<PAGE>
As filed with the Securities and Exchange Commission on May 4, 1999
Registration No. 333-74621
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDIAN VILLAGE BANCORP, INC.
(Name of Small Business Issuer in its Certificate of Incorporation)
<TABLE>
<CAPTION>
<S> <C> <C>
PENNSYLVANIA 6035 34-1891199
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
Incorporation or Organization) Classification Code Number)
100 South Walnut Street 100 South Walnut Street
Gnadenhutten, Ohio Gnadenhutten, Ohio
(740) 254-4313 (740) 254-4313
(Address and Telephone Number of Principal Executive Offices) (Address of Principal Place of Business or Intended Principal Place
of Business)
</TABLE>
Marty R. Lindon
President, Chief Executive Officer and Director
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio
(740) 254-4313
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Paul M. Aguggia, Esquire
Victor L. Cangelosi, Esquire
Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
(202) 362-0840
Approximate date of proposed sale to public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. /______/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. /___/
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. /___/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /___/
<TABLE>
CALCULATION OF REGISTRATION FEE
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Title of each Class of Amount to Proposed Maximum Proposed Maximum Amount of
Securities to be Registered be Registered Offering Price Aggregate Offering Registration Fee
Per Unit Price (1)
<S> <C> <C> <C> <C>
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Common Stock
$.01 par Value 793,500 Shares $10.00 $7,935,000 (2)
========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The registration fee of $2,206 was previously paid upon the initial filing
of the Form SB-2.
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 Section 8(a), may
determine.
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PROSPECTUS [LOGO]
INDIAN VILLAGE BANCORP, INC.
(Proposed Holding Company for Indian Village Community Bank)
586,500 Shares of Common Stock
Indian Village Community Bank is converting from the mutual form to the stock
form of organization and will become a wholly owned subsidiary of Indian Village
Bancorp, Inc.
Price Per Share: $10.00
Expected Trading Market: OTC Bulletin Board
Minimum Maximum
Number of shares: 433,500 586,500
Gross offering proceeds: $4,335,000 $5,865,000
Estimated underwriting commissions
and other offering expenses: $380,000 $380,000
Estimated net proceeds: $3,955,000 $5,485,000
Estimated net proceeds per share: $9.12 $9.35
With the approval of the Office of Thrift Supervision, Indian Village Bancorp
may increase the maximum number of shares by up to 15%, to 674,475 shares.
Trident Securities will use its best efforts to assist Indian Village Bancorp in
selling at least the minimum number of shares but does not guarantee that this
number will be sold. Trident Securities is not obligated to purchase any shares
of common stock in the offering. Trident Securities intends to make a market in
the common stock.
The offering to depositors and borrowers of Indian Village will end at 12:00
Noon, Eastern Time, on June ___, 1999. An offering to the general public may
also be held and may end as early as 12:00 Noon, Eastern Time, on June __, 1999.
If the conversion is not completed by _______, 1999, and the Office of Thrift
Supervision gives Indian Village more time to complete the conversion, Indian
Village Bancorp will allow all subscribers to increase, decrease or cancel their
orders. All extensions may not go beyond ___________, 2001. Indian Village
Bancorp will hold all funds of subscribers in an interest-bearing savings
account at Indian Village until the conversion is completed or terminated. Funds
will be returned promptly with interest if the conversion is terminated.
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These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
For a discussion of certain risks that you should consider, see "Risk Factors"
beginning on page ___.
Neither the Securities and Exchange Commission, the Office of Thrift
Supervision, nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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For assistance, please contact the stock information center at (740) 254-9164.
TRIDENT SECURITIES
The date of this prospectus is May ___, 1999
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TABLE OF CONTENTS
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Page
----
<S> <C>
Summary...................................................................................................
Risk Factors..............................................................................................
Selected Financial Information............................................................................
Recent Developments.......................................................................................
Use of Proceeds...........................................................................................
Dividend Policy...........................................................................................
Market for Common Stock...................................................................................
Capitalization............................................................................................
Historical and Pro Forma Regulatory Capital Compliance....................................................
Pro Forma Data............................................................................................
Shares to be Purchased by Management with Subscription Rights.............................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................................................
Business of Indian Village Bancorp........................................................................
Business of Indian Village................................................................................
Management of Indian Village Bancorp......................................................................
Management of Indian Village..............................................................................
Regulation and Supervision................................................................................
Federal and State Taxation................................................................................
The Conversion............................................................................................
Restrictions on Acquisition of Indian Village Bancorp.....................................................
Description of Capital Stock of Indian Village Bancorp ...................................................
Registration Requirements.................................................................................
Legal and Tax Opinions....................................................................................
Experts...................................................................................................
Change in Accountants.....................................................................................
Where You Can Find More Information.......................................................................
Index to Financial Statements.............................................................................
</TABLE>
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SUMMARY
You should read the entire prospectus carefully before you decide to invest. For
assistance, please contact the stock information center at (740) 254-9164.
THE COMPANIES
Indian Village Bancorp, Inc. (page __)
100 South Walnut Street
Gnadenhutten, Ohio 44629
(740) 254-4313
Indian Village formed Indian Village Bancorp to be its holding company. To date,
Indian Village Bancorp has only conducted organizational activities. After the
conversion, it will own all of Indian Village's capital stock and will direct,
plan and coordinate Indian Village's business activities. After the conversion,
Indian Village Bancorp might become an operating company or acquire or organize
other operating subsidiaries, including other financial institutions, although
it currently has no specific plans or agreements to do so.
Indian Village Community Bank (page __)
100 South Walnut Street
Gnadenhutten, Ohio 44629
(740) 254-4313
Indian Village's business strategy is to operate as a traditional,
community-oriented savings association dedicated to financing home ownership and
providing quality customer service. Currently, Indian Village operates out of
its main office in Gnadenhutten, Ohio. In February 1999 Indian Village received
regulatory approval to open its first branch office, which will be located in
New Philadelphia, Ohio. Gnadenhutten and New Philadelphia are both located in
Tuscarawas County, which Indian Village considers as its primary market area for
making loans and attracting deposits.
Indian Village's principal business is attracting deposits from the general
public and using those funds to originate fixed-rate residential mortgage loans,
which accounted for 82.1% of Indian Village's total loan portfolio at December
31, 1998. Indian Village also makes multi-family and commercial real estate
loans. Indian Village introduced home equity loans and lines of credit in May
1996 and other consumer loans in April 1998. Indian Village also invests in U.S.
government and agency securities and U.S. government insured or guaranteed
mortgage-backed securities. At December 31, 1998, Indian Village had total
assets of $40.0 million, deposits of $30.9 million and total equity of $5.1
million.
For a discussion of Indian Village's business strategy and recent results of
operations, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations." For a discussion of Indian Village's business
activities, see "Business of Indian Village."
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THE CONVERSION
What is the Conversion (page ___)
The conversion is a change in Indian Village's legal form of organization. As a
mutual savings association, Indian Village currently has no stock or
stockholders. Instead, Indian Village operates for the mutual benefit of its
depositors who elect its directors and vote on other important matters. Through
the conversion Indian Village will become a stock savings association and will
be owned and controlled by the holder of all its stock, Indian Village Bancorp.
Voting rights in Indian Village Bancorp will belong to its stockholders.
Indian Village is conducting the conversion under the terms of its plan of
conversion. The Office of Thrift Supervision has approved the conversion with
the condition that Indian Village's members approve the plan of conversion.
Indian Village has called a special meeting for June ___, 1999 to vote on the
plan of conversion.
Reasons for the Conversion (page ___)
By converting to the stock form of organization, Indian Village will be
structured in the form used by commercial banks, most business entities and a
large number of savings institutions. The conversion will be important to Indian
Village's future growth and performance because it will:
. provide a larger capital base from which to operate;
. enhance its ability to attract and retain qualified management
through stock-based compensation plans;
. expand its ability to serve the public;
. afford its depositors, borrowers and local community residents the
opportunity to participate as owners in the local financial
institution with which they do business; and
. enhance its ability to diversify into other financial services
related activities.
Presently, Indian Village does not have any specific plans or arrangements for
diversification or expansion into other financial services related activities.
Benefits of the Conversion to Management (page __)
Indian Village Bancorp and Indian Village intend to adopt the following
benefit plans and employment agreements:
. Employee Stock Ownership Plan. This plan intends to purchase 8% of
the shares issued in the conversion. This would range from 34,680
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shares, assuming 433,500 shares are issued in the conversion, to
46,920 shares, assuming 586,500 shares are issued in the conversion.
Indian Village will allocate these shares to employees over a period
of years in proportion to their compensation.
. Stock Option Plan. Under this plan, Indian Village Bancorp may award
stock options to key employees and directors. The number of options
available under this plan will be equal to 10% of the number shares
sold in the conversion. This would range from 43,350 shares, assuming
433,500 shares are issued in the conversion, to 58,650 shares,
assuming 586,500 shares are issued in the conversion. This plan will
require shareholder approval.
. Management Development and Recognition Plan. Under this plan, Indian
Village Bancorp may award shares of restricted stock to key employees
and directors at no cost to the recipient. The number of shares
available under this plan will equal 4% of the number of shares sold
in the conversion. This would range from 17,340 shares, assuming
433,500 shares are issued in the conversion, to 23,460 shares,
assuming 586,500 shares are issued in the conversion. This plan will
require shareholder approval.
. Employment Agreement. Indian Village Bancorp and Indian Village
intend to enter into employment agreements with Indian Village's
President and Chief Executive Officer, and Vice President, Treasurer
and Chief Financial Officer. These agreements will provide for
severance benefits if the executive is terminated following a change
in control of Indian Village Bancorp or Indian Village.
. Employee Severance Compensation Plan. This plan will provide
severance benefits to eligible employees if there is a change in
control of Indian Village Bancorp or Indian Village.
The following table summarizes the total number and dollar value of the shares
of common stock, assuming 586,500 shares are issued in the conversion, which the
employee stock ownership plan expects to acquire and the total value of all
shares that are expected to be available for
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award under the stock option plan and the management development and recognition
plan. The table assumes the value of the shares is $10.00 per share. The table
does not include a value for the options because their value would be equal to
the fair market value of the common stock on the day that the options are
granted. As a result, financial gains can be realized on an option only if the
market price of common stock increases above the price at which the options are
granted.
<TABLE>
<CAPTION>
Percentage
of Shares
Number Estimated Issued
of Value in the
Shares of Shares Conversion
------- --------- ----------
<S> <C> <C> <C>
Employee stock ownership plan... 46,920 $469,200 8.0%
Management development
and recognition plan awards.. 23,460 234,600 4.0
Stock options................... 58,650 -- 10.0
------- -------- ----
Total.................. 129,030 $703,800 22.0%
======= ======== ====
</TABLE>
For a discussion of risks associated with these plans and agreements, see "Risk
Factors--The Implementation of Benefit Plans Will Increase Future Compensation
Expense and May Lower Indian Village's Net Income," and "Risk
Factors--Employment Agreements and Severance Plan Could Make Takeover Attempts
More Difficult to Achieve," and "Risk Factors--Issuance of Shares for Benefit
Programs May Lower Your Ownership Interest."
THE OFFERING
Subscription Offering (page ___)
Note: Subscription rights are not transferable, and persons with subscription
rights may not subscribe for shares for the benefit of any other person. If you
violate this prohibition, you may lose your rights to purchase shares and may
face criminal prosecution and/or other sanctions.
Indian Village has granted subscription rights in the following order of
priority to:
1. Persons with $50 or more on deposit at Indian Village as of December
31, 1997.
2. The Indian Village employee stock ownership plan.
3. Persons with $50 or more on deposit at Indian Village as of March 31,
1999.
4. Indian Village's depositors as of April 30, 1999 and borrowers of
Indian Village as of January 20, 1999 whose loans continue to be
outstanding as of April 30, 1999.
To ensure that Indian Village properly identifies your subscription rights, you
must list all of your savings accounts and loans as of the eligibility dates on
the stock order form. If
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you fail to do so, your subscription may be reduced or rejected if the offering
is oversubscribed.
The subscription offering will end at 12:00 Noon, Eastern time, on June ___,
1999. If the offering is oversubscribed, Indian Village Bancorp will allocate
the shares in order of the priorities described above under a formula outlined
in the plan of conversion.
Community Offering (page __)
Indian Village Bancorp may offer shares not sold in the subscription offering to
the general public in a community offering. People and trusts of people who are
residents of Tuscarawas County, Ohio will have first preference to purchase
shares in a community offering. If shares are available, Indian Village Bancorp
expects to offer them to the general public immediately after the end of the
subscription offering, but may begin a community offering at any time during the
subscription offering.
Indian Village Bancorp and Indian Village may reject orders received in the
community offering either in whole or in part. If your order is rejected in
part, you cannot cancel the remainder of your order.
Time Period for Completing the
Conversion (page __)
If the conversion is not completed by __________, 1999 and the Office of Thrift
Supervision gives Indian Village more time to complete the conversion, Indian
Village Bancorp will contact everyone who subscribed for shares to see if they
still want to purchase stock. This is known as a "resolicitation offering." A
material change in the independent appraisal of Indian Village Bancorp and
Indian Village would be the most likely, but not necessarily the only, reason
for a delay in completing the conversion. Federal regulations permit the Office
of Thrift Supervision to grant one or more time extensions, none of which may
exceed 90 days. Extensions may not go beyond ________, 2001. In the
resolicitation offering, Indian Village Bancorp would mail a supplement to this
prospectus to you if you subscribed for stock to let you confirm, modify or
cancel your subscription. If you fail to respond to the resolicitation offering,
it would be as if you had canceled your order and all of your subscription
funds, together with accrued interest, would be returned to you. If you
authorized payment by withdrawal of funds on deposit at Indian Village, that
authorization would terminate. If you affirmatively confirm your subscription
order during the resolicitation offering, Indian Village Bancorp and Indian
Village would continue to hold your subscription funds until the end of the
resolicitation offering. Your resolicitation order would be irrevocable without
the consent of Indian Village Bancorp and Indian Village until the conversion is
completed or terminated.
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Purchase Price
The purchase price is $10.00 per share. The Boards of Directors of Indian
Village Bancorp and Indian Village consulted with Trident Securities in
determining it. You will not pay a commission to buy any shares in the
conversion.
Number of Shares to be Issued (page ___)
Indian Village Bancorp will sell between 433,500 and 586,500 shares of its
common stock in this offering. With regulatory approval, Indian Village Bancorp
may increase the number of shares to 674,475 without giving you further notice.
The amount of common stock that Indian Village Bancorp will offer in the
conversion is based on an independent appraisal of the estimated market value of
Indian Village Bancorp and Indian Village as if the conversion had occurred as
of the date of the appraisal. Keller & Company, Inc., an independent appraiser,
has estimated that, in its opinion, as of March 1, 1999, and updated as of April
8, 1998, the estimated market value ranged between $4,335,000 and $5,865,000,
with a midpoint of $5,100,000. The appraisal was based in part on Indian
Village's financial condition and operations and the effect on Indian Village of
the additional capital raised by the sale of common stock in this offering. The
independent appraisal will be updated before the conversion is completed.
In preparing its independent appraisal, Keller & Company focused primarily on
the price/core earnings and price/book valuation methodologies, both of which
are discussed in the appraisal report. See "Where You Can Find More Information"
for how to obtain a copy of the appraisal report. The following table compares
Indian Village's pro forma price/core earnings and price/book ratios at the
minimum and maximum of the offering range to the averages for all publically
traded thrift institutions, all publically traded Ohio thrift institutions and a
comparable group of ten publically traded thrift institutions identified in the
appraisal report. Thrift institutions in the mutual holding company structure
are excluded from each comparison group.
<TABLE>
<CAPTION>
Price/
Core Price/
Earnings Book
Ratio Ratio
--------- ---------
<S> <C> <C>
Indian Village:
Minimum.............................. 13.26x 50.50%
Maximum.............................. 16.46 59.06
All Publically Traded Thrifts........... 16.89 117.97
All Publicly Traded Ohio Thrifts........ 19.39 130.80
Comparable Group........................ 14.73 90.45
</TABLE>
The independent appraisal does not indicate market value. Do not assume or
expect that Indian Village's discounted valuation as shown in the above table
means that the
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common stock will trade above the $10.00 purchase price after the conversion.
Indian Village Bancorp cannot guarantee that anyone who purchases shares in the
conversion will be able to sell their shares at or above the $10.00 purchase
price. See "Risk Factors -- Possible Limited Market for Indian Village Bancorp's
Common Stock May Lower Market Price."
Purchase Limitations (page ___)
The minimum purchase is 25 shares. The maximum purchase in the subscription
offering by any person or group of persons through a single deposit account is
$100,000 of common stock, which equals 10,000 shares.
The maximum purchase by any person in the community offering is $100,000 of
common stock, which equals 10,000 shares.
The maximum purchase in the subscription offering and community offering
combined by any person, related persons or persons acting together is $150,000
of common stock, which equals 15,000 shares.
How to Purchase Common Stock
(page ___)
Note: Once Indian Village receives your order, you cannot cancel or change it
without Indian Village's consent. If Indian Village Bancorp intends to sell
fewer than 433,500 shares or more than 674,475 shares, all subscribers will be
notified and given the opportunity to change or cancel their orders. If you do
not respond to this notice, Indian Village Bancorp will return your funds
promptly with interest.
If you want to subscribe for shares in the subscription offering or place a
purchase order for shares in the community offering, you must complete an
original stock order form and send it together with full payment to Indian
Village in the postage-paid envelope provided. You must sign the certification
that is part of the stock order form. Indian Village must receive your stock
order form before the end of the subscription offering or the end of the
community offering, as appropriate.
You may pay for shares in the subscription offering or the community offering in
any of the following ways:
. By check or money order made payable to Indian Village Bancorp, Inc.
. By withdrawal from an account at Indian
Village. To use funds in an Individual
Retirement Account at Indian Village, you must
transfer your account to an unaffiliated
institution or broker. Please contact the stock
information center at least one week before the
end of the subscription offering or the
community offering, as appropriate, for
assistance.
Indian Village will pay interest on your subscription funds at the rate it pays
on passbook accounts from the date it receives
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your funds until the conversion is completed or terminated. All funds authorized
for withdrawal from deposit accounts with Indian Village will earn interest at
the applicable account rate until the conversion is completed. There will be no
early withdrawal penalty for withdrawals from certificates of deposit used to
pay for stock.
Use of Proceeds (page ___)
Indian Village Bancorp will pay 50% of the net offering proceeds to Indian
Village to buy all of the common stock of Indian Village. Indian Village will
use these funds to originate loans and purchase investments similar to the kinds
it currently holds.
Indian Village Bancorp will also loan an amount equal to 8% of the gross
proceeds of the offering to the employee stock ownership plan to fund its
purchase of common stock and will keep the remainder of the net proceeds for
general corporate purposes. These purposes may include, for example, paying cash
dividends or buying back shares of common stock.
Indian Village Bancorp and Indian Village may also use the proceeds of the
offering to expand and diversify their businesses, although they have no
specific plans to do so at this time.
Purchases by Directors and Executive
Officers (page ___)
Indian Village's directors and executive officers intend to subscribe for 73,000
shares, regardless of the number of shares issued in the conversion, which
equals 12.45% of the 586,500 shares that would be issued at the maximum of the
offering range. If fewer shares are issued in the conversion, then directors and
executive officers may own a greater percentage of Indian Village Bancorp.
Directors and executive officers will pay the $10.00 per share price as will
everyone else who purchases shares in the conversion.
Market for Common Stock (page ___)
Indian Village Bancorp intends to list the common stock over-the-counter through
the OTC Bulletin Board or the National Daily Quotation System "Pink Sheets"
published by the National Quotation Bureau, Inc. Trident Securities intends to
be a market maker in the common stock. After shares of the common stock begin
trading, you may contact a stock broker to buy or sell shares. Indian Village
Bancorp cannot assure you that there will be an active trading market for the
common stock. See "Risk Factors--Possible Limited Market for Indian Village
Bancorp's Common Stock May Lower Market Price."
Dividend Policy (page ___)
Indian Village Bancorp intends to adopt a policy of paying regular cash
dividends, but has not yet decided on the amount or frequency of payments.
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RISK FACTORS
Before investing in Indian Village Bancorp's common stock please
carefully consider the matters discussed below.
Indian Village's business depends heavily on economic conditions within its
primary market area and the rural nature of the area limits growth prospects
Indian Village's primary market area for lending and deposit gathering
activities is Tuscarawas County, a predominantly rural county with a small
population that is not growing rapidly. These characteristics limit Indian
Village's ability to increase its loan portfolio and deposit base. Furthermore,
because a substantial portion of Indian Village's borrowers and depositors and
substantially all of its real estate collateral is located in this market area,
a downturn in the economy of the primary market area could increase the risk of
loan losses. See "Business of Indian Village--Market Area."
Indian Village's goal to increase consumer lending may hurt both asset quality
and net income
Indian Village has limited experience with consumer lending, which
offers a higher rate of return but also possesses a greater risk of loss than
mortgage lending. Indian Village did not offer consumer loans before May 1996,
other than loans secured by deposit accounts at the institution, and intends to
emphasize consumer lending in future periods. Indian Village's consumer loan
portfolio has increased from $1.1 million, or 4.0% of total loans, at December
31, 1997 to $2.3 million, or 7.2% of total loans, at December 31, 1998. Although
Indian Village did not charge-off any consumer loans in either 1997 or 1998,
nonaccruing consumer loans increased from $59,000 at December 31, 1997 to
$87,000 at December 31, 1998 and to $101,000 at March 31, 1999. Indian Village
cannot assure you that the level of nonaccruing consumer loans will not be
higher in future periods which would reduce net interest income, or that it will
not have to charge-off material amounts of consumer loans in future periods,
which could lead to a material increase in the provision for loan losses in
future periods which would also reduce net income. See "Business of Indian
Village--Lending Activities--Nonperforming Assets and Delinquencies" and
"Business of Indian Village--Lending Activities--Consumer Loans" for
additional information on Indian Village's consumer lending activities.
Rising interest rates could hurt Indian Village's profits
Like most financial institutions, Indian Village's ability to make a
profit depends largely on its net interest income, which is the difference
between interest income it receives from its loans and investment securities and
interest it pays on deposits and borrowings. A large percentage of Indian
Village's assets are fixed-rate mortgage loans and fixed-rate investment
securities. Therefore, if interest rates rise, Indian Village anticipates that
its net interest income would decline as interest paid on deposits would
increase more quickly than the interest earned on loans and investment
securities. In addition, rising interest rates may adversely affect Indian
Village's earnings because rising rates may cause a decrease in customer demand
for loans and reduce the value of Indian Village's securities available for
sale. For further discussion of how changes in interest rates could impact
Indian Village, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Market Risk Analysis."
Investment of offering proceeds in debt securities could produce low earnings
Indian Village Bancorp expects to retain 42% of the net offering
proceeds for its own use. Indian Village Bancorp intends to invest these funds
in short-term U.S. Government and agency obligations until they may be used for
other purposes such as paying dividends or repurchasing stock. Furthermore,
Indian Village also intends to invest the portion of the net offering proceeds
that Indian Village Bancorp will contribute to it in short-term U.S. government
and agency obligations until they may be used to make loans. Interest income
earned on short-term investment securities is generally lower than interest
income earned on loans. Consequently, as long as Indian Village Bancorp and
Indian Village primarily invest the net offering proceeds in short term
investment securities, particularly during times like now of low market interest
rates, you should expect their earnings to be less than what they generally
could be if the net offering proceeds were invested primarily in loans. See "Use
of Proceeds" for
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further information regarding Indian Village Bancorp's and Indian Village's
intended uses of the net proceeds of this offering.
Competition has hurt Indian Village's net interest income
Indian Village faces intense competition both in making loans and
attracting deposits. This competition has made it more difficult for Indian
Village to make new loans and has forced it to offer higher deposit rates in its
market area. This competition for loans and deposits has contributed to a narrow
interest rate spread, which has hurt net interest income. The competition for
deposits, particularly from mutual funds and other stock market investment
vehicles, also has contributed to a decrease in Indian Village's deposit base in
recent years. Indian Village expects that the competition for loans and deposits
will continue to be intense. For more information about Indian Village's market
area and the competition it faces, see "Business of Indian Village--Market Area"
and "Business of Indian Village--Competition."
Indian Village's return on equity will continue to be below average after
conversion because of high capital levels
Return on equity, which equals net income divided by average equity, is
a ratio used by many investors to compare the performance of a particular
company with other companies. In recent years, Indian Village's return on
average equity has been below the average return on equity for publicly held
savings associations and banks of comparable size. As a result of the additional
capital that will be raised in this offering, Indian Village Bancorp expects
that its return on average equity will continue to be below average after the
offering. In addition, compensation expense will increase as a result of the new
benefit plans. Over time, Indian Village Bancorp intends to use the net proceeds
from this offering to increase earnings per share and book value per share,
without assuming undue risk, with the goal of achieving a return on equity
competitive with other publicly traded financial institutions. This goal could
take a number of years to achieve, and Indian Village Bancorp cannot assure you
that this goal can be attained. Consequently, you should not expect a
competitive return on equity in the near future. See "Pro Forma Data" for an
illustration of the financial effects of this stock offering.
Implementation of benefit plans will increase future compensation expense and
may lower Indian Village's net income
Indian Village will recognize additional material employee compensation
and benefit expenses stemming from the shares purchased or granted to employees
and executives under new benefit plans. Indian Village cannot predict the actual
amount of these new expenses because applicable accounting practices require
that they be based on the fair market value of the shares of common stock at
specific points in the future. Indian Village would recognize expenses for its
employee stock ownership plan when shares are committed to be released to
participants' accounts and would recognize expenses for the management
development and recognition plan over the vesting period of awards made to
recipients. These expenses have been reflected in the pro forma financial
information under "Pro Forma Data" assuming the $10.00 per share purchase price
as fair market value. Actual expenses, however, may be higher or lower. Recently
proposed accounting rules could also require Indian Village Bancorp to recognize
compensation expense for stock options awarded to nonemployee directors. For
further discussion of these plans, see "Management of Indian Village--Benefits."
Year 2000 data processing problems could interrupt and hurt Indian Village's
operations
Computer programs that use only two digits to identify a year could
fail or create erroneous results by or at the year 2000. All of the material
data processing for Indian Village is performed by a third-party service bureau.
If the service bureau is unable to complete its year 2000 adjustments in a
timely fashion, or if it does not successfully make all the necessary year 2000
adjustments, resulting computer malfunctions could interrupt the operations of
Indian Village and have a significant adverse impact on Indian Village's
financial condition and results of operations. For further discussion of Indian
Village's year 2000 compliance program, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Issues."
10
<PAGE>
Issuance of shares for benefit programs may lower your ownership interest
If stockholders approve the new stock-based benefit programs, Indian
Village Bancorp intends to issue shares to its officers and directors through
these plans. If the shares for the management development and recognition plan
are issued from authorized but unissued stock, your ownership interest could be
reduced by up to approximately 3.85%. If the shares for the stock option plan
are issued from authorized but unissued stock, your ownership interest could be
reduced by up to approximately 9.09%. See "Pro Forma Data."
Expected voting control by management and employees may make takeover attempts
more difficult to achieve
The shares of common stock that Indian Village's directors and
executive officers intend to purchase in the conversion, when combined with the
shares that may be awarded or sold to participants under Indian Village's
employee stock ownership plan and Indian Village Bancorp's stock-based benefit
plans, could result in management and employees controlling a significant
percentage of Indian Village Bancorp's common stock. If these individuals were
to act together, they could have significant influence over the outcome of any
stockholder vote. This voting power may discourage takeover attempts you would
like to see happen. In addition, the total voting power of management and
employees could reach in excess of 25% of Indian Village Bancorp's outstanding
stock. That level would enable management and employees as a group to defeat any
stockholder matter that requires an 75% vote. For information about management's
intended stock purchases and the number of shares that may be awarded under new
benefit plans, see "Shares to Be Purchased by Management with Subscription
Rights," "Management of Indian Village--Executive Compensation" and
"Restrictions on Acquisition of Indian Village Bancorp."
Anti-takeover provisions and statutory provisions could make takeover attempts
more difficult to achieve
Provisions in Indian Village Bancorp's Articles of Incorporation and
Bylaws, the corporation law of the Commonwealth of Pennsylvania, and federal
regulations may make it difficult and expensive to pursue a takeover attempt
that management opposes. These provisions may discourage or prevent takeover
attempts you would like to see happen. These provisions will also make the
removal of the current board of directors or management of Indian Village
Bancorp, or the appointment of new directors, more difficult. These provisions
include: limitations on voting rights of beneficial owners of more than 10% of
Indian Village Bancorp's common stock; supermajority voting requirements for
certain business combinations; the election of directors to staggered terms of
three years; the elimination of cumulative voting for directors; and the removal
of directors without cause only upon the vote of holders of 75% of the
outstanding voting shares. The Articles of Incorporation of Indian Village
Bancorp also contain provisions regarding the timing and content of stockholder
proposals and nominations and limiting the calling of special meetings. For
further information about these provisions, see "Restrictions on Acquisition of
Indian Village Bancorp."
Employment agreements and severance plan could make takeover attempts more
difficult to achieve
The employment agreements of senior officers of Indian Village Bancorp
and Indian Village provide for cash severance payments and/or the continuation
of health, life and disability benefits if the executive is terminated following
a change in control of Indian Village Bancorp or Indian Village. If a change in
control had occurred at December 31, 1998, the aggregate value of the severance
benefits available to these executive officers under the agreements would have
been approximately $238,000. In addition, if a change in control had occurred at
December 31, 1998 and all eligible employees had been terminated, the aggregate
payment due under the severance plan would have been approximately $31,000.
These arrangements may have the effect of increasing the costs of acquiring
Indian Village Bancorp, thereby discouraging future attempts to take over Indian
Village Bancorp or Indian Village. For information about the proposed employment
and severance agreements and severance plan, see "Management of Indian
Village--Executive Compensation."
11
<PAGE>
Possible limited market for Indian Village Bancorp's common stock may lower
market price
Because Indian Village Bancorp has never issued capital stock, Indian
Village Bancorp does not know whether an active trading market will develop.
Because of the relatively small size of the offering, it is highly unlikely that
an active and liquid market for the common stock will develop. As a result, you
may not be able to sell all of your shares on short notice and the sale of a
large number of shares all at once could lower the market price. Therefore, you
should consider the potentially illiquid and long-term nature of an investment
in the common stock. Furthermore, Indian Village Bancorp cannot guarantee that
anyone who purchases shares in the conversion will be able to sell their shares
at or above the $10.00 purchase price. For further information on the expected
trading market for Indian Village Bancorp's common stock, see "Market For Common
Stock."
Banking reform legislation may reduce Indian Village Bancorp's and Indian
Village's powers
In 1998 the U.S. Congress considered legislation intended to modernize
the financial services industry. Under the proposed legislation, newly formed
unitary savings and loan holding companies would not have the broad powers
currently available to them. Previous proposals would have eliminated the
federal savings association charter by requiring all federal savings
associations convert to national banks or other banking charters, but these
provisions were not included in the final legislation that was considered.
Indian Village is a federal savings association and, after the conversion,
Indian Village Bancorp will be a unitary savings and loan holding company.
Indian Village Bancorp does not know whether federal legislation will be enacted
that affects the federal savings association charter or unitary savings and loan
holding companies or, if the legislation is enacted, what form it might take.
Accordingly, management of Indian Village and Indian Village Bancorp cannot
predict what effect, if any, banking reform legislation would have on the
activities and operations of Indian Village and Indian Village Bancorp.
12
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables contain certain information concerning the
financial position and results of operations of Indian Village at the dates and
for the periods indicated. This information should be read in conjunction with
the Financial Statements and related Notes at the back of this prospectus.
<TABLE>
<CAPTION>
At December 31,
---------------------------------
1998 1997 1996
---------- --------- ----------
(In thousands)
<S> <C> <C> <C>
SELECTED FINANCIAL DATA:
Total assets.................................................................... $40,024 $36,353 $36,065
Cash and cash equivalents....................................................... 797 923 3,869
Loans, net...................................................................... 31,274 27,241 25,499
Investment securities available for sale:
Mortgage-backed securities, net.............................................. 4,227 3,783 2,306
Investment securities, net................................................... 1,968 3,534 3,487
Deposits........................................................................ 30,866 30,277 31,439
Federal Home Loan Bank advances................................................. 4,000 1,000 --
Total equity, substantially restricted.......................................... 5,102 4,852 4,472
Real estate owned, net.......................................................... 122 41 111
Nonperforming assets and troubled debt restructurings........................... 473 512 633
<CAPTION>
Year Ended December 31,
---------------------------------
1998 1997 1996
---------- --------- ----------
(In thousands)
<S> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income................................................................. $3,020 $2,891 $2,842
Interest expense................................................................ 1,666 1,577 1,597
------- ------- -------
Net interest income............................................................. 1,354 1,314 1,245
Provision for loan losses....................................................... 60 -- 106
--------- -------- --------
Net interest income after provision for loan losses............................. 1,294 1,314 1,139
Noninterest income.............................................................. 29 21 55
Noninterest expense (1)......................................................... (950) (805) (1,080)
------- ------- -------
Income before income taxes...................................................... 373 530 114
Income taxes.................................................................... 127 180 41
------- ------- -------
Net income...................................................................... $ 246 $ 350 $ 73
======= ======= =======
</TABLE>
- --------------------
(1) Includes in 1996 a one-time, industry-wide, assessment to recapitalize the
Savings Association Insurance Fund, which for Indian Village totaled
$206,000.
13
<PAGE>
<TABLE>
<CAPTION>
At December 31,
---------------------------------
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
SELECTED OTHER DATA:
Number of:
Mortgage loans outstanding................................................... 877 848 798
Deposit accounts............................................................. 3,520 3,446 3,523
Full-service offices......................................................... 1 1 1
<CAPTION>
At or For
the Year Ended December 31,
---------------------------------
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
SELECTED OPERATING RATIOS AND OTHER DATA:
Performance Ratios:
Average yield earned on interest-earning assets.............................. 8.17% 8.30% 8.05%
Average rate paid on interest-bearing liabilities............................ 5.08 5.10 5.15
Average interest rate spread(1).............................................. 3.09 3.20 2.91
Net interest margin(2)....................................................... 3.68 3.78 3.38
Ratio of interest-earning assets to interest-bearing liabilities............. 113.04 112.61 110.05
Net interest income after provision for loan losses to noninterest expense... 136.21 163.23 105.46
Noninterest expense as a percent of average assets........................... 2.48 2.24 3.00
Return on average assets(3).................................................. 0.64 0.97 0.20
Return on average equity(4).................................................. 4.87 7.52 1.66
Efficiency ratio(5).......................................................... 68.69 60.30 83.08
Capital Ratios:
Tangible capital ratio....................................................... 12.5 13.1 12.2
Core capital ratio........................................................... 12.5 13.1 12.2
Risk-based capital ratio..................................................... 25.8 28.8 30.2
Ratio of average equity to average assets.................................... 13.20 12.95 12.20
Asset Quality Ratios:
Nonperforming loans and troubled debt restructurings
as a percent of total loans(6)............................................ 1.04 1.71 2.15
Nonperforming loans and troubled debt restructurings
as a percent of total assets(6)........................................... 0.82 1.30 1.45
Allowance for loan losses as a percent of total loans........................ 0.69 0.64 0.69
Allowance for loan losses as a percent of nonperforming loans
and troubled debt restructurings(6)....................................... 66.46 37.37 33.72
Net loans charged-off to average interest-earning loans...................... 0.06 -- --
</TABLE>
- ----------------------------------
(1) Difference between weighted average yield on interest-earning assets and
weighted average cost of interest-bearing liabilities.
(2) Net interest income as a percentage of average interest-earning assets.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Noninterest expense divided by the sum of net interest income and
noninterest income. Efficiency ratio was 67.23% in 1996 without the
one-time assessment to recapitalize the Savings Association Insurance Fund.
(6) Nonperforming loans consist of nonaccrual loans. See "Business of Indian
Village--Lending Activities--Nonperforming Assets and Delinquencies."
14
<PAGE>
RECENT DEVELOPMENTS
The following selected financial and operating data at March 31, 1999 and
for the three month periods ended March 31, 1999 and 1998 are derived from
unaudited financial data but, in the opinion of management, reflect all
adjustments needed to present fairly the results for these interim periods. All
adjustments are normal recurring ones. The results of operations of the three
months ended March 31, 1999 do not necessarily indicate the results of
operations that may be expected for the year ending December 31, 1999.
<TABLE>
<CAPTION>
At At
March 31, December 31,
1999 1998
-------------- -------------------
(Unaudited)
(In thousands)
<S> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets.............................................. $41,831 $40,024
Cash and cash equivalents................................. 301 797
Loans, net................................................ 33,564 31,274
Investment securities available for sale:
Mortgage-backed securities, net......................... 4,328 4,227
Investment securities, net.............................. 1,706 1,968
Deposits.................................................. 30,824 30,866
Federal Home Loan Bank advances........................... 5,750 4,000
Total equity, substantially restricted.................... 5,149 5,102
Real estate owned, net.................................... 122 122
Nonperforming assets and troubled debt restructurings..... 513 473
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1999 1998
------------------ -------------------
(Unaudited)
(In thousands)
<S> <C> <C>
SELECTED OPERATING DATA:
Interest income........................................... $777 $750
Interest expense.......................................... 432 397
----- -----
Net interest income....................................... 345 353
Provision for loan losses................................. 3 --
------- ------
Net interest income after provision for loan losses....... 342 353
Noninterest income........................................ 11 12
Noninterest expense....................................... (255) (221)
------- -------
Income before income tax.................................. 98 144
Income tax expense........................................ 34 48
------ ------
Net income................................................ $ 64 $ 96
===== =====
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
At or For the
Three Months Ended
March 31,
--------------------------------------
1999 1998
------------------ -------------------
<S> <C> <C>
KEY FINANCIAL RATIOS(1):
Performance Ratios:
Average yield earned on interest-earning assets........... 7.81% 8.37%
Average rate paid on interest-bearing liabilities......... 4.88 5.07
Average interest rate spread(2)........................... 2.93 3.30
Net interest margin(3).................................... 3.47 3.95
Ratio of interest-earning assets to interest-bearing
liabilities............................................. 112.51 114.70
Net interest income after provision for loan losses
losses to noninterest expense........................... 134.12 159.73
Return on average assets(4)............................... 0.63 1.05
Return on average equity(5)............................... 4.94 7.84
Efficiency ratio(6)....................................... 71.63 60.55
Capital Ratios:
Tangible capital ratio.................................... 12.1 13.2
Core capital ratio........................................ 12.1 13.2
Risk-based capital ratio.................................. 24.0 29.2
Average equity as a percent of average assets............. 12.66 13.39
Asset Quality Ratios:
Nonperforming loans and troubled debt restructurings
as a percent of total loans (7)........................ 1.09 1.95
Nonperforming loans and troubled debt restructurings
as a percent of total assets(7)........................ 0.92 1.46
Allowance for loan losses as a percent of
total loans............................................ 0.65 0.64
Allowance for loan losses as a percent of nonperforming
loans and troubled debt restructurings(7).............. 0.60 0.33
Net loan charged-off to average interest-earning loans.... -- --
</TABLE>
- ------------------------------
(1) Annualized where appropriate.
(2) Difference between weighted average yield on interest-earning assets and
weighted average cost of interest-bearing liabilities.
(3) Net interest income as a percentage of average interest-earning assets.
(4) Net income divided by average total assets.
(5) Net income divided by average total equity.
(6) Noninterest expense divided by the sum of net interest income and
noninterest income.
(7) Nonperforming loans consist of nonaccrual loans. See "Business of Indian
Village--Lending Activities--Nonperforming Assets and Delinquencies."
16
<PAGE>
Regulatory Capital
The table below sets forth Indian Village's capital position in
relation to its minimum regulatory capital requirements at the date indicated.
For a discussion of Indian Village's regulatory capital requirements, see
"Regulation -- Federal Regulation of Savings Associations -- Capital
Requirements."
<TABLE>
<CAPTION>
At March 31, 1999
--------------------------------------
Percent of
Adjusted
Amount Total Assets(1)
------------------ -------------------
(In thousands)
<S> <C> <C>
Tangible capital.......................................... $5,073 12.1%
Tangible capital requirement.............................. 627 1.5
------ -----
Excess.................................................... $4,446 10.6%
====== ====
Core capital.............................................. $5,073 12.1%
Core capital requirement.................................. 1,254 3.0
------ -----
Excess.................................................... $3,819 9.1%
====== =====
Risk-based capital(2)..................................... $5,294 24.0%
Risk-based capital requirement(2)......................... 1,766 8.0
------ -----
Excess.................................................... $3,528 16.0%
====== ====
</TABLE>
- ------------------------------
(1) Tangible capital levels and core capital levels are shown as a percentage
of adjusted total assets of $41.8 million. Risk-based capital levels are
shown as a percentage of risk-weighted assets of $22.1 million.
(2) Percentage represents total core and supplementary capital divided by total
risk-weighted assets.
Non-Performing Assets and Delinquencies
At March 31, 1999, Indian Village had $368,000 of loans accounted for
on a nonaccrual basis, compared to $328,000 at December 31, 1998. Nonaccrual
loans at March 31, 1999 consisted of $267,000 in residential real estate loans
and $101,000 in consumer loans. See "Risk Factors -- Indian Village's Goal to
Increase Consumer Lending May Hurt Both Asset Quality and Net Income." At March
31, 1999, Indian Village had no accruing loans contractually past due 90 days or
more, no restructured loans and $122,000 of real estate owned.
The allowance for loan losses was $221,000 at March 31, 1999. There
were no charge-offs or recoveries in either the three months ended March 31,
1999 or 1998.
17
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by category at March 31, 1999.
<TABLE>
<CAPTION>
Percent of
Allowance in Percent of Loans
Each Category in Each
to Total Category
Amount Allowance to Total Loans
------------------ ------------------ ------------------
(In thousands)
<S> <C> <C> <C>
Real estate loans:
One- to four-family...................... $106 47.96% 80.56%
Multi-family............................. 11 4.98 5.05
Commercial............................... 17 7.69 3.19
Construction............................. 2 0.90 2.64
Land..................................... 1 0.45 0.43
Consumer loans.............................. 12 5.43 7.96
Commercial business loans................... 3 1.36 0.17
Unallocated................................. 69 31.23 --
---- ------ ------
Total allowance for loan losses........ $221 100.00% 100.00%
==== ====== ======
</TABLE>
Comparison of Financial Condition at March 31, 1999 and December 31, 1998
Total assets increased 4.5% from $40.0 million at December 31, 1998 to
$41.8 million at March 31, 1999 primarily as a result of an increase in loans.
Loans, net, increased 7.3% from $31.3 million to $33.6 million primarily as a
result of growth in the residential mortgage loan and consumer loan portfolios.
The residential mortgage loan portfolio increased from $26.1 million to $27.3
million. The consumer loan portfolio increased from $2.3 million to $2.7
million. Cash and cash equivalents decreased from $797,000 to $301,000 to fund
loan growth. Mortgaged-backed securities, net, remained relatively unchanged
while investment securities, net, decreased from $2.0 million to $1.7 million as
a result of maturities.
Deposits decreased from $30.9 million at December 31, 1998 to $30.8
million at March 31, 1999. Management attributes this decline to increased
competition and the overall lack of growth in the Gnadenhutten market. To offset
the lack of deposit growth, Indian Village increased its Federal Home Loan Bank
advances from $4.0 million to $5.8 million in order to fund loans. Total equity
increased as a result of retained net income.
Comparison of Operating Results for the Three Months Ended March 31, 1999 and
1998
Net Income. Net income was $64,000 in the 1999 quarter compared to
$96,000 in the 1998 quarter. Higher interest expense and higher noninterest
expense were the primary reasons for the decline in net income.
Net Interest Income. Net interest income decreased from $353,000 in the
1998 quarter to $345,000 in the current quarter. Total interest income increased
from $750,000 to $777,000 primarily as a result of higher average loan balances.
Total interest expense increased from $397,000 to $432,000 primarily because of
increased interest expense on Federal Home Loan Bank advances due to higher
average outstanding balances.
18
<PAGE>
Provision for Loan Losses. Provisions for loan losses are charged to
operations to bring the total allowance for loan losses to a level considered by
management to be adequate to provide for probable losses based on management's
evaluation of the collectibility of the loan portfolio, including past loan loss
experience, known and inherent risks in the nature and volume of the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions, and other factors. The provision for loan losses was $3,000
in the current quarter compared to no provision in the 1998 quarter. The
provision was increased primarily because of the increased risk of loss
associated with the overall growth and changes in composition of the loan
portfolio, including the consumer loan portfolio which carries a higher inherent
risk of loss than the residential mortgage loan portfolio. The allowance for
loan losses was $221,000 at March 31, 1999 compared to $218,000 at December 31,
1998. Management deemed the allowance adequate at both dates. Although
management uses the best information available, future adjustments to the
allowance may be necessary due to changes in economic, operating, regulatory and
other conditions that may be beyond Indian Village's control. While Indian
Village maintains its allowance for loan losses at a level which it considers to
be adequate to provide for probable losses, there can be no assurance that
further additions will not be made to the allowance for loan losses and that
actual losses will not exceed the estimated amounts. See "Business of Indian
Village--Lending Activities--Allowance for Loan Losses" for further information.
Noninterest Income. Noninterest income remained relatively stable,
decreasing only $1,000 from $12,000 in the 1998 quarter to $11,000 in the
current quarter.
Noninterest Expense. Noninterest expense increased from $221,000 in the
1998 quarter to $255,000 in the current quarter primarily as a result of an
increase in stationary and printing expense and advertising expense. The
increase in stationary and printing expense, from $4,000 in the 1998 quarter to
$12,000 in the current quarter, was the result of Indian Village's name change
in January 1999. Advertising expense increased from $5,000 in the 1998 quarter
to $12,000 in the current quarter primarily as a result of consumer loan
advertising and advertising of debit cards. Noninterest expense is expected to
increase in future periods because of the expenses associated with the proposed
stock benefit plans, the costs associated with operating as a public company,
and the costs of staffing and equipping the proposed new branch office in New
Philadelphia, Ohio.
Income Tax Expense. Income tax expense decreased from $48,000 to
$34,000 as a result of lower income before taxes.
19
<PAGE>
USE OF PROCEEDS
The following table presents the estimated net proceeds of the
offering, the amount to be retained by Indian Village Bancorp, the amount to be
contributed to Indian Village, and the amount of Indian Village Bancorp's loan
to the employee stock ownership plan. See "Pro Forma Data" for the assumptions
used to arrive at these amounts. The Office of Thrift Supervision must approve
the issuance of up to 674,475 shares in the conversion.
<TABLE>
<CAPTION>
433,500 586,500 674,475
Shares at Shares at Shares at
$10.00 $10.00 $10.00
Per Share Per Share Per Share
--------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Gross proceeds................................................... $4,335 $5,865 $6,745
Less: estimated underwriting commissions and
other offering expenses................................... 380 380 380
------ ------ ------
Net proceeds..................................................... $3,955 $5,485 $6,365
====== ====== ======
Net proceeds to be retained by Indian Village Bancorp............ $1,977 $2,742 $3,182
Net proceeds to be contributed to Indian Village................. $1,978 $2,743 $3,183
Amount of loan by Indian Village Bancorp to employee $ 347 $ 469 $ 540
stock ownership plan..........................................
</TABLE>
Indian Village Bancorp has received conditional Office of Thrift
Supervision approval to purchase all of the capital stock of Indian Village to
be issued in the conversion in exchange for 50% of the net proceeds of the stock
offering. Receipt of 50% of the net proceeds of the sale of the common stock
will increase Indian Village's capital and will support the expansion of Indian
Village's existing business activities. Indian Village will use the funds
contributed to it for general corporate purposes, including, initially, lending
and investment in short-term U.S. Government and agency obligations and U.S.
government agency issued mortgage-backed securities.
Indian Village Bancorp intends to loan the employee stock ownership
plan the amount necessary to purchase 8% of the shares sold in the conversion.
Accordingly, the employee stock ownership plan purchases would range between
34,680 shares at the minimum of the offering range and 46,920 shares at the
maximum of the offering range. At the midpoint of the offering range, the
employee stock ownership plan would purchase 40,800 shares. If 674,475 shares
are issued in the conversion, the employee stock ownership plan would purchase
53,958 shares. It is anticipated that the employee stock ownership plan loan
will have a 15-year term with interest payable at the prime rate as published in
The Wall Street Journal on the closing date of the conversion. The loan will be
repaid principally from Indian Village's contributions to the employee stock
ownership plan and from any dividends paid on shares of common stock held by the
employee stock ownership plan.
The remaining net proceeds retained by Indian Village Bancorp initially
will be invested primarily in short-term U.S. Government and agency obligations.
These proceeds will be available for additional contributions to Indian Village
in the form of debt or equity, to support future diversification or acquisition
activities, as a source of dividends to the stockholders of Indian Village
Bancorp and for future repurchases of common stock as permitted under
Pennsylvania law and federal regulations. Indian Village Bancorp will consider
exploring opportunities to use these funds to expand operations through
acquiring or establishing additional branch offices or acquiring other financial
institutions. Currently, there are no specific plans, arrangements, agreements
or understandings, written or oral, regarding any expansion activities.
20
<PAGE>
Except as described above, neither Indian Village Bancorp nor Indian
Village has specific plans for the investment of the proceeds of this offering.
Although Indian Village's capital currently exceeds regulatory requirements, it
is converting to stock form primarily to structure itself in the form of
organization used by commercial banks and most other financial services
companies. For a discussion of management's business reasons for undertaking the
conversion, see "The Conversion--Reasons for the Conversion."
Following the conversion, the Board of Directors will have the
authority to adopt plans that meet statutory and regulatory requirements for
repurchases of common stock. Since Indian Village Bancorp has not yet issued
stock, there currently is insufficient information upon which an intention to
repurchase stock could be based. The Board of Directors will consider many facts
and circumstances in determining whether to repurchase stock in the future.
These factors include market and economic factors such as the price at which the
stock is trading in the market, the volume of trading, the attractiveness of
other investment alternatives in terms of the rate of return and risk involved
in the investment, the ability to increase the book value and/or earnings per
share of the remaining outstanding shares, and the ability to improve Indian
Village Bancorp's return on equity. The avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans is another factor that will be considered.
The Board of Directors will also consider any other circumstances in which
repurchases would be in the best interests of Indian Village Bancorp and its
stockholders.
Before any stock repurchases, the Board of Directors must determine
that both Indian Village Bancorp and Indian Village will be capitalized in
excess of all applicable regulatory requirements after any repurchases and that
capital will be adequate, taking into account, among other things, Indian
Village's level of nonperforming and classified assets, Indian Village Bancorp's
and Indian Village's current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations. For a discussion of the regulatory limitations applicable to
stock repurchases, see "The Conversion--Restrictions on Repurchase of Stock."
DIVIDEND POLICY
General
Indian Village Bancorp's Board of Directors intends to adopt a policy
of paying regular cash dividends after the conversion, but has not decided the
amount that may be paid or when the payments may begin. In addition, the Board
of Directors may declare and pay periodic special cash dividends in addition to,
or in lieu of, regular cash dividends. In determining whether to declare or pay
any dividends, whether regular or special, the Board of Directors will take into
account the amount of the net proceeds retained by Indian Village Bancorp,
Indian Village Bancorp's financial condition, results of operations, tax
considerations, capital requirements, industry standards, and economic
conditions. The regulatory restrictions that affect the payment of dividends by
Indian Village to Indian Village Bancorp discussed below will also be
considered. Under Pennsylvania law, Indian Village Bancorp is prohibited from
paying a cash dividend if, after the payment of the dividend, it would be unable
to pay its debts as they become due in the usual course of business, or if its
total assets would be less than its total liabilities plus the amount that would
be needed under certain circumstances to satisfy any preferential rights of
shareholders. In order to pay cash dividends, however, Indian Village Bancorp
must have available cash either from the net proceeds raised in the conversion
and retained by Indian Village Bancorp, borrowings by Indian Village Bancorp,
dividends received from Indian Village or earnings on Indian Village Bancorp's
assets. No assurances can be given that any dividends, either regular or
special, will be declared or paid, if declared and paid, what the amount of
dividends will be or whether they will continue uninterrupted.
21
<PAGE>
Regulatory Restrictions
Dividends from Indian Village Bancorp may depend, in part, upon receipt
of dividends from Indian Village because Indian Village Bancorp initially will
have no source of income other than dividends from Indian Village and earnings
from the investment of the net proceeds from the offering retained by Indian
Village Bancorp. Office of Thrift Supervision regulations require Indian Village
to give the Office of Thrift Supervision 30 days' advance notice of any proposed
declaration of dividends to Indian Village Bancorp, and the Office of Thrift
Supervision has the authority under its supervisory powers to prohibit the
payment of dividends to Indian Village Bancorp. The Office of Thrift Supervision
imposes certain limitations on the payment of dividends from Indian Village to
Indian Village Bancorp. These limitations utilize a three-tiered approach that
permits various levels of distributions based primarily upon a savings
association's capital level. Indian Village currently meets the criteria to be
designated a Tier 1 association. Consequently, after prior notice to and no
objection made by the Office of Thrift Supervision, Indian Village could
distribute up to 100% of its net income during the calendar year, plus 50% of
its capital in excess of the amount of capital necessary to maintain its Tier 1
designation at the beginning of the calendar year less any distributions
previously paid during the year. In addition, Indian Village may not declare or
pay a cash dividend on its capital stock if its effect would be to reduce the
regulatory capital of Indian Village below the amount required for the
liquidation account to be established as required by Indian Village's plan of
conversion. See "Regulation--Federal Regulation of Savings
Associations--Limitations on Capital Distributions," "The Conversion--Effects of
Conversion to Stock Form on Depositors and Borrowers of Indian
Village--Liquidation Account" and Note 12 of the Notes to Financial Statements
included in the back of this prospectus.
Additionally, Indian Village Bancorp and Indian Village have committed
to the Office of Thrift Supervision that during the one-year period following
the conversion, Indian Village Bancorp will not take any action to declare an
extraordinary dividend to stockholders that would be treated by recipients as a
tax-free return of capital for federal income tax purposes.
Tax Considerations
In addition to the foregoing, retained earnings of Indian Village
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by Indian Village to pay cash dividends to Indian Village Bancorp
without the payment of federal income taxes by Indian Village at the then
current income tax rate on the amount deemed distributed, which would include
the amounts of any federal income taxes paid by Indian Village relating to the
distribution. See "Taxation--Federal Taxation" and Note 7 of the Notes to
Financial Statements included in the back of this prospectus. Indian Village
Bancorp does not contemplate any distribution by Indian Village that would
result in a recapture of Indian Village's bad debt reserve or create the
above-mentioned federal tax liabilities.
MARKET FOR COMMON STOCK
Because Indian Village Bancorp has never issued capital stock, there is
no existing market for its common stock. Indian Village Bancorp intends to list
the common stock over-the-counter through either the National Daily Quotation
System "Pink Sheets" published by the National Quotation Bureau, Inc. or the OTC
Bulletin Board. Trident Securities has agreed to make a market in the common
stock following the conversion, although it has no obligation to do so. However,
there can be no assurance that timely and accurate quotations will be regularly
available. The development of a liquid public market depends on the existence of
willing buyers and sellers and their existence is not within the control of
Indian Village Bancorp, Indian Village or any market maker. Because of the small
size of the offering, it is highly unlikely that an active and liquid market for
the common stock will develop and the number of active buyers and sellers at any
particular time is expected to be limited. Under these circumstances, investors
in the common stock could have difficulty disposing of their shares on short
notice and should not view the common stock as a short-term investment.
Furthermore, there can be no assurance that purchasers will be able to sell
their shares at or above the $10.00 per share purchase price or that published
quotations will be regularly available.
22
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of Indian
Village at December 31, 1998, and the pro forma capitalization of Indian Village
Bancorp after giving effect to the assumptions listed under "Pro Forma Data,"
based on the sale of the number of shares of common stock indicated in the
table. The issuance of 674,475 shares would require Office of Thrift Supervision
approval of an updated appraisal confirming that valuation. This table does not
reflect the issuance of additional shares under the proposed stock option plan.
A change in the number of shares to be issued in the conversion may materially
affect pro forma capitalization.
<TABLE>
<CAPTION>
Indian Village Bancorp
Pro Forma Capitalization
Based Upon the Sale of
-------------------------------------------
Indian Village
Capitalization 433,500 586,500 674,475
as of Shares at Shares at Shares at
December 31, $10.00 $10.00 $10.00
1998 Per Share Per Share Per Share
-------------- ----------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Deposits (1)................................ $30,866 $30,866 $30,866 $30,866
Federal Home Loan Bank advances............. 4,000 4,000 4,000 4,000
------- ------- ------- -------
Total deposits and borrowed funds........... $34,866 $34,866 $34,866 $34,866
======= ======= ======= =======
Stockholders' equity:
Preferred stock:
1,000,000 shares, $.01 par value per
share, authorized; none issued or
outstanding........................ $ -- $ -- $ -- $ --
Common stock:
5,000,000, $.01 par value per
share, authorized; specified number
of shares assumed to be issued and
outstanding (2).................... -- 4 6 7
Additional paid-in capital.................. -- 3,951 5,479 6,358
Retained earnings (3)....................... 5,105 5,105 5,105 5,105
Accumulated other comprehensive
income................................... (3) (3) (3) (3)
Less:
Common stock acquired by employee
stock ownership plan (4).............. -- (347) (469) (540)
Common stock to be acquired by
management development and
recognition plan (5).................. -- (173) (235) (270)
------ ------ ------ -------
Total stockholders' equity.................. $5,102 $8,537 $9,883 $10,657
====== ====== ====== =======
</TABLE>
- -------------------------
(1) Withdrawals from deposit accounts for the purchase of common stock are not
reflected. Withdrawals to purchase common stock will reduce pro forma
deposits by the amounts of the withdrawals.
23
<PAGE>
(2) Indian Village's authorized capital consists solely of 1,000 shares of
common stock, par value $1.00 per share, 1,000 shares of which will be
issued to Indian Village Bancorp, and 9,000 shares of preferred stock, no
par value per share, none of which will be issued in connection with the
conversion.
(3) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, Indian Village will be prohibited from
paying any dividend that would reduce its regulatory capital below the
amount in the liquidation account, which will be established for the
benefit of Indian Village's eligible depositors as of December 31, 1997 and
March 31, 1999 at the time of the conversion and decreased subsequently as
these account holders reduce their balances or cease to be depositors. See
"The Conversion--Effects of Conversion on Depositors and Borrowers of
Indian Village--Liquidation Account."
(4) Assumes that 8% of the common stock sold in the conversion will be acquired
by the ESOP in the conversion with funds borrowed from Indian Village
Bancorp. Under generally accepted accounting principles, the amount of
common stock to be purchased by the ESOP represents unearned compensation
and is, accordingly, reflected as a reduction of capital. As shares are
released to ESOP participants' accounts, a corresponding reduction in the
charge against capital will occur. Since the funds are borrowed from Indian
Village Bancorp, the borrowing will be eliminated in consolidation and no
liability or interest expense will be reflected in the consolidated
financial statements of Indian Village Bancorp. See "Management of Indian
Village--Benefits--Employee Stock Ownership Plan."
(5) Assumes the purchase in the open market at $10.00 per share, under the
proposed management development and recognition plan, of a number of shares
equal to 4% of the shares of common stock issued in the conversion at the
minimum, maximum and 15% above the maximum of the estimated valuation
range. The shares are reflected as a reduction of stockholders' equity. See
"Risk Factors--Issuance of Shares for Benefit Programs May Reduce Your
Ownership Interest," "Pro Forma Data" and "Management of Indian
Village--Benefits--Management Development and Recognition Plan." The
management development and recognition plan will require stockholder
approval at a meeting following the conversion.
24
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents Indian Village's historical and pro forma
capital position relative to its capital requirements at December 31, 1998. The
amount of capital infused into Indian Village for purposes of the following
table is 50% of the net proceeds of the offering. For purposes of the table, the
amount expected to be borrowed by the employee stock ownership plan and the cost
of the shares expected to be acquired by the management development and
recognition plan are deducted from pro forma regulatory capital. For a
discussion of the assumptions underlying the pro forma capital calculations
presented below, 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 Office of Thrift Supervision. For a discussion of the
capital standards applicable to Indian Village, see "Regulation and
Supervision--Federal Savings Institution Regulation--Capital Requirements."
<TABLE>
<CAPTION>
Pro Forma at December 31, 1998
----------------------------------------------------------
15% Above
Minimum of Maximum of Maximum of
Estimated Estimated Estimated
Valuation Range Valuation Range Valuation Range
----------------- ------------------ ------------------
Historical at 433,500 Shares 586,500 Shares 674,475 Shares
December 31, 1998 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
------------------ ------------------- ------------------- -------------------
Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted
Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
-------- ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Generally accepted accounting
principles equity(2).. $5,102 12.7% $6,559 15.8% $7,141 17.0% $7,475 17.6%
====== ==== ====== ==== ====== ==== ====== ====
Tangible capital (2)..... $5,008 12.5% $6,465 15.6% $7,047 16.8% $7,381 17.4%
Tangible capital
requirement........... 599 1.5 621 1.5 630 1.5 635 1.5
------ ---- ------ ---- ------ ---- ------ ----
Excess................... $4,409 11.0% $5,844 14.1% $6,417 15.3% $6,746 15.9%
====== ==== ====== ==== ====== ==== ====== ====
Core capital (2)......... $5,008 12.5% $6,465 15.6% $7,047 16.8% $7,381 17.4%
Core capital requirement. 1,198 3.0 1,242 3.0 1,259 3.0 1,269 3.0
------ ---- ------ ---- ------ ---- ------ ----
Excess................... $3,810 9.5% $5,223 12.6% $5,788 13.8% $6,112 14.4%
====== ==== ====== ==== ====== ==== ====== ====
Total risk-based
capital (3).......... $5,226 25.8% $6,683 32.5% $7,265 35.2% $7,599 36.7%
Total risk-based capital
requirement........... 1,621 8.0 1,644 8.0 1,653 8.0 1,659 8.0
------ ---- ------ ---- ------ ---- ------ ----
Excess................... $3,605 17.8% $5,039 24.5% $5,612 27.2% $5,940 28.7%
====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
- --------------------------------
(1) Tangible capital levels and core capital levels are shown as a percentage
of adjusted total assets of $39.9 million. Risk-based capital levels are
shown as a percentage of risk-weighted assets of $20.3 million.
(2) Unrealized gains on investment securities and an unrecognized net asset
adjustment relating to Indian Villages's pension plan account for the
difference between generally accepted accounting principles capital and
each of tangible capital and core capital. See Notes 8 and 10 to Notes to
Financial Statements for additional information.
(3) Percentage represents total core and supplementary capital divided by total
risk-weighted assets. Assumes net proceeds are invested in assets that
carry a 20% risk-weighting.
25
<PAGE>
PRO FORMA DATA
The plan of conversion requires that the common stock must be sold at a
price equal to the estimated market value of Indian Village Bancorp and Indian
Village, as converted, based upon an independent appraisal. The estimated
valuation range as of March 1, 1999, is from a minimum of $4,335,000 to a
maximum of $5,865,000 with a midpoint of $5,100,000. At a price per share of
$10.00, this results in a minimum number of shares of 433,500, a maximum number
of shares of 586,500 and a midpoint number of shares of 510,000.
The actual net proceeds from the sale of the common stock cannot be
determined until the conversion is completed. However, net proceeds indicated in
the following table are based upon the following assumptions:
(1) Trident Securities will receive a fixed payment of $100,000 to
cover all of its fees and expenses as discussed under "The
Conversion--Plan of Distribution for the Subscription, Direct
Community and Syndicated Community Offerings"; and
(2) conversion expenses, excluding the fees and expenses paid to
Trident Securities, will total approximately $280,000
regardless of the number of shares sold in the conversion.
Actual expenses may vary from this estimate, and the fees paid will
depend upon whether a syndicate of broker-dealers or other means is necessary to
sell the shares, and other factors.
Indian Village Bancorp and Indian Village prepared the following pro
forma data with the assistance of Keller & Company. The following table
summarizes the historical net income and retained earnings of Indian Village and
the pro forma net income and stockholders' equity of Indian Village Bancorp at
and for the year ended December 31, 1998. Pro forma net income has been
calculated as if the conversion were completed on January 1, 1998 and the
estimated net proceeds had been invested at 4.62% beginning on that date, which
represents the one-year U.S. Treasury Bill yield as of December 31, 1998. While
Office of Thrift Supervision regulations call for the use of a yield equal to
the arithmetic average of the weighted average yield earned by Indian Village on
its interest-earning assets and the rates paid on its deposits, Indian Village
Bancorp believes that the one-year U.S. Treasury Bill yield is a more realistic
yield on the investment of the conversion proceeds.
A pro forma after-tax return of 3.05% is used for both Indian Village
Bancorp and Indian Village after giving effect to a combined federal and state
income tax rate of 34%. Historical and pro forma per share amounts have been
calculated by dividing historical and pro forma amounts by the number of shares
of common stock indicated in the table.
When reviewing the following table you should consider the following:
. The final column gives effect to the sale of an additional
87,975 shares in the conversion, which may be issued without
any further notice if Keller & Company increases its appraisal
to reflect the results of this offering or changes in the
financial condition or results of operations of Indian Village
or changes in market conditions after the offering begins. See
"The Conversion--Stock Pricing and Number of Shares to be
Issued."
. Since funds on deposit at Indian Village may be withdrawn to
purchase shares of common stock, the amount of funds available
for investment will be reduced by the amount of withdrawals
for stock purchases. The pro forma table does not reflect
withdrawals from deposit accounts.
. Historical per share amounts have been computed as if the
shares of common stock expected to be issued in the conversion
had been outstanding at January 1, 1998. However, neither
historical nor
26
<PAGE>
pro forma stockholders' equity has been adjusted to reflect
the investment of the estimated net proceeds of the sale of
the shares in the conversion, the additional employee stock
ownership plan expense or the proposed management development
and recognition plan expense.
. "Book value" represents the difference between the stated
amounts of Indian Village's assets and liabilities. The
amounts shown do not reflect the liquidation account, which
will be established for the benefit of eligible depositors as
of December 31, 1997 and March 31, 1999, or the federal income
tax consequences of the restoration to income of Indian
Village's special bad debt reserves for income tax purposes,
which would be required in the unlikely event of liquidation.
See "The Conversion--Effects of Conversion to Stock Form on
Depositors and Borrowers of Indian Village" and "Taxation."
The amounts shown for book value do not represent fair market
values or amounts available for distribution to stockholders
in the unlikely event of liquidation.
. The amounts shown as pro forma stockholders' equity per share
do not represent possible future price appreciation or
depreciation of Indian Village Bancorp's common stock.
. The amounts shown do not account for the shares to be reserved
for issuance under the stock option plan, which requires
stockholder approval at a meeting following the conversion.
Recently proposed accounting rules would require Indian
Village Bancorp to recognize compensation expense for stock
options awarded to nonemployee directors.
The following pro forma data, which are based on Indian Village's
retained earnings at December 31, 1998 and net income for the year ended
December 31, 1998, may not represent the actual financial effects of the
conversion or the operating results of Indian Village Bancorp after the
conversion. The pro forma data rely exclusively on the assumptions outlined
above. The pro forma data do not represent the fair market value of Indian
Village Bancorp's common stock, the current fair market value of Indian
Village's or Indian Village Bancorp's assets or liabilities, or the amount of
money that would be available for distribution to shareholders if Indian Village
Bancorp is liquidated after the conversion.
27
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1998
------------------------------------------------
15% Above
Minimum of Maximum of Maximum of
Estimated Estimated Estimated
Valuation Valuation Valuation
Range Range Range
----------- ---------- -----------
433,500 586,500 674,475
Shares Shares Shares
at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share
----------- ---------- -----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Gross proceeds................................................... $ 4,335 $5,865 $ 6,745
Less: estimated expenses........................................ (380) (380) (380)
-------- ------ -------
Estimated net proceeds........................................... 3,955 5,485 6,365
Less: common stock acquired by employee stock ownership plan.... (347) (469) (540)
Less: common stock to be acquired by management development
and recognition plan................................... (173) (235) (270)
-------- ------ -------
Net investable proceeds....................................... $ 3,435 $4,781 $ 5,555
======== ====== =======
Net income:
Historical.................................................... $ 246 $ 246 $ 246
Pro forma income on net proceeds.............................. 104 145 169
Pro forma employee stock ownership plan adjustments (1)....... (15) (21) (24)
Pro forma management development and recognition
plan adjustments (2)....................................... (23) (31) (36)
-------- ------ -------
Pro forma net income....................................... $ 312 $ 339 $ 355
======== ====== =======
Net income per share:
Historical.................................................... $ 0.61 $ 0.45 $ 0.39
Pro forma income on net proceeds.............................. 0.26 0.27 0.27
Pro forma employee stock ownership plan adjustments (1)....... (0.04) (0.04) (0.04)
Pro forma management development and recognition
plan adjustments (2)....................................... (0.06) (0.06) (0.06)
-------- ------ -------
Pro forma net income per share............................. $ 0.77 $ 0.62 $ 0.56
======== ====== =======
Number of shares used to calculate pro forma net income per share 401,132 452,708 624,114
Stockholders' equity (book value):
Historical.................................................... $ 5,102 $5,102 $ 5,102
Estimated net proceeds........................................ 3,955 5,485 6,365
Less: common stock acquired by employee stock ownership plan. (347) (469) (540)
Less: common stock to be acquired by management
development and recognition plan (2)....................... (173) (235) (270)
-------- ------ -------
Pro forma stockholders' equity............................. $ 8,537 $9,883 $10,657
======== ====== =======
Stockholders' equity per share:
Historical.................................................... $ 11.77 $ 8.70 $ 7.56
Estimated net proceeds........................................ 9.12 9.35 9.44
Less: common stock acquired by employee stock ownership plan. (0.80) (0.80) (0.80)
Less: common stock to be acquired by management development
and recognition plan (2)............................ (0.40) (0.40) (0.40)
-------- ------ -------
Pro forma stockholders' equity per share................... $ 19.69 $16.85 $ 15.80
======== ====== =======
Number of shares used to calculate pro forma stockholders' equity
per share..................................................... 433,500 586,500 674,475
Purchase price as a percentage of pro forma stockholders' equity
per share..................................................... 50.79% 59. 53% 63.29%
Purchase price as a multiple of pro forma net income per share... 12.99x 16.13x 17.86x
</TABLE>
28
<PAGE>
- ------------------------
(1) Assumes that the employee stock ownership plan will purchase 8% of the
shares of common stock offered in the conversion. The employee stock
ownership plan will borrow the funds used to acquire these shares from the
net proceeds from the conversion retained by Indian Village Bancorp. The
amount of this borrowing, which will have an interest rate equal to the
prime rate as published in The Wall Street Journal, which is currently
7.75%, has been reflected as a reduction from gross proceeds to determine
estimated net investable proceeds. Indian Village intends to make
contributions to the employee stock ownership plan in amounts at least
equal to the principal and interest requirement of the debt. As the debt is
paid down, stockholders' equity will be increased. Indian Village's payment
of the employee stock ownership plan debt is based upon equal installments
of principal over a 15-year period, assuming a combined federal and state
income tax rate of 34%. Interest income earned by Indian Village Bancorp on
the employee stock ownership plan debt offsets the interest paid by Indian
Village on the employee stock ownership plan loan. No reinvestment is
assumed on proceeds contributed to fund the employee stock ownership plan.
Applicable accounting practices require that compensation expense for the
employee stock ownership plan be based upon shares committed to be released
and that unallocated shares be excluded from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the $10.00 per
share purchase price. See "Management of Indian Village--Benefits--Employee
Stock Ownership Plan."
(2) In calculating the pro forma effect of the management development and
recognition plan, it is assumed that the required stockholder approval has
been received, that the shares were acquired by the management development
and recognition plan on January 1, 1998 in open market purchases at the
$10.00 per share purchase price, that 20% of the amount contributed was an
amortized expense during the period, and that the combined federal and
state income tax rate is 34%. The issuance of authorized but unissued
shares of the common stock instead of open market purchases would dilute
the voting interests of existing stockholders by approximately 3.85%.
For purposes of this table, shares issued under the management development
and recognition plan vest 20% per year and compensation expense is
recognized on a straight-line basis over each vesting period. If the fair
market value per share is greater than $10.00 per share on the date shares
are awarded under the management development and recognition plan, total
management development and recognition plan expense would be greater. The
total estimated management development and recognition plan expense was
multiplied by 20%, which is the total percent of shares for which expense
is recognized in the first year.
The following table shows what pro forma net income and stockholders'
equity per share would be if shares for the management development and
recognition plan were authorized but unissued shares instead of repurchased
shares. The table also shows pre-tax management development and recognition
plan expense.
<TABLE>
<CAPTION>
15% Above
Minimum Maximum Maximum
of of of
Estimated Estimated Estimated
Valuation Valuation Valuation
Range Range Range
----------- ----------- -------------
<S> <C> <C> <C>
Pro forma net income per share:
Year ended December 31, 1998........................... $0.76 $0.61 $0.56
Pro forma stockholders' equity per share:
At December 31, 1998................................... 19.32 16.59 15.58
Pre-tax management development and recognition plan expense:
Year ended December 31, 1998........................... 34,680 46,920 53,958
</TABLE>
29
<PAGE>
SHARES TO BE PURCHASED BY MANAGEMENT WITH SUBSCRIPTION RIGHTS
The following table presents certain information as to the approximate
purchases of common stock by each director and executive officer of Indian
Village, including their associates, as defined by applicable regulations. No
individual has entered into a binding agreement to purchase these shares and,
therefore, actual purchases could be more or less than indicated. Directors and
executive officers and their associates may not purchase more than 35% of the
shares sold in the conversion. For purposes of the following table, sufficient
shares are assumed to be available to satisfy subscriptions in all categories.
Directors, executive officers, their associates, and employees of Indian Village
Bancorp and Indian Village will pay the same price as all other subscribers for
the shares for which they subscribe.
<TABLE>
<CAPTION>
Percent of Percent of
Anticipated Anticipated Shares at Shares at
Number of Dollar Amount Minimum Maximum
Name and Shares to be to be of Estimated of Estimated
Position Purchased(1) Purchased(1) Valuation Range Valuation Range
- --------------- ----------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Rebecca S. Mastin 10,000 $100,000 2.31% 1.71%
Chairperson of the Board
John A. Beitzel 10,000 100,000 2.31 1.71
Vice Chairman of the Board
Marty R. Lindon 10,000 100,000 2.31 1.71
President, Chief Executive Officer
and Director
Michael A. Cochran 15,000 100,000 3.46 2.56
Corporate Secretary and Director
Cindy S. Knisely 7,500 75,000 1.73 1.28
Director
Joanne Limbach 6,500 65,000 1.50 1.11
Director
Vernon E. Mishler 10,000 100,000 2.31 1.71
Director
Lori S. Frantz 4,000 40,000 0.91 0.66
Vice President, Treasurer and Chief
Financial Officer
------ -------- ----- -----
73,000 $730,000 16.84% 12.45%
====== ======== ===== =====
</TABLE>
- ------------------------
(1) Does not include any shares to be awarded under the employee stock
ownership plan and management development and recognition plan or options
to acquire shares under the stock option plan.
30
<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 financial condition and
results of operations of Indian Village. The information contained in this
section should be read in conjunction with the Financial Statements and
accompanying Notes in the back of this prospectus, and with the other sections
of this prospectus.
Operating Strategy
Indian Village's business strategy is to operate as a traditional,
community-oriented savings association dedicated to financing home ownership and
providing quality customer service. Its business consists principally of
attracting retail deposits from the general public and using these funds to
originate mortgage loans secured by one- to four-family residences located
primarily in Tuscarawas County, Ohio. To a lesser extent, Indian Village also
originates multi-family loans, commercial real estate loans and residential
construction loans. Indian Village introduced home equity loans and lines of
credit in May 1996 and began offering other consumer loans in April 1998. Indian
Village intends to attempt to grow its consumer loan portfolio because the
shorter maturities of consumer loans help to manage interest rate risk and
because consumer loans generally earn higher levels of interest income than
mortgage loans. Indian Village is planning to establish a new office in New
Philadelphia. Indian Village believes the new office will help to increase the
overall size of its loan portfolio because New Philadelphia is more populated
and more commercial than Gnadenhutten and because there is no locally owned
financial institution currently headquartered in New Philadelphia.
Indian Village generally retains the loans it originates for long-term
investment. In an effort to meet the varying credit needs of the residents of
its primary market area, Indian Village established a relationship with an
unrelated third party lender in late 1998 under which Indian Village processes
mortgage loan applications on behalf of the lender, who underwrites and funds
the loan at closing. See "Business of Indian Village -- Lending Activities --
Loan Originations, Purchases and Sales" for further information.
Indian Village funds its assets primarily with retail certificates of
deposit. Transaction accounts are a relatively small portion of Indian Village's
deposit base, but it expects to increase their amount with the opening of the
New Philadelphia office. Indian Village also uses advances from the Federal Home
Loan Bank of Cincinnati as a supplemental source of funds.
The conversion will increase the consolidated capital of Indian Village
Bancorp by the amount of the net proceeds. Funds withdrawn from deposit accounts
will decrease interest-bearing liabilities, and new funds used to purchase
shares will increase interest-earning assets. While Indian Village Bancorp
expects these changes to increase its net interest income, Indian Village
Bancorp also expects that the adoption of the management development and
recognition plan and the additional costs of operating as a public company will
increase its noninterest expenses. For additional information regarding the
effects of this offering, see "Risk Factors--Implementation of Benefit Plan Will
Increase Future Compensation Expense and May Lower Indian Village's Net Income"
and "Pro Forma Data." Hiring new employees for the New Philadelphia office and
the other expenses of equipping and operating the office will also increase
noninterest expenses in future periods.
31
<PAGE>
Comparison of Financial Condition at December 31, 1998 and 1997
Total assets increased 10.1% from $36.4 million to $40.0 million. Cash
and cash equivalents decreased from $923,000 to $797,000 at December 31, 1998 to
fund the purchase of land for the new branch office. At December 31, 1998,
Indian Village had time deposits totaling $499,000, which are interest-bearing
deposits with other financial institutions, each with a balance of $100,000 or
less. There were no similar time deposits a year earlier. Securities available
for sale decreased from $7.3 million to $6.2 million at December 31, 1998 as a
result of prepayments, sales and maturities. Loans increased 14.8% from $27.2
million to $31.3 million, primarily as a result of growth in the residential
mortgage loan and consumer loan portfolios. The residential mortgage loan
portfolio increased from $23.0 million to $26.1 million. The consumer loan
portfolio increased from $1.1 million to $2.3 million. Management attributes
this growth to more aggressive promotion of consumer loans and the introduction
of an automobile loan program. Premises and equipment increased from $239,000 to
$447,000 primarily due to the purchase of the land for the New Philadelphia
office at a price of $213,000. Real estate owned increased from $41,000 to
$122,000 because of the foreclosure of a commercial real estate loan secured by
a commercial property located in Gnadenhutten.
Deposits increased only $589,000 from $30.3 million to $30.9 million.
Management attributes this flat deposit growth to increased competition and the
overall lack of growth in the Gnadenhutten market. To offset the lack of deposit
growth, Indian Village increased its Federal Home Loan Bank advances from $1.0
million to $4.0 million in order to fund loans. Total equity increased from $4.9
million to $5.1 million as a result of retained net income.
Comparison of Operating Results for the Years Ended December 31, 1998 and 1997
Net Income. Net income was $246,000 in 1998 compared to $350,000 in
1997. A higher provision for loan losses and increased noninterest expense were
the primary reasons for the decline in net income.
Net Interest Income. Net interest income increased from $1.3 million to
$1.4 million. Total interest income increased from $2.9 million to $3.0 million
primarily as a result of higher average loan balances. Interest on
interest-bearing deposits and federal funds sold decreased from $70,000 to
$46,000 as a result of lower average balances as funds were invested in loans.
Total interest expense increased from $1.6 million to $1.7 million primarily
because of increased interest expense on Federal Home Loan Bank advances due to
higher average outstanding balances. Interest expense on deposits decreased by
$23,000 due to a decrease in the average rate paid.
Provision for Loan Losses. Provisions for loan losses are charged to
operations to bring the total allowance for loan losses to a level considered by
management to be adequate to provide for probable losses based on management's
evaluation of the collectibility of the loan portfolio, including past loan loss
experience, known and inherent risks in the nature and volume of the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions, and other factors. The provision for loan losses was
$60,000 in 1998 compared to no provision in 1997. There was no provision for
loan losses in 1997 because of modest loan growth and the absence of charge-offs
during the year. The provision was increased primarily because of the increased
risk of loss associated with the overall growth and changes in composition of
the loan portfolio, including the consumer loan portfolio which carries a higher
inherent risk of loss than the residential mortgage loan portfolio. In 1998,
charge-offs were $18,000 compared to none in 1997. The allowance for loan losses
was $218,000 at December 31, 1998 and $176,000 at December 31, 1997. Management
deemed the allowance adequate at both dates. Although management uses the best
information available, future adjustments to the allowance may be necessary due
to changes in economic, operating, regulatory and other conditions that may be
beyond Indian Village's control. While Indian Village maintains its allowance
for loan losses at a level which it considers to be adequate to provide for
probable losses, there can be no assurance that further additions will not be
made to the allowance for loan losses and that actual losses will not exceed the
estimated amounts. See "Business of Indian Village--Lending Activities--
Allowance for Loan Losses" for further information.
32
<PAGE>
Noninterest Income. Noninterest income increased from $21,000 to
$29,000 primarily as a result of a $5,000 increase in miscellaneous service fees
and safe deposit box rental income.
Noninterest Expense. Noninterest expense increased from $805,000 to
$950,000 primarily as a result of an increase in salaries and employee benefits
and an increase in other expense. Salaries and employee benefits increased from
$336,000 to $440,000 primarily due to the severance payment to Indian Village's
immediate past President, who was employed from September 1997 to August 1998,
and normal salary increases. The one-time severance payment amounted to $33,000.
Other expense, which primarily includes advertising, regulatory assessments,
postage and supplies as well as other miscellaneous expenses, increased from
$114,000 to $160,000 primarily as a result of increased advertising and
promotion expense associated with the consumer loan program. These increases
were partially offset by a decrease in professional and consulting fees.
Professional and consulting fees decreased from $68,000 to $56,000 primarily as
a result of personnel search fees and a consulting agreement with the past
President of Indian Village in 1997 that were not repeated in 1998. Noninterest
expense is expected to increase in future periods because of the expenses
associated with the proposed stock benefit plans, the costs associated with
operating as a public company, and the costs of staffing and equipping the
proposed new branch office in New Philadelphia, Ohio.
Income Tax Expense. Income tax expense decreased from $180,000 to
$127,000 as a result of lower income before taxes.
33
<PAGE>
Average Balances, Interest and Average Yields/Cost
The following table presents certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities and average yields and
costs. The yields and costs for the periods indicated are derived by dividing
income or expense by the average balances of assets or liabilities,
respectively, for the periods presented. Average balances were derived from
month-end balances. Management does not believe that the use of month-end
balances instead of daily balances causes any material differences in the
information presented.
<TABLE>
<CAPTION>
Year Ended December 31,
At --------------------------------------------------------------
December 31,
1998 1998 1997
----------- ------------------------------ -----------------------------
Average Average
Yield/ Average Yield/ Average Yield/
Rate Balance Interest Rate Balance Interest Rate
------ ------- -------- ------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)......................... 8.03% $28,449 $2,450 8.61% $25,998 $2,285 8.79%
Mortgage-backed securities....... 6.82 3,874 280 7.23 2,964 218 7.35
Investment securities:
Taxable....................... 6.68 3,265 224 6.86 4,499 313 6.96
Non-taxable(2)................ 6.82 502 30 5.98 98 8 8.16
Interest-bearing deposits........ 5.24 976 46 4.71 1,288 70 5.43
---- ------- ------ ------ ------- ------ ------
Total interest-earning assets. 7.77 37,066 3,030 8.17 34,847 2,894 8.30
Noninterest-earning assets....... 1,219 1,105
------- -------
Total assets.................. $38,285 $35,952
======= =======
Interest-bearing liabilities:
Deposits:
Demand accounts............... 2.00 $ 815 16 1.96 $ 643 16 2.49
Savings accounts.............. 3.25 5,263 172 3.27 4,977 162 3.25
Money market accounts......... 3.30 1,777 59 3.32 1,775 59 3.32
Certificates of deposit....... 5.55 22,585 1,283 5.68 23,079 1,316 5.70
---- ------- ------ ------ ------- ------ ------
Total deposits............. 4.92 30,440 1,530 5.03 30,474 1,553 5.10
Federal Home Loan Bank
advances...................... 5.14 2,351 136 5.78 471 24 5.10
---- ------- ------ ------ ------- ------ ------
Total interest-bearing
liabilities................ 4.95 32,791 1,666 5.08 30,945 1,577 5.10
---- ------ ------ ------ ------
Noninterest-bearing liabilities.. 439 353
------- -------
Total liabilities............. 34,716 32,430
Equity........................... 5,055 4,654
------- -------
Total liabilities and equity.. $38,285 $35,952
======= =======
Net interest-earning assets...... $ 4,275 $ 3,902
======= =======
Net interest income/interest
rate spread..................... 2.82% $1,364 3.09% $1,317 3.20%
==== ====== ==== ====== ====
Net interest margin as a
percentage of interest-earning
assets.................... 3.68% 3.78%
====== ======
Ratio of interest-earning assets
to interest-bearing liabilities 113.04% 112.61%
====== ======
</TABLE>
- ----------------------
(1) Average balances include nonaccrual loans.
(2) Average yield for municipal securities are presented on a tax equivalent
basis based on an assumed tax rate of 34%.
34
<PAGE>
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes
on the interest income and interest expense of Indian Village. The rate column
shows the effects attributable to changes in rate (changes in rate multiplied by
prior volume). The volume column shows the effects attributable to changes in
volume (changes in volume multiplied by prior rate). For purposes of this table,
changes attributable to changes in both rate and volume, which cannot be
segregated, have been allocated proportionately based on the absolute value of
the change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
Compared to
Year Ended
December 31, 1997
-----------------------------
Increase (Decrease)
Due to
------------------ --------
Rate Volume Total
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans........................................................................... $ (47) $212 $165
Mortgage-backed securities...................................................... (4) 66 62
Investment securities:
Taxable...................................................................... (4) (85) (89)
Non-taxable(1)............................................................... (3) 25 22
Interest-bearing deposits....................................................... (8) (16) (24)
------ ---- ----
Total interest-earning assets................................................ (66) 202 136
Interest-bearing liabilities:
Deposits:
Demand accounts.............................................................. (4) 4 --
Savings accounts............................................................. 1 9 10
Money market accounts........................................................ -- -- --
Certificates of deposit...................................................... (5) (28) (33)
Federal Home Loan Bank advances................................................. 4 108 112
------ ---- ----
Total interest-bearing liabilities........................................... (4) 93 89
------ ---- ----
Increase (decrease) in net interest income......................................... $ (62) $109 $ 47
====== ==== ====
</TABLE>
- -----------------------------
(1) Municipal securities are presented on a tax equivalent basis based on an
assumed tax rate of 34%.
Market Risk Analysis
General. Indian Village's profitability depends primarily on its net
interest income, which is the difference between the income it receives on its
loan and investment portfolio and its cost of funds, which consists of interest
paid on deposits and borrowings. Net interest income is also affected by the
relative amounts of interest-earning assets and interest-bearing liabilities.
When interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. Indian
Village's profitability is also affected by the level of income and expenses.
Noninterest income includes service charges and fees and gain on sale of
investments. Noninterest expenses primarily include compensation and benefits,
occupancy and equipment expenses, deposit insurance premiums and data processing
expenses. Indian Village's results of operations are also
35
<PAGE>
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government legislation and
regulation and monetary and fiscal policies.
Quantitative Aspects of Market Risk. Indian Village does not maintain a
trading account for any class of financial instrument nor does it engage in
hedging activities or purchase high-risk derivative instruments. Furthermore,
Indian Village has no foreign currency exchange rate risk or commodity price
risk. For information regarding the sensitivity to interest rate risk of Indian
Village's interest-earning assets and interest-bearing liabilities, see the
tables under "Business of Indian Village--Lending Activities--Maturity of Loan
Portfolio," "--Investment Activities" and "--Deposit Activities and Other
Sources of Funds--Deposit Accounts--Time Deposits by Maturities."
Qualitative Aspects of Market Risk. Indian Village has sought to reduce
the exposure of its earnings to changes in market interest rates by attempting
to manage the mismatch between asset and liability maturities and interest
rates. The principal element in achieving this objective is to increase the
interest rate sensitivity of Indian Village's interest-earning assets by
originating loans with interest rates that periodically adjust to market
conditions for its portfolio and by attempting to originate shorter-term
consumer loans. Indian Village relies on retail deposits as its primary source
of funds. Management believes retail deposits, compared to brokered deposits,
reduce the effects of interest rate fluctuations because they generally
represent a more stable source of funds.
In order to encourage institutions to reduce their interest rate risk,
the Office of Thrift Supervision adopted a rule incorporating an interest rate
risk component into the risk-based capital rules. Using data compiled by the
Office of Thrift Supervision, Indian Village receives a report which measures
interest rate risk by modeling the change in net portfolio value over a variety
of interest rate scenarios. This procedure for measuring interest rate risk was
developed by the Office of Thrift Supervision to replace the "gap" analysis,
which is the difference between interest-earning assets and interest-bearing
liabilities that mature or reprice within a specific time period. Net portfolio
value is the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The calculation is intended to illustrate the
change in net portfolio value that will occur upon an immediate change in
interest rates of at least 200 basis points with no effect given to any steps
that management might take to counter the effect of that interest rate movement.
Under Office of Thrift Supervision regulations, an institution with a greater
than "normal" level of interest rate risk must take a deduction from total
capital for purposes of calculating its risk-based capital. The Office of Thrift
Supervision, however, has delayed the implementation of this regulation. An
institution with a "normal" level of interest rate risk is defined as one whose
"measured interest rate risk" is less than 2.0%. Institutions with assets of
less than $300 million and a risk-based capital ratio of more than 12.0% are
exempt. Indian Village is exempt because of its asset size. If the proposed
regulation was implemented and applied at December 31, 1998, Indian Village
believes that its level of interest rate risk would have caused it to be treated
as an institution with greater than "normal" interest rate risk.
36
<PAGE>
The Office of Thrift Supervision provides Indian Village with the
information presented in the following table. It presents the change in Indian
Village's net portfolio value, at December 31, 1998, that would occur upon an
immediate change in interest rates based on Office of Thrift Supervision
assumptions, but without effect to any steps that management might take to
counteract that change.
<TABLE>
<CAPTION>
Net Portfolio as % of
Net Portfolio Value Portfolio Value of Assets
------------------------------------------------ ------------------------------
Change in
Interest Rates in
Basis Points
("bp") Net Portfolio Change
(Rate Shock) Amount $ Change % Change Value Ratio (bp)
- ------------------ ------------------------------------------------ ------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
400 $2,256 $(3,319) (60)% 6.19% (748)
300 3,181 (2,394) (43) 8.46 (521)
200 4,109 (1,467) (26) 10.59 (308)
100 4,952 (623) (11) 12.41 (126)
Static 5,576 -- -- 13.67 --
(100) 5,992 417 7 14.44 77
(200) 6,336 760 14 15.03 136
(300) 6,758 1,183 21 15.75 209
(400) 7,043 1,467 26 16.19 252
</TABLE>
The Office of Thrift Supervision uses certain assumptions in assessing
the interest rate risk of savings associations. These assumptions relate to
interest rates, loan prepayment rates, deposit decay rates, and the market
values of certain assets under differing interest rate scenarios, among others.
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the method of analysis presented in the foregoing
table. For example, although certain assets and liabilities may have similar
maturities or periods to repricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable rate mortgage loans,
have features which restrict changes in interest rates on a short-term basis and
over the life of the asset. Further, if interest rates change, expected rates of
prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.
Liquidity and Capital Resources
Indian Village's primary sources of funds are maturities and
prepayments of investment securities, customer deposits, proceeds from principal
and interest payments on loans and Federal Home Loan Bank of Cincinnati
advances. While investment securities maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows, investment securities
prepayments and mortgage prepayments are greatly influenced by general interest
rates, economic conditions and competition.
Indian Village must maintain an adequate level of liquidity to ensure
the availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. Indian Village generally maintains sufficient cash and
short-term investments to meet short-term liquidity needs. At December 31, 1998,
cash and interest-bearing deposits and time deposits totaled $1.3 million, and
investment securities classified as available-for-sale totaled $6.2 million,
which together totaled 18.7%
37
<PAGE>
of total assets. At December 31, 1998, Indian Village had outstanding advances
of $4.0 million. At December 31, 1998, Indian Village was eligible to borrow up
to $20.0 million with the Federal Home Loan Bank of Cincinnati.
Office of Thrift Supervision regulations require savings institutions
to maintain an average daily balance of liquid assets, consisting of cash and
eligible investments, equal to at least 4.0% of the average daily balance of its
net withdrawals, deposits and short-term borrowings. Indian Village's actual
liquidity ratio at December 31, 1998 was 13.4%. See "--Comparison of Financial
Condition at December 31, 1998 and 1997" and "Business of Indian
Village--Investment Activities."
Indian Village's primary investing activity is the origination of one-
to four-family mortgage loans. During the years ended December 31, 1998 and
1997, Indian Village originated $5.1 million and $4.8 million of these loans,
respectively. At December 31, 1998, Indian Village had loan commitments totaling
$2.4 million. Indian Village anticipates that it will have sufficient funds
available to meet current loan commitments. Certificates of deposit that are
scheduled to mature in less than one year from December 31, 1998 totaled $14.3
million. Historically, Indian Village has been able to retain a significant
amount of its deposits as they mature. In addition, management of Indian Village
believes that it can adjust the offering rates of certificates of deposit to
retain deposits in changing interest rate environments. If Indian Village does
not retain a significant portion of these deposits, Indian Village could use
Federal Home Loan Bank of Cincinnati advances to fund deposit withdrawals, which
would increase interest expense if the average rate paid on advances exceeds the
average rate paid on deposits of similar duration.
Office of Thrift Supervision regulations require Indian Village to
maintain specific amounts of regulatory capital. As of December 31, 1998, Indian
Village complied with all regulatory capital requirements as of that date with
tangible, core and risk-based capital ratios of 12.5%, 12.5% and 25.8%,
respectively. For a detailed discussion of regulatory capital requirements, see
"Regulation--Federal Regulation of Savings Associations--Capital Requirements."
See also "Historical And Pro Forma Regulatory Capital Compliance."
Year 2000 Issues
Indian Village uses computers, computer software and equipment
utilizing embedded microprocessors that will be effected by the year 2000 issue.
The year 2000 issue exists because many computer systems and applications use
two-digit date fields to designate a year. As the century date change occurs,
date-sensitive systems may recognize the year 2000 as 1900, or not at all. This
inability to recognize or properly treat the year 2000 may cause erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.
Indian Village's year 2000 committee consists of Cindy S. Knisely,
Michael A. Cochran, Marty R. Lindon and Lori S. Frantz. The committee reports
monthly to the Board of Directors. The committee has developed and is
implementing a comprehensive plan to make all information and non-information
technology assets year 2000 compliant. The plan is comprised of the following
phases:
1. Awareness - Educational initiatives on year 2000 issues and
concerns. This phase is ongoing, especially as it relates to
informing customers of Indian Village's year 2000
preparedness.
2. Assessment - Inventory of all technology assets and
identification of third-party vendors and service providers.
Indian Village has analyzed the operation of all
date-sensitive computer systems and identified in writing all
third-party vendors and service providers associated with
these systems. This phase was completed as of June 30, 1998.
3. Renovation - Review of vendor and service providers responses
to Indian Village's year 2000 inquiries and development of a
follow-up plan and timeline. This phase was completed as of
December 31, 1998.
38
<PAGE>
4. Validation - Testing all systems and third-party vendors for
year 2000 compliance. Indian Village is currently in this
phase of its plan. Indian Village has replaced all in-house
equipment, such as teller station equipment, with year 2000
compliant equipment. A third-party service bureau processes
all customer transactions and has completed upgrades to its
systems to be year 2000 compliant. Indian Village conducted
in-house proxy testing in August 1998 and on-line testing in
February 1999. The results of both forms of testing were
satisfactory and without material exceptions. Other parties
whose year 2000 compliance may effect Indian Village include
the Federal Home Loan Bank of Cincinnati, brokerage firms, the
operator of Indian Village's automated teller machines network
and Indian Village's pension plan administrator. These third
parties have indicated their compliance or intended
compliance. Where it is possible to do so, Indian Village has
scheduled testing with these third parties. Where testing is
not possible, Indian Village will rely on certifications from
vendors and service providers.
5. Implementation - Replacement or repair of non-compliant
technology. As Indian Village progresses through the
validation phase, Indian Village expects to determine
necessary remedial actions and provide for their
implementation. Indian Village has already implemented a new
year 2000 compliant computerized teller system and has
verified the year 2000 compliance of its computer hardware and
other equipment containing embedded microprocessors. Indian
Village's plan provides for year 2000 readiness to be
completed by June 30, 1999.
Management of Indian Village has had discussions with a majority of its
commercial borrowers, including all of its large borrowers, regarding their year
2000 readiness. These discussions have revealed that these borrowers are not
heavily dependent on computers. Accordingly, Indian Village does not believe
that its commercial borrowers will be adversely affected by the year 2000.
Indian Village estimates its total cost to replace computer equipment,
software programs or other equipment containing embedded microprocessors that
were not year 2000 compliant to be approximately $35,000, none of which had been
incurred as of December 31, 1998. System maintenance or modification costs are
charged to expense as incurred, while the cost of new hardware, software or
other equipment is capitalized and amortized over their estimated useful lives.
Indian Village does not separately track the internal costs and time that its
own employees spend on year 2000 issues, which are principally payroll costs.
Because Indian Village depends substantially on its computer systems
and those of third parties, the failure of these systems to be year 2000
compliant could cause substantial disruption of Indian Village's business and
could have a material adverse financial impact on Indian Village. Failure to
resolve year 2000 issues presents the following risks to Indian Village, which
it believes reflects its most reasonably likely worst-case scenario:
1. Indian Village could lose customers to other financial institutions,
resulting in a loss of revenue, if Indian Village's third-party service bureau
is unable to properly process customer transactions;
2. Governmental agencies, such as the Federal Home Loan Bank of
Cincinnati, and correspondent institutions could fail to provide funds to Indian
Village, which could materially impair Indian Village's liquidity and affect
Indian Village's ability to fund loans and deposit withdrawals;
3. Concern on the part of depositors that year 2000 issues could impair
access to their deposit account balances could result in Indian Village
experiencing deposit outflows before December 31, 1999; and
39
<PAGE>
4. Indian Village could incur increased personnel costs if additional
staff is required to perform functions that inoperative systems would have
otherwise performed.
Management believes that it is impossible to estimate the potential
lost revenue due to the year 2000 issue, as the extent and longevity of any
potential problem cannot be predicted. Because substantially all of Indian
Village's loan portfolio consists of loans to individuals rather than commercial
enterprises, management believes that year 2000 issues will not impair
materially the ability of Indian Village's borrowers to repay their debt.
There can be no assurances that Indian Village's year 2000 plan will
effectively address the year 2000 issue, that Indian Village's estimates of the
timing and costs of completing the plan will ultimately be accurate or that the
impact of any failure of Indian Village or its third-party vendors and service
providers to be year 2000 compliant will not have a material adverse effect on
Indian Village's business, financial condition or results of operations.
Indian Village has a business resumption contingency plan for year 2000
compliance that calls for Indian Village to resort to manual processing of
transactions until the computer systems resume operation.
Impact of Accounting Pronouncements and Regulatory Policies
Accounting for Stock-Based Compensation. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
establishes financial accounting and reporting standards for stock-based
employee compensation plans. This statement encourages all entities to adopt a
new method of accounting to measure compensation cost of all employee stock
compensation plans based on the estimated fair value of the award at the date it
is granted. Companies are, however, allowed to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting, which
generally does not result in compensation expense recognition for most plans.
Companies that elect to remain with the existing accounting method are required
to disclose in a footnote to the financial statements pro forma net income and,
if presented, earnings per share, as if this statement had been adopted. The
accounting requirements of this statement are effective for transactions entered
into in fiscal years that begin after December 15, 1995; however, companies are
required to disclose information for awards granted in their first fiscal year
beginning after December 15, 1994. Management expects to use the financial
statement footnote disclosure option after the conversion and the adoption of
stock based benefit plans.
Earnings Per Share. Statement of Financial Accounting Standards No.
128, "Earnings Per Share," issued in February 1997, establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. It replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share and requires the dual presentation of basic and diluted earnings per
share on the face of the income statement. This statement is effective for
financial statements issued for periods after December 15, 1997 including
interim periods; earlier applications are not permitted. This statement requires
restatement of all prior period earnings per share data presented.
Disclosure About Segments. Statement of Financial Accounting Standards
No. 131, "Disclosure About Segments of an Enterprise and Related Information,"
issued in June 1997, establishes standards for disclosure about operating
segments in annual financial statements and selected information in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The statement
supersedes Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise." The statement becomes
effective for Indian Village's fiscal year ending December 31, 1998, and
requires that comparative information from earlier years be restated to conform
to its requirements. Management of Indian Village has determined that Indian
Village operates in only one segment, banking, and therefore additional
disclosures are not required.
40
<PAGE>
Accounting for Derivative Instruments and Hedging Activities. Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," issued in June 1998, standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts. The Statement requires entities to carry all
derivative instruments in the statement of financial position at fair value. The
accounting for changes in the fair value, gains and losses, of a derivative
instrument depends on whether it has been designated and qualifies as part of a
hedging relationship and, if so, on the reasons for holding it. If certain
conditions are met, entities may elect to designate a derivative instrument as a
hedge of exposures to changes in fair value, cash flows or foreign currencies.
The statement is effective for financial statements issued for periods beginning
after June 15, 1999. Currently, Indian Village is evaluating the effects of the
statement.
Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise.
Statement of Financial Accounting Standards No. 134, "Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise," issued in October 1998, amends
Statement of Financial Accounting Standards No. 65, "Accounting for Certain
Mortgage Banking Activities," and Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities," for
years beginning after December 15, 1998. Currently, neither Indian Village
Bancorp nor Indian Village conduct any mortgage banking activities.
Effect of Inflation and Changing Prices
The financial statements and related financial data presented herein
have been prepared following generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The primary impact of inflation is
reflected in the increased cost of Indian Village's operations. Unlike most
industrial companies, virtually all the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates generally have a
more significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
BUSINESS OF INDIAN VILLAGE BANCORP
General
Indian Village Bancorp was organized as a Pennsylvania business
corporation at the direction of Indian Village in March 1999 to become the
Holding Company for Indian Village upon completion of the conversion. As a
result of the conversion, Indian Village will be a wholly owned subsidiary of
Indian Village Bancorp and all of the issued and outstanding capital stock of
Indian Village will be owned by Indian Village Bancorp.
Business
Before the completion of the conversion, Indian Village Bancorp will
not engage in any significant activities other than of an organizational nature.
Upon completion of the conversion, Indian Village Bancorp's sole business
activity will be the ownership of the outstanding capital stock of Indian
Village. In the future, Indian Village Bancorp may acquire or organize other
operating subsidiaries, although there are no current plans, arrangements,
agreements or understandings, written or oral, to do so.
Initially, Indian Village Bancorp will neither own nor lease any
property but will instead use the premises, equipment and furniture of Indian
Village with the payment of appropriate rental fees, as required by applicable
law and regulations.
41
<PAGE>
Since Indian Village Bancorp will only hold the outstanding capital
stock of Indian Village after the conversion, the competitive conditions
applicable to Indian Village Bancorp will be the same as those confronting
Indian Village. See "Business of Indian Village--Competition."
BUSINESS OF INDIAN VILLAGE
General
Indian Village was founded in 1923 as an Ohio-chartered mutual savings
association. In 1938 Indian Village adopted a federal mutual charter under the
name "Indian Village Federal Savings and Loan Association." Indian Village
changed its name to "Indian Village Community Bank" on January 20, 1999. Indian
Village is regulated by the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation. Indian Village's deposits have been federally insured
since 1938 and are currently insured by the Federal Deposit Insurance
Corporation under the Savings Association Insurance Fund. Indian Village has
been a member of the Federal Home Loan Bank System since 1934.
Indian Village operates as a traditional savings association,
specializing in single-family residential mortgage lending and savings deposits.
Indian Village's business consists primarily of attracting retail deposits from
the general public and using those funds to originate fixed-rate residential
mortgage loans. Indian Village generally holds its loans for long-term
investment purposes. See "--Lending Activities." Because a large portion of
Indian Village's assets consist of fixed-rate mortgage loans, Indian Village's
earnings could be hurt by rising interest rates. See "Risk Factors -- Rising
Interest Rates Could Hurt Indian Village's Profits."
Indian Village introduced home equity loans and lines of credit to its
product line in May 1996 and other consumer loans in April 1998. Because these
loans often have shorter maturities than residential mortgage loans, they help
reduce Indian Village's interest rate risk associated with its fixed-rate
residential mortgage loans. However, consumer loans are inherently riskier than
residential mortgage loans and the balance of Indian Village nonperforming
consumer loans has increased in recent periods. See "Risk Factors -- Indian
Village's Goal to Increase Consumer Lending May Hurt Both Asset Quality and Net
Income" and "Recent Developments--Non- Performing Assets and Delinquencies" for
further information.
Market Area
Tuscarawas County in east central Ohio is Indian Village's primary
market area, although it also originates loans to borrowers and accepts deposits
from individuals residing in contiguous counties. Much of Tuscarawas County is
rural with dairy and grain farming being the primary businesses. Light
manufacturing and services are located in and around the towns of Dover and New
Philadelphia. Major industries include steel, machine tooling, chemicals and
heavy machinery.
Because Tuscarawas County is primarily rural and its economy is based
predominately in agriculture, its demographics are generally weaker, on average,
than Ohio and the U.S. as a whole. According to published statistics, Tuscarawas
County's 1998 population was slightly less than 90,000 and consisted of
approximately 34,000 households. The population increased approximately 5.6%
from 1990. Per capita income in 1998 for Tuscarawas County was approximately
$14,000, which was less than both the Ohio average of approximately $17,000 and
the U.S. average of approximately 18,000. Likewise, 1998 median household income
for Tuscarawas County was approximately $31,600 compared to approximately
$35,400 and $38,100 for Ohio and the U.S., respectively. See "Risk Factors --
Indian Village's Business Depends Heavily on Economic Conditions Within its
Primary Market Area and the Rural Nature of the Area Limits Growth Prospects."
42
<PAGE>
Competition
Indian Village faces intense competition for the attraction of deposits
and origination of loans in its primary market area. Its most direct competition
for deposits has historically come from the several commercial banks operating
in Indian Village's primary market area and, to a lesser extent, from other
financial institutions, such as brokerage firms, credit unions and insurance
companies. Particularly in times of high interest rates, Indian Village has
faced additional significant competition for investors' funds from short-term
money market securities and other corporate and government securities. Indian
Village's competition for loans comes primarily from the commercial banks and
loan brokers operating in its primary market area. Competition for deposits and
the origination of loans may limit Indian Village's growth in the future. See
"Risk Factors--Competition Has Hurt Indian Village's Net Interest Income."
Lending Activities
General. At December 31, 1998, Indian Village's net loans totaled $31.3
million, or 78.1% of total assets. Indian Village has concentrated its lending
activities on fixed-rate one- to four-family mortgage loans, with these loans
amounting to 82.1% of loans at December 31, 1998. To a lesser extent, Indian
Village also originates multi-family, commercial real estate, land, residential
construction loans, and consumer loans. Indian Village occasionally purchases
participation interests in multi-family loans originated by other lenders and
secured by properties located in other areas of Ohio.
Loan Portfolio Analysis. The following table presents the composition
of Indian Village's loan portfolio at the dates indicated. Indian Village had no
concentration of loans exceeding 10% of total loans receivable other than as
disclosed below.
43
<PAGE>
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------
1998 1997
----------------------- ----------------------
Percent Percent
Amount of Total Amount of Total
---------- ----------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate loans:
One- to four-family............................... $26,080 82.57% $23,002 83.59%
Multi-family...................................... 1,736 5.50 1,447 5.26
Commercial........................................ 647 2.05 763 2.77
Construction...................................... 677 2.14 1,107 4.02
Land.............................................. 135 0.43 45 0.16
------- ------ ------- -------
Total real estate loans........................ 29,275 92.69 26,364 95.80
Consumer loans:
Home equity loans and lines of credit............. 887 2.81 842 3.06
Home improvement loans............................ 301 0.95 43 0.16
Automobile........................................ 516 1.63 -- --
Loans on deposit accounts......................... 294 0.93 207 0.75
Unsecured......................................... 12 0.04 -- --
Other............................................. 274 0.87 -- --
------- ------ ------- -------
Total consumer loans........................... 2,284 7.23 1,092 3.97
Commercial business loans............................ 27 0.08 62 0.23
------- ------ ------- -------
Total loans.................................... 31,586 100.00% 27,518 100.00%
====== ======
Less:
Net deferred loan fees and costs.................. (54) (49)
Loans in process.................................. (40) (52)
Allowance for loan losses......................... (218) (176)
------- -------
Net loans...................................... $31,274 $27,241
======= =======
</TABLE>
One- to Four-Family Real Estate Loans. Indian Village's primary lending
activity is the origination of loans secured by one- to four-family residences
located in its primary market area. At December 31, 1998, $26.1 million, or
82.6%, of Indian Village's total loans consisted of one- to four-family loans.
One- to four-family mortgage loans are generally held in Indian Village's
portfolio for long-term investment.
At December 31, 1998, Indian Village's residential mortgage loan
portfolio consisted primarily of fixed-rate fully amortizing loans with
maturities ranging between 15 and 25 years. Management establishes the loan
interest rate based on market conditions. Indian Village generally retains these
loans in its portfolio because they generally do not conform to guidelines for
sale in the secondary market. These nonconforming characteristics generally
relate to the characteristics of the real property, such as excess acreage or
the lack of site surveys, rather than the credit worthiness of the borrower.
Indian Village generally underwrites and documents its residential mortgage
loans to secondary market standards.
44
<PAGE>
Recently, in order to improve its interest rate risk exposure, Indian
Village began offering adjustable rate mortgage loans with an interest rate
based on the one year Constant Maturity Treasury Bill index that adjusts every
year and with terms up to 25 years. These loans have a minimum interest rate of
6% and a maximum interest rate of 16% over the life of the loan. Interest rate
adjustments are limited to no more than 2% during any adjustment period. At
December 31, 1998, adjustable rate mortgage loans secured by one- to four-family
residences amounted to $138,000.
Adjustable rate mortgage loans, which Indian Village intends to
originate and retain in its portfolio, will help reduce Indian Village's
exposure to changes in interest rates. There are, however, unquantifiable credit
risks resulting from the potential of increased costs due to changed rates to be
paid by the borrower. It is possible that during periods of rising interest
rates the risk of default on adjustable rate mortgage loans may increase as a
result of repricing and the increased payments required by the borrower. In
addition, although adjustable rate mortgage loans allow Indian Village to
increase the sensitivity of its asset base to changes in interest rates, the
extent of this interest sensitivity is limited by the annual and lifetime
interest rate adjustment limits. Because of these considerations Indian Village
has no assurance that yields on adjustable rate mortgage loans will be
sufficient to offset increases in Indian Village's cost of funds during periods
of rising interest rates. Indian Village believes these risks, which have not
had a material adverse effect on Indian Village to date, generally are less than
the risks associated with holding fixed-rate loans in its portfolio in a rising
interest rate environment.
Indian Village generally requires an acceptable attorney's opinion on
the status of its lien on all loans where real estate is the primary source of
security. Indian Village also requires that fire and casualty insurance and, if
appropriate, flood insurance be maintained in an amount at least equal to the
outstanding loan balance.
Indian Village's one- to four-family residential mortgage loans do not
exceed 80% of the appraised value of the security property. Indian Village does
not use private mortgage insurance which would permit it to make loans with
higher loan-to-value ratios. An independent certified appraiser generally
appraises all properties.
Multi-family and Commercial Real Estate Loans. Indian Village
occasionally originates and purchases mortgage loans for the acquisition and
refinancing of multi-family and commercial real estate properties. At December
31, 1998, $1.7 million, or 5.5%, of Indian Village's total loans, consisted of
loans secured by multi-family residential property, and $647,000, or 2.1%, of
Indian Village's total loans, consisted of loans secured by commercial real
estate. All purchased participation interests are underwritten according to the
same standards that Indian Village would use if it were originating the
underlying loans. Indian Village has no written or oral commitments with any
institution to purchase predetermined numbers or types of participation
interests. At December 31, 1998, purchased participation interests amounted to
$62,000.
At December 31, 1998, the largest multi-family loan had an outstanding
balance of $450,000, was secured by seven duplex properties located in New
Philadelphia, Ohio, and was performing according to its original terms.
At December 31, 1998, Indian Village's commercial real estate loans are
secured by churches, storefronts, a strip shopping center and a warehouse, all
of which are located in Ohio. At December 31, 1998, Indian Village's largest
commercial real estate loan had an outstanding balance of $226,000. The loan is
secured by a strip shopping center located in Rittman, Ohio. At December 31,
1998, this loan was performing according to its original terms.
Multi-family and commercial real estate loans are fully amortizing
loans that are generally originated with fixed interest rates, but are
occasionally originated with variable rates. Fixed rate loans are originated for
terms up to 25 years. Variable rate loans are originated for terms up to 25
years. The interest rate on variable rate loans adjusts at either one, three or
five year intervals.
Multi-family and commercial real estate lending affords Indian Village
an opportunity to receive interest at rates higher than those generally
available from one- to four-family residential lending. However, loans secured
by
45
<PAGE>
these properties usually are greater in amount and are more difficult to
evaluate and monitor and, therefore, involve a greater degree of risk than one-
to four-family residential mortgage loans. Because payments on loans secured by
income producing properties are often dependent on the successful operation and
management of the properties, repayment of these loans may be affected by
adverse conditions in the real estate market or the economy. Indian Village
seeks to minimize these risks by limiting the maximum loan-to-value ratio to up
to 80% for multi-family and commercial real estate loans and by strictly
scrutinizing the financial condition of the borrower, the cash flow of the
project, the quality of the collateral and the management of the property
securing the loan. Indian Village also generally obtains loan guarantees from
financially capable parties based on a review of personal financial statements.
Residential Construction Loans. Indian Village originates residential
construction loans to local home builders and to individuals for the
construction and acquisition of personal residences. At December 31, 1998,
residential construction loans amounted to $677,000, or 2.1% of Indian Village's
total loans.
Indian Village's construction loans to builders generally have fixed
interest rates and are for a term of six months. Loans to builders are typically
made with a maximum loan to value ratio of 80%. These loans are usually made to
the builder before there is an identified buyer for the completed home. Indian
Village generally lends to no more than three builders with whom it has long
standing relationships and limits each builder to no more than three homes under
construction at a time. At December 31, 1998, the largest amount of construction
loans outstanding to one builder was $220,000, $65,000 of which was for
speculative construction. Construction loans to individuals are made on the same
terms as Indian Village's one- to four-family mortgage loans, but provide for
the payment of interest only during the construction phase, which is usually six
months with a contingency for an additional six months. At the end of the
construction phase, the loan converts to a permanent mortgage loan.
Before making a commitment to fund a construction loan, Indian Village
requires an appraisal of the property by an independent certified appraiser.
Indian Village also reviews and inspects each project before disbursement of
funds during the term of the construction loan. Loan proceeds are disbursed
after inspection based on the percentage of completion.
Construction lending affords Indian Village the opportunity to earn
higher interest rates with shorter terms to maturity relative to single-family
permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated cost of the
project. These loans are generally more difficult to evaluate and monitor. If
the estimate of construction cost proves to be inaccurate, Indian Village may be
required to advance funds beyond the amount originally committed to protect the
value of the project. If the estimate of value upon completion proves to be
inaccurate, Indian Village may be confronted with a project whose value is
insufficient to assure full repayment. Projects may also be jeopardized by
disagreements between borrowers and builders and by the failure of builders to
pay subcontractors. Loans to builders to construct homes for which no purchaser
has been identified carry more risk because the payoff for the loan depends on
the builder's ability to sell the property before the construction loan is due.
Indian Village has attempted to minimize the foregoing risks by, among
other things, limiting its construction lending to residential properties. It is
also Indian Village's general policy to obtain regular financial statements from
builders so that it can monitor their financial strength and ability to repay.
Land Loans. Indian Village occasionally originates loans secured by
unimproved land. These loans have terms of up to 15 years and generally have
fixed interest rates and loan-to-value ratios of up to 65%. At December 31,
1998, land loans totaled $135,000, or 0.4% of total loans.
46
<PAGE>
Consumer Loans. Indian Village introduced home equity loans and lines
of credit in May 1996 and other consumer loans in April 1998. At December 31,
1998, consumer loans amounted to $2.3 million, or 7.2% of total loans. Indian
Village intends to increase its emphasis on consumer loans because they have
shorter maturities than real estate mortgage loans, which helps to reduce Indian
Village's interest rate risk exposure, and higher yields than real estate
mortgage loans.
Home equity loans are generally fixed rate loans that fully amortize
over terms up to 10 years. Home equity lines of credit are written with variable
interest rates. The loan-to-value ratios on both home equity loans and lines of
credit are generally limited to 80%, taking into account the outstanding balance
of the first mortgage loan.
Home improvement loans are generally fixed-rate loans that fully
amortize over terms up to 15 years. Home improvement loans are generally secured
by a second mortgage on the property being improved. The loan-to-value ratio
generally does not exceed 80%, taking into account the outstanding balance of
the first mortgage loan.
Automobile loans are generally fixed rate loans. Loans on new
automobiles are written with terms up to 66 months and with loan-to-value ratios
not exceeding 100% for new cars and 90% for used cars. Loans on used cars are
written for lesser terms depending on the age of the vehicle. Indian Village
does not engage in indirect consumer lending.
Loans on deposit accounts generally carry interest rates up to 2% above
the rate paid on the deposit account securing the loan. The terms are generally
written for terms not exceeding five years, but may also be written as renewable
short term interest-only demand loans.
At December 31, 1998, Indian Village had other consumer loans totaling
$274,000. These loans generally consist of loans secured by various personal
property other than real estate and secured lines of credit.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or secured by rapidly
depreciating assets such as automobiles. In these cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy. See
"Risk Factors -- Indian Village's Goal to Increase Consumer Lending May Hurt
Both Asset Quality and Net Income" and "Recent Developments" for a discussion of
Indian Village's non-performing consumer loans.
Commercial Business Loans. Indian Village does not actively originate
commercial business loans. These loan are generally fixed-rate loans with terms
up to five years and secured by vehicle and business equipment. At December 31,
1998, commercial business loans amounted to $27,000 or 0.1% of total loans.
Loans to One Borrower. The maximum amount that Indian Village may lend
to one borrower is limited by federal regulations. At December 31, 1998, Indian
Village's regulatory limit on loans to one borrower was $771,000. At that date,
Indian Village's largest amount of loans to one borrower, including the
borrower's related interests, was $552,000 and consisted of one multi-family
loan and three residential mortgage loans. These loans were performing according
to their original terms at December 31, 1998.
47
<PAGE>
Maturity of Loan Portfolio. The following table presents certain
information at December 31, 1998 regarding the dollar amount of loans maturing
in Indian Village's portfolio based on their contractual terms to maturity, but
does not include potential prepayments. Demand loans, loans having no stated
schedule of repayments and no stated maturity, and overdrafts are reported as
becoming due within one year. Loan balances do not include undisbursed loan
proceeds, unearned discounts, unearned income and allowance for loan losses.
<TABLE>
<CAPTION>
At December 31, 1998
----------------------------------------------------------------------
Multi-
One- to Family and
Four- Commercial Commercial Total
Family(1) Real Estate Construction Consumer Business Loans
--------- ----------- ----------- --------- ---------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts due in:
One year or less....................... $ 95 $ -- $ -- $ 112 $-- $ 207
More than one year to three years...... 201 13 -- 589 -- 803
More than three years to five years.... 744 181 -- 370 27 1,322
More than five years to 10 years....... 3,396 594 -- 106 -- 4,096
More than 10 years to 15 years......... 14,084 562 214 119 -- 14,979
More than 15 years..................... 7,695 1,033 463 988 -- 10,179
------- ------ ---- - ------ --- -------
Total amount due.................... $26,215 $2,383 $677 $2,284 $27 $31,586
======= ====== ==== ====== === =======
</TABLE>
- -------------------------------
(1) Includes land loans.
The following table presents the dollar amount of all loans due after
December 31, 1999, which have fixed interest rates and have floating or
adjustable interest rates.
<TABLE>
<CAPTION>
Due After December 31, 1999
------------------------------------
Fixed- Adjustable-
Rate Rate Total
---------- ---------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
Real estate loans:
One- to four-family............................. $25,851 $ 138 $25,989
Multi-family.................................... 1,174 562 1,736
Commercial...................................... 647 -- 647
Construction................................... 463 214 677
Land............................................ 131 -- 131
------- ------- -------
Total real estate loans.................... 28,266 914 29,180
Consumer loans.................................. 1,547 625 2,172
Commercial business loans....................... 27 -- 27
------- ------- -------
Total loans................................ $29,840 $1,539 $31,379
======= ====== =======
</TABLE>
48
<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of the loans. The average life of a loan is substantially less than
its contractual term because of prepayments. In addition, due-on-sale clauses on
loans generally give Indian Village the right to declare loans immediately due
and payable if, among other things, the borrower sells the real property with
the mortgage and the loan is not repaid. The average life of a mortgage loan
tends to increase, however, when current mortgage loan market rates are
substantially higher than rates on existing mortgage loans and, conversely,
tends to decrease when rates on existing mortgage loans are substantially higher
than current mortgage loan market rates.
Loan Solicitation and Processing. Indian Village's lending activities
follow written, non-discriminatory, underwriting standards and loan origination
procedures established by Indian Village's Board of Directors and management.
Loan originations come from a number of sources. The customary sources of loan
originations are realtors, referrals and existing customers. Indian Village does
not utilize mortgage brokers or other third-party originators. Loans less than
or equal to $100,000 may be approved by Marty R. Lindon and John A. Beitzel,
jointly. Loans above $100,000 but less than $200,000 are approved by the Loan
Committee. Loans equal to or greater than $200,000 are approved by the full
Board of Directors.
Loan Originations, Purchases and Sales. Indian Village primarily
originates fixed-rate mortgage loans with amortization terms of up to 25 years.
In late 1998, Indian Village began originating mortgage loans for
Countrywide Home Loans Inc., an unrelated party. Generally, these loans are
30-year fixed rate mortgage loans that Indian Village chooses not to originate
for its portfolio, either for investment or for sale, because of interest rate
risk management, or loans that do not meet the credit standards for loans that
Indian Village retains in its portfolio. Indian Village's functions are limited
to accepting the application, obtaining credit reports and appraisals, verifying
employment history and other application processing functions. Indian Village
generally receives a processing fee equal to 1% of the loan balance as
compensation. Countrywide underwrites the loan, issues any interest rate
commitment to the borrower, writes the loan on its own loan documents and funds
the loan at closing. These loans never become an asset of Indian Village,
exposing it to credit risk or interest rate risk. Furthermore, Countrywide has
no right of recourse against Indian Village on any of these loans. During 1998,
Indian Village originated an immaterial dollar amount of loans under this
program and recorded an immaterial amount of income.
Occasionally, Indian Village purchases participation interests in
multi-family loans secured by properties located in Ohio but outside of its
primary market area. Indian Village generally limits its participation interest
to between 5% and 25%. Indian Village has established a policy that limits the
maximum participation interest per loan to $500,000 or less. Generally, the lead
lender retains the servicing rights. Indian Village pays no fee on the loans it
purchases and has no agreements or understandings with any lender to purchase a
predetermined amount of participation interests. Indian Village underwrites all
purchased participation interests according to the underwriting standards it
uses for loans it originates.
Except as for residential mortgage loans originated on behalf of a
third party private lender, as discussed above, Indian Village holds all loans
for long-term investment.
49
<PAGE>
The following table presents total loans originated, purchased, sold
and repaid during the periods indicated.
<TABLE>
<CAPTION>
For the Year Ended
December 31,
-----------------------
1998 1997
---------- ----------
(In thousands)
<S> <C> <C>
Total loans at beginning of period......................................................... $27,518 $26,207
Originations:
Real estate:
One- to four-family............................................................... 5,113 4,807
Multi-family...................................................................... 560 --
Commercial........................................................................ 205 190
Construction...................................................................... 1,178 897
Land.............................................................................. 112 --
------- -------
Total real estate loans........................................................ 7,168 5,894
Consumer loans....................................................................... 1,596 611
Commercial business.................................................................. -- 23
------- -------
Total loans originated......................................................... 8,764 6,528
Purchases............................................................................... -- --
Sales................................................................................... -- --
Less:
Principal loan repayments and prepayments............................................... (4,615) (5,173)
Transfers to real estate owned.......................................................... (81) (44)
------- -------
(4,696) (5,217)
Net loan activity.......................................................................... 4,068 1,311
------- -------
Total loans at end of period............................................................... $31,586 $27,518
======= =======
</TABLE>
Loan Commitments. Indian Village issues commitments for mortgage loans
conditioned upon the occurrence of certain events. Commitments are made in
writing on specified terms and conditions and are honored for up to 30 days from
approval. At December 31, 1998, Indian Village had variable rate loan
commitments totaling $494,000, ranging in rates from 6.25% to 7.75%, and
fixed-rate loan commitments totaling $1.9 million, ranging in rates from 7.00%
to 8.75%. See Note 9 of the Notes to Financial Statements included in the back
of this prospectus.
Loan Fees. In addition to interest earned on loans, Indian Village
receives income from fees in connection with loan originations, loan
modifications, late payments and for miscellaneous services related to its
loans. Income from these activities varies from period to period depending upon
the volume and type of loans made and competitive conditions.
Indian Village charges loan origination fees for fixed-rate loans which
are calculated as a percentage of the amount borrowed. As required by applicable
accounting procedures, loan origination fees and discount points in excess of
loan origination costs are deferred and recognized over the contractual
remaining lives of the related loans on a level yield basis. Discounts and
premiums on loans purchased are accreted and amortized in the same manner. At
December 31, 1998, Indian Village had $54,000 of deferred loan fees. Indian
Village recognized $70,000 and $14,000 of deferred loan fees during the years
ended December 31, 1998 and 1997, respectively, in connection with loan
refinancings, payoffs, sales and ongoing amortization of outstanding loans.
50
<PAGE>
Nonperforming Assets and Delinquencies. All loan payments are due on
the first day of each month. When a borrowers fails to make a required loan
payment, Indian Village attempts to cure the deficiency by contacting the
borrower and seeking the payment. A late notice is mailed on the 30th day of the
month. In most cases, deficiencies are cured promptly. If a delinquency
continues beyond the 30th day of the month, a phone call to the borrower is
usually made on the 45th day of delinquency. On or about the 60th day of
delinquency, Indian Village sends a certified letter to the borrower giving the
borrower 10 days in which to work out a payment schedule. While Indian Village
generally prefers to work with borrowers to resolve problems, Indian Village
will institute foreclosure or other proceedings after the 90th day of a
delinquency, as necessary, to minimize any potential loss.
Management informs the Board of Directors monthly of the amount of
loans delinquent more than 60 days, all loans in foreclosure, and all foreclosed
and repossessed property that Indian Village owns.
Indian Village ceases accruing interest on mortgage loans when, in the
judgment of management, the probability of collection of interest is deemed to
be insufficient to warrant further accrual. Indian Village does not accrue
interest on mortgage loans past due 90 days or more when the estimated value of
collateral and collection efforts are deemed insufficient to ensure full
recovery.
The following table presents information with respect to Indian
Village's nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
---------------------
1998 1997
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Nonaccruing loans:
One- to four-family....................................................................... $241 $412
Multi-family.............................................................................. -- --
Commercial real estate.................................................................... -- --
Construction.............................................................................. -- --
Land...................................................................................... -- --
Consumer.................................................................................. 87 59
Commercial business....................................................................... -- --
---- ----
Total nonaccruing loans(1)............................................................. 328 471
Loans past due 90 days and accruing interest................................................. -- --
Real estate owned(2)......................................................................... 122 41
Other repossessed assets..................................................................... 23 --
---- ----
Total nonperforming assets(3).......................................................... 473 512
Troubled debt restructurings................................................................. -- --
---- ----
Troubled debt restructurings and total nonperforming assets.................................. $473 $512
==== ====
Total nonperforming loans and troubled debt restructurings as a percentage of total loans.... 1.04% 1.71%
Total nonperforming assets and troubled debt restructurings as a percentage of total assets.. 1.18% 1.41%
</TABLE>
- -------------------------------
(1) Total nonaccruing loans equals total nonperforming loans.
(2) Real estate owned balances are shown net of related loss allowances.
(3) Nonperforming assets consist of nonperforming loans, impaired loans, real
estate owned and other repossessed assets.
51
<PAGE>
Interest income that would have been recorded for 1998 had nonaccruing
loans been current according to their original terms amounted to approximately
$16,000. No interest was included in interest income in 1998 related to these
loans.
Real Estate Owned. Real estate acquired by Indian Village as a result
of foreclosure or by deed-in-lieu of foreclosure is classified as real estate
owned until sold. When property is acquired it is recorded at fair market value
at the date of foreclosure, establishing a new cost basis. If the fair value
declines, Indian Village records a valuation allowance through expense. Costs
after acquisition are expensed. At December 31, 1998, Indian Village had
$122,000 of real estate owned, consisting of one residential property and one
commercial property.
Asset Classification. The Office of Thrift Supervision has adopted
various regulations regarding problem assets of savings institutions. The
regulations require that each insured institution review and classify its assets
on a regular basis. In addition, Office of Thrift Supervision examiners have
authority to identify problem assets during examinations and, if appropriate,
require them to be classified.
There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention." Indian Village monitors "special mention"
assets.
The aggregate amounts of Indian Village's classified and special
mention assets at the dates indicated were as follows:
<TABLE>
<CAPTION>
At December 31,
----------------------------
1998 1997
----------- -----------
(In thousands)
<S> <C> <C>
Classified assets:
Loss............................................................................. $ -- $ --
Doubtful......................................................................... -- --
Substandard...................................................................... 416 419
Special mention.................................................................. 173 314
</TABLE>
At December 31, 1998, assets designated substandard consisted of real
estate owned of $122,000 and ten residential mortgage loans totaling $294,000,
and assets designated as special mention consisted of seven residential mortgage
loans.
Allowance for Loan Losses. In originating loans, Indian Village
recognizes that losses will be experienced and that the risk of loss will vary
with, among other things, the type of loan being made, the creditworthiness of
the borrower over the term of the loan, general economic conditions and, in the
case of a secured loan, the quality of the security for the loan. The allowance
method is used in providing for loan losses. Accordingly, all loan losses are
charged to the allowance and all recoveries are credited to it. The allowance
for loan losses is established through a
52
<PAGE>
provision for loan losses charged to operations. The provision for loan losses
is based on management's evaluation of the collectibility of the loan portfolio,
including past loan loss experience, known and inherent risks in the nature and
volume of the portfolio, information about specific borrower situations and
estimated collateral values, and economic conditions.
At December 31, 1998, Indian Village had an allowance for loan losses
of $218,000. Although management believes that it uses the best information
available to establish the allowance for loan losses, future adjustments to the
allowance for loan losses may be necessary and results of operations could be
significantly and adversely affected if circumstances differ substantially from
the assumptions used in making the determinations. Furthermore, while Indian
Village believes it has established its existing allowance for loan losses as
required by generally accepted accounting principles, there can be no assurance
that regulators, in reviewing Indian Village's loan portfolio, will not request
Indian Village to increase significantly its allowance for loan losses. In
addition, because future events affecting borrowers and collateral cannot be
predicted with certainty, there can be no assurance that the existing allowance
for loan losses is adequate or that substantial increases will not be necessary
should the quality of any loans deteriorate as a result of the factors discussed
above. Any material increase in the allowance for loan losses may adversely
affect Indian Village's financial condition and results of operations.
53
<PAGE>
The following table presents an analysis of Indian Village's allowance
for loan losses.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1998 1997
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Allowance for loan losses, beginning of period...................................... $176 $176
Charge-offs:
One- to four-family.............................................................. -- --
Multi-family..................................................................... -- --
Commercial....................................................................... (18) --
Construction..................................................................... -- --
Land............................................................................. -- --
Consumer......................................................................... -- --
Commercial business.............................................................. -- --
----- -----
Total charge-offs............................................................. (18) --
Recoveries:
One- to four-family.............................................................. -- --
Multi-family..................................................................... -- --
Commercial....................................................................... -- --
Construction..................................................................... -- --
Land............................................................................. -- --
Consumer......................................................................... -- --
Commercial business.............................................................. -- --
----- -----
Total recoveries.............................................................. -- --
Net charge-offs..................................................................... (18) --
Provision for loan losses........................................................... 60 --
----- -----
Allowance for loan losses, end of period............................................ $218 $176
==== ====
Net charge-offs to average interest-earning loans................................... 0.06% 0.00%
Allowance for loan losses to total loans............................................ 0.69% 0.64%
Allowance for loan losses to nonperforming loans and
troubled debt restructurings..................................................... 66.46% 37.37%
Net charge-offs to allowance for loan losses........................................ 8.26% 0.00%
</TABLE>
For additional discussion regarding the provisions for loan losses in
recent periods, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Comparison of Operating Results for the Years Ended
December 31, 1998 and 1997--Provision for Loan Losses."
The following table presents the approximate allocation of the
allowance for loan losses by loan category at the dates indicated. Management
believes that the allowance can be allocated by category only on an approximate
basis. The allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict the use of the allowance to
absorb losses in any other category.
54
<PAGE>
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------
1998 1997
--------------------------------- ----------------------------------
Percent of Percent of
Allowance Percent Allowance Percent
in Each of Loans in Each of Loans
Category in Each Category in Each
to Total Category to to Total Category to
Amount Allowance Total Loans Amount Allowance Total Loans
-------- ---------- ----------- -------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family................... $121 55.50% 82.57% $104 59.09% 83.59%
Multi-family.......................... 9 4.13 5.50 7 3.98 5.26
Commercial............................ 5 2.29 2.05 4 2.27 2.77
Construction.......................... 1 0.46 2.14 1 0.57 4.02
Land.................................. 1 0.46 0.43 -- -- 0.16
Consumer loans........................... 10 4.59 7.23 2 1.14 3.97
Commercial business loans................ -- -- 0.08 -- -- 0.23
Unallocated.............................. 71 32.57 -- 58 32.95 --
---- ------ ------ ---- ------ ------
Total allowance for loan losses.... $218 100.00% 100.00% $176 100.00% 100.00%
==== ====== ====== ==== ====== ======
</TABLE>
Investment Activities
Indian Village is permitted under federal law to invest in various
types of liquid assets, including U.S. Government obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
Federal Home Loan Bank of Cincinnati, certificates of deposit of federally
insured institutions, certain bankers' acceptances and federal funds. Within
certain regulatory limits, Indian Village may also invest a portion of its
assets in commercial paper and corporate debt securities. Savings institutions
like Indian Village are also required to maintain an investment in Federal Home
Loan Bank of Cincinnati stock. Indian Village is required under federal
regulations to maintain a minimum amount of liquid assets. See "Regulation" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that investments be
categorized as "held to maturity," "trading securities" or "available for sale,"
based on management's intent as to the ultimate disposition of each security.
Statement of Financial Accounting Standards No. 115 allows debt securities to be
classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." These securities are reported at fair value, and
unrealized gains and losses on the securities would be included in earnings.
Indian Village does not currently use or maintain a trading account. Debt and
equity securities not classified as either "held to maturity" or "trading
securities" are classified as "available for sale." These securities are
reported at fair value, and unrealized gains and losses on the securities are
excluded from earnings and reported, net of deferred taxes, as a separate
component of equity. At December 31, 1998, all of Indian Village's
mortgage-backed securities and investment securities were classified as
"available for sale."
All of Indian Village's investment securities carry market risk insofar
as increases in market rates of interest may cause a decrease in their market
value. They also carry prepayment risk insofar as they may be called
55
<PAGE>
before maturity in times of low market interest rates, so that Indian Village
may have to invest the funds at a lower interest rate. Indian Village's
investment policy does not permit engaging directly in hedging activities or
purchasing high risk mortgage derivative products. Investments are made based on
certain considerations, which include the interest rate, yield, settlement date
and maturity of the investment, Indian Village's liquidity position, and
anticipated cash needs and sources. The effect that the proposed investment
would have on Indian Village's credit and interest rate risk and risk-based
capital is also considered. Indian Village purchases investment securities to
provide necessary liquidity for day-to-day operations. Indian Village also
purchases investment securities when investable funds exceed loan demand.
The following table presents the amortized cost and fair value of
Indian Village 's securities, by accounting classification and by type of
security, at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------
1998 1997
----------------------- -----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Investment securities available for sale:
Municipal securities....................................... $ 147 $ 152 $ 75 $ 75
Obligations of U.S. Treasury and U.S. government
agencies................................................ 1,797 1,816 3,433 3,459
------ ------ ------ ------
Total................................................ 1,944 1,968 3,508 3,534
Mortgage-backed securities available for sale:
Ginnie Mae.................................................... 2,022 2,063 1,735 1,782
Fannie Mae.................................................... 1,918 1,927 1,500 1,523
Freddie Mac................................................... 235 237 482 478
------ ------ ------ ------
Total................................................... 4,175 4,227 3,717 3,783
------ ------ ------ ------
Net unrealized gains (losses) on securities available for sale... 76 N/A 92 N/A
------ ------ ------ ------
Total securities available for sale.................. $6,195 $6,195 $7,317 $7,317
====== ====== ====== ======
</TABLE>
All of Indian Village's mortgage-backed securities are issued or
guaranteed by agencies of the U.S. Government. Accordingly, they carry lower
credit risk than mortgage-backed securities of a private issuer. However,
mortgage-backed securities still carry market risk, the risk that increases in
market interest rates may cause a decrease in market value, and prepayment risk,
the risk that the securities will be repaid before maturity and that Indian
Village will have to reinvest the funds at a lower interest rate.
Occasionally, Indian Village invests in municipal obligations of local
and out-of-state entities, such as school districts. Out-of-state obligations
are generally rated by a nationally recognized credit rating service.
At December 31, 1998, Indian Village did not own any securities, other
than U.S. Government and agency securities, which had an aggregate book value in
excess of 10% of Indian Village's retained earnings at that date.
The following presents the activity in the mortgage-backed securities
and investment securities portfolios for the periods indicated.
56
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1998 1997
----------- -----------
(In thousands)
<S> <C> <C>
Mortgage-backed securities(1):
Mortgage-backed securities, beginning of period.......................... $3,783 $2,306
Purchases................................................................ 2,336 1,980
Sales.................................................................... (844) --
Repayments and prepayments............................................... (1,022) (553)
Increase (decrease) in net premium....................................... (12) 27
Increase (decrease) in unrealized gain................................... (14) 23
------ ------
Net increase in mortgage-backed securities............................ 444 1,477
------ ------
Mortgage-backed securities, end of period................................ $4,227 $3,783
====== ======
Investment securities(2):
Investment securities, beginning of period............................... $3,534 $3,487
Purchases................................................................ 2,125 2,800
Sales.................................................................... (455) (1,600)
Calls.................................................................... (2,900) (650)
Maturities............................................................... (335) (525)
Increase (decrease) in net premium....................................... 1 (5)
Increase (decrease) in unrealized gain................................... (2) 27
------ ------
Net increase (decrease) in investment securities...................... (1,566) 47
------ ------
Investment securities, end of period..................................... $1,968 $3,534
====== ======
</TABLE>
- -----------------------------
(1) All mortgage-backed securities are classified as available for sale.
(2) All investment securities are classified as available for sale.
The following table presents certain information regarding the carrying
value, weighted average yields and maturities or periods to repricing of Indian
Village's debt securities at December 31, 1998, all of which are available for
sale.
<TABLE>
<CAPTION>
Less Than One to After Five to After
One Year Five Years Ten Years Ten Years Totals
----------------- ---------------- ------------------ ------------------- -----------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Carrying Average Carrying Average Carrying Average
Value Yield Amount Value Value Yield Value Yield Value Yield
-------- ------- ------ -------- -------- ------- -------- --------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for sale:
Investment securities:
Municipal securities(1).......... $ -- --% $ -- --% $ -- --% $ 152 6.82 $ 152 6.82%
Obligations of the U.S. Treasury
and U.S. government agencies.. 505 6.31 809 6.55 502 7.25 -- -- 1,816 6.68
Mortgage-backed securities....... -- -- 9 7.20 701 6.92 3,517 6.80 4,227 6.82
---- ---- ------ ------ ------
Total..................... $505 6.31 $818 6.56 $1,203 7.06 $3,669 6.80 $6,195 6.78
==== ==== ====== ====== ======
</TABLE>
- ------------------------------
(1) Weighted average yields for municipal securities are presented on a tax
equivalent basis based on an assumed rate of 34%.
57
<PAGE>
Deposit Activities and Other Sources of Funds
General. Deposits are the major external source of funds for Indian
Village's lending and other investment activities. In addition, Indian Village
also generates funds internally from loan principal repayments and prepayments
and maturing investment securities. Scheduled loan repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are influenced significantly by general interest rates and money market
conditions. Indian Village may use borrowings from the Federal Home Loan Bank of
Cincinnati to compensate for reductions in the availability of funds from other
sources. Presently, Indian Village has no other borrowing arrangements aside
from Federal Home Loan Bank of Cincinnati advances.
Deposit Accounts. Nearly all of Indian Village's depositors reside in
Ohio. Indian Village's deposit products include money market accounts, passbook
accounts, and term certificate accounts. Deposit account terms vary with the
principal differences being the minimum balance deposit, early withdrawal
penalties and the interest rate. Indian Village reviews its deposit mix and
pricing weekly. Indian Village does not utilize brokered deposits, nor has it
aggressively sought jumbo certificates of deposit.
Indian Village believes it is competitive in the interest rates it
offers on its deposit products. Indian Village determines the rates paid based
on a number of factors, including rates paid by competitors, Indian Village's
need for funds and cost of funds, borrowing costs and movements of market
interest rates. Historically, Indian Village has relied predominately on
certificates of deposit with terms of more than one year. Indian Village
believes that the opening of the new branch office in New Philadelphia, a more
commercial area than Gnadenhutten, will offer an opportunity to attract more
transaction accounts.
In the unlikely event Indian Village is liquidated after the
conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to Indian Village Bancorp as the sole
stockholder of Indian Village.
58
<PAGE>
The following table presents information concerning Indian Village's
deposit accounts at December 31, 1998.
<TABLE>
<CAPTION>
Weighted
Average Percentage
Interest Minimum of Total
Rate Category Amount Balance Deposits
-------- ----------------------------------------- --------- ------- -----------
(In thousands)
<S> <C> <C> <C> <C>
3.25% Passbook accounts $ 10 $ 5,464 17.70%
-- Noninterest-bearing demand accounts 100 81 0.27
2.00 NOW accounts 100 837 2.71
3.30 Money market accounts 2,500 1,695 5.49
Certificates of Deposit
-----------------------
4.89 6 Month money market certificate 500 2,424 7.85
4.93 9 Month certificate 500 763 2.47
5.10 12 Month certificate 500 3,463 11.22
5.38 18 Month certificate 500 2,559 8.29
5.46 18 Month individual retirement account 500 1,308 4.24
5.82 22 Month certificate 500 1,734 5.62
5.69 24 Month certificate 500 397 1.29
5.70 30 Month certificate 500 2,892 9.37
5.84 36 Month certificate 500 1,805 5.85
6.00 48 Month certificate 500 82 0.27
6.13 60 Month certificate 500 3,701 11.98
5.91 60 Month individual retirement account 500 1,661 5.38
------- ------
$30,866 100.00%
======= ======
</TABLE>
The following table indicates the amount of Indian Village's jumbo
certificate accounts by time remaining until maturity as of December 31, 1998.
Jumbo certificate accounts have principal balances of $100,000 or more.
<TABLE>
<CAPTION>
Maturity Period Amount
--------------- --------------
(In thousands)
<S> <C>
Three months or less.................... $ 103
Over three through six months........... 100
Over six through twelve months.......... 393
Over twelve months...................... 761
------
Total.......................... $1,357
======
</TABLE>
59
<PAGE>
The following table presents information concerning average balances
and rates paid on Indian Village's deposit accounts at the dates indicated.
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1998 1997
--------------------------------- --------------------------------
Percent Percent
of Total of Total
Average Average Average Average Average Average
Balance Deposits Rate Paid Balance Deposits Rate Paid
---------- --------- ---------- -------- --------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts........................ $ 5,263 17.23% 3.27% $ 4,977 16.28% 3.25%
Money market accounts.................... 1,777 5.82 3.32 1,775 5.81 3.32
NOW accounts............................. 815 2.67 1.96 643 2.10 2.49
Certificates of deposit(1)............... 22,585 73.95 5.68 23,079 75.51 5.70
Noninterest-bearing deposits:
Demand deposits....................... 101 0.33 -- 89 0.30 --
------- ------ ------- ------
Total average deposits............ $30,541 100.00% $30,563 100.00%
======= ====== ======= ======
</TABLE>
- -------------------------------
(1) Based on remaining maturity of certificates of deposit.
Deposit Flow. The following table presents the balances, with interest
credited, and changes in dollar amounts of deposits in the various types of
accounts offered by Indian Village between the dates indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1998 1997
---------------------------------- -----------------------
Percent Percent
of Increase of
Amount Total (Decrease) Amount Total
--------- ----------- ---------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Passbook accounts..................................... $ 5,464 17.70% $ 371 $ 5,093 16.82%
NOW accounts.......................................... 837 2.71 220 617 2.04
Money market deposits................................. 1,695 5.49 (29) 1,724 5.69
Fixed-rate certificates maturing:
Within 1 year...................................... 14,348 46.48 1,566 12,782 42.22
After 1 year, but within 2 years................... 4,194 13.59 (1,854) 6,048 19.98
After 2 years, but within 5 years.................. 4,247 13.76 328 3,919 12.94
After 5 years...................................... -- -- (32) 32 0.11
------- ------ ------- ------- ------
Total certificates................................. 22,789 73.83 8 22,781 75.25
------- ------ ------- ------- ------
Noninterest-bearing deposits:
Demand deposits.................................... 81 0.27 19 62 0.20
------- ------ ------- ------- ------
Total........................................... $30,866 100.00% $ 589 $30,277 100.00%
======= ====== ======= ======= ======
</TABLE>
60
<PAGE>
Time Deposits by Rates and Maturities. The following table presents the
amount of time deposits in Indian Village categorized by rates and maturities at
the dates indicated.
<TABLE>
<CAPTION>
Period to Maturity from December 31, 1998 At December 31,
-------------------------------------------------------------- ---------------------
Less than 1 - 2 2 - 3 3 - 4 After
One Year Years Years Years 4 Years Total 1998 1997
--------- -------- -------- -------- ----------- ---------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00 - 4.00%.......... $ 39 $ -- $ -- $ -- $ -- $ 39 $ 39 $ 81
4.01 - 5.00%.......... 2,738 304 100 -- -- 3,142 3,142 812
5.01 - 6.00%.......... 9,598 2,910 1,578 243 1,219 15,548 15,548 17,397
6.01 - 7.00%.......... 1,973 646 71 1,031 5 3,726 3,726 4,179
Over 7.00%............ -- 334 -- -- -- 334 334 312
------------------- ------------------ --------- --------- -------- --------
Total............. $14,348 $4,194 $1,749 $1,274 $1,224 $22,789 $22,789 $22,781
======= ====== ====== ====== ====== ======= ======= =======
</TABLE>
Deposit Activity. The following table presents the deposit activity of
Indian Village for the periods indicated.
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Beginning balance............................... $30,277 $31,439
Net deposits (withdrawals)
before interest credited....................... (629) (2,355)
Interest credited............................... 1,218 1,193
------- -------
Net increase (decrease) in deposits............. 589 (1,162)
------- -------
Ending balance.................................. $30,866 $30,277
======= =======
</TABLE>
The settlement of estate accounts totaling $642,000 contributed to part
of the net decrease in deposits in 1997. Management attributes the remainder of
the decrease to the withdrawal of funds for investment in the stock market and
other non-deposit investments.
Borrowings. Indian Village has the ability to use advances from the
Federal Home Loan Bank of Cincinnati to supplement its supply of lendable funds
and to meet deposit withdrawal requirements. The Federal Home Loan Bank of
Cincinnati functions as a central reserve bank providing credit for savings
associations and certain other member financial institutions. As a member of the
Federal Home Loan Bank of Cincinnati, Indian Village is required to own capital
stock in the Federal Home Loan Bank of Cincinnati and is authorized to apply for
advances on the security of the capital stock and certain of its mortgage loans
and other assets, principally securities that are obligations of, or guaranteed
by, the U.S. Government or its agencies, provided certain creditworthiness
standards have been met. Advances are made under several different credit
programs. Each credit program has its own interest rate and range of maturities.
Depending on the program, limitations on the amount of advances are based on the
financial condition of the member institution and the adequacy of collateral
pledged to secure the credit. At December 31, 1998, Indian Village had the
ability to borrow a total of approximately $20.0 million from the Federal Home
Loan Bank of Cincinnati. At that date, Indian Village had outstanding advances
of $4.0 million.
61
<PAGE>
The following tables presents certain information regarding Indian
Village's use of Federal Home Loan Bank of Cincinnati advances during the
periods and at the dates indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1998 1997
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Maximum amount of advances outstanding at any month end............................... $4,000 $1,000
Approximate average short-term advances outstanding................................... 2,351 471
Approximate weighted average rate paid on advances.................................... 5.78% 5.10%
<CAPTION>
At December 31,
--------------------------
1998 1997
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Balance outstanding at end of period.................................................. $4,000 $1,000
Weighted average rate paid on advances................................................ 5.14% 6.10%
</TABLE>
Subsidiary Activities
Under Office of Thrift Supervision regulations, Indian Village
generally may invest up to 3% of its assets in service corporations, provided
that at least one-half of investment in excess of 1% is used primarily for
community, inner-city and community development projects. On December 1, 1998,
Indian Village dissolved its only wholly owned subsidiary, Gnadenhutten
Development Corporation, because it was inactive.
Properties
Currently, Indian Village operates only from its main office located at
100 South Walnut Street, Gnadenhutten, Ohio. Indian Village owns this office,
which opened in 1968. The office consists of approximately 7,600 square feet. At
December 31, 1998, the net book value of land, building, furniture and equipment
of the main office was approximately $233,000.
In February 1999, Indian Village received Office of Thrift Supervision
approval to establish a branch office in the vicinity of 635 West High Avenue,
New Philadelphia, Ohio. Indian Village purchased the land in December 1998 for
$213,000. Based on preliminary architectural estimates, Indian Village expects
the total cost of construction and furniture, fixtures and equipment to be
approximately $1.0 million. Indian Village currently expects to open the office
in the fourth quarter of 1999.
Personnel
As of December 31, 1998, Indian Village had nine full-time employees
and three part-time employees, none of whom is represented by a collective
bargaining unit. Indian Village believes its relationship with its employees is
good.
Legal Proceedings
Periodically, there have been various claims and lawsuits involving
Indian Village, such as claims to enforce liens, condemnation proceedings on
properties in which Indian Village holds security interests, claims involving
the making and servicing of real property loans and other issues incident to
Indian Village's business. Indian Village is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of Indian Village.
62
<PAGE>
MANAGEMENT OF INDIAN VILLAGE BANCORP
Directors shall be elected by the stockholders of Indian Village
Bancorp for staggered three-year terms, or until their successors are elected
and qualified. Indian Village Bancorp's Board of Directors consists of seven
persons divided into three classes, each of which contains approximately one
third of the Board. One class, consisting of John A. Beitzel and Cindy S.
Knisely, has a term of office expiring at the first annual meeting of
stockholders after their initial election by stockholders; a second class,
consisting of Vernon E. Mishler, Joanne Limbach, and Marty R. Lindon, has a term
of office expiring at the second annual meeting of stockholders after their
initial election by stockholders; and a third class, consisting of Rebecca S.
Mastin and Michael A. Cochran, has a term of office expiring at the third annual
meeting of stockholders after their initial election by stockholders. Indian
Village Bancorp anticipates that its first annual meeting of stockholders will
be held in April 2000.
The executive officers of Indian Village Bancorp are elected annually
and serve at the Board's discretion. The executive officers of Indian Village
Bancorp are:
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
Rebecca S. Mastin................................ Chairperson of the Board
Marty R. Lindon.................................. President and Chief Executive Officer
Michael A. Cochran............................... Corporate Secretary
Lori S. Frantz................................... Vice President, Treasurer and Chief Financial Officer
</TABLE>
MANAGEMENT OF INDIAN VILLAGE
Directors and Executive Officers
The Board of Directors of Indian Village is presently composed of seven
members who are elected for terms of three years, approximately one third of
whom are elected annually as required by the Bylaws of Indian Village. The
executive officers of Indian Village are elected annually by the Board of
Directors and serve at the Board's discretion. The following table presents
information with respect to the directors and executive officers of Indian
Village.
<TABLE>
<CAPTION>
Directors
Director Term
Name Age(1) Position Held With Indian Village Since Expires
- ---- ------ ---------------------------------- --------- -------
<S> <C> <C> <C> <C>
Rebecca S. Mastin............... 45 Chairperson of the Board 1996 2002
John A. Beitzel................. 50 Vice Chairman of the Board 1997 2000
Marty R. Lindon................. 41 President and Chief Executive Officer 1998 2001
Michael A. Cochran.............. 48 Corporate Secretary 1995 2002
Vernon E. Mishler............... 70 Director 1989 2001
Joanne Limbach.................. 58 Director 1997 2001
Cindy S. Knisely................ 41 Director 1997 2000
<CAPTION>
Executive Officers Who Are Not Directors
Name Age(1) Position Held With Indian Village
- ---- ------ ----------------------------------
<S> <C> <C> <C> <C>
Lori S. Frantz.................. 39 Vice President, Treasurer and Chief Financial -- --
Officer
</TABLE>
- -----------------------
(1) As of December 31, 1998.
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Biographical Information
Below is certain information regarding the directors and executive
officers of Indian Village. Unless otherwise stated, each director and executive
officer has held his or her current occupation for the last five years. There
are no family relationships among or between the directors or executive
officers.
Rebecca S. Mastin owns Wendy's restaurant franchises.
John A. Beitzel retired as the elected Tuscarawas County auditor.
Marty R. Lindon joined Indian Village in September 1991 as a credit
manager. In December 1993 he was appointed Vice President of Lending. He was
appointed President and Chief Executive Officer in December 1998.
Michael A. Cochran is an attorney in private practice. He is also
Assistant Prosecuting Attorney for Tuscarawas County.
Vernon E. Mishler is a retired Ohio State Auditor and public
accountant.
Joanne Limbach is the President of Limbach, Nolan and Dantonio, Inc.
D/B/A/ Limbach and Associates, Columbus, Ohio, a state and local tax consulting
firm. Ms. Limbach served as Tax Commissioner for the State of Ohio from 1983 to
1991.
Cindy S. Knisely, a certified public accountant, is the President of
Kinsely & Associates Accounting and Financial Services, Inc., a certified public
accounting firm.
Lori S. Frantz joined Indian Village in 1977 as a teller and loan
processor. She was appointed Assistant Secretary in 1985, Vice President in 1993
and Treasurer in 1996.
Meetings and Committees of the Board of Directors
The business of Indian Village is conducted through meetings and
activities of the Board of Directors and its committees. During the fiscal year
ended December 31, 1998, the Board of Directors held 12 regular meetings and 19
special meetings. No director attended fewer than 75% of the total meetings of
the Board of Directors and committees on which the director served.
The Loan Committee consists of Marty R. Lindon, John A. Beitzel and
Cindy S. Knisely. This committee reviews and approves loan applications that do
not require the approval of the full Board of Directors. The committee met 41
times in 1998.
The Audit Committee consists of Rebecca S. Mastin and Vernon E.
Mishler. The committee receives and reviews all reports prepared by Indian
Village's external auditor. The committee met 12 times in 1998.
The Asset Classification Committee consists of Michael A. Cochran and
Joanne Limbach. The committee reviews and classifies Indian Village's loans and
other assets according to established policies of the Board of Directors. The
committee met four times in 1998.
Directors' Compensation
Fees. Directors who are not salaried employees of Indian Village each
receive $1,000 per month. Two excused absences from meetings are permitted.
After the conversion, Indian Village will continue to pay directors' fees, but,
initially, Indian Village Bancorp does not expect to pay separate fees for
service on its Board of Directors.
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Executive Compensation
Summary Compensation Table. The following information is furnished for
Marty R. Lindon and Paul M. Soupart, Jr. for the year ended December 31, 1998.
Mr. Soupart resigned as President and Managing Officer of Indian Village in
August 1998 for personal reasons. No executive officer of Indian Village
received salary and bonus of $100,000 or more during the year ended December 31,
1998.
<TABLE>
<CAPTION>
Annual Compensation (1)
------------------------------
Other Annual All Other
Name and Position Year Salary Bonus Compensation(2) Compensation
- ------------------------------------------- ------ ---------- -------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Marty R. Lindon............................ 1998 $41,000 $7,000 -- $4,686(3)
President, Chief Executive Officer
and Director
Paul M. Soupart, Jr........................ 1998 $42,000 2,000 -- $34,776(4)
Former President and Managing Officer
</TABLE>
- ----------------------
(1) Compensation information for the years ended December 31, 1997 and 1996 has
been omitted as Indian Village was neither a public company nor a
subsidiary of a public company at that time.
(2) Does not include the aggregate amount of perquisites and other personal
benefits, which was less than 10% of the total annual salary and bonus
reported.
(3) Consists of employer pension plan contribution.
(4) Consists of severance payment of $33,000 and medical insurance continuation
coverage expenses of $1,776.
Consulting Contract. Indian Village and John A. Beitzel are parties to
a consulting contract calling for him to consult with the Board of Directors on
general matters relating to the operations of the institution between January 1,
1999 and June 30, 1999. Mr. Beitzel will receive $13,010 as compensation for his
services over the term of the agreement. Either party may terminate the
agreement with 30 days notice to the other party. Mr. Beitzel would not be paid
after the date of termination.
Employment Agreements. Indian Village Bancorp and Indian Village plan
to enter into three-year employment agreements with Marty R. Lindon and Lori S.
Frantz. Under the employment agreements, the initial salary levels for Mr.
Lindon and Ms. Frantz will be $60,000 and $48,000, respectively, which amounts
will be paid by Indian Village and may be increased at the discretion of the
Board of Directors or an authorized committee of the Board. On each anniversary
after the starting date of the employment agreements, the term of the agreements
may be extended for an additional year at the discretion of the Board. The
agreements may be terminated by the Employers at any time, by the executive if
he or she is assigned duties inconsistent with his initial position, duties,
responsibilities and status, or upon the occurrence of certain events specified
by federal regulations. If the executive's employment is terminated without
cause or upon the executive's voluntary termination following the occurrence of
an event described in the preceding sentence, Indian Village would be required
to honor the terms of the agreement through the expiration of the current term,
including payment of current cash compensation and continuation of employee
benefits.
The employment agreements also provide for a severance payment and
other benefits upon involuntary termination of employment in connection with any
change in control of Indian Village Bancorp and Indian Village. A severance
payment also will be paid on a similar basis in connection with a voluntary
termination of employment where, after a change in control, the executive is
assigned duties inconsistent with his or her position, duties, responsibilities
and status immediately before a change in control. The term "change in control"
is defined in the agreement as having occurred when, among other things, a
person other than Indian Village Bancorp purchases
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shares of Indian Village Bancorp's common stock under a tender or exchange offer
for the shares; any person (as that term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) is or becomes the beneficial owner,
directly or indirectly, of securities of Indian Village Bancorp representing 25%
or more of the combined voting power of Indian Village Bancorp's then
outstanding securities; the membership of the Board of Directors changes as the
result of a contested election; or shareholders of Indian Village Bancorp
approve a merger, consolidation, sale or disposition of all or substantially all
of Indian Village Bancorp's assets, or a plan of partial or complete
liquidation.
The maximum value of the severance benefits under the employment
agreement is 2.99 times the executive's average annual compensation during the
five-year period preceding the effective date of the change in control. The
employment agreements provide that the value of the maximum benefit may be
distributed, at the executive's election, in the form of a lump sum cash payment
equal to 2.99 times the executive's average annual compensation for the five
years preceding the effective date of the change in control, or a combination of
a cash payment and continued coverage under the Indian Village Bancorp's and
Indian Village's health, life and disability programs for a 36-month period
following the change in control, the total value of which does not exceed 2.99
times the executive's average annual compensation for the five years preceding
the effective date of the change in control. Assuming that a change in control
had occurred at December 31, 1998 and that Mr. Lindon and Ms. Frantz each
elected to receive a lump sum cash payment, Mr. Lindon would have been entitled
to a payment of approximately $122,000 and Ms. Frantz would have been entitled
to approximately $116,000. The Internal Revenue Code provides that severance
payments that equal or exceed three times the individual's base amount are
deemed to be "excess parachute payments" if they are contingent upon a change in
control. Individuals receiving excess parachute payments must pay a 20% excise
tax on the amount of excess payments, and their employers would not be entitled
to deduct the amount of the excess payments.
The employment agreements restrict the executive's right to compete
against Indian Village Bancorp and Indian Village for a period of one year from
the date of termination of the agreement if he or she voluntarily terminates
employment, except upon a change in control.
Employee Severance Compensation Plan. Indian Village's Board of
Directors intends to adopt the Indian Village Community Bank Employee Severance
Compensation Plan to provide benefits to eligible employees upon a change in
control of Indian Village Bancorp or Indian Village. Eligible employees are
those with a minimum of two years of service with Indian Village. Generally, all
eligible employees, other than officers who will enter into separate employment
agreements with Indian Village Bancorp and Indian Village, will be eligible to
participate in the severance plan. Under the severance plan, if a change in
control of Indian Village Bancorp or Indian Village occurs, eligible employees
who are terminated or who terminate employment, but only upon the occurrence of
events specified in the severance plan, within 12 months of the effective date
of a change in control will be entitled to a payment based on years of service
with Indian Village with a maximum payment equal to 26 weeks of compensation,
which would be earned after 13 years of service. Assuming that a change in
control had occurred at December 31, 1998, and resulted in the termination of
all eligible employees, the maximum aggregate payment due under the severance
plan would be approximately $31,000.
Benefits
General. Indian Village currently pays 95% of the premiums for medical
insurance benefits and 100% of premiums for life and disability insurance
benefits for full-time employees.
Retirement Plan. Indian Village maintains a non-contributory defined
benefit retirement plan. The following table indicates the annual retirement
benefits that would be payable under the retirement plan upon retirement at age
65 to a participant electing to receive his retirement benefit in the standard
form of benefit, assuming various specified levels of plan compensation and
various specified years of credited service. Under the
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Internal Revenue Code, maximum annual benefits under the retirement plan are
limited to $130,000 per year for the 1999 calendar year.
<TABLE>
<CAPTION>
Highest Five-Year Years of Service
Average Annual ----------------------------------------------
Compensation 5 10 15 25+
----------------- --- ------ ------ -------
<S> <C> <C> <C> <C>
$ 10,000 $ 815 $ 1,630 $ 2,445 $ 4,075
20,000 1,774 3,548 5,323 8,871
30,000 2,914 5,828 8,742 14,571
40,000 4,054 8,108 12,163 20,271
60,000 6,334 12,668 19,003 31,671
80,000 8,614 17,228 25,843 43,071
100,000 10,894 21,788 32,683 54,471
120,000 13,174 26,348 39,523 65,871
130,000 14,314 28,628 42,943 71,571
</TABLE>
The retirement plan is a non-contributory, defined benefit plan which
provides for monthly payments to, or on behalf of, each covered employee. All
full-time employees are eligible to participate in the retirement plan after
completion of one year of service with Indian Village and attainment of age 21.
To obtain one year of service, an employee must complete at least 1,000 hours of
service in 12 consecutive months. Benefits are based upon years of service and
salary excluding bonuses, fees, overtime, etc. Employees become 20% vested
following three years of service increasing 20% annually to 100% after seven
years of service. As of December 31, 1998, Mr. Lindon had eight years of
credited service under the retirement plan.
The normal retirement age is 65 and the early retirement age is before
age 65, but after age 55 with the completion of ten years of service. Normal
retirement benefits are equal to 40.75% of the highest five year average
compensation up to the integration level plus 57% of average compensation in
excess of the integration level reduced for less than 25 years of service. If an
employee elects early retirement, but defers the receipt of benefits until age
65, the formula for computation of early retirement benefits is the same as if
the employee had retired at the normal retirement age but based on service and
average compensation at early retirement. If the employee elects early
retirement benefits before normal retirement, the benefits are equal to the
accrued benefits payable at age 65 reduced by applying an early retirement
factor. Payment may also be deferred beyond normal retirement in which case the
retirement allowance will be the actuarial equivalent of the normal retirement
benefit. Under the retirement plan, Indian Village makes annual contributions,
computed on an actuarial basis, to fund the benefits.
Upon retirement, the regular form of benefit under the retirement plan
is an annuity payable in equal monthly installments for the life of the employee
and guaranteed for ten years. Optional annuity or lump sum benefit forms may
also be elected by the employee. Benefits under the retirement plan are not
integrated with social security.
At December 31, 1998, which is the date of the most recent retirement
plan statement, the retirement plan's benefit obligation exceeded assets by
approximately $134,000.
Employee Stock Ownership Plan. Indian Village's Board of Directors has
authorized the adoption of an employee stock ownership plan for employees of
Indian Village to be effective upon the completion of the conversion. Full-time
employees of Indian Village Bancorp and Indian Village who have been credited
with at least 1,000 hours of service during a 12-month period and who have
attained age 21 will be eligible to participate in the employee stock ownership
plan.
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The employee stock ownership plan intends to purchase 8% of the shares
issued in the conversion. This would range between 34,680 shares, assuming
433,500 shares are issued in the conversion, and 46,920 shares assuming 586,500
shares are issued in the conversion. It is anticipated that the employee stock
ownership plan will borrow funds from Indian Village Bancorp to purchase stock
in the conversion. The loan will equal 100% of the aggregate purchase price of
the common stock. The loan to the employee stock ownership plan will be repaid
principally from Indian Village's contributions to the employee stock ownership
plan and dividends payable on common stock held by the employee stock ownership
plan over the anticipated 15-year term of the loan. The interest rate for the
employee stock ownership plan loan is expected to be the prime rate as published
in The Wall Street Journal on the closing date of the conversion. See "Pro Forma
Data." If the employee stock ownership plan is unable to acquire 8% of the
common stock sold in the offering, it is anticipated that these additional
shares may be acquired following the conversion through open market purchases.
In any plan year, Indian Village may make additional discretionary
contributions to the employee stock ownership plan for the benefit of plan
participants in either cash or shares of common stock, which may be acquired
through the purchase of outstanding shares in the market or from individual
stockholders or which constitute authorized but unissued shares or shares held
in treasury by Indian Village Bancorp. The timing, amount, and manner of
discretionary contributions will be affected by several factors, including
applicable regulatory policies, the requirements of applicable laws and
regulations, and market conditions.
Shares purchased by the employee stock ownership plan with the proceeds
of the loan will be held in a suspense account and released on a pro rata basis
as the loan is repaid. Discretionary contributions to the employee stock
ownership plan and shares released from the suspense account will be allocated
among participants on the basis of each participant's proportional share of
total compensation. Any forfeitures will be reallocated among the remaining plan
participants.
Participants will vest in their accrued benefits under the employee
stock ownership plan at the rate of 20% per year, beginning upon the completion
of two years of service. A participant is fully vested at retirement, upon death
or disability or upon termination of the employee stock ownership plan. Benefits
are distributable upon a participant's retirement, early retirement, death,
disability, or termination of employment. Indian Village's contributions to the
employee stock ownership plan are not fixed, so benefits payable under the
employee stock ownership plan cannot be estimated.
It is anticipated that members of Indian Village's Board of Directors
will serve as trustees of the employee stock ownership plan. The trustees must
vote all allocated shares held in the employee stock ownership plan as
instructed by the plan participants and unallocated shares and allocated shares
for which no instructions are received must be voted in the same ratio on any
matter as those shares for which instructions are given.
Under applicable accounting requirements, compensation expense for a
leveraged employee stock ownership plan is recorded at the fair market value of
the employee stock ownership plan shares when committed to be released to
participants' accounts. See "Pro Forma Data."
The employee stock ownership plan must meet the requirements of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
of the Internal Revenue Service and the Department of Labor. Indian Village
intends to request a determination letter from the Internal Revenue Service
regarding the tax-qualified status of the employee stock ownership plan. Indian
Village expects to receive a favorable determination letter, but cannot
guarantee it.
Stock Option Plan. The Board of Directors of Indian Village Bancorp
intends to adopt a stock option plan and to submit the it to the stockholders
for approval at a meeting held no earlier than six months following the
conversion. Under current Office of Thrift Supervision regulations, the approval
of a majority vote of Indian Village Bancorp's outstanding shares is required
for implementation of the stock option plan within one year after the
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conversion. The stock option plan will comply with all applicable regulatory
requirements. However, the stock option plan will not be approved or endorsed by
the Office of Thrift Supervision.
The stock option plan will be designed to attract and retain qualified
management personnel and nonemployee directors; to provide officers, key
employees and nonemployee directors with a proprietary interest in Indian
Village Bancorp as an incentive to contribute to the success of Indian Village
Bancorp and Indian Village; and to reward officers and key employees for
outstanding performance. The stock option plan will provide for the grant of
incentive stock options intended to comply with the requirements of the Internal
Revenue Code and for nonqualified stock options. Upon receipt of stockholder
approval of the stock option plan, stock options may be granted to officers, key
employees and nonemployee directors of Indian Village Bancorp and its
subsidiaries, including Indian Village. The stock option plan will continue in
effect for a period of ten years from the date the stock option plan is approved
by stockholders, unless terminated earlier.
A number of authorized shares of common stock equal to 10% of the
number of shares of common stock issued with the conversion will be reserved for
future issuance under the stock option plan. This would range from 43,350
shares, assuming 433,500 shares are issued in the conversion, to 58,650 shares,
assuming 586,500 shares are issued in the conversion. Shares acquired upon
exercise of options will be authorized but unissued shares or treasury shares.
If a stock split, reverse stock split, stock dividend, or similar event occurs,
the number of shares of common stock under the stock option plan, the number of
shares to which any award relates and the exercise price per share under any
option may be adjusted by the stock option plan committee to reflect the
increase or decrease in the total number of shares of common stock outstanding.
The stock option plan will be administered and interpreted by a
committee of the Board of Directors of Indian Village Bancorp. According to
applicable Office of Thrift Supervision regulations, the committee will
determine which nonemployee directors, officers and key employees will be
granted options, the number of shares represented by each option, and the
exercisability of options. All options granted to nonemployee directors will be
nonqualified stock options. The per share exercise price of all options will
equal at least 100% of the fair market value of a share of common stock on the
date the option is granted.
It is anticipated that all options will be granted according to a
vesting schedule so that the options become exercisable over a specified period
following the date of grant. Under Office of Thrift Supervision regulations, if
the stock option plan is implemented within the first year following the
conversion the minimum vesting period will be five years. All unvested options
will be immediately exercisable upon the recipient's death or disability.
Unvested options also will be exercisable following a change in control, as
defined in the stock option plan, of Indian Village Bancorp or Indian Village so
long as it is authorized or not prohibited by applicable law or regulations.
Under current Office of Thrift Supervision regulations, if the stock option plan
is implemented before the first anniversary of the conversion, vesting may not
be accelerated upon a change in control of Indian Village Bancorp or Indian
Village.
Each stock option that is awarded to an officer or key employee will
remain exercisable at any time on or after the date it vests through the earlier
to occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment, or one year if the optionee's
termination results from death or disability, unless the stock option committee
extends the time period. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant, or one year or two years upon a nonemployee
director's death or disability, following the termination of a nonemployee
director's service on the Board. All stock options are nontransferable except by
will or the laws of descent or distribution.
Under current provisions of the Internal Revenue Code, the federal tax
treatment of incentive stock options and nonqualified stock options is
different. For incentive stock options, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised.
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If the holding period requirements are satisfied, the optionee will generally
recognize capital gain or loss upon a subsequent disposition of the shares of
common stock received upon the exercise of a stock option. If the holding period
requirements are not satisfied, the difference between the fair market value of
the common stock on the date of grant and the option exercise price, if any,
will be taxable to the optionee at ordinary income tax rates. A federal income
tax deduction generally will not be available to Indian Village Bancorp as a
result of the grant or exercise of an incentive stock option, unless the
optionee fails to satisfy the holding period requirements. For nonqualified
stock options, the grant generally is not a taxable event for the optionee and
no tax deduction will be available to Indian Village Bancorp. However, upon
exercise, the difference between the fair market value of the common stock on
the date of exercise and the option exercise price generally will be treated as
compensation to the optionee upon exercise, and Indian Village Bancorp will be
entitled to a compensation expense deduction in the amount of income realized by
the optionee.
Under generally accepted accounting principles, compensation expense is
generally not recognized upon the award of options to officers and employees of
Indian Village Bancorp and its subsidiaries. However, the Financial Accounting
Standards Board recently indicated that it would propose rules during 1999 that
would generally require recognition of compensation expense with respect to
awards made to nonemployees, including nonemployee directors of Indian Village
Bancorp. The proposed changes would apply to awards made after December 15,
1998.
Under current Office of Thrift Supervision regulations, if the stock
option plan is implemented within one year of the conversion, no officer or
employee could receive an award of options covering more than 25%, no
nonemployee director could receive more than 5%, and nonemployee directors, as a
group, could not receive more than 30% of the number of shares reserved for
issuance under the stock option plan.
Although no specific award determinations have been made at this time,
Indian Village Bancorp and Indian Village anticipate that if stockholder
approval is obtained it would grant awards to its directors, officers and
employees up to amounts and under terms and conditions permitted by Office of
Thrift Supervision regulations. The size of individual awards will be determined
before submitting the stock option plan for stockholder approval, and disclosure
of anticipated awards will be included in the proxy materials for the meeting.
The material provisions of the stock option plan may be combined with
the material provisions of the management development and recognition plan to
create a single, unified stock-based benefit plan.
Management Recognition and Development Plan. The Board of Directors of
Indian Village Bancorp intends to adopt the Indian Village Bancorp, Inc.
Management Recognition and Development Plan, a restricted stock plan, for
officers, employees, and nonemployee directors of Indian Village Bancorp and
Indian Village, and to submit it to the stockholders for approval at a meeting
held no earlier than six months following the conversion. The plan will enable
Indian Village Bancorp and Indian Village to provide participants with a
proprietary interest in Indian Village Bancorp as an incentive to contribute to
the success of Indian Village Bancorp and Indian Village. Persons who are
awarded stock under the plan will not have to pay for the stock. Furthermore,
some or all of the persons who receive awards under the management development
and recognition plan will also be granted options under the stock option plan.
The plan will comply with all applicable regulatory requirements.
However, the plan will not be approved or endorsed by the Office of Thrift
Supervision. Under current Office of Thrift Supervision regulations, the
approval of a majority vote of Indian Village Bancorp's outstanding shares is
required for implementation of the plan within one year after the conversion.
The plan intends to acquire a number of shares of Indian Village
Bancorp's common stock equal to 4% of the common stock issued in the conversion.
This would range from 17,340 shares, assuming 433,500 shares are issued in the
conversion, to 23,460 shares, assuming 586,500 shares are issued in the
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conversion. The shares will be acquired on the open market, if available, with
funds contributed by Indian Village Bancorp or Indian Village to a trust which
Indian Village Bancorp may establish in conjunction with the plan or from
authorized but unissued shares or treasury shares of Indian Village Bancorp.
A committee of the Board of Directors of Indian Village Bancorp will
administer the management development and recognition plan, the members of which
will also serve as trustees for the plan, if a trust is formed. The trustees
will be responsible for the investment of all funds contributed by Indian
Village Bancorp or Indian Village to the trust. The Board of Directors of Indian
Village Bancorp may terminate the plan at any time and, upon termination, all
unallocated shares of common stock will revert to Indian Village Bancorp.
Shares of common stock granted under the plan will be in the form of
restricted stock payable ratably over a specified vesting period following the
date of grant. During the period of restriction, all shares will be held in
escrow by Indian Village Bancorp or by the plan. Under Office of Thrift
Supervision regulations, if the management development and recognition plan is
implemented within the first year following the conversion, the minimum vesting
period will be five years. All unvested awards will vest upon the recipient's
death or disability. Unvested management development and recognition plan awards
will also vest following a change in control, as defined in the plan, of Indian
Village Bancorp or Indian Village so long as it is authorized or not prohibited
by applicable law or regulations. Office of Thrift Supervision regulations
currently provide that, if the management development and recognition plan is
implemented before the first anniversary of the conversion, vesting may not be
accelerated upon a change in control of Indian Village Bancorp or Indian
Village.
A recipient of a plan award in the form of restricted stock generally
will not recognize income upon an award of shares of common stock, and Indian
Village Bancorp will not be entitled to a federal income tax deduction, until
the termination of the restrictions. Upon termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
common stock at the time and Indian Village Bancorp will be entitled to a
deduction in the same amount after satisfying federal income tax withholding
requirements. However, the recipient may elect to recognize ordinary income in
the year the restricted stock is granted in an amount equal to the fair market
value of the shares at that time, determined without regard to the restrictions.
In that event, Indian Village Bancorp will be entitled to a deduction in that
year and in the same amount. Any gain or loss recognized by the recipient upon
subsequent disposition of the stock will be either a capital gain or capital
loss.
Under current Office of Thrift Supervision regulations, if the plan is
implemented within one year after the conversion, no officer or employee could
receive an award covering more than 25%, no nonemployee director could receive
more than 5% and nonemployee directors, as a group, could not receive more than
30% of the number of shares reserved for issuance under the plan.
Although no specific award determinations have been made at this time,
Indian Village Bancorp and Indian Village anticipate that if stockholder
approval is obtained it would grant awards to its directors, officers and
employees up to amounts and under terms and conditions permitted by Office of
Thrift Supervision regulations. The size of individual awards will be determined
before submitting the plan for stockholder approval, and disclosure of
anticipated awards will be included in the proxy materials for the meeting.
The material provisions of the management development and recognition
plan may be combined with the material provisions of the stock option plan to
create a single, unified stock-based benefit plan.
Transactions with Indian Village
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, unless the loan or
extension of credit is made under a benefit program generally available to all
other employees and does not give preference to any insider over any other
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employee, and must not involve more than the normal risk of repayment or present
other unfavorable features. Indian Village's policy is not to make any new loans
or extensions of credit to Indian Village's executive officers and directors at
different rates or terms than those offered to the general public. In addition,
loans made to a director or executive officer in an amount that, when aggregated
with the amount of all other loans to the person and his or her related
interests, are in excess of the greater of $25,000 or 5% of Indian Village's
capital and surplus, up to a maximum of $500,000, must be approved in advance by
a majority of the disinterested members of the Board of Directors. See
"Regulation--Federal Regulation of Savings Associations--Transactions with
Affiliates." The aggregate amount of loans by Indian Village to its executive
officers and directors was $479,000 at December 31, 1998, or approximately 4.8%
of pro forma stockholders' equity assuming that 586,500 shares are issued in the
conversion. These loans were performing according to their original terms at
December 31, 1998.
Michael A. Cochran performs legal services for Indian Village Bancorp
and Indian Village. In 1998, Indian Village paid $3,200 in legal fees to Mr.
Cochran for legal services rendered to the institution, which includes a
retainer fee of $2,400. These amounts in total did not represent more than 5% of
total legal fees that Mr. Cochran earned in 1998.
John A. Beitzel and Indian Village are parties to a consulting
contract. See "--Executive Compensation--Consulting Contract" for further
information.
REGULATION AND SUPERVISION
General
As a savings and loan holding company, Indian Village Bancorp will be
required by federal law to file reports with, and otherwise comply with, the
rules and regulations of the Office of Thrift Supervision. Indian Village is
regulated, examined and supervised extensively by the Office of Thrift
Supervision, as its primary federal regulator, and the Federal Deposit Insurance
Corporation, as the deposit insurer. Indian Village is a member of the Federal
Home Loan Bank System and its deposit accounts are insured up to applicable
limits by the Savings Association Insurance Fund managed by the Federal Deposit
Insurance Corporation. Indian Village must file reports with the Office of
Thrift Supervision and the Federal Deposit Insurance Corporation concerning its
activities and financial condition in addition to obtaining their approval
before entering into certain transactions such as mergers with, or acquisitions
of, other savings institutions. The Office of Thrift Supervision and the Federal
Deposit Insurance Corporation examine Indian Village periodically to test Indian
Village's safety and soundness and compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework for Indian Village's activities and is intended primarily to protect
the insurance fund and Indian Village's depositors.
The regulatory structure also gives regulatory authorities extensive
discretion in their supervisory and enforcement activities and examination
policies, including policies regarding asset classification and the
establishment of adequate loan loss reserves for regulatory purposes. Any change
in regulatory requirements and policies, whether by the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation or the Congress, could
have a material adverse impact on Indian Village Bancorp, Indian Village and
their operations. The description of statutory provisions and regulations that
apply to Indian Village Bancorp and Indian Village discussed below and elsewhere
in this prospectus is not a complete description of them and their effects on
Indian Village and Indian Village Bancorp.
Holding Company Regulation
Indian Village Bancorp will be a non-diversified unitary savings and
loan holding company under federal law because Indian Village will be its only
insured subsidiary immediately after the conversion. As a unitary
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savings and loan holding company, Indian Village Bancorp generally will not be
restricted under existing laws as to the types of business activities in which
it may engage, provided that Indian Village continues to be a qualified thrift
lender. See "Federal Savings Institution Regulation - Qualified Thrift Lender
Test." If Indian Village Bancorp acquires another savings institution or savings
bank that is not a problem institution, that meets the qualified thrift lender
test and that the Office of Thrift Supervision considers to be a savings
institution, Indian Village Bancorp would become a multiple savings and loan
holding company if the acquired institution is held as a separate subsidiary and
not merged into Indian Village. As a multiple savings and loan holding company,
Indian Village Bancorp would generally be limited to activities permissible for
bank holding companies under federal law so long as the Office of Thrift
Supervision first approves of these activities, and to certain other activities
authorized by Office of Thrift Supervision regulation.
A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company and from acquiring or retaining
control of a depository institution that is not insured by the Federal Deposit
Insurance Corporation, unless it first receives the approval of the Office of
Thrift Supervision. In evaluating applications by holding companies to acquire
savings institutions, the Office of Thrift Supervision considers the financial
and managerial resources and future prospects of the holding company and the
institution involved, the effect of the acquisition on the risk to the deposit
insurance funds, the convenience and needs of the community and competitive
factors.
The Office of Thrift Supervision may not approve any acquisition that
results in a multiple savings and loan holding company controlling savings
institutions in more than one state. However, there are two exceptions to this
general rule. First, the approval of interstate supervisory acquisitions by
savings and loan holding companies. Second, the acquisition of a savings
institution in another state if the laws of the state of the target savings
institution specifically permit the acquisition. The states vary in the extent
to which they permit interstate savings and loan holding company acquisitions.
Although savings and loan holding companies do not face specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, federal regulations place these restrictions on
subsidiary savings institutions as described below. Indian Village must notify
the Office of Thrift Supervision 30 days before declaring any dividend to Indian
Village Bancorp. In addition, the financial impact of a holding company on its
subsidiary institution is a matter that is evaluated by the Office of Thrift
Supervision, which has authority to order the stoppage of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.
Federal Savings Institution Regulation
Business Activities. The activities of federal savings institutions are
governed by federal law and regulations. These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage. In particular, many types of lending authority for federal association
are limited to a specified percentage of the institution's capital or assets.
Capital Requirements. The Office of Thrift Supervision capital
regulations require savings institutions to meet three minimum capital
standards: a 1.5% tangible capital ratio, a 3% leverage ratio and an 8%
risk-based capital ratio. In addition, the prompt corrective action standards
discussed below also establish, in effect, a minimum 2% tangible capital
standard, a 4% leverage ratio (3% for institutions receiving the highest rating
on the CAMELS financial institution rating system) and, together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
Office of Thrift Supervision regulations also require that, in meeting the
tangible, leverage and risk-based capital standards, institutions must generally
deduct investments in and loans to subsidiaries engaged in activities as
principal that are not permissible for a national bank.
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The risk-based capital standard requires an institution to maintain
Tier 1 or core capital to risk-weighted assets of at least 4% and total capital
to risk-weighted assets of at least 8%. Total capital is defined as core capital
and supplementary capital. In determining the amount of risk-weighted assets,
all assets, including certain off-balance sheet assets, are multiplied by a
risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision
capital regulation based on the risks believed inherent in the type of asset.
Core or Tier 1 capital is defined as common stockholders' equity and retained
earnings, certain noncumulative perpetual preferred stock and related surplus,
and minority interests in equity accounts of consolidated subsidiaries, less
intangibles other than certain mortgage servicing rights and credit card
relationships. The components of supplementary capital include cumulative
preferred stock, long-term perpetual preferred stock, mandatory convertible
securities, subordinated debt and intermediate preferred stock, and the
allowance for loan and lease losses limited to a maximum of 1.25% of risk-
weighted assets. Overall, the amount of supplementary capital included as part
of total capital cannot exceed 100% of core capital.
The capital regulations also incorporate an interest rate risk
component. Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. Presently, the Office of Thrift Supervision has
deferred implementation of the interest rate risk component. At December 31,
1998, Indian Village met each of its capital requirements. See "Historical and
Pro Forma Regulatory Capital Compliance" for information regarding Indian
Village's compliance with the Office of Thrift Supervision's regulatory capital
requirements.
Prompt Corrective Regulatory Action. The Office of Thrift Supervision
is required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
undercapitalization. Generally, a savings institution that has a ratio of total
capital to risk weighted assets of less than 8%, a ratio of Tier 1 or core
capital to risk-weighted assets of less than 4%, or a ratio of core capital to
total assets of less than 4%, or 3% or less for institutions with the highest
examination rating, is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a Tier 1
capital ratio of less than 3% or a leverage ratio that is less than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible capital to assets ratio equal to or less than 2% is deemed to be
"critically undercapitalized." Although there is a narrow exception, the Office
of Thrift Supervision is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that an institution must file a capital restoration plan with the Office of
Thrift Supervision within 45 days of the date that the Office of Thrift
Supervision notifies it that it is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." Compliance with the plan
must be guaranteed by any parent holding company. In addition, numerous
mandatory supervisory actions immediately apply to an undercapitalized
institution, including, but not limited to, increased monitoring by regulators
and restrictions on growth, capital distributions and expansion. The Office of
Thrift Supervision could also take any one of a number of discretionary
supervisory actions, including issuing a capital directive and replacing senior
executive officers and directors.
Insurance of Deposit Accounts. Deposits of Indian Village are presently
insured by the Savings Association Insurance Fund. The Federal Deposit Insurance
Corporation maintains a risk-based assessment system by which institutions are
assigned to one of three categories based on their capitalization and one of
three subcategories based on examination ratings and other supervisory
information. An institution's assessment rate depends upon the categories to
which it is assigned. Assessment rates for Savings Association Insurance Fund
member institutions are determined semiannually by the Federal Deposit Insurance
Corporation and currently range from zero basis points for the healthiest
institutions to 27 basis points for the riskiest.
In addition to the assessment for deposit insurance, institutions are
required to pay on bonds issued in the late 1980s by the Financing Corporation
to recapitalize the predecessor to the Savings Association Insurance Fund.
During 1998, Financing Corporation payments for Savings Association Insurance
Fund members approximated 6.10 basis points, while Bank Insurance Fund members
paid 1.22 basis points. By law, there will be equal sharing of Financing
Corporation payments between the members of both insurance funds on the earlier
of January 1, 2000 or the date the two insurance funds are merged.
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Indian Village's assessment rate for fiscal 1998 ranged from 0 to 3
basis points and the premium paid for this period was $4,500. Payments toward
the Financing Corporation bonds amounted to $18,000. The Federal Deposit
Insurance Corporation has authority to increase insurance assessments. A
significant increase in Savings Association Insurance Fund insurance premiums
would likely have an adverse effect on the operating expenses and results of
operations of Indian Village. Management cannot predict what insurance
assessment rates will be in the future.
The Federal Deposit Insurance Corporation may terminate an
institution's deposit insurance if it finds that the institution has engaged in
unsafe or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the Federal Deposit Insurance Corporation or the Office of
Thrift Supervision. The management of Indian Village does not know of any
practice, condition or violation that might lead to termination of its deposit
insurance.
Thrift Rechartering Legislation. Legislation enacted in 1996 provided
that the Bank Insurance Fund and the Savings Association Insurance Fund were to
have merged on January 1, 1999 if there were no more savings associations as of
that date. Various proposals to eliminate the federal savings association
charter, create a uniform financial institutions charter, abolish the Office of
Thrift Supervision and restrict savings and loan holding company activities have
been introduced in Congress. Indian Village is unable to predict whether any of
this legislation will be enacted or the extent to which legislation might
restrict or disrupt its operations. See "Risk Factors -- Banking Reform
Legislation May Reduce Indian Village Bancorp's and Indian Village's Powers."
Loans to One Borrower. Federal law provides that savings institutions
must generally follow the limits on loans to one borrower applicable to national
banks. A savings institution may not make a loan or extend credit to a single or
related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if secured by specified readily-marketable collateral. See
"Business of Indian Village -- Lending Activities -- Loans to One Borrower" for
further information.
Qualified Thrift Lender Test. Federal law requires savings institutions
to meet a qualified thrift lender test. Under the test, a savings association is
required to either qualify as a "domestic building and loan association" under
the Internal Revenue Code or maintain at least 65% of its "portfolio assets" in
certain "qualified thrift investments" in at least 9 months out of each 12 month
period. "Portfolio assets" equals total assets less specified liquid assets up
to 20% of total assets, intangibles, including goodwill, and the value of
property used to conduct business. "Qualified thrift investments" are primarily
residential mortgages and related investments, including certain mortgage-backed
securities.
A savings institution that fails the qualified thrift lender test faces
certain operating restrictions and may be required to convert to a bank charter.
As of December 31, 1998, Indian Village complied with the qualified thrift
lender test. Recent legislation has expanded the extent to which education
loans, credit card loans and small business loans may be considered "qualified
thrift investments."
Limitation on Capital Distributions. Office of Thrift Supervision
regulations impose limitations upon all capital distributions by a savings
institution, including cash dividends, payments to repurchase its shares and
payments to shareholders of another institution in a cash-out merger. The rule
effective in 1998 established three tiers of institutions based primarily on an
institution's capital level.
A Tier I institution exceeds all capital requirements before and after
a proposed capital distribution and has not been advised by the Office of Thrift
Supervision that it needs more than normal supervision. A Tier I institution
could, after first giving notice to but without obtaining approval of the Office
of Thrift Supervision, make capital distributions during the calendar year equal
to the greater of 100% of its net earnings to date during the calendar year plus
the amount that would reduce by one-half the excess capital over its capital
requirements at the beginning of the calendar year, or 75% of its net income for
the previous four quarters. Any additional capital distributions would first
require regulatory approval. At December 31, 1998, Indian Village was a Tier 1
institution.
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Effective April 1, 1999, the Office of Thrift Supervision's capital
distribution regulation changed. Under the new regulation, an application to and
the prior approval of the Office of Thrift Supervision is required before any
capital distribution if the institution does not meet the criteria for
"expedited treatment" of applications under Office of Thrift Supervision
regulations, the total capital distributions for the calendar year exceed net
income for that year plus the amount of retained net income for the preceding
two years, the institution would be undercapitalized following the distribution
or the distribution would otherwise be contrary to a statute, regulation or
agreement with Office of Thrift Supervision. If an application is not required,
the institution must still give advance notice to Office of Thrift Supervision
of the capital distribution. If Indian Village's capital fell below its
regulatory requirements or if the Office of Thrift Supervision notified it that
it was in need of more than normal supervision, Indian Village's ability to make
capital distributions could be restricted. In addition, the Office of Thrift
Supervision could prohibit a proposed capital distribution, which would
otherwise be permitted by the regulation if the Office of Thrift Supervision
determines that the distribution would be an unsafe or unsound practice.
Liquidity. Indian Village is required to maintain an average daily
balance of specified liquid assets equal to a monthly average of not less than a
specified percentage of its net withdrawable deposit accounts plus short-term
borrowings. This liquidity requirement is currently 4%, but may be changed from
time to time by the Office of Thrift Supervision to any amount within the range
of 4% to 10%. Monetary penalties may be imposed for failure to meet these
liquidity requirements. The Bank met these requirements at December 31, 1998.
See "Business of Indian Village -- Liquidity and Capital Resources" for further
information.
Assessments. Savings institutions are required to pay assessments to
the Office of Thrift Supervision to fund the agency's operations. The general
assessments, paid on a semi-annual basis, are computed upon the savings
institution's total assets, including consolidated subsidiaries, as reported in
Indian Village's latest quarterly thrift financial report. Indian Village's
assessments for the fiscal year ended December 31, 1998 totaled $13,000.
Transactions with Related Parties. Indian Village's authority to engage
in transactions with "affiliates" is limited by federal law. Generally, an
affiliate is any company that controls or is under common control with an
institution, including Indian Village Bancorp. The aggregate amount of covered
transactions with any individual affiliate is limited to 10% of the capital and
surplus of the savings institution. The aggregate amount of covered transactions
with all affiliates is limited to 20% of the savings institution's capital and
surplus. Certain transactions with affiliates are required to be secured by
collateral in an amount and of a type described in federal law. The purchase of
low quality assets from affiliates is generally prohibited. The transactions
with affiliates must be on terms and under circumstances, that are at least as
favorable to the institution as those prevailing at the time for comparable
transactions with non-affiliated companies. In addition, savings institutions
are prohibited from lending to any affiliate that is engaged in activities that
are not permissible for bank holding companies and no savings institution may
purchase the securities of any affiliate other than a subsidiary.
Indian Village's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities within the control of these
persons, is also governed by federal law. These persons are often referred to as
"insiders" of a company. Loans to insiders are required to be made on terms
substantially the same as those offered to unaffiliated individuals and may not
involve more than the normal risk of repayment. Recent legislation created an
exception for loans made pursuant to a benefit or compensation program that is
widely available to all employees of the institution and does not give
preference to insiders over other employees. The law limits both the individual
and aggregate amount of loans Indian Village may make to insiders based, in
part, on Indian Village's capital position and requires certain board approval
procedures to be followed.
Enforcement. The Office of Thrift Supervision has primary enforcement
responsibility over savings institutions and has the authority to bring actions
against the institution and all institution-affiliated parties, including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order, to removal of officers and/or
directors, to institution of a receivership or conservatorship, or to
termination of deposit insurance. Civil penalties cover a wide
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range of violations and can amount to $25,000 per day, or even $1 million per
day in especially serious cases. The Federal Deposit Insurance Corporation has
the authority to recommend to the Director of the Office of Thrift Supervision
that enforcement action to be taken with respect to a particular savings
institution. If action is not taken by the Director, the Federal Deposit
Insurance Corporation has authority to take action under certain circumstances.
Federal law also establishes criminal penalties for certain violations.
Standards for Safety and Soundness. The federal banking agencies have
adopted Interagency Guidelines prescribing Standards for Safety and Soundness.
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. If the Office of Thrift
Supervision determines that a savings institution fails to meet any standard
prescribed by the guidelines, the Office of Thrift Supervision may require the
institution to submit an acceptable plan to achieve compliance with the
standard.
Federal Reserve System
The Federal Reserve Board regulations require savings institutions to
maintain non-interest earning reserves against their transaction accounts,
primarily NOW and regular checking accounts. The regulations generally require
that reserves be maintained against aggregate transaction accounts as follows:
for accounts aggregating $46.5 million or less, subject to adjustment by the
Federal Reserve Board the reserve requirement is 3%; and for accounts
aggregating greater than $46.5 million, the reserve requirement is $1.395
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 $46.5
million. The first $4.9 million of otherwise reservable balances, as adjusted by
the Federal Reserve Board, are exempted from the reserve requirements. Indian
Village complies with the foregoing requirements.
FEDERAL AND STATE TAXATION
Federal Taxation
General. Indian Village Bancorp and Indian Village intend to report
their income on a calendar year, unconsolidated basis using the accrual method
of accounting. The federal income tax laws apply to Indian Village Bancorp and
Indian Village in the same manner as to other corporations with some exceptions,
including particularly Indian Village's reserve for bad debts discussed below.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to
Indian Village or Indian Village Bancorp. Indian Village's federal tax returns
have been either audited or closed under the statute of limitations through tax
year 1994. For its 1998 tax year, Indian Village's maximum federal income tax
rate was 34%.
Bad Debt Reserves. For fiscal years beginning before December 31, 1995,
thrift institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986, as amended, were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve. A reserve could be
established for bad debts on qualifying real property loans, generally secured
by interests in real property improved or to be improved, under the percentage
of taxable income method or the experience method. The reserve for nonqualifying
loans was computed using the experience method.
Federal legislation enacted in 1996 repeal the reserve method of
accounting for bad debts for tax years beginning after 1995 and require savings
institutions to recapture or take into income certain portions of their
accumulated bad debt reserves. Thrift institutions eligible to be treated as
"small banks," those with assets of $500 million or less, are allowed to use the
experience method that applies to "small banks," while thrift institutions that
are treated as large banks, those with assets exceeding $500 million, are
required to use only the specific charge-off
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method. As a result, the percentage of taxable income method of accounting for
bad debts is no longer available for any financial institution.
A thrift institution required to change its method of computing
reserves for bad debts will treat the change as a change in method of
accounting, initiated by the taxpayer, and having been made with the consent of
the Internal Revenue Service. Any adjustment required to be taken into income
with respect to a change in accounting method generally will be taken into
income ratably over a six-taxable year period, beginning with the first taxable
year beginning after 1995, subject to a 2-year suspension if the "residential
loan requirement" is satisfied. Under the residential loan requirement
provision, the recapture required by the new legislation will be suspended for
each of two successive taxable years, beginning with Indian Village's 1996
taxable year, in which Indian Village originates a minimum of certain
residential loans based upon the average of the principal amounts of these loans
that Indian Village makes during its six taxable years preceding its current
taxable year.
Indian Village is required to recapture or take into income over a six
year period the excess of the balance of its tax bad debt reserves as of
December 31, 1995 over the balance of the reserves as of December 31, 1987. As a
result, Indian Village will incur an additional tax liability of approximately
$35,000, which is generally expected to be taken into income beginning in 1996
over a six year period.
Distributions. If Indian Village makes "non-dividend distributions" to
Indian Village Bancorp, they will be considered to have been made from Indian
Village's unrecaptured tax bad debt reserves, including the balance of its
reserves as of December 31, 1987, to the extent of the "nondividend
distributions," and then from Indian Village's supplemental reserve for losses
on loans, to the extent of those reserves, and an amount based on the amount
distributed, but not more than the amount of those reserves, will be included in
Indian Village's income. Non-dividend distributions include distributions in
excess of Indian Village's current and accumulated earnings and profits, as
calculated for federal income tax purposes, distributions in redemption of
stock, and distributions in partial or complete liquidation. Dividends paid out
of Indian Village's current or accumulated earnings and profits will not be so
included in Indian Village's income.
The amount of additional taxable income triggered by a non-dividend is
an amount that, when reduced by the tax attributable to the income, is equal to
the amount of the distribution. Therefore, if Indian Village makes a
non-dividend distribution to Indian Village Bancorp, approximately one and
one-half times the amount of the distribution not in excess of the amount of the
reserves would be includable in income for federal income tax purposes, assuming
a 34% federal corporate income tax rate. Indian Village does not intend to pay
dividends that would result in a recapture of any portion of its bad debt
reserves.
Savings Association Insurance Fund Recapitalization Assessment. Federal
legislation enacted in 1996 levied a 65.7-cent fee on every $100 of thrift
deposits held on March 31, 1995. For financial statement purposes, this
assessment was reported as an expense for the quarter ended September 30, 1996.
The law includes a provision which states that the amount of any special
assessment paid to capitalize Savings Association Insurance Fund under this
legislation is deductible in the year of payment.
Ohio Taxation
Indian Village Bancorp is subject to the Ohio corporation franchise
tax, which, as applied to it, is a tax measured by both net income and net
worth. In general, the tax liability is the greater of 5.1% on the first $50,000
of computed Ohio taxable income and 8.5% of computed Ohio taxable income in
excess of $50,000, or 0.40% of taxable net worth. Under these alternative
measures of computing the tax liability, complex formulas determine the
jurisdictions to which total net income and total net worth are apportioned or
allocated. The minimum tax is $50 per year and maximum tax liability as measured
by net worth is limited to $150,000 per year.
A special litter tax also applies to all corporations, including Indian
Village Bancorp, subject to the Ohio corporation franchise tax. This litter tax
does not apply to "financial institutions." If a corporation pays franchise
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tax on the basis of net income, the litter tax is equal to .11% of the first
$50,000 of computed Ohio taxable income and .22% of computed Ohio taxable income
in excess of $50,000. If a corporation pays franchise tax on the basis of net
worth, the litter tax is equal to .014% times taxable net worth.
A statutory exemption from the net worth tax is available to Indian
Village Bancorp if certain conditions are satisfied. Indian Village Bancorp
expects to qualify for this exemption, which would restrict its tax liability to
the tax measured by net income.
Indian Village is a "financial institution" for State of Ohio tax
purposes. Accordingly, it must pay the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.4% of the
Indian Village's apportioned book net worth, determined under generally accepted
accounting principles, less any statutory deduction. This tax rate is scheduled
to decrease to 1.3% in the year 2000. As a "financial institution," Indian
Village does not pay any Ohio tax based upon net income or net profits.
THE CONVERSION
The Office of Thrift Supervision has approved the plan of conversion,
provided that it is approved by the members of Indian Village and that Indian
Village Bancorp and Indian Village satisfy certain other conditions imposed by
the Office of Thrift Supervision in its approval. Office of Thrift Supervision
approval is not a recommendation or endorsement of the plan of conversion.
General
On January 20, 1999, the Board of Directors of Indian Village
unanimously adopted the plan of conversion, under which Indian Village will be
converted from a federally chartered mutual savings and loan association to a
federally chartered stock savings bank to be held as a wholly owned subsidiary
of Indian Village Bancorp, a newly formed Pennsylvania corporation. The
following discussion of the plan of conversion contains all material terms about
the conversion. Nevertheless, readers are urged to read carefully the plan of
conversion, which accompanies Indian Village's proxy statement and is available
to members of Indian Village upon request. The plan of conversion is also filed
as an exhibit to the registration statement that Indian Village Bancorp has
filed with the Securities and Exchange Commission. See "Where You Can Find More
Information." The Office of Thrift Supervision has approved the plan of
conversion with the condition that it is approved by the members of Indian
Village entitled to vote on the matter at a special meeting on _______, 1999 and
conditioned on the satisfaction of certain other conditions imposed by the
Office of Thrift Supervision in its approval.
The conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by Indian Village.
As part of the conversion, Indian Village will issue all of its newly issued
capital stock, or 1,000 shares of common stock, to Indian Village Bancorp in
exchange for 50% of the net proceeds from the sale of common stock by Indian
Village Bancorp.
The plan of conversion provides generally that: Indian Village will
convert from a federally chartered mutual savings and loan association to a
federally chartered stock savings bank; the common stock will be offered by
Indian Village Bancorp in the subscription offering to persons having
subscription rights; if necessary, shares of common stock not subscribed for in
the subscription offering will be offered in a direct community offering to
certain members of the general public, with preference given to natural persons
and their trusts residing in Tuscarawas County, Ohio, and then to certain
members of the general public in a syndicated community offering through a
syndicate of registered broker-dealers under selected dealers agreements; and
Indian Village Bancorp will purchase all of the capital stock of Indian Village
to be issued in the conversion. The conversion will be completed only upon the
sale of at least $5,100,000 of common stock to be issued under the plan of
conversion.
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As part of the conversion, Indian Village Bancorp is making a
subscription offering of its common stock to holders of subscription rights in
the following order of priority. First, depositors of Indian Village with $50.00
or more on deposit as of December 31, 1997. Second, Indian Village's employee
stock ownership plan. Third, depositors of Indian Village with $50.00 or more on
deposit as of March 31, 1999. Finally, depositors of Indian Village as of April
30, 1999 and borrowers of Indian Village with loans outstanding as of January
20, 1999 which continue to be outstanding as of April 30, 1999.
Shares of common stock not subscribed for in the subscription offering
may be offered for sale in the direct community offering. The direct community
offering, if one is held, is expected to begin immediately after the expiration
of the subscription offering, but may begin at any time during the subscription
offering. Shares of common stock not sold in the subscription and direct
community offerings may be offered in the syndicated community offering.
Regulations require that the direct community and syndicated community offerings
be completed within 45 days after completion of the fully extended subscription
offering unless extended by Indian Village or Indian Village Bancorp with the
approval of the regulatory authorities. If the syndicated community offering is
not feasible, the Board of Directors of Indian Village will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed shares of common stock. The plan of conversion provides
that the conversion must be completed within 24 months after the date of the
approval of the plan of conversion by the members of Indian Village.
No sales of common stock may be completed, either in the subscription
offering, direct community offering or syndicated community offering unless the
plan of conversion is approved by the members of Indian Village.
The completion of the offering, however, depends on market conditions
and other factors beyond Indian Village's control. No assurance can be given as
to the length of time after approval of the plan of conversion at the special
meeting that will be required to complete the Direct Community or syndicated
community offerings or other sale of the common stock. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of Indian Village Bancorp and Indian Village as converted, together with
corresponding changes in the net proceeds realized by Indian Village Bancorp
from the sale of the common stock. If the conversion is terminated, Indian
Village would be required to charge all conversion expenses against current
income.
Orders for shares of common stock will not be filled until at least
433,500 shares of common stock have been subscribed for or sold and the Office
of Thrift Supervision approves the final valuation and the conversion closes. If
the conversion is not completed within 45 days after the last day of the fully
extended subscription offering and the Office of Thrift Supervision consents to
an extension of time to complete the conversion, subscribers will be given the
right to increase, decrease or rescind their subscriptions. Unless an
affirmative indication is received from subscribers that they wish to continue
to subscribe for shares, the funds will be returned promptly, together with
accrued interest at Indian Village's passbook rate from the date payment is
received until the funds are returned to the subscriber. If the period is not
extended, or, in any event, if the conversion is not completed, all withdrawal
authorizations will be terminated and all funds held will be promptly returned
together with accrued interest at Indian Village's passbook rate from the date
payment is received until the conversion is terminated.
Reasons for the Conversion
The Board of Directors and management believe that the conversion is in
the best interests of Indian Village, its members and the communities it serves.
Indian Village's Board of Directors has formed Indian Village Bancorp to serve
as a holding company, with Indian Village as its subsidiary, after the
conversion. By converting to the stock form of organization, Indian Village
Bancorp and Indian Village will be structured in the form used by holding
companies of commercial banks, most business entities and by a growing number of
savings institutions. Management of Indian Village believes that the conversion
offers a number of advantages which will be important to the future growth and
performance of Indian Village. The capital raised in the conversion is intended
to support
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Indian Village's current lending and investment activities and may also support
possible future expansion and diversification of operations, although there are
no current specific plans, arrangements or understandings, written or oral,
regarding any expansion or diversification other than the proposed New
Philadelphia branch. The conversion is also expected to afford Indian Village's
management, members and others the opportunity to become stockholders of Indian
Village Bancorp and participate more directly in, and contribute to, any future
growth of Indian Village Bancorp and Indian Village. The conversion will also
enable Indian Village Bancorp and Indian Village to raise additional capital in
the public equity or debt markets should the need arise, although there are no
current specific plans, arrangements or understandings, written or oral,
regarding any financing activities. Indian Village, as a mutual savings and loan
association, does not have the authority to issue capital stock or debt
instruments, other than by accepting deposits.
Effects of Conversion to Stock Form on Depositors and Borrowers of Indian
Village
Voting Rights. Savings members and borrowers will have no voting rights
in the converted association or Indian Village Bancorp and therefore will not be
able to elect directors of Indian Village or Indian Village Bancorp or to
control their affairs. Currently, these rights are accorded to savings members
of Indian Village. After the conversion, voting rights will be vested
exclusively in Indian Village Bancorp with respect to Indian Village and the
holders of the common stock as to matters pertaining to Indian Village Bancorp.
Each holder of common stock shall be entitled to vote on any matter to be
considered by the stockholders of Indian Village Bancorp. A stockholder will be
entitled to one vote for each share of common stock owned.
Savings Accounts and Loans. Indian Village's savings accounts, account
balances and existing Federal Deposit Insurance Corporation insurance coverage
of savings accounts will not be affected by the conversion. Furthermore, the
conversion will not affect the loan accounts, loan balances or obligations of
borrowers under their individual contractual arrangements with Indian Village.
Tax Effects. Indian Village has received an opinion from Muldoon,
Murphy & Faucette LLP, Washington, D.C., that addresses all the material federal
income tax consequences of the conversion. The opinion concludes that the
conversion will constitute a nontaxable reorganization under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended. Among other
things, the opinion states that:
1. no gain or loss will be recognized to Indian Village in its mutual
or stock form by reason of the conversion;
2. no gain or loss will be recognized to its account holders upon the
issuance to them of accounts in Indian Village immediately after
the conversion, in the same dollar amounts and on the same terms
and conditions as their accounts at Indian Village in its mutual
form plus interest in the liquidation account;
3. the tax basis of account holders' accounts in Indian Village
immediately after the conversion will be the same as the tax
basis of their accounts immediately before conversion;
4. the tax basis of each account holder's interest in the liquidation
account will be equal to the value, if any, of that interest;
5. the tax basis of the common stock purchased in the conversion will
be the amount paid and the holding period for the stock will begin
on the date of purchase; and
6. no gain or loss will be recognized to account holders upon the
receipt or exercise of subscription rights in the conversion,
except if subscription rights are deemed to have value as discussed
below.
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Unlike a private letter ruling issued by the Internal Revenue Service,
an opinion of counsel is not binding on the Internal Revenue Service and the
Internal Revenue Service could disagree with the conclusions reached in the
opinion. If there is a disagreement, no assurance can be given that the
conclusions reached in an opinion of counsel would be sustained by a court if
contested by the Internal Revenue Service.
Based upon past rulings issued by the Internal Revenue Service, the
opinion provides that the receipt of subscription rights by eligible account
holders, supplemental eligible account holders and other members under the plan
of conversion will be taxable if the subscription rights are deemed to have a
fair market value. Keller & Company, whose findings are not binding on the
Internal Revenue Service, has issued a letter indicating that the subscription
rights do not have any value, based on the fact that the rights are acquired by
the recipients without cost, are nontransferable and of short duration and
afford the recipients the right only to purchase shares of the common stock at a
price equal to its estimated fair market value, which will be the same price
paid by purchasers in the direct community offering for unsubscribed shares of
common stock. If the subscription rights are deemed to have a fair market value,
the receipt of the rights may only be taxable to those persons who exercise
their subscription rights. Indian Village could also recognize a gain on the
distribution of subscription rights. Holders of subscription rights are
encouraged to consult with their own tax advisors as to the tax consequences if
the subscription rights are deemed to have a fair market value.
Indian Village has also received an opinion from Crowe, Chizek and
Company LLP, Columbus, Ohio, that, assuming the conversion does not result in
any federal income tax liability to Indian Village, its account holders, or
Indian Village Bancorp, implementation of the plan of conversion will not result
in any Ohio income tax liability to those entities or persons.
The opinions of Muldoon, Murphy & Faucette LLP and Crowe, Chizek and
Company LLP, and the letter from Keller & Company are filed as exhibits to the
registration statement that Indian Village Bancorp has filed with the Securities
and Exchange Commission. See "Where You Can Find More Information."
Prospective investors are urged to consult with their own tax advisors
regarding the tax consequences of the conversion particular to them.
Liquidation Account. In the unlikely event of a complete liquidation of
Indian Village, before the conversion, each depositor in Indian Village would
receive a pro rata share of any assets of Indian Village remaining after payment
of claims of all creditors, including the claims of all depositors up to the
withdrawal value of their accounts. Each depositor's pro rata share of the
remaining assets would be in the same proportion as the value of his or her
deposit account to the total value of all deposit accounts in Indian Village at
the time of liquidation.
After the conversion, holders of withdrawals deposit(s) in Indian
Village, including certificates of deposit, shall not be entitled to share in
any residual assets upon liquidation of Indian Village. However, under Office of
Thrift Supervision regulations, Indian Village shall, at the time of the
conversion, establish a liquidation account in an amount equal to its total
equity as of the date of the latest statement of financial condition contained
in the final prospectus relating to the conversion.
The liquidation account shall be maintained by Indian Village after the
conversion for the benefit of eligible account holders and supplemental eligible
account holders who retain their savings accounts in Indian Village. Each
eligible account holder and supplemental eligible account holder shall, with
respect to each savings account held, have a related inchoate interest in a
sub-account portion of the liquidation account balance.
The initial subaccount balance for a savings account held by an
eligible account holder or a supplemental eligible account holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of the holder's "qualifying
deposit" in the savings account and the
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denominator is the total amount of the "qualifying deposits" of all eligible
account holders. The initial subaccount balance shall not be increased, and it
shall be decreased as provided below.
If the deposit balance in any savings account of an eligible account
holder or supplemental eligible account holder at the close of business on any
annual closing day of Indian Village after December 31, 1997, or March 31, 1999
is less than the lesser of the deposit balance in a savings account at the close
of business on any other annual closing date after December 31, 1997 or March
31, 1999, or the amount of the "qualifying deposit" in a savings account on
December 31, 1997 or March 31, 1999, then the subaccount balance for a savings
account shall be adjusted by reducing the subaccount balance in an amount
proportionate to the reduction in the deposit balance. Once reduced, the
subaccount balance shall not be subsequently increased, notwithstanding any
increase in the deposit balance of the related savings account. If any savings
account is closed, the related subaccount balance shall be reduced to zero.
Only upon a complete liquidation of Indian Village, 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 savings account(s) held by
the holder before any liquidation distribution may be made to stockholders. No
merger, consolidation, bulk purchase of assets with assumptions of savings
account and other liabilities or similar transactions with another federally
insured institution in which Indian Village is not the surviving institution
shall be considered to be a complete liquidation. In any of these transaction
the liquidation account shall be assumed by the surviving institution.
In the unlikely event Indian Village is liquidated after the
conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to Indian Village Bancorp as the sole
stockholder of Indian Village.
The Subscription, Direct Community and Syndicated Community Offerings
Subscription Offering. Under the plan of conversion, nontransferable
subscription rights to purchase the common stock have been issued to persons and
entities entitled to purchase the common stock in the subscription offering. The
amount of the common stock which these parties may purchase will depend on the
availability of the common stock for purchase under the categories described in
the plan of conversion. Subscription priorities have been established for the
allocation of stock that may be available. These priorities are as follows:
Category 1: Eligible Account Holders. Each depositor with $50.00 or
more on deposit at Indian Village as of December 31, 1997 will receive
nontransferable subscription rights to subscribe for up to the greater of
$100,000 of common stock, which equals 10,000 shares, one-tenth of one percent
of the total offering of common stock or 15 times the product, rounded down to
the next whole number, obtained by multiplying the total number of shares of
common stock to be issued by a fraction of which the numerator is the amount of
qualifying deposit of the eligible account holder and the denominator is the
total amount of qualifying deposits of all eligible account holders. If the
exercise of subscription rights in this category results in an oversubscription,
shares of common stock will be allocated among subscribing eligible account
holders so as to permit each one, if possible, to purchase a number of shares
sufficient to make the person's total allocation equal 100 shares or the number
of shares actually subscribed for, whichever is less. After that, unallocated
shares will be allocated proportionately, based on the amount of the eligible
accountholder's qualifying deposits as compared to total qualifying deposits of
all subscribing eligible account holders. Subscription rights received by
officers and directors in this category based on any increased deposits in
Indian Village in the one year period preceding December 31, 1997 are
subordinated to the subscription rights of other eligible account holders.
Category 2: Employee Stock Ownership Plan. The plan of conversion
provides that the employee stock ownership plan shall receive nontransferable
subscription rights to purchase up to 8% of the shares of common stock issued in
the conversion. The plan intends to purchase 8% of the shares of common stock
issued in the conversion. If the number of shares offered in the conversion is
increased, the plan shall have a priority right to
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purchase any shares exceeding that amount up to 8% of the common stock. If the
plan's subscription is not filled in its entirety, the employee stock ownership
plan may purchase shares in the open market or may purchase shares directly from
Indian Village Bancorp.
Category 3: Supplemental Eligible Account Holders. Each depositor with
$50.00 or more on deposit as of March 31, 1999 will receive nontransferable
subscription rights to subscribe for up to the greater of $100,000 of common
stock, which equals 10,000 shares, one-tenth of one percent of the total
offering of common stock or 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of shares of common stock to be
issued by a fraction of which the numerator is the amount of qualifying deposits
of the supplemental eligible account holder and the denominator is the total
amount of qualifying deposits of all supplemental eligible account holders. If
the exercise of subscription rights in this category results in an
oversubscription, shares of common stock will be allocated among subscribing
supplemental eligible account holders so as to permit each supplemental eligible
account holder, if possible, to purchase a number of shares sufficient to make
his or her total allocation equal 100 shares or the number of shares actually
subscribed for, whichever is less. After that, unallocated shares will be
allocated among subscribing supplemental eligible account holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all subscribing supplemental eligible
account holders.
Category 4: Other Members. Each depositor of Indian Village as of April
30, 1999 and each borrower with a loan outstanding on January 20, 1999 which
continues to be outstanding as of April 30, 1999 will receive nontransferable
subscription rights to purchase up to $100,000 of common stock, which equals
10,000 shares, in the conversion if shares are available following subscriptions
by eligible account holders, Indian Village's employee stock ownership plan and
supplemental eligible account holders. If there is an oversubscription in this
category, the available shares will be allocated proportionately based on the
amount of the respective subscriptions.
Subscription rights are nontransferable. Persons selling or otherwise
transferring their rights to subscribe for common stock in the subscription
offering or subscribing for common stock on behalf of another person may forfeit
those rights and may face possible further sanctions and penalties imposed by
the Office of Thrift Supervision or another agency of the U.S. Government. Each
person exercising subscription rights will be required to certify that he or she
is purchasing shares solely for his or her own account and that he or she has no
agreement or understanding with any other person for the sale or transfer of the
shares. Once tendered, subscription orders cannot be revoked without the consent
of Indian Village and Indian Village Bancorp.
Indian Village Bancorp and Indian Village will make reasonable attempts
to provide a prospectus and related offering materials to holders of
subscription rights. However, the subscription offering and all subscription
rights under the plan of conversion will expire at 12:00 Noon, Eastern time, on
the ___________, 1999, whether or not Indian Village has been able to locate
each person entitled to subscription rights. Orders for common stock in the
subscription offering received in hand by Indian Village after that time will
not be accepted. The subscription offering may be extended by Indian Village
Bancorp and Indian Village up to _______, 1999 without regulatory approval.
Office of Thrift Supervision regulations require that Indian Village Bancorp
complete the sale of common stock within 45 days after the close of the
subscription offering. If the direct community offering and the syndicated
community offerings are not completed within that period all funds received will
be promptly returned with interest at Indian Village's passbook rate and all
withdrawal authorizations will be canceled. If regulatory approval of an
extension of the time period has been granted, all subscribers will be notified
of the extension and of the duration of any extension that has been granted, and
will be given the right to increase, decrease or rescind their orders. If an
affirmative response to any resolicitation is not received by Indian Village
Bancorp 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.
Direct Community Offering. Any shares of common stock which remain
unsubscribed for in the subscription offering will be offered by Indian Village
Bancorp to certain members of the general public in a direct
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community offering, with preference given to natural persons and trusts of
natural persons residing in Tuscarawas County, Ohio. Purchasers in the direct
community offering are eligible to purchase up to $100,000 of common stock,
which equals 10,000 shares. If not enough shares are available to fill orders in
the direct community offering, the available shares will be allocated on a pro
rata basis determined by the amount of the respective orders. The direct
community offering, if held, may be concurrent with, during or promptly after
the subscription offering. The direct community offering may terminate on or at
any time after 12 Noon, Eastern time, on _________, 1999, but no later than 45
days after the close of the subscription offering, unless extended by Indian
Village Bancorp and Indian Village, with approval of the Office of Thrift
Supervision. If regulatory approval of an extension of the time period has been
granted, all subscribers will be notified of the extension and of the duration
of any extension that has been granted, and will be given the right to increase,
decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by Indian Village Bancorp from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest. Indian Village Bancorp and Indian Village have the
absolute right to accept or reject in whole or in part any orders to purchase
shares in the direct community offering. If an order is rejected in part, the
purchaser does not have the right to cancel the remainder of the order. Indian
Village Bancorp presently intends to terminate the direct community offering as
soon as it has received orders for all shares available for purchase in the
conversion.
If all of the common stock offered in the subscription offering is
subscribed for, no common stock will be available for purchase in the direct
community offering.
Syndicated Community Offering. The plan of conversion provides that, if
necessary, all shares of common stock not purchased in the subscription offering
and direct community offering, if any, may be offered for sale to certain
members of the general public in a syndicated community offering through a
syndicate of registered broker-dealers to be formed and managed by Trident
Securities acting as agent of Indian Village Bancorp. Indian Village Bancorp and
Indian Village have the right to reject orders, in whole or part, in their sole
discretion in the syndicated community offering. Neither Trident Securities nor
any registered broker-dealer shall have any obligation to take or purchase any
shares of the common stock in the syndicated community offering; however,
Trident Securities has agreed to use its best efforts in the sale of shares in
the syndicated community offering.
Stock sold in the syndicated community offering also will be sold at
the $10.00 purchase price. See "--Stock Pricing and Number of Shares to Be
Issued." No person will be permitted to subscribe in the syndicated community
offering for shares of common stock with an aggregate purchase price of more
than $100,000 of common stock, which equals 10,000 shares. See "--Plan of
Distribution for the Subscription, Direct Community and Syndicated Community
Offerings" for a description of the commission to be paid to the selected
dealers and to Trident Securities.
Trident Securities may enter into agreements with selected dealers to
assist in the sale of shares in the syndicated community offering. During the
syndicated community offering, selected dealers may only solicit indications of
interest from their customers to place orders with Indian Village Bancorp as of
a certain date for the purchase of shares. When and if Trident Securities and
Indian Village Bancorp believe that enough indications of interest and orders
have been received in the subscription offering, the direct community offering
and the syndicated community offering to consummate the conversion, Trident
Securities will request, as of that certain date, selected dealers to submit
orders to purchase shares for which they have received indications of interest
from their customers. Selected dealers will send confirmations to customers on
the next business day after that certain date. Selected dealers may settle the
trade by debiting the accounts of their customers on a date which will be three
business days from that certain date. Customers who authorize selected dealers
to debit their brokerage accounts are required to have the funds for payment in
their account on but not before the settlement date. On the settlement date,
selected dealers will remit funds to the account that Indian Village Bancorp
established for each selected dealer. Each customer's funds so forwarded to
Indian Village Bancorp, along with all other accounts held in the same title,
will be insured by the Federal Deposit Insurance Corporation up to the
applicable $100,000 legal limit. After payment has been received by Indian
Village Bancorp from selected dealers, funds will earn interest at Indian
Village's passbook rate until the completion of the offering. At the completion
of the conversion, the funds received
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will be used to purchase the shares of common stock ordered. The shares issued
in the conversion cannot and will not be insured by the Federal Deposit
Insurance Corporation or any other government agency. If the conversion is not
completed, funds with interest will be returned promptly to the selected
dealers, who, in turn, will promptly credit their customers' brokerage accounts.
The syndicated community offering may terminate no more than 45 days
after the expiration of the subscription offering, unless extended by Indian
Village Bancorp and Indian Village, with approval of the Office of Thrift
Supervision.
If Indian Village 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 Indian Village, if feasible. Any other arrangements must
be approved by the Office of Thrift Supervision. The Office of Thrift
Supervision may grant one or more extensions of the offering period, provided
that no single extension exceeds 90 days, subscribers are given the right to
increase, decrease or rescind their subscriptions during the extension period,
and the extensions do not go more than two years beyond the date on which the
members approved the plan of conversion. If the conversion is not completed
within 45 days after the close of the subscription offering, either all funds
received will be returned with interest, and withdrawal authorizations canceled,
or, if the Office of Thrift Supervision has granted an extension of time, all
subscribers will be given the right to increase, decrease or rescind their
subscriptions at any time before 20 days before the end of the extension period.
If an extension of time is obtained, all subscribers will be notified of the
extension and of their rights to modify their orders. If an affirmative response
to any resolicitation is not received by Indian Village Bancorp 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.
Persons in Non-Qualified States. Indian Village Bancorp and Indian
Village will make reasonable efforts to comply with the securities laws of all
states in the United States in which persons entitled to subscribe for stock
under the plan of conversion reside. However, Indian Village Bancorp and Indian
Village are not required to offer stock in the subscription offering to any
person who resides in a foreign country, who resides in a state of the United
States in which only a small number of persons otherwise eligible to subscribe
for shares of common stock reside, or in a state where Indian Village Bancorp or
Indian Village determines that compliance with that state's securities laws
would be impracticable for reasons of cost or otherwise, including but not
limited to a request or requirement that Indian Village Bancorp and Indian
Village or their officers, directors or trustees register as a broker, dealer,
salesman or selling agent, under the securities laws of the state, or a request
or requirement to register or otherwise qualify the subscription rights or
common stock for sale or submit any filing in the state. Where the number of
persons eligible to subscribe for shares in one state is small, Indian Village
Bancorp and Indian Village will base their decision as to whether or not to
offer the common stock in the state on a number of factors, including the size
of accounts held by account holders in the state, the cost of reviewing the
registration and qualification requirements of the state, and of actually
registering or qualifying the shares, or the need to register Indian Village
Bancorp, its officers, directors or employees as brokers, dealers or salesmen.
Plan of Distribution for the Subscription, Direct Community and Syndicated
Community Offerings
Indian Village and Indian Village Bancorp have retained Trident
Securities to consult with and advise Indian Village and to assist Indian
Village and Indian Village Bancorp, on a best efforts basis, in the distribution
of shares in the offering. Trident Securities is a broker-dealer registered with
the Securities and Exchange Commission and a member of the National Association
of Securities Dealers, Inc. Trident Securities will assist Indian Village in the
conversion by acting as marketing advisor with respect to the subscription
offering and will represent Indian Village as placement agent on a best efforts
basis in the sale of the common stock in the direct community offering if one is
held; conducting training sessions with directors, officers and employees of
Indian Village regarding the conversion process; and assisting in the
establishment and supervision of Indian Village's stock information center and,
with management's input, will train Indian Village's staff to record properly
and tabulate orders for the purchase of common stock and to respond
appropriately to customer inquiries.
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Based upon negotiations between Trident Securities and Indian Village
Bancorp and Indian Village concerning fee structure, Trident Securities will
receive a payment of $100,000 that will cover all of its fees and reimbursable
expenses. Trident Securities and selected dealers participating in the
syndicated community offering may receive a commission in the syndicated
community offering in a maximum amount to be agreed upon by Indian Village
Bancorp and Indian Village to reflect market requirements at the time of the
allocation of shares in the syndicated community offering. Fees and commissions
paid to Trident Securities and to any selected dealers may be deemed to be
underwriting fees, and Trident Securities and the selected dealers may be deemed
to be underwriters. Trident Securities has received an advance of $10,000
towards its reimbursable expenses. For additional information, see "--Stock
Pricing and Number of Shares to Be Issued" and "Use of Proceeds."
With certain limitations, Indian Village Bancorp and Indian Village
have also agreed to indemnify Trident Securities against liabilities and
expenses, including legal fees, incurred in connection with certain claims or
litigation arising out of or based upon untrue statements or omissions contained
in the offering material for the common stock or with regard to allocations of
shares if there is an oversubscription, or determinations of eligibility to
purchase shares.
Description of Sales Activities
The common stock will be offered in the subscription offering and
direct community offering principally by the distribution of this prospectus and
through activities conducted at Indian Village's stock information center at its
main office. The stock information center is expected to operate during normal
business hours throughout the subscription offering and direct community
offering. It is expected that at any particular time one or more Trident
Securities employees will be working at the stock information center. Employees
of Trident Securities will be responsible for mailing materials relating to the
offering, responding to questions regarding the conversion and the offering and
processing stock orders.
Sales of common stock will be made by registered representatives
affiliated with Trident Securities or by the selected dealers managed by Trident
Securities. The management and employees of Indian Village may participate in
the offering in clerical capacities, providing administrative support in
effecting sales transactions or, when permitted by state securities laws,
answering questions of a mechanical nature relating to the proper execution of
the order form. Management of Indian Village may answer questions regarding the
business of Indian Village when permitted by state securities laws. Other
questions of prospective purchasers, including questions as to the advisability
or nature of the investment, will be directed to registered representatives. The
management and employees of Indian Village Bancorp and Indian Village have been
instructed not to solicit offers to purchase common stock or provide advice
regarding the purchase of common stock.
No officer, director or employee of Indian Village or Indian Village
Bancorp will be compensated, directly or indirectly, for any activities in
connection with the offer or sale of securities issued in the conversion.
None of Indian Village's personnel participating in the offering is
registered or licensed as a broker or dealer or an agent of a broker or dealer.
Indian Village's personnel will assist in the above-described sales activities
under an exemption from registration as a broker or dealer provided by Rule
3a4-1 promulgated under the Securities Exchange Act of 1934, as amended. 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 the issuer if the associated person meets certain conditions.
These 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 the person not be
associated with a broker or dealer and that the person observe certain
limitations on his or her 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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Procedure for Purchasing Shares in the Subscription and Direct Community
Offerings
To purchase shares in the subscription offering, an executed order form
with the required full payment for each share subscribed for, or with
appropriate authorization indicated on the stock order form for withdrawal of
full payment from the subscriber's deposit account with Indian Village, must be
received by Indian Village by 12:00 Noon, Eastern time, on __________, 1999.
Order forms that are not received by that time or are executed defectively or
are received without full payment or without appropriate withdrawal instructions
are not required to be accepted. Indian Village Bancorp and Indian Village 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. Under the plan of
conversion, the interpretation by Indian Village Bancorp and Indian Village of
the terms and conditions of the plan of conversion and of the order form will be
final. In order to purchase shares in the direct community offering, the order
form, accompanied by the required payment for each share subscribed for, must be
received by Indian Village before the direct community offering terminates,
which may be on or at any time after the end of the offering. Once received, an
executed order form may not be modified, amended or rescinded without the
consent of Indian Village unless the conversion has not been completed within 45
days after the end of the subscription offering, unless extended.
In order to ensure that persons with subscription rights are properly
identified as to their stock purchase priorities, they must list all accounts on
the order form giving all names in each account, the account number and the
approximate account balance as of the appropriate eligibility date. Failure to
list an account could result in fewer shares allocated if there is an
oversubscription than if all accounts had been disclosed.
Full payment for subscriptions may be made by check, bank draft or
money order, or by authorization of withdrawal from deposit accounts maintained
with Indian Village. Appropriate means by which withdrawals may be authorized
are provided on the order form. No wire transfers will be accepted. Interest
will be paid on payments made by cash, check, bank draft or money order at
Indian Village's passbook rate from the date payment is received at the stock
information center until the completion or termination of the conversion. If
payment is made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn from a deposit account will continue to accrue
interest at the contractual rates until completion or termination of the
conversion, unless the certificate matures after the date of receipt of the
order form but before closing, in which case funds will earn interest at the
passbook rate from the date of maturity until the conversion is completed or
terminated, but a hold will be placed on the funds, making them unavailable to
the depositor until completion or termination of the conversion. When the
conversion is completed, the funds received in the offering will be used to
purchase the shares of common stock ordered. The shares of common stock issued
in the conversion cannot and will not be insured by the Federal Deposit
Insurance Corporation or any other government agency. If the conversion is not
consummated for any reason, all funds submitted will be promptly refunded with
interest as described above.
If a subscriber authorizes Indian Village to withdraw the amount of the
aggregate purchase price from his or her deposit account, Indian Village will do
so as of the effective date of conversion, though the account must contain the
full amount necessary for payment at the time the subscription order is
received. Indian Village will waive any applicable penalties for early
withdrawal from certificate accounts. If the remaining balance in a certificate
account is reduced below the applicable minimum balance requirement at the time
funds are actually transferred under the authorization the certificate will be
canceled at the time of the withdrawal, without penalty, and the remaining
balance will earn interest at Indian Village's passbook rate.
The employee stock ownership plan will not be required to pay for the
shares subscribed for at the time it subscribes, but rather may pay for shares
of common stock subscribed for at the $10.00 purchase price after the
conversion, provided that there is in force from the time of its subscription
until that time, a loan commitment from an unrelated financial institution or
Indian Village Bancorp to lend to the employee stock ownership plan, at that
time, the aggregate purchase price of the shares for which it subscribed.
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Individual retirement accounts maintained in Indian Village do not
permit investment in the common stock. A depositor interested in using his or
her Individual Retirement Account funds to purchase common stock must do so
through a self-directed individual retirement account. Since Indian Village does
not offer those accounts, it will allow a depositor to make a trustee-to-trustee
transfer of the individual retirement account funds to a trustee offering a
self-directed individual retirement account program with the agreement that the
funds will be used to purchase Indian Village Bancorp's common stock in the
offering. There will be no early withdrawal or Internal Revenue Service interest
penalties for transfers. The new trustee would hold the common stock in a self-
directed account in the same manner as Indian Village now holds the depositor's
Individual Retirement Account funds. An annual administrative fee may be payable
to the new trustee. Depositors interested in using funds in an individual
retirement account at Indian Village to purchase common stock should contact the
stock information center as soon as possible so that the necessary forms may be
forwarded for execution and returned before the subscription offering ends. In
addition, federal laws and regulations require that officers, directors and 10%
shareholders who use self-directed individual retirement account funds to
purchase shares of common stock in the subscription offering, make purchases for
the exclusive benefit of individual retirement accounts.
Certificates representing shares of common stock purchased, and any
refund due, will be mailed to purchasers at the address specified in properly
completed order forms or to the last address of the persons appearing on the
records of Indian Village as soon as practicable following the sale of all
shares of common stock. Any certificates returned as undeliverable will be
disposed of as required by applicable law. Purchasers may not be able to sell
the shares of common stock which they purchased until certificates for the
common stock are available and delivered to them, even though trading of the
common stock may have begun.
To ensure that each purchaser receives a prospectus at least 48 hours
before the end of the offering as required by Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended, no prospectus will be mailed any later than
five days before that date or hand delivered any later than two days before that
date. Execution of the order form will confirm receipt or delivery under Rule
15c2-8. Order forms will only be distributed with a prospectus. Indian Village
will accept for processing only orders submitted on original order forms. Indian
Village is not obligated to accept orders submitted on photocopied or telecopied
order forms. Orders cannot and will not be accepted without the execution of the
certification appearing on the reverse side of the order form.
Stock Pricing and Number of Shares to be Issued
Federal regulations require that the aggregate purchase price of the
securities sold in connection with the conversion be based upon an estimated pro
forma value of Indian Village Bancorp and Indian Village as converted, as
determined by an independent appraisal. Indian Village and Indian Village
Bancorp have retained Keller & Company to prepare an appraisal of the pro forma
market value of Indian Village Bancorp and Indian Village as converted, as well
as a business plan. Keller & Company will receive a fee expected to total
approximately $23,000 for its appraisal services and assistance in the
preparation of a business plan, plus reasonable out-of-pocket expenses incurred
in connection with the appraisal. Indian Village has agreed to indemnify Keller
& Company under certain circumstances against liabilities and expenses,
including legal fees, arising out of, related to, or based upon the conversion.
Keller & Company has prepared an appraisal of the estimated pro forma
market value of Indian Village Bancorp and Indian Village as converted taking
into account the formation of Indian Village Bancorp as Indian Village Bancorp
for Indian Village. For its analysis, Keller & Company undertook substantial
investigations to learn about Indian Village'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, Keller & Company reviewed
Indian Village's conversion application as filed with the Office of Thrift
Supervision and Indian Village Bancorp's registration statement as filed with
the Securities and Exchange Commission. Furthermore, Keller & Company visited
Indian Village's facilities and had discussions with Indian Village's management
and its special conversion legal counsel, Muldoon, Murphy & Faucette LLP. Keller
&
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Company did not perform a detailed individual analysis of the separate
components of Indian Village Bancorp's or Indian Village's assets and
liabilities.
Keller & Company's analysis utilized three selected valuation
procedures, the Price/Book method, the Price/Earnings method, and Price/Assets
method, all of which are described in its report. Keller & Company placed the
greatest emphasis on the Price/Earnings and Price/Book methods in estimating pro
forma market value. In applying these procedures, Keller & Company reviewed,
among other factors, the economic make-up of Indian Village's primary market
area, Indian Village's financial performance and condition in relation to
publicly traded institutions that Keller & Company deemed comparable to Indian
Village, the specific terms of the offering of Indian Village Bancorp's 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. Keller & Company's analysis provides an
approximation of the pro forma market value of Indian Village Bancorp and Indian
Village as converted based on the valuation methods applied and the assumptions
outlined in its report. Included in its report were certain assumptions as to
the pro forma earnings of Indian Village Bancorp after the conversion that were
utilized in determining the appraised value. These assumptions included
estimated expenses and an assumed after-tax rate of return on the net conversion
proceeds as described under "Pro Forma Data," purchases by the employee stock
ownership plan of 8% of the common stock sold in the conversion and purchases in
the open market by the management development and recognition plan of a number
of shares equal to 4% of the common stock sold in the conversion at the $10.00
purchase price. See "Pro Forma Data" for additional information concerning these
assumptions. The use of different assumptions may yield different results.
On the basis of the foregoing, Keller & Company has advised Indian
Village Bancorp and Indian Village that, in its opinion, as of March 1, 1999,
and updated as of April 8, 1999, the aggregate estimated pro forma market value
of Indian Village Bancorp and Indian Village, as converted and, therefore, the
common stock was within the valuation range of $4,335,000 to $5,865,000 with a
midpoint of $5,100,000. After reviewing the methodology and the assumptions used
by Keller & Company in the preparation of the appraisal, the Board of Directors
established the estimated valuation range which is equal to the valuation range
of $4,335,000 to $5,865,000 with a midpoint of $5,100,000. Assuming that the
shares are sold at $10.00 per share in the conversion, the estimated number of
shares would be between 433,500 and 586,500 with a midpoint of 510,000. The
purchase price of $10.00 was determined by discussion among the Boards of
Directors of Indian Village and Indian Village Bancorp and Trident Securities,
taking into account, among other factors, the requirement under Office of Thrift
Supervision regulations that the common stock be offered in a manner that will
achieve the widest distribution of the stock, and desired liquidity in the
common stock after the conversion. Since the outcome of the offering relates in
large measure to market conditions at the time of sale, it is not possible to
determine the exact number of shares that will be issued by Indian Village
Bancorp at this time. The estimated valuation range may be amended, with the
approval of the Office of Thrift Supervision, if necessitated by developments
following the date of the appraisal in, among other things, market conditions,
the financial condition or operating results of Indian Village, regulatory
guidelines or national or local economic conditions. Keller & Company's
appraisal report is filed as an exhibit to the registration statement that
Indian Village Bancorp has filed with the Securities and Exchange Commission.
See "Where You Can Find More Information."
If, upon completion of the subscription offering, at least the minimum
number of shares are subscribed for, Keller & Company, after taking into account
factors similar to those involved in its prior appraisal, will determine its
estimate of the pro forma market value of Indian Village Bancorp and Indian
Village as converted, as of the close of the subscription offering.
No shares will be sold unless Keller & Company confirms to the Office
of Thrift Supervision that, to the best of its knowledge and judgment, nothing
of a material nature has occurred that 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 Indian Village Bancorp and
Indian Village as converted at the time of the sale. If, however, the facts do
not justify that statement, the offering may be canceled, a new estimated
valuation range and price per share set and new
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subscription, direct community and syndicated community offerings held. Under
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.
Depending upon market and financial conditions, the number of shares
issued may be more than 674,475 shares or less than 433,500 shares. If the total
amount of shares issued is less than 433,500 or more than 674,475, for aggregate
gross proceeds of less than $4,335,000 or more than $6,744,750, subscription
funds will be returned promptly with interest to each subscriber unless he
indicates otherwise. If Keller & Company establishes a new valuation range, it
must be approved by the Office of Thrift Supervision.
If purchasers cannot be found for an insignificant residue of
unsubscribed shares from the general public, other purchase arrangements will be
made by the Boards of Directors of Indian Village and Indian Village Bancorp, if
possible. Other purchase arrangements must be approved by the Office of Thrift
Supervision and may provide for purchases for investment purposes by directors,
officers, their associates and other persons in excess of the limitations
provided in the plan of conversion and in excess of the proposed director
purchases discussed earlier, although no purchases are currently intended. If
other purchase arrangements cannot be made, the plan of conversion will
terminate.
In formulating its appraisal, Keller & Company relied upon the
truthfulness, accuracy and completeness of all documents Indian Village
furnished to it. Keller & Company also considered financial and other
information from regulatory agencies, other financial institutions, and other
public sources, as appropriate. While Keller & Company believes this information
to be reliable, Keller & Company does not guarantee the accuracy or completeness
of the information and did not independently verify the financial statements and
other data provided by Indian Village and Indian Village Bancorp or
independently value the assets or liabilities of Indian Village Bancorp and
Indian Village. The appraisal 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
plan of conversion or of purchasing shares of common stock. Moreover, because
the appraisal must be based on many factors which change periodically, there is
no assurance that purchasers of shares in the conversion will be able to sell
shares after the conversion at prices at or above the purchase price.
Limitations on Purchases of Shares
The plan of conversion provides for certain limitations to be placed
upon the purchase of common stock by eligible subscribers and others in the
conversion. Each subscriber must subscribe for a minimum of 25 shares.
The plan of conversion provides for the following purchase limitations:
1. The maximum purchase in the subscription offering by any person or
group of persons through a single account is $100,000, which
equals 10,000 shares;
2. No person may purchase more than $100,000, which equals 10,000
shares, in the direct community offering; and
3. The maximum purchase in the conversion by any person, related
persons or persons acting in concert is $150,000, which equals
15,000 shares.
For purposes of the plan of conversion, the directors are not deemed to be
acting in concert solely by reason of their Board membership. Pro rata
reductions within each subscription rights category will be made in allocating
shares if the maximum purchase limitations are exceeded.
Indian Village's and Indian Village Bancorp's Boards of Directors may,
in their sole discretion, increase the maximum purchase limitation up to 9.99%
of the shares of common stock sold in the conversion, provided that
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orders for shares which exceed 5% of the shares of common stock sold in the
conversion may not exceed, in the aggregate, 10% of the shares sold in the
conversion. Indian Village and Indian Village Bancorp do not intend to increase
the maximum purchase limitation unless market conditions warrant an increase in
the maximum purchase limitation and the sale of a number of shares in excess of
the minimum of the estimated valuation range. If the Boards of Directors decide
to increase the purchase limitation above, persons who subscribed for the
maximum number of shares of common stock will be, and other large subscribers in
the discretion of Indian Village Bancorp and Indian Village may be, given the
opportunity to increase their subscriptions accordingly, based on the rights and
preferences of any person who has priority subscription rights.
The plan of conversion defines "acting in concert" to mean knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not by an express agreement; or a combination
or pooling of voting or other interests in the securities of an issuer for a
common purpose under any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. In general, a person who acts
in concert with another party shall also be deemed to be acting in concert with
any person who is also acting in concert with that other party. Indian Village
Bancorp and Indian Village may presume that certain persons are acting in
concert based upon, among other things, joint account relationships and the fact
that persons may have filed joint Schedules 13D with the Securities and Exchange
Commission with respect to other companies.
The plan of conversion defines "associate," with respect to a
particular person, to mean any corporation or organization other than Indian
Village or a majority-owned subsidiary of Indian Village of which a person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; any trust or other estate in which a
person has a substantial beneficial interest or as to which a person serves as
trustee or in a similar fiduciary capacity; and any relative or spouse of a
person, or any relative of a spouse, who either has the same home as a person or
who is a director or officer of Indian Village or any of its parents or
subsidiaries. For example, a corporation of which a person serves as an officer
would be an associate of a person and, therefore, all shares purchased by a
corporation would be included with the number of shares which a person could
purchase individually under the above limitations.
The plan of conversion defines "officer" to mean an executive officer
of Indian Village, including its Chairman of the Board, President, Executive
Vice Presidents, Senior Vice Presidents, Vice Presidents in charge of principal
business functions, Secretary and Treasurer.
Common stock purchased in the conversion will be freely transferable,
except for shares purchased by directors and officers of Indian Village and
Indian Village Bancorp and by NASD members. See "--Restrictions on
Transferability by Directors and Officers and NASD Members."
Restrictions on Repurchase of Stock
Under Office of Thrift Supervision regulations, savings associations
and their holding companies may not for a period of three years from the date of
an institution's mutual-to-stock conversion repurchase any of its common stock
from any person, except in an offer made to all of its stockholders to
repurchase the common stock on a pro rata basis, approved by the Office of
Thrift Supervision or the repurchase of qualifying shares of a director.
Furthermore, repurchases of any common stock are prohibited if they would cause
the association's regulatory capital to be reduced below the amount required for
the liquidation account or the regulatory capital requirements imposed by the
Office of Thrift Supervision. Repurchases are generally prohibited during the
first year following conversion. Upon ten days' written notice to the Office of
Thrift Supervision, and if the Office of Thrift Supervision does not object, an
institution may make open market repurchases of its outstanding common stock
during years two and three following the conversion, provided that certain
regulatory conditions are met and that the repurchase would not adversely affect
the financial condition of the institution. Any repurchases of common stock by
Indian Village Bancorp must meet these regulatory restrictions unless the Office
of Thrift Supervision would provide otherwise.
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Restrictions on Transferability by Directors and Officers and NASD Members
Shares of common stock purchased by directors and officers of Indian
Village Bancorp may not be sold for a period of one year following the
conversion, except upon the death of the stockholder or in any exchange of the
common stock in connection with a merger or acquisition of Indian Village
Bancorp. Shares of common stock received by directors or officers through the
employee stock ownership plan or the management development and recognition plan
or upon exercise of options issued under the stock option plan or purchased
after the conversion are free of this restriction. Accordingly, shares of common
stock issued by Indian Village Bancorp to directors and officers shall bear a
legend giving appropriate notice of the restriction and, in addition, Indian
Village Bancorp will give appropriate instructions to the transfer agent for
Indian Village Bancorp's common stock with respect to the restriction on
transfers. Any shares issued to directors and officers as a stock dividend,
stock split or otherwise with respect to restricted common stock shall also be
restricted.
Purchases of outstanding shares of common stock of Indian Village
Bancorp by directors, executive officers, or any person who was an executive
officer or director of Indian Village after adoption of the plan of conversion,
and their associates during the three-year period following the conversion may
be made only through a broker or dealer registered with the SEC, except with the
prior written approval of the Office of Thrift Supervision. This restriction
does not apply, however, to negotiated transactions involving more than 1% of
Indian Village Bancorp's outstanding common stock or to the purchase of stock
under the stock option plan.
Indian Village Bancorp has filed with the Securities and Exchange
Commission a registration statement under the Securities Act of 1933, as
amended, for the registration of the common stock to be issued in the
conversion. This registration does not cover the resale of the shares. Shares of
common stock purchased by persons who are not affiliates of Indian Village
Bancorp may be resold without registration. Shares purchased by an affiliate of
Indian Village Bancorp will have resale restrictions under Rule 144 of the
Securities Act, as amended. If Indian Village Bancorp meets the current public
information requirements of Rule 144, each affiliate of Indian Village Bancorp
who complies with the other conditions of Rule 144, including those that require
the affiliate's sale to be aggregated with those of certain other persons, would
be able to sell in the public market, without registration, a number of shares
not to exceed, in any three-month period, the greater of 1% of the outstanding
shares of Indian Village Bancorp or the average weekly volume of trading in the
shares during the preceding four calendar weeks. Provision may be made in the
future by Indian Village Bancorp to permit affiliates to have their shares
registered for sale under the Securities Act of 1933, as amended, under certain
circumstances.
Under guidelines of the National Association of Securities Dealers,
Inc., members of that organization and their associates face certain
restrictions on the transfer of securities purchased with subscription rights
and to certain reporting requirements upon purchase of the securities.
RESTRICTIONS ON ACQUISITION OF INDIAN VILLAGE BANCORP
The following discussion is a summary of the material provisions of
federal law and regulations and Pennsylvania corporate law, as well as the
Articles of Incorporation and Bylaws of Indian Village Bancorp, relating to
stock ownership and transfers, the Board of Directors and business combinations,
all of which may be deemed to have "anti-takeover" effects. The description of
these provisions is necessarily general and reference should be made to the
actual law and regulations and to the Articles of Incorporation and Bylaws of
Indian Village Bancorp contained in the registration statement that Indian
Village Bancorp has filed with the Securities and Exchange Commission. See
"Where You Can Find More Information" as to how to obtain a copy of these
documents.
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Conversion Regulations
Office of Thrift Supervision regulations prohibit any person from
making an offer, announcing an intent to make an offer or participating in any
other arrangement to purchase stock or acquire stock or subscription rights in a
converting institution or its holding company from another person before
completion of its conversion. Further, without the prior written approval of the
Office of Thrift Supervision, no person may make an offer or announcement of an
offer to purchase shares or actually acquire shares in the converting
institution or its holding company for a period of three years from the date of
the completion of the conversion if, upon the completion of an offer,
announcement or acquisition, that person would become the beneficial owner of
more than 10% of the outstanding stock of the institution or its holding
company. The Office of Thrift Supervision has defined "person" to include any
individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed to acquire, hold or dispose of securities of
an insured institution. However, offers made exclusively to an association or
its holding company or an underwriter or member of a selling group acting on the
converting institution's or its holding company behalf for resale to the general
public are excepted. The regulation also provides civil penalties for willful
violation or assistance in any violation of the regulation by any person
connected with the management of the converting institution or its holding
company or who controls more than 10% of the outstanding shares or voting rights
of a converting or converted institution or its holding company.
Change in Control Regulations
Under the Change in Bank Control Act, no person may acquire control of
an insured federal savings and loan association or its parent holding company
unless the Office of Thrift Supervision has been given 60 days' prior written
notice and has not issued a notice disapproving the proposed acquisition. In
addition, Office of Thrift Supervision regulations provide that no company may
acquire control of a savings association without the prior approval of the
Office of Thrift Supervision. Any company that acquires control becomes a
savings and loan holding company under registration, examination and regulation
by the Office of Thrift Supervision.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the Office of Thrift Supervision
that the acquirer has the power to direct, or directly or indirectly to exercise
a controlling influence over, the management or policies of the institution.
Acquisition of more than 10% of any class of a savings association's voting
stock, if the acquirer also meets any one of eight "control factors,"
constitutes a rebuttable determination of control under the regulations. Control
factors include the acquirer being one of the two largest stockholders. The
determination of control may be rebutted by submission to the Office of Thrift
Supervision, before the acquisition of stock or the occurrence of any other
circumstances giving rise to a control determination, of a statement setting
forth facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings. The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of a savings association's stock must file with the
Office of Thrift Supervision a certification form that the holder is not in
control of the institution, is not under a rebuttable determination of control
and will take no action which would result in a determination or rebuttable
determination of control without prior notice to or approval of the Office of
Thrift Supervision, as applicable. There are also rebuttable presumptions in the
regulations concerning whether a group "acting in concert" exists, including
presumed action in concert among members of an "immediate family."
The Office of Thrift Supervision may prohibit an acquisition of control
if it finds, among other things, that the acquisition would result in a monopoly
or substantially lessen competition, the financial condition of the acquiring
person might jeopardize the financial stability of the institution, or the
competence, experience or integrity of the acquiring person indicates that it
would not be in the interest of the depositors or the public to permit the
acquisition of control by the person.
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Pennsylvania Corporate Law
In addition to provisions which may be contained in Indian Village
Bancorp's Articles of Incorporation, Pennsylvania law includes certain
provisions applicable to Pennsylvania corporations, like Indian Village Bancorp,
which may be deemed to have an anti-takeover effect. These provisions include
rights of stockholders to receive the fair value of their shares of stock
following a control transaction with a controlling person or group, and
requirements relating to certain business combinations.
Control Transactions. Pennsylvania law allows holders of voting shares
of a business corporation involved in a control transaction to object to any
control transaction and demand payment of the fair value of their shares unless
the corporation's articles of incorporation or bylaws explicitly provide
otherwise or the articles of the corporation are amended before the control
transaction to provide that the anti-takeover provisions are inapplicable. Any
amendment rendering the anti-takeover provisions inapplicable would require the
affirmative vote of the holders of at least 80% of the outstanding stock, or, if
the board of directors has approved the amendment, by the holders of at least
50% of the outstanding stock. Fair value for purposes of these provisions means
an amount not less than the highest price per share paid by the controlling
person or group at anytime during the 90-day period ending on and including the
date of the control transaction plus any incremental value that may not be
reflected in the price. A control transaction for purposes of these provisions
means the acquisition by a person or group of persons acting in concert of at
least 20% of the outstanding voting stock of the corporation.
Business Combinations. Under Pennsylvania law, a Pennsylvania
corporation may not engage in a business combination with an interested
shareholder, which is generally defined as the holder of 20% of the outstanding
voting stock, except for:
1. a business combination approved by the corporation's board of
directors before the date on which the interested shareholder
became a 20% holder;
2. a business combination approved by a majority of the
non-interested shares of voting stock, at a meeting held no
earlier than three months after the interested shareholder
became the beneficial owner of at least 80% of the outstanding
voting stock, and if the business combination satisfies
certain Pennsylvania minimum price requirements which are
based on the price paid by the interested shareholder for its
shares and market prices;
3. a business combination approved by all of the holders of all of
the outstanding shares of company common stock;
4. a business combination approved by a majority of the non-
interested outstanding shares of voting stock, at a meeting held
no earlier than five years after the interested shareholder became
a 20% holder; or
5. a business combination approved at a stockholders meeting held
no earlier than five years after the interested shareholder
became a 20% holder that meets certain Pennsylvania minimum
price requirements which are based on the price paid by the
interested shareholder for its shares and market prices.
Pennsylvania law defines a business combination generally to include
certain sales, purchases, exchanges, leases, mortgages, pledges, transfers or
dispositions of assets, mergers or consolidations, certain issuances or
reclassification of securities, liquidations or dissolutions or certain loans,
guarantees or financial assistance, under an agreement or understanding between
the corporation or any subsidiaries, on the one hand, and an interested
shareholder or an affiliate or associate thereof, on the other hand.
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Furthermore, under Pennsylvania law, unless explicitly provided for
otherwise in a corporation's bylaws or articles of incorporation, shares
acquired by a person in excess of 20% of a class of securities of a qualified
Pennsylvania corporation are deemed control shares and cannot be voted until a
majority of the disinterested stockholders give their approval. In addition,
Pennsylvania law provides that the voting rights may lapse in certain instances,
and the corporation is also given the option to redeem the control shares in
certain instances.
Pennsylvania law also provides certain protection to qualified
Pennsylvania corporations from being exposed to and paying greenmail, which is
generally defined as offering to purchase at least 20% of the voting shares of a
corporation or threatening to wage or waging a proxy contest and thereafter
disposing of the securities at a profit before consummating the proposed
transactions. Generally, Pennsylvania law provides that a qualified corporation
can recover any profit realized by the controlling person or group due to the
disposition of the securities of the corporation within a certain time after
obtaining the control shares.
Furthermore, Pennsylvania law requires acquiring persons to pay a
minimum severance salary to any eligible employee, as defined, whose employment
is terminated, other than for willful misconduct, due to a business combination
or control share acquisition.
Anti-takeover Provisions in Indian Village Bancorp's Articles of Incorporation
and Bylaws
Several provisions of Indian Village Bancorp's Articles of
Incorporation and Bylaws deal with matters of corporate governance and certain
rights of stockholders. The following discussion is a general summary of the
material provisions of Indian Village Bancorp's Articles of Incorporation and
Bylaws and regulatory provisions relating to stock ownership and transfers, the
Board of Directors and business combinations, which might be deemed to have a
potential "anti-takeover" effect. These provisions may have the effect of
discouraging a future takeover attempt which is not approved by the Board of
Directors but which individual stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in a transaction may not have an opportunity to do so.
These provisions will also render the removal of the incumbent Board of
Directors or management of Indian Village Bancorp more difficult. The following
description of certain of the provisions of the Articles of Incorporation and
Bylaws of Indian Village Bancorp is necessarily general and reference should be
made in each case to the Articles of Incorporation and Bylaws, which are
incorporated herein by reference. See "Where You Can Find More Information" as
to where to obtain a copy of these documents.
Limitation on Voting Rights. The Articles of Incorporation of Indian
Village Bancorp provides that in no event shall any record owner of any
outstanding common stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns more than 10% of the then outstanding shares of
common stock be entitled or permitted to any vote in respect of the shares held
in excess of that percentage limit, unless permitted by a resolution adopted by
a majority of the board of directors. Beneficial ownership is determined under
Rule 13d-3 of the General Rules and Regulations of the Securities Exchange Act
of 1934, as amended, and includes shares beneficially owned by that person or
any of his or her affiliates, shares which that person or his or her affiliates
have the right to acquire upon the exercise of conversion rights or options and
shares as to which the person and his or her affiliates have or share investment
or voting power, but shall not include shares beneficially owned by the employee
stock ownership plan or directors, officers and employees of Indian Village or
Holding Company or shares that are associated with a revocable proxy and that
are not otherwise beneficially, or deemed by Indian Village Bancorp to be
beneficially, owned by the person and his or her affiliates.
Board of Directors. The Board of Directors of Indian Village Bancorp is
divided into three classes, each of which shall contain approximately one-third
of the whole number of the members of the Board. The members of each class shall
be elected for a term of three years, with the terms of office of all members of
one class expiring each year so that approximately one-third of the total number
of directors are elected each year. Indian Village Bancorp's Articles of
Incorporation provides that the size of the Board shall be established in the
Bylaws. The Bylaws currently set the number of directors at seven. The Articles
of Incorporation provides that any vacancy
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occurring in the Board, including a vacancy created by an increase in the number
of directors, shall be filled by a vote of a majority of the directors then in
office and any director so chosen shall hold office for a term expiring at the
next annual meeting of stockholders. The classified Board is intended to provide
for continuity of the Board of Directors and to make it more difficult and time
consuming for a stockholder group to fully use its voting power to gain control
of the Board of Directors without the consent of the incumbent Board of
Directors of Indian Village Bancorp. The Articles of Incorporation of Indian
Village Bancorp provides that a director may be removed from the Board of
Directors before the expiration of his or her term only for cause and upon the
vote of 75% of the outstanding shares of voting stock. In the absence of this
provision, the vote of the holders of a majority of the shares could remove the
entire Board, but only with cause, and replace it with persons of the holders'
choice.
Cumulative Voting; Special Meetings. The Articles of Incorporation do
not provide for cumulative voting for any purpose. The Articles of Incorporation
also provide that special meetings of stockholders of Indian Village Bancorp may
be called only by the Chairperson of the Board, the President or by the Board of
Directors of Indian Village Bancorp.
Authorized Shares. The Articles of Incorporation authorizes the
issuance of 5,000,000 shares of common stock and 1,000,000 shares of preferred
stock. The shares of common stock and preferred stock were authorized in an
amount greater than that to be issued in the conversion to provide Indian
Village Bancorp's Board of Directors with as much flexibility as possible to
effect, among other transactions, financings, acquisitions, stock dividends,
stock splits, restricted stock grants and the exercise of stock options.
However, these additional authorized shares may also be used by the Board of
Directors, consistent with fiduciary duties, to deter future attempts to gain
control of Indian Village Bancorp. The Board of Directors also has sole
authority to determine the terms of any one or more series of preferred stock,
including voting rights, conversion rates, and liquidation preferences. As a
result of the ability to fix voting rights for a series of preferred stock, the
Board has the power, consistent with its fiduciary duty, to issue a series of
preferred stock to persons friendly to management in order to attempt to block a
tender offer, merger or other transaction by which a third party seeks control
of Indian Village Bancorp, and thereby assist members of management to retain
their positions. Indian Village Bancorp's Board currently has no plans for the
issuance of additional shares, other than the issuance of shares of common stock
upon exercise of stock options and in connection with the management development
and recognition plan.
Stockholder Vote Required to Approve Business Combinations with
Principal Stockholders. The Articles of Incorporation requires the approval of
the holders of at least 80% of Indian Village Bancorp's outstanding shares of
voting stock to approve certain "Business Combinations" involving a "Related
Person" except in cases where the proposed transaction has been approved in
advance by a majority of those members of Indian Village Bancorp's Board of
Directors who are unaffiliated with the Related Person and were directors before
the time when the Related Person became a Related Person. The term "Related
Person" is defined to include any individual, corporation, partnership or other
entity which owns beneficially or controls, directly or indirectly, 10% or more
of the outstanding shares of voting stock of Indian Village Bancorp or an
affiliate of that person or entity. This provision of the Articles of
Incorporation applies to any "Business Combination," which is defined to
include:
1. any merger or consolidation of Indian Village Bancorp with or into
any Related Person;
2. any sale, lease, exchange, mortgage, transfer, or other
disposition of 25% or more of the assets of Indian Village Bancorp
or combined assets of Indian Village Bancorp and its subsidiaries
to a Related Person;
3. any merger or consolidation of a Related Person with or into
Indian Village Bancorp or a subsidiary of Indian Village
Bancorp; any sale, lease, exchange, transfer, or other
disposition of 25% or more of the assets of a Related Person
to Indian Village Bancorp or a subsidiary of Indian Village
Bancorp;
4. the issuance of any securities of Indian Village Bancorp or a
subsidiary of Indian Village Bancorp to a Related Person;
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5. the acquisition by Indian Village Bancorp or a subsidiary of
Indian Village Bancorp of any securities of a Related Person;
6. any reclassification of common stock of Indian Village Bancorp
or any recapitalization involving the common stock of Indian
Village Bancorp; or
7. any agreement or other arrangement providing for any of the
foregoing transactions.
Amendment of Articles of Incorporation and Bylaws. Amendments to Indian
Village Bancorp's Articles of Incorporation must be approved by a majority vote
of its Board of Directors and also by a majority of the outstanding shares of
its voting stock, provided, however, that an affirmative vote of at least 75% of
the outstanding voting stock entitled to vote after giving effect to the
provision limiting voting rights is required to amend or repeal certain
provisions of the Articles of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
directors, director and officer indemnification by Indian Village Bancorp and
amendment of Indian Village Bancorp's Bylaws and Articles of Incorporation.
Indian Village Bancorp's Bylaws may be amended by its Board of Directors, or by
the stockholders; provided, however, that an affirmative vote of at least 75% of
the total votes eligible to be voted at a duly constituted meeting of
stockholders is necessary to amend certain provisions relating to the conduct of
stockholders meetings, directors and amendment of the Bylaws.
Stockholder Nominations and Proposals. The Bylaws of Indian Village
Bancorp require a stockholder who intends to nominate a candidate for election
to the Board of Directors, or to raise new business at a stockholder meeting to
give not less than 60 nor more than 90 days' advance notice to the Secretary of
Indian Village Bancorp; provided, however, that if less than 71 days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice, to be timely, must be received no later than the close of
business on the 10th day following the date on which notice was mailed to
shareholders or other public disclosure was made. The notice provision requires
a stockholder who desires to raise new business to provide certain information
to Indian Village Bancorp concerning the nature of the new business, the
stockholder and the stockholder's interest in the business matter. Similarly, a
stockholder wishing to nominate any person for election as a director must
provide Indian Village Bancorp with certain information concerning the nominee
and the proposing stockholder.
Purpose and Takeover Defensive Effects of Indian Village Bancorp's
Articles of Incorporation and Bylaws. The Board of Directors of Indian Village
Bancorp believes that the provisions described above are prudent and will reduce
Indian Village Bancorp's vulnerability to takeover attempts and certain other
transactions that have not been negotiated with and approved by its Board of
Directors. These provisions will also assist Indian Village Bancorp and Indian
Village in the orderly deployment of the conversion proceeds into productive
assets during the initial period after the conversion. The Board of Directors
believes these provisions are in the best interest of Indian Village and Indian
Village Bancorp and its stockholders. In the judgment of the Board of Directors,
Indian Village Bancorp's Board will be in the best position to determine the
true value of Indian Village Bancorp and to negotiate more effectively for what
may be in the best interests of its stockholders. Accordingly, the Board of
Directors believes that it is in the best interest of Indian Village Bancorp and
its stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors of Indian Village Bancorp and that these provisions will
encourage negotiations and discourage hostile takeover attempts. It is also the
view of the Board of Directors that these provisions should not discourage
persons from proposing a merger or other transaction at a price reflective of
the true value of Indian Village Bancorp and that is in the best interest of all
stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts that have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms that may be less favorable than
might otherwise be available. A transaction that is first negotiated and
approved by the Board of Directors, on the other hand, can be carefully planned
and undertaken at an opportune time in order to obtain maximum value of Indian
Village Bancorp
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<PAGE>
for its stockholders, with due consideration given to matters such as the
management and business of the acquiring corporation and maximum strategic
development of Indian Village Bancorp's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, these offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment when it
may be disadvantageous, or retaining their investment in an enterprise that is
under different management and whose objectives may not be similar to those of
the remaining stockholders. The concentration of control, which could result
from a tender offer or other takeover attempt, could also deprive Indian Village
Bancorp's remaining stockholders of benefits of certain protective provisions of
the Securities Exchange Act of 1934, as amended, if the number of beneficial
owners became less than 300, thereby allowing for deregistration under that
statute.
Despite the belief of Indian Village and Indian Village Bancorp as to
the benefits to stockholders of these provisions of Indian Village Bancorp's
Articles of Incorporation and Bylaws, these provisions may also have the effect
of discouraging a future takeover attempt that would not be approved by Indian
Village Bancorp's Board, but where stockholders may receive a substantial
premium for their shares over then current market prices. As a result,
stockholders who might want to participate in a transaction may not have any
opportunity to do so. These provisions will also make the removal of Indian
Village Bancorp's Board of Directors and management more difficult. The Board of
Directors of Indian Village and Indian Village Bancorp, however, have concluded
that the potential benefits outweigh the possible disadvantages.
Following the conversion, if required by law, following the approval by
stockholders, Indian Village Bancorp may adopt additional anti-takeover charter
provisions or other devices regarding the acquisition of its equity securities
that would be permitted for a Pennsylvania business corporation.
The cumulative effect of the restriction on acquisition of Indian
Village Bancorp contained in the Articles of Incorporation and Bylaws of Indian
Village Bancorp and in Federal and Pennsylvania law may be to discourage
potential takeover attempts and perpetuate incumbent management, even though
certain stockholders of Indian Village Bancorp may deem a potential acquisition
to be in their best interests, or deem existing management not to be acting in
their best interests.
DESCRIPTION OF CAPITAL STOCK OF INDIAN VILLAGE BANCORP
General
Indian Village Bancorp is authorized to issue 5,000,000 shares of
common stock having a par value of $.01 per share and 1,000,000 shares of
preferred stock having a par value of $.01 per share. Indian Village Bancorp
currently expects to issue up to 586,500 shares of common stock, unless
increased to 674,475 shares of common stock sold. Indian Village Bancorp will
not issue any shares of preferred stock in the conversion. Each share of Indian
Village Bancorp's common stock will have the same relative rights as, and will
be identical in all respects with, each other share of common stock. Upon
payment of the purchase price for the common stock, as required by the plan of
conversion, all stock will be duly authorized, fully paid and nonassessable.
The common stock of Indian Village Bancorp will represent
nonwithdrawable capital, will not be an account of any type, and will not be
insured by the Federal Deposit Insurance Corporation or any other government
agency.
Common Stock
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Dividends. Indian Village Bancorp can pay dividends out of statutory
surplus or from certain net profits if, as and when declared by its Board of
Directors. The payment of dividends by Indian Village Bancorp is limited by law
and applicable regulation. See "Dividend Policy" and "Regulation." The holders
of common stock of Indian Village Bancorp will be entitled to receive and share
equally in dividends as may be declared by the Board of Directors of Indian
Village Bancorp out of funds legally available therefor. If Indian Village
Bancorp issues preferred stock, the holders thereof may have a priority over the
holders of the common stock with respect to dividends.
Voting Rights. After the conversion, the holders of common stock of
Indian Village Bancorp will possess exclusive voting rights in Indian Village
Bancorp. They will elect Indian Village Bancorp's Board of Directors and act on
other matters as are required to be presented to them under Pennsylvania law or
as are otherwise presented to them by the Board of Directors. Except as
discussed in "Restrictions on Acquisition of Indian Village Bancorp," each
holder of common stock will be entitled to one vote per share and will not have
any right to cumulate votes in the election of directors. If Indian Village
Bancorp issues preferred stock, holders of Indian Village Bancorp preferred
stock may also possess voting rights. Certain matters require a vote of 80% of
the outstanding shares entitled to vote. See "Restrictions on Acquisition of
Indian Village Bancorp."
As a federal mutual savings association, corporate powers and control
of Indian Village are currently vested in its Board of Directors, who elect the
officers of Indian Village and who fill any vacancies on the Board of Directors.
After the conversion, voting rights will be vested exclusively in Indian Village
Bancorp, which will own all of the outstanding capital stock of Indian Village,
and will be voted at the direction of Indian Village Bancorp's Board of
Directors. Consequently, the holders of the common stock of Indian Village
Bancorp will not have direct control of Indian Village.
Liquidation. If there is any liquidation, dissolution or winding up of
Indian Village, Indian Village Bancorp, as the holder of Indian Village's
capital stock, would be entitled to receive all of Indian Village's assets
available for distribution after payment or provision for payment of all debts
and liabilities of Indian Village, including all deposit accounts and accrued
interest, and after distribution of the balance in the special liquidation
account to eligible account holders and supplemental eligible account holders.
Upon liquidation, dissolution or winding up of Indian Village Bancorp, the
holders of its common stock would be entitled to receive all of the assets of
Indian Village Bancorp available for distribution after payment or provision for
payment of all its debts and liabilities. If Indian Village Bancorp issues
preferred stock, the preferred stock holders may have a priority over the
holders of the common stock upon liquidation or dissolution.
Preemptive Rights; Redemption. Holders of the common stock of Indian
Village Bancorp will not be entitled to preemptive rights with respect to any
shares that may be issued. The common stock cannot be redeemed.
Preferred Stock
Indian Village Bancorp will not issue any preferred stock in the
conversion and it has no current plans to issue any preferred stock after the
conversion. Preferred stock may be issued with designations, powers, preferences
and rights as the Board of Directors may from time to time determine. The Board
of Directors can, without stockholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights that could dilute the voting
strength of the holders of the common stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
Restrictions on Acquisition
Acquisitions of Indian Village Bancorp are restricted by provisions in
its Articles of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies. See "Regulation" and "Restrictions on Acquisition
of Indian Village Bancorp."
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REGISTRATION REQUIREMENTS
Indian Village Bancorp has registered the common stock with the
Securities and Exchange Commission under Section 12(g) of the Securities
Exchange Act of 1934, as amended, and will not deregister its common stock for a
period of at least three years following the conversion. As a result of
registration, the proxy and tender offer rules, insider trading reporting and
restrictions, annual and periodic reporting and other requirements of that
statute will apply.
LEGAL AND TAX OPINIONS
The legality of the common stock has been passed upon for Indian
Village Bancorp by Muldoon, Murphy & Faucette LLP, Washington, D.C. The federal
tax consequences of the conversion have been opined upon by Muldoon, Murphy &
Faucette LLP and the Ohio tax consequences of the conversion have been opined
upon by Crowe, Chizek and Company LLP, Columbus, Ohio. Muldoon, Murphy &
Faucette LLP and Crowe, Chizek and Company LLP have consented to the references
to their opinions in this prospectus. Certain legal matters will be passed upon
for Trident Securities by Michael Best & Friedrich, L.L.P., Milwaukee,
Wisconsin.
EXPERTS
The financial statements of Indian Village at December 31, 1998 and
1997 and for each of the years ended December 31, 1998 and 1997 included in this
prospectus have been audited by Crowe, Chizek and Company LLP, Columbus, Ohio,
independent auditors, as stated in its report in the back of this prospectus.
These financial statements have been included in this prospectus in reliance
upon the report of Crowe, Chizek and Company LLP given upon its authority as
experts in accounting and auditing.
Keller & Company has consented to the summary in this prospectus of its
report to Indian Village setting forth its opinion as to the estimated pro forma
market value of Indian Village Bancorp and Indian Village, as converted, and its
letter with respect to subscription rights, and to the use of its name and
statements with respect to it appearing in this prospectus.
CHANGE IN ACCOUNTANTS
Before the fiscal year ended December 31, 1998, Indian Village's
financial statements were audited by Robb, Dixon, Francis, Davis, Oneson &
Company, Granville, Ohio. The former accountant was dismissed and replaced by
Crowe, Chizek and Company LLP, which was engaged on October 15, 1998 and
continues as the independent auditors of Indian Village.
For the fiscal years ended December 31, 1997 and 1996 and up to the
date of the replacement of Indian Village's former accountant, there were no
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure
which, if not resolved to the satisfaction of the former accountant, would have
caused it to refer to the subject matter of the disagreement in connection with
its reports. The independent auditors' report on the financial statements for
the fiscal years ended December 31, 1997 and 1996 did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope, or accounting principles.
WHERE YOU CAN FIND MORE INFORMATION
Indian Village Bancorp has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 (File No. 333-74621) under the
Securities Act of 1933, as amended, with respect to the common stock offered in
the conversion. This prospectus does not contain all the information contained
in the registration statement, certain parts of which are omitted as permitted
by the rules and regulations of the Securities and Exchange Commission. This
information may be inspected at the public reference facilities maintained by
the Securities and Exchange Commission at 450 Fifth Street, NW, Room 1024,
Washington, D.C. 20549 and at its
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regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
may be obtained at prescribed rates from the Public Reference Room of the
Securities and Exchange Commission at 450 Fifth Street, NW, Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-
0330. The registration statement also is available through the Securities and
Exchange Commission's World Wide Web site on the Internet at http://www.sec.gov.
Indian Village has filed with the Office of Thrift Supervision an
Application for Approval of Conversion, which includes proxy materials for
Indian Village's special meeting of members and certain other information. This
prospectus omits certain information contained in that application. The
application, including the proxy materials, exhibits and certain other
information included in the Application, may be inspected, without charge, at
the offices of the Office of Thrift Supervision, 1700 G Street, NW, Washington,
D.C. 20552 and at the offices of the Regional Director of the Office of Thrift
Supervision at the Central Regional Office of the Office of Thrift Supervision,
200 West Madison Street, Suite 1300, Chicago, Illinois 60606.
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Index To Financial Statements
Indian Village Community Bank
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................................................................ F-1
Balance Sheets as of December 31, 1998 and 1997........................................................... F-2
Statements of Income for the Years Ended December 31, 1998 and 1997....................................... F-3
Statements of Comprehensive Income for the Years Ended December 31, 1998 and 1997......................... F-4
Statements of Member's Equity for the Years Ended December 31, 1998 and 1997.............................. F-5
Statements of Cash Flows for the Years Ended December 31, 1998 and 1997................................... F-6
Notes to Financial Statements............................................................................. F-7
* * *
</TABLE>
All schedules are omitted as the required information either is not
applicable or is included in the Financial Statements or related Notes.
Separate financial statements for Indian Village Bancorp have not been
included in this prospectus because Indian Village Bancorp, which has engaged in
only organizational activities to date, has no significant assets, contingent or
other liabilities, revenues or expenses.
103
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[CROWE CHIZEK LOGO APPEARS HERE]
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Indian Village Community Bank
Gnadenhutten, Ohio
We have audited the accompanying balance sheets of Indian Village Community Bank
as of December 31, 1998 and 1997, and the related statements of income,
comprehensive income, members' equity and cash flows for each of the years then
ended. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Indian Village Community Bank
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years then ended in conformity with generally accepted
accounting principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
February 18, 1999
- --------------------------------------------------------------------------------
F-1
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
BALANCE SHEETS
December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks $ 409 $ 387
Interest-bearing deposits in other banks 388 536
------- -------
Total cash and cash equivalents 797 923
Time deposits 499 --
Securities available for sale at fair value 6,195 7,317
Loans, net of allowance for loan losses 31,274 27,241
Premises and equipment, net 447 239
Real estate owned 122 41
Federal Home Loan Bank stock 407 379
Accrued interest receivable 183 153
Other assets 100 60
------- -------
Total assets $40,024 $36,353
======= =======
LIABILITIES
Deposits $30,866 $30,277
Federal Home Loan Bank advances 4,000 1,000
Accrued interest payable 37 27
Other liabilities 19 197
------- -------
Total liabilities 34,922 31,501
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY
Retained earnings - substantially restricted 5,105 4,859
Accumulated other comprehensive income
Unrealized gains on securities available for sale 50 61
Additional minimum pension liability (53) (68)
------- -------
Total accumulated other comprehensive income (3) (7)
------- -------
Total members' equity 5,102 4,852
------- -------
Total liabilities and members' equity $40,024 $36,353
======= =======
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-2
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF INCOME
Years ended December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Interest and dividend income
Loans $2,450 $2,285
Securities 524 536
Interest-bearing deposits and Federal funds sold 46 70
------ ------
Total interest income 3,020 2,891
Interest expense
Deposits 1,530 1,553
Federal Home Loan Bank advances 136 24
------ ------
Total interest expense 1,666 1,577
------ ------
Net interest income 1,354 1,314
Provision for loan losses 60 --
------ ------
Net interest income after provision for loan losses 1,294 1,314
Noninterest income
Service charges and other fees 11 9
Loss on sale of securities available for sale, net (2) (3)
Other income 20 15
------ ------
Total noninterest income 29 21
Noninterest expense
Salaries and employee benefits 440 336
Occupancy, furniture and fixtures 69 69
Professional and consulting fees 56 68
FDIC deposit insurance 23 20
Franchise taxes 73 68
Data processing 57 57
Director and committee fees 72 73
Other expense 160 114
------ ------
Total noninterest expense 950 805
------ ------
Income before federal income tax expense 373 530
Federal income tax expense 127 180
------ ------
Net income $ 246 $ 350
====== ======
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-3
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1988 1997
------ ------
<S> <C> <C>
Net Income $ 246 $ 350
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale arising
during year (12) 31
Reclassification adjustment for accumulated losses included in
net income 1 2
----- -----
Net unrealized gains (losses) on securities before tax (11) 33
Additional minimum pension liability adjustment 15 (3)
----- -----
Other comprehensive income 4 30
----- -----
Comprehensive income $ 250 $ 380
===== =====
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-4
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF MEMBERS' EQUITY
Years ended December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other Total
Retained Comprehensive Members'
Earnings Income Equity
--------- -------------- --------
<S> <C> <C> <C>
Balance at January 1, 1997 $4,509 $(37) $4,472
Net income 350 350
Change in additional minimum pension liability,
net of tax (3) (3)
Change in unrealized gain (loss) on securities available
for sale, net of reclassification and tax items 33 33
--------- -------------- --------
Balance at December 31, 1997 4,859 (7) 4,852
Net income 246 246
Change in additional minimum pension liability,
net of tax 15 15
Change in unrealized gain (loss) on securities available
for sale, net of reclassification and tax items (11) (11)
--------- -------------- --------
Balance at December 31, 1998 $5,105 $ (3) $5,102
========= ============== ========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-5
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF CASH FLOWS
Years ended December 31, 1998 and 1997
(In thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 246 $ 350
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation 35 31
Premium amortization, net of accretion (7) (3)
Provision for loan losses 60 --
Federal Home Loan Bank stock dividends (28) (26)
Loss on sale of real estate owned -- 14
Loss on sale of securities available for sale 2 3
Net change in:
Accrued interest receivable and other assets (74) (29)
Accrued expenses and other liabilities (149) 64
Deferred income taxes 6 5
------- -------
Net cash from operating activities 91 409
Cash flows from investing activities
Net change in time deposits (499) --
Purchases of securities available for sale (4,133) (4,791)
Proceeds from sales of securities available for sale 1,456 1,292
Proceeds from maturities of securities available for sale 3,787 2,035
Net change in loans (4,174) (1,786)
Premises and equipment expenditures, net (243) (43)
Proceeds from sale of real estate owned -- 100
------- -------
Net cash from investing activities (3,806) (3,193)
Cash flows from financing activities
Net change in deposits 589 (1,162)
Repayment of long-term FHLB advances (1,000) --
Proceeds from long-term FHLB advances 4,000 1,000
------- -------
Net cash from financing activities 3,589 (162)
------- -------
Net change in cash and cash equivalents (126) (2,946)
Cash and cash equivalents at beginning of year 923 3,869
------- -------
Cash and cash equivalents at end of year $ 797 $ 923
======= =======
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 1,656 $ 1,571
Income taxes 241 70
Noncash transactions
Transfers from loans to real estate loans $ 81 $ 44
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to financial statements
F-6
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Indian Village Community Bank's (the "Bank") revenues,
- --------------------
operating income and assets are primarily from the financial institution
industry. The Bank is engaged in the business of residential mortgage lending
and consumer banking with operations conducted through its main office located
in Gnadenhutten, Ohio. This community and the contiguous areas are the source
of substantially all the Bank's loan and deposit activities. The majority of
the Bank's income is derived from residential and consumer lending activities
and investments.
Use of Estimates: To prepare financial statements in conformity with generally
- ----------------
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect amounts
reported in the financial statements and disclosures provided, and future
results could differ. The allowance for loan losses, fair values of financial
instruments and pension obligations are particularly subject to change.
Cash Flows: Cash and cash equivalents includes cash, deposits with other
- ----------
financial institutions with original maturities less than 90 days and Federal
funds sold. Net cash flows are reported for loan and deposit transactions.
Securities: Securities are classified as held to maturity and carried at
- ----------
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported in accumulated other
comprehensive income. Other securities such as Federal Home Loan Bank stock are
carried at cost.
Interest income includes amortization of purchased premium or discount. Gains
and losses on sales are based on the amortized cost of the security sold.
Securities are written down to fair value when a decline in fair value is not
temporary.
Loans: Loans are reported at the principal balance outstanding, net of unearned
- -----
interest, deferred fees and costs, and the allowance for loan losses.
Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the contractual life of the loan.
Interest income is not reported when full loan repayment is in doubt, typically
when the loan is impaired or payments are past due over 90 days. Payments
received on such loans are reported as principal reductions.
- -------------------------------------------------------------------------------
(Continued)
F-7
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses: The allowance for loan losses is a valuation
- -------------------------
allowance for probable credit losses, increased by the provision for loan losses
and decreased by charge-offs less recoveries. Management estimates the
allowance balance required based on past loan loss experience, known and
inherent risks in the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, economic
conditions, and other factors. Allocations of the allowance may be made for
specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.
A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgage and consumer loans, and on an individual basis for
other loans. If a loan is impaired, a portion of the allowance is allocated so
the loan is reported, net, at the present value of estimated future cash flows
using the loan's existing rate or at the fair value of collateral if repayment
is expected solely from the collateral.
Premises and Equipment: Premises and equipment are stated at cost less
- ----------------------
accumulated depreciation. Depreciation expense is calculated using primarily
the straight-line method over the estimated useful lives of the assets.
Real Estate Owned: Real estate acquired through or instead of loan foreclosure
- -----------------
is initially recorded at the lower of cost or fair value less estimated costs to
sell when acquired, establishing a new cost basis. If the fair value declines,
a valuation allowance is recorded through expense. Costs after acquisition are
expensed.
Benefit Plans: Pension expense is the net of service and interest cost, return
- -------------
on plan assets, and amortization of gains and losses not immediately recognized.
Income Taxes: Income tax expense is the total of the current year income tax
- ------------
due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.
Concentration of Credit Risk: The Bank grants primarily one- to four-family
- ----------------------------
residential mortgage loans to customers in Tuscarawas County, Ohio. These
customers' ability to honor their contracts is dependent, to a certain extent,
on the economic conditions of Tuscarawas County. The Bank evaluates each
customer's creditworthiness on a case-by-case basis at the time of application.
One- to four-family residential mortgage loans comprise approximately 83% and
84% of the Bank's loan portfolio as of December 31, 1998 and 1997.
- -------------------------------------------------------------------------------
(Continued)
F-8
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Instruments: Financial instruments include credit instruments, such
- ---------------------
as commitments to make loans and standby letters of credit, issued to meet
customer-financing needs. The face amount for these items represents the
exposure to loss, before considering customer collateral or ability to repay.
Comprehensive Income: Comprehensive income consists of net income and other
- --------------------
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale and changes in minimum pension liability
which are also recognized as separate components of equity. The accounting
standard that requires reporting comprehensive income first applies for 1998,
with prior information restated to be comparable.
Loss Contingencies: Loss contingencies, including claims and legal actions
- ------------------
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will
have a material effect on the financial statements.
Reclassifications: Reclassifications of certain amounts in the 1997 financial
- -----------------
statements have been made to conform to the 1998 presentation.
NOTE 2 - SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair values of securities available for sale at
December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 747 $13 $ -- $ 760
U.S. Government agencies 1,050 6 -- 1,056
Obligations of states and
political subdivisions 147 5 -- 152
Mortgage-backed securities 4,175 70 (18) 4,227
--------- ---------- ----------- ------
$6,119 $94 $(18) $6,195
========= ========== =========== ======
</TABLE>
- -------------------------------------------------------------------------------
(Continued)
F-9
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 2 - SECURITIES AVAILABLE FOR SALE (Continued)
The amortized cost and estimated fair values of securities available for sale at
December 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 786 $11 $-- $ 797
U.S. Government agencies 2,647 15 -- 2,662
Obligations of states and
political subdivisions 75 -- -- 75
Mortgage-backed securities 3,717 71 (5) 3,783
--------- ---------- ----------- ------
$7,225 $97 $(5) $7,317
========= ========== =========== ======
</TABLE>
At December 31, 1998 and 1997, all mortgage-backed securities were issued or
guaranteed by agencies of the U.S. Government.
The amortized cost and estimated fair values of debt securities available for
sale at December 31, 1998, by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties. Securities not due at a single maturity date, primarily mortgage-
backed securities, are shown separately.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- ------
<S> <C> <C>
Due in one year or less $ 499 $ 505
Due after one year through five years 798 809
Due after five years through ten years 500 502
Due after ten years 147 152
Mortgage-backed securities 4,175 4,227
--------- ------
$6,119 $6,195
========= ======
</TABLE>
During 1998 and 1997, the Bank sold securities available for sale for total
proceeds of $1,456,000 and $1,292,000, resulting in gross realized gains of
approximately $11,000 and $4,000 and gross realized losses of approximately
$13,000 and $7,000. No other securities were sold during 1998 or 1997.
No securities were pledged to secure public deposits at December 31, 1998 or
1997.
- -------------------------------------------------------------------------------
(Continued)
F-10
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 3 - LOANS
Year-end loans were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Real estate loans:
One- to four-family residential $26,080 $23,002
Multi-family residential 1,736 1,447
Nonresidential 647 763
Construction 677 1,107
Land 135 45
------- -------
29,275 26,364
Consumer loans:
Home equity loans and lines of credit 887 842
Home improvement 301 43
Automobile 516 --
Loans on deposit accounts 294 207
Unsecured 12 --
Other 274 --
------- -------
2,284 1,092
Commercial business loans 27 62
------- -------
31,586 27,518
Less:
Net deferred loan fees and costs (54) (49)
Loans in process (40) (52)
Allowance for loan losses (218) (176)
------- -------
$31,274 $27,241
======= =======
Activity in the allowance for loan losses was as follows:
1998 1997
------- -------
Beginning balance $ 176 $ 176
Charge-offs (18) --
Recoveries -- --
Provision for losses 60 --
------- -------
Ending balance $ 218 $ 176
======= =======
</TABLE>
- -------------------------------------------------------------------------------
(Continued)
F-11
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 3 - LOANS (Continued)
Nonaccrual loans totaled approximately $328,000 and $471,000 at December 31,
1998 and 1997. Interest not recognized on nonaccrual loans totaled approximately
$16,000 and $9,000 for the years then ended December 31, 1998 and 1997. The
Bank had no impaired loans at December 31, 1998 or 1997 or during the years then
ended.
Loans to directors and officers totaled approximately $479,000 and $474,000 at
December 31, 1998 and 1997. A summary of activity on related party loans is as
follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Beginning balance $ 474 $ 272
New loans 225 354
Principal repayments (220) (152)
----- -----
Ending balance $ 479 $ 474
===== =====
</TABLE>
NOTE 4 - PREMISES AND EQUIPMENT
Year-end premises and equipment were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Land $ 244 $ 31
Buildings and improvements 287 286
Furniture, fixtures, and equipment 198 185
Automobiles 17 17
------- -------
Total cost 746 519
Accumulated depreciation (299) (280)
------- -------
$ 447 $ 239
======= =======
</TABLE>
NOTE 5 - DEPOSITS
Year-end deposits consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Non-interest bearing demand deposit accounts $ 81 $ 62
NOW accounts 837 617
Money market accounts 1,695 1,724
Savings accounts 5,464 5,093
Certificates of deposit 22,789 22,781
------- -------
$30,866 $30,277
======= =======
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-12
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 5 - DEPOSITS (Continued)
The aggregate amount of certificates of deposit accounts with balances of
$100,000 or more at December 31, 1998 and 1997 was $1,357,000 and $831,000.
Deposits greater than $100,000 are not federally insured.
At December 31, 1998, the scheduled maturities of time deposits were as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $14,348
2000 4,194
2001 1,749
2002 1,274
2003 1,224
-------
$22,789
=======
</TABLE>
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
NOW accounts $ 16 $ 16
Money market accounts 59 59
Savings accounts 172 162
Certificates of deposit 1,283 1,316
------- ------
$ 1,530 $1,553
======= ======
</TABLE>
Directors and officers of the Bank are customers of the institution in the
ordinary course of business. At December 31, 1998 and 1997, deposits from
officers and directors of the Bank totaled approximately $198,000 and $275,000.
NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES
Year-end outstanding Federal Home Loan Bank advances are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
4.20% FHLB advance, due December 2003 $1,000,000
5.60% FHLB advance, due April 2008 2,000,000
5.15% FHLB advance, due July 2008 1,000,000
6.10% FHLB advance, due August 1998 $1,000,000
---------- ----------
$4,000,000 $1,000,000
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-13
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES (Continued)
As a member of the Federal Home Loan Bank system, the Bank has the ability to
obtain borrowings up to a maximum total of 50% of Bank assets subject to the
level of qualified, pledgable one- to four-family residential real estate loans
and Federal Home Loan Bank stock.
The advances were collateralized by $6,000,000 and $1,500,000 of first mortgage
loans under a blanket lien arrangement at year-end 1998 and 1997.
NOTE 7 - INCOME TAXES
The provision for federal income tax consisted of the following components:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Current tax expense $ 121 $ 175
Deferred tax expense 6 5
----- -----
$ 127 $ 180
===== =====
</TABLE>
The sources of gross deferred tax assets and gross deferred tax liabilities are
as follows:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 57 $ 37
Nonaccrual loan interest 6 3
Accrued pension 8 25
Additional minimum pension liability 42 51
Other -- 3
----- -----
Total deferred tax assets 113 119
----- -----
Deferred tax liabilities:
Depreciation (19) (19)
FHLB stock dividends (9) --
Unrealized gain on securities available for sale (26) (31)
----- -----
Total deferred tax liabilities (54) (50)
----- -----
Net deferred tax asset (liability) $ 59 $ 69
===== =====
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-14
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES (Continued)
The difference between the financial statement income tax expense and amounts
computed by applying the statutory federal income tax rate to income before
income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Income taxes computed at the statutory
tax rate on pretax income $ 127 $ 180
Tax effect of:
Tax-exempt income (6) (11)
Nondeductible expenses and other 6 11
----- -----
$ 127 $ 180
===== =====
Statutory tax rate 34.0% 34.0%
===== =====
Effective tax rate 34.0% 34.0%
===== =====
</TABLE>
Federal income tax laws provided additional bad debt deductions through 1987,
totaling $584,000. Accounting standards do not require a deferred tax liability
to be recorded on this amount, which liability otherwise would total $199,000 at
December 31, 1998. If the Bank was liquidated, or would otherwise cease to be
in the business of banking, or if tax laws were to change, this amount would be
expensed. Under 1996 tax law changes, bad debts are based on actual loss
experience and tax bad debt reserves accumulated since 1987 are to be reduced.
This requires payment of approximately $35,000 over six years beginning in 1996.
- --------------------------------------------------------------------------------
(Continued)
F-15
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 8 - PENSION PLAN
Information about the pension plan was as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Change in benefit obligation:
Beginning benefit obligation $ 168 $ 120
Service cost 13 6
Interest cost 12 9
Actuarial gain 22 33
Benefits paid (1) --
----- -----
Ending benefit obligation 214 168
----- -----
Change in plan assets, at fair value:
Beginning plan assets 48 28
Actual return 22 4
Employer contribution 11 16
Benefits paid (1) --
----- -----
Ending plan assets 80 48
----- -----
Funded status (134) (120)
Unrecognized net actuarial loss 150 156
Unrecognized net asset at date of adoption of SFAS No. 87 44 48
Minimum additional pension liability (124) (150)
----- -----
Accrued benefit cost $ (64) $ (66)
===== =====
The components of pension expense and related actuarial assumptions were as
follows:
1998 1997
----- -----
Service cost $ 13 $ 6
Interest cost 12 9
Expected return on plan assets 1 1
Net amortization and deferral 1 2
Recognized net actuarial (gain) loss 7 6
----- -----
Net $ 34 $ 24
===== =====
Discount rate on benefit obligation 7.27% 7.27%
Long-term expected rate of return on plan assets 3.00 3.00
Rate of compensation increase 4.00 4.00
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-16
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 9 - COMMITMENTS AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of customers. These
financial instruments include commitments to make loans. The Bank's exposure to
credit loss in case of nonperformance by the other party to the financial
instrument for commitments to make loans is represented by the contractual
amount of those instruments. The Bank follows the same credit policy to make
such commitments as is followed for those loans recorded in the financial
statements.
As of December 31, 1998, variable rate and fixed rate commitments to make loans
or fund outstanding lines of credit amounted to approximately $494,000 and
$1,891,000. The interest rates on variable rate commitments ranged from 6.25%
to 7.75% and the interest rates on fixed rate commitments ranged from 7.00% to
8.75% at December 31, 1998. As of December 31, 1997, variable rate and fixed
rate commitments to make loans or fund outstanding lines of credit amounted to
approximately $282,000 and $292,000. Since loan commitments may expire without
being used, the amounts do not necessarily represent future cash commitments.
NOTE 10 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the federal regulatory agencies. Failure to meet minimum capital requirements
can initiate certain mandatory actions that, if undertaken, could have a direct
material affect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about the Bank's components, risk weightings and other factors. At December 31,
1998 and 1997, management believes the Bank complies with all regulatory capital
requirements. Based on the computed regulatory capital ratios, the Bank is
considered well capitalized under the Federal Deposit Insurance Act at December
31, 1998 and 1997. No conditions or events have occurred after December 31,
1998 that management believes have changed the Bank's category.
- --------------------------------------------------------------------------------
(Continued)
F-17
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 10 - REGULATORY MATTERS (Continued)
Year-end actual capital levels and minimum required levels were as follows:
<TABLE>
<CAPTION>
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
-------------- ------------------ ------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ------ --------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
Total capital (to risk-weighted assets) $5,226 25.8% $1,621 8.0% $2,026 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 5,008 24.7 810 4.0 1,215 6.0
Tier 1 (core) capital (to adjusted
total assets) 5,008 12.5 1,597 4.0 1,997 5.0
Tangible capital (to adjusted
total assets) 5,008 12.5 599 1.5 N/A
December 31, 1997
Total capital (to risk-weighted assets) $4,919 28.8% $1,367 8.0% $1,708 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 4,743 27.8 683 4.0 1,025 6.0
Tier 1 (core) capital (to adjusted
total assets) 4,743 13.1 1,451 4.0 1,814 5.0
Tangible capital (to adjusted
total assets) 4,743 13.1 544 1.5 N/A
</TABLE>
The following is a reconciliation of the Bank's equity reported in the financial
statements under generally accepted accounting principles to the Office of
Thrift Supervision regulatory capital requirements:
<TABLE>
<CAPTION>
Tier 1 Total
Tangible (Core) Risk-Based
Capital Capital Capital
----------- --------- -----------
<S> <C> <C> <C>
December 31, 1998
Total equity as reported in the financial statements $ 5,102 $ 5,102 $ 5,102
Net unrealized (gain) loss on securities available for sale (50) (50) (50)
Goodwill and other intangible assets (44) (44) (44)
General allowance for loan losses -- -- 218
-------- -------- --------
Regulatory capital $ 5,008 $ 5,008 $ 5,226
======== ======== ========
December 31, 1997
Total equity as reported in the financial statements $ 4,852 $ 4,852 $ 4,852
Net unrealized (gain) loss on securities available for sale (61) (61) (61)
Goodwill and other intangible assets (48) (48) (48)
General allowance for loan losses -- -- 176
-------- -------- --------
Regulatory capital $ 4,743 $ 4,743 $ 4,919
======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-18
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair values of financial instruments at
year-end were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 797 $ 797 $ 923 $ 923
Time deposits 499 499 -- --
Securities available for sale 6,195 6,195 7,317 7,317
Loans, net 31,274 31,531 27,241 26,599
Federal Home Loan Bank stock 407 407 379 379
Accrued interest receivable 183 183 153 153
Financial liabilities:
Demand and savings deposits (8,077) (8,077) (7,496) (7,496)
Certificates of deposit (22,789) (22,663) (22,781) (25,011)
Federal Home Loan Bank advances (4,000) (4,000) (1,000) (1,000)
Accrued interest payable (37) (37) (27) (27)
</TABLE>
Carrying amount is the estimated fair value for cash and cash equivalents, time
deposits, Federal Home Loan Bank stock, accrued interest receivable and payable,
demand and savings deposits, and variable rate loans and Federal Home Loan Bank
advances that reprice frequently and fully. Security fair values are based on
market prices or dealer quotes, and if no such information is available, on the
rate and term of the security and information about the issuer. For fixed rate
loans and certificates of deposit and for variable rate loans with infrequent
repricing or repricing limits, fair value is based on discounted cash flows
using current market rates applied to the estimated life and credit risk. Fair
value of fixed rate Federal Home Loan Bank advances and for variable rate
advances with infrequent repricing or repricing limits, fair value is based on
current rates for similar financing. The estimated fair value for other
financial instruments and off-balance-sheet loan commitments approximate cost at
December 31, 1998 and is not considered significant to this presentation.
NOTE 12 - OTHER COMPREHENSIVE INCOME
The tax effects on the components of other comprehensive income were as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during year $ (6) $ 16
Reclassification adjustment for gains (losses) 1 1
----- -----
Net unrealized gain (losses) (5) 17
Additional minimum pension liability 9 (2)
----- -----
Other comprehensive income $ 4 $ 15
===== =====
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-19
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 13 - ADOPTION OF PLAN OF CONVERSION
On January 20, 1999, the Board of Directors of the Bank, subject to regulatory
approval and approval by the members of the Bank, unanimously adopted a Plan of
Conversion from a federally chartered mutual bank to a federally chartered stock
bank with the concurrent formation of a holding company. The Holding Company
will acquire 100 percent of the Bank's common stock. The conversion is expected
to be accomplished through amendment of the Bank's charter and the sale of the
Holding Company's common stock in an amount equal to the pro forma market value
of the Bank after giving effect to the conversion. A subscription offering of
the shares of the Holding Company's common stock will be offered to the Bank's
depositors, then to an employee stock benefit plan and then to other members.
Any shares of the Holding Company's common stock not sold in the subscription
offering may be offered for sale to the general public.
At the time of the conversion, the Bank will establish a liquidation account in
an amount equal to its regulatory capital as of the latest practicable date
before the conversion at which such regulatory capital can be determined. The
liquidation account will be maintained for the benefit of eligible depositors
who continue to maintain their accounts at the Bank after the conversion. The
liquidation account will be reduced annually to the extent that eligible
depositors have reduced their qualifying deposits. Subsequent increases will
not restore an eligible account holder's interest in the liquidation account.
In the event of a complete liquidation, each eligible depositor will be entitled
to receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts then
held. The Bank may not pay dividends that would reduce shareholders' equity
below the required liquidation account balance.
Under Office of Thrift Supervision ("OTS") regulations, limitations have been
imposed on all "capital distributions" by savings institutions, including cash
dividends. The regulation establishes a three-tiered system of restrictions,
with the greatest flexibility afforded to thrifts that are both well capitalized
and given favorable qualitative examination ratings by the OTS.
Conversion costs will be deferred and deducted from the proceeds of the shares
sold in the conversion. If the conversion is not completed, all costs will be
charged to expense. At December 31, 1998, $16,513 of costs have been deferred.
- --------------------------------------------------------------------------------
F-20
<PAGE>
You should rely only on the information contained in this prospectus. Neither
Indian Village Bancorp, Inc. nor Indian Village Community Bank has authorized
anyone to provide you with different information. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered by this prospectus to any person or in any jurisdiction in
which an offer or solicitation is not authorized or in which the person making
an offer or solicitation is not qualified to do so, or to any person to whom it
is unlawful to make an offer or solicitation in those jurisdictions. Neither the
delivery of this prospectus nor any sale hereunder shall under any circumstances
imply that there has been no change in the affairs of Indian Village Bancorp,
Inc. or Indian Village Community Bank since any of the dates as of which
information is furnished in this prospectus or since the date of this
prospectus.
[Logo for Indian Village Bancorp, Inc.]
(Proposed Holding Company for Indian Village Community Bank)
586,500 Shares of Common Stock
----
Prospectus
----
TRIDENT SECURITIES
May ___, 1999
Until August __, 1999, all dealers that buy, sell or trade these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
In accordance with the General and Business Corporations Law of the Commonwealth
of Pennsylvania (being Title 15 of the Pennsylvania Statutes), Article 9 of the
Registrant's Articles of Incorporation provide as follows:
ARTICLE 9. INDEMNIFICATION, ETC. OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
A. Personal Liability of Directors. A director of the Corporation shall not
-------------------------------
be personally liable for monetary damages for any action taken, or any failure
to take any action, as a director except to the extent that by law a director's
liability for monetary damages may not be limited.
B. Indemnification. The Corporation shall indemnify any person who was or is
---------------
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under Pennsylvania law.
C. Advancement of Expenses. Reasonable expenses incurred by an officer,
-----------------------
director, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding described in Section B of this Article 9 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 person to
repay such amount if it shall ultimately be determined that the person is not
entitled to be indemnified by the Corporation.
D. Other Rights. The indemnification and advancement of expenses provided by
------------
or pursuant to this Article 9 shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any insurance or other agreement, vote of stockholders or
directors or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
E. Insurance. The Corporation shall have the power to purchase and maintain
---------
insurance 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
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article 9.
F. Security Fund; Indemnity Agreements. By action of the Board of Directors
-----------------------------------
(notwithstanding their interest in the transaction), the Corporation may create
and fund a trust fund or fund of any nature, and may enter into agreements with
its officers, directors, employees and agents for the purpose of securing or
insuring in any manner its obligation to indemnify or advance expenses provided
for in this Article 9.
G. Modification. The duties of the Corporation to indemnify and to advance
------------
expenses to any person as provided in this Article 9 shall be in the nature of a
contract between the Corporation and each such person, and no amendment or
repeal of any provision of this Article 9, and no amendment or termination of
any trust or other fund created pursuant to Section F of this Article 9, shall
alter to the detriment of such person the right of such person to the advance of
expenses or indemnification related to a claim based on an act or failure to act
which took place prior to such amendment, repeal or termination.
<PAGE>
H. Proceedings Initiated by Indemnified Persons. Notwithstanding any other
--------------------------------------------
provision of this Article 9, the Corporation shall not indemnify a director,
officer, employee or agent for any liability incurred in an action, suit or
proceeding initiated (which shall not be deemed to include counter-claims or
affirmative defenses) or participated in as an intervener or amicus curiae by
the person seeking indemnification unless such initiation of or participation in
the action, suit or proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.
<TABLE>
<CAPTION>
<S> <C>
SEC filing................................................................................ $ 2,206
OTS filing fee............................................................................ 8,400
NASD filing fee........................................................................... 1,294
Printing, postage and mailing............................................................. 70,000
Legal fees and expenses................................................................... 95,000
Accounting fees and expenses.............................................................. 65,000
Appraisers' fees and expenses (including business plan)................................... 23,000
Marketing fees, selling commissions and expenses (including underwriter's counsel fees)... 100,000
Conversion agent fees..................................................................... 5,000
Certificate printing...................................................................... 1,500
Miscellaneous............................................................................. 8,600
--------
TOTAL..................................................................................... $380,000
========
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
None.
<PAGE>
Item 27. Exhibits.
The exhibits filed as a part of this Registration Statement are as follows:
(a) List of Exhibits (filed herewith unless otherwise noted)
1.1 Engagement Letter between Indian Village Community Bank and Trident
Securities, Inc.*
1.2 Draft Form of Agency Agreement
2.0 Plan of Conversion (including the Federal Stock Charter and Bylaws of
Indian Village Community Bank)*
3.1 Articles of Incorporation of Indian Village Bancorp, Inc.*
3.2 Bylaws of Indian Village Bancorp, Inc.*
4.0 Specimen Stock Certificate of Indian Village Bancorp, Inc.*
5.0 Opinion of Muldoon, Murphy & Faucette LLP re: legality
8.1 Opinion of Muldoon, Murphy & Faucette LLP re: Federal Tax Matters
8.2 Opinion of Crowe, Chizek and Company LLP re: State Tax Matters
10.1 Form of Indian Village Community Bank Employee Stock Ownership Plan and
Trust Agreement*
10.2 Draft ESOP Loan Commitment Letter and ESOP Loan Documents*
10.3 Form of Indian Village Community Bank and Indian Village Bancorp, Inc.
Employment Agreement*
10.4 Form of Indian Village Community Bank Employee Severance Compensation
Plan*
16.0 Letter regarding change in certifying accountant*
23.1 Consent of Muldoon, Murphy & Faucette LLP*
23.2 Consent of Crowe, Chizek and Company LLP
23.4 Consent and Subscription Rights Opinion of Keller & Company, Inc.*
24.1 Powers of Attorney*
27.0 Financial Data Schedule*
99.1 Updated Appraisal Report of Keller & Company, Inc. (P)
99.2 Draft Marketing Materials
99.3 Draft Stock Order Form
- --------------------------------------
* Previously filed
(P) Filed pursuant to Rule 202 of Regulation S-T.
<PAGE>
Item 28. Undertakings.
The small business issuer will:
(1) 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; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each 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.
The small business issuer will 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
of 1933 (the "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 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 Act and will be governed by the final adjudication of such
issue.
<PAGE>
CONFORMED 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 of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Gnadenhutten, State of Ohio, on May 4, 1999.
Indian Village Bancorp, Inc.
By: /s/ Marty R. Lindon
__________________________________
Marty R. Lindon
President, Chief Executive Officer
and Director
(duly authorized representative)
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Marty R. Lindon President, Chief Executive
_____________________ Officer and Director May 4, 1999
Marty R. Lindon (principal executive officer)
/s/ Lori S. Frantz Vice President, Treasurer May 4, 1999
_____________________ and Chief Financial Officer
Lori S. Frantz (principal accounting and
financial officer)
* Chairperson of the Board
_____________________
Rebecca S. Mastin
*
_____________________ Vice Chairman of the Board
John A. Beitzel
*
_____________________ Corporate Secretary and Director
Michael A. Cochran
*
_____________________ Director
Vernon E. Mishler
*
_____________________ Director
Joanne Limbach
*
_____________________ Director
Cindy S. Knisely
</TABLE>
_____________________
*Pursuant to a Power of Attorney dated March 18, 1999 and filed as Exhibit 24.1
to the Registration Statement on Form SB-2 of Indian Village Bancorp, Inc. on
March 18, 1999.
/s/ Marty R. Lindon President, Chief Executive Officer May 4, 1999
_____________________ and Director
Marty R. Lindon
II-6
<PAGE>
As filed with the Securities and Exchange Commission on May 4, 1999
Registration No. 333-74621
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
EXHIBITS
TO THE
PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
INDIAN VILLAGE BANCORP, INC.
(Exact name of registrant as specified in its
certificate of incorporation)
================================================================================
<PAGE>
TABLE OF CONTENTS
List of Exhibits (filed herewith unless otherwise noted)
The exhibits filed as a part of this Registration Statement are as follows:
(a) List of Exhibits (filed herewith unless otherwise noted)
1.1 Engagement Letter between Indian Village Community Bank and Trident
Securities, Inc.*
1.2 Draft Form of Agency Agreement
2.0 Plan of Conversion (including the Federal Stock Charter and Bylaws of
Indian Village Community Bank)*
3.1 Articles of Incorporation of Indian Village Bancorp, Inc.*
3.2 Bylaws of Indian Village Bancorp, Inc.*
4.0 Specimen Stock Certificate of Indian Village Bancorp, Inc.*
5.0 Opinion of Muldoon, Murphy & Faucette LLP re: legality
8.1 Opinion of Muldoon, Murphy & Faucette LLP re: Federal Tax Matters
8.2 Opinion of Crowe, Chizek and Company LLP re: State Tax Matters
10.1 Form of Indian Village Community Bank Employee Stock Ownership Plan and
Trust Agreement*
10.2 Draft ESOP Loan Commitment Letter and ESOP Loan Documents*
10.3 Form of Indian Village Community Bank and Indian Village Bancorp, Inc.
Employment Agreement*
10.4 Form of Indian Village Community Bank Employee Severance Compensation Plan*
16.0 Letter regarding change in certifying accountant*
23.1 Consent of Muldoon, Murphy & Faucette LLP*
23.2 Consent of Crowe, Chizek and Company LLP
23.4 Consent and Subscription Rights Opinion of Keller & Company, Inc.*
24.1 Powers of Attorney*
27.0 Financial Data Schedule*
99.1 Updated Appraisal Report of Keller & Company, Inc. (P)
99.2 Draft Marketing Materials
99.3 Draft Stock Order Form
_______________________
* Previously filed
(P) Filed pursuant to Rule 202 of Regulation S-T.
<PAGE>
Exhibit 1.2
Indian Village Bancorp, Inc.
Common Stock
510,000 to 793,500 Shares
$10.00 Per Share
SALES AGENCY AGREEMENT
----------------------
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
Indian Village Bancorp, Inc., a Pennsylvania-chartered corporation (the
"Company"), and Indian Village Community Bank, a federally chartered and
federally-insured mutual savings bank (the "Bank"), hereby confirm, as of April
___, 1999, their respective agreements with Trident Securities, Inc.
("Trident"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introductory. The Bank intends to convert from a federally-chartered mutual
------------
savings bank to a federally chartered stock savings bank as a wholly-owned
subsidiary of the Company (which conversion, together with the Offerings, as
defined below, the issuance of shares of common stock of the Bank to the Company
and the incorporation of the Company, are referred to collectively herein as the
"Conversion") pursuant to a plan of conversion adopted on January 20, 1999 (as
amended, if amended, the "Plan"). In accordance with the Plan, the Company is
offering shares of its common stock (the "Shares" and the "Common Stock"),
pursuant to nontransferable subscription rights in a subscription offering (the
"Subscription Offering") to certain depositors of the Bank and to the Bank's
tax-qualified employee benefit plan (i.e., the Bank's Employee Stock Ownership
Plan (the "ESOP")). Shares of the Common Stock not sold in the Subscription
Offering may be offered to the general public in a community offering, with
preference given to natural persons residing in Tuscarawas County, Ohio (the
"Community Offering"), subject to the right of the Company and the Bank, in
their absolute discretion, to reject orders in the Community Offering in whole
or in part. Shares not sold in the Subscription Offering or otherwise in the
Community Offering may be offered to certain members of the general public as
part of the Community Offering by a group of broker-dealers (the "Syndicated
Community Offering") (the Subscription Offering
1
<PAGE>
and, if any, the Community and Syndicated Community Offerings are sometimes
referred to collectively as the "Offerings"). In the Offerings, the Company is
offering between 510,000 and 690,000 Shares, with the possibility of offering up
to 793,500 Shares without a resolicitation of subscribers, as contemplated by
Part 563b of Title 12 of the Code of Federal Regulations. With the exception of
the ESOP, no person (or persons through a single account) may purchase in the
Offerings more than 10,000 Shares; no person, together with associates of and
persons acting in concert with such person, may purchase in the Offerings more
than 15,000 Shares.
The Company and the Bank have been advised by Trident that it will utilize its
best efforts in assisting the Company and the Bank with the sale of the Shares
in the Offerings, including any Syndicated Community Offering. Prior to the
execution of this Agreement, the Company has delivered to Trident a prospectus
dated as of the date hereof and all supplements thereto to be used in the
Offerings. Such prospectus contains information with respect to the Company,
the Bank and the Shares.
2. Representations and Warranties.
------------------------------
(a) The Company and the Bank jointly and severally represent and warrant to
Trident that:
(i) The Company has filed with the Commission a registration
statement, including exhibits and an amendment or amendments thereto,
on Form SB-2 (No. ___________), including a prospectus relating
to the Offerings, for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"); and such registration
statement has become effective under the Act and no stop order has
been issued with respect thereto and no proceedings therefor have been
initiated or, to the Company's best knowledge, threatened by the
Commission. Except as the context may otherwise require, such
registration statement, as amended or supplemented, on file with the
Commission at the time the registration statement became effective,
including the prospectus, financial statements, schedules, exhibits
and all other documents filed as part thereof, as amended and
supplemented, is herein called the "Registration Statement," and the
prospectus, as amended or supplemented, on file with the Commission at
the time the Registration Statement became effective is herein called
the "Prospectus," except that if the prospectus filed by the Company
with the Commission pursuant to Rule 424(b) of the general rules and
regulations of the Commission under the Act (together with the
enforceable published policies and actions of the Commission
thereunder, the "SEC Regulations")
2
<PAGE>
differs from the form of prospectus on file at the time the
Registration Statement became effective, the term "Prospectus" shall
refer to the Rule 424(b) prospectus from and after the time it is
filed with or mailed for filing to the Commission and shall include
any amendments or supplements thereto from and after their dates of
effectiveness or use, respectively. If any Shares remain unsubscribed
following completion of the Subscription Offering and, if any, the
Community Offering, the Company (i) will promptly file with the
Commission a post-effective amendment to such Registration Statement
relating to the results of the Subscription Offering and, if any, the
Community Offering, any additional information with respect to the
proposed plan of distribution and any revised pricing information or
(ii) if no such post-effective amendment is required, will file with,
or mail for filing to, the Commission a prospectus or prospectus
supplement containing information relating to the results of the
Subscription Offering and, if any, the Community Offering and pricing
information pursuant to Rule 424(c) of the Regulations, in either case
in a form reasonably acceptable to the Company and Trident.
(ii) The Bank has filed an Application for Approval of Conversion on
Form AC, including exhibits (as amended or supplemented, the "Form AC"
and together with the Form H-(e)l-S referred to below, the "Conversion
Application") with the Office of Thrift Supervision (the "Office")
under the Home Owners' Loan Act, as amended (the "HOLA") and the
enforceable rules and regulations, including published policies and
actions, of the Office thereunder (the "OTS Regulations"), which has
been approved by the Office; and the Prospectus and the proxy
statement for the solicitation of proxies from members for the special
meeting to approve the Plan (the "Proxy Statement") included as part
of the Form AC have been approved for use by the Office. No order has
been issued by the Office preventing or suspending the use of the
Prospectus or the Proxy Statement; and no action by or before the
Office revoking such approvals is pending or, to the Bank's best
knowledge, threatened. The Company has filed with the Office the
Company's application on Form H-(e)l-S promulgated under the savings
and loan holding company provisions of the HOLA and the OTS
Regulations and has received approval of its acquisition of the Bank
from the Office.
(iii) At the date of the Prospectus and at all times subsequent
thereto through and including the Closing Date (i) the Registration
Statement and the Prospectus
3
<PAGE>
(as amended or supplemented, if amended or supplemented) complied with
the Act and the Regulations, (ii) the Registration Statement (as
amended or supplemented, if amended or supplemented) did not contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (iii) the Prospectus (as amended or
supplemented, if amended or supplemented) did not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Representations or warranties in this subsection shall not
apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company or the
Bank relating to Trident by or on behalf of Trident expressly for use
in the Registration Statement or Prospectus.
(iv) The Company has been duly organized as a Pennsylvania
corporation, and the Bank has been duly organized as a mutual savings
bank under the laws of the United States, and each of them is validly
existing and in good standing under the laws of the jurisdiction of
its organization with full power and authority to own its property and
conduct its business as described in the Registration Statement and
Prospectus; the Bank is a member in good standing of the Federal Home
Loan Bank of Cincinnati; and the deposit accounts of the Bank are
insured by the Savings Bank Insurance Fund ("SAIF") administered by
the Federal Deposit Insurance Corporation ("FDIC") up to the
applicable legal limits. Each of the Company and the Bank is not
required to be qualified to do business as a foreign corporation in
any jurisdiction where non-qualification would have a material adverse
effect on the Company and the Bank, taken as a whole. The Bank does
not own equity securities of or an equity interest in any business
enterprise except as described in the Prospectus. Upon amendment of
the Bank's charter and bylaws as provided in the rules and regulations
of the Office and completion of the sale by the Company of the Shares
as contemplated by the Prospectus, (i) the Bank will be converted
pursuant to the Plan to a federally chartered capital stock savings
bank with full power and authority to own its property and conduct its
business as described in the Prospectus, (ii) all of the authorized
and outstanding capital stock of the Bank will be owned of record and
beneficially by the Company, and (iii) the Company will have no direct
4
<PAGE>
subsidiaries other than the Bank. (v) The Bank has good, marketable
and insurable title to all assets material to its business and to
those assets described in the Prospectus as owned by it, free and
clear of all material liens, charges, encumbrances or restrictions,
except for liens for taxes not yet due, except as described in the
Prospectus and except as could not in the aggregate have a material
adverse effect upon the operations or financial condition of the Bank;
and all of the leases and subleases material to the operations or
financial condition of the Bank, under which it holds properties,
including those described in the Prospectus, are in full force and
effect as described therein.
(vi) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary actions on the part of each of
the Company and the Bank, and this Agreement is a valid and binding
obligation with valid execution and delivery of each of the Company
and the Bank, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of
creditors of savings and loan holding companies the accounts of whose
subsidiaries are insured by the FDIC or by general equity principles,
regardless of whether such enforceability is considered in a
proceeding in equity or at law, and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or pursuant to Sections 23A and 23B of the Federal
Reserve Act, 12 U.S.C. Sections 371c and 371c-1 (collectively,
"Section 23A")).
(vii) There is no litigation or governmental proceeding pending or,
to the best knowledge of the Company or the Bank, threatened against
or involving the Company, the Bank or any of their respective assets
which individually or in the aggregate would reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise), results of operations and business, including the assets
and properties, of the Company and the Bank, taken as a whole.
(viii) The Company and the Bank have received the opinions of
Muldoon, Murphy & Faucette, LLP, with respect to federal tax
consequences of the Conversion,
5
<PAGE>
and of Crowe, Chizek and Company LLP, with respect to Ohio tax
consequences of the Conversion, to the effect that the Conversion will
constitute a taxfree reorganization under the Internal Revenue Code of
1986, as amended, and will not be a taxable transaction for the Bank
or the Company under the laws of Georgia, and the facts relied upon in
such opinions are accurate and complete.
(ix) Each of the Company and the Bank has all such corporate power,
authority, authorizations, approvals and orders as may be required to
enter into this Agreement and to carry out the provisions and
conditions hereof, subject to the limitations set forth herein and
subject to the satisfaction of certain conditions imposed by the
Office in connection with its approvals of the Form AC and the
Application H-(e)1-S, and except as may be required under the
securities laws of various jurisdictions, and in the case of the
Company, as of the Closing Date, will have such approvals and orders
to issue and sell the Shares to be sold by the Company as provided
herein, and in the case of the Bank, as of the Closing Date, will have
such approvals and orders to issue and sell the Shares of its Common
Stock to be sold to the Company as provided in the Plan, subject to
the issuance of amended charter in the form required for federally
chartered stock savings associations (the "Stock Charter"), the form
of which Stock Charter has been approved by the Office.
(x) Neither the Company nor the Bank is in violation of any rule or
regulation of the Office or the FDIC that could reasonably be expected
to result in any enforcement action against the Company, the Bank or
their officers or directors that might have a material adverse effect
on the condition (financial or otherwise), operations, businesses,
assets or properties of the Company and the Bank, taken as a whole.
(xi) The financial statements and any related notes or schedules
which are included in the Registration Statement and the Prospectus
fairly present the financial condition, income, retained earnings and
cash flows of the Bank at the respective dates thereof and for the
respective periods covered thereby and comply as to form with the
applicable accounting requirements of the SEC and OTS Regulations.
Such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth therein, and such
financial statements are
6
<PAGE>
consistent with financial statements and other reports filed by the
Bank with supervisory and regulatory authorities except as such
generally accepted accounting principles may otherwise require. The
tables in the Prospectus accurately present the information purported
to be shown thereby at the respective dates thereof and for the
respective periods therein.
(xii) There has been no material change in the condition (financial
or otherwise), results of operations or business, including assets and
properties, of the Company and the Bank, taken as a whole, since the
latest date as of which such condition is set forth in the Prospectus,
except as set forth therein; and the capitalization, assets,
properties and business of each of the Company and the Bank conform to
the descriptions thereof contained in the Prospectus. None of the
Company or the Bank has any material liabilities of any kind,
contingent or otherwise, except as set forth in the Prospectus.
(xiii) There has been no breach or default (or the occurrence of any
event which, with notice or lapse of time or both, would constitute a
default) under, or creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company or the
Bank pursuant to any of the terms, provisions or conditions of, any
agreement, contract, indenture, bond, debenture, note, instrument or
obligation to which the Company or the Bank is a party or by which any
of them or any of their respective assets or properties may be bound
or is subject, or violation of any governmental license or permit or
any enforceable published law, administrative regulation or order or
court order, writ, injunction or decree, which breach, default,
encumbrance or violation would have a material adverse effect on the
condition (financial or otherwise), operations, business, assets or
properties of the Company and the Bank, taken as a whole; all
agreements which are material to the condition (financial or
otherwise), results of operations or business of the Company and the
Bank, taken as a whole are in full force and effect, and no party to
any such agreement has instituted or, to the best knowledge of the
Company and the Bank, threatened any action or proceeding wherein the
Company or the Bank would be alleged to be in default thereunder.
(xiv) None of the Company or the Bank is in violation of its
respective charter or bylaws. The execution and delivery hereof and
the consummation of the
7
<PAGE>
transactions contemplated hereby by the Company and the Bank do not
conflict with or result in a breach of the charter or bylaws of the
Company or the Bank (in either mutual or stock form) or constitute a
material breach of or default (or an event which, with notice or lapse
of time or both, would constitute a default) under, give rise to any
right of termination, cancellation or acceleration contained in, or
result in the creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company or the
Bank pursuant to any of the terms, provisions or conditions of, any
material agreement, contract, indenture, bond, debenture, note,
instrument or obligation to which the Company or the Bank is a party
or violate any governmental license or permit or any enforceable
published law, administrative regulation or order or court order,
writ, injunction or decree (subject to the satisfaction of certain
conditions imposed by the Office in connection with its approval of
the Conversion Application), which breach, default, encumbrance or
violation would have a material adverse effect on the condition
(financial or otherwise), operations or business of the Company and
the Bank, taken as a whole.
(xv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and prior to the
Closing Date (as hereinafter defined), except as otherwise may be
indicated or contemplated therein, none of the Company or the Bank has
issued any securities which will remain issued at the Closing Date or
incurred any liability or obligation, direct or contingent, or
borrowed money, except borrowings in the ordinary course of business,
or entered into any.other transaction not in the ordinary course of
business and consistent with prior practices, which is material in
light of the business of the Company and the Bank, taken as a whole.
(xvi) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company shall be within the range as
set forth in the Prospectus under the caption "Capitalization," and no
Common Stock of the Company shall be outstanding immediately prior to
the Closing Date; the issuance and the sale of the Shares of the
Company have been duly authorized by all necessary action of the
Company and approved by the Office and, when issued in accordance with
the terms of the Plan and paid for, shall be validly issued, fully
paid and nonassessable and shall conform to the description thereof
contained in the Prospectus; the issuance of the Shares is not subject
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<PAGE>
to preemptive rights, except as set forth in the Prospectus; and good
title to the Shares will be transferred by the Company upon issuance
thereof against payment therefor, free and clear of all claims,
encumbrances, security interests and liens against the Company
whatsoever. The certificates representing the Shares will conform in
all material respects with the requirements of applicable laws and
regulations. The issuance and sale of the capital stock of the Bank to
the Company has been duly authorized by all necessary action of the
Bank and the Company and appropriate regulatory authorities (subject
to the satisfaction of various conditions imposed by the Office in
connection with its approval of the Conversion Application), and such
capital stock, when issued in accordance with the terms of the Plan,
will be fully paid and nonassessable and will conform in all material
respects to the description thereof contained in the Prospectus.
(xvii) No approval of any regulatory or supervisory or other public
authority is required in connection with the execution and delivery of
this Agreement or the issuance of the Shares, except for the
declaration of effectiveness of any required post-effective amendment
by the Commission and approval thereof by the Office and approval of
the Company's application on Form H-(e)l-S by the Office, the issuance
of the Stock Charter by the Office and as may be required under the
securities laws of various jurisdictions.
(xviii) All contracts and other documents required to be filed as
exhibits to the Registration Statement or the Conversion Application
have been filed with the Commission and/or the Office, as the case may
be.
(xix) Crowe, Chizek and Company LLP, which has audited the financial
statements of the Bank at December 31, 1998 and 1997 and for the years
ended December 31, 1998 and 1997 included in the Prospectus, is an
independent public accountant within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public
Accountants and Title 12 of the Code of Federal Regulations, Section
571.2(c)(3).
(xx) For the past five years, the Company and the Bank have timely
filed all required federal, state and local franchise tax returns, and
no deficiency has been asserted with respect to such returns by any
taxing authorities, and the Company and the Bank have paid all taxes
that have become due and, to the best of their knowledge, have made
adequate reserves for similar future tax liabilities, except where any
failure to
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make such filings, payments and reserves, or the assertion of such a
deficiency, would not have a material adverse effect on the condition
of the Company and the Bank, taken as a whole.
(xxi) All of the loans represented as assets of the Bank on the most
recent financial statements of the Bank included in the Prospectus
meet or are exempt from all requirements of federal, state or local
law pertaining to lending and interest, including without limitation
truth in lending (including the requirements of Regulation Z and 12
C.F.R. Part 226 and Section 563.99), real estate settlement
procedures, consumer credit protection, equal credit opportunity and
all disclosure laws applicable to such loans, except for violations
which, if asserted, would not have a material adverse effect on the
Company and the Bank, taken as a whole.
(xxii) The records of account holders, depositors, borrowers and
other members of the Bank delivered to Trident by the Bank or its
agent for use during the Conversion have been prepared or reviewed by
the Bank and, to the best knowledge of the Company and the Bank, are
reliable and accurate.
(xxiii) None of the Company, the Bank or, to the best knowledge of
the Company and the Bank, the employees of the Company or the Bank,
has made any payment of funds of the Company or the Bank prohibited by
law, and no funds of the Company or the Bank have been set aside to be
used for any payment prohibited by law.
(xxiv) To the best knowledge of the Company and the Bank, the Company
and the Bank are in compliance with all laws, rules and regulations
relating to the discharge, storage, handling and disposal of hazardous
or toxic substances, pollutants or contaminants and neither the
Company nor the Bank believes that the Company or the Bank is subject
to liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any similar
law, except for violations which, if asserted, would not have a
material adverse effect on the Company and the Bank, taken as a whole.
There are no actions, suits, regulatory investigations or other
proceedings pending or, to the best knowledge of the Company or the
Bank, threatened against the Company or the Bank relating to the
discharge, storage, handling and disposal of hazardous or toxic
substances, pollutants or contaminants. To the best knowledge of the
Company and the Bank, no disposal, release or discharge of
10
<PAGE>
hazardous or toxic substances, pollutants or contaminants, including
petroleum and gas products, as any of such terms may be defined under
federal, state or local law, has been caused by the Company or the
Bank or, to the best knowledge of the Company or the Bank, has
occurred on, in or at any of the facilities or properties of the
Company or the Bank, except such disposal, release or discharge which
would not have a material adverse effect on the Company and the Bank,
taken as a whole.
(xxv) At the Closing Date, the Company and the Bank will have
completed the conditions precedent to, and shall have conducted the
Conversion in all material respects in accordance with, the Plan, the
HOLA, the OTS Regulations and all other applicable laws, regulations,
published decisions and orders, including all terms, conditions,
requirements and provisions precedent to the Conversion imposed by the
Office.
(b) Trident represents and warrants to the Company and the Bank that:
(i) Trident is registered as a broker-dealer with the Commission, and
is in good standing with the Commission and the NASD.
(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to provide the services to be furnished
to the Company and the Bank hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary action on the part of Trident,
and this Agreement is a legal, valid and binding obligation of
Trident, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of
creditors of registered broker-dealers accounts of whose may be
protected by the Securities Investor Protection Corporation or by
general equity principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law, and except to the
extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or pursuant to Section 23A).
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<PAGE>
(iv) Each of Trident and, to Trident's knowledge, its employees,
agents and representatives who shall perform any of the services
required hereunder to be performed by Trident shall be duly authorized
and shall have all licenses, approvals and permits necessary to
perform such services, and Trident is a registered selling agent in
the jurisdictions listed in Exhibit A hereto and will remain
registered in such jurisdictions in which the Company is relying on
such registration for the sale of the Shares, until the Conversion is
consummated or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with
the corporate charter or bylaws of Trident or violate, conflict with
or constitute a breach of, or default (or an event which, with notice
or lapse of time, or both, would.constitute a default) under, any
material agreement, indenture or other instrument by which Trident is
bound or under any governmental license or permit or any law,
administrative regulation, authorization, approval or order or court
decree, injunction or order.
(vi) Any funds received by Trident to purchase Common Stock will be
handled in accordance with Rule 15c2-4 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(vii) There is not now pending or, to Trident's knowledge, threatened
against Trident any action or proceeding before the Commission, the
NASD, any state securities commission or any state or federal court
concerning Trident's activities as a broker-dealer.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis of
------------------------------------------------------
the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Bank hereby employ Trident
as their agent to utilize its best efforts in assisting the Company with the
Company's sale of the Shares in the Subscription Offering and, if any, the
Community Offering. The employment of Trident hereunder shall terminate (a)
forty-five (45) days after the Offerings close, unless the Company and the Bank,
with the approval of the Office, are permitted to extend such period of time, or
(b) upon consummation of the Conversion, whichever date shall first occur.
In the event the Company is unable to sell a minimum of 510,000 Shares (or such
lesser amount as the Office may permit) within the period herein provided, this
Agreement shall terminate, and
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<PAGE>
the Company and the Bank shall refund promptly to any persons who have
subscribed for any of the Shares, the full amount which it may have received
from them, together with interest as provided in the Prospectus, and no party to
this Agreement shall have any obligation to the other party hereunder, except as
set forth in Sections 6, 8(a) and 9 hereof. Appropriate arrangements for placing
the funds received from subscriptions for Shares in special interest-bearing
accounts with the Bank until all Shares are sold and paid for were made prior to
the commencement of the Offerings, with provision for prompt refund to the
purchasers as set forth above, or for delivery to the Company if all Shares are
sold. If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on the Closing Date against
payment to the Company by any means authorized pursuant to the Prospectus, at
the principal office of the Company at 100 South Walnut Street, Gnadenhutten,
Ohio 44629, or at such other place as shall be agreed upon between the parties
hereto. The date upon which Trident is paid the compensation due hereunder is
herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a subscriber
to forward the offering price of the Common Stock ordered on or before twelve
noon on the next business day following receipt or execution of an order form by
Trident to the Bank for deposit in a segregated account or (b) to solicit
indications of interest in which event (i) Trident will subsequently contact any
potential subscriber indicating interest to confirm the interest and give
instructions to execute and return an order form or to receive authorization to
execute the order form on the subscriber's behalf, (ii) Trident will mail
acknowledgements of receipt of orders to each subscriber confirming interest on
the business day following such confirmation, (iii) Trident will debit accounts
of such subscribers on the third business day ("debit date") following receipt
of the confirmation referred to in (i), and (iv) Trident will forward completed
order forms together with such funds to the Bank on or before twelve noon on the
next business day following the debit date for deposit in a segregated account.
Trident acknowledges that if the procedure in (b) is adopted, subscribers' funds
are not required to be in their accounts until the debit date.
In addition to the expenses specified in Section 6 hereof, Trident shall receive
the following compensation for its services hereunder:
(a) (i) the amount of $100,000 (less the Bank's advance payment in the
amount of $10,000 provided to Trident for the defrayal of expenses), and
(ii) a commission of 5-1/2% of
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<PAGE>
the per Share sales price for each share sold by other member firms of the
NASD through a selected dealers arrangement in any Syndicated Community
Offering. All commissions shall be based on the amount of Common Stock
sold. All such amounts and commissions are to be payable in same-day funds
to Trident on the Closing Date.
(b) Notwithstanding amounts coming due under the preceding paragraph (a),
in the event that a resolicitation or other event causes the Offerings to
be extended beyond their original expiration date, the Company and the Bank
shall reimburse Trident for its reasonable additional expenses incurred
during such extended period, provided that any such additional
reimbursements shall not exceed an amount equal to the product obtained by
dividing $10,000 (the original payment by the Bank to defray Trident's out-
of-pocket expenses) by the total number of days of the unextended
Subscription Offering (calculated from the date of the Prospectus to the
intended close of the Subscription Offering as stated in the Prospectus)
and multiplying such product by the number of days of the extension (that
number of days from the date of the supplemental prospectus used in the
extended offering to the closing of the extension of the offering(s)
described in such supplemental prospectus).
The Company shall pay any stock issue and transfer taxes which may be payable
with respect to the sale of the Shares. The Company and the Bank shall also pay
all expenses of the Conversion incurred by them or on their prior approval
including but not limited to their attorneys' fees, NASD filing fees, and
attorneys' fees relating to any required state securities laws research and
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 Conversion.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
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assisting the Company on a best efforts basis in offering a minimum of 510,000
and a maximum of 690,000 Shares, with the possibility of offering up to 793,500
Shares (except as the Office may permit to be decreased or increased) in the
Offerings. The Shares are to be offered to the public at the price set forth on
the cover page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Bank jointly and severally
------------------
covenant and agree that:
(a) The Company shall deliver to Trident, from time to time, such number
of copies of the Prospectus as Trident reasonably may request. The Company
authorizes Trident to use the Prospectus in any lawful manner in connection
with
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<PAGE>
the offer and sale of the Shares.
(b) The Company will notify Trident immediately upon discovery, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement becomes effective or any supplement to the
Prospectus has been filed, (ii) of the issuance by the Commission of any
stop order relating to the Registration Statement or of the initiation or
the threat of any proceedings for that purpose, (iii) of the receipt of any
notice with respect to the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, and (iv) of the receipt of any
comments from the staff of the Commission relating to the Registration
Statement. If the Commission enters a stop order relating to the
Registration Statement at any time, the Company will make every reasonable
effort to obtain the lifting of such order at the earliest possible moment.
(c) During the time when a prospectus is required to be delivered under
the Act, the Company will comply so far as it is able with all requirements
imposed upon it by the Act, as now in effect and hereafter amended, and by
the Regulations, as from time to time in force, so far as necessary to
permit the continuance of offers and sales of or dealings in the Shares in
accordance with the provisions hereof and the Prospectus. If during the
period when the Prospectus is required to be delivered in connection with
the offer and sale of the Shares any event relating to or affecting the
Company and the Bank, taken as a whole, shall occur as a result of which it
is necessary, in the opinion of counsel for Trident, with the concurrence
of counsel to the Company, to amend or supplement the Prospectus in order
to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the
Shares, the Company forthwith shall prepare and furnish to Trident a
reasonable number of copies of an amendment or amendments or of a
supplement or supplements to the Prospectus (in form and substance
satisfactory to counsel for Trident) which shall amend or supplement the
Prospectus so that, as amended or supplemented, the Prospectus shall not
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a
purchaser of the Shares, not misleading. The Company will not file or use
any amendment or supplement to the Registration Statement or the Prospectus
of which Trident has not first been furnished a copy or to which Trident
shall reasonably object after having been furnished such copy. For the
purposes of this subsection the Company and the Bank shall furnish such
information with respect to
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<PAGE>
themselves as Trident from time to time may reasonably request.
(d) The Company and the Bank have taken or will take all reasonably
necessary action as may be required to qualify or register the Shares for
offer and sale by the Company under the securities laws of such
jurisdictions as Trident and either the Company or its counsel may agree
upon; provided, however, that the Company shall not be obligated to qualify
as a foreign corporation to do business under the laws of any such
jurisdiction. In each jurisdiction where such qualification or registration
shall be effected, the Company, unless Trident agrees that such action is
not necessary or advisable in connection with the distribution of the
Shares, shall file and make such statements or reports as are, or
reasonably may be, required by the laws of such jurisdiction.
(e) Appropriate entries will be made in the financial records of the Bank
sufficient to establish a liquidation account for the benefit of eligible
account holders and supplemental eligible account holders in accordance
with the requirements of the Office.
(f) The Company will file a registration statement for the Common Stock
under Section 12(g) of the Exchange Act, prior to completion of the stock
offering pursuant to the Plan and shall request that such registration
statement be effective upon completion of the Conversion. The Company
shall maintain the effectiveness of such registration for a minimum period
of three years or for such shorter period as may be required by applicable
law.
(g) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the regulations promulgated under the Act)
covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date (as defined
in said Rule 158) of the Registration Statement.
(h) For a period of three (3) years from the date of this Agreement
(unless the Common Stock shall have been deregistered under the Exchange
Act), the Company will furnish to Trident, as soon as publicly available
after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and the Company will furnish to Trident (i) as
soon as publicly available, a copy of each report or definitive proxy
statement of the Company filed with the Commission under the Exchange Act
or mailed to
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<PAGE>
shareholders, and (ii) from time to time, such other public information
concerning the Company as Trident may reasonably request.
(i) The Company shall use the net proceeds from the sale of the Shares
consistently with the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived in writing by Trident.
(k) The Company shall advise Trident, if necessary, as to the allocation
of deposits, in the case of eligible account holders, and votes, in the
case of other members, and of the Shares in the event of an
oversubscription and shall, after consultation with Trident, provide
Trident final instructions as to the allocation of the Shares ("Allocation
Instructions") in such event and such information shall be accurate and
reliable. Trident shall be entitled to rely on such instructions and shall
have no liability in respect of its reliance thereon, including without
limitation, no liability for or related to any denial or grant of a
subscription in whole or in part.
(l) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
ensure compliance with the NASD's "Interpretation Relating to Free-Riding
and Withholding."
6. Payment of Expenses. Whether or not the Conversion is consummated, the
-------------------
Company and the Bank shall pay or reimburse Trident for (a) all filing fees paid
or incurred by Trident in connection with all filings with the NASD with respect
to the Offerings, and (b) in addition, if the Company is unable to sell a
minimum of 510,000 Shares or such lesser amount as the OTS may permit or the
Conversion is otherwise terminated, for Trident's expenses incurred relating to
the offering of the Shares as provided in Section 3 hereof; provided that the
$10,000 advance payment made by the Bank for deferral of Trident's expenses
shall be applied to reduce any amounts owing under this Section 6, and; further
provided that neither the Company nor the Bank shall pay or reimburse Trident
for any of the foregoing expenses accrued after Trident shall have notified the
Company or the Bank of its election to terminate this Agreement pursuant to
Section 11 hereof or after such time as the Company or the Bank shall have given
notice in accordance with Section 12 hereof that Trident is in breach of this
Agreement.
7. Conditions of Trident's Obligations. Except as may be waived in writing by
-----------------------------------
17
<PAGE>
Trident, the obligations of Trident as provided herein shall be subject to the
accuracy of the representations and warranties contained in Section 2 hereof as
of the date hereof and as of the Closing Date, to the performance by the Company
and the Bank of their obligations hereunder and to the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinions of
Muldoon, Murphy & Faucette LLP, special counsel for the Company and the
Bank, dated the Closing Date, addressed to Trident, in form and substance
reasonably satisfactory to counsel for Trident, substantially as set forth
in Exhibits B and C, respectively, hereto.
(b) At the Closing Date, Trident shall receive the letter of Muldoon,
Murphy & Faucette LLP, special counsel for the Company and the Bank, dated
the Closing Date, addressed to Trident, in form and substance reasonably
satisfactory to counsel for Trident, substantially as set forth in Exhibit
D hereto.
(c) Counsel for Trident shall have been furnished such documents as they
reasonably may require for the purpose of enabling them to review or pass
upon the matters required by Trident, and for the purpose of evidencing the
accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained, including but not limited to,
resolutions of the Board of Directors of the Company and the Bank regarding
the authorization of this Agreement and the transactions contemplated
hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material change in the condition,
financial or otherwise, business or results of operations of the Company
and the Bank, taken as a whole, since the latest date as of which such
condition is set forth in the Prospectus, except as referred to therein;
(ii) there shall have been no transaction entered into by the Company or
the Bank after the latest date as of which the financial condition of the
Company or the Bank is set forth in the Prospectus other than transactions
referred to or contemplated therein, transactions in the ordinary course of
business, and transactions which are not material to the Company and the
Bank, taken as a whole; (iii) none of the Company or the Bank shall have
received from the Office or Commission any direction (oral or written) to
make any change in the method of conducting their respective businesses
which is material to the business of the Company and the Bank, taken as a
whole, with which they have not complied; (iv) no action, suit or
proceeding, at law or in equity or before or by any federal or state
commission,
18
<PAGE>
board or other administrative agency, shall be pending or threatened
against the Company or the Bank or affecting any of their respective
assets, wherein an unfavorable decision, ruling or finding would have a
material adverse effect on the business, operations, financial condition or
income of the Company and the Bank, taken as a whole; and (v) the Shares
shall have been qualified or registered for offering and sale by the
Company under the securities laws of such jurisdictions as Trident and the
Company shall have agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
principal executive, financial and accounting officer(s) of each of the
Company and the Bank, dated the Closing Date, to the effect that: (i) they
have examined the Prospectus and, at the time the Prospectus became
authorized by the Company for use, the Prospectus did not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading with respect to the Company or the
Bank; (ii) since the date the Prospectus became authorized by the Company
for use, no event has occurred which should have been set forth in an
amendment or supplement to the Prospectus which has not been so set forth,
including specifically, but without limitation, any material change in the
business, condition (financial or otherwise) or results of operations of
the Company or the Bank and, the conditions set forth in clauses (ii)
through (iv) inclusive of subsection(d) of this Section 7 have been
satisfied; (iii) to the best knowledge of such officers, no order has been
issued by the Commission or the Office to suspend the Offerings or the
effectiveness of the Prospectus, and no action for such purposes has been
instituted or threatened by the Commission or the Office; (iv) to the best
knowledge of such officers, no person has sought to obtain review of the
final actions of the Office and division approving the Plan; and (v) all of
the representations and warranties contained in Section 2 of this Agreement
are true and correct, with the same force and effect as though expressly
made on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other documents, (i)
copies of the letters from the Office authorizing the use of the Prospectus
and the Proxy Statement, (ii) a copy of the order of the Commission
declaring the Registration Statement effective; (iii) copies of the letters
from the Office evidencing the corporate existence of the Bank; (iv) a copy
of the letter from the appropriate Georgia authority evidencing the
incorporation (and, if generally available from such authority, good
standing) of the Company; (v) a copy of the Company's
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charter certified by the appropriate Pennsylvania governmental authority;
and, (vi) if available, a copy of the letter from the Office approving the
Bank's Stock Charter.
(g) As soon as available after the Closing Date, Trident shall receive a
copy of the Bank's Certified Stock Charter executed by the appropriate
federal governmental authority.
(h) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from Crowe, Chizek and Company LLP,
independent certified public accountants, addressed to Trident and the
Company, in substance and form satisfactory to counsel for Trident, with
respect to the financial statements and certain financial information
contained in the Prospectus.
(i) At the Closing Date, Trident shall receive a letter in form and
substance satisfactory to counsel for Trident from Crowe, Chizek and
Company LLP, independent certified public accountants, dated the Closing
Date and addressed to Trident and the Company, confirming the statements
made by them in the letter delivered by them pursuant to the preceding
subsection as of a specified date not more than five (5) days prior to the
Closing Date.
All such opinions, certificates, letters and documents shall be in compliance
with the provisions hereof only if they are, in the reasonable opinion of
Trident and its counsel, satisfactory to Trident and its counsel. Any
certificates signed by an officer or director of the Company or the Bank
prepared for Trident's reliance and delivered to Trident or to counsel for
Trident shall be deemed a representation and warranty by the Company and the
Bank to Trident as to the statements made therein. If any condition to
Trident's obligations hereunder to be fulfilled prior to or at the Closing Date
is not so fulfilled, Trident may terminate this Agreement or, if Trident so
elects, may waive in writing any such conditions which have not been fulfilled,
or may extend the time of their fulfillment. If Trident terminates this
Agreement as aforesaid, the Company and the Bank shall reimburse Trident for its
expenses as provided in Section 3(b) hereof.
8. Indemnification.
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(a) The Company and the Bank jointly and severally agree to indemnify and
hold harmless Trident, its officers, directors and employees and each
person, if any, who controls Trident within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, against any and all loss,
liability, claim, damage and expense whatsoever and shall further promptly
reimburse such persons for any legal or other expenses reasonably incurred
by each or any of them in
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investigating, preparing to defend or defending against any such action,
proceeding or claim (whether commenced or threatened) arising out of or
based upon (A) any misrepresentation by the Company or the Bank in this
Agreement or any breach of warranty by the Company or the Bank with respect
to this Agreement or arising out of or based upon any untrue or alleged
untrue statement of a material fact or the omission or alleged omission of
a material fact required to be stated or necessary to make not misleading
any statements contained in (i) the Registration Statement or the
Prospectus or (ii) any application (including the Form AC and the Form H-
(e)1-S) or other document or communication (in this Section 8 collectively
called "Application") prepared or executed by or on behalf of the Company
or the Bank or based upon written information furnished by or on behalf of
the Company or the Bank, whether or not filed in any jurisdiction, to
effect the Conversion or qualify the Shares under the securities laws
thereof or filed with the Office or Commission, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to the Company or the Bank with respect to Trident by
or on behalf of Trident expressly for use in the Prospectus or any
amendment or supplement thereof or in any Application, as the case may be,
or (B) the participation by Trident in the Conversion. This indemnity shall
be in addition to any liability the Company and the Bank may have to
Trident otherwise.
(b) The Company shall indemnify and hold Trident harmless for any
liability whatsoever arising out of (i) the Allocation Instructions or (ii)
any records of account holders, depositors, borrowers and other members of
the Bank delivered to Trident by the Bank or its agents for use during the
Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the Bank,
their officers, directors and employees and each person, if any, who
controls the Company or the Bank within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Bank to Trident, but only with
respect to (A) statements or omissions, if any, made in the Prospectus or
any amendment or supplement thereof, in any Application or to a purchaser
of the Shares in reliance upon, and in conformity with, written information
furnished to the Company or the Bank with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus or in any
Application; (B) any misrepresentation by Trident in Section 2(b) of this
Agreement; or (C) any liability of the Company or the Bank which is found
in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to have
21
<PAGE>
principally and directly resulted from gross negligence or willful
misconduct of Trident.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 8, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party otherwise
than under this Section 8. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than the reasonable cost of investigation except as
otherwise provided herein. In the event the indemnifying party elects to
assume the defense of any such action and retain counsel acceptable to the
indemnified party, the indemnified party may retain additional counsel, but
shall bear the fees and expenses of such counsel unless (i) the
indemnifying party shall have specifically authorized the indemnified party
to retain such counsel or (ii) the parties to such suit include such
indemnifying party and the indemnified party, and such indemnified party
shall have been advised by counsel that one or more material legal defenses
may be available to the indemnified party which may not be available to the
indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the
indemnifying party's obligation to bear the fees and expenses of such
counsel. An indemnifying party against whom indemnity may be sought shall
not be liable to indemnify an indemnified party under this Section 8 if any
settlement of any such action is effected without such indemnifying party's
consent. To the extent required by law, this Section 8 is subject to and
limited by the provisions of Section 23A.
9. Contribution. In order to provide for just and equitable contribution in
------------
circumstances in which the indemnity agreement provided for in Section 8 above
is for any reason held to be unavailable to Trident, the Company and/or the Bank
other than in accordance with its terms, the Company or the Bank and Trident
22
<PAGE>
shall contribute to the aggregate losses, liabilities, claims, damages, and
expenses of the nature contemplated by said indemnity agreement incurred by the
Company or the Bank and Trident (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Bank on the one
hand and Trident on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the Company or
the Bank on the one hand and Trident on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Bank on
the one hand and Trident on the other shall be deemed to be in the same
proportions as the total net proceeds from the Conversion received by the
Company and the Bank bear to the total commissions received by Trident under
this Agreement. The relative fault of the Company or the Bank on the one hand
and Trident on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Bank or by Trident and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Bank and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, Trident shall not be required
to contribute any amount in excess of the amount by which commissions owed
Trident pursuant to this Agreement exceeds the amount of any damages which
Trident has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. To the extent required by law, this Section 8 is
subject to and limited by the provisions of Section 23A.
10. Survival of Agreements, Representations and Indemnities. The respective
-------------------------------------------------------
23
<PAGE>
indemnities of the Company and the Bank and Trident and the representation and
warranties of the Company and the Bank and of Trident set forth in or made
pursuant to this Agreement shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of Trident or the Company or the Bank or any controlling person or
indemnified party referred to in Section 8 hereof, and shall survive any
termination or consummation of this Agreement and/or the issuance of the Shares,
and any legal representative of Trident, the Company, the Bank and any such
controlling persons shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations.
11. Termination. Trident may terminate this Agreement by giving the notice
-----------
indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make
it, in Trident's reasonable opinion, impracticable to proceed with the
offering of the Shares; or if trading on the New York Stock Exchange shall
have suspended; or if the United States shall have become involved in a war
or major hostilities; or if a general banking moratorium has been declared
by a state or federal authority which has material effect on the Bank or
the Conversion; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if there shall have
been a material change in the capitalization, condition or business of the
Company, or if the Bank shall have sustained a material or substantial loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act, whether or not said loss shall have been
insured; or if there shall have been a material adverse change in the
condition or prospects of the Company, the Bank or the Subsidiary.
(b) If Trident elects to terminate this Agreement as provided in this
Section, the Company and the Bank shall be notified promptly by Trident by
telephone or telegram, confirmed by letter.
(c) If this Agreement is terminated by Trident for any of the reasons set
forth in subsection (a) above, and to fulfill its obligations, if any,
pursuant to Sections 3, 6, 8(a) and 9 of this Agreement and upon demand,
the Company and the Bank shall pay Trident the full amount so owing
thereunder.
(d) The Bank may terminate the Conversion in accordance with the terms of
the Plan. Such termination shall be
24
<PAGE>
without liability to any party, except that the Company and the Bank shall
be required to fulfill their obligations, if any, pursuant to Sections
3(b), 6, 8(a) and 9 of this Agreement.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows, Jr. (with a copy to Michael, Best & Friedrich, 100 East Wisconsin
Avenue, Milwaukee, WI 53202, Attention: W. Charles Jackson, Esquire) and if
sent to the Company or the Bank, shall be mailed, delivered or telegraphed and
confirmed to Indian Village Bank, Inc., and Indian Village Community Bank, 100
South Walnut Street Gnadenhutten, Ohio 44629, Attention: Marty R. Lindon,
President (with a copy to Muldoon, Murphy & Faucette LLP, 5101 Wisconsin Avenue,
N.W., Washington, DC 20016, Attention: Victor L. Cangelosi, Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and shall be
-------
binding upon, Trident, the Company, the Bank and the controlling and other
persons referred to in Section 8 hereof, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained; provided, however,
that the Bank and Company specifically consent to any assignment by Trident of
its rights and obligations hereunder to McDonald Investments, Inc.
14. Construction. Unless governed by preemptive federal law, this Agreement
------------
shall be governed by and construed in accordance with the substantive laws of
Georgia.
15. Counterparts. This Agreement may be executed in separate counterparts,
------------
each of which when so executed and delivered shall be an original, but all of
which together shall constitute but one and the same instrument.
* * *
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
INDIAN VILLAGE BANK, INC. INDIAN VILLAGE COMMUNITY BANK, INC.
By: By:
------------------ ------------------
Marty R. Lindon Marty R. Lindon
President President
25
<PAGE>
Date: April ____, 1999 Date: April ___, 1999
Agreed to and accepted:
TRIDENT SECURITIES, INC.
By:
-------------------
Date: April ____, 1999
26
<PAGE>
Exhibit A
Trident Securities, Inc. is a registered selling agent in the jurisdictions
--
listed below:
Alabama Missouri
Alaska Montana
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota (Trident Inc.
Georgia Securities, only, no agents)
Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan Tennessee
Minnesota Utah
Mississippi Wisconsin
Wyoming
Trident Securities, Inc. is not a registered selling agent in the jurisdictions
listed below:
Hawaii
South Dakota
Exhibit B
Exhibit C
Exhibit D
27
<PAGE>
Exhibit B
Form of Opinion
___ _, 1999
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, N.C. 27609
Re: Indian Village Bancorp, Inc.
Ladies and Gentlemen:
We have acted as special counsel for Indian Village Bancorp, Inc., a
Pennsylvania corporation (the "Company") and Indian Village Community Bank, a
federally chartered, federally-insured mutual savings bank (the "Bank"), in
connection with the preparation and filing with the Securities and Exchange
Commission (the "SEC" or the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act" or the "1933 Act") of the Company's Registration
Statement on Form SB-2 (No. ____________) as amended, relating to the offering
of the Company's common stock (the "Common Stock") in Subscription, Community
and Syndicated Community Offerings (hereinafter the "Offerings") in connection
with the conversion of the Bank from a federally-chartered mutual savings bank
to a federally-chartered stock savings bank (the "Conversion") and the issuance
of the Bank's capital stock to the Company pursuant to the Bank's plan of
conversion, as approved by the Office of Thrift Supervision ("OTS") on
__________________, 1999 (the "Plan of Conversion" or the "Plan"). Such
registration statement, as amended when it last became effective, is herein
called the "Registration Statement," and the related prospectus, as filed with
the SEC pursuant to Rule 424(b) of the Securities Act, is herein called the
"Prospectus." This opinion is furnished pursuant to Section 7(a) of the Sales
Agency Agreement dated April ___, 1999 (the "Agreement") between the Company,
the Bank and you. Reference to the Agreement is made for the meaning of
capitalized terms used herein without definition. References herein to the
Pennsylvania Corporations and Unincorporated Associations Act (PCUAA") shall
include judicial and regulatory interpretations thereof as well as all
applicable amendments thereto.
We have examined originals, or copies identified to our satisfaction, of
such corporate records of the Bank and the Company and have made such
examinations of law as we have deemed relevant. In our examination, we have
assumed, but have not verified (i) the genuineness of all signatures, (ii) the
authenticity of all
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 2
documents submitted to us as originals, (iii) the conformity with the originals
of all documents supplied to us as copies, (iv) the accuracy and completeness of
all corporate records and documents and of all certificates and statements of
fact, in each case given or made available to us by the Company or the Bank, and
(v) that the Agreement has been duly and validly executed and delivered by, and
constitutes the legal, valid, binding and enforceable agreement of, each party
thereto other than the Company and the Bank. We also have assumed that the
certificates for shares of Common Stock will be prepared by the Transfer Agent
in accordance with instructions of the Company and the Bank, and the
certificates will conform to the specimen thereof examined by us and will have
been duly signed and countersigned, all of which we are not independently
verifying by inspection. We express no opinion as to matters of law other than
the federal laws of the United States and Pennsylvania law. As to factual
matters set forth therein, we have relied solely upon certificates from officers
of the Bank and the Company and in certain circumstances certificates and other
written documents from public officials and government agencies and departments,
and we have assumed the accuracy and authenticity of such certificates and
documents.
In addition, we have assumed as to all parties other than the Bank and the
Company, and to the extent relevant to the opinions hereinafter expressed, that
each such other party has duly authorized, executed and delivered each document
to which it is a party, that each such document constitutes the legal, valid and
binding obligation of each such other party thereto, enforceable against such
other party in accordance with its terms, and that each such other party to each
such document has given and delivered the consideration contemplated by such
document in favor of the Company or the Bank.
Whenever in our opinion we indicate that the existence or absence of facts
is based on our knowledge, we are referring to the actual knowledge of Muldoon,
Murphy & Faucette, LLP attorneys who have given substantive attention to matters
concerning the Bank or the Company during the course of our representation of
them in connection with the transactions contemplated by the Agreement, which
knowledge has been obtained by such attorneys in their capacity as such. Except
as expressly set forth herein, we have not undertaken any independent
investigation to determine the existence or absence of such facts, and no other
inference as to our knowledge concerning such facts shall be drawn.
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 3
On the basis of the foregoing and having regard for such legal
considerations as we deem relevant, it is our opinion that:
(i) The Company has been duly incorporated and is validly existing as a
corporation under the laws of the State of Pennsylvania and has full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus; the Company is qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which its
ownership or leasing of properties or the conduct of its business requires
such qualification except where the failure to so qualify would not have a
material adverse effect on the business, operations or financial condition
of the Company and the Bank taken as a whole.
(ii) The Bank is a duly organized, validly existing federally-chartered
savings bank in stock form of organization, duly authorized to conduct its
business and own its property as described in the Registration Statement
and the Prospectus; and the Bank is in good standing with the OTS and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which its ownership of property or leasing
of properties or the conduct of its business requires such qualification
unless the failure to be so qualified in one or more such jurisdictions
would not have a material adverse effect on the condition, financial or
otherwise, or the business, operation, income, or prospects of the Bank.
(iii) The Bank is a member in good standing of the Federal Home Loan Bank
System. The deposit accounts of the Bank are insured by the SAIF up to the
maximum amount allowed under law; and, to the best of our knowledge after
due inquiry, no proceedings for the termination or revocation of such
insurance are pending or threatened. A liquidation account has been duly
established in accordance with the requirements of the Plan and the
Savings Institutions Regulations, and the description of the liquidation
account as set forth in the Registration Statement and the Prospectus
under the caption "The Conversion" has been reviewed by us and is accurate
in all material respects.
(iv) The authorized, issued and outstanding capital stock of the Company
is within the range set forth in the Registration Statement and the
Prospectus under the caption "Capitalization," and one share of Common
Stock has been issued prior to the Closing Date; the Shares issued in
connection with the Offerings have been
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 4
duly authorized and validly issued and are fully paid and nonassessable;
that good title to the Shares has been transferred from the Company to the
purchasers thereof against payment therefor subject to any action by such
purchasers with respect thereto; that such Shares are the only shares of
capital stock of the Company outstanding; and that the issuance of the
Shares is not subject to preemptive rights.
(v) All of the issued and outstanding capital stock of the Bank has been
duly authorized and validly issued and is fully paid, nonassessable and
owned beneficially and of record by the Company, free and clear of any
lien, encumbrance, claim or other restriction.
(vi) The Agreement and the consummation of the transactions contemplated
thereunder have been duly and validly authorized, executed and delivered by
the Company and the Bank and the Agreement is the legal, valid and binding
agreement of the Company and the Bank, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and subject, as
to the enforcement of remedies, to general equity principles, and except as
the rights of indemnification and contribution may be limited under
applicable law.
(vii) The Plan has been duly adopted by the required vote of the Directors
of the Company and the Directors and members of the Bank, and no action has
been taken, is pending or, to the best of our knowledge, is threatened to
revoke such approvals.
(viii) The Application for Conversion, Form AC, as filed with the OTS was
in the form required by the regulations of the OTS and was complete in all
material respects; the Application for Conversion has been approved by the
OTS and the Prospectus and the Proxy Statement have been authorized for use
by the OTS. The OTS has authorized the conversion of the Bank from mutual
to stock form. No action has been taken, is pending or, to the best of our
knowledge, threatened to revoke such approval and authorizations.
(ix) The OTS has approved registration of the Company as a savings and
loan holding company and the Company's acquisition of the Bank pursuant to
the Plan and as described in the Application for Conversion; no action has
been taken, is pending, or, to the best of our knowledge following due
inquiry, threatened to revoke
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 5
such approval. The Bank's Employee Stock Ownership Plan is not required to
register as a holding company as a result of its acquisition of shares of
common stock of the Company in the Conversion.
(x) No further approval, registration, authorization, consent or other
order of any regulatory agency, public board or body is required in
connection with the execution and delivery of the Agreement, the issuance
of the Shares or the consummation of the Conversion. To the best of our
knowledge, the Conversion has been consummated in all material respects in
accordance with all applicable provisions and requirements of the PCUAA and
the OTS, as well as those of all other applicable federal and state laws
and all rules and regulations promulgated thereunder.
(xi) The Registration Statement is effective under the 1933 Act, and no
stop order suspending the effectiveness of the Registration Statement has
been issued under the 1933 Act or proceedings therefor initiated or, to the
best of our knowledge, threatened by the Commission or any state authority.
(xii) At such time as the Registration Statement became effective, (i) the
Registration Statement (and any amendment or supplement thereto) (other
than the financial statements and other financial and statistical date
included therein, as to which no opinion is expressed), complied as to form
in all material respects with the requirements of the 1933 Act and the 1933
Act Regulations and (ii) the Prospectus (other than the financial
statements and other financial and statistical data included therein, as to
which no opinion is expressed) complied as to form in all material respects
with the requirements of the 1933 Act, the 1933 Act Regulations, the OTS,
and federal law. At the time the Application for Conversion, including the
Prospectus contained therein, was approved by the OTS, the Application for
Conversion, including the Prospectus contained therein (and any amendment
or supplement thereto), complied as to form in all material respects with
the requirements of the OTS, federal law and all applicable rules and
regulations promulgated thereunder (other than the financial statements and
other financial and statistical data included therein, as to which no
opinion is expressed).
(xiii) The information in the Registration Statement and the Prospectus,
under the captions "Supervision and Regulation," "The Conversion,"
"Taxation," "Anti-takeover Provisions Affecting First Community and
Community Savings" and "Description of Capital
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 6
Stock", to the extent that such information constitutes matters of law,
summaries of legal matters, or proceedings, or legal conclusions has been
reviewed by us and is correct in all material respects. The descriptions of
the Conversion process in the Registration Statement and the Prospectus
have been reviewed by us and are correct in all material respects. Further,
the information under the caption "The Conversion - Effects of Conversion
to Stock Form on Depositors and Borrowers of Indian Village - Tax Effects"
has been reviewed by us and constitutes a correct summary, in all material
respects, of the opinion rendered by us to the Bank and the Company with
respect to the federal and state tax consequences of the Conversion.
(xiv) The terms and provisions of the Shares conform to the description
thereof contained in the Registration Statement and the Prospectus, and the
form of certificate used to evidence the Shares is in due and proper form.
(xv) There are no legal or governmental proceedings pending or, to the
best of our knowledge, threatened which are required to be disclosed in the
Registration Statement or the Prospectus, other than those disclosed
therein, and all pending legal and governmental proceedings to which the
Company or the Bank is a party or to which any of their property is subject
which are not described in the Registration Statement or the Prospectus,
including ordinary routine litigation incidental to their respective
businesses, are, considered in the aggregate, not material to the business,
operations or financial condition of the Company and the Bank taken as a
whole.
(xvi) To the best of our knowledge, there are no contracts, indentures,
mortgages, loan agreements, notes, leases or other instruments required to
be described or referred to in the Registration Statement and the
Prospectus or required to be filed as exhibits thereto other than those
described or referred to therein or filed as exhibits thereto. The
description in the Application for Conversion, the Registration Statement
and the Prospectus of such documents and exhibits is accurate, in all
material respects, and fairly presents the information required to be
shown.
(xvii) The Bank and the Company have conducted the Conversion in
accordance with the Plan. The Plan complies with the laws and regulations
of the OTS in all material respects. The Plan and the Application for
Conversion comply as to form in all material
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 7
respects with all applicable laws, rules, regulations, decisions and orders
including, but not limited to, all federal statutes, the laws of Ohio and
Pennsylvania, and all other applicable laws, regulations, decisions and
orders, including all material and applicable terms, conditions,
requirements and provisions precedent to the Conversion imposed upon them
by the OTS and the Federal Deposit Insurance Corporation ("FDIC"); no order
has been issued by the OTS, the Commission, the FDIC, or any state
authority to suspend the Subscription and Community Offering or the use of
the Prospectus, and no action for such purposes has been instituted or, to
the best of our knowledge, threatened by the OTS, the Commission, the FDIC,
or any state authority and, to the best of our knowledge, no person has
sought to obtain regulatory or judicial review of the final action of the
Administrator approving the Plan, the Application for Conversion or the
Prospectus.
(xviii) To the best of our knowledge, the Company and the Bank have
obtained all material licenses, permits and other governmental
authorizations currently required for the conduct of their respective
businesses, and all such material licenses, permits and other governmental
authorizations are in full force and effect, and the Company and the Bank
are in all material respects complying therewith.
(xix) Neither the Company nor the Bank is in violation of its respective
articles of incorporation or charter (and the Bank will not be in violation
of its charter in stock form upon consummation of the Conversion). To the
best of our knowledge, neither the Company nor the Bank is in violation of
any material obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which it is a party or by which it or its property may
be bound; to the best of our knowledge, the execution, delivery and
performance of this Agreement will not (i) conflict with, result in a
breach of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under any contract, lease or
other instrument to which the Company or the Bank is a party or in which
the Company or the Bank has a beneficial interest, or any applicable law,
rule, regulation or order, which would in any such case have a material
adverse effect on the business, operations or financial condition of the
Company and the Bank taken as a whole; (ii) violate any authorization,
approval, judgment, decree, order, statute, rule or regulation applicable
to the Company or the Bank, which would in any such case have a material
adverse effect on the business, operations or
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 8
financial condition of the Company and the Bank taken as a whole; or (iii)
with the exception of the liquidation account established in the
Conversion, result in the creation of any material lien, charge or
encumbrance upon any property of the Company or the Bank. The execution,
delivery and performance of this Agreement will not result in any violation
of the provisions of the respective articles of incorporation or bylaws of
the Company or the Bank or any applicable law, regulation or order. All
provisions of the Bank's charter in mutual form and in stock form comply in
all respects with federal law including, without limitation, and the
requirements of the OTS and FDIC and their respective regulations, and all
provisions of the Company's articles of incorporation and bylaws comply in
all respects with the laws of the State of Pennsylvania.
(xx) To the best of our knowledge following due inquiry of the officers
and directors of the Company and the Bank, the Company and the Bank have
good and marketable title to all properties and assets which are material
to the business of the Company and the Bank and to those properties and
assets described in the Registration Statement as owned by them, free and
clear of all liens, charges, encumbrances or restrictions, except such as
are described in the Registration Statement or are not material in relation
to the business of the Company and the Bank considered as one enterprise,
and all of the leases and subleases material to the business of the Company
and the Bank under which the Company and the Bank hold properties as
described in the Registration Statement, are in full force and effect;
except as set forth in the Registration Statement and the Prospectus, to
the best of our knowledge following due inquiry of the officers and
directors of the Company and the Bank, neither the Company nor the Bank is
an owner or operator or otherwise responsible party for purposes of (S)107
of the Comprehensive Environmental Response Compensation and Liability Act,
42 U.S.C. (S)9607, or otherwise have responsibility for the clean-up or
remediation of any hazardous substances (including petroleum) under any
state or federal law.
(xxi) To the best of our knowledge, the Company and the Bank are not in
violation of any directive from the OTS or FDIC to make any material change
in the method of conducting their businesses; to the best of our knowledge,
the Bank has conducted and is conducting its business so as to comply in
all material respects with all applicable statutes and regulations
(including, without limitation, regulations, decisions, directives and
orders of the
<PAGE>
Trident Securities, Inc.
___ __, 1999
Page 9
OTS and the FDIC), except as otherwise disclosed in the Registration
Statement and the Prospectus.
We assume no obligation to advise you of any events that occur
subsequent to the date of this opinion. This opinion is being furnished to
you solely for your benefit and may not be relied upon by any other person
or for any other purpose, and it should not be quoted in whole or in part
or otherwise referred to and it should not be filed with or furnished to
any governmental agency or other person or entity without the prior written
consent of this firm.
Sincerely,
Muldoon, Murphy & Faucette, LLP
<PAGE>
Exhibit C
Form of Opinion
___ __, 1999
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, N.C. 27609
Re: Indian Village Bancorp, Inc.
Ladies and Gentlemen:
We have acted as special counsel for Indian Village Bancorp, Inc. (the
"Company") and Indian Village Community Bank, a federally-chartered, federally-
insured, mutual savings bank (the "Bank"), in connection with the preparation
and filing with the Securities and Exchange Commission (the "SEC" or the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), of the Company's Registration Statement on Form SB-2 (No. ____________),
as amended, relating to the offering of the Company's common stock (the "Common
Stock") in Subscription, Community and Syndicated Community Offerings
(hereinafter the "Offerings") in connection with the conversion of the Bank from
a federally-chartered mutual savings bank to a federally-chartered stock savings
bank (the "Conversion") and the issuance of the Bank's capital stock to the
Company pursuant to the Bank's plan of conversion, as amended and approved by
the Office of Thrift Supervision (the "OTS") on ______________, 1999 (the "Plan
of Conversion" or the "Plan"). Such registration statement, as amended when it
last became effective, is herein called the "Registration Statement," and the
related prospectus, as filed with the SEC pursuant to Rule 424(b) of the
Securities Act, is herein called the "Prospectus." This letter is furnished
pursuant to Section 7(b) of the Sales Agency Agreement dated April ____, 1999
(the "Agreement") between the Company, the Bank and you. Reference to the
Agreement is made for the meaning of capitalized terms used herein without
definition.
During the course of the preparation of the Application for Conversion,
Form AC, and the Registration Statement, we participated in conferences with
representatives of the Company and the Bank and its independent certified public
accountants and with your representatives, at which conferences the contents of
the Application for Conversion and the Registration Statement were discussed.
Based on our participation in the above-referenced conferences, nothing has come
to our attention that would lead us to believe that the Application for
Conversion and the Registration Statement, as amended (except as to financial
statements, notes to
<PAGE>
financial statements, financial tables and other financial and statistical data
contained therein with respect to which we express no opinion), at the time each
became effective and on the Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading or that the Prospectus, as amended (except
as to financial statements, notes to financial statements, financial tables and
other financial and statistical data contained therein with respect to which we
express no opinion), at the time the Prospectus became effective or at the time
any amendment to the Prospectus was filed with the Commission or OTS or
transmitted to the Commission, OTS, or any other regulatory authority whose
approval was or is required, for filing or on the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. In making the
representations set forth in this paragraph, we do not represent that we have
independently determined or otherwise verified the accuracy and completeness of
information with respect to the Bank and the Company and the statements
contained in the Application for Conversion, the Registration Statement and the
Prospectus, or any amendments thereto.
We assume no obligation to advise you of any events that occur subsequent
to the date of this opinion. This opinion is being furnished to you solely for
your benefit and may not be relied upon by any other person or for any other
purpose, and it should not be quoted in whole or in part or otherwise referred
to and it should not be filed with or furnished to any governmental agency or
other person or entity without the prior written consent of this firm.
Sincerely,
Muldoon, Murphy & Faucette LLP
<PAGE>
[Muldoon, Murphy & Faucette LLP Letterhead]
May 4, 1999
Board of Directors
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio 44629
Re: The offering of up to 674,475 shares of
Indian Village Bancorp, Inc. Common Stock
-----------------------------------------
Ladies and Gentlemen:
You have requested our opinion concerning certain matters of Pennsylvania
law in connection with the conversion of Indian Village Community Bank (the
"Bank"), a federally-chartered savings bank, from the mutual form of ownership
to a federally-chartered capital stock savings bank (the "Conversion"), and the
related subscription offering, community offering and syndicated community
offering (the "Offerings") by Indian Village Bancorp, Inc., a Pennsylvania
corporation (the "Company"), of up to 586,500 shares of its common stock, par
value $.01 per share ("Common Stock") (674,475 shares if the Estimated Valuation
Range is increased up to 15% to reflect changes in market and financial
conditions following commencement of the Offerings).
In connection with your request for our opinion, you have provided to us
and we have reviewed the Company's articles of incorporation filed with the
Secretary of State of the Commonwealth of Pennsylvania on March 3, 1999 (the
"Articles of Incorporation"); the Company's Bylaws; the Company's Registration
Statement on Form SB-2, as filed with the Securities and Exchange Commission
initially on March 18, 1999, and as amended (the "Registration Statement"); the
ESOP trust agreement and the ESOP loan agreement; resolutions of the Board of
Directors of the Company (the "Board") concerning the organization of the
Company, the Offerings and designation of a Pricing Committee of the Board, and
the form of stock certificate approved by the Board to represent shares of
Common Stock. We have also been furnished a certificate of the Secretary of
State of the Commonwealth of Pennsylvania, certifying the Company's good
standing as a Pennsylvania corporation. Capitalized terms used but not defined
herein shall have the meaning given them in the Articles of Incorporation.
We understand that the Company will loan to the trust for the Bank's
Employee Stock Ownership Plan (the "ESOP") the funds the ESOP Trust will use to
purchase shares of Common
<PAGE>
Board of Directors
Indian Village Bancorp, Inc.
May 4,1999
Page 2
Stock for which the ESOP Trust subscribes pursuant to the Offerings and for
purposes of rendering the opinion set forth below, we assume that: (a) the Board
of Directors of the Company has duly authorized the loan to the ESOP Trust (the
"Loan"); (b) the ESOP serves a valid corporate purpose for the Company; (c) the
Loan will be made at an interest rate and on other terms that are fair to the
Company; (d) the terms of the Loan will be set forth in customary and
appropriate documents including, without limitation, a promissory note
representing the indebtedness of the ESOP Trust to the Company as a result of
the Loan; and (e) the closing for the Loan and for the sale of Common Stock to
the ESOP Trust will be held after the closing for the sale of the other shares
of Common Stock sold in the Offerings and the receipt by the Company of the
proceeds thereof.
Based upon and subject to the foregoing, and limited in all respects to
matters of Missouri law, it is our opinion that:
Upon the due adoption by the Pricing Committee of a resolution fixing the
number of shares of Common Stock to be sold in the Offerings, the Common Stock
to be issued in the Offerings (including the shares to be issued to the ESOP
Trust) will be duly authorized and, when such shares are sold and paid for in
accordance with the terms set forth in the Prospectus and such resolution of the
Pricing Committee and certificates representing such shares substantially in the
form provided to us and included as Exhibit 4.0 to the Registration Statement,
are duly and properly issued, will be validly issued, fully paid and
nonassessable.
The following provisions of the Articles of Incorporation may not be given
effect by a court applying Pennsylvania law, but in our opinion the failure to
give effect to such provisions will not affect the duly authorized, validly
issued, fully paid and nonassessable status of the Common Stock:
Subsections D.3 and D.6 of ARTICLE 5, which grant the Board the
authority to construe and apply the provisions of that Article,
subsection D.4 of Article 5, to the extent that subsection obligates
any person to provide to the Board the information such subsection
authorizes the Board to demand and subsection D.1 of Article 5, to the
extent that subsection limits the amount of shares of Common Stock a
shareholder may vote, in each case to the extent, if any, that a court
applying Pennsylvania law were to impose equitable limitations upon
such authority.
<PAGE>
Board of Directors
Indian Village Bancorp, Inc.
May 4,1999
Page 3
We consent to the filing of this opinion as an exhibit to the Registration
Statement on Form SB-2 and the Form AC and to the use of the name of our firm
where it appears in the Registration Statement, Form AC and Prospectus.
Very truly yours,
/s/ Muldoon, Murphy & Faucette LLP
MULDOON, MURPHY & FAUCETTE LLP
<PAGE>
EXHIBIT 8.1
[Muldoon, Murphy & Faucette LLP Letterhead]
April 30, 1999
Board of Directors
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio 44629
Board of Directors
Indian Village Community Bank
100 South Walnut Street
Gnadenhutten, Ohio 44629
Re: Federal Tax Consequences of the Conversion of Indian Village Community
Bank from a Federally-chartered Mutual Savings Bank to a Federally-
chartered Stock Savings Bank and the Offer and Sale of Common Stock of
Indian Village Bancorp, Inc. (the "Conversion")
To the Members of the Board of Directors:
You have requested an opinion regarding all the material federal income tax
consequences of the proposed conversion of Indian Village Community Bank (the
"Bank") from a federally-chartered mutual savings bank to a federally-chartered
stock savings bank (the "Converted Bank") and the acquisition of the Converted
Bank's capital stock by Indian Village Bancorp, Inc., a Pennsylvania corporation
(the "Holding Company"), pursuant to the plan of conversion adopted by the Board
of Directors on January 20, 1999 (the "Plan of Conversion").
The proposed transaction is described in the Prospectus and the Plan of
Conversion, and the tax consequences of the proposed transaction will be as set
forth in the section of this letter entitled "FEDERAL TAX OPINION."
<PAGE>
MULDOON, MURPHY & FAUCETTE LLP
Board of Directors
April 30, 1999
Page 2
We have made such inquiries and have examined such documents and records as
we have deemed appropriate for the purpose of this opinion. In rendering this
opinion, we have received factual representations of the Holding Company and the
Bank concerning the Holding Company and the Bank as well as the transaction
("Representations"). These Representations are required to be furnished prior
to the execution of this letter and again prior to the closing of the
Conversion. We will rely upon the accuracy of the Representations of the
Holding Company and the Bank and the statements of facts contained in the
examined documents, particularly the Plan of Conversion. We have also assumed
the authenticity of all signatures, the legal capacity of all natural persons
and the conformity to the originals of all documents submitted to us as copies.
Each capitalized term used herein, unless otherwise defined, has the meaning set
forth in the Plan of Conversion. We have assumed that the Conversion will be
consummated strictly in accordance with the terms of the Plan of Conversion.
The Plan of Conversion and the Prospectus contain a detailed description of
the Conversion. These documents as well as the Representations to be provided
by the Holding Company and the Bank are incorporated in this letter as part of
the statement of the facts.
The Bank, with its headquarters in Gnadenhutten, Ohio, is a federally-
chartered mutual savings bank. As a mutual savings bank, the Bank has never
been authorized to issue stock. Instead, the proprietary interest in the
reserves and undivided profits of the Bank belong to the deposit account holders
of the Bank, hereinafter sometimes referred to as "shareholders." A shareholder
of the Bank has a right to share, pro rata, with respect to the withdrawal value
of his respective deposit account in any liquidation proceeds distributed in the
event the Bank is ever liquidated. In addition, a shareholder of the Bank is
entitled to interest on his account balance as fixed and paid by the Bank.
In order to provide organizational and economic strength to the Bank, the
Board of Directors has adopted the Plan of Conversion whereby the Bank will
convert itself into a federally-chartered stock savings bank, the stock of which
will be held entirely by the Holding Company. The Holding Company will acquire
the stock of the Converted Bank by purchase, in exchange for the Conversion
proceeds that are not permitted to be retained by the Holding Company. The
Holding Company will apply to the Office of Thrift Supervision ("OTS") to retain
up to 50% of the proceeds received from the Conversion. The aggregate sales
price of the Common Stock issued in the Conversion will be based on an
independent appraiser's valuation of the estimated pro forma market value of the
Holding Company and the Converted Bank. The Conversion and sale of the Common
Stock will be subject to applicable regulatory approval and the approval by the
affirmative vote of a majority of the Members.
<PAGE>
MULDOON, MURPHY & FAUCETTE LLP
Board of Directors
April 30, 1999
Page 3
The Bank shall establish at the time of Conversion a liquidation account in
an amount equal to its net worth as of the latest practicable date prior to
Conversion. The liquidation account will be maintained by the Converted Bank
for the benefit of the Eligible Account Holders and Supplemental Eligible
Account Holders who continue to maintain their deposit accounts at the Converted
Bank. Each Eligible Account Holder and Supplemental Eligible Account Holder
shall, with respect to his Savings Account, hold a related inchoate interest in
a portion of the liquidation account balance, in relation to his deposit account
balance on the Eligibility Record Date and/or Supplemental Eligibility Record
Date or to such balance as it may be subsequently reduced, as provided in the
Plan of Conversion.
In the unlikely event of a complete liquidation of the Converted Bank (and
only in such event), following all liquidation payments to creditors (including
those to Account Holders to the extent of their deposit accounts), each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the liquidation account, in the amount
of the then adjusted subaccount balance for his deposit accounts then held,
before any liquidation distribution may be made to any holders of the Converted
Bank's capital stock. No merger, consolidation, purchase of bulk assets with
assumption of Savings Accounts and other liabilities, or similar transaction
with a Federal Deposit Insurance Corporation ("FDIC") institution, in which the
Converted Bank is not the surviving institution, shall be deemed to be a
complete liquidation for this purpose. In such transactions, the liquidation
account shall be assumed by the surviving institution.
LIMITATIONS ON OPINION
----------------------
Our opinions expressed herein are based solely upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), including applicable
regulations thereunder and current judicial and administrative authority. Any
future amendments to the Code or applicable regulations, or new judicial
decisions or administrative interpretations, any of which could be retroactive
in effect, could cause us to modify our opinion. No opinion is expressed herein
with regard to the federal, state, or city tax consequences of the Conversion
under any section of the Code except if and to the extent specifically
addressed.
FEDERAL TAX OPINION
-------------------
Based upon the Representations and the other factual information referred
to in this letter, and assuming the transaction occurs in accordance with the
Plan of Conversion, and taking into consideration the limitations noted
throughout this opinion, it is our opinion that under current federal income tax
law:
<PAGE>
MULDOON, MURPHY & FAUCETTE LLP
Board of Directors
April 30, 1999
Page 4
(1) Pursuant to the Conversion, the changes at the corporate level other
than changes in the form of organization will be insubstantial. Based
upon that fact and the fact that the equity interest of a shareholder
in a mutual entity is more nominal than real, unlike that of a
shareholder of a corporation, the Conversion of the Bank from a mutual
entity to a stock savings bank is a tax-free reorganization since it
is a mere change in identity, form or place of organization within the
meaning of section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105,
1980-1 C.B. 78). Neither the Bank nor the Converted Bank shall
recognize gain or loss as a result of the Conversion. The Bank and the
Converted Bank shall each be "a party to a reorganization" within the
meaning of section 368(b) of the Code.
(2) No gain or loss shall be recognized by the Converted Bank or the
Holding Company on the receipt by the Converted Bank of money from the
Holding Company in exchange for shares of the Converted Bank's capital
stock or by the Holding Company upon the receipt of money from the
sale of its Common Stock (Section 1032(a) of the Code).
(3) The basis of the assets of the Bank in the hands of the Converted Bank
shall be the same as the basis of such assets in the hands of the Bank
immediately prior to the Conversion (Section 362(b) of the Code).
(4) The holding period of the assets of the Bank in the hands of the
Converted Bank shall include the period during which the Bank held the
assets (Section 1223(2) of the Code).
(5) No gain or loss shall be recognized by the Eligible Account Holders
and the Supplemental Eligible Account Holders of the Bank on the
issuance to them of withdrawable deposit accounts in the Converted
Bank plus interests in the liquidation account of the Converted Bank
in exchange for their deposit accounts in the Bank or to the other
depositors on the issuance to them of withdrawable deposit accounts
(Section 354(a) of the Code).
(6) Provided that the amount to be paid for such stock pursuant to the
subscription rights is equal to the fair market value of the stock, no
gain or loss will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders upon the distribution to them of
the nontransferable subscription rights to purchase shares of stock in
the Holding Company (Section 356(a)). Gain realized, if any, by the
Eligible Account Holders and Supplemental Eligible Account Holders on
the distribution to them of nontransferable subscription rights to
<PAGE>
MULDOON, MURPHY & FAUCETTE LLP
Board of Directors
April 30, 1999
Page 5
purchase shares of Common Stock will be recognized but only in an
amount not in excess of the fair market value of such subscription
rights (Section 356(a)). Eligible Account Holders and Supplemental
Eligible Account Holders will not realize any taxable income as a
result of the exercise by them of the nontransferable subscription
rights (Rev. Rul. 56-572, 1956-2 C.B. 182).
(7) The basis of the deposit accounts in the Converted Bank to be received
by the Eligible Account Holders, Supplemental Eligible Account Holders
and other shareholders of the Bank will be the same as the basis of
their deposit accounts in the Bank surrendered in exchange therefor
(Section 358(a)(1) of the Code). The basis of the interests in the
liquidation account of the Converted Bank to be received by the
Eligible Account Holders and Supplemental Eligible Account Holders of
the Bank shall be zero (Rev. Rul. 71-233, 1971-1 C.B. 113). The basis
of the Holding Company Common Stock to its stockholders will be the
purchase price thereof plus the basis, if any, of nontransferable
subscription rights (Section 1012 of the Code). Accordingly, assuming
the nontransferable subscription rights have no value, the basis of
the Common Stock to the Eligible Account Holders and Supplemental
Eligible Account Holders will be the amount paid therefor. The holding
period of the Common Stock purchased pursuant to the exercise of
subscription rights shall commence on the date on which the right to
acquire such stock was exercised (Section 1223(6) of the Code).
Our opinion under paragraph (6) above is predicated on the Representation
that no person shall receive any payment, whether in money or property, in lieu
of the issuance of subscription rights. Our opinion under paragraphs (6) and
(7) above assumes that the subscription rights to purchase shares of Common
Stock received by Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members have a fair market value of zero. We understand that
you have received a letter from Keller & Company that the subscription rights do
not have any value. We express no view regarding the valuation of the
subscription rights.
If the subscription rights are subsequently found to have a fair market
value, income may be recognized by various recipients of the subscription rights
(in certain cases, whether or not the rights are exercised) and Holding Company
and/or the Converted Bank may be taxable on the distribution of the subscription
rights.
* * *
Since this letter is rendered in advance of the closing of this
transaction, we have assumed that the transaction will be consummated in
accordance with the Plan of Conversion as well as all
<PAGE>
MULDOON, MURPHY & FAUCETTE LLP
Board of Directors
April 30, 1999
Page 6
the information and Representations referred to herein. Any change in the
transaction could cause us to modify our opinion.
We consent to the inclusion of this opinion as an exhibit to the Form AC
Application for Conversion of the Bank and the references to and summary of this
opinion in such Application for Conversion. We also consent to the inclusion of
this opinion as an exhibit to the Form SB-2 Registration Statement and the Form
H-(e)1-S Application of Indian Village Bancorp, Inc. and the references to and
summary of this opinion in both the Form SB-2 and the Form H-(e)1-S.
Sincerely,
/s/ Muldoon, Murphy & Faucette LLP
MULDOON, MURPHY & FAUCETTE LLP
<PAGE>
CERTIFICATE OF REPRESENTATIONS
------------------------------
I, Marty R. Lindon, President, Chief Executive Officer, and Director,
Indian Village Community Bank, a federally chartered mutual savings bank (the
"Bank"), for the purpose of obtaining an opinion of counsel to be rendered by
Muldoon, Murphy & Faucette LLP in connection with the Conversion of the Bank
from a federally chartered mutual savings bank to a federally chartered stock
savings bank (the "Converted Bank"), and the offer and sale of 100% of the
issued and outstanding stock of the Converted Bank to Indian Village Bancorp,
Inc., a Pennsylvania corporation (the "Holding Company"), pursuant to the Plan
of Conversion, as adopted by the Board of Directors on January 20, 1999 (the
"Plan of Conversion"), do hereby certify that all the information set forth in
the following representations is true to the best of my knowledge and belief:
(a) The fair market value of the withdrawable deposit accounts plus
interests in the liquidation account of the Converted Bank to be
received under Paragraphs XII and XIII of the Plan of Conversion will,
in each instance, be equal to the fair market value of the
withdrawable deposit accounts (plus the related interest in the
residual equity of the Converted Bank) deemed to be surrendered in
exchange therefor.
(b) If an individual's total deposits in the Bank equal or exceed $50 as
of the Eligibility Record Date or the Supplemental Eligibility Record
Date, then no amount of that individual's total deposits will be
excluded from participating in the liquidation account. The fair
market value of the deposit accounts of the Bank which have a balance
of less than $50 on the Eligibility Record Date or the Supplemental
Eligibility Record Date will be less than 1% of the total fair market
value of all deposit accounts of the Bank.
(c) Immediately following the Conversion, the Eligible Account Holders and
the Supplemental Eligible Account Holders of the Converted Bank will
own all of the outstanding interests in the liquidation account and
will own such interest solely by reason of their ownership of deposits
in the Bank immediately before the Conversion.
(d) After the Conversion, the Converted Bank will continue the business of
the Bank in the same manner as prior to the Conversion. The Converted
Bank has no plan or intention and the Holding Company has no plan or
intention to cause the Converted Bank to sell its assets other than in
the ordinary course of business.
(e) The Holding Company has no plan or intention to sell, liquidate or
otherwise dispose of the stock of the Converted Bank other than in the
ordinary course of business.
<PAGE>
(f) The Converted Bank has no plan or intention to redeem or otherwise
acquire any of the Common Stock of the Converted Bank issued in the
Conversion transaction.
(g) Immediately after the Conversion, the assets and liabilities of the
Converted Bank will be identical to the assets and liabilities of the
Bank immediately prior to the Conversion, plus the net proceeds from
the sale of the Converted Bank's common stock to the Holding Company
and any liability associated with indebtedness incurred by the
Employee Stock Ownership Plan ("ESOP") in the acquisition of Common
Stock by the ESOP.
(h) The Bank is federally-chartered as a mutual savings bank. The
Converted Bank will receive a federal stock charter as a stock savings
bank. The Holding Company is incorporated under the laws of the
Commonwealth of Pennsylvania.
(i) None of the shares of the Common Stock to be purchased by the
depositor-employees of the Bank in the Conversion will be issued or
acquired at a discount. However, shares may be given to certain
Directors and employees as compensation by means of the Tax-Qualified
(or non-tax-qualified) Employee Stock Benefit Plans. Compensation to
be paid to such Directors and depositor-employees will be commensurate
with amounts paid to third parties bargaining at arm's length for
similar services.
(j) The fair market value of the assets of the Bank, which will be
transferred to the Converted Bank in the Conversion, will equal or
exceed the sum of the liabilities of the Bank which will be assumed by
the Converted Bank and any liabilities to which the transferred assets
are subject.
(k) The Bank is solvent and is not under the jurisdiction of a bankruptcy
or similar court, a receivership, foreclosure, or similar proceeding
in a Federal or State court.
(l) Upon the completion of the Conversion, the Holding Company will own
and hold 100% of the issued and outstanding capital stock of the
Converted Bank and no other shares of capital stock of the Converted
Bank will be issued and/or outstanding. At the time of the
Conversion, the Bank does not have any plan or intention to issue
additional shares of its stock following the transaction. Further, no
shares of preferred stock of the Converted Bank will be issued and/or
outstanding.
(m) Upon the completion of the Conversion, there will be no rights,
warrants, contracts, agreements, commitments or understandings with
respect to the capital stock of the Converted Bank, nor will there be
any securities outstanding which are convertible into the capital
stock of the Converted Bank.
2
<PAGE>
(n) No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders, or others in lieu of: -- (a)
nontransferable subscription rights, or (b) an interest in the
liquidation account of the Converted Bank.
(o) The Bank has utilized the reserve method of accounting for bad debts
in filing its federal income tax return for the past 3 tax years. For
the 1996 and 1997 tax years, the Bank calculated its addition to the
tax reserve for bad debts under the experience method. For the 1995
tax year, the Bank calculated its addition to the bad debt reserve
under both the percentage of taxable income method and the experience
method. The Bank was not entitled to deduct an addition to the bad
debt reserve under either method for the 1995 tax year. Following the
Conversion, the Converted Bank will maintain a tax reserve for bad
debts to the extent allowable under the Internal Revenue Code.
(p) In preparing its federal income tax return for the 1995 taxable year,
the Bank analyzed its assets by reference to whether at least 60% of
its total assets consisted of the items listed below; the Bank
satisfied this test for the 1995 taxable year. For the 1996 and 1997
tax years, this test was not performed since the Bank utilized the
experience method. For the 1995 tax year, at least 60% of the amount
of the total assets at the close of the year consisted of the
following items: (i) cash, (ii) obligations of the US, of a State or
political subdivision of a State, obligations of a corporation which
is an instrumentality of the US or of a State (but excluding tax-
exempt obligations), (iii) certificates of deposit in, or obligations
of a corporation organized under a State law which specifically
authorizes such corporation to insure the deposits or share accounts,
(iv) loans secured by a deposit or share of a member, (v) loans
secured by an interest in real property which is residential real
property or used primarily for church purposes, loans made for the
improvement of residential or church property, (vi) loans secured by
an interest in educational, health, or welfare institutions or
facilities, including structures designed to be used for residential
purposes, (vii) property acquired through the liquidation of
defaulted loans described in (v) or (vi) above, (viii) loans made for
the repayment of expenses of college or university education or
vocational training, (ix) property used by the Bank in the conduct of
the business of acquiring the savings of the public and investing in
loans, and (x) any regular or residual interest in a REMIC, but only
in the proportion of the assets of the REMIC which consists of
property described in (i) through (ix) above.
(q) Depositors will pay the expenses of the Conversion solely applicable
to them, if any. The Holding Company and the Bank will each pay
expenses of the transaction attributable to them and will not pay any
expenses solely attributable to the depositors or to the Holding
Company shareholders.
3
<PAGE>
(r) The exercise price of the subscription rights received by the Bank's
Eligible Account Holders, Supplemental Eligible Account Holders, and
other holders of subscription rights to purchase Holding Company
Common Stock will be equal to the fair market value of the stock of
the Holding Company at the time of the completion of the Conversion as
determined by an independent appraisal.
(s) The proprietary interests of the Eligible Account Holders and the
Supplemental Eligible Account Holders in the Bank arise solely by
virtue of the fact that they are account holders in the Bank.
(t) There is no plan or intention for the Converted Bank to be liquidated
or merged with another corporation following this proposed
transaction.
(u) The liabilities of the Bank assumed by the Converted Bank plus the
liabilities, if any, to which the transferred assets are subject were
incurred by the Bank in the ordinary course of its business and are
associated with the assets transferred.
(v) The Bank currently has no net operating losses for federal tax
purposes, and has no such losses available for carryover to future tax
years. The Bank has neither generated nor carried forward a net
operating loss for federal tax purposes in the past ten tax years.
I understand that the underlying premise of a tax-free reorganization is
grounded in the continuity of both the organization itself and the shareholders'
interests in the organization. Therefore, I understand that to the extent that
any repurchase of the common stock of the Converted Bank is considered to be
part of the reorganization, such repurchase could weaken continuity of interest
and thus, jeopardize the tax-free status of the reorganization. I also
understand that such repurchase of Converted Bank stock could trigger recapture
of the bad debt loss reserve.
Additionally, I understand that any change in facts or in the execution of
this transaction could cause a modification of the opinion of Muldoon, Murphy &
Faucette LLP. Since these representations are being offered in advance of the
closing of this transaction, I will undertake to promptly notify Muldoon, Murphy
& Faucette LLP if I discover at any time following the date hereof that any of
the above representations cease to be true, correct and/or complete.
/s/ Marty R. Lindon
April 30, 1999 ________________________________________________
Marty R. Lindon
President, Chief Executive Officer, and Director
Indian Village Community Bank
4
<PAGE>
Exhibit 8.2
[CROWE CHIZEK LETTERHEAD APPEARS HERE]
April 30, 1999
Board of Directors
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, OH 44629
Board of Directors
Indian Village Community Bank
100 South Walnut Street
Gnadenhutten, OH 44629
RE: Ohio business franchise tax and Ohio personal income tax opinion relating
to the proposed Conversion of Indian Village Community Bank from a
federally-chartered mutual savings bank to a federally-chartered stock
savings bank and the offer and sale of common stock of Indian Village
Bancorp, Inc., a newly-formed Pennsylvania holding company (the
"Conversion").
Ladies and Gentlemen:
Pursuant to your request, our opinion concerning certain Ohio business franchise
tax and Ohio personal income tax consequences of the proposed Conversion of
Indian Village Community Bank, a federally-chartered mutual savings bank (the
"Bank") to a federally-chartered stock savings bank (the "Converted Bank") and
the concurrent acquisition of 100% of the newly-issued stock of such corporation
by Indian Village Bancorp, Inc., a newly-formed Pennsylvania corporation
operating exclusively within the State of Ohio (the "Holding Company"), is set
forth below.
Statement of Facts
The facts and circumstances surrounding the proposed reorganization are quite
detailed and are described at length in the Prospectus and the Plan of
Conversion adopted by the Board of Directors on January 20, 1999. A list of the
related assumptions regarding such Conversion are documented in the federal tax
opinion letter dated April 30, 1999, as provided by Muldoon, Murphy & Faucette
LLP.
Our opinion is based solely upon our understanding that, pursuant to the Plan of
Conversion, Bank will, through a series of transactions, convert from a
federally-chartered mutual savings
<PAGE>
Board of Directors
April 30, 1999
Page 2
bank to a federally-chartered stock savings bank and issue 100% of its newly-
issued stock to Holding Company.
In addition, we have assumed, based solely on the opinion of Muldoon, Murphy &
Faucette LLP, as presented in their letter dated April 30, 1999, for purposes
of this opinion, that the following federal tax consequences will result:
-------
1) The Conversion of Bank to Converted Bank will constitute a tax-free
reorganization under the Internal Revenue Code of 1986 as amended.
2) No gain or loss will be recognized for federal income tax purposes by Bank,
Converted Bank or Holding Company as a result of the Conversion.
3) Taxable income will be recognized for federal income tax purposes by the
Eligible Account Holders and Supplemental Eligible Account Holders of Bank
only to the extent of the taxable value, if any, of the stock subscription
rights received.
Opinion
Based upon our analysis of applicable Ohio tax law and administrative rulings,
we have made the following determinations:
A) The income tax liability of a corporation, other than a bank or thrift,
conducting business and owning property within Ohio, is calculated by
reference to the separate federal taxable income of that corporation, with
certain modifications (Section 5733.04(I) of the Ohio Revised Code).
B) Banks and thrifts are not subject to the Ohio income tax (Section 5733.06(D)
of the Ohio Revised Code).
C) The net worth tax liability of any corporation, including banks and
thrifts, conducting business and owning property within Ohio, is
determined by reference to the balance sheet of the corporation as of the
end of its fiscal year or, under certain circumstances, as of December 31
of the year preceding the first year such corporation is required to file
an Ohio franchise tax return (Sections 5733.056(B), 5733.05(C) and
5733.031(A) of the Ohio Revised Code and Tax Commissioner's
Rule 5703-5-03)
D) The income tax liability of an individual subject to the Ohio income tax
on personal income is calculated by reference to the federal Adjusted
Gross Income of that individual, with certain modifications (Section
5747.02 of the Ohio Revised Code).
Based upon the above facts and the opinions provided in the federal tax opinion
letter dated April 30, 1999, as provided by Muldoon, Murphy & Faucette LLP, we
are of the opinion that, if the Conversion is effected in accordance with the
Plan of Conversion, for Ohio tax purposes:
<PAGE>
Board of Directors
April 30, 1999
Page 3
1) No gain or loss will be recognized by Bank upon its Conversion from a
federally-chartered mutual savings bank to a federally-chartered stock
savings bank because such conversion will have no effect on the federal
taxable income of Bank and because Bank is exempt from the Ohio income
tax.
2) No gain or loss will be recognized by Holding Company or Converted Bank
upon the acquisition of the stock of Converted Bank by Holding Company
because such acquisition will have no effect on the federal taxable income
of either corporation.
3) No gain or loss will be recognized by Holding Company upon the receipt of
property in exchange for its newly issued shares of stock because such
receipt will have no effect on the federal taxable income of Holding
Company.
4) Ohio taxable income will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders of Bank only to the extent that
taxable income is recognized with respect to the stock subscription rights
received in the Eligible Account Holders' and Supplemental Eligible
Account Holders' federal Adjusted Gross Income.
Our opinion is based upon legal authorities currently in effect, which
authorities are subject to modification or challenge at any time and perhaps
with retroactive effect. Further, no opinion is expressed as to the tax
treatment of the transaction under the provisions of any of the other sections
of the Ohio Revised Code which may also be applicable thereto, or as to the tax
treatment of any conditions existing at the time of, or effects resulting from,
the transaction which are not specifically covered by the opinions set forth
above.
Respectfully submitted,
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation in Amendment No. 1 to this Registration
Statement of Indian Village Bancorp, Inc. on Form SB-2, of our report dated
February 18, 1999 on the financial statements of Indian Village Community Bank
as of December 31, 1998 and 1997 and for the years then ended. We also consent
to the reference to our firm under the heading "Experts" in the prospectus,
which is part of this registration statement.
/s/ Crowe, Chizek and Company LLP
---------------------------------
Crowe, Chizek and Company LLP
Columbus, Ohio
May 4, 1999
<PAGE>
EXHIBIT 99.2
INDIAN VILLAGE BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
INDIAN VILLAGE COMMUNITY BANK
GNADENHUTTEN, OHIO
PROPOSED MARKETING MATERIALS
4/15/99
PREPARED BY: MELANIE A. JOHNSON
TRIDENT SECURITIES
<PAGE>
Marketing Materials
Indian Village Bancorp
Gnadenhutten, Ohio
Table of Contents
-----------------
I. Press Releases
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
IV. Individual Letters and Community Meeting Invitations
V. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VI. Proxy Reminder
A. Explanation
B. Example
VII. Subscription Rights Notice
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers receive prompt accurate
information in a simultaneous manner, Trident advises Indian Village to
forward press releases to area newspapers, radio stations, etc. at various
points during the conversion process.
Only press releases approved by Conversion Counsel and the OTS will be
forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion
2. Close of Stock Offering
<PAGE>
C. Distribution List
National Distribution List
--------------------------
National Thrift News Wall Street Journal
- -------------------- -------------------
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
- --------------- --------------
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
- ------- ------------------------
Dow Jones & Savings Bank 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
- --------------
229 West 43rd Street
New York, NY 10036
<PAGE>
Local Media List
----------------
Newspaper
- ---------
Akron Beacon Journal Times Reporter
Akron, Ohio New Philadelphia, Ohio
(330) 996-3700 (330) 364-5577
(330) 376-9235 (fax) (330) 364-8449 (fax)
Radio
- -----
WJER Radio WTUZ Radio
New Philadelphia, Ohio New Philadelphia, Ohio
(330) 343-7755 (330) 339-2222
(330) 364-4538 (fax) (330) 339-5930 (fax)
WBTC Radio
Uhrichsville, Ohio
(740) 922-2700
(740) 922-2702 (fax)
<PAGE>
D. Press Release Examples
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Marty R. Lindon, President and CEO
(740) 254-4313
INDIAN VILLAGE COMMUNITY BANK
-----------------------------
CONVERSION TO STOCK FORM APPROVED
---------------------------------
Gnadenhutten, Ohio (May __, 1999) - Marty R. Lindon, President and CEO of
Indian Village Community Bank ("Indian Village"), Gnadenhutten, Ohio announced
today that Indian Village has received approval from the Office of Thrift
Supervision to convert from a federally-chartered mutual savings bank to a
federally-chartered stock savings bank. In connection with the Conversion,
Indian Village has formed a holding company, Indian Village Bancorp, Inc.
("Indian Village Bancorp"), to hold all of its outstanding capital stock.
Indian Village Bancorp is offering up to 586,500 shares of its common
stock, subject to adjustment, at a price of $10.00 per share. Certain account
holders and borrowers of Indian Village will have an opportunity to subscribe
for stock in a Subscription Offering that closes at 12:00 noon on June __, 1999.
Shares that are not subscribed for during the Subscription Offering may be
offered subsequently to the general public in a Direct Community Offering, with
first preference given to natural persons and trusts of natural persons residing
in Tuscarawas County, Ohio. The Subscription Offering, and the Community
Offering, if conducted, will be managed by Trident Securities of Raleigh, North
Carolina. Copies of the Prospectus relating to the offerings and describing the
Plan of Conversion will be mailed on or about May __, 1999.
As a result of the Conversion, Indian Village will be structured in the
stock form and will be a wholly-owned subsidiary of Indian Village Bancorp.
According to Mr. Lindon, "Our day to day operations will not change as a result
of the Conversion and deposits will continue to be
<PAGE>
insured by the FDIC up to the applicable legal limits."
Customers with questions concerning the stock offering should call Indian
Village's Stock Information Center at (740) 254-9164, or visit Indian Village's
main office.
<PAGE>
PRESS RELEASE #2 FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Marty R. Lindon, President and CEO
(740) 254-4313
INDIAN VILLAGE BANCORP, INC. COMPLETES INITIAL PUBLIC OFFERING
--------------------------------------------------------------
Gnadenhutten, Ohio - (June __, 1999) Marty R. Lindon, President and CEO of
Indian Village Community Bank ("Indian Village"), announced today that Indian
Village Bancorp, Inc. ("Indian Village Bancorp") the proposed holding company
for Indian Village, has completed its initial stock offering in connection with
Indian Village's conversion from a mutual to a stock organization. A total of
_______ shares were sold at the price of $10.00 per share.
On June __, 1999, Indian Village's Plan of Conversion was approved by its
voting members at a special meeting.
Mr. Lindon said that the officers and boards of directors of Indian Village
Bancorp and Indian Village wished to express their thanks for the response to
the stock offering and that Indian Village looks forward to serving the needs of
its customers and new stockholders as a community-based stock institution. The
stock will commence trading on June __, 1999 on the OTC Electronic Bulletin
Board under the symbol "____". Trident Securities of Raleigh, North Carolina
managed the stock offering.
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify Indian
Village's customers and members of the local community that the conversion
offering is underway.
The intended use of advertisement "B" is to remind Indian Village's
customers of the closing date of the Subscription Offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval and
possibly run weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the subscription
offering.
Trident may feel it is necessary to run more ads in order to remind
customers of the close of The Subscription Offering, and the Community
Offering, if conducted.
Alternatively, Trident may, depending upon the response from the customer
base, choose to run fewer ads or no ads at all.
These ads will run in the local newspapers.
The ad size will be as shown or smaller.
<PAGE>
This is neither an offer to sell nor a solicitation of an offer to buy the
stock of Indian Village Bancorp. The offer is made only through the prospectus.
There shall be no offer in any state where such offer or solicitation of an
offer to buy Indian Village Bancorp stock would be unlawful. The shares of
Indian Village Bancorp common stock are not deposits or savings accounts and
will not be insured by the FDIC or any other governmental agency.
NEW ISSUE ____________, 1999
586,500 SHARES
These shares are being offered pursuant
to the Plan of Conversion whereby
INDIAN VILLAGE COMMUNITY BANK
Gnadenhutten, Ohio, will convert from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank
and become a wholly owned subsidiary of
INDIAN VILLAGE BANCORP, INC.
COMMON STOCK
_______________
PRICE $10.00 PER SHARE
_______________
TRIDENT SECURITIES
For a copy of the prospectus call (740) 254-9164.
<PAGE>
Advertisement (B)
INDIAN VILLAGE COMMUNITY BANK
JUNE __, 1999 IS THE DEADLINE TO
SUBSCRIBE FOR STOCK OF INDIAN VILLAGE BANCORP.
Customers of Indian Village Community Bank
have the opportunity to invest in Indian Village by subscribing
for common stock in its proposed holding company.
INDIAN VILLAGE BANCORP
A Prospectus relating to these securities is
available at our Stock Information Center located
at our main office. The telephone number for the
Stock Information Center is (740) 254-9164.
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus.
There shall be no offer in any state where such offer or solicitation of an
offer to buy Indian Village Bancorp stock would be unlawful. The shares of
Indian Village Bancorp common stock are not deposits or savings accounts and
will not be insured by the FDIC or any other governmental agency.
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves two purposes: a) to answer specifically some of the
most commonly asked questions; and b) to highlight in brochure form the
intended stock purchases of Indian Village's officers and directors shown
in the Prospectus. Although most of the answers are taken verbatim from
the Prospectus, it saves the individual from searching for the answer to a
simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and Answer
brochure. However, regardless of the method the brochures must always be
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members of Indian Village.
2. Question and Answer brochures are available in Indian Village's Stock
Information Center.
3. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
<PAGE>
PROPOSED OFFICER AND DIRECTOR PURCHASES
<TABLE>
<CAPTION>
Total Shares Aggregate Price of Percent of Shares
Name and Position Purchased Shares Purchased Issued*
- ----------------- ------------ ------------------ -----------------
<S> <C> <C> <C>
Rebecca S. Mastin 15,000 $ 150,000 2.94%
Chairman of the Board
John A. Beitzel 10,000 100,000 1.96%
Vice Chairman of the Board
Marty R. Lindon 10,000 100,000 1.96%
President, CEO and Director
Michael A. Cochran 15,000 150,000 2.94%
Corporate Secretary and Director
Cindy Knisely 7,500 75,000 1.47%
Director
Joanne Limbach 7,500 75,000 1.47%
Director
Vernon E. Mishler 10,000 100,000 1.96%
Director
Lori S. Frantz 4,000 40,000 0.78%
--------- -------------- ---------
Vice President, Treasurer
and Chief Financial Officer
TOTAL 79,000 $790,000 15.49%
</TABLE>
* Based on the issuance of 510,000 shares at the midpoint of the Estimated
Valuation Range
<PAGE>
QUESTIONS AND ANSWERS
REGARDING
THE PLAN OF CONVERSION
On January 20, 1999 the Board of Directors of Indian Village Community Bank
("Indian Village") unanimously adopted the Plan of Conversion, pursuant to which
Indian Village will convert from a federally-chartered mutual savings bank to a
federally-chartered stock savings bank (the "Conversion"). In addition, all of
Indian Village's outstanding capital stock will be issued to Indian Village
Bancorp, Inc. ("Indian Village Bancorp"), which Indian Village organized to be
its holding company.
This brochure is provided to answer general questions you might have about the
Conversion. Following the Conversion, Indian Village will continue to provide
financial services to its depositors, borrowers and other customers as it has in
the past and will operate with its existing management and employees. The
Conversion will not affect the terms, balances, interest rates or existing
federal insurance coverage on Indian Village's deposits or the terms or
conditions of any loans to existing borrowers under their individual contract
arrangements with Indian Village.
For complete information regarding the Conversion, see the both the Prospectus
and the Proxy Statement dated May __, 1999. Copies of each of the Prospectus
and the Proxy Statement may be obtained by calling the Stock Information Center
at (740) 254-9164.
This is neither an offer to sell nor a solicitation of an offer to buy the
stock of Indian Village Bancorp. The offer is made only through the prospectus.
There shall be no offer in any state where such offer or solicitation of an
offer to buy Indian Village Bancorp stock would be unlawful. The shares of
Indian Village Bancorp common stock are not deposits or savings accounts and
will not be insured by the FDIC or any other governmental agency.
<PAGE>
QUESTIONS AND ANSWERS
INDIAN VILLAGE BANCORP
(THE PROPOSED HOLDING COMPANY FOR
INDIAN VILLAGE)
MUTUAL TO STOCK CONVERSION
--------------------------
1. Q. WHAT IS A "CONVERSION"?
A. Conversion is a change in the legal form of organization. Indian
Village currently operates as a federally-chartered mutual savings
bank with no stockholders. Through the Conversion, Indian Village
will become a federally-chartered stock savings bank, and the stock of
its holding company, Indian Village Bancorp, will be held by those
individuals who purchase stock in the Subscription and Community
Offerings or in the open market following the Offerings.
2. Q. WHY IS INDIAN VILLAGE CONVERTING?
A. Indian Village, as a mutual savings bank, does not have stockholders
and has no authority to issue capital stock. By converting to the
stock form of organization, Indian Village will be structured in the
form used by commercial banks, most business entities and a growing
number of savings institutions. The Conversion will be important to
the future growth and performance of Indian Village by providing a
larger capital base from which Indian Village may operate, the ability
to attract and retain qualified management through stock-based
employee benefit plans, enhanced ability to diversify into other
financial services related activities and expanded ability to render
services to the public.
The Board of Directors and management of Indian Village believe that
the stock form of organization is preferable to the mutual form of
organization for a financial institution. In fact, there has been a
significant decline in the number of mutual thrifts from over 12,500
mutual institutions at their height in the late 1920's to fewer than
800 mutual thrifts today.
Indian Village believes that converting to the stock form of
organization will allow Indian Village to more effectively compete
with local community banks, thrifts, and with statewide and regional
banks, which are in stock form. Indian Village believes that by
combining its existing quality service and products with a local
ownership base, Indian Village's customers and community members who
become stockholders will be inclined to do more business with Indian
Village.
Furthermore, because Indian Village competes with local and regional
banks not only for customers, but also for employees, it believes that
the stock form of organization will better afford Indian Village the
opportunity to attract and retain employees, management and directors
through various stock benefit plans which are not available to mutual
savings institutions.
<PAGE>
3. Q. IS THE CONVERSION BENEFICIAL TO THE COMMUNITIES THAT INDIAN
VILLAGE SERVES?
A. Management believes that the structure of the Subscription and
Community Offerings is in the best interest of the communities that
Indian Village serves because following the Conversion it is
anticipated that a significant portion of the Common Stock will be
owned by local residents desiring to share in the ownership of a local
community financial institution. Management desires that a
significant portion of the shares of common stock sold in the
Offerings will be sold to residents of Tuscarawas County, Ohio.
4. Q. What effect will the Conversion have on deposit accounts and
loans?
A. Terms and balances of accounts in Indian Village and interest rates
paid on such accounts will not be affected by the Conversion.
Insurable accounts will continue to be insured by the Federal Deposit
Insurance Corporation ("FDIC") up to the maximum amount permitted by
law. The Conversion also will not affect the terms or conditions of
any loans to existing borrowers or the rights and obligations of these
borrowers under their individual contractual arrangements with Indian
Village.
5. Q. WILL THE CONVERSION CAUSE ANY CHANGES IN INDIAN VILLAGE'S
PERSONNEL?
A. No. Both before and after the Conversion, Indian Village's business
of accepting deposits, making loans and providing financial services
will continue without interruption with the same board of directors,
management and staff.
6. Q. WHAT APPROVALS MUST BE RECEIVED BEFORE THE CONVERSION BECOMES
EFFECTIVE?
A. First, the Board of Directors of Indian Village must adopt the Plan of
Conversion, which occurred on January 20, 1999. Second, the Office of
Thrift Supervision must approve the applications required to effect
the Conversion. These approvals have been obtained. Third, the Plan
of Conversion must be approved by a majority of all votes eligible to
be cast by Indian Village's voting members. A Special Meeting of
voting members will be held on June __, 1999 to consider and vote upon
the Plan of Conversion.
INDIAN VILLAGE BANCORP, INC.
----------------------------
7. Q. WHAT IS A HOLDING COMPANY?
A. A holding company is a business entity that owns another entity.
Concurrent with the Conversion, Indian Village will become a
subsidiary of Indian Village Bancorp, a holding company Indian Village
formed to hold all of its outstanding capital stock.
8. Q. IF I DECIDE TO BUY STOCK IN THIS OFFERING, WILL I OWN STOCK IN
INDIAN VILLAGE BANCORP OR INDIAN VILLAGE?
A. You will own stock in Indian Village Bancorp. However, Indian Village
Bancorp, as a holding company, will own all of the outstanding capital
stock of Indian Village.
<PAGE>
9. Q. WHY DID THE BOARD OF DIRECTORS FORM INDIAN VILLAGE BANCORP?
A. The Board of Directors believes that the Conversion of Indian Village
and the formation of Indian Village Bancorp will result in a stronger
financial institution with the ability to provide additional
flexibility to diversify Indian Village's business activities.
ABOUT BECOMING A STOCKHOLDER
----------------------------
10. Q. WHAT ARE THE SUBSCRIPTION AND COMMUNITY OFFERINGS?
A. Under the Plan of Conversion, Indian Village Bancorp is offering
shares of stock in the Subscription Offering, to certain current and
former customers of Indian Village and to Indian Village's Employee
Stock Ownership Plan ("ESOP"). Shares which are not subscribed for in
the Subscription Offering, if any, may be offered to the general
public in a Community Offering with preference given to natural
persons and their trusts who are permanent residents of Tuscarawas
County, Ohio. These Offerings are consistent with the board's
objective of Indian Village being a locally owned financial
institution. The Subscription Offering, and the Community Offering,
if conducted, are being managed by Trident Securities. It is
anticipated that any shares not subscribed for in either the
Subscription or Community Offerings may be offered for sale in a
Syndicated Community Offering, an offering held on a best efforts
basis by a selling group of broker-dealers.
11. Q. MUST I PAY A COMMISSION TO BUY STOCK IN CONJUNCTION WITH THE
SUBSCRIPTION OFFERING OR COMMUNITY OFFERING?
A. No. You will not pay a commission to buy the stock if the stock is
subscribed for in the Subscription Offering, or the Community
Offering, if conducted.
12. Q. HOW MANY SHARES OF INDIAN VILLAGE BANCORP COMMON STOCK WILL BE ISSUED
IN THE CONVERSION?
A. It is currently expected that between 433,500 shares and 586,500
shares of common stock will be sold at a price of $10.00 per share.
Under certain circumstances the number of shares may be increased to
674,475.
13. Q. HOW WAS THE DOLLAR SIZE OF THE OFFERING DETERMINED?
A. The aggregate price of the common stock was determined by Keller &
Company, Inc., an independent appraisal firm specializing in the
thrift industry, and was approved by the Office of Thrift Supervision.
The dollar size of the offering is based on the pro forma market value
of Indian Village and Indian Village Bancorp, as determined by the
independent evaluation.
14. Q. WHO IS ENTITLED TO SUBSCRIBE FOR STOCK IN THE CONVERSION?
A. The shares of Indian Village Bancorp to be issued in the Conversion
are being offered in the Subscription Offering to the following
categories in order of priority: (i) depositors whose accounts in
Indian Village total $50.00 or more as of
<PAGE>
December 31, 1997, (ii) Indian Village's ESOP, (iii) depositors with
$50.00 or more on deposit at Indian Village as of March 31, 1999, but
not otherwise eligible in the first two priority categories, and (iv)
depositors of Indian Village as of April 30, 1999, and borrowers as of
January 20, 1999 whose loans continued to be outstanding as of April
30, 1999, but who are not otherwise eligible in the first three
priority categories. All of which is subject to the priorities and
purchase limitations set forth in the Plan of Conversion. Common Stock
not subscribed for in the Subscription Offering may be offered in the
Community Offering to certain members of the general public, with
preference given to natural persons and trusts of natural persons
residing in Tuscarawas County, Ohio. Shares not subscribed for in the
Subscription, or the Community Offerings, if any, may be offered to
the general public in a Syndicated Community Offering.
15. Q. ARE THE SUBSCRIPTION RIGHTS TRANSFERABLE?
A. No. Subscription rights granted to Indian Village's depositors and
borrowers in the Conversion are not transferable. Persons violating
such prohibition, directly or indirectly, may lose their right to
subscribe for stock in the Conversion and be subject to other possible
sanctions. It is the responsibility of each subscriber who is a
depositor and/or borrower to list completely all account numbers for
qualifying savings accounts or loans as of the qualifying date on the
stock order form.
16. Q. WHAT ARE THE MINIMUM AND MAXIMUM NUMBERS OF SHARES THAT I CAN
SUBSCRIBE FOR IN THE CONVERSION?
A. The minimum stock purchase is 25 shares or $250.00. The maximum
purchase in the Conversion by any person or person exercising rights
through one account other than the ESOP, is 10,000 shares or
$100,000.00. The maximum purchase for any person, related persons or
persons acting together is 15,000 shares or $150,000.00.
17. Q. WILL THE BOARD OF DIRECTORS AND MANAGEMENT OF INDIAN VILLAGE SUBSCRIBE
FOR STOCK IN INDIAN VILLAGE BANCORP?
A. Directors and executive officers of Indian Village are expected to
subscribe for 79,000 shares. The directors and executive officers
will pay the same $10.00 per share price as all other persons who
order stock in the Subscription or Community Offerings.
18. Q. HOW DO I SUBSCRIBE FOR SHARES OF STOCK?
A. To subscribe for shares of stock in the Subscription Offering, you
should send or deliver an original stock order form together with full
payment (or appropriate instructions for withdrawal from permitted
deposit accounts as described below) to Indian Village in the postage-
paid envelope provided. The stock order form and payment or withdrawal
authorization instructions must be received prior to the close of the
Subscription Offering, which will terminate at 12:00 noon, Eastern
Time, on June __, 1999, unless extended. Payment for shares may be
made by check, money order or account withdrawal. Subscribers who have
deposit
<PAGE>
accounts with Indian Village may include instructions on the stock
order form requesting withdrawal from such deposit account(s) to
subscribe for shares of Indian Village Bancorp. Withdrawals from
certificates of deposit may be made without incurring an early
withdrawal penalty.
If shares remain available for sale after the expiration of the
Subscription Offering, they may be offered in the Community Offering,
which may commence at any time after the commencement of the
Subscription Offering and may terminate at any time without notice,
but may not terminate later than July __, 1999. Persons who wish to
order stock in the Community Offering should return their stock order
form as soon as possible after the Community Offering begins. Members
of the general public should contact the Stock Information Center at
(740) 254-9164 for additional information before submitting an order
in the Community Offering.
19. Q. MAY I USE FUNDS IN A RETIREMENT ACCOUNT TO SUBSCRIBE FOR STOCK?
A. Yes. If you are interested in using funds held in your retirement
account at Indian Village, YOU WILL NEED TO TRANSFER THOSE FUNDS TO A
SELF-DIRECTED BROKERAGE IRA WITH THE BROKER OF YOUR CHOICE. This
process may be done without an early withdrawal penalty and generally
without a negative tax consequence to your retirement account. Due to
the additional paperwork involved; however, IRA transfers often
require several days to complete. Therefore, the process should be
initiated as soon as possible to have the self-directed IRA in place
to subscribe for the stock before the offering closes on June __,
1999. Indian Village will not be responsible for delays caused by
third party brokerage firms which could result in IRA stock orders not
meeting the June __, 1999 deadline. For additional information or
names of local brokers offering this option, call the Stock
Information Center at (740) 254-9164.
20. Q. WILL I RECEIVE INTEREST ON FUNDS I SUBMIT FOR A STOCK SUBSCRIPTION?
A. Yes. Indian Village will pay interest at its passbook savings account
rate from the date the funds are received until completion of the
stock offering or termination of the Conversion. All funds authorized
for withdrawal from deposit accounts with Indian Village will continue
to earn interest at the contractual rate until the date of the
completion of the Conversion.
21. Q. MAY I OBTAIN A LOAN FROM INDIAN VILLAGE TO PAY FOR SHARES SUBSCRIBED
FOR IN THE CONVERSION?
A. No. Federal regulations prohibit Indian Village from making loans for
this purpose. However, federal regulations do not prohibit you from
obtaining a loan from another source for the purpose of subscribing
for stock in the Conversion.
22. Q. IF I BUY STOCK IN THE CONVERSION, HOW WOULD I GO ABOUT BUYING
ADDITIONAL SHARES OR SELLING SHARES IN THE AFTERMARKET?
A. You would contact a stock broker to buy or sell shares. However, as a
newly organized company, Indian Village Bancorp has never issued
capital stock, and
<PAGE>
consequently there is no established market for its Common Stock at
this time. Indian Village Bancorp has requested that Trident
Securities make a market for the Common Stock through the OTC
Electronic Bulletin Board. However, it is unlikely that an active
trading market for the Common Stock will develop, and there can be no
assurance that the shares of Common Stock being offered in the
Conversion can be resold at or above the $10.00 purchase price.
23. Q. WHAT IS INDIAN VILLAGE BANCORP'S DIVIDEND POLICY?
A. The Board of Directors of Indian Village Bancorp intends to adopt a
policy of paying regular cash dividends after the consummation of the
Conversion, but has not decided the amount that may be paid or when
the payments may begin. No assurance can be given, however, that the
payment of dividends, if commenced, will continue. In addition, from
time to time in an effort to manage capital at a reasonable level, the
board may determine that it is prudent to pay special cash dividends.
Special cash dividends may be paid in addition to, or in lieu of,
regular cash dividends. There can be no assurance that special
dividends will be paid, or, if paid, will continue to be paid.
24. Q. WILL THE FDIC INSURE THE SHARES OF INDIAN VILLAGE BANCORP?
A. No. The shares of Indian Village Bancorp are not savings deposits or
savings accounts and are not insured by the FDIC or any other
government agency.
25. Q. IF I SUBSCRIBE FOR SHARES AND LATER CHANGE MY MIND, WILL I BE ABLE TO
GET A REFUND OR MODIFY MY ORDER?
A. No. Your order cannot be canceled, withdrawn or modified once it has
been received by Indian Village without the consent of Indian Village.
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
-----------------------------------------
26. Q. WHO IS ELIGIBLE TO VOTE AT THE SPECIAL MEETING OF MEMBERS TO BE HELD
TO CONSIDER THE PLAN OF CONVERSION?
A. You are eligible to vote at the Special Meeting of Members to be held
on June __, 1999 if you were a depositor or borrower of Indian Village
at the close of business on April 30, 1999, and continue as such until
the Special Meeting. If you were a member on April 30, 1999, you
should have received a proxy statement and a proxy card with which to
vote.
27. Q. HOW MANY VOTES DO I HAVE?
A. Each account holder is entitled to one vote for each $100, or fraction
thereof, on deposit in such account(s) as of April 30, 1999. Each
borrower member is entitled to cast one vote in addition to the number
of votes, if any, he or she is entitled to cast as an account holder.
No member may cast more than 1,000 votes. These voting criteria are
established by law under Indian Village's charter.
<PAGE>
28. Q. IF I VOTE "AGAINST" THE PLAN OF CONVERSION AND IT IS APPROVED, WILL I
BE PROHIBITED FROM BUYING STOCK DURING THE SUBSCRIPTION OFFERING?
A. No. Voting against the Plan of Conversion in no way restricts you
from purchasing Indian Village Bancorp stock.
29. Q. DID THE BOARD OF DIRECTORS OF INDIAN VILLAGE UNANIMOUSLY ADOPT THE
PLAN OF CONVERSION?
A. Yes. Indian Village's Board of Directors unanimously adopted the Plan
of Conversion and recommends that all members vote "FOR" approval of
such Plan.
30. Q. WHAT HAPPENS IF INDIAN VILLAGE DOES NOT GET ENOUGH VOTES TO APPROVE
THE PLAN OF CONVERSION?
A. The Conversion would not take place, and Indian Village would remain a
mutual savings bank.
31. Q. AS A QUALIFYING DEPOSITOR OR BORROWER OF INDIAN VILLAGE, AM I REQUIRED
TO VOTE?
A. No. However, failure to return your proxy card or otherwise vote will
have the same effect as a vote AGAINST the Plan of Conversion.
32. Q. WHAT IS A PROXY CARD?
A. A proxy card gives you the ability to vote without attending the
Special Meeting in person. IF YOU RECEIVED MORE THAN ONE
INFORMATIONAL PACKET, THEN YOU SHOULD VOTE THE PROXY CARDS IN ALL
PACKETS. Your proxy card(s) is (are) located in the window sleeve of
your informational packet(s).
You may attend the meeting and vote, even if you have returned your
proxy card, if you choose to do so. However, if you are unable to
attend, you still are represented by proxy. Previously executed
proxies, other than those proxies sent pursuant to the Conversion,
will not be used to vote for approval of the Plan of Conversion, even
if the respective members do not execute another proxy or attend the
Special Meeting and vote in person.
33. Q. HOW CAN I GET FURTHER INFORMATION CONCERNING THE STOCK OFFERING?
A. You may call the Stock Information Center at (740) 254-9164 for
further information or to request a copy of the Prospectus, a stock
order form, a proxy statement or a proxy card.
This is neither an offer to sell nor a solicitation of an offer to buy the
stock of Indian Village Bancorp. The offer is made only through the prospectus.
There shall be no offer in any state where such offer or solicitation of an
offer to buy Indian Village Bancorp stock would be unlawful. The shares of
Indian Village Bancorp common stock are not deposits or savings accounts and
will not be insured by the FDIC or any other governmental agency.
<PAGE>
IV. Individual Letters and Community Meeting Invitations
A. Explanation
In order to educate the public about the stock offering, Trident suggests
holding community meetings in various locations. In an effort to target a
group of interested investors, Trident requests that each Director of Indian
Village submit a list of people that he or she would like to invite to a
community meeting.
B. Method of Distribution of Invitations and Prospect Letters
Each Director submits his or her list of prospects. Invitations are sent to
each Director's prospects through the mail. All invitations are preceded by a
Prospectus and all attendees are given a Prospectus at the meeting. Letters
will be sent all attendees to thank them for their attendance and to remind them
of closing dates.
C. Examples enclosed.
<PAGE>
(Trident Letterhead)
May __, 1999
To Members and Friends of Indian Village Community Bank:
Trident Securities, a member of the National Association of Securities
Dealers, Inc., is assisting Indian Village Community Bank ("Indian Village") in
its Conversion from a federally-chartered mutual savings bank to a federally-
chartered stock savings bank, whereby Indian Village will operate as a wholly-
owned subsidiary of Indian Village Bancorp, Inc. ("Indian Village Bancorp").
At the request of Indian Village, we are enclosing materials explaining the
subscription offering process and your right to subscribe for common shares of
Indian Village Bancorp. Please read the enclosed offering materials carefully
before subscribing for stock.
If you have any questions, please call the Stock Information Center at
(740) 254-9164.
Sincerely,
TRIDENT SECURITIES
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
(Indian Village Letterhead)
____________, 1999
Dear Valued Customer:
Indian Village Community Bank ("Indian Village") is pleased to announce
that it has received regulatory approval to proceed with its plan to convert to
a federally-chartered stock savings bank. This stock conversion is the most
significant event in the history of Indian Village in that it allows customers,
community members, directors and employees an opportunity to own stock in Indian
Village Bancorp, Inc. ("Indian Village Bancorp"), the proposed holding company
for Indian Village.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage deposits at Indian
Village, or the terms or conditions of any loans to existing borrowers under
their individual contract arrangements with Indian Village. Let us also assure
you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of Indian Village.
As one of our valued members, you have the opportunity to invest in Indian
Village's future by subscribing for stock in Indian Village Bancorp during the
Subscription Offering, without paying a sales commission.
If you decide to exercise your rights to subscribe for shares, you must
return the properly completed stock order form together with full payment for
the subscribed shares so that it is received by Indian Village not later than
12:00 noon. Eastern Time on June __, 1999.
Enclosed is a proxy card. Your Board of Directors urges you to vote "FOR"
Indian Village's Plan of Conversion. A vote in favor of the Plan does not
obligate you to subscribe for stock. Please sign and return your proxy card
promptly; your vote is important to us.
We have also enclosed a Prospectus and Proxy Statement which fully the
describes Indian Village, its management, Board of Directors, business and the
Plan of Conversion. Please review it carefully before you vote or invest. For
your convenience we have established a Stock Information Center. If you have
any questions, please call the Stock Information Center collect at (740) 254-
9164.
We look forward to continuing to provide quality financial services to you.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
(Indian Village Letterhead)
____________, 1999
Dear Interested Investor:
Indian Village Community Bank ("Indian Village") is pleased to announce
that it has received regulatory approval to proceed with its plan to convert to
a federally-chartered stock savings bank. This stock conversion is the most
significant event in the history of Indian Village in that it allows customers,
community members, directors and employees an opportunity to own stock in Indian
Village Bancorp, Inc. ("Indian Village Bancorp"), the proposed holding company
for Indian Village.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on Indian Village
deposits, or the terms or conditions of any loans to existing borrowers under
their individual contract arrangements with Indian Village. Let us also assure
you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of Indian Village.
Enclosed is a Prospectus fully describing Indian Village, its management,
Board of Director, business and Plan of Conversion. Please review it carefully
before you make an investment decision. If you decide to invest, please return
to Indian Village a properly completed stock order form together with full
payment for shares at your earliest convenience but not later than 12:00 noon
Eastern Time on June __, 1999. For your convenience we have established a Stock
Information Center. If you have any questions, please call the Stock Information
Center collect at (740) 254-9164.
We look forward to continuing to provide quality financial services to you.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
(Indian Village Letterhead)
____________, 1999
Dear Friend:
Indian Village Community Bank ("Indian Village") is pleased to announce
that it has received regulatory approval to proceed with its plan to convert to
a federally-chartered stock savings bank. This stock conversion is the most
significant event in the history of Indian Village in that it allows customers,
community members, directors and employees an opportunity to own stock in Indian
Village Bancorp, Inc. ("Indian Village Bancorp"), the proposed holding company
for Indian Village.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on Indian Village
deposits, or the terms or conditions of any loans to existing borrowers under
their individual contract arrangements with Indian Village. Let us also assure
you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of Indian Village.
Our records indicate that you were a depositor of Indian Village on
December 31, 1997 or March 31, 1999, but that you were not a member on April 30,
1999. Therefore, under applicable law, you are entitled to subscribe for Common
Stock in Indian Village Bancorp's Subscription Offering. Orders submitted by you
and others in the Subscription Offering are contingent upon the current members'
approval of the Plan of Conversion at a special meeting of members to be held on
June __, 1999 and upon receipt of all required regulatory approvals.
If you decide to exercise your rights to subscribe for stock, you must
return the properly completed stock order form together with full payment for
the subscribed shares so that it is received by Indian Village not later than
12:00 noon. Eastern Time on June __, 1999.
Enclosed is a Prospectus that fully describes Indian Village, its
management, Board of Directors, business and Plan of Conversion. Please review
it carefully before you invest. For your convenience we have established a Stock
Information Center. If you have any questions, please call the Stock Information
Center collect at (740) 254-9164.
We look forward to continuing to provide quality financial services to you.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
(Indian Village Letterhead)
___________, 1999
Dear Member:
As a qualified member of Indian Village Community Bank ("Indian Village"),
you have the right to vote upon Indian Village's Plan of Conversion and also
generally have the right to subscribe for shares of common stock of Indian
Village Bancorp, Inc. ("Indian Village Bancorp"), the proposed holding company
for Indian Village through its mutual to stock conversion.
However, the Plan of Conversion, which has been approved by the Office of
Thrift Supervision, provides that Indian Village Bancorp will not offer stock in
any state in which compliance with the securities laws would be impracticable
for reasons of cost or otherwise. Unfortunately, the securities laws of your
state would require Indian Village Bancorp to register its common stock and/or
its employees in order to sell the common stock to you. Such registration would
be prohibitively expensive or otherwise impracticable in light of the few
members residing in your state.
You may vote on the Plan of Conversion and we urge you to read the enclosed
Summary Proxy Statement and execute the enclosed Revocable Proxy. Questions
regarding the execution of the Revocable Proxy should be directed to Indian
Village's Stock Information Center at (740) 254-9164.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
Sent to prospects who are customers*
_______________, 1999
&salutation& &firstname& &last name&
&address&
&city&, &state& &zip&
Dear &prefername&
Recently you may have read in the newspaper that Indian Village Community
Bank ("Indian Village") will convert from a federally-chartered mutual savings
bank to a federally-chartered stock savings bank. This is the most significant
event in the history of Indian Village in that it allows customers, employees
and directors the opportunity to share in Indian Village's future by becoming
charter stockholders of Indian Village's newly-formed holding company, Indian
Village Bancorp, Inc. ("Indian Village Bancorp").
As a customer of Indian Village, you should have received a packet of
information regarding the conversion, including a Prospectus and a Proxy
Statement. In addition, we are holding several presentations to discuss the
stock offering in more detail. You will receive an invitation in the near
future.
Please feel free to call me or Indian Village's Stock Information Center at
(740) 254-9164 if you have any questions. I look forward to seeing you at one
of our informational presentations.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
*Sent to prospects who are not customers*
____________, 1999
&salutation& &firstname& &lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
Recently you may have read in the newspaper that Indian Village Community
Bank ("Indian Village") will be converting from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank. This is the most
significant event in the history of Indian Village in that it allows customers,
employees and directors the opportunity to share in Indian Village's future by
becoming charter stockholders of Indian Village's holding company, Indian
Village Bancorp, Inc. ("Indian Village Bancorp").
[Director] has asked that you be sent a Prospectus and stock order form,
which would allow you to become a charter stockholder, should stock be
available. In addition, we are holding several presentations to discuss the
stock offering in more detail. You will receive an invitation in the near
future.
Please feel free to call me or Indian Village's Stock Information Center at
(740) 254-9164 if you have any questions. I look forward to seeing you at one
of our information presentations.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
*Sent to those attending a community meeting*
____________, 1999
&salutation& &firstname& &lastname&
&address&
&City&, &state& &zip&
Dear &prefername&:
Thank you for attending our informational presentation relating to Indian
Village's conversion to a stock savings bank. The information presented at the
meeting and the Prospectus you recently received should assist you in making an
informed investment decision.
Obviously, we are excited about this stock offering and the opportunity for
the community to share in the future of Indian Village. This conversion is the
most important event in our history and it gives Indian Village the strength to
compete in the future and will provide Indian Village additional corporate
flexibility.
We may contact you in the near future to see if you are interested in
participating in our offering. If you decide to invest, please return your
properly completed stock order form no later than 12:00 noon, Eastern Time, on
June __, 1999. If you have any questions, please call the Stock Information
Center at (740) 254-9164.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
.
<PAGE>
* Sent to those not attending a community meeting *
_________, 1999
&salutation& &firstname& &lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
I am sorry you were unable to attend our recent presentation regarding
Indian Village's mutual to stock conversion. We are enthusiastic about the stock
offering and the opportunity for the community to share in the future of Indian
Village.
We have established a Stock Information Center to assist you with any
questions regarding the stock offering. Should you require any assistance
between now and the Subscription Offering deadline of 12:00 Noon, Eastern Time,
on June __, 1999, I encourage you to either stop by our Stock Information Center
or call (740) 254-9164.
I hope you will join me as a charter stockholder in Indian Village Bancorp.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
* Final Reminder Letter *
_________, 1999
&salutation&firstname&lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
I am writing to remind you that the deadline for subscribing for stock in
Indian Village Bancorp is quickly approaching. I hope you will join me in
becoming a charter stockholder in one of Ohio's newest publicly owned financial
institutions.
The deadline for becoming a charter stockholder is 12:00 Noon, Eastern
Time, on June __, 1999. If you have any questions, please call our Stock
Information Center at (740) 254-9164.
Once again, I look forward to having you join me as a charter stockholder
in Indian Village Bancorp.
Sincerely,
Marty R. Lindon
President and CEO
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
- --------------------------------------------------------------------------------
The Directors and Officers
of
Indian Village Community Bank
cordially invite you to attend a brief
presentation regarding the stock offering of
Indian Village Bancorp, our proposed holding company.
Please join us at the
______________
_____________________
___________________________
____________
____________
for refreshments
YOU MUST RESPOND BY ____________ TO RESERVE A SEAT
R.S.V.P. (740) 254-9164
- --------------------------------------------------------------------------------
<PAGE>
V. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to
Indian Village's customers and members of the local community that the
stock sale is underway and (2) to remind the customers of the end of the
Subscription Offering. Many people often forget the deadline for
subscribing and therefore we suggest the use of these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used at teller windows and on
customer service representatives' desk.
Approximately 1 - 2 Lobby posters will be used at Indian Village's office.
C. Example
D. Size
The counter card will be approximately 8 1/2" x 11".
The lobby poster will be approximately 16" x 20".
<PAGE>
C.
POSTER OR COUNTER CARD
- -------------------------------------------------------------------------------
"TAKE STOCK IN OUR FUTURE"
"INDIAN VILLAGE BANCORP
STOCK OFFERING MATERIALS
AVAILABLE HERE"
"DEADLINE TO SUBSCRIBE FOR STOCK IS JUNE __, 1999."
INDIAN VILLAGE COMMUNITY BANK
- -------------------------------------------------------------------------------
<PAGE>
VII. Proxy Reminder
A. Explanation
A proxy reminder is used when the majority of votes needed to adopt the
Plan of Conversion is still outstanding. The proxy reminder is mailed to
those "target vote" depositors who have not previously returned their
signed proxy.
The target vote depositors are determined by the conversion agent.
B. Example
C. Size
Proxy reminder is approximately 8 1/2" x 11".
<PAGE>
B. Example
- --------------------------------------------------------------------------------
P R O X Y R E M I N D E R
INDIAN VILLAGE COMMUNITY BANK
YOUR VOTE ON OUR STOCK CONVERSION PLAN HAS NOT BEEN RECEIVED. YOUR VOTE IS VERY
- --------- ----------------------------------------
IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO VOTING AGAINST
- ---------
THE PLAN OF CONVERSION.
VOTING FOR THE PLAN OF CONVERSION WILL NOT AFFECT THE INSURANCE OF YOUR
ACCOUNTS. DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED UP TO THE
APPLICABLE LIMITS.
YOU MAY SUBSCRIBE FOR STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
-------------------------------------
PROXY CARD TO INDIAN VILLAGE TODAY.
PLEASE VOTE ALL PROXY CARDS RECEIVED.
---
WE RECOMMEND THAT YOU VOTE TO APPROVE THE PLAN OF CONVERSION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
INDIAN VILLAGE COMMUNITY BANK
- --------------------------------------------------------------------------------
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST
FOR FURTHER INFORMATION CALL (740) 254-9164.
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Indian Village Bancorp. The offer is made only through the prospectus. There
shall be no offer in any state where such offer or solicitation of an offer to
buy Indian Village Bancorp stock would be unlawful. The shares of Indian
Village Bancorp common stock are not deposits or savings accounts and will not
be insured by the FDIC or any other governmental agency.
<PAGE>
VII. Subscription Rights Special Notice
A. Explanation
In an effort to educate depositors and/or borrowers of Indian Village about
their subscription rights and the possible violation or transfer of
subscription rights which could occur, each member and friend will receive
a special one-page notice. The notice should be printed on a colored paper
and will contain language from the Prospectus that discusses the transfer
of subscription rights.
A. Example enclosed
<PAGE>
SUBSCRIPTION RIGHTS
SPECIAL NOTICE
ANY TRANSFER OF, OR ATTEMPT TO TRANSFER, A SUBSCRIPTION RIGHT TO ANY OTHER
PERSON IS ILLEGAL AND SUBJECT TO CIVIL FINES AND/OR PENALTIES AND EVEN CRIMINAL
FINES AND/OR PENALTIES. INDIAN VILLAGE COMMUNITY BANK INTENDS TO PROSECUTE
VIGOROUSLY ANY TRANSFER OF, OR ATTEMPT TO TRANSFER, SUBSCRIPTION RIGHTS THAT
COME TO ITS ATTENTION.
IF YOU ARE CONTACTED BY ANYONE OFFERING TO GIVE YOU MONEY TO BUY STOCK IN
EXCHANGE FOR TRANSFERRING THE STOCK TO THEM LATER, SHARE IN ANY WAY PROCEEDS
UPON THE SALE OF THE STOCK, OR TRANSFER YOUR SUBSCRIPTION RIGHTS IN ANY OTHER
WAY, PLEASE CALL US IMMEDIATELY AT (740) 254-9164.
<PAGE>
Exhibit 99.3
Indian Village Bancorp, Inc.
Stock Order Form
----------------------------------------
Indian Village
Community Bank
South Walnut Street
P.O. Box 830
Gnadernhutten, OH
44629
(740)254-9164
Expiration Date for
Stock Order Forms:
June , 1999
12:00 Noon, Eastern Time
- --------------------------------------------------------------------------------
IMPORTANT--PLEASE NOTE: A properly completed original stock order form
must be used to subscribe for common stock. Faxes or copies of this
form may not be accepted. Please read the Stock Ownership Guide and
Stock Order Form Instructions as you complete this Form.
- --------------------------------------------------------------------------------
(1) Number of Shares Subscription Price (2) Total Payment Due
X $10.00 = $
-------------------- ---------------------
- --------------------------------------------------------------------------------
(3) Employee/Officer/Director Information
[_] Check here if you are a director, officer or employee of Indian Village
or a member of such person's immediate family.
- --------------------------------------------------------------------------------
(4) Method of Payment/Check
Enclosed is a check, bank draft or money order made payable to Indian
Village Bancorp, Inc. in the amount of:
----------------------------------------
No wire transfers will be accepted
- --------------------------------------------------------------------------------
(5) Method of Payment/Withdrawal
The undersigned authorizes withdrawal from the following account(s) at
Indian Village Community Bank. There is no penalty for early withdrawal for
purposes of this payment.
--------------------------------------
Account Number(s) Withdrawal
Amount(s)
--------------------------------------
$
--------------------------------------
$
--------------------------------------
$
--------------------------------------
Total Withdrawal $
Amount -----------------
- --------------------------------------------------------------------------------
(6) Purchaser Information
a. [ ] Eligible Account Holder -- Check here if you were a depositor of at
least $50.00 at Indian December 31,1997. Enter information below for
all deposit accounts that you had at Indian Village Community Bank on
December 31, 1997.
b. [ ] Supplemental Eligible Account Holder -- Check here if you were a
depositor of at least $50.00 at Indian Village Community Bank on March
31, 1999 but are not an Eligible Account Holder. Enter information
below for all deposit accounts that you had at Indian Village Community
Bank on March 31, 1999.
c. [ ] Other Member -- Check here if you were a depositor on April 30, or a
borrower as of January 20, 1999 of Indian Village Community Bank with
loans outstanding as of April 30, and January 20, 1999 but are not an
Eligible Account Holder or Supplemental Eligible Account Holder. Enter
information below for all deposit accounts that you had at Indian
Village Community Bank on April 30, 1999 and/or for all loans you had
with Indian Village Community Bank as of April 30, 1999.
d. [ ] Community--Check here if you are a permanent resident of Tuscarawas
County, Ohio.
ACCOUNT INFORMATION
---------------------------------
- -------------------------------------
. These account numbers correspond to
the preprinted account registration
in the top left hand corner of this ---------------------------------
form.
- -------------------------------------
------------------------------------
. These may not be all of your Account Title Account
qualifying accounts. (Names on Accounts) Number(s)
------------------------------------
- -------------------------------------
. You must list any account numbers ------------------------------------
from other stock order forms you
have received in the mail and any ------------------------------------
other accounts that you have, or
have had ownership in, at Indian ------------------------------------
Village Community Bank.
------------------------------------
. If you do not list all of your
accounts, you may not receive all
of the shares that you are eligible
for.
- --------------------------------------------------------------------------------
(7) Stock Registration/Form of Stock Ownership
[_] Individual [_] Joint Tenants
[_] Tenants in Common [_] Fiduciary (Under Agreement
Dated ____, 19 )
[_] Individual Retirement [_] Corporation or Partnership
Account (IRA)
[_] Uniform Transfer to Minors Act [_] Other ________________
- --------------------------------------------------------------------------------
(8) Name(s) in which your stock Social Security No.
is to be registered or Tax ID No.
(Please print clearly)
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
Name(s) continued County of Residence
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
Street Address Telephone (Daytime)
- ------------------------------------ -----------------------------------
( )
- ------------------------------------ -----------------------------------
City State Zip Code Telephone (Evening)
- ------------------- ----- -------- -----------------------------------
( )
- ------------------- ----- -------- -----------------------------------
- --------------------------------------------------------------------------------
(9) NASD Affiliation
[_] Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member
of the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which
an NASD member or person associated with an NASD member has a beneficial
interest. To comply with conditions under which an exemption from the
NASD's Interpretation With Respect to Free-Riding and Withholding is
available, you agree, if you have checked the NASD Affiliation box, (i) not
to sell, transfer or hypothecate the stock for a period of 90 days
following issuance, and (ii) to report this subscription in writing to the
applicable NASD member within one day of payment therefor.
- --------------------------------------------------------------------------------
(10) Associate--Acting in Concert
[_] Check here and complete the reverse side of this Form, if you or any
associate (as defined on the reverse side of this Form) or persons acting
in concert with you have submitted other orders for shares in the
offering.
- --------------------------------------------------------------------------------
(11) Acknowledgment
To be effective, this fully completed Stock Order Form and Form of
Certification must be actually received by Indian Village Community Bank,
no later than 12:00 noon, Eastern Time on June , 1999, unless extended;
otherwise this Stock Order Form and all subscription rights will be void.
Completed Stock Order Forms, together with the executed Form of
Certification and the required payment or withdrawal authorization, may be
delivered to Indian Village Community Bank or may be mailed to the address
indicated on the enclosed business reply envelope. All rights exercisable
hereunder are not transferable and shares purchased upon exercise of such
rights must be purchased for the account of the person exercising such
rights.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of Conversion
("Plan") of Indian Village Community Bank described in the accompanying
Prospectus. If the Plan is not approved by the members of Indian Village
Community Bank at a Special Meeting to be held on June , 1999, or any
adjournment thereof, all orders will be canceled and funds received as
payment, with accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Indian Village Community
Bank, this Stock Order Form may not be modified, withdrawn or canceled
without Indian Village Community Bank's consent, and if authorization to
withdraw from deposit accounts at Indian Village Community Bank has been
given as payment for shares, the amount authorized for withdrawal shall
not otherwise be available for withdrawal by the undersigned.
Under penalty of perjury, I certify that the Social Security or Tax ID
Number and the other information provided in this Stock Order Form are
true, correct and complete, that I am not subject to back-up withholding,
that I am purchasing only for my own account and that there is no
agreement or understanding regarding the transfer of my subscription
rights or the sale or transfer of these shares.
Federal regulations prohibit any person from transferring or entering into
any agreement directly or indirectly to transfer the legal or beneficial
ownership of subscription rights, or the underlying securities to the
account of another. Indian Village Community Bank and Indian Village
Bancorp, Inc., will pursue any and all legal and equitable remedies in the
event they become aware of the transfer of subscription rights and will
not honor orders known by them to involve such transfer. I acknowledge
that the common stock offered is not a savings or deposit account and is
not insured by the Savings Association Insurance Fund, the Bank Insurance
Fund, the Federal Deposit Insurance Corporation, or any other government
agency, may lose value and is not guaranteed by Indian Village Community
Bank or Indian Village Bancorp, Inc. I further acknowledge receipt of the
Prospectus at least 48 hours prior to delivery of this Stock Order Form to
Indian Village Bancorp, Inc.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED TWICE: BELOW AND ON THE
FORM OF CERTIFICATION ON THE REVERSE HEREOF.
Signature Date Signature Date
---------------------------- --------------------------
---------------------------- --------------------------
OFFICE USE
----------------
Date Received
--------- ----------------
Batch # Order #
A SIGNED FORM OF CERTIFICATION MUST ACCOMPANY ALL STOCK ORDER FORMS (SEE
REVERSE SIDE)
- --------------------------------------------------------------------------------
<PAGE>
Item (6)a, b--(continued)
Account Title (Names Account Account Title (Names Account
on Accounts) Number(s) on Accounts) Number(s)
- ------------------------- -------------- ----------------------- ---------------
- ------------------------- -------------- ----------------------- ---------------
- ------------------------- -------------- ----------------------- ---------------
- ------------------------- -------------- ----------------------- ---------------
Item (11)--(continued)
List below all other orders submitted by you or your Associates (as defined) or
by persons acting in concert with you.
"Associate" is defined as (i) any corporation or organization (other than Indian
Village Community Bank, Indian Village Bancorp, Inc. or a majority-owned
subsidiary of Indian Village Community Bank or Indian Village Bancorp, Inc.) of
which such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities, (ii) any
trust or other estate in which such person has a substantial beneficial interest
or as to which such person serves as trustee or in a similar fiduciary capacity,
except that such term shall not include a tax-qualified employee stock benefit
plan of Indian Village Community Bank or Indian Village Bancorp, Inc. in which a
person has a substantial beneficial interest or serves as a trustee in a similar
fiduciary capacity; and (iii) any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person or who is a
director of Indian Village Community Bank or Indian Village Bancorp, Inc. or any
of their subsidiaries.
Name(s) Listed on Number of
Other Stock Order Shares
Forms Ordered
- ------------------------- --------------
- ------------------------- --------------
- ------------------------- --------------
- ------------------------- --------------
A valid Stock Order Form must be signed and dated below and on the front of
this form.
- --------------------------------------------------------------------------------
CERTIFICATION
I/WE ACKNOWLEDGE THE COMMON STOCK OF INDIAN VILLAGE BANCORP. INC., IS NOT A
DEPOSIT OR SAVINGS ACCOUNT AND IS NOT FEDERALLY INSURED, AND IS NOT
GUARANTEED BY INDIAN VILLAGE COMMUNITY BANK, INDIAN VILLAGE BANCORP. INC.
OR BY THE FEDERAL GOVERNMENT. THE SECURITIES ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED.
If anyone asserts that the common stock is federally insured or guaranteed,
or is as safe as an insured deposit, I should call the Federal Deposit
Insurance Corporation Regional Director, at .
I/We further certify that, before purchasing the common stock, par value of
$0.01 per share, of Indian Village Bancorp, Inc., the proposed holding
company for Indian Village Community Bank, I/we received a Prospectus dated
May , 1999 (the "Prospectus"), which contains disclosure concerning the
nature of the common stock being offered and describes the following risks
involved in the investment under the heading "RISK FACTORS" beginning on
page 8 of the Prospectus.
<TABLE>
<S> <C> <C>
1. Indian Village's business depends heavily on economic
conditions within its primary market area and the rural
nature of the area limits growth prospects .............. (page 8)
2. Indian Village's goal to increase consumer lending may
hurt both asset quality and net income .................. (page 8)
3. Rising interest rates could hurt Indian Village's
profits ................................................. (page 8)
4. Investment of offering proceeds in debt securities could
produce low earnings .................................... (page 8)
5. Indian Village's return on equity will be below average
after conversion because of high capital levels ......... (page 9)
6. Implementation of benefit plans will increase future
compensation expense and may lower Indian Village's net
income .................................................. (page 9)
7. Year 2000 data processing problems could interrupt and
hurt Indian Village's operations ........................ (page 9)
8. Issuance of shares for benefit programs may lower your
ownership interest ...................................... (page 9)
9. Possible voting control by management and employees may
make takeover attempts more difficult to achieve ........ (page 10)
10. Anti-takeover provisions and statutory provisions could
make takeover attempts more difficult to achieve ........ (page 10)
11. Employment agreements and severance plan could make
takeover attempts more difficult to achieve ............. (page 10)
12. Competition has hurt Indian Village's net interest
income .................................................. (page 10)
13. Possible limited market for Indian Village Bancorp's
common stock may lower market price ..................... (page 11)
14. Indian Village could hold your subscription funds for an
extended time period if the conversion is delayed ....... (page 11)
15. Banking reform legislation may reduce Indian Village
Bancorp's and Indian Village's powers ................... (page 11)
</TABLE>
BY EXECUTING THIS CERTIFICATION, INVESTORS ARE NOT WAIVING ANY RIGHTS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
Signature Date Signature Date
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
Name (Please Print) Name (Please Print)
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Subscription Rights
Special Notice
Any transfer of, or attempt to transfer, a subscription right to any other
person is illegal and subject to civil fines and/or penalties and even criminal
fines and/or penalties. The Bank intends to prosecute vigorously any transfer
of, or attempt to transfer, subscription rights that comes to its attention.
If you are (or have been already) contacted by anyone offering to give you
money to buy stock in exchange for transferring the stock to them later or to
share in any way proceeds upon the sale of the stock, or to transfer your
subscription rights in any other way, please call us immediately at (740) .
<PAGE>
THIS IS YOUR PROXY CARD.
YOU MAY RECEIVE MORE THAN ONE PROXY CARD IN THIS PACKET OF MATERIAL.
PLEASE VOTE ALL PROXY CARDS RECEIVED.
A POSTAGE PRE-PAID ENVELOPE IS INCLUDED IN THIS
PACKET FOR YOUR CONVENIENCE.
THANK YOU.
<PAGE>
Stock Order Form Instructions
- ------------------------------------------------------------------------------
If you decide to subscribe for common stock, you will need to register your
common stock in one of the following ways. Please consult this guide when
completing items 7 and 8 of your Stock Order Form.
Item 1--
. Fill in the number of shares that you wish to purchase.
. The minimum order is 25 shares. The maximum order for any person, including
Associates of and persons acting in concert with that person, is 15,000
shares.
. Indian Village Bancorp, Inc. and Indian Village Community Bank have the
right to reject the order of any subscriber who (i) submits false or
misleading information on a Stock Order Form or otherwise, (ii) attempts to
purchase shares in violation of the Plan or applicable law or (iii) fails to
cooperate with attempts to verify information with respect to subscription
rights.
. Failure to properly complete and return this Stock Order Form will result in
the loss of subscription rights.
Item 2--
. Multiply the shares ordered by $10 per share.
Item 3--
. Check the box if you are a director, officer or employee of Indian Village
Community Bank or are a member of such person's immediate family.
Item 4--
. You can pay for shares in cash (if delivered by you) or by check, bank draft
or money order made payable to Indian Village Bancorp, Inc.
. Funds earn interest at the current Indian Village Community Bank. passbook
rate until the offering is completed or terminated.
. Do not mail cash to purchase stock.
. Wire transfers will not be accepted as payment.
Item 5--
. If you plan to pay for your order by a withdrawal from a Indian Village
Community Bank deposit account, list the account number(s) and the amount of
withdrawal for each account.
. Your order will be returned if, on the date your order is received, the
accounts designated do not contain sufficient funds to complete your
purchase.
. There is no penalty for early withdrawals to use funds on deposit at Indian
Village Community Bank to pay for stock purchases.
. In order to use your Indian Village Community Bank IRA to order stock, you
must call the Stock Information Center before May , 1999 and complete all
required paperwork.
Item 6--
. Please check the appropriate box to tell us when you were a depositor of at
least $50.00 at Indian Village Community Bank.
. The preprinted account numbers correspond to the preprinted name and address
at the top of the order form.
. These may not be all of your qualifying accounts.
. You must make sure that every account you have ownership in or have had at
Indian Village Community Bank is listed.
. If you do not list all of your accounts, you may not receive all of the
shares you are eligible for.
Item 7--
. Please consult the Stock Ownership Guide below for help with these sections.
Item 8--
. The name and address for the stock registration should be the same as the
name and address in the preprinted section at the top of your Stock Order
Form.
Item 9--
. Please check the box if you are a member of the NASD or if this item
otherwise applies to you.
Item 10--
. Please check this box if any of your Associates or persons acting in concert
with you (as defined on the back of the Stock Order Form) have submitted
other orders for shares.
Item 11--
. Please sign and date the Stock Order Form where indicated and return it to
the address appearing on the front of this Stock Order Form.
. Review the Stock Order Form carefully, including the Acknowledgment, before
you sign.
. An additional signature is required only when payment is authorized from a
deposit account that requires multiple signatures to withdraw funds.
. If you have any remaining questions, or for assistance in completing your
Stock Order Form, please call the Stock Information Center at (740).
- -------------------------------------------------------------------------------
Stock Ownership Guide
- ------------------------------------------------------------------------------
If you decide to subscribe for common stock, you will need to register your
common stock in one of the following ways. Please consult this guide when
completing items 7 and 8 of your stock order form.
Individual
. Include the first name, middle initial and last name of the shareholder.
. Avoid the use of two initials.
. Omit titles such as "Mr." "Mrs." or "Dr."
Joint Tenants
. Joint Tenant can be used to identify two or more owners.
. When stock is held by joint tenants, ownership passes automatically to the
surviving joint tenant (s) upon the death of any joint tenant.
. All parties must agree to the transfer or sale of shares held by joint
tenants.
. In order to subscribe as joint tenants, all tenants must appear together on
an eligible joint tenant account at Indian Village Community Bank.
Tenants in Common
. Tenants in common may be used to identify two or more owners.
. When stock is held by tenants in common, upon the death of one co-tenant,
ownership of the stock is held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant.
. All parties must agree to the transfer or sale of shares held by tenants in
common.
. In order to subscribe as tenants in common, all tenants must appear
together on an eligible tenants in common account at Indian Village
Commuinity Bank.
Uniform Transfer to Minors
. Shares may be held in the name of a custodian for a minor under the Uniform
Transfer to Minors Acts of each state.
. There may be only one custodian and one minor designated on a stock
certificate.
. Example, shares held by John Doe as custodian for Susan Doe under the Ohio
Uniform Transfer to Minors Act will be abbreviated: John Doe, CUST Susan
Doe UTMA, OH.
. Use the minor's social security number.
Fiduciaries
Information provided with respect to shares to be held in a fiduciary capacity
must contain the following:
. The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title. If
an individual and a corporation, list the corporation before the
individual.
. The fiduciary capacity, such as administrator, executor, trustee,
committee, etc.
. The date of the document governing the relationship.
. The name of the maker, donor or testator and the name of the beneficiary.
. An example of fiduciary ownership in the case of a trust is:
John Doe, Trustee Under Agreement Dated 10-1-87 for Susan Doe.
- -------------------------------------------------------------------------------
