
2001 311,441
2002 618,536
2003 199,590
-------------------
$ 4,788,923
-------------------
-------------------
</TABLE>
LONG-TERM DEBT
At March 31, 1998, long-term debt consisted of a Federal Home Loan Bank
(FHLB) advance, 6.36%, due December 2007. The FHLB advance is secured by all
stock in the FHLB and first mortgage loans totaling $960,000.
INCOME TAX
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Income tax expense
Currently payable
Federal $ 19,885 $ 7,036
State 3,597 1,051
Deferred
Federal (12,780) (6,709)
------------------------------------
Total income tax expense $ 10,702 $ 1,378
------------------------------------
------------------------------------
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34% $ 17,875 $ 6,575
Graduated tax rates (11,610) (5,841)
Effect of state income taxes 2,374 697
Other 2,063 (53)
------------------------------------
Actual tax expense $ 10,702 $ 1,378
------------------------------------
------------------------------------
</TABLE>
(11)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
A cumulative net deferred tax liability is included in other liabilities. The
components of the liability are as follows:
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Loan fees $ 21,290 $ 18,817
Allowance for loan losses 5,828
------------------------------------
Total assets 27,118 18,817
------------------------------------
LIABILITIES
Accrual to cash adjustment (814) (2,523)
Depreciation (274) (274)
Allowance for loan losses (2,770)
Net unrealized gains on securities available for sale (58,379) (33,013)
FHLB stock dividends (1,305) (1,305)
------------------------------------
Total liabilities (60,772) (39,885)
------------------------------------
$ (33,654) $ (21,068)
------------------------------------
------------------------------------
</TABLE>
Retained earnings include approximately $125,000 for which no deferred income
tax liability has been recognized. This amount represents an allocation of
income to bad debt deductions as of April 30, 1988, for tax purposes only.
Reduction of amounts so allocated for purposes other than tax bad debt losses
or adjustments arising from carryback of net operating losses would create
income for tax purposes only, which income would be subject to the
then-current corporate income tax rate. The unrecorded deferred income tax
liability on the above amount was approximately $43,000.
COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit, which are not
included in the accompanying financial statements. The Bank's exposure to
credit loss in the event of nonperformance by the other party to the
financial instruments for commitments to extend credit is represented by the
contractual or notional amount of those instruments. The Bank uses the same
credit policies in making such commitments as it does for instruments that
are included in the balance sheet.
Financial instruments whose contract amount represents credit risk were as
follows:
<TABLE>
<CAPTION>
MARCH 31 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loan commitments-- fixed rates $ 0 $ 115,000
</TABLE>
(12)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation. Collateral held varies
but may include residential real estate, income-producing commercial
properties, or other assets of the borrower.
The Bank is subject to claims and lawsuits which arise primarily in the
ordinary course of business. It is the opinion of management that the
disposition or ultimate resolution of such claims and lawsuits will not have
a material adverse effect on the financial position of the Bank.
REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies and is assigned to a capital category. The
assigned capital category is largely determined by three ratios that are
calculated according to the regulations: total risk adjusted capital, Tier 1
capital, and Tier 1 leverage ratios. The ratios are intended to measure
capital relative to assets and credit risk associated with those assets and
off-balance sheet exposures of the entity. The capital category assigned to
an entity can also be affected by qualitative judgments made by regulatory
agencies about the risk inherent in the entity's activities that are not part
of the calculated ratios.
There are five capital categories defined in the regulations, ranging from
well capitalized to critically undercapitalized. Classification of a bank in
any of the undercapitalized categories can result in actions by regulators
that could have a material effect on a bank's operations. At March 31, 1998
and 1997, the Bank is categorized as well capitalized and met all subject
capital adequacy requirements. There are not conditions or events since March
31, 1998 that management believes have changed the Bank's classification.
The Bank's actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
1998
--------------------------------------------------------------------------
REQUIRED FOR ADEQUATE TO BE WELL
ACTUAL CAPITAL (1) CAPITALIZED (1)
--------------------------------------------------------------------------
MARCH 31 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital(1) (to risk-weighted
assets) $ 906,000 28.58% $ 254,000 8.0% $ 317,000 10.0%
Tier 1 capital(1) (to risk-weighted assets) 873,000 27.54 127,000 4.0 190,000 6.0
Tier 1 capital(1) (to average assets) 873,000 12.55 278,000 4.0 349,000 5.0
</TABLE>
(13)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1997
--------------------------------------------------------------------------
REQUIRED FOR ADEQUATE TO BE WELL
ACTUAL CAPITAL (1) CAPITALIZED (1)
--------------------------------------------------------------------------
MARCH 31 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital(1) (to risk-weighted
assets) $ 837,000 31.35% $ 214,000 8.0% $ 267,000 10.0%
Tier 1 capital(1) (to risk-weighted assets) 831,000 31.12 107,000 4.0 160,000 6.0
Tier 1 capital(1) (to average assets) 831,000 13.07 254,000 4.0 318,000 5.0
</TABLE>
(1) As defined by regulatory agencies
BENEFIT PLANS
The Bank maintains a Simplified Employee Pension Plan for the benefit of
eligible employees. The contributions to the Plan were $12,753 and $11,487
during 1998 and 1997, respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
CASH AND DUE FROM BANKS -- The fair value of cash and due from banks
approximates carrying value.
INTEREST-BEARING TIME DEPOSITS -- The fair value of interest-bearing time
deposits approximates carrying value.
SECURITIES -- Fair values are based on quoted market prices.
LOANS -- For short-term loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair
values for mortgage loans, including one-to-four family residential, are
based on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan characteristics.
INTEREST RECEIVABLE/PAYABLE -- The fair values of interest receivable/payable
approximate carrying values.
FHLB STOCK -- Fair value of FHLB stock is based on the price at which it may
be resold to the FHLB.
DEPOSITS -- The fair values of interest-bearing savings accounts are equal to
the amount payable on demand at the balance sheet date. The carrying amounts
for variable rate, fixed-term certificates of deposit approximate their fair
values at the balance sheet date. Fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on such time deposits.
(14)
<PAGE>
CERRO GORDO BUILDING AND LOAN, S.B.
NOTES TO FINANCIAL STATEMENTS
LONG-TERM DEBT -- The fair value of these borrowings are estimated using a
discounted cash flow calculation, based on current rates for similar debt.
OFF-BALANCE SHEET COMMITMENTS -- Commitments include commitments to originate
mortgage loans, and are generally of a short-term nature. The fair value of
such commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
MARCH 31 AMOUNT VALUE AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 524,845 $ 524,845 $ 109,912 $ 109,912
Interest-bearing time deposits 590,000 590,000 1,279,000 1,279,000
Investment securities available for sale 175,329 175,329 100,716 100,716
Loans, net 5,526,189 5,576,000 4,705,287 4,541,000
Interest receivable 19,449 19,449 17,365 17,365
Stock in FHLB 46,200 46,200 43,000 43,000
LIABILITIES
Deposits 5,250,307 5,271,000 5,308,464 5,258,000
Long-term debt 600,000 603,000 0 0
Interest payable 54,505 54,505 51,667 51,667
OFF-BALANCE SHEET ASSETS (LIABILITIES)
Commitments to extend credit 0 0 0 0
</TABLE>
(15)
<PAGE>
OTHER INFORMATION
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL
Board of Directors
Cerro Gordo Building and Loan, s.b.
Cerro Gordo, Illinois
We have audited the financial statements of Cerro Gordo Building and Loan,
s.b. as of and for the year ended March 31, 1998, and have issued our report
thereon, dated April 10, 1998. In planning and performing our audit of the
financial statements we considered its internal controls in order to
determine our auditing procedures for the purpose of expressing our opinion
on the financial statements and not to provide assurance on internal
controls. Our consideration of internal controls would not necessarily
disclose all matters in internal controls that might be material weaknesses
under standards established by the American Institute of Certified Public
Accountants.
A material weakness is a reportable condition in which the design or
operation of one or more of the internal control elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving internal controls and its operations that we consider to be
material weaknesses as defined above.
This report is intended solely for the information and use of the Audit
Committee, Board of directors, management, examiners and bonding company.
[illegible]
Decatur, Illinois
April 10, 1998
(16)
<PAGE>
EXHIBIT 3
<TABLE>
<CAPTION>
AT MARCH 31,
---------------------------------------------
1998 1997
---- ----
<S> <C> <C>
FINANCIAL DATA:
Total assets.............................. $6,934,981 $6,288,646
Cash and due from banks................... 524,845 109,912
Interest-bearing time deposits............ 590,000 1,279,000
Investment securities available for sale.. 175,329 100,716
Loans, net................................ 5,526,189 4,705,287
Federal Home Loan Bank stock.............. 46,200 43,000
Deposits.................................. 5,250,307 5,308,464
Long-term debt............................ 600,000
Total equity capital...................... 986,014 894,897
</TABLE>
<TABLE>
FOR THE FISCAL YEAR ENDED
MARCH 31,
-------------------------------------------
1998 1997(1)
---- -------
<S> <C> <C>
OPERATING DATA:
Total interest income..................... $541,984 $459,968
Total interest expense.................... 309,763 270,470
Net interest income....................... 232,221 189,498
Provision for loan losses................. 26,500 --
Net interest income after provision for loan 205,721 189,498
losses.................................... 6,708 6,510
Non-interest income....................... 159,855 176,671
Non-interest expense...................... 52,574 19,337
Income before income tax.................. 10,702 1,378
Income tax expense........................ 41,872 17,959
Net income
OTHER DATA:
Number of:
Real estate loans outstanding..........
Deposit accounts.......................
</TABLE>
<PAGE>
EXHIBIT 4
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MARCH 31,
------------------------------
1998 1997(1)
---- -------
<S> <C> <C>
Return on assets (net income divided by average
total assets).......................................... 0.63% 0.31%
Return on average equity (net income divided by
average equity)........................................ 4.60 2.27
Average equity to average assets ........................ 13.62 13.47
Interest rate spread (difference between average
yield on interest earning assets and average
cost of interest bearing liabilities) ................. 2.67 1.81
Net interest margin (net interest income as a
percentage of average interest earning assets) ........ 3.47 2.97
Non-interest expense to average assets
Average interest-earning assets to interest
bearing liabilities ................................. 2.38 2.76
Allowance for loan losses
to total loans at end of period ...................... 117.29 116.96
Net charge offs to average outstanding
loans during the period .............................. 0.58 0.13
Ratio of nonperforming assets............................ N/A N/A
to total assets (define) ............................. 0.16 0.68
</TABLE>
(1) During fiscal 1997, the Savings Bank changed its fiscal year end from April
30 to March 31. Accordingly, information related to income and expense
during the period ending March 31, 1997 is for the eleven-month period then
ended. Operating ratios have been annualized where appropriate.
<PAGE>
EXHIBIT 5
CERRO GORDO BUILDING & LOAN, sb
INTEREST RATE RISK REPORT
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Cumulative Gap Analysis - Flat Rates 1 Year 3 Year 5 Year
------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Cumulative Risk Sensitive Assets (RSA) 1,879 3,532 4,528
Cumulative Risk Sensitive Liabilities (RSL) 2,537 4,349 4,991
Cumulative Gap (RSA - RSL) (658) (817) (463)
Cumulative Gap / Assets -9.489% -17.760% -6.674%
</TABLE>
<PAGE>
EXHIBIT 6
<TABLE>
<CAPTION>
Market Market Market
Value of Value of Value of
Market Value Report Assets Liabilities Equity
------------------- -------- ----------- --------
<S> <C> <C> <C>
Rate Shocks
- 400 basis points 7,490 6,527 963
Portfolio Equity Ratio 12.857%
Rate Sensitivity (expressed in basis points) -550.0
- 200 basis points 7,366 6,250 1,116
Portfolio Equity Ratio 15.151%
Rate Sensitivity (expressed in basis points) -321.3
0 basis points 7,330 5,984 1,346
Portfolio Equity Ratio 18.363%
Rate Sensitivity (expressed in basis points) 0.0
+ 200 basis points 6,883 5,738 1,145
Portfolio Equity Ratio 16.635%
Rate Sensitivity (expressed in basis points) -172.4
+ 400 basis points 6,415 5,514 901
Portfolio Equity Ratio 14.045%
Rate Sensitivity (expressed in basis points) -432.1
</TABLE>
<TABLE>
<CAPTION>
Duration Duration Duration
Value of Value of Value of
Duration Report Assets Liabilities Equity
--------------- -------- ----------- --------
<S> <C> <C> <C>
Rate Shocks
- 400 basis points 0.547 2.268 (1.399)
- 300 basis points 0.262 2.232 (1.652)
- 200 basis points 0.245 2.222 (1.661)
- 100 basis points (1.139) 2.306 (3.116)
0 basis points 0.785 2.242 (1.139)
+ 100 basis points 2.708 2.179 0.839
+ 200 basis points 3.046 2.055 1.284
+ 300 basis points 3.139 2.028 1.399
+ 400 basis points 3.121 1.963 1.437
</TABLE>
<TABLE>
<CAPTION>
Return on Return on
Income Simulation 12 Mo Projection Assets Equity
---------------------------------- --------- ---------
<S> <C> <C>
Rate Shocks
- 400 basis points 0.201% 1.444%
- 200 basis points 0.366% 2.614%
0 basis points 0.438% 3.127%
+ 200 basis points 0.405% 2.894%
+ 400 basis points 0.318% 2.276%
</TABLE>
<PAGE>
CERRO GORDO BUILDING & LOAN, sb
INTEREST RATE RISK REPORT
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Cumulative Gap Analysis - Flat Rates 1 Year 3 Year 5 Year
------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Cumulative Risk Sensitive Assets (RSA) 1,879 3,532 4,528
Cumulative Risk Sensitive Liabilities (RSL) 2,537 4,349 4,991
Cumulative Gap (RSA - RSL) (658) (817) (463)
Cumulative Gap / Assets -9.489% -17.760% -6.674%
</TABLE>
<TABLE>
<CAPTION>
Market Market Market
Value of Value of Value of
Market Value Report Assets Liabilities Equity
------------------- -------- ----------- --------
<S> <C> <C> <C>
Rate Shocks
- 400 basis points 7,490 6,527 963
Portfolio Equity Ratio 12.857%
Rate Sensitivity (expressed in basis points) -550.0
- 200 basis points 7,366 6,250 1,116
Portfolio Equity Ratio 15.151%
Rate Sensitivity (expressed in basis points) -321.3
0 basis points 7,330 5,984 1,346
Portfolio Equity Ratio 18.363%
Rate Sensitivity (expressed in basis points) 0.0
+ 200 basis points 6,883 5,738 1,145
Portfolio Equity Ratio 16.635%
Rate Sensitivity (expressed in basis points) -172.4
+ 400 basis points 6,415 5,514 901
Portfolio Equity Ratio 14.045%
Rate Sensitivity (expressed in basis points) -432.1
</TABLE>
<TABLE>
<CAPTION>
Duration Duration Duration
Value of Value of Value of
Duration Report Assets Liabilities Equity
--------------- -------- ----------- --------
<S> <C> <C> <C>
Rate Shocks
- 400 basis points 0.547 2.268 (1.399)
- 300 basis points 0.262 2.232 (1.652)
- 200 basis points 0.245 2.222 (1.661)
- 100 basis points (1.139) 2.306 (3.116)
0 basis points 0.785 2.242 (1.139)
+ 100 basis points 2.708 2.179 0.839
+ 200 basis points 3.046 2.055 1.284
+ 300 basis points 3.139 2.028 1.399
+ 400 basis points 3.121 1.963 1.437
</TABLE>
<TABLE>
<CAPTION>
Return on Return on
Income Simulation 12 Mo Projection Assets Equity
---------------------------------- --------- ---------
<S> <C> <C>
Rate Shocks
- 400 basis points 0.201% 1.444%
- 200 basis points 0.366% 2.614%
0 basis points 0.438% 3.127%
+ 200 basis points 0.405% 2.894%
+ 400 basis points 0.318% 2.276%
</TABLE>
<PAGE>
EXHIBIT 7
The following table presents for the periods indicated the
total dollar amount of interest income from average interest-earning
assets and the resultant yields, as well as the total dollar amount of
interest expense on average interest-bearing liabilities and the
resultant rates, and the net interest margin. The table does not reflect
any effect of income taxes. All average balances are based on average
monthly balances during the periods.
<TABLE>
<CAPTION>
AT MARCH 31, PERIOD ENDED MARCH 31,
------------ ---------------------------------------------------------------
1998 1998 1997
------------ ----------------------------- ------------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE(1)
---- -------- -------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Interest-earning assets:
Loans, net.................... 8.45% $5,289 $466 8.81% $4,629 $373 8.79%
Interest-bearing deposits with
financial institutions...... 6.06 1,205 71 5.89 1,636 82 5.47
Securities.................... 2.65 189 5 2.65 134 4 3.26
------ ---- ------ ----
Total interest-earning
assets..................... 7.87 6,683 542 8.11 6,399 459 7.84
---- ---
Non-interest-earning assets... 29 24
------ ------
Total assets................ $6,712 $6,423
------ ------
------ ------
Interest-bearing liabilities:
Deposits:
Savings....................... 3.00 $ 462 15 3.25 $ 478 14 3.20
Certificates.................. 5.66 4,885 274 5.61 4,993 256 5.59
------ ---- ------ ---
Total deposits................ 6.36 5,347 289 5.40 5,471 270 5.38
----
FHLB advances................. 5.52 351 21 5.98 0 - -
------ ---- ------ ----
Total interest-bearing
liabilities................. 5.52 5,698 310 5.44 $5,471 270 5.38
----
Non-interest-bearing
liabilities.................. 100 87
------
Total liabilities........... 5,798 5,558
Equity capital................ 914 865
------ ------
Total liabilities and equity
capital.................... $6,712 $6,423
------ ------
------ ------
Net interest income; interest rate $232 2.67% $189 2.46%
spread(2)..................... 2.35% 3.47% 2.98%
----- ----- -----
----- ----- -----
Net interest margin(3).......... 117.29% 116.96%
------- -------
------- -------
Ratio of average-interest-earning
assets to average
interest-bearing
liabilities................... 117.86%
-------
-------
</TABLE>
Annualized.
(2) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average rate on
interest-bearing liabilities.
(3) Net interest margin is net interest income divided by average
interest-earning assets.
<PAGE>
EXHIBIT 8
RATE/VOLUME ANALYSIS. The following table describes the extent to which
changes in interest rates and changes in volume of interest-related assets
and liabilities have affected the Savings Bank's interest income and interest
expense during the periods indicated. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes
attributable to (i) changes in volume (change in volume multiplied by prior
year rate), (ii) changes in rate (change in rate multiplied by prior year
volume), and (iii) total change in rate and volume. the combined effect of
changes in both rate and volume has been allocated proportionately to the
change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------------
1998 vs. 1997
-------------------------------------------------------------------------
Increase
(Decrease)
Due To
-------------------------------------------
Total Increase
Volume Rate (Decrease)
----------------------- ---------------- ------------------------
(In Thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans, net.................. $91 $2 $93
Interest-bearing deposits with
financial institutions.... (19) (8) (11)
Securities.................. 2 (1) 1
--- ----- ----
Total change in interest
income..................... $74 $9 83
--- ----- ----
Interest-bearing liabilities:
Deposits:
Savings..................... -- 1 1
Certificates................ (1) 19 18
FHLB advances............... 21 -- 21
-- -- --
Total change in interest
expense....................... 20 20 40
-- -- --
Net change in net interest income $54 $(11) $43
--- ----- ---
--- ----- ---
</TABLE>
<PAGE>
EXHIBIT 9
The following table sets forth in greater detail the composition
of the Savings Bank's loan portfolio by type of loan as of the dates
indicated:
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------------------------------------------------------------------
1998 1997
---------------------------- ------------------------------
TYPE OF LOAN: AMOUNT PERCENT AMOUNT PERCENT
- ------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Mortgage Loans:
One-to-four family....................... $5,303,917 93.78% $4,680,155 94.88%
Multi-family............................. 87,348 1.54 95,128 1.93
Commercial............................... 185,060 3.27 24,098 0.48
Total mortgage loans......................
Share loans............................. 79,534 1.41 133,586 2.71
--------- ------- ---------- ----
Total loans............................. 5,655,859 100.00% 4,932,967 100.00%
------- -------
------- -------
Less:
Undisbursed portion of loans............. (23,555) (156,598)
Deferred loan fees....................... (73,415) (64,882)
Allowance for possible
loan losses............................. (32,700) (6,200)
-------- ----------
Net loans................................ $5,526,189 $4,705,287
---------- ----------
---------- ----------
</TABLE>
<PAGE>
EXHIBIT 11
LOAN ORIGINATIONS, PURCHASES AND SALE.
The following table shows loans originated, purchased, sold and repaid
during the periods indicated.
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31,
-------------------------------------------------------------------------
1998 1997
--------------------------- -----------------------
<S> <C> <C>
Net Mortgage Loans at Beginning of Period $4,705,287 $4,405,920
Loans originated Real estate mortgage loans:
One-to-four family........................... 1,739,550 1,313,940
Multi-family................................. - -
Commercial................................... 200,000 -
Share loans.................................. 40,190 14,970
--------- ---------
Total loans originated..................... 1,979,740 1,328,910
Loan Principal repayments 1,132,338 1,029,543
Provision for loan losses...................... 26,500 -
Net loan activity.............................. 820,902 299,367
------- ---------
Net Loans at End of Period..................... $5,526,189 $4,705,287
---------- ----------
---------- ----------
</TABLE>
<PAGE>
EXHIBIT 12
The following table sets forth information with respect to Savings Bank's
nonperforming assets at March 31, 1998 and 1997. At such dates, Savings Bank
did not have any material troubled debt restructured loans within the meaning
of Statement of Financial Accounting Standard No. 15 ("SFAS 15").
<TABLE>
<CAPTION>
AT MARCH 31,
----------------------------------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Loans accounted for on
A nonaccrual basis:
Real estate -
Residential..........................................
Multi-family.........................................
Commercial...........................................
Commercial Business...................................
Consumer..............................................
TOTAL................................................ $ -- $ --
Accruing loans which
are contractually past
Due 90 days or more:
Real estate -
One-to-four family................................... 11,116 42,699
Multi-family.........................................
Commercial...........................................
Commercial Business...................................
Consumer..............................................
------- -------
TOTAL................................................ 11,116 42,699
Total of Nonaccrual and 90 days past due loans........
Real estate owned........................................ -- --
Other Non-Performing Assets.............................. -- --
------- -------
Total nonperforming assets............................. $11,116 $42,699
------- -------
------- -------
Total loans delinquent 90 days or more to net loans...... 0.20% 0.91%
Total loans delinquent 90 days or more to total assets... 0.16% 0.68%
Total nonperforming assets to total assets............... 0.16% 0.68%
</TABLE>
At March 31, 1998 and 1997 the aggregate amounts of Savings Bank's
classified assets, and of Savings Bank's general loss allowances for the
period then ended, were as follows:
<TABLE>
<CAPTION>
AT MARCH 31,
------------------------------------------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Substandard assets........................ $11,116 --
General loss allowances................... $32,700 $6,200
</TABLE>
<PAGE>
EXHIBIT 13
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31,
1998 1997
-------------- --------------
<S> <C> <C>
Allowance at beginning of period................... $ 6,200 $6,200
Provision for loan losses.......................... 26,500 --
Total recoveries............................... --
Total charge offs.............................. -- --
------- ------
Balance at end of period...................... $32,700 $6,200
------- ------
------- ------
Ratio of allowance to total loans
outstanding at the end of the period.............. 0.58% 0.13%
Ratio of net charge offs to average
loans outstanding during the period............... N/A N/A
</TABLE>
<PAGE>
EXHIBIT 14
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------------
1998 1997
---------- ----------
AS % OF AS % OF
OUTSTANDING OUTSTANDING
LOANS IN LOANS IN
AMOUNT CATEGORY AMOUNT CATEGORY
------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Real estate - mortgage:
One-to-four family...................................... $30,850 $6,200
Multi-family............................................ -- --
Commercial.............................................. 1,850 --
Share..................................................... 0 0
------- ------
Total allowance for loan losses........................... $32,700 100.00% $6,200 100.00%
------- ------- ------ -------
------- ------- ------ -------
</TABLE>
<PAGE>
EXHIBIT 15
<TABLE>
<CAPTION>
AT MARCH 31,
----------------------------------------------------------------------------------------
1998 1997
------------------------------- -------------------------------
CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE
--------- -------- --------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation common stock.... $175,329 $175,329 $100,716 $100,716
</TABLE>
The following table sets forth the Savings Bank's investment securities
portfolio at carrying value at the dates indicated.
<TABLE>
<CAPTION>
MARCH 31,
------------------------------------------------------------------------------------
1998 1997
-------------------------------- ----------------------------------
BOOK PERCENT OF BOOK PERCENT OF
VALUE(1) PORTFOLIO VALUE PORTFOLIO
--------- ----------- -------- ----------
<S> <C> <C> <C> <C>
U.S. Government securities............. $ 0 0 % $ 0 0 %
Corporate obligations.................. 0 0 0 0
Industrial development revenue bonds... 0 0 0 0
Collateralized mortgage obligations.... 0 0 0 0
Mutual funds........................... 0 0 0 0
FHLMC common stock..................... 175,329 100 100,716 100
--------- --- -------- ---
Total............................. $175,329 100% $100,716 100%
--------- --- -------- ---
--------- --- -------- ---
</TABLE>
<PAGE>
EXHIBIT 17
The following table sets forth information concerning the deposit
flows of the Savings Bank during the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE PERIOD
ENDED MARCH 31,
-------------------- --------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Total deposits at beginning $5,308,464 $5,482,630
of period
Net deposits (withdrawals) (227,181) (339,561)
Interest credited on deposits 169,024 165,395
Net increase (decrease) in
savings deposits
---------- ----------
Total deposits at end of period $5,250,307 $5,308,464
---------- ----------
---------- ----------
</TABLE>
<PAGE>
EXHIBIT 18
The following table sets forth the balances of savings deposits in
the various types of savings accounts offered by the Savings Bank at the
dates indicated.
<TABLE>
<CAPTION>
AT AND FOR THE PERIOD ENDED MARCH 31,
1998 1997
------------------------ -------------------------
AMOUNT PERCENT OF AMOUNT PERCENT OF
------ ---------- ------ ----------
TOTAL TOTAL
-----
<S> <C> <C> <C> <C>
Regular savings accounts..................... $ 461,384 8.79% $ 409,467 7.71%
Fixed-rate certificates which mature
in the year ending (1):
March 31, 1999............................. 2,190,214 41.72 2,590,242 48.79
March 31, 2000............................. 1,469,142 27.98 390,223 7.35
March 31, 2001............................. 311,441 5.93 1,335,233 25.16
Certificates maturing thereafter........... 818,126 15.58 583,299 10.99
------------ ------ --------- -----
Total...................................... $5,250,307 100.00% $5,308,464 100.00%
------------ ------ --------- -----
------------ ------ --------- -----
</TABLE>
NOTE: Employee IRA-SEP accounts are included in certificate balance:
amounts are $132,641 and $112,577 for March 31, 1998 and 1997, respectively.
(1) At March 31, 1998 and 1997 jumbo certificates amounted to $100,000.
<PAGE>
EXHIBIT 19
The following table sets forth the amount and maturities of time
deposits classified by rates at March 31, 1998.
<TABLE>
<CAPTION>
AMOUNT DUE
-----------------------------------------------------------------------------------------
LESS THAN 1-2 2-3 AFTER
ONE YEAR YEARS YEARS 3 YEARS TOTAL TOTAL
-------- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
4.00 - 4.99%.... $ 53,662 -- -- -- $ 53,662 $ 151,929
5.00 - 5.99%.... 2,054,587 $ 410,863 $ 57,601 $165,510 2,688,561 2,437,819
6.00 - 6.99%.... 73,974 1,046,724 160,580 616,476 1,897,754 2,150,786
7.00% - 7.99%.... 7,991 11,555 93,260 36,140 148,946 158,463
----------- ---------- -------- -------- --------- ----------
Total............. $2,190,214 $1,469,142 $311,441 $818,126 $4,788,923 $4,898,997
----------- ---------- -------- -------- --------- ----------
----------- ---------- -------- -------- --------- ----------
</TABLE>
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FBCV 1ST Bancorp IN 04/07/87 259,562 122,711 23,417 8.50 14.74 1.71 0.75 8.79
FBER 1st Bergen Bancorp NJ 04/01/96 316,071 223,953 36,947 10.10 24.40 0.95 0.75 5.41
AABC Access Anytime
Bancorp, Inc. NM 08/08/86 114,047 98,351 9,223 7.28 14.55 0.14 1.46 18.18
AFBC Advance Financial
Bancorp WV 01/02/97 110,668 82,611 15,594 14.20 21.40 0.60 0.90 5.92
AFCB Affiliated Community
Bancorp, Inc. MA 10/19/95 1,140,762 727,703 115,975 10.00 18.08 0.41 1.09 11.08
AFED AFSALA Bancorp, Inc. NY 10/01/96 160,408 136,083 20,086 12.48 29.54 0.30 0.79 5.91
AHM Ahmanson &
Company (H.F.) CA 10/25/72 54,519,346 38,363,249 3,254,533 5.96 9.28 2.14 0.88 16.89
ALBK ALBANK Financial
Corporation NY 04/01/92 4,089,428 3,539,650 366,828 8.26 12.99 0.92 1.16 12.79
ALBC Albion Banc Corp. NY 07/26/93 72,898 55,890 6,226 NA NA 0.55 0.48 5.60
ABCL Alliance Bancorp IL 07/07/92 1,537,067 1,020,204 132,070 7.39 14.94 0.22 0.90 9.73
ALLB Alliance Bank (MHC) PA 03/03/95 272,755 210,570 29,237 NA 24.98 1.38 0.79 7.02
AMFC AMB Financial Corp. IN 04/01/96 106,201 74,391 14,976 9.37 17.00 0.33 1.02 6.94
AHCI Ambanc Holding
Co., Inc. NY 12/27/95 519,831 324,448 60,754 NA NA 0.62 0.51 4.20
ASBI Ameriana Bancorp IN 03/02/87 388,491 321,349 45,209 NA NA 0.47 0.96 8.58
BKC American Bank of
Connecticut CT 12/01/81 651,217 470,934 58,712 NA 12.40 2.28 1.34 15.97
ABCW Anchor BanCorp
Wisconsin, Inc. WI 07/16/92 1,999,307 1,392,472 127,951 5.64 8.92 0.68 1.05 16.20
ANDB Andover Bancorp, Inc. MA NA 1,385,507 975,748 109,876 NA 13.70 0.49 1.07 13.41
ASBP ASB Financial Corp. OH 05/11/95 114,907 91,017 17,462 12.66 25.88 0.14 0.95 6.12
ASFC Astoria Financial
Corporation NY 11/18/93 10,895,609 6,205,643 916,849 5.42 13.93 0.54 0.82 10.04
AVND Avondale Financial
Corp. IL 04/07/95 606,658 390,432 46,120 7.34 14.23 1.14 (0.77) (9.13)
BKCT Bancorp Connecticut,
Inc. CT 07/03/86 479,776 336,362 48,160 NA 15.46 0.74 1.43 13.85
BPLS Bank Plus Corporation CA NA 4,220,069 2,995,954 185,532 5.27 10.34 1.64 0.31 6.83
BNKU Bank United Corporation TX 08/09/96 13,109,497 6,506,367 653,021 7.02 11.05 0.65 0.88 17.31
BWFC Bank West Financial
Corporation MI 03/30/95 180,157 117,556 23,431 11.69 20.80 0.44 0.66 4.69
BANC BankAtlantic Bancorp,
Inc. FL 11/29/83 3,526,508 1,830,083 217,043 9.81 14.93 1.17 0.91 15.43
BKUNA BankUnited Financial
Corporation FL 12/11/85 3,326,968 1,833,904 154,303 9.02 18.62 0.44 0.37 6.96
BVCC Bay View Capital
Corporation CA 05/09/86 5,341,413 3,491,957 388,705 6.32 9.88 0.37 0.37 5.78
BFSB Bedford Bancshares,
Inc. VA 08/22/94 153,149 106,027 20,351 11.82 23.24 0.43 1.20 8.48
BFFC Big Foot Financial
Corporation IL 12/20/96 209,474 122,712 38,288 12.87 33.23 0.09 0.58 3.32
BYFC Broadway Financial
Corporation CA 01/09/96 128,444 113,554 13,562 NA NA 1.02 0.52 4.80
CBCI Calumet Bancorp, Inc. IL 02/20/92 490,268 347,979 85,762 10.72 16.23 1.45 2.08 12.95
CAFI Camco Financial
Corporation OH NA 575,563 429,602 56,961 NA NA 0.68 1.27 13.23
CMRN Cameron Financial
Corporation MO 04/03/95 220,892 134,120 45,904 16.28 23.65 0.81 1.15 5.37
CAPS Capital Savings
Bancorp, Inc. MO 12/29/93 231,850 170,998 23,493 8.76 17.14 0.38 1.09 11.90
CFNC Carolina Fincorp, Inc. NC 11/25/96 118,468 90,305 26,479 15.10 27.93 0.15 0.93 4.07
CNY Carver Bancorp, Inc. NY 10/25/94 436,775 274,989 36,019 NA NA NA 0.24 2.99
CASB Cascade Financial
Corporation WA 09/16/92 434,697 301,504 30,353 6.94 10.71 0.38 0.77 11.46
CATB Catskill Financial
Corporation NY 04/18/96 295,932 203,815 69,317 20.88 59.19 0.29 1.34 5.37
CBES CBES Bancorp, Inc. MO 09/30/96 116,427 82,943 16,569 11.75 13.92 0.53 1.03 6.24
CCFH CCF Holding Company GA 07/12/95 143,062 128,109 11,576 7.24 10.90 0.41 0.14 1.51
CNIT CENIT Bancorp, Inc. VA 08/06/92 734,427 509,445 50,498 NA NA 0.36 0.92 12.78
Source: SNL Securities
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEBK Central Co-operative
Bank MA 10/24/86 367,096 277,143 36,059 NA NA 0.42 0.82 8.11
CENB Century Bancorp, Inc. NC 12/23/96 104,379 72,278 18,529 NA NA 0.37 1.32 4.63
CFSB CFSB Bancorp, Inc. MI 06/22/90 846,142 576,481 65,360 7.45 12.51 0.08 1.32 16.97
COFI Charter One
Financial, Inc. OH 01/22/88 19,457,016 10,548,095 1,433,375 6.01 9.52 0.38 0.84 11.82
CVAL Chester Valley
Bancorp Inc. PA 03/27/87 343,865 278,370 29,797 8.36 13.73 0.24 1.03 11.92
CTZN CitFed Bancorp, Inc. OH 01/23/92 3,533,433 1,772,846 221,094 NA NA NA 0.89 14.20
CBK Citizens First
Financial Corp. IL 05/01/96 279,849 201,320 38,718 11.20 17.58 0.71 0.72 5.15
CKFB CKF Bancorp, Inc. KY 01/04/95 62,567 45,217 13,349 16.86 28.60 0.43 1.87 8.15
CLAS Classic Bancshares,
Inc. KY 12/29/95 132,793 99,719 19,995 11.60 22.55 0.42 0.83 5.58
CNSB CNS Bancorp, Inc. MO 06/12/96 97,510 72,255 24,069 19.90 39.49 0.10 0.90 3.66
CBSA Coastal Bancorp, Inc. TX NA 2,966,202 1,367,371 110,507 NA 11.24 0.57 0.49 14.01
CFCP Coastal Financial
Corporation SC 09/26/90 583,239 353,144 35,171 6.31 10.50 0.91 1.25 20.01
CFB Commercial Federal
Corporation NE 12/31/84 8,528,709 5,222,085 589,741 6.59 12.52 0.83 0.81 12.79
CMSB Commonwealth Bancorp,
Inc. PA 06/17/96 2,390,417 1,579,284 218,144 6.50 12.58 0.42 0.68 7.24
CFTP Community Federal
Bancorp, Inc. MS 03/26/96 254,072 139,037 59,997 20.64 50.45 0.49 1.20 4.45
CFFC Community Financial
Corporation VA NA 182,879 132,962 24,924 11.68 16.66 0.44 1.07 7.85
CIBI Community Investors
Bancorp, Inc. OH 02/07/95 101,734 75,370 11,178 10.39 19.03 0.56 0.95 8.17
COOP Cooperative
Bankshares, Inc. NC 08/21/91 381,432 299,690 29,133 7.64 14.40 0.16 0.63 8.16
CRZY Crazy Woman Creek
Bancorp, Incorporated WY 03/29/96 61,681 30,628 14,547 NA NA 0.09 1.27 5.18
CSBF CSB Financial Group,
Inc. IL 10/09/95 47,983 36,498 11,104 22.35 46.92 0.95 0.54 2.25
DNFC D & N Financial
Corporation MI 02/13/85 1,867,539 1,038,363 101,654 6.53 NA 0.56 0.87 15.90
DCBI Delphos Citizens
Bancorp, Inc. OH 11/21/96 112,625 78,903 28,110 12.40 25.00 0.56 1.52 5.60
DME Dime Bancorp,
Incorporated NY 08/19/86 22,023,998 13,991,123 1,299,635 5.86 10.22 1.03 0.70 12.52
DIME Dime Community
Bancorp, Inc. NY 06/26/96 1,577,141 1,033,614 189,305 8.21 15.66 0.48 0.85 6.32
DIBK Dime Financial
Corporation CT 07/09/86 1,016,401 853,260 82,427 NA 20.49 0.29 1.70 21.20
DSL Downey Financial Corp. CA 01/01/71 5,871,913 5,108,822 446,086 6.83 11.96 0.85 0.86 12.06
EGLB Eagle BancGroup, Inc. IL 07/01/96 180,211 132,105 20,670 9.61 15.17 1.27 0.34 2.85
EBSI Eagle Bancshares, Inc. GA 04/01/86 934,458 604,514 73,203 5.91 8.17 1.18 0.64 7.50
ETFS East Texas Financial
Services, Inc. TX 01/10/95 120,943 87,907 21,077 14.90 38.53 0.41 0.60 3.35
ESBK Elmira Savings Bank,
FSB NY 03/01/85 229,712 210,398 14,272 6.24 9.30 0.68 0.44 7.04
EMLD Emerald Financial
Corporation OH NA 615,799 529,373 50,852 7.94 11.96 0.38 1.09 13.92
EFBC Empire Federal
Bancorp, Inc. MT 01/27/97 110,590 67,208 40,653 24.69 68.64 0.01 1.47 3.98
EFBI Enterprise Federal
Bancorp, Inc. OH 10/17/94 301,261 147,026 32,387 9.97 17.76 0.01 0.83 6.94
EQSB Equitable Federal
Savings Bank MD 09/10/93 335,060 255,307 17,362 5.18 NA NA 0.72 14.03
ESBF ESB Financial Corp. PA 06/13/90 945,550 401,587 68,047 6.69 18.04 0.44 0.69 8.69
ESX Essex Bancorp, Inc. VA 07/18/90 193,047 155,372 14,916 8.00 13.19 1.69 (0.11) (1.44)
FCBF FCB Financial Corp. WI 09/24/93 519,911 315,978 73,284 11.51 18.65 0.26 1.12 7.50
FOBC Fed One Bancorp, Inc. WV 01/19/95 367,667 264,096 41,328 10.03 24.11 0.29 0.86 7.78
FFDF FFD Financial
Corporation OH 04/03/96 100,104 60,625 22,302 NA NA 0.08 1.75 7.27
FFLC FFLC Bancorp, Inc. FL 01/04/94 408,651 322,759 51,944 NA NA 0.31 0.97 7.25
FFWC FFW Corporation IN 04/05/93 198,712 124,025 19,044 6.81 11.38 0.33 1.00 10.41
Source: SNL Securities
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFYF FFY Financial Corp. OH 06/28/93 644,647 451,507 84,442 9.00 15.71 0.53 1.28 9.40
FSBI Fidelity Bancorp, Inc. PA 06/24/88 402,919 263,006 27,553 NA 16.85 0.08 0.74 10.89
FBCI Fidelity Bancorp, Inc. IL 12/15/93 484,340 330,445 52,244 9.22 19.41 0.29 0.21 2.01
FFFL Fidelity Bankshares
Inc. (MHC) FL 01/07/94 1,320,669 921,378 88,526 8.70 17.40 0.32 0.67 8.49
FFED Fidelity Federal Bancorp IN 08/31/87 215,821 161,711 15,702 8.74 9.71 0.35 0.73 12.62
FFOH Fidelity Financial of
Ohio, Inc. OH 03/04/96 540,408 424,737 65,150 10.27 18.45 0.18 0.92 7.27
FIBC Financial Bancorp, Inc. NY 08/17/94 310,368 228,617 28,043 6.83 16.65 2.19 0.95 10.27
FBSI First Bancshares, Inc. MO 12/22/93 177,946 140,733 23,889 10.43 15.69 0.87 1.12 8.11
FBBC First Bell Bancorp,
Inc. PA 06/29/95 664,632 474,052 74,563 10.92 23.29 0.07 1.08 10.44
SKBO First Carnegie
Deposit (MHC) PA 04/04/97 143,650 77,295 24,691 17.19 56.57 0.78 0.63 4.49
FSTC First Citizens
Corporation GA 03/01/86 352,233 303,948 35,542 8.20 NA 1.12 1.88 19.41
FCME First Coastal
Corporation ME NA 150,022 118,517 15,089 9.65 15.16 0.50 0.86 8.80
FFBA First Colorado
Bancorp, Inc. CO 01/02/96 1,559,294 1,189,386 212,806 12.67 NA 0.18 1.30 9.85
FDEF First Defiance
Financial Corp. OH 10/02/95 577,471 402,797 101,865 14.12 21.36 0.31 0.94 4.77
FESX First Essex
Bancorp, Inc. MA 08/04/87 1,293,302 760,216 91,132 6.17 10.95 0.54 0.84 11.55
FFBZ First Federal
Bancorp, Inc. OH 07/13/92 211,644 133,909 16,123 6.75 10.24 0.46 0.90 11.81
BDJI First Federal
Bancorporation MN 04/04/95 113,159 83,035 12,330 9.90 18.92 0.24 0.68 6.40
FFBH First Federal
Bancshares of
Arkansas, Inc. AR 05/03/96 570,400 462,340 84,227 11.77 22.06 0.85 0.99 6.60
FTFC First Federal
Capital Corp. WI 11/02/89 1,580,295 1,206,965 113,316 NA NA NA 1.19 17.54
FFKY First Federal
Financial Corporation
of Kentucky KY 07/15/87 407,347 305,895 53,810 11.98 18.60 0.47 1.63 11.99
FFES First Federal
Savings & Loan
of East Hartford CT 06/23/87 990,982 581,237 68,540 7.01 21.44 0.31 0.58 8.71
FFSX First Federal Savings
Bank of
Siouxland (MHC) IA 07/13/92 458,940 328,551 40,639 8.73 16.54 0.19 0.74 8.70
FFCH First Financial
Holdings Inc. SC 11/10/83 1,858,165 1,147,341 118,192 6.58 10.22 1.26 0.89 14.17
FFHS First Franklin
Corporation OH 01/26/88 232,340 204,224 21,469 6.50 13.88 0.49 0.82 9.01
FGHC First Georgia
Holding, Inc. GA 02/11/87 175,515 145,326 14,209 7.53 9.29 1.64 1.12 13.58
FSPG First Home
Bancorp, Inc. NJ 04/20/87 545,775 328,249 38,176 6.69 15.92 0.80 0.88 12.99
FFSL First Independence
Corporation KS 10/08/93 124,494 84,172 11,554 7.93 17.03 0.51 0.66 6.56
FISB First Indiana
Corporation IN 08/02/83 1,687,938 1,192,424 156,317 8.01 10.63 1.38 1.17 12.10
FKFS First Keystone
Financial, Inc. PA 01/26/95 385,152 237,534 25,686 8.50 NA 1.34 0.78 11.32
FLKY First Lancaster
Bancshares, Inc. KY 07/01/96 53,002 24,417 14,124 27.83 NA 1.70 1.04 3.46
FLFC First Liberty
Financial Corp. GA 12/06/83 1,355,001 979,317 99,649 6.63 9.46 0.82 0.78 10.36
CASH First Midwest
Financial, Inc. IA 09/20/93 405,417 264,084 42,137 8.28 12.56 1.11 0.59 5.36
FMBD First Mutual
Bancorp, Inc. IL 07/05/95 390,231 319,820 55,214 NA 19.39 0.43 0.32 2.38
FMSB First Mutual Savings
Bank WA 12/17/85 469,318 392,801 32,291 NA NA 0.15 1.05 15.46
FNGB First Northern Capital
Corporation WI 12/29/83 677,038 494,909 75,155 NA NA 0.12 0.96 8.61
FFPB First Palm Beach
Bancorp, Inc. FL 09/29/93 1,791,370 1,281,229 117,044 NA NA 0.57 0.53 8.16
SOPN First Savings
Bancorp, Inc. NC 01/06/94 299,802 213,172 69,045 NA 49.25 0.16 1.77 7.66
FWWB First Savings Bank
of Washington
Bancorp, Inc. WA 11/01/95 1,136,693 582,309 152,080 NA 21.85 0.25 1.21 8.47
SHEN First Shenango
Bancorp, Inc. PA 04/06/93 403,146 275,393 48,292 9.94 19.51 0.97 1.10 9.39
FBNW FirstBank Corporation ID 07/02/97 183,529 114,495 30,008 11.56 17.10 0.73 1.02 6.98
FAB FIRSTFED AMERICA
BANCORP, INC. MA 01/15/97 1,281,832 708,488 126,986 8.54 17.10 0.31 0.60 5.47
Source: SNL Securities
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp,
Incorporated AL 11/19/91 178,792 160,345 17,325 8.91 15.86 1.42 0.96 9.89
FED FirstFed Financial
Corp. CA 12/16/83 4,067,344 2,157,502 232,539 6.59 11.54 0.89 0.63 12.26
FSPT FirstSpartan
Financial Corp. SC 07/09/97 503,324 363,006 132,334 19.06 30.24 0.35 1.34 6.31
FLAG FLAG Financial
Corporation GA 12/11/86 395,456 302,991 34,076 7.91 11.84 0.99 0.91 10.18
FLGS Flagstar Bancorp,
Inc. MI NA 2,563,924 1,367,275 133,550 6.90 13.02 2.32 1.31 21.11
FFIC Flushing Financial
Corporation NY 11/21/95 1,078,456 656,100 137,160 9.39 NA 0.31 0.92 6.59
FMCO FMS Financial
Corporation NJ 12/14/88 668,619 509,806 39,768 6.72 14.61 0.70 0.91 14.32
FBHC Fort Bend Holding Corp. TX 06/30/93 302,728 255,726 20,492 7.40 14.32 0.47 0.67 10.68
FTSB Fort Thomas Financial
Corporation KY 06/28/95 101,600 74,793 16,021 15.06 23.44 2.22 1.23 7.72
FKKY Frankfort First
Bancorp, Inc. KY 07/10/95 133,304 82,352 22,608 17.54 33.81 0.12 0.25 1.30
FFHH FSF Financial Corp. MN 10/07/94 411,059 218,441 42,730 8.90 15.78 0.18 0.83 7.45
FTNB Fulton Bancorp, Inc. MO 10/18/96 109,622 69,543 25,615 16.60 28.65 0.70 1.23 5.03
GAF GA Financial, Inc. PA 03/26/96 818,091 469,862 114,590 12.24 32.07 0.21 1.09 7.36
GUPB GFSB Bancorp, Inc. NM 06/30/95 118,175 67,172 14,575 NA NA 0.37 0.90 6.67
GFCO Glenway Financial
Corp. OH 11/30/90 300,448 225,529 28,757 NA 12.90 0.19 0.86 9.12
GDW Golden West Financial
Corporation CA 05/29/59 39,669,420 24,559,270 2,814,961 6.76 12.31 1.02 0.95 14.38
GTPS Great American
Bancorp, Inc. IL 06/30/95 146,234 117,518 26,807 NA NA 0.11 0.66 3.24
GSBC Great Southern
Bancorp, Inc. MO 12/14/89 814,855 497,122 66,797 6.97 NA 1.51 1.89 22.17
GSFC Green Street Financial
Corp. NC 04/04/96 177,901 112,111 63,665 35.79 79.67 0.18 1.60 4.48
GPT GreenPoint Financial
Corporation NY 01/28/94 13,228,239 10,867,656 1,279,297 NA 14.78 2.73 1.08 10.90
GSLA GS Financial Corp. LA 04/01/97 129,398 58,305 53,859 34.17 NA 0.13 1.48 3.38
GOSB GSB Financial
Corporation NY 07/09/97 118,855 81,961 33,453 19.68 39.40 0.10 0.71 3.47
HALL Hallmark Capital Corp. WI 01/03/94 420,954 275,772 32,342 NA 11.62 0.27 0.67 9.08
HRBF Harbor Federal
Bancorp, Inc. MD 08/12/94 233,572 176,671 29,165 9.41 21.34 0.53 0.75 5.77
HFSA Hardin Bancorp, Inc. MO 09/29/95 121,148 76,884 13,478 10.22 26.44 0.19 0.83 6.52
HARL Harleysville Savings
Bank PA 08/04/87 367,596 281,890 24,508 NA 13.39 0.00 1.01 15.28
HFGI Harrington Financial
Group, Inc. IN NA 553,134 167,207 24,471 NA 3.60 0.16 (0.02) (0.35)
HARS Harris Financial,
Inc. (MHC) PA 01/25/94 2,260,301 1,139,174 183,758 6.90 12.38 0.66 0.89 11.02
HFFB Harrodsburg First
Financial Bancorp,
Inc. KY 10/04/95 108,820 78,075 28,794 22.90 42.65 0.44 1.36 5.07
HHFC Harvest Home Financial
Corporation OH 10/10/94 90,881 59,948 10,310 NA NA 0.23 0.62 5.39
HAVN Haven Bancorp, Inc. NY 09/23/93 2,017,784 1,474,828 114,101 6.41 12.85 0.57 0.53 9.04
HTHR Hawthorne Financial
Corporation CA NA 1,046,906 848,870 44,528 7.45 10.20 6.04 1.11 21.01
HBS Haywood Bancshares,
Inc. NC 12/18/87 152,002 116,608 22,572 NA NA 0.37 1.45 10.19
HCBB HCB Bancshares, Inc. AR 05/07/97 204,944 148,458 38,218 13.80 28.50 0.23 0.30 1.92
HMLK Hemlock Federal
Financial Corporation IL 04/02/97 191,023 133,264 30,930 NA NA 0.23 1.00 5.55
HEMT HF Bancorp, Inc. CA 06/30/95 1,065,733 868,548 83,760 6.16 5.12 0.95 (0.05) (0.57)
HFFC HF Financial Corp. SD 04/08/92 570,420 436,237 55,452 7.63 11.57 0.49 1.08 11.44
HFNC HFNC Financial Corp. NC NA 979,554 432,054 168,920 15.42 28.11 0.73 1.35 7.37
HIFS Hingham Institution
for Savings MA 12/20/88 231,710 163,486 21,954 NA 14.49 0.42 1.26 13.04
HMNF HMN Financial, Inc. MN 06/30/94 732,118 466,998 84,954 6.54 14.06 0.12 0.95 6.94
HBFW Home Bancorp IN 03/30/95 353,364 303,595 42,525 9.72 19.31 0.08 0.86 6.74
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HBEI Home Bancorp of
Elgin, Inc. IL 09/27/96 368,976 267,745 95,669 20.15 36.20 0.32 0.69 2.58
HCFC Home City Financial
Corporation OH 12/30/96 76,374 55,545 14,193 13.88 21.92 0.65 1.30 6.57
HOMF Home Federal Bancorp IN 01/23/88 705,175 528,127 64,849 8.28 11.27 0.53 1.44 16.58
HWEN Home Financial Bancorp IN 07/02/96 41,466 26,106 7,462 15.30 25.13 1.32 0.93 5.32
HPBC Home Port Bancorp,
Inc. MA 08/25/88 225,708 147,420 22,067 NA 15.80 0.29 1.47 14.05
HRZB Horizon Financial
Corp. WA 08/01/86 547,146 450,125 83,895 NA 27.54 0.01 1.55 10.13
HZFS Horizon Financial
Services Corporation IA 06/30/94 92,710 59,089 8,446 NA NA NA 0.91 9.15
IBSF IBS Financial Corp. NJ 10/13/94 752,115 575,181 130,517 17.23 59.41 0.09 0.82 4.67
IFSB Independence Federal
Savings Bank DC 06/06/85 269,761 204,091 19,281 6.20 15.84 1.66 0.59 8.70
INBI Industrial Bancorp,
Inc. OH 08/01/95 374,035 272,009 61,631 10.06 18.42 0.25 1.48 8.63
IWBK InterWest Bancorp,
Inc. WA NA 2,091,022 1,238,725 141,356 NA 13.57 0.66 1.03 15.51
IPSW Ipswich Savings Bank MA 05/26/93 237,575 170,609 12,538 NA 9.45 0.79 1.24 22.54
ITLA ITLA Capital
Corporation CA 10/24/95 1,010,987 836,957 102,889 NA 11.60 1.31 1.45 13.54
JXVL Jacksonville
Bancorp, Inc. TX 04/01/96 237,102 196,586 34,919 NA NA NA 1.45 9.84
JXSB Jacksonville Savings
Bank (MHC) IL 04/21/95 169,648 148,827 17,604 NA 14.74 0.86 0.58 5.61
JSBA Jefferson Savings
Bancorp, Inc. MO 04/08/93 1,241,864 1,043,881 118,770 NA NA 0.66 0.78 8.67
JOAC Joachim Bancorp, Inc. MO 12/28/95 34,229 24,028 9,897 24.20 47.95 0.25 0.75 2.62
JSB JSB Financial, Inc. NY 06/27/90 1,563,956 1,127,623 372,449 NA NA NA 2.49 10.73
KNK Kankakee Bancorp, Inc. IL 01/06/93 399,477 333,200 38,533 6.79 12.13 1.12 0.86 8.00
KYF Kentucky First
Bancorp, Inc. KY 08/29/95 81,800 56,219 13,934 14.40 25.31 0.18 1.13 6.74
KFBI Klamath First
Bancorp, Inc. OR 10/05/95 994,193 680,635 149,250 11.05 22.54 0.02 0.95 5.84
KSBK KSB Bancorp, Inc. ME 06/24/93 154,637 125,015 12,035 NA NA NA NA NA
LVSB Lakeview Financial
Corp. NJ 12/22/93 472,691 360,659 45,625 NA 12.70 1.27 1.43 13.46
LARK Landmark Bancshares,
Inc. KS 03/28/94 231,267 149,966 32,643 11.25 22.16 0.21 1.09 7.74
LARL Laurel Capital
Group, Inc. PA 02/20/87 216,781 171,488 23,042 NA 20.45 0.37 1.43 13.78
LSBX Lawrence Savings Bank MA 05/02/86 355,073 256,838 39,551 NA 17.06 0.40 2.46 25.76
LXMO Lexington B&L
Financial Corp. MO 06/06/96 94,517 76,090 17,027 21.90 NA 0.47 0.97 4.22
LFCO Life Financial Corp. CA NA 387,187 239,805 58,536 7.67 11.21 2.43 4.57 33.62
LFBI Little Falls
Bancorp, Inc. NJ 01/05/96 355,443 233,848 36,253 NA NA NA 0.58 4.88
LOGN Logansport Financial
Corp. IN 06/14/95 88,999 63,330 16,784 18.76 34.55 0.57 1.49 7.79
LISB Long Island
Bancorp, Inc. NY 04/18/94 6,295,868 3,762,115 563,744 7.37 14.51 0.86 0.88 9.63
LSBI LSB Financial Corp. IN 02/03/95 216,065 146,240 18,179 7.82 11.13 1.69 0.81 9.46
MAFB MAF Bancorp, Inc. IL 01/12/90 3,511,185 2,348,974 271,770 6.86 13.16 0.55 1.12 14.40
MARN Marion Capital
Holdings, Inc. IN 03/18/93 192,532 133,311 39,565 18.50 27.34 1.00 1.33 6.14
MRKF Market Financial
Corporation OH 03/27/97 57,756 36,387 20,369 23.61 61.34 0.33 1.12 3.18
MFSL Maryland Federal
Bancorp, Inc. MD 06/02/87 1,192,046 831,590 104,453 8.24 15.75 0.66 0.75 8.74
MASB MASSBANK Corp. MA 05/28/86 929,450 809,757 107,061 NA 34.80 0.17 1.15 10.55
MFLR Mayflower Co-operative
Bank MA 12/23/87 131,908 101,927 12,867 NA 14.30 0.69 1.11 11.51
MBLF MBLA Financial Corp. MO 06/24/93 223,558 108,919 28,347 11.88 31.32 0.48 0.81 6.31
METF Metropolitan Financial
Corp. OH NA 989,706 808,553 38,222 5.38 7.76 0.92 0.75 18.99
MWBX MetroWest Bank MA 10/10/86 646,567 536,217 46,642 NA 9.91 0.70 1.30 17.60
Source: SNL Securities
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFBC MFB Corp. IN 03/25/94 290,631 176,027 34,210 10.61 20.91 0.02 0.85 6.50
MCBN Mid-Coast Bancorp, Inc. ME 11/02/89 62,632 46,618 5,221 8.01 14.00 1.09 0.75 8.91
MIFC Mid-Iowa Financial
Corp. IA 10/14/92 147,047 96,538 13,010 7.20 17.90 0.07 1.17 12.62
MWBI Midwest Bancshares,
Inc. IA 11/12/92 158,661 105,486 10,934 6.18 13.91 0.66 0.89 12.83
MFFC Milton Federal
Financial Corporation OH 10/07/94 226,711 151,690 25,724 9.91 20.47 0.28 0.68 5.42
MBSP Mitchell Bancorp, Inc. NC 07/12/96 36,931 21,254 14,519 NA 58.84 1.56 1.43 3.50
MBBC Monterey Bay Bancorp,
Inc. CA 02/15/95 403,141 326,729 47,084 9.63 16.37 0.35 0.42 3.76
MBB MSB Bancorp, Inc. NY 09/03/92 765,367 673,432 74,776 6.15 12.08 1.61 0.29 3.11
MSBF MSB Financial, Inc. MI 02/06/95 79,414 42,965 13,259 12.74 20.80 0.74 1.55 9.26
MSBK Mutual Savings Bank,
FSB MI 07/17/92 656,624 412,346 33,310 5.14 1.83 0.07 (1.31) (22.77)
NHTB New Hampshire Thrift
Bancshares, Inc. NH 05/22/86 320,592 272,307 25,940 6.72 11.65 0.76 0.93 12.16
NMSB NewMil Bancorp, Inc. CT 02/01/86 370,276 289,335 32,989 NA 19.46 0.63 0.86 8.68
NBSI North Bancshares, Inc. IL 12/21/93 118,477 73,449 13,569 10.04 26.12 0.00 0.46 3.43
FFFD North Central
Bancshares, Inc. IA 03/21/96 332,812 244,733 51,334 11.63 22.07 0.16 1.70 8.33
NBN Northeast Bancorp ME 08/19/87 310,623 173,971 23,745 7.06 10.72 NA 0.73 9.36
NEIB Northeast Indiana
Bancorp, Inc. IN 06/28/95 200,306 119,853 26,727 12.16 18.84 0.18 1.19 8.32
NWEQ Northwest Equity
Corporation WI 10/11/94 99,558 62,969 11,556 NA 13.19 1.35 1.06 9.14
NSLB NS&L Bancorp, Inc. MO 06/08/95 61,144 47,767 11,486 15.07 34.26 0.11 0.69 3.51
NTMG Nutmeg Federal
Savings & Loan
Association CT NA 105,151 83,006 8,673 8.15 12.67 1.57 0.85 11.33
OCFC Ocean Financial Corp. NJ NA 1,518,485 987,180 215,948 12.30 28.43 0.48 0.95 6.28
OCN Ocwen Financial
Corporation FL NA 3,421,142 1,933,594 447,312 NA NA NA 2.85 24.46
OHSL OHSL Financial Corp. OH 02/10/93 251,174 187,859 26,484 8.57 16.17 0.17 0.87 7.96
OFCP Ottawa Financial
Corporation MI 08/19/94 915,465 663,887 77,346 6.68 10.20 0.36 0.87 10.09
PBCI Pamrapo Bancorp, Inc. NJ 11/14/89 381,444 309,106 48,908 11.85 24.31 1.94 1.32 10.23
PFED Park Bancorp, Inc. IL 08/12/96 197,350 138,373 39,297 13.52 37.82 0.10 0.90 4.12
PVSA Parkvale Financial
Corporation PA 07/16/87 1,055,508 921,328 82,502 NA 13.17 0.52 1.07 14.66
PEEK Peekskill Financial
Corporation NY 12/29/95 195,847 137,538 44,999 22.60 88.30 0.89 1.03 4.08
PFSB PennFed Financial
Services, Inc. NJ 07/15/94 1,469,064 1,021,082 105,693 7.24 15.41 0.50 0.81 11.17
PWBK Pennwood Bancorp, Inc. PA 07/15/96 46,398 35,592 8,508 NA 34.51 1.60 0.77 4.21
PBKB People's Bancshares,
Inc. MA 10/30/86 862,000 386,199 31,625 NA 9.14 0.42 0.78 17.24
PFDC Peoples Bancorp IN 07/07/87 300,651 249,784 45,364 12.30 24.90 0.21 1.50 9.86
PFFC Peoples Financial
Corporation OH 09/13/96 82,215 65,115 15,738 NA NA 0.01 1.06 4.79
PHBK Peoples Heritage
Financial Group, Inc. ME NA 7,309,525 5,076,325 490,703 6.44 10.53 0.91 1.25 16.83
PSFC Peoples-Sidney
Financial Corporation OH 04/28/97 105,522 78,613 26,546 17.10 26.79 1.10 1.23 5.26
PERM Permanent Bancorp, Inc. IN 04/04/94 419,819 273,183 41,970 8.89 21.02 0.70 0.62 6.54
PMFI Perpetual Midwest
Financial, Inc. IA 03/31/94 401,951 320,635 36,149 8.38 11.65 0.30 0.53 6.16
PCBC Perry County
Financial Corporation MO 02/13/95 86,081 62,517 16,302 15.60 67.00 0.00 1.03 5.40
PFFB PFF Bancorp, Inc. CA 03/29/96 2,812,384 1,740,824 254,278 7.10 12.95 1.33 0.60 6.07
PDB Piedmont Bancorp, Inc. NC 12/08/95 132,828 88,323 21,384 NA 26.19 0.48 1.25 7.50
PHFC Pittsburgh Home
Financial Corp. PA 04/01/96 338,312 145,930 25,137 NA 17.30 1.37 0.78 8.06
PTRS Potters Financial
Corporation OH 12/31/93 126,578 102,390 11,021 7.88 16.34 0.13 0.81 8.99
Source: SNL Securities
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRBC Prestige Bancorp, Inc. PA 06/27/96 160,580 93,565 15,781 7.99 16.56 0.40 0.52 4.69
PFNC Progress Financial
Corporation PA 07/18/83 484,809 343,580 26,753 6.80 9.43 1.31 0.85 15.91
PSBK Progressive Bank, Inc. NY 08/01/84 896,110 799,362 79,729 NA 14.92 0.76 0.97 11.14
PROV Provident Financial
Holdings, Inc. CA 06/28/96 764,550 563,240 84,809 8.44 13.34 1.34 0.75 5.85
PSFI PS Financial, Inc. IL 11/27/96 83,823 41,116 23,321 24.80 NA NA 1.07 3.15
PULB Pulaski Bank,
A Savings
Bank (MHC) MO 05/11/94 183,629 154,116 24,649 13.39 25.68 NA 1.11 8.40
PLSK Pulaski Savings
Bank (MHC) NJ 04/03/97 190,778 161,779 22,017 11.54 26.38 0.73 0.64 5.68
PULS Pulse Bancorp, Inc. NJ 09/18/86 540,008 428,133 45,030 NA 25.41 0.60 1.07 13.17
PVFC PVF Capital Corp. OH 12/30/92 418,928 331,806 30,175 7.21 NA 0.69 1.34 18.69
QCFB QCF Bancorp, Inc. MN 04/03/95 154,089 105,239 27,275 NA NA 1.22 1.68 9.66
QCBC Quaker City Bancorp,
Inc. CA 12/30/93 859,993 571,893 75,299 7.45 12.03 1.25 0.76 8.72
QCSB Queens County
Bancorp, Inc. NY 11/23/93 1,622,467 1,048,088 169,493 NA 15.03 0.55 1.49 13.47
RARB Raritan Bancorp, Inc. NJ 03/01/87 418,811 345,876 31,575 7.45 12.11 0.34 1.00 12.96
REDF RedFed Bancorp Inc. CA 04/08/94 1,033,586 860,587 88,684 7.98 10.93 1.81 1.17 13.96
RELY Reliance Bancorp, Inc. NY 03/31/94 2,179,754 1,592,954 193,799 NA NA NA 0.89 10.65
RELI Reliance Bancshares,
Inc. WI 04/19/96 44,174 17,468 22,071 46.71 67.82 0.00 1.02 2.06
RIVR River Valley Bancorp IN 12/20/96 133,848 113,621 18,261 NA NA NA 0.93 7.28
RSLN Roslyn Bancorp, Inc. NY 01/13/97 3,706,388 2,006,440 621,270 NA 25.19 0.25 1.32 7.14
SBFL Savings Bank of the
Finger Lakes (MHC) NY 11/11/94 250,845 186,775 21,793 8.57 21.55 0.27 0.40 4.41
SSB Scotland Bancorp, Inc. NC 04/01/96 61,278 45,174 15,139 20.82 42.22 0.00 1.48 5.12
SFSL Security First Corp. OH 01/22/88 677,876 503,637 63,454 8.17 10.32 0.43 1.37 14.73
SFED SFS Bancorp, Inc. NY 06/30/95 175,420 151,186 21,681 12.36 22.89 0.72 0.65 5.27
SGVB SGV Bancorp, Inc. CA 06/29/95 401,065 290,122 31,634 6.84 13.87 1.45 0.38 5.10
SISB SIS Bancorp, Inc. MA 02/08/95 1,793,968 1,309,402 128,185 NA 11.50 0.43 0.69 9.64
SKAN Skaneateles Bancorp
Inc. NY 06/02/86 257,605 218,347 17,971 NA 10.09 2.01 0.64 9.28
SOBI Sobieski Bancorp, Inc. IN 03/31/95 89,848 60,227 12,669 10.40 22.09 0.29 0.58 3.93
SOSA Somerset Savings Bank MA 07/09/86 533,020 452,477 38,651 7.19 10.60 4.58 1.46 22.40
SCCB South Carolina
Community Bancshares,
Inc. SC 07/07/94 46,305 36,457 9,438 18.30 38.85 1.26 1.01 4.19
SSFC South Street Financial
Corp. NC 10/03/96 216,977 146,882 34,440 NA 42.31 0.22 0.75 3.34
SRN Southern Banc Company,
Inc. (The) AL 10/05/95 105,719 86,276 18,392 NA NA 0.00 0.49 2.84
SCBS Southern Community
Bancshares, Inc. AL 12/23/96 72,447 57,764 11,483 NA NA 0.36 1.13 5.60
SMBC Southern Missouri
Bancorp, Inc. MO 04/13/94 157,438 107,927 26,403 14.04 25.35 0.63 0.70 4.27
SZB SouthFirst Bancshares,
Inc. AL 02/14/95 162,279 124,100 16,348 9.37 20.13 1.04 0.54 4.60
SWBI Southwest Bancshares,
Inc. IL 06/24/92 392,962 307,280 45,661 7.94 13.63 0.16 1.13 10.14
SVRN Sovereign Bancorp, Inc. PA 08/12/86 18,096,121 9,248,612 977,961 NA NA NA 0.52 9.58
STFR St. Francis Capital
Corporation WI 06/21/93 1,647,880 1,089,294 131,881 7.25 11.44 0.21 0.80 9.93
SPBC St. Paul Bancorp, Inc. IL 05/18/87 4,583,390 3,230,580 428,121 8.60 16.09 0.20 1.08 12.08
SFFC StateFed Financial
Corporation IA 01/05/94 89,573 54,043 15,887 10.91 18.73 1.70 1.26 7.12
SFIN Statewide Financial
Corp. NJ 10/02/95 670,561 452,0 65,910 9.24 22.16 0.51 NA NA
STSA Sterling Financial
Corporation WA NA 1,888,214 1,026,101 105,826 7.63 12.71 0.72 0.58 10.44
SSM Stone Street Bancorp,
Inc. NC 04/01/96 110,961 67,756 31,062 NA 40.83 0.28 1.38 4.44
Source: SNL Securities
<PAGE>
EXHIBIT 20-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<CAPTION>
RISK-
BASED NPAS +
TANGIBLE CAPITAL/ LOANS RETURN RETURN
EQUITY/ RISK- 90+ PST ON ON
TOTAL TOTAL TOTAL TANG WEIGHTD DUE/ AVG AVG
ASSETS DEPOSITS EQUITY ASSETS ASSETS ASSETS ASSETS EQUITY
TICKER INSTITUTION STATE IPO DATE ($000) ($000) ($000) (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFSB SuburbFed Financial
Corp. IL 03/04/92 446,475 320,968 30,030 NA 13.30 1.00 0.63 9.55
TPNZ Tappan Zee Financial,
Inc. NY 10/05/95 126,470 103,240 21,522 13.50 40.45 1.39 0.84 4.85
TSH Teche Holding Co. LA 04/19/95 407,265 278,170 56,329 12.57 22.81 0.20 0.94 6.91
FTF Texarkana First
Financial Corporation AR 07/07/95 184,776 148,377 28,130 15.19 25.48 0.23 1.75 11.36
THRD TF Financial
Corporation PA 07/13/94 639,455 450,629 50,979 6.77 17.53 0.30 0.76 7.73
THR Three Rivers
Financial Corp. MI 08/24/95 98,063 61,225 13,262 11.63 21.34 1.00 0.88 6.45
ROSE TR Financial Corp. NY 06/29/93 4,005,695 2,133,760 246,295 NA 17.56 0.57 0.99 16.10
TRIC Tri-County Bancorp,
Inc. WY 09/30/93 89,263 44,925 14,044 13.77 35.34 0.00 1.02 6.65
TWIN Twin City Bancorp,
Inc. TN 01/04/95 110,366 91,972 14,071 11.45 20.70 0.10 1.03 7.99
UFRM United Federal
Savings Bank NC 07/01/80 305,650 268,362 22,905 7.47 9.05 0.64 0.60 8.21
UBMT United Financial
Corporation MT 09/23/86 96,258 70,924 24,650 17.20 41.07 0.23 1.30 5.39
USAB USABancshares, Inc. PA NA 102,535 82,480 12,811 NA 16.50 0.22 0.20 2.17
VABF Virginia Beach Federal
Financial Corporation VA 11/01/80 625,254 427,798 44,648 7.00 11.33 NA 0.69 9.92
WRNB Warren Bancorp, Inc. MA 07/09/86 372,529 325,624 41,120 9.54 11.48 1.01 1.74 16.35
WFSL Washington Federal,
Inc. WA 11/17/82 5,633,772 2,944,881 755,679 11.69 21.35 0.75 1.93 15.32
WAMU Washington Mutual
Inc. WA 03/11/83 103,123,908 51,313,052 5,436,999 NA NA 0.78 0.59 10.56
WSB Washington Savings
Bank, FSB MD NA 265,742 235,930 23,038 8.16 21.30 NA 0.77 9.10
WYNE Wayne Bancorp, Inc. NJ 06/27/96 272,004 203,532 34,529 10.60 21.25 0.90 0.71 5.35
WCFB Webster City Federal
Savings Bank (MHC) IA 08/15/94 93,922 68,608 22,557 24.02 53.26 0.12 1.42 6.06
WBST Webster Financial
Corporation CT 12/12/86 7,558,815 4,444,483 399,828 5.24 11.71 0.59 0.79 14.90
WEFC Wells Financial Corp. MN 04/11/95 209,442 146,618 30,248 11.22 19.69 0.14 1.13 7.89
WCBI Westco Bancorp, Inc. IL 06/26/92 319,130 261,692 49,276 13.65 29.53 0.45 1.53 9.97
WES Westcorp CA 05/01/86 3,812,806 2,159,776 332,764 8.81 6.40 0.55 0.45 4.95
WSTR WesterFed Financial
Corporation MT 01/10/94 1,023,174 644,560 108,694 7.93 12.38 0.64 0.74 6.96
WOFC Western Ohio
Financial Corporation OH 07/29/94 365,426 256,188 53,590 11.80 21.08 0.91 0.06 0.45
WEHO Westwood Homestead
Financial Corporation OH 09/30/96 129,872 83,480 29,864 22.42 40.13 0.12 0.61 2.25
WHGB WHG Bancshares
Corporation MD 04/01/96 118,467 83,890 19,957 13.41 28.63 1.06 0.65 3.29
WFI Winton Financial Corp. OH 08/04/88 344,861 251,606 25,181 NA NA 0.22 1.12 15.51
FFWD Wood Bancorp, Inc. OH 08/31/93 165,007 129,157 21,787 9.93 15.08 0.35 1.43 11.30
WSFS WSFS Financial
Corporation DE 11/26/86 1,534,551 773,813 91,092 7.12 11.18 1.38 1.12 19.88
WVFC WVS Financial
Corporation PA 11/29/93 297,814 165,059 32,734 NA 22.09 0.20 1.27 11.12
YFCB Yonkers Financial
Corporation NY 04/18/96 343,861 228,642 45,337 11.40 27.36 0.41 0.98 6.94
YFED York Financial Corp. PA 02/01/84 1,217,774 1,057,443 106,827 7.60 11.59 2.37 0.88 10.15
MAXIMUM: 103,123,908 51,313,052 5,436,999 46.71 88.30 6.04 4.57 33.62
MINIMUM: 34,229 17,468 5,221 5.14 6.40 0.00 (1.31) (22.77)
AVERAGE: 1,665,893 1,032,383 125,172 10.97 20.89 0.66 0.96 8.87
MEDIAN: 355,258 259,265 36,104 9.23 16.93 0.49 0.91 8.19
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/TANG PRICE/
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE ASSETS
TICKER INSTITUTION EXCHANGE ($M) ($) (x) (%) (%) (%)
- ------ ----------- ------- ------- ------- ------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Median: 69.61 21.126 20.18 156.70 162.66 17.36
QCBC Quaker City Bancorp, Inc. NASDAQ 95.41 20.500 33.61 137.31 137.22 12.03
QCFB QCF Bancorp, Inc. NASDAQ 37.08 26.000 17.81 136.99 136.99 24.78
QCSB Queens County Bancorp, Inc. NASDAQ 547.10 53.875 26.03 271.68 271.68 37.39
RARB Raritan Bancorp, Inc. NASDAQ 53.66 22.250 15.78 178.29 161.19 14.14
RCSB RCSB Financial, Inc. NASDAQ 716.13 46.875 19.63 228.17 233.85 17.36
REDF RedFed Bancorp, Inc. NASDAQ 124.65 17.375 157.95 161.83 162.23 13.66
RELI Reliance Bancshares, Inc. NASDAQ 21.10 6.375 33.50 92.24 92.24 45.05
RELY Reliance Bancorp, Inc. NASDAQ 270.43 30.813 25.47 166.20 230.64 13.68
RIVR River Valley Bancorp NASDAQ 19.64 16.500 NA 112.66 114.58 13.95
ROSE TR Financial Corp. NASDAQ 486.30 27.625 15.10 205.39 206.39 13.83
RSLN Roslyn Bancorp, Inc. NASDAQ 992.87 22.750 NA 156.04 156.79 31.43
RVSB Riverview Savings Bank (MHC) NASDAQ 65.30 27.000 30.68 253.05 277.21 26.43
SBFL Savings Bank of the Finger Lakes (MHC) NASDAQ 41.06 23.000 153.33 197.76 197.76 18.95
SCBS Southern Community Bancshares, Inc. NASDAQ 18.06 15.875 NA 120.36 120.36 25.86
SCCB South Carolina Community Bancshares, Inc. NASDAQ 15.14 21.500 39.61 125.86 125.66 32.62
SECP Security Capital Corporation NASDAQ 953.06 103.500 21.65 170.20 170.20 25.94
SFED SFS Bancorp, Inc. NASDAQ 23.70 19.250 30.08 110.38 110.38 13.77
SFFC StateFed Financial Corporation NASDAQ 17.24 22.000 18.33 113.17 113.17 20.12
SFIN Statewide Financial Corp. NASDAQ 68.32 16.750 22.59 134.89 135.16 13.12
SFNB Security First Network Bank NASDAQ 112.06 13.000 NM 430.46 437.71 142.47
SFSB SuburbFed Financial Corp. NASDAQ 34.71 27.500 23.71 125.46 125.92 8.13
SFSL Security First Corp. NASDAQ 136.37 16.250 22.53 224.75 228.41 21.16
SGVB SGV Bancorp, Inc. NASDAQ 35.43 15.125 47.27 118.44 120.42 6.65
SHEN First Shenango Bancorp, Inc. NASDAQ 56.98 27.500 NA 126.44 126.44 13.05
SISB SIS Bancorp, Inc. NASDAQ 163.12 29.250 8.81 159.75 159.75 11.37
SKAN Skansatelen Bancorp, Inc. NASDAQ 21.71 22.750 12.93 127.88 131.XX 8.75
SKBO First Carnegie Deposit (MHC) NASDAQ 35.65 15.500 NA 147.34 147.34 24.23
SMBC Southern Missouri Bancorp, Inc. NASDAQ 26.25 17.250 23.95 108.83 108.83 17.05
SMFC Sho-Me Financial Corp., Inc. NASDAQ 56.95 38.000 18.63 175.78 175.76 17.32
SOBI Sobieski Bancorp, Inc. NASDAQ 12.74 16.438 51.37 95.35 95.36 15.58
SOPN First Savings Bancorp, Inc. NASDAQ 75.68 20.625 21.05 112.95 112.95 25.79
SOSA Somerset Savings Bank NASDAQ 81.41 3.688 14.75 158.16 1XX.16 11.94
SPBC St. Paul Bancorp, Inc. NASDAQ 785.97 23.125 25.98 198.16 198.67 17.04
SRN Southern Banc Company, Inc. (The) AMSE 19.07 15.500 67.39 107.49 108.62 16.17
SSB Scotland Bancorp, Inc. AMSE 34.57 18.063 31.09 134.30 134.30 49.75
<CAPTION>
CURRENT 1 MONTH AVG
DIVIDEND WEEKLY VOL/
YIELD SHARES OUT SHARES
TICKER INSTITUTION (%) (%) OUTSTANDING
- ------ ----------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Median: 1.82 0.76 2,776,068
QCBC Quaker City Bancorp, Inc. 0.00 0.69 4,703,102
QCFB QCF Bancorp, Inc. 0.00 0.05 1,426,200
QCSB Queens County Bancorp, Inc. 1.86 0.94 10,180,765
RARB Raritan Bancorp, Inc. 2.16 0.22 2,411,673
RCSB RCSB Financial, Inc. 1.23 2.81 14,590,975
REDF RedFed Bancorp, Inc. 0.00 1.08 7,174,149
RELI Reliance Bancshares, Inc. 0.00 3.20 2,528,499
RELY Reliance Bancorp, Inc. 2.08 1.46 8,778,337
RIVR River Valley Bancorp 0.97 1.07 1,190,250
ROSE TR Financial Corp. 2.17 2.74 17,519,296
RSLN Roslyn Bancorp, Inc. 1.05 3.12 43,642,459
RVSB Riverview Savings Bank (MHC) 0.89 0.36 2,418,501
SBFL Savings Bank of the Finger Lakes (MHC) 1.74 0.20 1,785,000
SCBS Southern Community Bancshares, Inc. 1.89 0.70 1,137,350
SCCB South Carolina Community Bancshares, Inc. 2.79 2.76 704,233
SECP Security Capital Corporation 1.16 1.01 9,208,932
SFED SFS Bancorp, Inc. 1.45 1.23 1,235,997
SFFC StateFed Financial Corporation 1.82 0.36 783,724
SFIN Statewide Financial Corp. 2.35 1.01 4,710,298
SFNB Security First Network Bank 0.00 8.23 8,619,873
SFSB SuburbFed Financial Corp. 1.16 0.26 1,261,758
SFSL Security First Corp. 1.75 0.53 7,575,474
SGVB SGV Bancorp, Inc. 0.00 1.09 2,542,176
SHEN First Shenango Bancorp, Inc. 2.18 0.33 2,072,157
SISB SIS Bancorp, Inc. 1.91 2.47 5,576,842
SKAN Skanastelen Bancorp, Inc. 1.76 1.81 953,225
SKBO First Carnegie Deposit (MHC) 1.94 1.14 2,300,000
SMBC Southern Missouri Bancorp, Inc. 0.00 1.35 1,637,913
SMFC Sho-Me Financial Corp. 0.00 4.56 1,498,636
SOBI Sobieski Bancorp, Inc. 1.95 0.31 774,770
SOPN First Savings Bancorp, Inc. 3.88 0.42 3,679,185
SOSA Somerset Savings Bank 0.00 5.68 16,651,602
SPBC St. Paul Bancorp, Inc. 1.73 1.55 33,988,070
SRN Southern Banc Company, Inc. (The) 2.26 0.21 1,230,313
SSB Scotland Bancorp, Inc. 1.68 1.64 1,913,600
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
CURRENT CURRENT CURRENT CURRENT CURRENT CURRENT 1 MONTH AVG
MARKET STOCK PRICE/ PRICE/ PRICE/TANG PRICE/ DIVIDEND WEEKLY VOL/
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE ASSETS YIELD SHARES OUT SHARES
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%) (%) (%) (%) OUTSTANDING
- ------ ----------- -------- ------- ------- ------- ---------- ----------- ------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SSFC South Street
Financial Corp. NASDAQ 84.31 18.750 NA 127.64 127.64 34.88 2.13 0.68 4,498,500
SSM Stone Street Bancorp,
Inc. AMSE 40.33 21.250 25.30 131.74 131.74 38.01 2.12 0.34 1,898,052
STFR St. Francis Capital
Corporation NASDAQ 182.95 34.500 19.60 142.68 161.44 11.13 1.39 1.62 5,307,977
STND Standard Financial,
Inc. NASDAQ 413.37 25.500 33.55 149.04 149.30 16.06 1.57 0.71 18,210,435
STSA Sterling Financial
Corporation NASDAQ 102.96 18.500 86.10 152.01 174.36 6.11 0.00 3.62 5,566,652
SVRN Sovereign Bancorp,
Inc. NASDAQ 1,022.34 15.500 NA 226.28 300.39 9.96 0.52 2.58 70,010,461
SWBI Southwest Bancshares,
Inc. NASDAQ 53.67 20.250 20.05 129.15 129.15 14.20 3.75 0.16 2,652,332
SWCB Sandwich Co-operative
Bank NASDAQ 61.29 32.000 14.04 153.62 160.48 12.21 3.75 1.21 1,915,213
SZB SouthFirst Bancshares,
Inc. AMSE 13.77 16.250 NM 101.18 101.18 14.16 3.08 0.18 847,600
TBK Tolland Bank AMSE 26.72 17.125 15.00 161.56 168.28 11.21 1.17 1.15 1,580,000
THR Three Rivers Financial
Corp. AMSE 12.97 15.750 24.23 103.41 103.62 14.23 2.54 0.31 823,540
THRD TF Financial
Corporation NASDAQ 78.60 19.250 22.92 102.07 116.38 12.27 2.08 0.94 4,083,100
TPNZ Tappan Zee Financial,
Inc. NASDAQ 25.82 17.250 26.75 122.25 122.25 20.80 1.62 0.27 1,497,062
TRIC Tri-County Bancorp,
Inc. NASDAQ 13.85 22.750 20.50 101.07 101.07 15.48 2.64 0.18 608,749
TSBS Peoples Bancorp,
Inc. (MHC) NASDAQ 258.69 28.625 33.28 242.79 264.58 41.00 1.22 2.43 9,037,160
TSH Teche Holding Co. AMSE 62.73 16.250 21.99 117.51 117.51 15.44 2.74 0.32 3,437,530
TWIN Twin City Bancorp,
Inc. NASDAQ 17.07 20.000 29.41 123.69 123.69 15.90 3.20 1.36 853,484
UBMT United Financial
Corporation NASDAQ 28.75 23.500 25.27 118.92 118.92 27.22 4.17 1.16 1,223,312
UFRM United Federal
Savings Bank NASDAQ 36.69 12.000 83.18 179.10 179.10 13.39 2.00 0.16 3,074,314
USAB USABancshares, Inc. NASDAQ 5.97 8.125 30.09 126.16 128.56 12.35 0.00 1.35 734,261
VABF Virginia Beach
Federal Financial
Corporation NASDAQ 67.80 13.625 52.40 160.29 160.29 10.97 1.47 1.55 4,975,991
VFFC Virginia First
Financial
Corporation NASDAQ 138.66 23.875 27.44 210.35 217.84 16.96 0.42 0.27 5,604,661
WAMU Washington Mutual
Inc. NASDAQ 15,089.29 59.875 51.82 290.68 305.27 15.52 1.80 4.41 126,357,488
WAYN Wayne Savings & Loan
Co. (MHC) NASDAQ 47.21 21.000 61.76 200.98 200.96 18.57 2.95 0.13 2,247,993
WBST Webster Financial
Corporation NASDAQ 717.05 52.675 29.98 212.26 246.47 10.68 1.51 2.55 11,965,306
WCBI Westco Bancorp, Inc. NASDAQ 63.77 25.750 20.28 134.25 134.25 20.46 2.33 0.99 2,476,353
WCFB Webster City Federal
Savings Bank (MHC) NASDAQ 37.28 17.750 NA 168.41 168.41 39.36 4.51 0.20 2,100,000
WEFC Wells Financial Corp. NASDAQ 32.33 16.500 22.30 112.78 112.78 16.00 2.91 2.86 1,959,382
WEHO Westwood Homestead
Financial
Corporation NASDAQ 43.33 15.500 NA 109.39 109.39 32.18 1.81 0.45 2,795,475
WES West, Inc. NYSE 564.64 21.583 19.43 169.65 170.06 15.35 1.86 0.33 26,195,099
WFI Winton Financial Corp. AMSE 31.76 16.000 13.91 140.65 143.88 10.01 2.88 0.23 1,986,152
WFSG Wilshire Financial
Services Group Inc. NASDAQ 126.89 17.000 NA 186.61 186.61 10.78 0.00 1.13 7,570,000
WFSL Washington Federal,
Inc. NASDAQ 1,290.52 27.250 13.90 185.88 203.51 22.45 3.38 1.37 47,462,067
WHGB WHG Bancshares
Corporation NASDAQ 23.03 15.750 45.00 111.23 111.23 22.97 1.27 0.17 1,462,107
WOFC Western Ohio Financial
Corporation NASDAQ 55.55 23.750 44.81 101.58 108.94 14.01 4.21 1.50 2,338,692
WRNB Warren Bancorp, Inc. NASDAQ 66.28 17.500 9.07 178.21 178.21 16.48 2.97 1.19 3,781,287
source: SNL Securities
</TABLE>
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (x) (%) (%)
- ------- ----------- -------- ------ ----- ----- ----- ------
<C> <S> <C> <C> <C> <C> <C> <C>
WSB Washington Savings Bank, FSB AMSE 28.67 6.750 24.11 153.68 133.65
WSFS WSFS Financial Corporation NASDAQ 167.87 15.125 10.96 239.32 241.23
WSTR WesterFed Financial Corporation NASDAQ 118.95 21.375 22.27 114.06 142.60
WNFC WNS Financial Corporation NASDAQ 47.16 27.000 15.98 143.48 143.48
WWFC Westwood Financial Corporation NASDAQ 15.05 24.250 31.09 153.87 172.72
WYNE Wayne Bancorp, Inc. NASDAQ 50.61 23.875 45.05 145.23 145.23
YFCB Yonkers Financial Corporation NASDAQ 52.49 17.375 22.28 122.66 122.66
YFED York Finanical Corp. NASDAQ 165.45 23.750 23.99 168.32 106.32
Minimum: 11,009.29 183.600 131.28 469.10 604.84
Maximum: 1.98 1.876 2.41 76.XX 76.XX
Average: 207.34 22.709 23.30 161.83 1XX.13
Median: 43.31 20.000 13.32 137.36 142.14
<CAPTION>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOLL
ASSETS YIELD SHARES OUT SHARES
TICKER INSTITUTION EXCHANGE (%) (%) (%) OUTSTANDING
- ------- ----------- -------- ----- ----- ------ -----------
<C> <S> <C> <C> <C> <C> <C>
WSB Washington Savings Bank, FSB AMSE 11.10 1.48 0.63 4,247,406
WSFS WSFS Financial Corporation NASDAQ 12.45 0.00 1.95 12,421,439
WSTR WesterFed Financial Corporation NASDAQ 12.45 2.06 1.10 5,564,904
WNFC WNS Financial Corporation NASDAQ 16.01 2.96 1.18 1,747,280
WWFC Westwood Financial Corporation NASDAQ 14.05 0.82 1.41 645,241
WYNE Wayne Bancorp, Inc. NASDAQ 19.39 0.64 6.16 2,119,614
YFCB Yonkers Financial Corporation NASDAQ 18.31 1.38 1.73 3,035,750
YFED York Finanical Corp. NASDAQ 14.32 2.53 0.79 7,008,347
Minimum: 142.47 6.00 8.83 126,267,466
Maximum: 1.94 0.00 0.00 232,883
Average: 17.63 1.63 1.27 6,467,464
Median: 18.24 1.63 0.96 2,684,137
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FBCV 1ST Bancorp NASDAQ 32.70 30.000 16.57 139.60 141.98
FBER 1st Bergen Bancorp NASDAQ 53.91 19.750 24.38 145.86 145.86
AABC Access Anytime Bancorp, Inc. NASDAQ 13.70 11.250 8.79 148.42 148.42
AFBC Advance Financial Bancorp NASDAQ 19.06 17.750 18.68 122.25 122.25
AFCB Affiliated Community Bancorp, Inc. NASDAQ 247.59 37.625 20.90 211.02 211.97
AFED AFSALA Bancorp, Inc. NASDAQ 26.28 19.063 20.72 116.59 116.59
AHM Ahmanson & Company (H.F.) NYSE 8,545.77 77.875 20.99 287.68 390.94
ALBK ALBANK Financial Corporation NASDAQ 671.58 52.250 16.38 183.08 234.09
ALBC Albion Banc Corp. NASDAQ 8.27 11.000 23.91 132.85 132.85
ABCL Alliance Bancorp NASDAQ 227.69 28.375 19.57 172.39 174.40
ALLB Alliance Bank (MHC) NASDAQ 109.63 33.500 54.03 375.14 375.14
AMFC AMB Financial Corp. NASDAQ 17.17 18.750 16.89 120.66 120.66
AHCI Ambanc Holding Co., Inc. NASDAQ 81.18 19.063 29.79 133.59 133.59
ASBI Ameriana Bancorp NASDAQ 65.45 20.125 17.50 144.78 147.54
BKC American Bank of Connecticut AMSE 135.50 29.125 16.93 230.78 238.34
ABCW Anchor BanCorp Wisconsin, Inc. NASDAQ 386.51 43.125 20.34 302.00 306.94
ANDB Andover Bancorp, Inc. NASDAQ 223.34 34.500 16.83 203.18 203.18
ASBP ASB Financial Corp. NASDAQ 24.73 15.125 22.24 141.62 141.62
ASFC Astoria Financial Corporation NASDAQ 1,471.58 55.813 17.61 169.75 239.85
AVND Avondale Financial Corp. NASDAQ 58.99 17.750 NM 127.88 127.88
BKCT Bancorp Connecticut, Inc. NASDAQ 108.37 21.250 18.97 225.11 225.11
BPLS Bank Plus Corporation NASDAQ 259.04 13.375 21.93 139.76 152.68
BNKU Bank United Corporation NASDAQ 1,607.43 50.875 15.80 246.13 272.35
BWFC Bank West Financial Corporation NASDAQ 36.73 14.000 33.33 156.77 156.77
BANC BankAtlantic Bancorp, Inc. NASDAQ 446.71 13.750 18.09 208.97 249.55
BKUNA BankUnited Financial Corporation NASDAQ 266.83 17.250 31.94 182.93 210.88
BVCC Bay View Capital Corporation NASDAQ 657.89 32.500 36.11 169.27 264.44
BFSB Bedford Bancshares, Inc. NASDAQ 32.17 28.000 19.44 150.54 150.54
BFFC Big Foot Financial Corporation NASDAQ 50.26 20.000 37.74 131.23 131.23
BYFC Broadway Financial Corporation NASDAQ 10.47 12.125 16.84 77.18 77.18
CBCI Calumet Bancorp, Inc. NASDAQ 116.24 37.000 12.42 135.53 135.53
CAFI Camco Financial Corporation NASDAQ 105.72 29.000 15.18 185.66 197.82
CMRN Cameron Financial Corporation NASDAQ 54.42 21.250 21.68 118.65 118.65
CAPS Capital Savings Bancorp, Inc. NASDAQ 40.90 21.625 15.90 174.11 174.11
CFNC Carolina Fincorp, Inc. NASDAQ 34.54 18.125 30.72 130.40 130.40
CNY Carver Bancorp, Inc. AMSE 32.40 14.000 29.17 89.97 93.21
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
12.60 0.89 1.10 1,089,840
17.06 1.01 0.93 2,729,435
12.01 0.00 1.39 1,217,336
17.22 1.80 0.34 1,073,606
21.70 1.59 1.28 6,580,570
16.44 1.47 3.41 1,383,440
15.67 1.13 3.49 109,737,033
16.42 1.61 1.41 12,853,277
11.35 1.09 0.58 751,848
14.81 1.55 0.54 8,024,293
40.19 1.07 0.21 3,272,500
17.02 1.49 3.98 963,798
15.62 1.26 1.31 4,258,418
16.85 3.18 0.48 3,252,015
20.81 2.61 1.16 4,652,300
19.33 0.83 0.53 8,962,594
16.12 2.09 1.66 6,473,518
21.53 2.64 0.23 1,635,346
13.51 1.43 7.78 26,366,224
9.72 0.00 1.81 3,323,566
22.59 2.54 0.44 5,099,948
6.14 0.00 1.98 19,383,215
12.26 1.26 1.39 31,595,596
20.39 1.71 0.61 2,623,629
12.87 0.70 2.17 32,995,849
8.02 0.00 2.46 15,468,190
12.32 1.23 4.13 20,242,897
21.01 2.00 0.38 1,148,950
23.99 0.00 0.68 2,512,750
8.15 1.65 0.73 863,447
23.71 0.00 0.17 3,141,497
18.37 1.93 0.72 3,645,509
24.65 1.32 1.00 2,562,759
17.64 1.11 0.62 1,891,400
29.15 1.32 1.55 1,905,545
7.42 0.00 0.52 2,314,275
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-B
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CASB Cascade Financial Corporation NASDAQ 58.64 17.250 19.83 193.17 193.17
CATB Catskill Financial Corporation NASDAQ 79.74 17.875 20.31 115.03 115.03
CBES CBES Bancorp, Inc. NASDAQ 20.55 21.875 18.86 124.08 124.08
CCFH CCF Holding Company NASDAQ 20.86 23.250 122.37 180.23 180.23
CNIT CENIT Bancorp, Inc. NASDAQ 123.37 24.750 19.04 231.96 251.52
CEBK Central Co-operative Bank NASDAQ 57.97 29.500 18.91 160.76 177.82
CENB Century Bancorp, Inc. NASDAQ 26.05 20.500 17.23 140.60 140.60
CFSB CFSB Bancorp, Inc. NASDAQ 210.17 28.125 19.95 321.43 321.43
COFI Charter One Financial, Inc. NASDAQ 4,480.78 69.938 28.31 312.64 333.20
CVAL Chester Valley Bancorp Inc. NASDAQ 72.23 33.000 21.71 241.94 241.94
CTZN CitFed Bancorp, Inc. NASDAQ 654.35 50.000 23.26 296.03 321.34
CBK Citizens First Financial Corp. AMSE 50.08 19.750 25.99 129.34 129.34
CKFB CKF Bancorp, Inc. NASDAQ 16.25 19.000 14.18 111.31 111.31
CLAS Classic Bancshares, Inc. NASDAQ 22.10 17.000 19.10 110.53 129.57
CNSB CNS Bancorp, Inc. NASDAQ 28.99 17.625 32.64 120.39 120.39
CBSA Coastal Bancorp, Inc. NASDAQ 197.24 39.125 14.23 180.72 209.67
CFCP Coastal Financial Corporation NASDAQ 114.80 24.500 18.70 326.23 326.23
CFB Commercial Federal Corporation NYSE 1,408.51 34.938 20.31 238.81 273.17
CMSB Commonwealth Bancorp, Inc. NASDAQ 381.46 23.750 23.99 177.11 221.55
CFTP Community Federal Bancorp, Inc. NASDAQ 81.49 18.000 29.51 121.95 121.95
CFFC Community Financial Corporation NASDAQ 40.63 15.875 21.45 162.65 163.32
CIBI Community Investors Bancorp, Inc. NASDAQ 18.13 20.375 19.40 162.22 162.22
COOP Cooperative Bankshares, Inc. NASDAQ 50.75 17.000 24.29 174.18 174.18
CRZY Crazy Woman Creek Bancorp, Incorporated NASDAQ 18.14 19.000 22.89 124.75 124.75
CSBF CSB Financial Group, Inc. NASDAQ 11.65 13.875 44.76 104.88 111.18
DNFC D & N Financial Corporation NASDAQ 249.50 27.313 17.18 247.62 249.66
DCBI Delphos Citizens Bancorp, Inc. NASDAQ 40.26 21.250 23.35 143.97 143.97
DME Dime Bancorp, Incorporated NYSE 3,206.41 28.063 21.42 246.82 301.75
DIME Dime Community Bancorp, Inc. NASDAQ 351.42 28.250 29.43 185.61 213.37
DIBK Dime Financial Corporation NASDAQ 190.70 36.188 12.48 230.35 236.06
DSL Downey Financial Corp. NYSE 944.65 33.625 18.78 211.74 214.17
EGLB Eagle BancGroup, Inc. NASDAQ 22.96 19.500 37.50 111.05 111.05
EBSI Eagle Bancshares, Inc. NASDAQ 138.68 24.250 26.94 188.86 188.86
ETFS East Texas Financial Services, Inc. NASDAQ 24.63 16.000 33.33 116.87 116.87
ESBK Elmira Savings Bank, FSB NASDAQ 22.66 30.000 21.28 150.00 150.00
EMLD Emerald Financial Corporation NASDAQ 135.98 13.250 21.03 267.14 270.41
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
13.49 0.00 0.57 3,399,255
26.94 1.79 1.44 4,460,743
17.65 1.83 0.64 939,607
14.58 2.75 0.49 897,056
16.77 1.62 1.19 4,977,321
15.79 1.08 0.42 1,965,000
24.96 3.32 0.55 1,270,869
24.84 1.85 0.32 7,472,772
23.03 1.60 1.77 64,067,849
20.97 1.33 0.17 2,184,753
18.52 0.72 1.04 13,087,024
17.90 0.00 0.88 2,535,750
25.96 2.63 0.14 855,016
16.64 1.65 0.30 1,299,950
29.73 1.36 3.33 1,644,598
6.64 1.23 1.92 5,035,493
19.68 1.47 0.50 4,685,834
16.51 0.63 0.67 40,306,274
16.16 1.35 1.87 16,264,463
32.07 1.78 2.25 4,527,250
22.17 1.76 0.36 2,554,446
17.82 1.57 3.52 889,871
13.30 0.00 0.45 2,984,396
29.41 2.11 1.87 954,845
24.28 0.00 0.52 839,596
13.36 0.73 0.56 9,134,755
35.92 1.13 1.17 1,903,911
14.56 0.71 1.62 114,257,711
22.28 1.27 2.05 12,439,713
18.69 1.33 3.07 5,248,067
16.09 0.95 1.36 28,093,735
12.74 0.00 1.00 1,177,205
14.84 2.47 2.80 5,718,668
20.37 1.25 1.00 1,539,461
9.87 2.13 1.47 755,394
22.08 1.06 0.74 10,262,288
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
EFBC Empire Federal Bancorp, Inc. NASDAQ 44.07 17.000 25.37 108.42 108.42
EFBI Enterprise Federal Bancorp, Inc. NASDAQ 56.60 28.500 24.57 174.74 174.85
EQSB Equitable Federal Savings Bank NASDAQ 40.65 33.375 19.07 234.05 234.05
ESBF ESB Financial Corp. NASDAQ 114.44 20.000 19.61 169.06 189.39
ESX Essex Bancorp, Inc. AMSE 4.23 4.000 NM NM NM
FCBF FCB Financial Corp. NASDAQ 122.78 31.750 20.48 167.37 167.37
FOBC Fed One Bancorp, Inc. NASDAQ 87.09 36.375 27.98 204.01 212.47
FFDF FFD Financial Corporation NASDAQ 32.88 22.750 19.44 147.44 147.44
FFLC FFLC Bancorp, Inc. NASDAQ 74.94 20.000 20.41 144.30 144.30
FFWC FFW Corporation NASDAQ 27.54 19.000 14.73 144.60 157.55
FFYF FFY Financial Corp. NASDAQ 138.36 34.125 17.15 163.83 163.83
FSBI Fidelity Bancorp, Inc. NASDAQ 48.95 24.875 18.03 177.43 177.43
FBCI Fidelity Bancorp, Inc. NASDAQ 67.11 23.625 69.49 127.56 127.77
FFFL Fidelity Bankshares Inc. (MHC) NASDAQ 200.66 29.500 27.31 226.75 227.80
FFED Fidelity Federal Bancorp NASDAQ 23.84 7.625 NM 151.89 151.89
FFOH Fidelity Financial of Ohio, Inc. NASDAQ 97.21 17.375 19.31 149.27 168.53
FIBC Financial Bancorp, Inc. NASDAQ 43.52 25.500 15.36 155.20 155.87
FBSI First Bancshares, Inc. NASDAQ 30.98 14.000 16.47 129.51 135.27
FBBC First Bell Bancorp, Inc. NASDAQ 136.20 20.875 16.44 182.63 182.63
SKBO First Carnegie Deposit (MHC) NASDAQ 46.29 20.125 NA 187.38 187.38
FSTC First Citizens Corporation NASDAQ 88.72 32.000 15.38 248.83 311.28
FCME First Coastal Corporation NASDAQ 18.43 13.563 14.58 122.19 122.19
FFBA First Colorado Bancorp, Inc. NASDAQ 489.46 29.063 23.44 229.75 234.38
FDEF First Defiance Financial Corp. NASDAQ 124.89 15.375 25.20 122.61 122.61
FESX First Essex Bancorp, Inc. NASDAQ 174.72 23.188 17.70 191.79 217.73
FFBZ First Federal Bancorp, Inc. NASDAQ 37.80 24.000 22.86 234.38 234.60
BDJI First Federal Bancorporation NASDAQ 18.72 18.750 20.60 151.82 151.82
FFBH First Federal Bancshares of Arkansas, Inc. NASDAQ 135.25 27.625 23.41 160.61 160.61
FTFC First Federal Capital Corp. NASDAQ 328.65 35.500 19.09 290.03 305.77
FFKY First Federal Financial Corporation of Kentucky NASDAQ 114.08 27.625 18.29 212.17 224.05
FFES First Federal Savings & Loan of East Hartford NASDAQ 107.33 39.563 19.49 156.62 156.62
FFSX First Federal Savings Bank of Siouxland (MHC) NASDAQ 107.13 37.750 32.83 263.25 265.28
FFCH First Financial Holdings Inc. NASDAQ 312.98 23.000 20.18 264.37 264.37
FFHS First Franklin Corporation NASDAQ 32.63 18.250 17.72 151.96 152.59
FGHC First Georgia Holding, Inc. NASDAQ 43.99 13.750 25.00 309.68 332.13
FSPG First Home Bancorp, Inc. NASDAQ 88.13 32.000 19.05 226.95 229.89
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
39.85 1.88 1.48 2,592,100
18.79 3.51 0.85 1,985,828
12.13 0.00 0.89 1,217,840
12.16 1.64 0.50 5,751,026
2.19 0.00 1.83 1,058,510
23.59 2.52 0.20 3,862,531
23.69 1.70 0.69 2,394,279
32.85 1.32 2.00 1,445,350
18.34 1.80 0.24 3,747,173
13.86 1.89 0.41 1,449,532
21.46 2.34 0.37 4,054,502
12.14 1.45 0.16 1,966,015
13.76 1.69 0.34 2,821,530
15.19 3.05 0.35 6,801,986
11.05 5.25 1.19 3,127,712
17.99 1.84 0.21 5,595,058
14.02 1.96 0.45 1,706,666
17.39 0.86 0.13 2,210,528
20.49 1.92 0.42 6,523,920
32.22 1.49 0.15 2,300,000
25.12 1.00 0.12 2,764,531
12.29 0.00 1.30 1,359,194
31.36 1.79 1.30 16,826,798
21.63 2.34 1.90 8,123,000
13.51 2.42 1.98 7,534,721
17.86 1.17 0.10 1,575,116
16.54 0.00 0.14 998,275
23.71 1.01 1.65 4,896,063
20.80 1.58 0.67 9,257,630
28.03 2.03 0.15 4,132,812
10.83 1.72 1.10 2,712,918
23.31 1.27 0.08 2,834,393
16.82 1.83 0.67 13,587,204
14.04 1.46 0.41 1,788,044
25.06 2.91 0.30 3,199,352
15.88 1.25 0.57 2,708,426
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FFSL First Independence Corporation NASDAQ 13.40 14.000 18.42 115.80 115.80
FISB First Indiana Corporation NASDAQ 322.67 25.250 18.30 205.79 208.16
FKFS First Keystone Financial, Inc. NASDAQ 48.57 20.125 16.77 188.97 188.97
FLKY First Lancaster Bancshares, Inc. NASDAQ 14.67 15.500 29.25 103.89 103.89
FLFC First Liberty Financial Corp. NASDAQ 279.05 24.000 28.57 280.05 306.12
CASH First Midwest Financial, Inc. NASDAQ 62.19 23.500 28.31 147.61 166.08
FMBD First Mutual Bancorp, Inc. NASDAQ 64.10 18.156 46.55 107.12 138.38
FMSB First Mutual Savings Bank NASDAQ 69.78 16.750 15.23 216.13 216.13
FNGB First Northern Capital Corporation NASDAQ 122.61 13.750 19.93 163.11 163.11
FFPB First Palm Beach Bancorp, Inc. NASDAQ 182.08 36.000 20.11 155.57 159.01
SOPN First Savings Bancorp, Inc. NASDAQ 88.11 23.750 18.27 127.62 127.62
FWWB First Savings Bank of Washington Bancorp, Inc. NASDAQ 251.53 25.125 18.34 155.86 168.29
SHEN First Shenango Bancorp, Inc. NASDAQ 91.81 44.375 21.03 190.12 190.12
FBNW FirstBank Corporation NASDAQ 43.15 21.750 NA 132.62 132.62
FAB FIRSTFED AMERICA BANCORP, INC. AMSE 179.59 20.625 24.55 128.99 128.99
FFDB FirstFed Bancorp, Incorporated NASDAQ 28.87 25.000 18.52 166.67 181.55
FED FirstFed Financial Corp. NYSE 509.10 48.063 19.94 218.97 220.57
FSPT FirstSpartan Financial Corp. NASDAQ 202.67 45.750 NA 153.16 153.16
FLAG FLAG Financial Corporation NASDAQ 75.66 21.938 21.94 196.23 196.23
FLGS Flagstar Bancorp, Inc. NASDAQ 343.46 25.125 13.80 257.16 265.59
FFIC Flushing Financial Corporation NASDAQ 206.46 26.375 21.62 150.54 156.53
FMCO FMS Financial Corporation NASDAQ 107.76 45.000 20.36 270.92 273.56
FBHC Fort Bend Holding Corp. NASDAQ 44.80 26.750 27.58 217.83 232.41
FTSB Fort Thomas Financial Corporation NASDAQ 22.67 15.375 18.30 141.44 141.44
FKKY Frankfort First Bancorp, Inc. NASDAQ 26.92 16.625 92.36 119.09 119.09
FFHH FSF Financial Corp. NASDAQ 58.73 19.750 17.63 122.06 122.06
FTNB Fulton Bancorp, Inc. NASDAQ 38.24 22.500 28.85 149.40 149.40
GAF GA Financial, Inc. AMSE 151.90 20.000 17.54 132.54 133.78
GUPB GFSB Bancorp, Inc. NASDAQ 20.42 17.000 21.52 140.03 140.03
GFCO Glenway Financial Corp. NASDAQ 47.93 21.000 19.44 166.67 168.13
GDW Golden West Financial Corporation NYSE 6,114.86 106.750 16.55 216.88 216.88
GTPS Great American Bancorp, Inc. NASDAQ 33.75 21.250 39.35 115.61 115.61
GSBC Great Southern Bancorp, Inc. NASDAQ 205.99 25.750 15.24 309.87 312.12
GSFC Green Street Financial Corp. NASDAQ 71.46 16.625 24.45 112.26 112.26
GPT GreenPoint Financial Corporation NYSE 3,378.76 40.000 21.62 229.49 411.52
GSLA GS Financial Corp. NASDAQ 63.22 18.875 32.54 117.38 117.38
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
10.75 2.14 0.07 955,693
19.05 1.90 0.48 12,736,533
12.61 0.99 0.32 2,412,838
27.68 3.23 1.26 946,545
20.59 1.22 0.48 11,622,342
15.34 2.04 0.75 2,646,471
16.43 1.76 1.31 3,530,570
14.87 1.19 0.78 4,166,131
18.11 2.62 0.69 8,917,023
10.16 1.94 1.79 5,057,746
29.39 4.21 1.07 3,709,870
22.45 1.43 1.16 10,156,113
22.77 1.35 0.84 2,069,007
23.51 1.47 2.93 1,983,750
14.01 0.00 1.73 8,707,152
16.15 2.00 0.03 1,154,963
12.52 0.00 2.08 10,592,414
40.27 1.31 1.26 4,430,000
16.92 1.55 0.81 3,049,274
13.40 1.11 1.20 13,670,000
19.14 1.21 1.02 7,827,695
16.12 0.80 0.47 2,394,612
14.74 1.50 1.19 1,668,058
22.31 1.63 0.76 1,474,321
20.19 4.81 1.82 1,619,111
14.17 2.53 0.67 2,949,207
34.91 1.07 0.50 1,700,650
18.57 2.80 0.69 7,594,980
17.28 1.57 0.35 1,201,050
15.95 2.10 0.27 2,282,494
15.39 0.47 1.56 57,190,004
23.08 1.88 0.29 1,588,378
25.40 1.71 0.28 8,036,421
40.17 2.65 0.65 4,298,125
25.54 1.60 1.13 84,469,000
48.86 1.48 1.38 3,349,500
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
GOSB GSB Financial Corporation NASDAQ 39.34 17.500 NA 117.61 117.61
HALL Hallmark Capital Corp. NASDAQ 44.56 15.188 16.16 130.03 130.03
HRBF Harbor Federal Bancorp, Inc. NASDAQ 41.91 24.750 25.00 143.73 143.73
HFSA Hardin Bancorp, Inc. NASDAQ 16.27 19.750 18.29 120.65 120.65
HARL Harleysville Savings Bank NASDAQ 54.13 32.375 15.95 220.84 220.84
HFGI Harrington Financial Group, Inc. NASDAQ 37.87 11.500 NM 155.62 155.62
HARS Harris Financial, Inc. (MHC) NASDAQ 878.66 25.875 47.05 478.28 532.41
HFFB Harrodsburg First Financial Bancorp, Inc. NASDAQ 32.98 16.938 21.44 105.99 105.99
HHFC Harvest Home Financial Corporation NASDAQ 13.82 15.500 25.00 133.97 133.97
HAVN Haven Bancorp, Inc. NASDAQ 223.10 25.250 22.75 195.58 196.04
HTHR Hawthorne Financial Corporation NASDAQ 62.49 19.750 12.82 140.37 140.37
HBS Haywood Bancshares, Inc. AMSE 28.60 22.875 13.00 126.73 130.86
HCBB HCB Bancshares, Inc. NASDAQ 41.49 15.688 NA 108.57 112.46
HMLK Hemlock Federal Financial Corporation NASDAQ 37.75 18.875 21.21 122.09 122.09
HEMT HF Bancorp, Inc. NASDAQ 102.88 16.250 NM 122.46 144.32
HFFC HF Financial Corp. NASDAQ 106.39 36.250 17.95 191.90 191.90
HFNC HFNC Financial Corp. NASDAQ 226.73 13.188 17.58 134.16 134.16
HIFS Hingham Institution for Savings NASDAQ 45.95 35.250 17.20 209.32 209.32
HMNF HMN Financial, Inc. NASDAQ 108.33 27.500 18.97 134.15 144.28
HBFW Home Bancorp NASDAQ 80.16 34.000 26.98 188.47 188.47
HBEI Home Bancorp of Elgin, Inc. NASDAQ 119.12 17.375 44.55 124.55 124.55
HCFC Home City Financial Corporation NASDAQ 20.58 22.750 22.52 145.00 145.00
HOMF Home Federal Bancorp NASDAQ 169.19 33.000 17.93 260.87 268.07
HWEN Home Financial Bancorp NASDAQ 8.25 8.875 19.72 110.52 110.52
HPBC Home Port Bancorp, Inc. NASDAQ 44.90 24.375 14.95 203.46 203.46
HRZB Horizon Financial Corp. NASDAQ 136.47 18.250 16.74 162.66 162.66
HZFS Horizon Financial Services Corporation NASDAQ 13.97 15.875 17.07 165.36 165.36
IBSF IBS Financial Corp. NASDAQ 209.60 19.125 34.15 160.58 160.58
IFSB Independence Federal Savings Bank NASDAQ 25.30 19.750 12.27 131.23 145.97
INBI Industrial Bancorp, Inc. NASDAQ 109.41 21.750 20.33 179.16 179.16
IWBK InterWest Bancorp, Inc. NASDAQ 378.86 45.000 18.44 268.02 272.23
IPSW Ipswich Savings Bank NASDAQ 44.66 18.688 18.50 355.96 355.96
ITLA ITLA Capital Corporation NASDAQ 176.14 22.875 13.95 171.22 171.73
JXVL Jacksonville Bancorp, Inc. NASDAQ 51.34 21.000 15.44 146.96 146.96
JXSB Jacksonville Savings Bank (MHC) NASDAQ 44.36 23.250 45.59 251.90 251.90
JSBA Jefferson Savings Bancorp, Inc. NASDAQ 303.80 30.313 30.31 237.94 296.60
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
33.10 0.00 4.12 2,248,250
10.58 0.00 0.63 2,933,608
17.94 2.10 0.56 1,693,420
13.43 2.63 0.97 823,560
14.72 1.36 0.09 1,671,729
6.88 1.04 0.67 3,310,711
38.86 0.85 0.18 33,941,700
30.31 2.36 0.15 1,947,143
15.20 2.84 0.11 891,357
11.06 1.19 2.29 8,835,588
5.97 0.00 0.85 3,164,096
18.82 2.62 0.06 1,250,356
20.25 1.27 1.61 2,645,000
19.76 1.48 1.23 2,000,176
9.62 0.00 1.45 6,311,609
18.65 1.16 0.50 2,934,865
23.15 2.43 1.82 17,192,500
19.83 1.48 0.21 1,303,500
15.57 0.87 3.39 4,144,368
22.68 0.59 0.48 2,357,584
32.28 2.30 1.38 6,855,799
26.95 1.58 2.23 904,590
23.99 1.21 1.28 5,127,091
19.88 1.13 0.82 929,052
19.89 3.28 0.66 1,841,890
24.94 2.41 0.93 7,477,672
15.07 1.13 0.91 879,942
27.87 2.09 3.51 10,959,674
9.38 1.27 0.70 1,281,083
29.53 2.76 1.03 5,077,800
18.12 1.69 1.17 8,419,059
18.80 0.86 3.33 2,389,576
17.42 0.00 1.04 7,699,984
21.65 2.38 0.79 2,443,968
26.15 1.29 0.09 1,908,121
24.46 0.92 0.39 10,019,714
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
JOAC Joachim Bancorp, Inc. NASDAQ 11.92 16.500 45.83 120.44 120.44
JSB JSB Financial, Inc. NYSE 568.90 57.563 15.47 152.73 152.73
KNK Kankakee Bancorp, Inc. AMSE 48.47 35.125 17.30 125.63 151.01
KYF Kentucky First Bancorp, Inc. AMSE 18.85 15.188 19.47 135.12 135.12
KFBI Klamath First Bancorp, Inc. NASDAQ 213.73 21.438 24.09 132.66 144.56
KSBK KSB Bancorp, Inc. NASDAQ 23.60 18.750 13.59 196.13 225.63
LVSB Lakeview Financial Corp. NASDAQ 101.79 23.750 15.32 202.13 246.37
LARK Landmark Bancshares, Inc. NASDAQ 44.97 27.000 19.15 137.76 137.76
LARL Laurel Capital Group, Inc. NASDAQ 45.95 21.000 15.91 199.24 199.24
LSBX Lawrence Savings Bank NASDAQ 73.36 17.000 8.76 185.59 185.59
LXMO Lexington B&L Financial Corp. NASDAQ 18.21 16.250 23.55 106.98 114.04
LFCO Life Financial Corp. NASDAQ 137.48 21.000 9.21 234.90 234.90
LFBI Little Falls Bancorp, Inc. NASDAQ 49.40 19.938 26.23 136.28 147.58
LOGN Logansport Financial Corp. NASDAQ 22.70 18.000 18.18 135.24 135.24
LISB Long Island Bancorp, Inc. NASDAQ 1,495.90 62.500 27.78 265.39 267.67
LSBI LSB Financial Corp. NASDAQ 30.24 33.000 17.74 155.81 155.81
MAFB MAF Bancorp, Inc. NASDAQ 573.02 38.125 15.89 210.87 237.69
MARN Marion Capital Holdings, Inc. NASDAQ 50.03 28.625 21.52 128.36 131.13
MRKF Market Financial Corporation NASDAQ 19.37 14.500 27.88 95.08 95.08
MFSL Maryland Federal Bancorp, Inc. NASDAQ 254.75 39.188 29.69 243.86 246.16
MASB MASSBANK Corp. NASDAQ 182.93 51.000 17.83 170.85 173.23
MFLR Mayflower Co-operative Bank NASDAQ 23.16 25.750 16.40 179.94 182.75
MBLF MBLA Financial Corp. NASDAQ 30.08 24.125 18.14 108.09 108.09
METF Metropolitan Financial Corp. NASDAQ 111.94 15.875 16.89 292.90 316.87
MWBX MetroWest Bank NASDAQ 114.66 8.063 14.93 245.82 245.82
MFBC MFB Corp. NASDAQ 42.95 26.000 20.16 125.54 125.54
MCBN Mid-Coast Bancorp, Inc. NASDAQ 8.53 12.000 18.46 163.49 163.49
MIFC Mid-Iowa Financial Corp. NASDAQ 20.26 11.750 13.51 155.63 155.84
MWBI Midwest Bancshares, Inc. NASDAQ 16.32 15.875 13.23 149.34 149.34
MFFC Milton Federal Financial Corporation NASDAQ 35.51 15.875 24.05 127.10 127.10
MBSP Mitchell Bancorp, Inc. NASDAQ 15.71 16.875 28.60 108.17 108.17
MBBC Monterey Bay Bancorp, Inc. NASDAQ 69.26 21.875 39.77 138.10 147.70
MBB MSB Bancorp, Inc. AMSE 106.48 37.438 129.10 170.79 321.08
MSBF MSB Financial, Inc. NASDAQ 20.15 16.375 16.38 151.90 151.90
MSBK Mutual Savings Bank, FSB NASDAQ 51.75 12.063 NM 155.45 155.45
NHTB New Hampshire Thrift Bancshares, Inc. NASDAQ 41.56 19.875 14.61 160.15 184.37
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
34.82 3.03 0.26 722,415
36.38 2.78 0.71 9,883,047
12.12 1.37 0.24 1,377,988
23.02 3.29 1.88 1,239,605
21.50 1.59 2.32 9,969,570
15.26 0.53 0.42 1,258,614
19.51 1.05 0.65 3,882,063
19.44 2.22 0.68 1,665,482
21.18 2.48 0.30 2,186,752
20.66 0.00 2.02 4,315,550
19.27 1.85 1.02 1,120,761
35.51 0.00 3.87 6,546,716
13.90 1.00 0.23 2,477,525
25.51 2.22 0.52 1,261,100
23.76 0.96 7.39 23,934,414
14.00 1.21 0.28 916,350
16.32 1.10 1.53 15,029,984
26.37 3.07 1.95 1,773,892
33.53 1.93 0.82 1,335,725
21.37 1.15 0.73 6,500,824
19.68 1.96 0.50 3,586,878
17.56 3.11 0.75 899,300
13.70 1.66 0.41 1,269,989
11.31 0.00 0.44 7,051,270
17.73 1.49 1.01 14,220,235
14.78 1.31 0.69 1,651,767
13.62 1.44 0.58 710,964
13.78 0.68 0.33 1,723,988
10.29 1.51 0.23 1,028,199
15.66 3.78 0.36 2,236,836
42.54 2.37 0.17 930,902
17.18 0.64 0.84 3,166,214
13.91 1.50 2.48 2,844,153
25.37 1.83 0.63 1,230,510
7.88 0.00 0.86 4,289,914
12.96 3.02 0.76 2,090,855
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
NMSB NewMil Bancorp, Inc. NASDAQ 49.91 13.000 19.12 151.34 151.34
NBSI North Bancshares, Inc. NASDAQ 21.76 17.000 42.50 160.38 160.38
FFFD North Central Bancshares, Inc. NASDAQ 74.31 22.750 17.77 144.72 166.30
NBN Northeast Bancorp AMSE 43.99 17.875 22.92 183.90 202.43
NEIB Northeast Indiana Bancorp, Inc. NASDAQ 35.98 21.500 15.81 135.82 135.82
NWEQ Northwest Equity Corporation NASDAQ 16.98 20.250 15.00 136.64 136.64
NSLB NS&L Bancorp, Inc. NASDAQ 12.09 17.625 27.98 105.22 105.98
NTMG Nutmeg Federal Savings & Loan Association NASDAQ 10.39 10.500 NA 167.73 167.73
OCFC Ocean Financial Corp. NASDAQ 308.74 19.875 21.37 142.99 142.99
OCN Ocwen Financial Corporation NYSE 1,487.36 24.500 17.13 332.43 351.00
OHSL OHSL Financial Corp. NASDAQ 43.27 17.375 20.68 159.11 159.11
OFCP Ottawa Financial Corporation NASDAQ 155.64 29.250 21.51 201.03 245.18
PBCI Pamrapo Bancorp, Inc. NASDAQ 81.02 28.500 16.47 165.70 166.67
PFED Park Bancorp, Inc. NASDAQ 44.61 19.125 26.56 113.50 113.50
PVSA Parkvale Financial Corporation NASDAQ 164.81 32.000 15.53 199.75 200.75
PEEK Peekskill Financial Corporation NASDAQ 52.04 17.250 26.14 115.62 115.62
PFSB PennFed Financial Services, Inc. NASDAQ 168.29 17.500 15.09 148.56 171.40
PWBK Pennwood Bancorp, Inc. NASDAQ 10.92 14.875 28.61 118.15 118.15
PBKB People's Bancshares, Inc. NASDAQ 88.09 26.625 17.29 278.50 288.46
PFDC Peoples Bancorp NASDAQ 74.31 22.000 17.19 163.81 163.81
PFFC Peoples Financial Corporation NASDAQ 21.70 15.250 23.83 137.26 137.26
PHBK Peoples Heritage Financial Group, Inc. NASDAQ 2,085.61 23.563 17.20 267.15 351.16
PSFC Peoples-Sidney Financial Corporation NASDAQ 34.37 19.250 NA 120.46 120.46
PERM Permanent Bancorp, Inc. NASDAQ 71.66 17.000 27.42 164.41 166.34
PMFI Perpetual Midwest Financial, Inc. NASDAQ 57.41 28.875 25.55 155.74 155.74
PCBC Perry County Financial Corporation NASDAQ 19.87 24.000 21.62 121.89 121.89
PFFB PFF Bancorp, Inc. NASDAQ 308.67 19.000 20.00 127.52 128.81
PDB Piedmont Bancorp, Inc. AMSE 27.51 10.000 17.24 128.70 128.70
PHFC Pittsburgh Home Financial Corp. NASDAQ 35.45 18.000 15.13 141.07 142.74
PTRS Potters Financial Corporation NASDAQ 18.13 18.750 18.56 164.47 164.47
PRBC Prestige Bancorp, Inc. NASDAQ 22.19 24.250 27.87 140.58 140.58
PFNC Progress Financial Corporation NASDAQ 96.88 19.563 23.02 307.11 346.25
PSBK Progressive Bank, Inc. NASDAQ 158.57 41.125 18.86 198.86 217.94
PROV Provident Financial Holdings, Inc. NASDAQ 110.31 23.625 21.67 130.09 130.09
PSFI PS Financial, Inc. NASDAQ 28.08 14.000 29.17 124.44 124.44
PULB Pulaski Bank, A Savings Bank (MHC) NASDAQ 97.92 46.500 48.95 397.10 397.10
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
13.48 2.46 0.23 3,839,000
18.37 2.35 1.86 1,280,278
22.33 1.41 0.71 3,266,483
12.87 1.19 0.24 2,236,668
18.13 1.58 0.85 1,688,927
17.06 2.96 0.12 838,754
19.77 2.84 0.90 685,858
9.85 1.90 0.23 986,169
20.33 2.42 3.47 15,534,134
43.48 0.00 1.15 60,708,735
17.23 2.53 0.48 2,490,498
16.99 1.37 1.33 5,316,503
21.24 3.93 0.62 2,842,924
22.61 0.00 2.07 2,332,649
15.61 1.88 0.43 5,149,780
26.57 2.09 1.35 3,016,790
11.49 0.80 1.42 9,646,589
23.54 1.82 0.12 734,188
10.22 1.95 1.52 3,308,702
24.72 2.00 0.17 3,377,665
26.28 3.93 0.34 1,416,612
17.94 1.87 1.92 55,662,218
32.57 1.45 0.52 1,785,375
17.03 1.29 0.53 4,206,210
14.01 1.04 1.03 1,949,873
23.08 2.08 0.22 827,897
11.53 0.00 3.15 17,067,099
20.71 4.00 0.72 2,750,800
10.48 1.33 0.55 1,969,369
14.32 1.28 1.13 966,936
13.82 0.82 1.64 914,873
16.95 0.61 3.52 4,201,000
17.70 1.95 0.66 3,855,781
14.43 0.00 0.98 4,669,215
34.63 3.43 3.65 2,073,708
53.33 2.37 0.14 2,105,840
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
PLSK Pulaski Savings Bank (MHC) NASDAQ 39.00 18.500 32.46 177.20 177.20
PULS Pulse Bancorp, Inc. NASDAQ 86.59 27.750 15.77 191.78 191.78
PVFC PVF Capital Corp. NASDAQ 74.48 28.000 15.05 246.91 246.91
QCFB QCF Bancorp, Inc. NASDAQ 41.29 30.250 13.81 151.40 151.40
QCBC Quaker City Bancorp, Inc. NASDAQ 112.95 24.250 17.83 150.25 150.25
QCSB Queens County Bancorp, Inc. NASDAQ 678.95 45.500 28.62 347.06 347.06
RARB Raritan Bancorp, Inc. NASDAQ 65.66 27.500 17.63 208.02 210.73
REDF RedFed Bancorp Inc. NASDAQ 149.61 20.250 13.41 168.75 169.31
RELY Reliance Bancorp, Inc. NASDAQ 358.04 37.188 18.69 184.74 267.73
RELI Reliance Bancshares, Inc. NASDAQ 20.45 8.625 41.07 92.64 92.64
RIVR River Valley Bancorp NASDAQ 23.81 20.000 17.09 130.38 132.10
RSLN Roslyn Bancorp, Inc. NASDAQ 1,142.77 27.563 24.61 189.96 190.88
SBFL Savings Bank of the Finger Lakes (MHC) NASDAQ 69.39 19.438 74.76 318.66 318.66
SSB Scotland Bancorp, Inc. AMSE 16.74 8.750 15.35 110.62 110.62
SFSL Security First Corp. NASDAQ 189.15 25.125 22.64 299.82 304.55
SFED SFS Bancorp, Inc. NASDAQ 26.74 22.125 22.81 123.33 123.33
SGVB SGV Bancorp, Inc. NASDAQ 42.80 18.250 28.08 135.29 137.11
SISB SIS Bancorp, Inc. NASDAQ 295.35 42.375 23.94 231.56 231.56
SKAN Skaneateles Bancorp Inc. NASDAQ 26.82 18.625 16.93 149.24 153.17
SOBI Sobieski Bancorp, Inc. NASDAQ 15.06 19.250 29.62 107.90 107.90
SOSA Somerset Savings Bank NASDAQ 86.24 5.156 11.46 223.20 223.20
SCCB South Carolina Community Bancshares, Inc. NASDAQ 12.32 21.250 28.72 130.53 130.53
SSFC South Street Financial Corp. NASDAQ 43.84 9.375 NA 113.91 113.91
SRN Southern Banc Company, Inc. (The) AMSE 19.99 16.250 37.79 108.70 109.50
SCBS Southern Community Bancshares, Inc. NASDAQ 19.05 16.750 20.43 165.84 165.84
SMBC Southern Missouri Bancorp, Inc. NASDAQ 33.78 20.625 29.46 125.38 125.38
SZB SouthFirst Bancshares, Inc. AMSE 19.51 20.000 25.64 119.40 NA
SWBI Southwest Bancshares, Inc. NASDAQ 90.37 32.500 20.83 198.41 198.41
SVRN Sovereign Bancorp, Inc. NASDAQ 2,450.67 18.438 32.35 277.68 324.04
STFR St. Francis Capital Corporation NASDAQ 220.69 42.250 17.24 167.33 187.28
SPBC St. Paul Bancorp, Inc. NASDAQ 832.03 24.250 17.08 194.31 195.09
SFFC StateFed Financial Corporation NASDAQ 22.47 14.375 20.25 141.49 141.49
SFIN Statewide Financial Corp. NASDAQ 102.14 22.625 17.54 155.07 155.28
STSA Sterling Financial Corporation NASDAQ 203.19 26.750 20.42 192.03 206.09
SSM Stone Street Bancorp, Inc. AMSE 37.41 20.063 25.72 121.45 121.45
SFSB SuburbFed Financial Corp. NASDAQ 60.66 47.750 23.76 201.99 202.50
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
20.44 1.62 0.21 2,108,088
15.99 2.88 0.21 3,111,300
17.78 0.00 0.89 2,659,827
26.80 0.00 0.67 1,364,901
13.15 0.00 1.06 4,665,094
41.85 2.20 1.56 14,921,967
15.68 2.18 0.11 2,387,714
14.47 0.00 1.51 7,388,068
16.43 1.94 2.26 9,627,726
46.30 0.00 1.11 2,371,238
17.79 1.00 0.26 1,190,250
31.85 1.23 4.53 42,822,459
27.66 1.23 0.07 3,570,000
27.32 2.29 0.79 1,913,600
28.06 1.27 0.69 7,570,885
15.24 1.45 0.43 1,208,472
10.67 0.00 0.56 2,345,340
16.46 1.51 2.80 6,969,984
10.41 1.50 0.58 1,440,122
16.37 1.66 0.45 764,130
16.18 0.00 1.67 16,726,856
26.60 3.01 0.86 579,664
20.21 4.27 1.23 4,676,360
18.91 2.15 0.44 1,230,313
26.30 1.79 0.01 1,137,350
21.03 2.42 1.43 1,605,306
12.03 3.00 0.14 975,744
23.05 2.46 0.59 2,787,585
13.54 0.43 4.28 132,914,220
13.39 1.33 0.42 5,223,415
18.15 1.65 1.12 34,310,608
25.08 1.39 0.19 1,562,892
15.25 1.94 3.74 4,518,767
10.76 0.00 1.58 7,596,062
34.01 2.29 0.65 1,880,752
13.59 0.67 0.39 1,270,284
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 20-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
CURRENT CURRENT CURRENT CURRENT CURRENT
MARKET STOCK PRICE/ PRICE/ PRICE/ TANG
VALUE PRICE LTM EPS BOOK VALUE BOOK VALUE
TICKER INSTITUTION EXCHANGE ($M) ($) (X) (%) (%)
- ------ ----------- -------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
TPNZ Tappan Zee Financial, Inc. NASDAQ 29.56 20.000 25.97 137.36 137.36
TSH Teche Holding Co. AMSE 68.35 19.875 17.43 121.34 121.34
FTF Texarkana First Financial Corporation AMSE 52.98 30.125 16.55 188.40 188.40
THRD TF Financial Corporation NASDAQ 87.69 27.500 21.65 155.98 185.19
THR Three Rivers Financial Corp. AMSE 16.39 19.875 18.40 123.60 123.99
ROSE TR Financial Corp. NASDAQ 638.77 36.438 17.52 245.04 245.04
TRIC Tri-County Bancorp, Inc. NASDAQ 17.80 15.250 20.61 126.77 126.77
TWIN Twin City Bancorp, Inc. NASDAQ 17.80 14.250 16.01 127.57 127.57
UFRM United Federal Savings Bank NASDAQ 59.96 18.375 33.41 261.75 261.75
UBMT United Financial Corporation NASDAQ 48.61 28.625 26.02 142.06 142.06
USAB USABancshares, Inc. NASDAQ 21.59 14.375 NM 177.69 178.79
VABF Virginia Beach Federal Financial Corporation NASDAQ 88.43 17.750 21.13 198.10 198.10
WRNB Warren Bancorp, Inc. NASDAQ 94.84 12.375 15.47 230.45 230.45
WFSL Washington Federal, Inc. NASDAQ 1,519.74 29.000 14.01 201.11 217.39
WAMU Washington Mutual Inc. NASDAQ 18,548.13 71.875 33.12 333.37 355.99
WSB Washington Savings Bank, FSB AMSE 33.05 7.500 17.05 143.40 143.40
WYNE Wayne Bancorp, Inc. NASDAQ 63.41 31.500 32.47 183.67 183.67
WCFB Webster City Federal Savings Bank (MHC) NASDAQ 42.77 20.250 31.64 189.61 189.61
WBST Webster Financial Corporation NASDAQ 911.43 33.250 17.32 227.90 258.55
WEFC Wells Financial Corp. NASDAQ 41.15 21.000 17.36 136.01 136.01
WCBI Westco Bancorp, Inc. NASDAQ 73.56 29.875 16.69 149.30 149.30
WES Westcorp NYSE 368.50 14.000 21.88 110.67 110.94
WSTR WesterFed Financial Corporation NASDAQ 138.90 24.875 18.84 127.76 159.35
WOFC Western Ohio Financial Corporation NASDAQ 60.57 25.750 214.58 113.04 120.84
WEHO Westwood Homestead Financial Corporation NASDAQ 41.58 14.625 NA 139.29 139.29
WHGB WHG Bancshares Corporation NASDAQ 24.31 17.500 35.00 121.78 121.78
WFI Winton Financial Corp. AMSE 68.24 17.000 19.10 271.13 275.97
FFWD Wood Bancorp, Inc. NASDAQ 47.25 17.750 20.64 216.99 216.99
WSFS WSFS Financial Corporation NASDAQ 267.99 21.500 16.17 294.12 295.74
WVFC WVS Financial Corporation NASDAQ 68.71 38.000 18.27 209.94 209.94
YFCB Yonkers Financial Corporation NASDAQ 56.55 18.750 17.36 124.75 124.75
YFED York Financial Corp. NASDAQ 200.80 22.500 20.27 187.97 187.97
MAXIMUM: 18,548.13 106.750 214.58 478.28 532.41
MINIMUM: 4.23 4.000 8.76 77.18 77.18
AVERAGE: 292.39 24.225 23.71 175.18 183.19
MEDIAN: 60.61 21.125 20.18 156.70 162.66
</TABLE>
<TABLE>
CURRENT 1 MONTH AVG
PRICE/ DIVIDEND WEEKLY VOL/
ASSETS YIELD SHARES OUT SHARES
(%) (%) (%) OUTSTANDING
--- --- --- -----------
<C> <C> <C> <C>
23.37 1.40 1.05 1,478,062
16.78 2.52 0.30 3,438,880
28.67 1.86 0.56 1,758,692
13.71 1.75 1.16 3,188,699
16.71 2.21 0.56 824,540
15.95 1.98 1.72 17,530,381
19.95 2.62 0.25 1,167,498
16.27 2.81 0.35 1,260,127
19.62 1.31 0.20 3,263,314
36.38 3.49 1.25 1,223,312
21.05 0.00 1.54 1,501,657
14.14 1.35 0.59 4,982,164
25.46 2.91 2.37 7,663,824
26.98 3.03 1.92 52,404,672
17.97 1.67 3.94 257,887,741
12.44 1.33 0.19 4,406,206
23.31 0.63 2.33 2,013,124
45.53 3.95 0.13 2,111,960
12.06 1.32 2.79 27,411,298
19.65 2.86 0.82 1,959,360
23.05 2.28 0.84 2,462,253
9.66 1.43 0.77 26,301,428
13.58 2.01 0.59 5,583,968
16.58 3.88 1.52 2,352,236
32.02 2.46 2.43 2,843,375
20.52 1.83 0.10 1,389,002
19.79 1.47 0.33 4,014,304
28.63 1.92 0.36 2,661,762
17.46 0.56 2.58 12,464,479
23.07 3.16 0.45 1,808,050
16.44 1.49 2.93 3,015,763
16.49 2.31 0.62 8,924,267
MAXIMUM: 53.33 5.25 7.78 257,887,741
MINIMUM: 2.19 0.00 0.01 579,664
AVERAGE: 19.78 1.61 1.11 7,982,001
MEDIAN: 17.98 1.53 0.75 2,776,058
</TABLE>
Source: SNL Securities
<PAGE>
EXHIBIT 21
COMPARATIVE GROUP
GENERAL DATA
<TABLE>
<CAPTION>
NUMBER EQUITY/
OF FTE ASSETS DEPOSITS ASSETS HOLDING
TICKER INSTITUTION CITY STATE OFFICES EMPLOYEES ($000) ($000) (%) COMPANY
- ------ ----------- ---- ----- ------- --------- ------ ------ --- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. Munster IN 4 NA $106,201 $74,391 14.10 Y
FFSL First Independence Corporation Independence KS 2 27 $124,494 $84,172 9.28 Y
FLKY First Lancaster Bancshares, Inc. Lancaster KY 1 NA $53,002 $24,417 26.65 Y
HFFB Harrodsburg First Financial Bancorp, Inc. Harrodsburg KY 2 15 $108,820 $78,075 26.46 Y
HWEN Home Financial Bancorp Spencer IN 1 20 $41,466 $26,106 18.00 Y
MRKF Market Financial Corporation Mount Healthy OH 2 9 $57,756 $36,387 35.27 Y
NBSI North Bancshares, Inc. Chicago IL 2 37 $118,477 $73,449 11.45 Y
NSLB NS&L Bancorp, Inc. Neosho MO 2 NA $61,144 $47,767 18.79 Y
PFFC Peoples Financial Corporation Massillon OH 2 NA $82,215 $65,115 19.14 Y
PSFC Peoples-Sidney Financial Corporation Sidney OH 1 20 $105,522 $78,613 25.16 Y
SOBI Sobieski Bancorp, Inc. South Bend IN 3 NA $89,848 $60,227 14.10 Y
THR Three Rivers Financial Corp. Three Rivers MI 5 NA $98,063 $61,225 13.52 Y
WEHO Westwood Homestead Financial Corporation Cincinnati OH 2 22 $129,872 $83,480 22.99 Y
Maximum: 5 37 $129,872 $84,172 35.27 Y
Minimum: 1 9 $41,466 $24,417 9.28 Y
Comp Group Average 2 21 $90,529 $61,033 19.61 Y
Comp Group Median 2 20 $98,063 $65,115 18.79 Y
Illinois Median 8 235 $663,572 $463,190 14.67 Y
Illinois Average 5 127 $346,128 $264,719 12.73 Y
Midwest Region Average 11 169 $627,493 $406,031 13.93 Y
All Publicly Traded Thrifts Average 19 385 $1,573,823 $985,516 13.12 Y
Cerro Gordo Savings 1 4 $6,934 $5,250 13.62 Y
Cerro Gordo Savings Pro Forma $7,651 22.25
</TABLE>
<PAGE>
EXHIBIT 22
COMPARATIVE GROUP
FINANCIAL PERFORMANCE
<TABLE>
<CAPTION>
CORE EARNINGS NET INTEREST
---------------------------- INCOME/ NONINTEREST NONINTEREST
RETURN ON RETURN ON RETURN ON RETURN ON AVG ASSETS INCOME/ EXPENSE/
AVG ASSETS AVG EQUITY AVG ASSETS AVG EQUIT (%) AVG ASSETS AVG ASSETS
TICKER INSTITUTION (%) (%) (%) (%) LTM (%) (%)
- ------ ----------- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 1.02 6.94 0.59 4.03 3.40 0.60 2.88
FFSL First Independence Corporation 0.66 6.56 0.66 6.56 2.83 0.22 1.91
FLKY First Lancaster Bancshares, Inc. 1.04 3.46 1.04 3.46 4.43 0.00 2.58
HFFB Harrodsburg First Financial Bancorp, Inc. 1.36 5.07 1.36 5.06 3.58 0.10 1.54
HWEN Home Financial Bancorp 0.93 5.32 0.74 4.23 4.34 0.35 3.29
MRKF Market Financial Corporation 1.12 3.18 1.12 3.18 3.91 0.01 2.22
NBSI North Bancshares, Inc. 0.46 3.43 0.44 3.23 3.07 0.20 2.58
NSLB NS&L Bancorp, Inc. 0.69 3.51 0.69 3.51 3.20 0.50 2.56
PFFC Peoples Financial Corporation 1.06 4.79 0.67 3.00 3.58 0.03 2.52
PSFC Peoples-Sidney Financial Corporation 1.23 5.26 1.23 5.26 3.89 0.06 2.00
SOBI Sobieski Bancorp, Inc. 0.58 3.93 0.57 3.89 3.22 0.14 2.34
THR Three Rivers Financial Corp. 0.88 6.45 0.88 6.45 3.56 0.62 2.84
WEHO Westwood Homestead Financial Corporation 0.61 2.25 0.99 3.64 3.57 0.15 2.15
Maximum: 1.36 6.94 1.36 6.94 4.43 0.62 3.29
Minimum: 0.46 2.25 0.44 2.15 2.83 0.00 1.54
Comp Group Average 0.90 4.63 0.84 4.32 3.58 0.23 2.42
Comp Group Median 0.93 4.79 0.74 3.81 3.57 0.15 2.34
Illinois Median 0.75 5.69 0.80 6.07 3.31 0.42 2.36
Illinois Average 0.71 4.91 0.75 5.19 3.26 0.32 2.30
Midwest Region Average 0.97 7.89 0.96 7.81 3.30 0.47 2.18
All Publicly Traded Thrifts Average 0.94 8.75 0.93 8.66 3.32 0.52 2.24
Cerro Gordo Savings 0.63 4.60 0.88 6.43 3.52 0.01 2.38
Cerro Gordo Savings Pro Forma 0.68 3.08 0.90 4.06
</TABLE>
<PAGE>
EXHIBIT 23
COMPARATIVE GROUP
CAPITAL RATIOS
<TABLE>
<CAPTION>
TANGIBLE REGULATORY CORE CAP/
EQUITY/ EQUITY/ CORE CAP/ RISK-ADJ
ASSETS TANG ASSETS ASSETS ASSETS
TICKER INSTITUTION (%) (%) (%) (%)
- ------ ----------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 14.10 9.37 9.37 17.00
FFSL First Independence Corporation 9.28 7.93 7.93 17.03
FLKY First Lancaster Bancshares, Inc. 26.65 27.83 26.26
HFFB Harrodsburg First Financial Bancorp, Inc. 26.46 22.90 22.90 42.65
HWEN Home Financial Bancorp 18.00 15.30 15.30 25.13
MRKF Market Financial Corporation 35.27 23.61 23.61 61.34
NBSI North Bancshares, Inc. 11.45 10.04 10.04 26.12
NSLB NS&L Bancorp, Inc. 18.79 15.07 15.07 34.26
PFFC Peoples Financial Corporation 19.14 NA NA
PSFC Peoples-Sidney Financial Corporation 25.16 17.10 17.10 26.79
SOBI Sobieski Bancorp, Inc. 14.10 10.40 10.40 22.09
THR Three Rivers Financial Corp. 13.52 11.63 11.63 21.34
WEHO Westwood Homestead Financial Corporation 22.99 22.42 22.42 40.13
Maximum: 35.27 27.83 26.26 61.34
Minimum: 9.28 7.93 7.93 17.00
Comp Group Average 19.61 16.13 16.00 30.35
Comp Group Median 18.79 15.19 15.19 26.79
Illinois Median 14.67 12.21 12.18 16.23
Illinois Average 12.73 10.04 10.32 22.24
Midwest Region Average 13.93 12.36 12.07 21.49
All Publicly Traded Thrifts Average 13.12 11.29 11.27 20.89
Cerro Gordo Savings 13.85 13.85 14.48 29.36
Cerro Gordo Savings Pro Forma 24.33 24.33 24.88 50.45
</TABLE>
<PAGE>
EXHIBIT 24
COMPARATIVE GROUP
LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
1-4 FAM LOANS/ 5+ FAM LOANS/ C&I LOANS/ CONSUMER LOANS/ CR CARD REC/
TOT LNS TOT LNS TOT LNS TOT LNS TOT LNS
TICKER INSTITUTION (%) (%) (%) (%) (%)
- ------ ----------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 68.15 5.18 6.18 2.58 0.52
FFSL First Independence Corporation 79.55 1.40 0.00 3.20 0.00
FLKY First Lancaster Bancshares, Inc. 72.24 0.59 0.27 0.65 0.00
HFFB Harrodsburg First Financial Bancorp, Inc. 83.95 2.33 0.66 3.42 0.00
HWEN Home Financial Bancorp 69.03 2.72 0.71 5.47 0.00
MRKF Market Financial Corporation 91.62 4.15 0.00 0.42 0.00
NBSI North Bancshares, Inc. 90.48 8.14 1.02 0.36 0.00
NSLB NS&L Bancorp, Inc. 91.86 0.00 0.00 5.54 0.00
PFFC Peoples Financial Corporation 87.19 0.00 0.00 0.65 0.00
PSFC Peoples-Sidney Financial Corporation 84.74 0.40 0.10 2.34 0.08
SOBI Sobieski Bancorp, Inc. 82.89 0.00 6.05 3.50 0.00
THR Three Rivers Financial Corp. 68.41 1.73 1.83 16.34 0.00
WEHO Westwood Homestead Financial Corporation 78.33 11.62 0.00 0.56 0.00
Maximum: 91.86 11.62 6.18 16.34 0.52
Minimum: 68.15 0.00 0.00 0.36 0.00
Comp Group Average 80.65 2.94 1.29 3.46 0.05
Comp Group Median 82.89 1.73 0.27 2.58 0.00
Illinois Median 74.56 7.73 2.20 7.66 0.19
Illinois Average 76.49 7.73 0.91 3.93 0.02
Midwest Region Average 73.11 5.14 2.31 7.95 0.22
All Publicly Traded Thrifts Average 70.59 5.83 2.92 6.80 0.29
Cerro Gordo Savings 93.78 1.54 3.27 1.00 0.00
<CAPTION>
TOTAL
TOTAL TOTAL LOAN LOAN LOAN
REAL EST LNS/ NON-RE LOANS/ CONST&DEV LOANS/ ORIGINATIONS PURCHASES SALES
TOT LNS TOT LNS TOT LNS ($000) ($000) ($000)
TICKER INSTITUTION (%) (%) (%) LTM MST RCTY MST RCTY
- ------ ----------- --- --- --- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 91.24 8.76 3.39 21,867 NA 0
FFSL First Independence Corporation 96.80 3.20 7.97 33,626 NA 0
FLKY First Lancaster Bancshares, Inc. 99.07 0.93 19.77 NA NA 0
HFFB Harrodsburg First Financial Bancorp, Inc. 95.92 4.08 2.80 NA NA 0
HWEN Home Financial Bancorp 93.83 6.17 0.00 8,097 23 0
MRKF Market Financial Corporation 99.58 0.42 0.57 9,723 NA 0
NBSI North Bancshares, Inc. 98.63 1.37 0.00 19,140 NA 0
NSLB NS&L Bancorp, Inc. 94.46 5.54 0.87 NA NA NA
PFFC Peoples Financial Corporation 99.35 0.65 9.01 31,047 NA 0
PSFC Peoples-Sidney Financial Corporation 97.56 2.44 5.76 28,517 NA 0
SOBI Sobieski Bancorp, Inc. 90.45 9.55 3.17 NA NA NA
THR Three Rivers Financial Corp. 81.84 18.16 4.19 NA NA 4,493
WEHO Westwood Homestead Financial Corporation 99.61 0.56 3.18 50,648 16 3,034
Maximum: 99.61 18.16 19.77 50,648 23 4,493
Minimum: 81.84 0.42 0.00 8,097 16 0
Comp Group Average 95.26 4.76 4.67 25,333 19 684
Comp Group Median 96.80 3.20 3.18 25,192 19 0
Illinois Median 90.13 9.88 2.27 189,004 21 51,552
Illinois Average 95.52 4.48 1.95 107,185 19 940
Midwest Region Average 89.61 10.40 4.12 222,998 19 97,406
All Publicly Traded Thrifts Average 90.16 9.89 4.12 546,297 27 168,944
Cerro Gordo Savings 2.00 0.00 0.00 69,748 0 0
</TABLE>
<PAGE>
EXHIBIT 25
COMPARATIVE GROUP
BALANCE SHEET RATIOS
<TABLE>
<CAPTION>
CASH,
LOANS/ LOANS/ DEPOSITS/ BORROWINGS/ DEPOSITS &
DEPOSITS ASSETS ASSETS ASSETS INVEST SECS/
TICKER INSTITUTION (%) (%) (%) (%) ASSETS (%)
- ------ ----------- --- --- --- --- -----------
<S> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 112.34 78.69 70.05 14.12 1.62
FFSL First Independence Corporation 102.08 69.02 67.61 21.93 0.00
FLKY First Lancaster Bancshares, Inc. 194.98 89.83 46.07 25.88 0.82
HFFB Harrodsburg First Financial Bancorp, Inc. 108.04 77.52 71.75 0.00 4.80
HWEN Home Financial Bancorp 130.40 82.10 62.96 18.57 0.36
MRKF Market Financial Corporation 83.31 52.49 63.00 0.00 0.00
NBSI North Bancshares, Inc. 103.45 64.13 61.99 24.56 2.63
NSLB NS&L Bancorp, Inc. 76.17 59.50 78.12 1.64 10.00
PFFC Peoples Financial Corporation 93.91 74.38 79.20 0.00 0.23
PSFC Peoples-Sidney Financial Corporation 119.05 88.69 74.50 0.00 0.41
SOBI Sobieski Bancorp, Inc. 118.96 79.74 67.03 17.75 2.07
THR Three Rivers Financial Corp. 104.38 65.16 62.43 22.17 5.96
WEHO Westwood Homestead Financial Corporation 143.76 92.41 64.28 12.14 1.68
Maximum: 194.98 154.42 79.20 25.88 10.00
Minimum: 76.17 35.09 46.07 0.00 0.00
Comp Group Average 114.68 76.66 66.85 12.21 2.35
Comp Group Median 108.04 72.42 67.03 14.12 1.62
Illinois Median 91.24 64.80 71.02 11.84 2.53
Illinois Average 92.77 65.62 70.73 10.88 2.71
Midwest Region Average 103.38 71.69 69.35 15.29 2.39
All Publicly Traded Thrifts Average 96.15 67.10 69.79 15.16 3.82
Cerro Gordo Savings 105.25 79.69 75.71 8.65 18.60
<CAPTION>
GOODWILL &
OTHER NON INTE BEAR
REO & REI INTANGIBLES/ DEPOSITS/
TICKER INSTITUTION ASSETS (%) ASSETS (%) DEPOSITS (%)
- ------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
AMFC AMB Financial Corp. 0.00 0.00 1.62
FFSL First Independence Corporation 0.00 0.00 0.00
FLKY First Lancaster Bancshares, Inc. 0.00 0.00 0.82
HFFB Harrodsburg First Financial Bancorp, Inc. 0.00 0.00 4.80
HWEN Home Financial Bancorp 0.00 0.00 0.36
MRKF Market Financial Corporation 0.00 0.00 0.00
NBSI North Bancshares, Inc. 0.00 0.00 2.63
NSLB NS&L Bancorp, Inc. 0.00 0.15 10.00
PFFC Peoples Financial Corporation 0.00 0.00 0.23
PSFC Peoples-Sidney Financial Corporation 0.00 0.00 0.41
SOBI Sobieski Bancorp, Inc. 0.00 0.00 2.07
THR Three Rivers Financial Corp. 0.00 0.00 5.96
WEHO Westwood Homestead Financial Corporation 0.00 0.00 1.68
Maximum: 0.00 0.00 10.00
Minimum: 0.00 0.00
Comp Group Average 0.00 0.15 2.35
Comp Group Median 0.00 0.00 1.62
Illinois Median 0.00 0.00 2.53
Illinois Average 0.00 0.00 2.71
Midwest Region Average 0.00 0.00 2.39
All Publicly Traded Thrifts Average 0.00 0.00 3.82
Cerro Gordo Savings 0.00 0.00 0.00
</TABLE>
<PAGE>
EXHIBIT 26
COMPARATIVE GROUP
ANNUALIZED GROWTH RATES
<TABLE>
<CAPTION>
ASSET LOAN DEPOSIT
GROWTH GROWTH GROWTH
RATE RATE RATE
TICKER INSTITUTION (%) (%) (%)
- ------ ----------- --- --- ---
<S> <C> <C> <C> <C>
AMFC AMB Financial Corp. 13.4 20.5 10.1
FFSL First Independence Corporation 14.0 21.1 13.5
FLKY First Lancaster Bancshares, Inc. 31.0 36.3 11.2
HFFB Harrodsburg First Financial Bancorp, Inc. 0.6 5.3 (0.3)
HWEN Home Financial Bancorp 5.1 3.8 8.9
MRKF Market Financial Corporation 2.5 19.1 0.8
NBSI North Bancshares, Inc. (1.3) 2.3 1.8
NSLB NS&L Bancorp, Inc. 5.3 13.8 12.0
PFFC Peoples Financial Corporation (8.3) 26.7 0.8
PSFC Peoples-Sidney Financial Corporation 12.6 8.1 (3.4)
SOBI Sobieski Bancorp, Inc. 13.6 23.8 2.1
THR Three Rivers Financial Corp. 7.6 5.6 2.1
WEHO Westwood Homestead Financial Corporation (0.1) 26.7 5.6
Maximum: 31.0 36.3 13.5
Minimum: (8.3) 2.3 (3.4)
Average: 7.4 16.4 5.0
Median: 5.3 19.1 2.1
Illinois Median 6.4 6.9 3.1
Illinois Average 3.6 5.8 2.0
Midwest Region Average 9.8 11.9 8.0
All Publicly Traded Thrifts Average 13.6 14.4 9.5
Cerro Gordo Savings 10.3 18.0 (1.1)
</TABLE>
<PAGE>
EXHIBIT 27
COMPARATIVE GROUP
ASSET AND RISK RATIOS
<TABLE>
<CAPTION>
NPAs + LOANS NET LOAN ONE YEAR
NPAs/ 90+ PST DUE/ RESERVES/ CHARGEOFFS/ CUM GAP/
ASSETS ASSETS NPAs + 90 AVG LOANS ASSETS
TICKER INSTITUTION (%) (%) (%) (%) (%)
- ------ ----------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 0.33 0.33 122.66 0.00 NA
FFSL First Independence Corporation 0.51 0.51 102.98 0.06 -10.12
FLKY First Lancaster Bancshares, Inc. 1.70 1.70 18.91 0.10 NA
HFFB Harrodsburg First Financial Bancorp, Inc. 0.00 0.44 79.96 0.00 NA
HWEN Home Financial Bancorp 1.32 1.32 53.55 0.08 0.84
MRKF Market Financial Corporation 0.00 0.33 27.08 0.00 NA
NBSI North Bancshares, Inc. 0.00 0.00 NM 0.00 1.46
NSLB NS&L Bancorp, Inc. 0.01 0.11 73.53 0.00 NA
PFFC Peoples Financial Corporation 0.01 0.01 NM 0.00 NA
PSFC Peoples-Sidney Financial Corporation 0.72 1.10 35.55 (0.01) NA
SOBI Sobieski Bancorp, Inc. 0.29 0.29 77.82 0.00 NA
THR Three Rivers Financial Corp. 0.98 1.00 48.12 0.28 NA
WEHO Westwood Homestead Financial Corporation 0.07 0.12 178.06 0.00 -27.54
Maximum: 1.70 1.70 178.06 0.28 1.46
Minimum: 0.00 0.00 18.91 (0.01) -27.54
Average: 0.46 0.56 74.38 0.04 -8.84
Median: 0.29 0.33 77.82 0.00 -4.64
Illinois Median 0.48 0.54 116.75 0.15 -4.51
Illinois Average 0.32 0.43 84.08 0.02 1.07
Midwest Region Average 0.49 0.58 146.09 0.11 -4.18
All Publicly Traded Thrifts Average 0.59 0.66 140.83 0.12 -5.69
Cerro Gordo Savings 0.16 0.16 292.00 0.00 (9.00)
</TABLE>
<PAGE>
EXHIBIT 28
COMPARATIVE GROUP
YIELD-COST SPREAD A NALYSIS
<TABLE>
<CAPTION>
INTEREST NET INTEREST EARN ASSETS/
INTEREST EXPENSE/ INCOME/ INT BEARING
INCOME/ AVG ASSETS AVG ASSETS LIABILITIES
AVG ASSETS (%) (%) (%)
TICKER INSTITUTION (%) LTM LTM LTM
- ------ ----------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 7.43 4.02 3.4 116.85
FFSL First Independence Corporation 7.44 4.61 2.83 106.20
FLKY First Lancaster Bancshares, Inc. 8.27 3.84 4.43 137.96
HFFB Harrodsburg First Financial Bancorp, Inc. 7.15 3.57 3.58 136.78
HWEN Home Financial Bancorp 8.70 4.35 4.34 117.28
MRKF Market Financial Corporation 6.87 2.96 3.91 157.27
NBSI North Bancshares, Inc. 7.24 4.16 3.07 115.01
NSLB NS&L Bancorp, Inc. 6.71 3.52 3.2 122.50
PFFC Peoples Financial Corporation 7.29 3.71 3.58 123.61
PSFC Peoples-Sidney Financial Corporation 7.74 3.85 3.89 132.10
SOBI Sobieski Bancorp, Inc. 7.30 4.08 3.22 114.49
THR Three Rivers Financial Corp. 7.53 3.97 3.56 113.63
WEHO Westwood Homestead Financial Corporation 7.83 4.27 3.57 128.17
Maximum: 8.70 4.61 4.43 157.27
Minimum: 6.71 2.96 2.83 106.20
Average: 7.50 3.92 3.58 124.76
Median: 7.43 3.97 3.57 122.50
Illinois Median 7.29 3.97 3.31 116.49
Illinois Average 7.21 4.14 3.26 113.59
Midwest Region Average 7.52 4.22 3.30 115.84
All Publicly Traded Thrifts Average 7.46 4.14 3.32 115.43
Cerro Gordo Savings 8.21 4.69 3.52 117.30
<CAPTION>
YIELD ON COST OF INTEREST NET
INT EARNING INT BEARING YIELD INTEREST
ASSETS LIABILITIES SPREAD MARGIN
(%) (%) (%) (%)
TICKER INSTITUTION LTM LTM LTM LTM
- ------ ----------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 7.57 4.80 2.77 3.47
FFSL First Independence Corporation 7.67 5.21 2.46 2.92
FLKY First Lancaster Bancshares, Inc. 8.40 5.61 2.79 4.50
HFFB Harrodsburg First Financial Bancorp, Inc. 7.27 5.04 2.23 3.64
HWEN Home Financial Bancorp 9.00 5.30 3.70 4.49
MRKF Market Financial Corporation 6.95 4.69 2.26 3.95
NBSI North Bancshares, Inc. 7.36 4.95 2.41 3.13
NSLB NS&L Bancorp, Inc. 6.91 4.46 2.45 3.29
PFFC Peoples Financial Corporation 7.46 4.83 2.63 3.67
PSFC Peoples-Sidney Financial Corporation 7.86 5.06 2.80 3.95
SOBI Sobieski Bancorp, Inc. 7.58 4.83 2.75 3.34
THR Three Rivers Financial Corp. 7.79 4.68 3.11 3.68
WEHO Westwood Homestead Financial Corporation 7.94 5.90 2.04 3.62
Maximum: 9.00 5.90 3.70 4.50
Minimum: 6.91 4.46 2.04 2.92
Average: 7.67 5.03 2.65 3.67
Median: 7.58 4.95 2.63 3.64
0.00 0.00 0.00 0.00
Illinois Median 7.62 4.80 2.82 3.46
Illinois Average 7.52 4.91 2.76 3.43
Midwest Region Average 7.79 5.02 2.77 3.42
All Publicly Traded Thrifts Average 7.77 4.89 2.88 3.46
Cerro Gordo Savings 8.11 5.44 2.67 3.47
</TABLE>
<PAGE>
EXHIBIT 30
COMPARATIVE GROUP
CAPITAL MARKET ISSUES
<TABLE>
<CAPTION>
PRICE/ PRICE/ PRICE/ TANG PRICE/ PRICE/CORE
EARNINGS BOOK VALUE BOOK VALUE ASSETS EARNINGS
TICKER INSTITUTION (X) (%) (%) (%) (X)
- ------ ----------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. 16.89 120.66 120.66 17.02 19.53
FFSL First Independence Corporation 18.42 115.80 115.80 10.75 17.50
FLKY First Lancaster Bancshares, Inc. 29.25 103.89 103.89 27.68 27.68
HFFB Harrodsburg First Financial Bancorp, Inc. 21.44 105.99 105.99 30.31 21.17
HWEN Home Financial Bancorp 19.72 110.52 110.52 19.88 13.87
MRKF Market Financial Corporation 27.88 95.08 95.08 33.53 30.21
NBSI North Bancshares, Inc. 42.50 160.38 160.38 18.37 35.42
NSLB NS&L Bancorp, Inc. 27.98 105.22 105.98 19.77 27.54
PFFC Peoples Financial Corporation 23.83 137.26 137.26 26.28 13.15
PSFC Peoples-Sidney Financial Corporation NA 120.46 120.46 32.57 24.06
SOBI Sobieski Bancorp, Inc. 29.62 107.90 107.90 16.37 28.31
THR Three Rivers Financial Corp. 18.40 123.60 123.99 16.71 20.70
WEHO Westwood Homestead Financial Corporation NA 139.29 139.29 32.02 30.47
Maximum: 42.50 160.38 160.38 33.53 35.42
Minimum: 16.89 95.08 95.08 10.75 13.15
Average: 25.08 118.93 119.02 23.17 23.82
Median: 23.83 115.80 115.80 19.88 24.06
Illinois Median 31.17 145.82 149.89 20.58 29.16
Illinois Average 27.87 127.88 131.23 19.76 22.47
Midwest Region Average 25.50 166.97 171.31 21.38 23.09
All Publicly Traded Thrifts Average 23.77 175.24 182.64 21.03 23.30
All Publicly Traded Thrifts Median 20.85 165.13 166.15 19.14 20.65
</TABLE>
<PAGE>
EXHIBIT 31 - A
RECENT CONVERSIONS
PRO FORMA PRICING INFORMATION
<TABLE>
<CAPTION>
PRO FORMA PRICING RATIOS
-----------------------------------------------------------
PRICE/ PRICE/
GROSS PRO-FORMA PRO-FORMA
PROCEEDS BOOK VALUE TANG. BOOK
TICKER INSTITUTION IPO DATE ($000) (%) (%)
- ------ ----------- -------- ------ --- ---
<S> <C> <C> <C> <C> <C>
CAVB Columbia Financial of Kentucky, Inc. 15-Apr-98 $26,715 74.5 74.5
CFKY EFC Bancorp, Inc. 07-Apr-98 $69,365 76.6 76.6
EFC Heritage Bancorp, Inc. 06-Apr-98 $69,431 78.0 78.0
HBSC Northeast Pennsylvania Financial Corporation 01-Apr-98 $59,515 75.4 75.4
NEP Bay State Bancorp, Inc. 30-Mar-98 $46,949 78.7 78.7
BYS Home Loan Financial Corp. 26-Mar-98 $22,483 76.0 76.0
HLFC Cavalry Bancorp, Inc. 17-Mar-98 $75,383 79.8 79.8
CAVB Independence Community Bank Corp. 17-Mar-98 $704,109 77.2 82.7
ICBC Richmond County Financial Corp. 18-Feb-98 $244,663 79.6 79.6
RCBK HopFed Bancorp, Inc. 09-Feb-98 $40,336 75.4 75.4
HFBC Timberland Bancorp, Inc. 13-Jan-98 $66,125 81.5 81.5
TSBK Mystic Financial, Inc. 09-Jan-98 $27,111 77.8 77.8
MYST United Tennessee Bankshares, Inc. 05-Jan-98 $14,548 78.4 78.4
UTBI Great Pee Dee Bancorp 31-Dec-97 $21,821 73.9 73.9
PEDE Union Community Bancorp 29-Dec-97 $30,418 74.1 74.1
UCBC Warwick Community Bancorp, Inc. 23-Dec-97 $64,141 78.1 78.1
WSBI Staten Island Bancorp, Inc. 22-Dec-97 $515,775 80.6 83.0
SIB High Country Bancorp, Inc. 10-Dec-97 $13,225 77.8 77.8
HCBC First SecurityFed Financial, Inc. 31-Oct-97 $64,080 75.8 75.8
FSFF Oregon Trail Financial Corp. 06-Oct-97 $46,949 76.6 76.6
OTFC SHS Bancorp, Inc. 01-Oct-97 $8,200 70.7 70.7
SHSB GSB Financial Corporation 09-Jul-97 $22,483 73.4 73.4
GOSB FirstSpartan Financial Corp. 09-Jul-97 $88,608 73.0 73.0
FSPT FirstBank Corporation 02-Jul-97 $19,838 71.9 71.9
FBNW
Maximum: $704,109 81.5 83.0
Minimum: $8,200 70.7 70.7
Average: $98,428 76.5 76.8
Median: $46,949 76.6 76.6
<CAPTION>
PRO FORMA PRICING RATIOS
-------------------------
PRICE/ PRICE/
PRO-FORMA ADJUSTED
EARNINGS ASSETS
TICKER INSTITUTION (X) (%)
- ------ ----------- --- ---
<S> <C> <C> <C>
CAVB Columbia Financial of Kentucky, Inc. 19.6 20.4
CFKY EFC Bancorp, Inc. 13.5 18.0
EFC Heritage Bancorp, Inc. 16.1 21.9
HBSC Northeast Pennsylvania Financial Corporation 18.7 13.9
NEP Bay State Bancorp, Inc. 20.9 16.8
BYS Home Loan Financial Corp. 17.0 27.1
HLFC Cavalry Bancorp, Inc. 14.3 21.5
CAVB Independence Community Bank Corp. 17.9 15.9
ICBC Richmond County Financial Corp. 14.0 19.8
RCBK HopFed Bancorp, Inc. 12.4 16.6
HFBC Timberland Bancorp, Inc. 10.5 24.3
TSBK Mystic Financial, Inc. 17.5 15.3
MYST United Tennessee Bankshares, Inc. 16.1 18.5
UTBI Great Pee Dee Bancorp 15.9 26.5
PEDE Union Community Bancorp 13.5 26.5
UCBC Warwick Community Bancorp, Inc. 13.5 18.3
WSBI Staten Island Bancorp, Inc. 14.1 19.4
SIB High Country Bancorp, Inc. 30.5 14.8
HCBC First SecurityFed Financial, Inc. 25.9 19.9
FSFF Oregon Trail Financial Corp. 18.5 18.7
OTFC SHS Bancorp, Inc. 12.5 9.1
SHSB GSB Financial Corporation 19.0 18.9
GOSB FirstSpartan Financial Corp. 19.5 19.1
FSPT FirstBank Corporation 18.0 13.0
FBNW
Maximum: 30.5 27.1
Minimum: 10.5 9.1
Average: 17.1 18.9
Median: 16.6 18.8
</TABLE>
<PAGE>
EXHIBIT 31 - B
RECENT CONVERSIONS
PRICE APPRECIATION INFORMATION
<TABLE>
<CAPTION>
CHANGE IN PRICE FROM IPO TO:
------------------------------------------------------
OFFERING ONE ONE ONE
PRICE DAY AFTER WEEK AFTER MONTH AFTER
TICKER INSTITUTION ($) CONVERSION CONVERSION CONVERSION
- ------ ----------- --- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CFKY Columbia Financial of Kentucky, Inc. $10.00 71.3% 57.5% 62.5%
EFC EFC Bancorp, Inc. $10.00 47.5% 48.8% 43.8%
HBSC Heritage Bancorp, Inc. $15.00 0.0% 49.2% 46.7%
NEP Northeast Pennsylvania Financial Corporation $10.00 55.0% 53.1% 55.0%
BYS Bay State Bancorp, Inc. $20.00 46.9% 49.4% 50.0%
HLFC Home Loan Financial Corp. $10.00 52.5% 58.8% 67.5%
CAVB Cavalry Bancorp, Inc. $10.00 105.6% 133.8% 141.3%
ICBC Independence Community Bank Corp. $10.00 72.5% 76.9% 78.8%
RCBK Richmond County Financial Corp. $10.00 63.1% 59.4% 73.8%
HFBC HopFed Bancorp, Inc. $10.00 68.1% 60.0% 67.5%
TSBK Timberland Bancorp, Inc. $10.00 45.0% 61.9% 58.8%
MYST Mystic Financial, Inc. $10.00 44.4% 50.6% 50.6%
UTBI United Tennessee Bankshares, Inc. $10.00 47.5% 40.0% 38.8%
PEDE Great Pee Dee Bancorp $10.00 61.3% 56.3% 48.8%
UCBC Union Community Bancorp $10.00 46.9% 43.1% 39.4%
WSBI Warwick Community Bancorp, Inc. $10.00 56.3% 66.9% 56.3%
SIB Staten Island Bancorp, Inc. $12.00 58.9% 59.9% 58.3%
HCBC High Country Bancorp, Inc. $10.00 44.4% 51.3% 45.0%
FSFF First SecurityFed Financial, Inc. $10.00 50.6% 51.9% 60.6%
OTFC Oregon Trail Financial Corp. $10.00 67.5% 64.4% 60.0%
SHSB SHS Bancorp, Inc. $10.00 47.5% 52.1% 60.0%
GOSB GSB Financial Corporation $10.00 46.3% 47.5% 43.8%
FSPT FirstSpartan Financial Corp. $20.00 83.4% 85.0% 78.1%
FBNW FirstBank Corporation $10.00 58.1% 57.5% 77.5%
Maximum: 105.6% 133.8% 141.3%
Minimum: 0.0% 40.0% 38.8%
Average: 55.9% 59.8% 60.9%
Median: 55.0% 57.5% 58.8%
<CAPTION>
CHANGE IN PRICE FROM IPO TO:
---------------------------------
THREE CURRENT
MONTHS AFTER STOCK
TICKER INSTITUTION CONVERSION PRICE
- ------ ----------- ---------- -----
<S> <C> <C> <C>
CFKY Columbia Financial of Kentucky, Inc. 57.5%
EFC EFC Bancorp, Inc. 40.0%
HBSC Heritage Bancorp, Inc. 43.3%
NEP Northeast Pennsylvania Financial Corporation 51.3%
BYS Bay State Bancorp, Inc. 44.1%
HLFC Home Loan Financial Corp. 56.3%
CAVB Cavalry Bancorp, Inc. 138.8%
ICBC Independence Community Bank Corp. 78.1%
RCBK Richmond County Financial Corp. 86.9% 86.9%
HFBC HopFed Bancorp, Inc. 118.8% 106.9%
TSBK Timberland Bancorp, Inc. 80.0% 73.8%
MYST Mystic Financial, Inc. 76.3% 60.0%
UTBI United Tennessee Bankshares, Inc. 50.0% 51.3%
PEDE Great Pee Dee Bancorp 60.0% 55.0%
UCBC Union Community Bancorp 58.1% 50.0%
WSBI Warwick Community Bancorp, Inc. 76.3% 70.0%
SIB Staten Island Bancorp, Inc. 74.5% 88.5%
HCBC High Country Bancorp, Inc. 50.0% 50.0%
FSFF First SecurityFed Financial, Inc. 46.9% 66.3%
OTFC Oregon Trail Financial Corp. 70.0% 67.5%
SHSB SHS Bancorp, Inc. 67.5% 77.5%
GOSB GSB Financial Corporation 57.5% 75.0%
FSPT FirstSpartan Financial Corp. 93.8% 128.8%
FBNW FirstBank Corporation 73.8% 117.5%
Maximum: 118.8% 138.8%
Minimum: 46.9% 40.0%
Average: 71.3% 72.3%
Median: 73.8% 67.5%
</TABLE>
<PAGE>
EXHIBIT 32
PRO FORMA ANALYSIS SHEET
Name of Institution: Cerro Gordo Savings/CGSB Financial Corp
Date of Letter to Association: May 27, 1998
Date of Market Prices: May 19, 1998
<TABLE>
Comparable All Publicly
Companies Traded Thrifts
--------------------- ---------------------
Symbols Subject Mean Median Mean Median
------- ------- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Price\Earnings Mutliples P\E 20.2 25.1 23.8 24.4 20.9
Price\Core Earnings 15.5 23.8 24.1 23.3 20.7
Price\Tangible Book Value Ratio P\BV 64.7% 119.0% 115.8% 185.4% 166.2%
Price\Assets Ratio P\A 14.4% 23.2% 19.9% 21.1% 19.1%
Valuation Parameters
- -----------------------------------------------------------------
Pre-Conversion Earnings Y $41,872
Pre-Conversion Book Value B $986,014
Pre-Conversion Assets A $6,934,981
Reinvestment Rate R 5.03%
Estimated Conversion Expenses X $254,850
Proceeds Not Reinvested Z
Estimated ESOP Borrowings E 8.00%
Cost of ESOP Borrowings S 0.00%
Amortization of ESOP Borrowings T 10
MRP M 4.00%
MRP Vesting N 5
Tax Rate t 31.00%
</TABLE>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
P\E (Y- RX)
V = -------------------------------------- = $1,100,000
1 - P/E (R - (PE/T*(1-t)) - M/N*(1-t))
P\B (B - X)
V = -------------------------------------- = $1,100,000
1 - (P/B (1- M - E)
P\A (A - E)
V = -------------------------------------- = $1,100,000
1 - (P/A)
</TABLE>
<TABLE>
Total Price
Conclusion Shares Per Share Value
- ----------------- ---------- X ---------- = ----------
<S> <C> <S> <C>
Appraised Value 110,000 $10.00 $1,100,000
Range
- -----------------
Minium 93,500 $10.00 $935,000
Maximum 126,500 $10.00 $1,265,000
Supermax 145,475 $10.00 $1,454,750
</TABLE>
<PAGE>
EXHIBIT 33
PRO FORMA EFFECT ON CONVERSION PROCEEDS
CGBL FINANCIAL GROUP, INC.
<TABLE>
Minimum Midpoint Maximum Super Max
------- -------- ------- ---------
<S> <C> <C> <C> <C>
Conversion Proceeds
- -------------------
Pro Forma Market Value $935,000 $1,100,000 $1,265,000 $1,454,750
Less: ESOP $74,800 $88,000 $101,200 $116,380
MRP $37,400 $44,000 $50,600 $58,190
Estimated Expenses $254,850 $254,850 $254,850 $254,850
---------- ---------- ---------- ----------
Net Proceeds $567,950 $713,150 $858,350 $1,025,330
Pro Forma Adjusted Earnings
- ---------------------------
(Twelve Months Ended 03/31/98)
Reported Earnings $41,872 $41,872 $41,872 $41,872
Earnings on Proceeds $19,712 $24,751 $29,791 $35,586
Pro Forma MRP Adjustments $5,161 $6,072 $6,983 $8,030
Pro Forma ESOP Adjustments $5,161 $6,072 $6,983 $8,030
---------- ---------- ---------- ----------
Pro Forma Earnings $51,261 $54,479 $57,697 $61,398
Pro Forma Adjusted Core Earnings
- --------------------------------
(Twelve Months Ended 03/31/98)
Reported Earnings Before Taxes $41,872 $41,872 $41,872 $41,872
Adjustments to Reported Earnings $24,197 $24,197 $24,197 $24,197
Tax Effect $7,501 $7,501 $7,501 $7,501
Earnings on Proceeds $19,712 $24,751 $29,791 $35,586
Pro Forma MRP Adjustments $5,161 $6,072 $6,983 $8,030
Pro Forma ESOP Adjustments $5,161 $6,072 $6,983 $8,030
---------- ---------- ---------- ----------
Pro Forma Earnings $67,957 $71,175 $74,393 $78,094
Pro Forma Net Worth
- -------------------
Net Worth $986,014 $986,014 $986,014 $986,014
Conversion Proceeds $567,950 $713,150 $858,350 $1,025,330
---------- ---------- ---------- ----------
Pro Forma Net Worth $1,553,964 $1,699,164 $1,844,364 $2,011,344
Pro Forma Total Assets
- ----------------------
Total Assets $6,934,981 $6,934,981 $6,934,981 $6,934,981
Conversion Proceeds $567,950 $713,150 $858,350 $1,025,330
---------- ---------- ---------- ----------
Pro Forma Assets $7,502,931 $7,648,131 $7,793,331 $7,960,311
</TABLE>
<PAGE>
EXHIBIT 34
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
<TABLE>
Minimum Cerro Gordo Savings Average Median
- ------- ------------------- ------- ------
<S> <C> <C> <C>
Price/Earnings 18.2 27.3% 23.5%
Price/Core Earnings 13.8 42.2% 42.8%
Price/Book Value 60.2% 48.1% 46.3%
Price Tangible Book Value 60.2% 49.4% 48.0%
Price/Assets 12.5% 46.2% 37.3%
Midpoint Cerro Gordo Savings Average Median
- ------- ------------------- ------- ------
Price/Earnings 20.2 19.5% 15.3%
Price/Core Earnings 15.5 35.1% 35.8%
Price/Book Value 64.7% 44.2% 42.2%
Price Tangible Book Value 64.7% 44.2% 42.2%
Price/Assets 14.4% 37.9% 27.7%
Maximum Cerro Gordo Savings Average Median
- ------- ------------------- ------- ------
Price/Earnings 21.9 12.6% 8.0%
Price/Core Earnings 17.0 28.6% 29.3%
Price/Book Value 68.6% 40.8% 38.8%
Price Tangible Book Value 68.6% 40.8% 38.8%
Price/Assets 16.2% 29.9% 18.4%
Super maximum Cerro Gordo Savings Average Median
- ------------- ------------------- ------- ------
Price/Earnings 23.7 5.5% 0.6%
Price/Core Earnings 18.6 21.8% 22.6%
Price/Book Value 72.3% 37.6% 35.4%
Price Tangible Book Value 72.3% 37.6% 35.4%
Price/Assets 18.3% 21.1% 8.1%
Comparative Group Ratios
--------------------------------------
Price/Earnings 25.08 23.83
Price/Core Earnings 23.82 24.06
Price/Book Value 115.9% 112.0%
Price Tangible Book Value 119.0% 115.8%
Price/Assets 23.2% 19.9%
</TABLE>
<PAGE>
JOHN PALFFY,
PRESIDENT, JMP FINANCIAL, INC.
John Palffy, founder and president of JMP Financial, Inc. since 1991 has
ten years of investment banking experience. Prior to JMP Financial, Inc. John
Palffy was Vice President, Corporate Finance at First of Michigan Corporation
(Detroit, 1989-1991) and Vice President, Corporate Finance at Johnston, Lemon
& Co., Incorporated (Wash D.C. 1986-1989).
Mr. Palffy has extensive experience in analyzing and advising financial
institutions in the academic and investment banking arena, having devoted
much of his professional career to the industry since 1986. As an
accomplished writer and communicator with considerable experience in the
industry and established analytical excellence Mr. Palffy's expertise is
determining financial value and strategy for institutions and demonstrating
that value to its shareholders.
Prior to forming JMP Financial, Inc. Mr. Palffy assisted a number of
firms in his role as investment banking representative for First of Michigan
Corporation and Johnston-Lemon & Co., Incorporated. Among those firms were:
- Interfirst Bancorp (Ann Arbor, Mi.)
- HomeCorp Federal Savings (Rockford, Illinois)
- Capitol Bancorp (Lansing, Mi.)
- Franklin Bank (Southfield, Mi.)
- Haverfield Corporation (Lakewood, Oh.)
- Ludington Federal Savings Bank (Ludington, Mi.)
- Washtenaw Mortgage Corporation (Ann Arbor, Mi.)
- Heritage Bancorp (Taylor, Mi.)
- Valley Federal Savings (Terre Haute, In.)
- Citizens Federal Savings Bank (Silver Spring, Md.)
- Lenawce Federal Savings (Adrian, Mi.)
- HomeCorp, Inc. (Rockford, Ill.)
- Prince George's Savings & Loan Association (Upper Marlboro, Md.)
- Alleco, Inc. (Silver Spring, Md.)
- TCOM (Washington D.C.)
Prior to 1986 Mr. Palffy served as a senior political appointee in the
Reagan Agriculture Department, as Chief Economist to U.S. Senator Dan Quayle,
and as Walker Fellow in Economic Policy for The Heritage Foundation. Mr.
Palffy is also an Adjunct Professor of Money and Banking at Walsh College
(Troy, Mi.) and a licensed securities representative with the securities firm
of Bentley-Lawrence Securities, Inc.
Mr. Palffy has completed most coursework towards a Ph.D. in Economics
from George Mason University (Fairfax, Va.), has a MBA from the University of
Michigan with a concentration in Finance, and a AB with Honors from Kenyon
College (Gambier, Ohio).
<PAGE>
JMP FINANCIAL INC.
JMP Financial, Inc., is an investment banking firm founded in 1991
primarily to serve small and mid sized financial institutions in the Great
Lakes area. JMP Financial specializes in advisory services, merger and
acquisition services, and securities placement for financial institutions.
JMP Financial has diverse experience advising savings and loans, commercial
banks, mortgage banking companies, and other business interests.
JMP Financial, Inc. has been approved by the Office of Thrift Supervision
to perform market value appraisals and business plans for savings and loans
converting from mutual-to-stock form. JMP has performed appraisals for and/or
served as underwriter or placement agent for a number of thrifts in the
Midwest and Mid-Atlantic, including Home Savings Bank (Thomasville, N.C.),
First Savings Bank (Three Rivers, Mi.), Macomb Savings Bank (Eastpointe,
Mi.), and Interfirst Bancorp (Ann Arbor, Mi.). In addition, John Palffy,
President of JMP Financial, Inc. has served as principal in a number of other
investment banking transactions. See "John Palffy, President, JMP Financial,
Inc.".
JMP has also been engaged by a number of mortgage banking and commercial
banking institutions to perform merger and acquisition, advisory, and capital
placement services, including Midwest Guaranty Bancorp (Troy, Mi.), Dearborn
Bancorp (Dearborn, Mi.), DMR Financial Services (Detroit, Mi.), Towne
Mortgage Co. (Sterling Heights, Mi.), Haverfield Corporation (Lakewood, Oh.)
and Middendorf Financial Corporation (Washington D.C.).
Among the more recent transactions completed by JMP are:
- the conversion of Home Savings Bank (Thomasville, NC) from
mutual-to-stock form in which JMP served as appraiser and developed
a business plan for the institution pursuant to its $13 million public
offering;
- the conversion of First Savings Bank (Three Rivers, MI) from
mutual-to-stock form in which JMP served as OTS appraiser and developed a
business plan for the institution pursuant to its $10 million public
offering;
- private placement of $5 million of common stock in the initial public
offering of Dearborn Bancorp, a holding company for the de novo Community
Bank of Dearborn (MI), and
- the acquisition of InterFirst Bancorp (Ann Arbor, MI) by Standard Federal
(Troy) for a purchase price of $32 million.
