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PROSPECTUS Filed Pursuant to Rule 424(b)(3)
Registration No. 333-81551
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
a proposed holding company for
LEHIGH ACRES FIRST NATIONAL BANK
[INSERT COMPANY LOGO HERE]
1,000,000 Shares of Common Stock
$10.00 per share
-------------------------------
We are offering shares of common stock of Lehigh Acres First National
Bancshares, Inc. to fund the start-up of a proposed new community bank named
Lehigh Acres First National Bank. We will be the sole owner of Lehigh Acres
First National Bank, which will be headquartered in Lee County, Florida. We are
currently obtaining regulatory approvals for the bank and expect to open it in
the first quarter of 2000. This is our first offering of stock to the public and
there is no public market for our shares.
The shares will be sold by our sales agent, Berthel Fisher and Company
Financial Services, Inc., which has agreed to use its best efforts to sell a
minimum of 600,000 shares and a maximum of 1,000,000 shares, but must sell at
least 600,000 shares if it sells any. The minimum purchase requirement for
investors is 100 shares. Organizers and officers will receive warrants to
purchase one share of common stock at $10.00 a share for every share they
purchase in the offering.
We intend to close the offering on December 31, 1999, but we may extend
the offering until March 30, 2000 at the latest. We will place all money we
receive in the offering with an independent escrow agent who will hold the money
until we receive preliminary approval from our bank regulatory agencies for the
new bank. If we do not succeed before the end of the offering period, we will
return all funds received to the subscribers promptly, with interest.
This table summarizes the offering and the amounts we expect to
receive.
<TABLE>
<CAPTION>
Minimum Total Maximum Total
Per Share 600,000 Shares 1,000,000 Shares
--------- -------------- ----------------
<S> <C> <C> <C>
Public Offering Price .. $10.00 $6,000,000 $10,000,000
Sales Agency Commission $ .80 $ 326,400 $ 646,400
Proceeds to Lehigh Acres
Bancshares ............. $ 9.20 $5,673,600 $ 9,353,600
</TABLE>
We will not pay a sales commission for shares purchased by our officers
and directors, we will pay $.50 per share for shares sold to residents of Lehigh
Acres and investors recommended by our organizers, and we will pay $.80 per
share for all other shares sold to the public. The total sales agency
commissions in the table reflect a blended rate on the assumption that our
organizers and directors will purchase 117,000 shares, residents of Lehigh Acres
will purchase 200,000 shares, and that we will pay the maximum sales agency
commission of $.80 per share on the rest of the shares sold.
THIS IS A NEW BUSINESS. AS WITH ALL NEW BUSINESSES, AN INVESTMENT WILL
INVOLVE RISKS. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. YOU SHOULD NOT INVEST IN THIS OFFERING UNLESS
YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SOME OF THE RISKS OF THIS
INVESTMENT ARE DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[INSERT BERTHEL FISHER LOGO]
September 14, 1999
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LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
LEHIGH ACRES FIRST NATIONAL BANK
PROPOSED MARKET AREA
[INSERT MAP OF FLORIDA AND LEE COUNTY SHOWING MARKET AREA]
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SUMMARY
We encourage you to read the entire prospectus carefully before
investing. Because this section is a summary, it may not contain all of the
information about the offering that is important to you.
We are raising capital in this offering to open Lehigh Acres First
National Bank. The bank will be a new locally owned and operated community bank
which will serve Lee County, Florida. The bank will initially market its
services to customers in the following communities; Lehigh Acres, Alva,
Buckingham, and Gateway, Florida. Our initial office will be in Lehigh Acres,
Florida. We have received preliminary approvals from the Office of the
Comptroller of the Currency, the FDIC, and the Federal Reserve Board to open for
business. We expect to receive final regulatory approvals by the fourth quarter
of 1999. Our principal executive offices are located at:
1300 Homestead Road N.
Lehigh Acres, Florida 33936
Telephone: (941) 368-1190
Fax: (941) 368-1191
REASONS FOR STARTING LEHIGH ACRES FIRST NATIONAL BANK
We are organizing the bank to provide customer-oriented commercial and
consumer banking services to local businesses and individuals in the Lehigh
Acres area of Lee County. We will focus on offering our customers personalized
service and local decision-making, and we will emphasize our local ownership and
management and our strong ties to the Lee County community. Our customers will
consist primarily of individuals and small- to medium-sized businesses.
BOARD OF DIRECTORS AND MANAGEMENT
Lehigh Acres Bancshares was founded by the following fifteen business
leaders and who will also serve as our initial board of directors:
- Robert C. Bagans - Lawrence J. Murphy, D.V.M.
- Calvin H. Beals - Micki J. Regas
- Benjamin R. Bell - Patricia A. Regas
- Craig A. Dearden - E. Byron Richardson
- Paul F. Dinger - Kenneth K. Thompson
- Teresa Goodlad - Lloyd J. Weber
- James D. Hull - Kenneth C. Wolfe
- Vikas K. Jain, M.D.
Lloyd J. Weber will be our president and CEO. He is a seasoned banker
with almost thirty years of experience in operations, strategic planning,
marketing, and lending. From 1973 through 1998, Mr. Weber has served in various
executive capacities, including, chairman of the board, CEO, president, and
senior loan officer of several banks throughout the State of Florida. Mr. Weber
has resided in Florida for 27 years.
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TOTAL FUNDS TO BE RAISED IN THE OFFERING
The banking regulators have required us to have at least $5,000,000 in
capital to open the bank. Therefore, we plan to sell a minimum of 600,000 shares
and a maximum of 1,000,000 shares in the offering, all at $10.00 per share. We
anticipate our organizers and directors will purchase at least 117,000 shares in
the offering, for an investment of at least $1,170,000. We hope to raise the
rest of these funds primarily from individuals and businesses in Lee County who
share our desire to support a new local community bank in the area.
THE OFFERING
We will use the first $5,000,000 we raise in this offering to
capitalize Lehigh Acres Bank. We will use the remaining proceeds to pay expenses
and provide working capital. Lehigh Acres Bank will use some of the funds it
receives from our investment to pay expenses, for leasehold improvements, to
build and furnish its offices, and to provide working capital to operate the
bank. See "Use of Proceeds" on page 12.
FUNDS RECEIVED WILL BE PLACED IN ESCROW
Because we cannot open the bank without final regulatory approvals, we
will place all the proceeds raised in this offering with the Independent
Bankers' Bank of Florida acting as an independent escrow agent. The escrow agent
will hold these funds until we raise at least $6,000,000 and obtain preliminary
regulatory approvals to open the bank. In March 1999, we received the
preliminary approval of the Office of the Comptroller of the Currency to open
the bank, in April 1999, the FDIC preliminarily approved our application for
deposit insurance, and in August 1999, the Federal Reserve approved our
application to own Lehigh Acres Bank. Therefore, the only remaining condition
that we must satisfy prior to releasing the funds from escrow is raising at
least $6,000,000. We currently intend to close the offering on December 31,
1999, but may extend the date of the offering up to March 30, 2000. If we fail
to meet these conditions, we will refund your subscription in full, with
interest.
SHARES WILL BE SOLD BY A SALES AGENT
We have engaged Berthel Fisher & Company as our sales agent to sell
shares in the offering. The sales agent has agreed to use its best efforts to
sell the shares offered, but must sell at least 600,000 shares in order to sell
any. We have agreed to pay the sales agent no commission on shares sold in the
offering to our organizers and a 5% commission on shares sold to investors who
are (i) residents of the City of Lehigh Acres or (ii) whose names are provided
to the sales agent by our organizers, except that the 5% commission will not
apply to shares sold by selected dealers of the sales agent. We will pay the
sales agent an 8% commission on all other shares sold to the public, including
any shares sold by selected dealers of the sales agent. This will result in fees
and commissions of approximately $326,400 on the minimum of 600,000 shares and
$646,400 on the maximum of 1,000,000 shares. We will also pay the sales agent
$20,000 to develop a marketing plan. We will reimburse the sales agent for its
marketing expenses not to exceed $20,000.
WE DO NOT PLAN TO PAY DIVIDENDS
Because we are a new business, we will not pay dividends in the
foreseeable future. We intend to use all available earnings to fund the
continued operation and growth of the business and the bank.
LOCATION OF OFFICE
Our main office will be located at 1300 Homestead Road N., in the
Homestead Road Shopping Center in the central business district of Lehigh Acres,
Florida. We will lease this property at an initial monthly rate of $6,486. We
plan to open this office by the first quarter of 2000. See "Offices and
Facilities" on page 16.
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RISK FACTORS
The following is a summary of some of the risks which we will encounter
in starting and operating the new bank. There may be other risks that we are not
aware of and have not listed. Please read the entire prospectus for a more
thorough discussion of the risks of an investment in our common stock.
WE ARE A NEW BUSINESS AND CANNOT BE SURE WHETHER WE WILL BE SUCCESSFUL.
Neither Lehigh Acres Bancshares nor Lehigh Acres Bank has any operating
history. The operations of new businesses are always risky. Because Lehigh Acres
Bank has not yet opened, we do not have historical financial data and similar
information which would be available for a financial institution that has been
operating for several years.
WE EXPECT TO INCUR LOSSES FOR AT LEAST TWO YEARS AND THERE IS A RISK WE MAY
NEVER BECOME PROFITABLE.
In order for us to become profitable, we will need to attract a large
number of customers to deposit and borrow money. This will take time. We expect
to incur large initial expenses and may not be profitable for several years.
Although we expect to become profitable in our second year, there is a risk that
we may never become profitable and that you will lose part or all of your
investment.
WE CANNOT OPEN THE BANK FOR BUSINESS UNTIL WE RECEIVE REGULATORY APPROVALS,
WHICH ARE AT THE DISCRETION OF OUR REGULATORY AGENCIES.
We cannot begin operations until we receive all required regulatory
approvals. We will not receive these approvals until we satisfy certain
requirements for new banks imposed by state and federal regulatory agencies. We
believe that one requirement will be that we have at least $5 million to
capitalize the bank. We have already received preliminary approval from the
Office of the Comptroller of the Currency, the FDIC, and the Federal Reserve.
Any delay in starting operations will increase our pre-operational expenses,
such as salaries and other administrative expenses, without the ability to
generate any revenues. We expect to obtain all necessary approvals by the fourth
quarter of 1999, but it may take longer.
WE WILL DEPEND HEAVILY ON MR. LLOYD WEBER AND OUR BUSINESS WOULD SUFFER IF
SOMETHING WERE TO HAPPEN TO HIM OR IF HE WERE TO LEAVE.
Lloyd J. Weber will be our president and chief executive officer. Mr.
Weber will provide valuable services to us, and he would be difficult to
replace. If he were to leave, our business would suffer. We will carry key man
life insurance on Mr. Weber, payable to the bank, in the amount of $500,000.
THE OFFERING PRICE OF $10.00 WAS DETERMINED ARBITRARILY AND MAY NOT REFLECT THE
VALUE OF THE SHARES.
Because we do not have any history of operations, we determined the
offering price arbitrarily. The offering price is essentially the book value of
the shares prior to deduction for expenses of the offering and the organization
of the bank. The offering price may not be indicative of the present or future
value of the common stock. As a result, the market price of the stock after the
offering may be more susceptible to fluctuations than it otherwise might be. The
market price will be affected by our operating results, which could fluctuate
greatly. These fluctuations could result from expenses of operating and
expanding Lehigh Acres First National Bank, trends in the banking industry,
economic conditions in our market area, and other factors which are beyond our
control.
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WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
AVAILABLE AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE THE
SHARES AFTER THE OFFERING.
Prior to this offering, there has been no public trading market for our
shares. After the offering, we will encourage broker-dealers to match buy and
sell orders, or "make a market," for our common stock on the Over-the-Counter
Bulletin Board. However, we do not currently have any broker-dealers that are
willing to make a market in our common stock, and there is a risk that none will
ever do so. Even if a market is made for our common stock, the trading markets
for securities quoted on the OTC Bulletin Board typically lack the depth,
liquidity, and orderliness necessary to maintain a liquid market. A public
market having depth and liquidity depends on having enough buyers and sellers at
any given time. Because this a relatively small offering, we do not expect to
have enough shareholders or outstanding shares to support an active trading
market, and we do not expect a liquid market for our common stock to develop for
several years, if at all. Accordingly, investors should consider the potential
illiquid and long-term nature of an investment in our common stock.
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED
BANKS WHICH COULD PREVENT US FROM OBTAINING CUSTOMERS AND MAY CAUSE US TO HAVE
TO PAY HIGHER INTEREST RATES TO ATTRACT CUSTOMERS.
We will encounter strong competition from existing banks and other
types of financial institutions operating in the Lee County area and elsewhere.
Some of these competitors have been in business for a long time and have already
established their customer base and name recognition. Most are larger than we
will be and have greater financial and personal resources than we will have.
Some are affiliated with large super-regional and regional banks like Bank of
America (formerly Nationsbank), First Union, and SouthTrust, and offer services,
such as extensive and established branch networks and trust services that we
either do not expect to provide or will not provide for some time. Due to this
competition, we may have to pay higher rates of interest to attract deposits. In
addition, competitors that are not depository institutions are generally not
subject to the extensive regulations that will apply to our bank. See "Proposed
Business - Competition" and "Supervision and Regulation" starting on page 24.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of Lehigh Acres Bank's capital. The legal lending limit is 15% of the
bank's capital and surplus. We expect that our initial legal lending limit will
be approximately $690,000 immediately following the offering, but we intend to
impose an internal limit on the bank of 80% of this amount, or approximately
$550,000. Until the bank is profitable, we will lose money, which will decrease
our capital and therefore our lending limit. Our lending limit will be
significantly less than the limit for most of our competitors and may affect our
ability to seek relationships with larger businesses in our market area. We
intend to accommodate larger loans by selling participations in those loans to
other financial institutions.
WE HAVE IMPLEMENTED ANTI-TAKEOVER DEVICES WHICH COULD PREVENT ANOTHER COMPANY
FROM PURCHASING US, EVEN THOUGH SUCH A PURCHASE MAY INCREASE SHARE VALUE.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. However, state and federal law and our articles
of incorporation and bylaws make it difficult for anyone to purchase Lehigh
Acres Bancshares without approval of our board of directors. For a discussion of
some of these provisions, please see "Description of Capital Stock -
Anti-takeover Effects" on page 38.
WE ARE AUTHORIZED TO ISSUE PREFERRED STOCK WHICH, IF ISSUED, MAY ADVERSELY
AFFECT YOUR VOTING RIGHTS AND REDUCE THE MARKET PRICE OF THE COMMON STOCK.
We are authorized by our articles of incorporation to issue shares of
preferred stock without the consent of the shareholders. Preferred stock, when
issued, may rank senior to common stock with respect to voting rights, the
payment of dividends, and amounts received by shareholders upon liquidation,
dissolution, or winding
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up. The existence of rights which are senior to common stock may reduce the
price of our shares. We do not have any plans to issue any shares of preferred
stock at this time.
THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE STOCK DILUTION AND MAY
ADVERSELY AFFECT THE VALUE OF OUR COMMON STOCK.
The organizers and officers may exercise warrants and options to
purchase common stock, which would result in the dilution of your proportionate
interests in Lehigh Acres Bancshares. Upon completion of the offering, we will
issue to the organizers warrants to purchase one share of common stock at $10.00
per share for every share they purchase in the offering. If the organizers
purchase 117,000 shares in the offering, we will issue warrants to purchase an
additional 117,000 shares of common stock to them. In addition, after the
offering, we expect to adopt a stock option plan which will permit us to grant
options to our officers, directors, and employees. We anticipate that we will
initially authorize the issuance of a number of shares under the stock option
plan equal to 15% of the shares outstanding after the offering. We do not intend
to issue stock options at less than the fair market value of the common stock on
the date of grant.
WE MAY NOT ALLOCATE ALL OF THE NET PROCEEDS IN THE MOST PROFITABLE MANNER.
After capitalizing Lehigh Acres Bank with $5,000,000, we will have
broad discretion in allocating the remaining proceeds. If we complete the
maximum offering, these remaining proceeds will be approximately $4,243,000, or
42% of the proceeds of the offering. Initially we plan to invest these proceeds
in United States government securities or deposit them with the bank, and in the
long term we intend use them for general corporate purposes. We cannot predict
the extent to which we will allocate these funds to income-generating assets,
capital assets, or liquidity. Although we intend to utilize these funds to serve
Lehigh Acres Bancshares' best interest, we cannot assure you that our allocation
will ultimately reflect the most profitable application of these proceeds.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS OR THOSE OF OUR PROCESSING VENDORS OR
LOAN CUSTOMERS COULD FAIL TO OPERATE ON JANUARY 1, 2000.
Like many financial institutions, we will rely upon computers for
conducting our business and for information systems processing. There is concern
among industry experts that on January 1, 2000, computers will be unable to read
or interpret the new year and there may be widespread computer malfunctions. We
will generally rely on software and hardware developed by independent third
parties to provide our information systems. We will request warranties about
Year 2000 compliance from the primary third party hardware and software system
providers we use. We believe that our other internal systems and software,
including our network connections, will be programmed to comply with Year 2000
requirements, although there is a risk they may not comply. Based on information
currently available, we believe that we will not incur significant expenses in
connection with the Year 2000 issue.
The Year 2000 issue may also negatively affect the business of our
customers. We intend to include Year 2000 readiness in our lending criteria to
minimize this risk. However, we cannot be certain that this will eliminate the
issue, and any financial difficulties our customers experience as a result of
Year 2000 issues could impair their ability to repay loans to the bank.
We may not open the bank until after January 1, 2000, at which time we
believe that most of the uncertainty surrounding the Year 2000 issue should be
resolved. In this event, our risks associated with computer malfunctions should
be greatly reduced, but we will still seek to ensure that our computer systems
and our major vendors' and clients' computer systems are in compliance and
functioning properly. For more information on Year 2000 issues, please refer to
page 16.
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FORWARD LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements"
concerning Lehigh Acres Bancshares and Lehigh Acres Bank and their operations,
performance, financial conditions, and likelihood of success. These statements
are based on many assumptions and estimates. Our actual results will depend on
many factors about which we are unsure, including those discussed above. Many of
these risks and factors are beyond our control. The words "may," "would,"
"could," "will," "expect," "anticipate," "believe," "intend," "plan," and
"estimate," as well as similar expressions, are meant to identify such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to:
- significant increases in competitive pressure in the banking and
financial services industries;
- changes in the interest rate environment which could reduce
anticipated or actual margins;
- changes in political conditions or the legislative or regulatory
environment;
- general economic conditions, either nationally or regionally and
especially in southwest Florida, becoming less favorable than
expected resulting in, among other things, a deterioration in
credit quality;
- changes occurring in business conditions and inflation;
- changes in technology;
- changes in monetary and tax policies;
- changes in the securities markets; and
- other risks and uncertainties detailed from time to time in the
filings of Lehigh Acres Bancshares with the Securities and
Exchange Commission.
The most significant of these risks, uncertainties, and other factors are
discussed under the heading "Risk Factors," beginning on page 5 of this
prospectus, and prospective investors are urged to carefully consider such
factors.
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THE OFFERING
GENERAL
We are offering a minimum of 600,000 shares and a maximum of 1,000,000
shares of our common stock at a price of $10.00 per share to raise between
$6,000,000 and $10,000,000. We intend to impose a minimum purchase requirement
for any investor of 100 shares and the maximum purchase of 5% of the offering,
although we reserve the right to accept subscriptions for more or less.
The organizers and directors intend to purchase 117,000 shares in the
offering, for a total investment of $1,170,000. As a result, they will own
approximately 19.5% of the common stock outstanding upon completion of the
offering if we sell the minimum number of 600,000 shares, and 11.7% of the
common stock outstanding upon completion of the offering if we sell the maximum
number of 1,000,000 shares. Additionally, each of the organizers will receive a
warrant to purchase one additional share of common stock at $10.00 per share for
each share purchased in the offering, exercisable for ten years after the
completion of the offering. If each organizer exercises his warrant in full, the
organizers' ownership of Lehigh Acres Bancshares will increase to 32.6% based on
the minimum offering and 20.9% based on the maximum offering. Although they have
not promised to do so, the organizers may purchase additional shares in the
offering, including up to 100% of the minimum offering. All shares purchased by
the organizers will be for investment and not intended for resale. Because
purchases by the organizers may be substantial, you should not assume that the
sale of a specified minimum offering amount indicates the merits of this
offering.
We must receive your subscription for shares before midnight, Eastern
Standard Time, on December 31, 1999, unless all of the shares are sold earlier
or the offering is terminated or extended. We reserve the right to terminate the
offering at any time or to extend the expiration date up to March 30, 2000.
Extension of the expiration date might cause an increase in our expenses. We do
not have to give you any prior written notice of an extension. If we extend the
offering, subscriptions we have already accepted will still be binding. We do,
however, intend to communicate quarterly with all subscribers and inform you of
any extensions of the offering.
Accepted subscriptions will be binding and may not be revoked except
with our consent. We reserve the right to cancel or reject any or all of any
subscription before or after acceptance until the proceeds of this offering are
released from escrow. We may also allocate shares among subscribers if the
offering is oversubscribed; however, we believe that we will not have to adjust
subscribers for the minimum number of shares. In deciding which subscriptions to
accept, we may take into account any factors, including:
- the order in which subscriptions are received,
- a subscriber's potential to do business with or to direct
customers to the bank, and
- our desire to have a broad distribution of stock ownership.
If we reject any subscription, or accept a subscription but subsequently elect
to cancel all or part of such subscription, we will refund the amount remitted
for shares for which a subscription is rejected or canceled. We will issue
certificates for shares which have been subscribed and paid for promptly after
we receive the funds out of escrow.
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
We will place all subscription proceeds with an independent escrow
agent. The escrow agent will hold these funds, and no shares will be issued,
until:
- We have accepted subscriptions and payment in full for a minimum
of 600,000 shares at $10.00 per share;
- We have obtained preliminary approval from the Federal Reserve to
acquire the stock of the bank, which we have already obtained;
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- We have obtained preliminary approval from the Office of the
Comptroller of the Currency to grant us a national bank charter,
which we have already obtained; and
- We have received preliminary approval of the bank's application
for deposit insurance from the FDIC, which we have already
obtained.
If we terminate the offering without accepting subscriptions or if the offering
period expires before these conditions are satisfied, then:
- We will cancel all subscription agreements and subscribers in the
offering will not become shareholders;
- The funds held in the escrow account will not be subject to the
claims of any of our creditors or available to defray the expenses
of this offering; and
- We will return the full amount of all subscription funds promptly
to subscribers, with interest.
The escrow agent has not investigated the desirability, advisability,
or merits of a purchase of the shares. The escrow agent will invest escrowed
funds in interest-bearing savings accounts, short-term United States Treasury
securities, FDIC-insured bank deposits, or such other investments as we agree on
with the escrow agent. We do not intend to invest the subscription proceeds held
in escrow in instruments that would mature after the expiration date of the
offering.
If the conditions for releasing subscription funds from escrow are met
and the funds are released but we do not receive final regulatory approval to
operate the bank, or if the bank does not open for any other reason, our board
of directors intends to propose that the shareholders approve a plan to
liquidate Lehigh Acres Bancshares. If this plan is adopted, we would be
dissolved and our net assets, consisting primarily of the funds received in this
offering less the costs and expenses we have incurred, would be distributed to
our shareholders.
PLAN OF DISTRIBUTION
We have entered into an agreement with Berthel Fisher and Company to
sell up to 1,000,000 shares of our common stock. We have agreed to pay the sales
agent no commission on shares sold in the offering to our organizers and a 5%
commission on shares sold to investors who are (i) residents of the City of
Lehigh Acres or (ii) whose names are provided to the sales agent by our
organizers, except that the 5% commission will not apply to shares sold by
selected dealers of the sales agent. We will pay the sales agent an 8%
commission on all other shares sold to the public, including any shares sold by
selected dealers of the sales agent. We will also pay the sales agent $20,000 to
develop a marketing plan. We will reimburse the sales agent for its marketing
expenses not to exceed $20,000.
The sales agency agreement provides for reciprocal indemnification
between Lehigh Acres Bancshares and the sales agent against certain liabilities
in connection with this offering, including liabilities under the Securities Act
of 1933. The SEC has advised us that it believes such indemnification is against
public policy as expressed by the Securities Act of 1933 and is, therefore,
unenforceable.
Prior to this offering there has been no public market for our shares.
We established the initial offering price of the shares based upon our
assessment of the capital needs of Lehigh Acres Bancshares and the commercial
potential of the services to be offered by Lehigh Acres Bank. We have discussed
the establishment and maintenance of a market for the shares after the offering
with the sales agent. Based upon the discussions, we expect that a secondary
market may eventually develop for the shares, although we cannot be sure. In
general, if a secondary market develops, the shares other than those held by
affiliates will be freely transferable in the secondary market. See "Description
of the Capital Stock of Lehigh Acres Bancshares - Shares Eligible for Future
Sale" on page 39. Once a secondary market is established, the market makers may
or may not continue to maintain the secondary market, based on factors such as
the degree to which the secondary market is active.
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HOW TO SUBSCRIBE
If you desire to purchase shares of the common stock of Lehigh Acres
Bancshares, you should:
1. Complete, date, and execute the subscription agreement which
you received with this prospectus;
2. Make a check, bank draft, or money order payable to
"Independent Bankers' Bank of Florida, Escrow Account for
Lehigh Acres First National Bancshares, Inc.," in the amount
of $10.00 times the number of shares you wish to purchase; and
3. Deliver the completed subscription agreement and check to the
sales agent at the following address:
Diane Anderson
Corporate Office
Berthel Fisher & Company
100 Second Street, N.E.
Cedar Rapids, Iowa 52407-4250
If you have any questions about the offering or how to subscribe,
please call Mr. Lloyd Weber at (941) 368-1190 (or any of the other organizers)
or Mr. Tim Moody with Berthel Fisher & Company at 1-800-356-5234. If you
subscribe, you should retain a copy of the completed subscription agreement for
your records. You must pay the subscription price at the time you deliver the
subscription agreement.
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USE OF PROCEEDS
Below, we describe how we intend to use the funds received in this
offering based on our plans and estimates of our start-up expenses. Our actual
expenses may be different. Although we believe that the minimum proceeds of
$6,000,000 from the offering will satisfy our cash requirements for our first
twelve months of operation, we cannot be sure. Because we are a new enterprise,
we cannot predict the bank's ability to generate revenue to cover its expenses,
and therefore we cannot predict how we will actually use the proceeds. To date
our expenses have been funded by an initial $180,000 investment from some of
our organizers to whom we issued 18,000 shares of our common stock at $10.00
per share, a $30,000 loan by two individuals, and a line of credit with The
Independent Bankers' Bank of Florida guaranteed by the organizers. If we
complete the offering, we will use some of the proceeds to pay down the line of
credit and the loan, and we will redeem the 18,000 shares issued to some of our
organizers for their initial investment at $10.00 per share.
The following table shows the expected proceeds from the offering. The
total sales agency commissions payable in the event of a minimum offering and a
maximum offering assume that 117,000 shares will be purchased by our organizers
and directors for no commission, 200,000 shares will be purchased by residents
of Lehigh Acres for a commission of $.50 per share, and the remaining shares
will be sold to the public for which we will pay the maximum sales agency
commission of $.80 per share. All shares, including those to our organizers,
will be at the offering price of $10.00 per share. Based on our assumptions, the
gross proceeds, expenses, and net proceeds from the minimum and maximum offering
would be as follows:
<TABLE>
<CAPTION>
Minimum Total Maximum Total
Per Share 600,000 Shares 1,000,000 Shares
--------- -------------- ----------------
<S> <C> <C> <C>
Public Offering Price .. $10.00 $6,000,000 $10,000,000
Sales Agency Commission $ (.80) $ (326,400) $ (646,400)
------ ---------- -----------
Proceeds to Lehigh Acres
Bancshares ............. $ 9.20 $5,673,600 $ 9,353,400
====== ========== ===========
</TABLE>
12
<PAGE> 13
USE OF PROCEEDS BY LEHIGH ACRES FIRST NATIONAL BANCSHARES
The following table shows our anticipated use of the proceeds by Lehigh
Acres Bancshares of the offering based on the sale of the minimum number and
maximum number of shares. The gross proceeds shown in the table include
$1,170,000 we expect to receive from our organizers and directors. As shown, a
minimum of $5,000,000 will be invested in Lehigh Acres Bank. After we make this
capital investment and we pay all of the costs of organizing the bank, we will
retain 100% of the excess in Lehigh Acres Bancshares. We will initially invest
these proceeds in United States government securities or deposit them with
Lehigh Acres Bank. In the long-term, we will use these funds for the operational
expenses of Lehigh Acres Bancshares and Lehigh Acres Bank and for other general
corporate purposes, including the provision of additional capital to the bank,
if necessary. We may also use these proceeds to expand, for example by opening
additional branches or acquiring other financial institutions. We do not
currently have any definitive plans for expansion. We have established a line of
credit in the amount of $250,000 at the prime rate minus 1% with the Independent
Bankers' Bank of Florida to pay for organizational expenses. We plan to pay down
this line of credit with proceeds from the offering.
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
600,000 shares 1,000,000 shares
-------------- ----------------
<S> <C> <C>
Gross proceeds from offering.................................. $ 6,000,000 $10,000,000
Sales Agency Commission....................................... $ (326,400) $ (646,400)
Offering and organizing expenses of Lehigh Acres Bancshares... $ (109,780) $ (109,780)
Investment in capital stock of the bank....................... $(5,000,000) $(5,000,000)
------------ ------------
Remaining proceeds............................................ $ 563,820 $ 4,243,820
=========== ===========
</TABLE>
13
<PAGE> 14
USE OF PROCEEDS BY LEHIGH ACRES FIRST NATIONAL BANK
The following table shows the anticipated use of the proceeds by Lehigh
Acres Bank. All proceeds received by the bank will be in the form of an
investment in the bank's capital stock by Lehigh Acres Bancshares as described
above. We have entered into a long-term lease for our offices with an option to
extend. The table below reflects our rent obligation for this facility for our
initial 12 months of operation of $6,486 per month from January 2000 through May
2000 and $7,252 per month from June 2000 through December 2000. We expect our
main office to be completed by January 2000. Furniture, fixtures, and equipment
will be capitalized and amortized over the life of the lease or over the
estimated useful life of the asset. The remaining proceeds will be used to fund
loans or invested in investment grade bonds and government securities, but we
have not determined specifically how we will allocate or invest these funds.
These numbers are estimates only. We cannot assure you that we will open on time
or ever. If the opening of the bank is delayed, our expenses will be
substantially higher.
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
600,000 shares 1,000,000 shares
-------------- ----------------
<S> <C> <C>
Investment by Lehigh Acres Bancshares in the bank's
capital stock .................................. $5,000,000 $5,000,000
Organizational and pre-opening expenses of the bank $ (400,000) $ (400,000)
Furniture, fixtures and equipment ................. $ (250,000) $ (250,000)
Lease of permanent facility ....................... $ (83,180) $ (83,180)
Construction of leasehold Improvements ............ $ (150,000) $ (150,000)
Other operational losses in first year ............ $ (170,000) $ (170,000)
---------- ----------
Remaining proceeds ................................ $3,946,820 $3,946,820
========== ==========
</TABLE>
14
<PAGE> 15
CAPITALIZATION
The following table shows Lehigh Acres Bancshares' capitalization as of
June 30, 1999 and the pro forma consolidated capitalization of Lehigh Acres
Bancshares and the bank as adjusted to give effect to the sale of the minimum
and maximum number of shares. All numbers on the "As Adjusted" columns reflect
the proposed initial investment by the organizers and directors of $1,170,000.
The additional paid in capital section shows capital to be received in the
offering for the minimum and maximum offerings, less the sales agent commissions
and expenses of the offering which are charged against this account. The "As
Adjusted" columns also reflect the estimated cost of organizing Lehigh Acres
Bancshares and organizing and preparing to open Lehigh Acres Bank through the
expected opening date, which should be in the first quarter of 2000. See "Use of
Proceeds" above.
Please note that you will probably experience additional dilution due
to operating losses expected during the initial years of the our operations.
<TABLE>
<CAPTION>
As Adjusted As Adjusted
For for
June 30, 1999 Minimum Offering Maximum Offering
------------- ---------------- ----------------
<S> <C> <C> <C>
Shareholders Equity:
Common Stock, par value $.01 per share; 10,000,000
shares authorized; 18,000 shares issued and
outstanding; 600,000 shares issued and outstanding
as adjusted (minimum offering); 1,000,000 shares
issued and outstanding (maximum offering) ........ $ 180 $ 6,000 $ 10,000
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding ... 0 0 0
Additional paid-in capital ............................ $ 179,820 $5,667,600 $9,343,600
Deficit accumulated during the pre-opening stage ...... $(194,476) $ (509,780) $ (509,780)
--------- ---------- ----------
Total shareholders' equity (deficit) .................. $ (14,476) $5,163,820 $8,843,820
========= ========== ==========
Book Value Per Share .................................. $ (.80) $ 8.61 $ 8.84
========= ========== ==========
</TABLE>
DIVIDEND POLICY
We expect to initially retain all earnings to operate and expand the
business. It is unlikely that we will pay any cash dividends in the near future.
Our ability to pay any cash dividends will depend primarily on Lehigh Acres
Bank's ability to pay dividends to Lehigh Acres Bancshares, which depends on the
profitability of the bank. In order to pay dividends, the bank must comply with
the requirements of all applicable laws and regulations. See "Supervision and
Regulation - The Bank - Dividends" on page 27 and "Supervision and Regulation -
The Bank - Capital Regulations" on page 28. In addition to the availability of
funds from the bank, our dividend policy is subject to the discretion of our
board of directors and will depend upon a number of factors, including future
earnings, financial condition, cash needs, and general business conditions.
15
<PAGE> 16
PLAN OF OPERATION
GENERAL
Lehigh Acres Bancshares was formed to organize and own all of the
capital stock of Lehigh Acres Bank. The organizers filed an application with the
Office of the Comptroller of the Currency on June 26, 1998 to charter the bank
as a national bank, and it was preliminarily approved on March 30, 1999. We
obtained the preliminary approval of the FDIC to receive federal deposit
insurance on April 2, 1999 and approval from the Federal Reserve to become a
bank holding company on August 13, 1999. Whether the charter is issued and
deposit insurance is obtained will depend upon compliance with legal
requirements imposed by the Office of the Comptroller of the Currency, FDIC, and
Federal Reserve, which includes capitalization of the bank with at least
$5,000,000. We expect to receive all regulatory approvals as soon as we raise
at least $6,000,000 in this offering.
EXPENSES
As of June 30, 1999, Lehigh Acres Bancshares had total assets of
$27,522, consisting of cash $2,308, deferred registration costs of $23,319 and
other assets $1,895. Lehigh Acres Bancshares incurred a net loss of $194,476 for
the period from its inception on April 14, 1998 through June 30, 1999.
On completion of the offering and opening of the bank, we expect we
will have incurred the following expenses:
- $ 646,400 in commissions to the sale agent in the event of a
maximum offering, which will be deducted from the proceeds of the
offering.
- $ 109,780 in expenses of organizing Lehigh Acres Bancshares, which
will be charged against the income of Lehigh Acres Bancshares.
- $ 400,000 in expenses to organize and prepare to open Lehigh Acres
Bank, consisting principally of salaries, overhead and other
operating costs, will be charged against the income of Lehigh
Acres Bank.
- $ 150,000 for the construction of leasehold improvements.
- $ 250,000 for furniture, fixtures, and equipment.
OFFICES AND FACILITIES
The bank's permanent office will be located in a facility at the
intersection of Homestead Road and Plaza Drive in the Homestead Road Shopping
Center in the heart of Lehigh Acres' business district. We have leased a 4,700
square foot permanent facility with three drive-through service lanes at this
location at an initial rental rate of $6,486 per month. The term of the lease is
16 years, with an option to renew the lease for another 10 years. We also intend
to construct leasehold improvements to this facility prior opening the bank at a
projected cost of $150,000. We will purchase furniture, fixtures, and equipment
for the bank at a projected cost of $250,000. We believe that this facility will
adequately serve the bank's needs for its first several years of operation.
YEAR 2000 ISSUES
Like many financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000, computers will be unable
to "read" the new year and there may be widespread computer malfunctions. We
will generally be relying on software and hardware developed by independent
third parties for our information systems.
We have entered into an agreement with M & I Data Services to provide
our core data processing software and services and our ATM services. We plan to
request and review testing and results from each of our vendors demonstrating
Year 2000 readiness and compliance. We have prepared a comprehensive Year 2000
Plan. Our chief executive officer will implement the plan with oversight from
our board of directors. The plan involves investigation of each vendor,
validation of each vendor's testing procedures and results, testing on our own
systems if reasonable, and receiving Year 2000 warranties from each of our
selected vendors. Based on our
16
<PAGE> 17
preliminary review of each vendor, we do not believe that any of them have any
significant Year 2000 problems. We will seek to ensure that our agreements with
our primary vendors include warranties regarding Year 2000 compliance, although
the remedies available under such agreements include standard disclaimers of
liability and specifically exclude special, incidental, indirect, and
consequential damages.
Our customers may also have Year 2000 issues. We may incur losses if
such issues affect our loan customers' ability to repay their loans or if they
suffer material harm to their businesses as a result. We intend to require
certification from each commercial borrower that their systems are Year 2000
compliant and that they do not expect to be adversely affected by the year
change. Although these certifications will be helpful, it would be very
difficult for us to accurately assess the Year 2000 readiness of any borrower.
We may therefore suffer loan losses from customers who have significant Year
2000 problems.
We anticipate opening the bank after January 1, 2000, at which time we
believe that most of the uncertainty surrounding the Year 2000 issue should be
resolved. In this event, our risks associated with computer malfunctions should
be greatly reduced, but we will still seek to ensure that our computer systems
and our major vendors' and clients' computer systems are in compliance and
functioning properly.
17
<PAGE> 18
PROPOSED BUSINESS
GENERAL
We incorporated Lehigh Acres Bancshares as a Florida corporation on May
19, 1999 primarily to function as a holding company to own and control all of
the capital stock of Lehigh Acres Bank. We initially will engage in no business
other than owning and managing the bank.
We have chosen this holding company structure because we believe it
will provide flexibility that would not otherwise be available. Subject to
Federal Reserve Board debt guidelines, the holding company structure can assist
the bank in maintaining its required capital ratios by borrowing money and
contributing the proceeds to the bank as primary capital. Additionally, a
holding company may engage in certain non-banking activities that the Federal
Reserve Board has deemed to be closely related to banking. Although we do not
presently intend to engage in other activities, we will be able to do so with a
proper notice or filing to the Federal Reserve if we believe that there is a
need for these services in our market area and that such activities could be
profitable.
We are organizing the bank as a national bank under the laws of the
United States and, subject to regulatory approval, will engage in a commercial
and consumer-banking business with deposits insured by the FDIC. The bank may
not commence business until the Office of the Comptroller of the Currency issues
a charter for the bank and the FDIC grants deposit insurance to the bank.
STATUS OF ORGANIZATION
On June 26, 1998 our directors filed, as organizers, an application
with the Office of the Comptroller of the Currency for permission to operate a
national bank and an application with the Federal Deposit Insurance Corporation
for deposit insurance. On March 30, 1999, the Office of the Comptroller of the
Currency issued an order preliminarily approving the charter of the bank with
conditions, including the receipt of federal deposit insurance and satisfaction
of minimum capital requirements. On April 2, 1999, the Federal Deposit Insurance
Corporation approved the bank's application for federal deposit insurance
subject to conditions including minimum capital requirements. The Federal
Reserve Board approved our application to become a bank holding company through
ownership of the bank on August 13, 1999. We expect to be in a position to
satisfy all conditions of our regulatory approvals upon the completion of this
offering.
MANAGEMENT
We have retained Lloyd Weber to lead the management teams for both
Lehigh Acres Bancshares and Lehigh Acres Bank as their president and chief
executive officer. He has over 30 years of experience in the banking industry.
Until Mr. Weber resigned to begin preparations to open Lehigh Acres Bank, he
served as the senior vice president and senior loan officer (Lee County) of
Florida Community Bank.
SERVICE AREA
We expect initially to draw a large percentage of our business from the
Lee County area, primarily Lehigh Acres. Lee County has been one of the fastest
growing regions in Florida over the last several years. The county's population
has grown from 335,113 in 1990 to 389,100 in 1997. By 2005, the population is
expected to reach 463,195, an increase of over 19% since 1997. The economy in
this area has been strong as well. The primary employment industries in the area
are real estate, finance, insurance, and service. The unemployment rate dropped
to 3.0% in 1998 and gross retail sales in the county increased 10% from 1997 to
1998 to $6.2 billion. During the same period, the annual rate of construction of
single family homes increased 10% and that of multi-family units increased
almost 50%. While the economy in this area has been strong in recent years, an
economic downturn in the area would hurt our business.
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<PAGE> 19
MARKETING FOCUS
Most of the banks in the Lee County area are now local branches of
large regional banks. Although size gives the larger banks certain advantages in
competing for business from large corporations, including higher lending limits
and the ability to offer services in other areas of Florida and of Lee County,
we believe that there is a void in the community banking market in the Lehigh
Acres and greater Lee County areas and believe that the bank can successfully
fill this void. We will not compete with large institutions for the primary
banking relationships of large corporations, but we will compete for niches in
this business and for the consumer business of their employees. We will also
focus on small- to medium-sized businesses and their employees.
We plan to advertise to emphasize our local ownership, community focus,
and ability to provide more personalized service than our competition. We will
also have the ability to offer large bank services. Most of the organizers are
long-time residents and business people in the target market area and have
determined the credit needs of the area through personal experience and
communications with their business colleagues. We believe that the proposed
community focus of the bank will succeed in this market and that the area will
react favorably to the bank's emphasis on service to small businesses,
individuals, and professional concerns.
The bank will be active in providing residential mortgages, acquisition
and development financing for subdivisions, and construction, and permanent
financing for commercial real estate, particularly owner-occupied property.
Consumers will enjoy extended bank operating hours, drive-up windows,
drive-up ATMs, and a convenient centrally-located main office location where
road infrastructure is in place to make access easier. We will emphasize local
decision-making with experienced bankers, attention to lower employee turnover,
and professional and responsive service. We believe customers will be responsive
to a banking environment where they are encouraged with an approach of "what the
bank can do for you" versus an approach of "what the bank can't do for you."
This highlights the community bank approach we will take in the market place.
DEPOSITS
We intend to offer a full range of deposit services that are typically
available in most banks and savings and loan associations, including checking
accounts, commercial accounts, savings accounts, and other time deposits of
various types, ranging from daily money market accounts to longer-term
certificates of deposit. The transaction accounts and time certificates will be
tailored to our principal market area at rates competitive to those offered in
the Lee County area. In addition, we intend to offer certain retirement account
services, such as Individual Retirement Accounts (IRAs). We intend to solicit
these accounts from individuals, businesses, associations, organizations, and
governmental authorities.
LENDING ACTIVITIES
General. We intend to emphasize a range of lending services, including
real estate, commercial, and consumer loans to individuals and small- to
medium-sized businesses and professional concerns that are located in or conduct
a substantial portion of their business in the our market area. We will
initially emphasize retail banking, home mortgages, real estate, and consumer
lending needs.
Real Estate Loans. We expect that loans secured by first or second
mortgages on real estate will make up a significant portion of the bank's loan
portfolio. These loans will generally fall into one of three categories:
commercial real estate loans, construction and development loans, or residential
real estate loans. Each of these categories is discussed in more detail below,
including their specific risks. Home equity loans are not included because they
are classified as consumer loans, which are discussed below under a separate
heading. Interest rates for all categories may be fixed or adjustable, and will
more likely be fixed for shorter-term loans. The bank will generally charge an
origination fee for each loan.
The principal economic risk associated with real estate loans is cash
flow capability and creditworthiness of the borrowers. Other risks associated
with real estate loans vary with many economic factors, including
19
<PAGE> 20
employment levels, strength of the local and national economies, and
fluctuations in the value of real estate, the primary form of collateral for
these types of loans. Deterioration of any of these factors after a loan has
been made could negatively affect a borrower's cash flow, creditworthiness, and
ability to repay the loan. On first and second mortgage loans we would typically
not advance more than 90% of the lesser of the cost or appraised value of the
property. In the event we advance more than 80% of the lesser of the cost or
appraised value of a property, we will require mortgage insurance. We will
require a valid mortgage lien on all real property loans along with a title lien
policy which insures the validity and priority of the lien. We will also require
borrowers to obtain hazard insurance policies and flood insurance if applicable.
We will compete for these loans with competitors who are well
established in the Lee County area and have greater resources and lending
limits. As a result, we may have to charge lower interest rates to attract
borrowers.
We will have the ability to originate real estate loans for sale into
the secondary market. We may be able to limit our interest rate and credit risks
on these loans by locking the interest rate for each loan with the secondary
investor and receiving the investor's underwriting approval prior to originating
the loan.
Commercial Real Estate Loans. Commercial real estate loans will
generally have terms of five years or less, although payments may be structured
on a longer amortization basis. Risks associated with commercial real estate
loans include the general risk of the failure of each commercial borrower, which
will be different for each type of business and commercial entity. We will
evaluate each business on an individual basis and attempt to determine its
business risks and credit profile. We may or may not be successful. We will
attempt to reduce credit risk in the commercial real estate portfolio by
emphasizing loans on owner-occupied office and retail buildings where the
loan-to-value ratio, established by independent appraisals, does not exceed 80%.
We will also generally require that the debtor has sufficient cash flow to
handle the debt service. We will typically review all of the personal financial
statements of the principal owners and require their personal guarantees. One
purpose of these reviews is to reveal secondary sources of payment and liquidity
to support a loan request.
Construction and Development Real Estate Loans. We will offer
adjustable and fixed rate residential and commercial construction loans to
builders and developers and to consumers who wish to build their own home. The
term of construction and development loans will generally be limited to one
year, although payments may be structured on a longer amortization basis. These
loans are generally interim loans and are refinanced as general residential and
commercial real estate loans upon completion of the project or paid off on the
sale of the property. Construction and development loans generally carry a
higher degree of risk than long term financing of existing properties. Repayment
depends on the ultimate completion of the project and usually on the sale of the
property. Risks include:
- cost overruns;
- mismanaged construction;
- inferior or improper construction techniques;
- economic changes or downturns during construction;
- a downturn in the real estate market;
- rising interest rates which may prevent sale the of the property;
and
- failure to sell completed projects in a timely manner.
We will attempt to reduce risk by obtaining personal guarantees where possible,
and by keeping the loan-to-value ratio of the completed project below specified
percentages. We may also reduce risk by selling participations in larger loans
to other institutions when possible.
Residential Real Estate Loans. Residential real estate loans will
generally have longer terms up to 30 years. We will offer fixed and adjustable
rate mortgages. We expect to face very limited credit risk on these loans
because most of them will be underwritten and sold in the secondary market
without any recourse against the bank.
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<PAGE> 21
Commercial Loans. The bank will make loans for commercial purposes in
various types of businesses. Equipment loans will typically be made for a term
of five years or less at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment and with a loan-to-value
ratio of 80% or less. Working capital loans will typically have terms not
exceeding one year and will usually be secured by accounts receivable,
inventory, or personal guarantees of the principals of the business. For loans
secured by accounts receivable or inventory, principal will typically be repaid
as the assets securing the loan are converted into cash, and in other cases
principal will typically be due at maturity. Asset based lending, leasing, and
factoring will be offered through third party vendors who can handle the paper
work and servicing and generally assume most of the credit risk. Trade letters
of credit, standby letters of credit, and foreign exchange will be handled
through a correspondent bank as agent for the bank.
The principal economic risk associated with each category of
anticipated loans, including commercial loans, is the cash flow capability and
creditworthiness of the borrowers. The risks associated with commercial loans
vary with many economic factors, including the economy in the Lee County area.
Deterioration of the economy could impact our borrower's businesses and
therefore their cash flow and ability to repay their loans. The well established
banks in the Lee County area will make proportionately more loans to medium-to
large-sized businesses than we will. Many of the bank's anticipated commercial
loans will likely be made to small- to medium-sized businesses which may be less
able to withstand competitive, economic, and financial conditions than larger
borrowers.
Consumer Loans. The bank will make a variety of loans to individuals
for personal and household purposes, including secured and unsecured installment
loans. Installment loans typically will carry balances of less than $50,000 and
be amortized over periods up to 60 months. Consumer loans may be offered on a
single maturity basis where a specific source of repayment is available.
Revolving loan products will typically require monthly payments of interest and
a portion of the principal.
The principal economic risks associated with consumer loans are the
creditworthiness and cash flow of the bank's borrowers. The principal
competition for consumer loans will be the established banks in the Lee County
area. Consumer loans are generally considered to have greater risk than first or
second mortgages on real estate.
We will also offer home equity loans. Our underwriting criteria for
and the risks associated with home equity loans and lines of credit will
generally be the same as those for first mortgage loans. Home equity lines of
credit will typically have terms of 15 years or less, will typically carry
balances less than $125,000, and may extend up to 80% of the available equity of
each property.
Loan Approval and Review. The bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with a
higher lending limit or the bank's loan committee. The bank will not make any
loans to any director or executive officer of the bank unless the loan is
approved by the board of directors of the bank and is made on terms not more
favorable to such person than would be available to a person not affiliated with
the bank. The bank currently intends to adhere to Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation guidelines in its
mortgage loan review process, but may choose to alter this policy in the future.
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<PAGE> 22
Loan and Asset Distribution. We estimate that our initial percentage
distribution of our loans and deposits will be as follows:
<TABLE>
<CAPTION>
Loans Deposits
----- --------
<S> <C> <C> <C>
Real Estate 45% Regular Checking 7%
Commercial Loans 35% Interest Checking 9%
Equity Line and Consumer Loans 20% Business Checking 7%
Passbooks 12%
Money Market 13%
CD's under $100,000 38%
CD's over $100,000 10%
IRA & KEOGH 3%
Other 1%
</TABLE>
These are estimates only. Our actual deposit and loan distribution will depend
on our customers and vary initially and over time. We will maintain an allowance
for loan losses, which we will establish through a provision for loan losses
charged against income. We will charge loans against this allowance when we
believe that the collectibility of the principle is unlikely. The allowance will
be an estimated amount that we believe will be adequate to absorb losses
inherent in the loan portfolio based on evaluations of its collectibility. We
anticipate that initially our loan loss reserve will equal approximately 1% of
the average outstanding balance of our loans. Over time, we will base the
allowance for loan losses on our evaluation of factors such as changes in the
nature and volume of the loan portfolio, overall portfolio quality, specific
problem loans and commitments, and current anticipated economic conditions that
may affect the borrower's ability to pay. Despite these allocation measures, we
will continue to be susceptible to risks caused by concentrations in types of
loans. For example, a high percentage of home mortgage loans would be
susceptible to a risk of a drop in the value of real estate.
Lending Limits. The bank's lending activities will be subject to a
variety of lending limits imposed by federal law. In general the bank will be
subject to a legal limit on loans to a single borrower equal to 15% of the
bank's capital and unimpaired surplus. Different limits may apply in certain
circumstances based on the type of loan or the nature of the borrower, including
the borrower's relationship to the bank. These limits will increase or decrease
as the bank's capital increases or decreases. We expect the bank's initial legal
limit will be around $690,000 based on the minimum offering. The bank will
initially have a self-imposed loan limit of 80% of the legal limit, or
approximately $550,000. Unless the bank is able to sell participations in its
loans to other financial institutions, the bank will not be able to meet all of
the lending needs of loan customers requiring aggregate extensions of credit
above these limits.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services for
commercial businesses such as a sweep services and lines of credit. We will
offer drive-up window service and ATMs, debit cards, safe deposit boxes,
travelers checks, direct deposit of payroll and social security checks, and
automatic drafts for various accounts. We plan for the bank to become associated
with the Honor and Cirrus ATM networks that may be used by the bank's customers
throughout Lee County and other regions. We believe that by being associated
with a shared network of ATMs, we will be better able to serve our customers and
will be able to attract customers who are accustomed to the convenience of using
ATMs, although we do not believe that maintaining this association will be
critical to our success. We intend to begin offering these services shortly
after opening the bank. We also plan to offer debit card services through a
correspondent bank as an agent for the bank. We do not expect the bank to
exercise trust powers during its initial years of operation.
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<PAGE> 23
COMPETITION
The banking business is highly competitive. The bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, finance companies, and money market mutual funds
operating in the Lee County area and elsewhere. In 1998, there were more than
148 banking offices representing 26 financial institutions operating in Lee
County holding almost $5.3 billion in deposits. In the City of Lehigh Acres,
there were 6 financial institutions holding over $264 million in deposits in
1998. Most of these competitors have substantially greater resources and lending
limits than the bank will and offer certain services, such as extensive and
established branch networks and trust services, that we either do not expect to
provide or will not provide initially. Our competitors in the Lehigh Acres area
include First Union Bank, Bank of America (formerly NationsBank), SouthTrust
Bank, SunTrust Bank, Florida Community Bank, and Colonial Bank. As a result of
these competitive factors, the bank may have to pay higher rates of interest to
attract deposits. Based on a conservative growth rate of 3%, the deposits in the
Lee County area will grow to approximately $6.5 billion by the year 2005. During
this same period, deposits in the City of Lehigh Acres are projected to grow to
over $325 million. Our plan over the next five years is to reach a 12.3% market
share in Lehigh Acres with deposits in excess of $40 million.
Of course, there can be no assurances that we will accomplish these objectives.
EMPLOYEES
We anticipate that, upon commencement of operations, the bank will have
approximately 13 full time employees and no part time employees operating out of
the facility in Lehigh Acres. Lehigh Acres Bancshares, as the holding company
for the bank, will not have any employees other than its officers.
LEGAL PROCEEDINGS
Neither Lehigh Acres Bancshares, Lehigh Acres Bank, nor any of their
properties are subject to any material legal proceedings.
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<PAGE> 24
SUPERVISION AND REGULATION
Both Lehigh Acres Bancshares and Lehigh Acres Bank are subject to state
and federal banking laws and regulations which impose specific requirements or
restrictions on and provide for general regulatory oversight with respect to
virtually all aspects of operations. These laws and regulations are generally
intended to protect depositors, not shareholders. The following summary is
qualified by reference to the statutory and regulatory provisions discussed.
Changes in applicable laws or regulations may have a material effect on our
business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991, numerous additional regulatory requirements have
been placed on the banking industry in the past several years, and additional
changes have been proposed. Our operations may be affected by legislative
changes and the policies of various regulatory authorities. We cannot predict
the effect that fiscal or monetary policies, economic control, or new federal or
state legislation may have in the future on our business and earnings.
LEHIGH ACRES BANCSHARES
Because it will own the outstanding capital stock of the bank, Lehigh
Acres Bancshares will be a bank holding company within the meaning of the
federal Bank Holding Company Act of 1956. As a Florida corporation, Lehigh Acres
Bancshares is also subject to Chapter 607, Florida Business Corporation Act and
the regulations effected by the Florida Department of State. Our activities will
also be governed by the Glass-Steagall Act of 1933.
The Bank Holding Company Act. Under the Bank Holding Company Act,
Lehigh Acres Bancshares will be subject to periodic examination by the Federal
Reserve and required to file periodic reports of its operations and such
additional information as the Federal Reserve may require. Our activities at the
bank and holding company levels will be limited to:
- banking and managing or controlling banks;
- furnishing services to or performing services for its
subsidiaries; and
- engaging in other activities that the Federal Reserve determines
to be so closely related to banking and managing or controlling
banks as to be a proper incident to those activities.
Investments, Control, and Activities. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or
control more than 5% of the voting shares of such bank (unless it
already owns or controls the majority of such shares); or
- merging or consolidating with another bank holding company.
In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations under
these Acts, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more but less than 25% of any class of voting
securities and either Lehigh Acres Bancshares has registered securities under
Section 12 of the Securities Exchange Act of 1934 or no other person owns a
greater percentage of that class of voting securities immediately after the
transaction. We will most likely be required to register under the Securities
Exchange Act of 1934 once we have more than 500 shareholders of record. The
regulations provide a procedure for challenge of the rebuttable control
presumption.
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<PAGE> 25
Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
activities to be so closely related to banking or managing or controlling banks
as to be a proper incident under the Act. Some of the activities that the
Federal Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include the following:
- making or servicing loans and certain types of leases;
- engaging in certain insurance and discount brokerage activities;
- performing certain data processing services;
- acting in certain circumstances as a fiduciary or investment or
financial adviser;
- owning savings associations; and
- making investments in certain corporations or projects designed
primarily to promote community welfare.
The Federal Reserve Board imposes certain capital requirements on
Lehigh Acres Bancshares under the Bank Holding Company Act, including a minimum
leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted
assets. These requirements are described below under "- Capital Regulations."
Subject to its capital requirements and certain other restrictions, Lehigh Acres
Bancshares is able to borrow money to make a capital contribution to the bank,
and such loans may be repaid from dividends paid from the bank to Lehigh Acres
Bancshares. Our ability to pay dividends will be subject to regulatory
restrictions as described below in "The Bank - Dividends." Lehigh Acres
Bancshares is also able to raise capital for contribution to the bank by issuing
securities without having to receive regulatory approval, subject to compliance
with federal and state securities laws.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
Board policy, Lehigh Acres Bancshares will be expected to act as a source of
financial strength to the bank and to commit resources to support the bank in
circumstances in which Lehigh Acres Bancshares might not otherwise do so. Under
the Bank Holding Company Act, the Federal Reserve Board may require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.
Glass-Steagall Act. We will also be restricted by the provisions of the
Glass-Steagall Act, which prohibits Lehigh Acres Bancshares from owning
subsidiaries that are engaged principally in the issue, flotation, underwriting,
public sale, or distribution of securities. The interpretation, scope, and
application of the provisions of the Glass-Steagall Act currently are being
considered and reviewed by regulators and legislators, and the interpretation
and application of those provisions have been challenged in the federal courts.
THE BANK
The bank will operate as a national banking association incorporated
under the laws of the United States and subject to examination by the Office of
the Comptroller of the Currency. Deposits in the bank will be insured by the
FDIC up to a maximum amount, which is generally $100,000 per depositor subject
to aggregation rules.
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<PAGE> 26
The Office of the Comptroller of the Currency and the FDIC will
regulate or monitor virtually all areas of the bank's operations, including:
- security devices and procedures,
- adequacy of capitalization and loss reserves,
- loans,
- investments,
- borrowings,
- deposits,
- mergers,
- issuances of securities,
- payment of dividends,
- interest rates payable on deposits,
- interest rates or fees chargeable on loans,
- establishment of branches,
- corporate reorganizations,
- maintenance of books and records, and
- adequacy of staff training to carry on safe lending and deposit
gathering practices.
The Office of the Comptroller of the Currency will require the bank to maintain
certain capital ratios and imposes limitations on the bank's aggregate
investment in real estate, bank premises, and furniture and fixtures and to
prepare quarterly reports on the bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with its minimum standards
and procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:
- internal controls,
- information systems and audit systems,
- loan documentation,
- credit underwriting,
- interest rate risk exposure, and
- asset quality.
National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the Office of the Comptroller of the Currency or the
Federal Reserve Board to be troubled institutions must give the Office of the
Comptroller of the Currency or the Federal Reserve Board thirty days prior
notice of the appointment of any senior executive officer or director. Within
the thirty day period, the Office of the Comptroller of the Currency or the
Federal Reserve Board, as the case may be, may approve or disapprove any such
appointment.
Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance premiums
from the industry used to
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<PAGE> 27
offset losses from insurance payouts when banks and thrifts fail. In 1993, the
FDIC adopted a rule which establishes a risk-based deposit insurance premium
system for all insured depository institutions. Under this system, until
mid-1995 depository institutions paid to Bank Insurance Fund or Savings
Association Insurance Fund from $0.23 to $0.31 per $100 of insured deposits
depending on its capital levels and risk profile, as determined by its primary
federal regulator on a semiannual basis. Once the Bank Insurance Fund reached
its legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually to $00 per $100, with a minimum semiannual
assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance
Funds Act of 1996, which eliminated even this minimum assessment. It also
separated the Financial Corporation (FICO) assessment to service the interest on
its bond obligations. The amount assessed on individual institutions, including
the bank, by FICO is in addition to the amount paid for deposit insurance
according to the risk-related assessment rate schedule. Increases in deposit
insurance premiums or changes in risk classification will increase the bank's
cost of funds, and there can be no assurance that such cost can be passed on to
the bank's customers.
Transactions With Affiliates and Insiders. The bank will be subject to
the provisions of Section 23A of the Federal Reserve Act, which place limits on
the amount of loans or extensions of credit to, or investments in, or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. The
aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the bank's capital and surplus and, as to all affiliates
combined, to 20% of the bank's capital and surplus. Furthermore, within the
foregoing limitations as to amount, each covered transaction must meet specified
collateral requirements. Compliance is also required with certain provisions
designed to avoid the taking of low quality assets.
The bank will also be subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The bank will be subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Office of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the total of
its net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.
Branching. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current Florida law, the bank may open branch
offices throughout Florida with the prior approval of the Office of the
Comptroller of the Currency. In addition, with prior regulatory approval, the
bank will be able to acquire existing banking operations in Florida.
Furthermore, federal legislation has recently been passed which permits
interstate branching. The new law permits out-of-state acquisitions by bank
holding companies, interstate branching by banks if allowed by state law, and
interstate merging by banks.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could impose additional requirements
and limitations on the bank.
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<PAGE> 28
Other Regulations. Interest and certain other charges collected or
contracted for by the bank are subject to state usury laws and certain federal
laws concerning interest rates. The bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as:
- the federal Truth-In-Lending Act, governing disclosures of credit
terms to consumer borrowers;
- the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and
public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the
community it serves;
- the Equal Credit Opportunity Act, prohibiting discrimination on
the basis of race, creed or other prohibited factors in extending
credit;
- the Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
- the Fair Debt Collection Act, governing the manner in which
consumer debts may be collected by collection agencies; and
- the rules and regulations of the various federal agencies charged
with the responsibility of implementing such federal laws.
The deposit operations of the bank also are subject to:
- the Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas
of financial records; and
- the Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve Board to implement that act, which governs
automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
Capital Regulations. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have not
received any notice indicating that either Lehigh Acres Bancshares or Lehigh
Acres Bank is subject to higher capital requirements. The current guidelines
require all bank holding companies and federally-regulated banks to maintain a
minimum risk-based total capital ratio equal to 8%, of which at least 4% must be
Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
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guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To quality as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Initially, we
will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan,
- raise additional capital,
- restrict their growth, deposit interest rates, and other
activities,
- improve their management,
- eliminate management fees, or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow the
bank's loan portfolio at a rapid pace, its capital may be depleted too quickly,
and a capital infusion from the holding company may be necessary which could
impact our ability to pay dividends. Our capital levels will initially be more
than adequate; however, rapid growth, poor loan portfolio performance or poor
earnings performance or a combination of these factors could change our capital
position in a relatively short period of time.
The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.
Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
Enforcement Powers. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such
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<PAGE> 30
violations. Criminal penalties for some financial institution crimes have been
increased to twenty years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Furthermore, banking agencies' power to issue
cease-and-desist orders were expanded. Such orders may, among other things,
require affirmative action to correct any harm resulting from a violation or
practice, including restitution, reimbursement, indemnification or guarantees
against loss. A financial institution may also be ordered to restrict its
growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.
Recent Legislative Developments. From time to time, various bills are
introduced in the United States Congress with respect to the regulation of
financial institutions. Some of these proposals, if adopted, could significantly
change the regulation of banks and the financial services industry. We cannot
predict whether any of these proposals will be adopted or, if adopted, what
effect these would have.
Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.
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MANAGEMENT
GENERAL
The following table sets forth the number and percentage of outstanding
shares of common stock beneficially owned as of the date of this prospectus by
the organizers. This table also reflects the anticipated purchases by the
organizers in the offering. We issued 18,000 shares to some of our organizers in
return for their $180,000 initial investment. All purchases by the organizers
prior to the offering were made at a price of $10.00 per share, the same price
at which shares are being offered to the public. Upon completion of the
offering, we will redeem these shares with the proceeds of the offering for
$10.00 per share. Information relating to the beneficial ownership of common
stock is based upon "beneficial ownership" concepts described in rules of the
SEC under Section 13(d) of the Securities Exchange Act of 1934. Under these
rules a person is deemed to be a "beneficial owner" of a security if that person
has or shares "voting power," which includes the power to vote or direct the
voting of each security, or "investment power," which includes the power to
dispose or to direct the disposition of such security. A person is also deemed
to be a beneficial owner of any security of which that person has the right to
acquire beneficial ownership within 60 days, including, without limitation,
shares of common stock subject to currently exercisable options. Under the
rules, more than one person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of securities as
to which he has no beneficial interest. For instance, beneficial ownership
includes spouses, minor children, and other relatives residing in the same
household, and trusts, partnerships, corporations or deferred compensation plans
which are affiliated with the principal. This table does not reflect warrants
that will be granted to our organizers to purchase one share of common stock at
$10.00 per share for each share purchased by the organizers in the offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES ANTICIPATED TO BE OWNED FOLLOWING
PRIOR TO THE OFFERING THE OFFERING
------------------------- ----------------------------------------
PERCENTAGE PERCENTAGE
OF MINIMUM OF MAXIMUM
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER OFFERING OFFERING
- ------------------------ ------ ---------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
ROBERT C. BAGANS 1,500 8.33% 6,500 1.08% 0.65%
CALVIN BEALS 1,500 8.33% 8,600 1.43% 0.86%
BENJAMIN BELL 1,500 8.33% 6,500 1.08% 0.65%
CRAIG A. DEARDEN 1,500 8.33% 5,000 0.83% 0.50%
PAUL DINGER 1,500 8.33% 8,000 1.33% 0.80%
TERESA GOODLAD 1,500 8.33% 7,700 1.28% 0.77%
JAMES D. HULL (CHAIRPERSON) 1,500 8.33% 15,000 2.50% 1.50%
VIKAS K. JAIN 1,500 8.33% 10,000 1.67% 1.00%
LAWRENCE J. MURPHY 1,500 8.33% 8,600 1.43% 0.86%
MICKI J. REGAS 1,500 8.33% 7,500 1.25% 0.75%
PATRICIA A. REGAS 1,500 8.33% 7,500 1.25% 0.75%
E. BYRON RICHARDSON 2,500 0.42% 0.25%
KENNETH K. THOMPSON 3,000 0.50% 0.30%
LLOYD J. WEBER (CEO) 10,300 1.72% 1.03%
KENNETH C. WOLFE 1,500 8.33% 10,300 1.72% 1.03%
ALL EXECUTIVE OFFICERS AND DIRECTORS AS 18,000 100.00% 117,000 19.50% 11.70%
A GROUP (15 PERSONS)
</TABLE>
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<PAGE> 32
EXECUTIVE OFFICERS AND DIRECTORS OF LEHIGH ACRES BANCSHARES
The following sets forth certain information about executive officers
and directors. Lehigh Acres Bancshares' articles of incorporation provide for a
classified board of directors, so that, as nearly as possible, one-third of the
directors are elected each year to serve three-year terms. The terms of office
of the classes of directors expire as follows: Class I at the 2000 annual
meeting of shareholders, Class II at the 2001 annual meeting of shareholders,
and Class III at the 2002 annual meeting of shareholders. Executive officers
serve at the discretion of the board of directors.
<TABLE>
<CAPTION>
POSITION WITH
NAME AGE LEHIGH ACRES BANCSHARES
---- --- -----------------------
<S> <C> <C>
Robert C. Bagans 34 Director
Calvin H. Beals 64 Director
Benjamin R. Bell 53 Director, Vice Chairperson of the Board
Craig A. Dearden 34 Director
Paul F. Dinger 57 Director
Teresa Goodlad 51 Director
James D. Hull 60 Director, Chairperson of the Board
Vikas K. Jain, M.D. 32 Director
Lawrence J. Murphy, D.V.M. 46 Director
Micki J. Regas 38 Director
Patricia A. Regas 65 Director
E. Byron Richardson 48 Director
Kenneth K. Thompson 45 Director
Kenneth C. Wolfe 48 Director
Lloyd J. Weber 57 Director, Chief Executive Officer
</TABLE>
Robert C. Bagans, Class I Director, is the owner of Realty World - C.
Bagans First, Bagans Construction, Inc., and Benchmark Mortgage Corp., all
operating in Lehigh Acres, Florida. He is a graduate of the Georgia Institute of
Technology with a BS in Electrical Engineering. He is a long time resident of
Lehigh Acres, moving to the community in 1970. Mr. Bagans serves as a board
member for the Lehigh Acres Chamber of Commerce, and is President of the Realty
World - Brokers' Council, a member of the National Association of Mortgage
Brokers, and a member of the International Who's Who of Entrepreneurs.
Calvin Beals, Class II Director, is an Executive Search Consultant for
the banking industry. He has been a resident of Lee County for 12 years. Mr.
Beals is a past bank president and was a bank board member for over 21 years. He
also has been (1966 and 1968) involved as the CEO or COO of two de novo banks in
Wisconsin and has total bank employment experience of 30 years. Mr. Beals was a
founding board member and school director of the Wisconsin General Banking
School and a founding board member and president of the District 1 Technical
Foundation. Mr. Beals also served on the Financial Advisory Committee for the
University of Wisconsin-Stout Foundation. He has experience as a director of the
Menomonie, Wisconsin Industrial Development Corporation and several community
and eleemosynary activities. He is currently active on several committees of
Gateway Trinity Lutheran Church.
Benjamin Bell, Class II Director, will be the vice chairperson of the
bank and the holding company. He is a Senior Account Agent with Allstate
Insurance. He started in the insurance business in 1975 with Metropolitan
Insurance as a management trainee. He has been with Allstate since 1982 and
opened his office in Lehigh Acres in 1985. He attended Rider College and Mercer
County Community College from 1964 to 1970. He has served on numerous community
and non-profit boards, is past president of Lehigh Acres Chamber of Commerce,
President of Lehigh Acres Rotary Club, on the board of Directors of Community
Health Assoc., Past President of Southwest Florida Safety Counsel, and a past
Regional Vice President of Florida Association of Life Underwriters.
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Craig A. Dearden, Class I Director, is Vice President/CFO of AIM
Engineering and Surveying, Inc. He received two BS degrees in accounting and
finance from Florida State University. Mr. Dearden started his career in banking
with Citicorp Savings and subsequently moved on to public accounting and
governmental auditing. At present, he is responsible for the fiscal operations,
human resources, and contract negotiations with AIM. Mr. Dearden is an active
member of the Florida Institute of Consulting Engineers Transportation
Committee.
Paul Dinger, Class I Director, is currently a citrus grower. He was
formerly with Chemical Dynamics, Inc. for eight years. Prior to that he was with
Chevron Chemical Co. for 22 years. Mr. Dinger has been a resident in the area
since 1971. He is a graduate of Florida State University with a BS in Business
Management. Mr. Dinger also has an active real estate brokers' license and is a
certified general contractor. He is a member of the Eagles Aerie #3938 in Lehigh
Acres and the Elks Lodge #1288 in Fort Myers.
Teresa Goodlad, Class I Director, CLU, is President of Goodlad
Insurance Agency, Inc., an exclusive agency for State Farm Insurance Companies.
Formerly an educator, she began her State Farm Agency in Lehigh Acres in 1987.
Ms. Goodlad received her BA degree, cum laude, from the University of West
Florida, and received her Chartered Life Underwriter designation from the
American College. Her professional memberships include the National Association
of Life Underwriters and the Society of Financial Service Planners. She is a
member of the State Farm Speakers Bureau and a designated media spokesperson for
State Farm Insurance Company in Lee County. Ms. Goodlad is a past President,
Vice-president, and current director of the Lehigh Acres Chamber of Commerce and
a member of the Town and Gown Society of Florida Gulf Coast University.
James D. Hull, Class III Director, will be the Chairperson of the Board
of the bank and the holding company. He is the owner and president of AIM
Engineering & Surveying, Inc. He is a licensed engineer, surveyor, general
contractor, real estate broker, and appraiser. Mr. Hull was born and raised in
agriculture, still having cattle, but has worked 40 years in the development
field, and for the past 18 years has served as the CEO for AIM, a 150 employee
engineering firm. He is the past chairman of the CE&I sub-committee for the
Florida Institute of Consulting Engineers, and he is a member of FICE, Florida
Engineering Society, Florida Society of Surveyors and Mappers, Appraisal
Institute, National Association of Master Appraisers, the Board of Realtors, the
American Congress on Surveying and Mapping.
Vikas K. Jain, MD, Class II Director, is President, Chief Executive
Officer, and founder of Cornea and Cataract Center, P.A., an ophthalmology
practice specializing in total eye care. He has been in private practice in Lee
County for three years. He attended Johns Hopkins University as an
undergraduate. Thereafter, Dr. Jain took his medical training at the University
of Florida College of Medicine, where he graduated first in his class with
honors and honors for research. Next, he took his internship, residency, and
fellowship in ophthalmology at Harvard Medical School in Boston. Dr. Jain is a
Diplomat of the National Board of Medical Examiners and is board-certified by
the American Board of Ophthalmology. He is an active member of the American
College of Surgeons, American Academy of Ophthalmology, Alpha Omega Honor
Medical Society, and the American Society of Cataract and Refractive Surgery.
Dr. Jain is a staff surgeon at all hospitals and surgery centers in Lee County.
Dr. Jain has published widely in scientific journals and contributed to numerous
ophthalmic textbooks. He has also appeared on Connie Chung's "Eye to Eye" in a
segment focusing on limbal transplantation, a unique surgical procedure to
restore sight to patients with severely injured eyes. In addition, Dr. Jain has
taught and lectured on the local, national and international level in his area
of specialty. Dr. Jain resides in Lee County with his wife, also a physician,
and his three children.
Lawrence J. Murphy, Class III Director, DVM, is a lifetime resident in
Lee County (Fort Myers area since 1955) and received his BS at Florida State
University and his doctorate from The University of Florida in 1982. Dr. Murphy
is the President of The Animal Medical Center of Lehigh Acres, P.A., a full
service small animal veterinary hospital that he and his wife, Beth Murphy, DVM
built and opened in 1986. Nationally, Dr. Murphy belongs to the American
Veterinary Medical Association and the American Animal Hospital Association.
Locally, Dr. Murphy is actively involved with the Lehigh Acres Rotary Club (Past
President 1993), the Humane Society of Lee county (current Board member, Past
President 1991), and The Southwest Florida Community Foundation (currently on
the Grants Advisory Committee).
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Micki J. Regas, Class III Director, has been President and CEO of
Fleetwood Title, a Real Estate Title Insurance company since 1983. He is also
President of Fleetwood Travel. Mr. Regas has a Title Insurance license as well
as a General Contractor's license. He graduated as a junior in high school at
the top of his class and went directly to Ohio State University in Columbus,
Ohio. Mr. Regas relocated to Lehigh Acres and started Fleetwood Title. He has
become well known in the local community as a member of FAITA (Florida
Association of Independent Title Agents), ASTA (American Society of Travel
Agents), and AOPA (Airplane Owner and Pilot Association).
Patricia A. Regas, Class II Director, has been Vice President of
Fleetwood Title since 1983. She has a Real Estate Broker's license and a Title
Insurance license. Ms. Regas has over 40 years of experience in the real estate
industry, and she has taught real estate licensing courses for the State of Ohio
for 5 years. Prior to moving to the Lehigh Acres area in 1981, Ms. Regas was the
President of James Regas, Inc., a real estate holding company, for 25 years, and
she was vice president of All-Ohio Realty, a real estate agency from 1956 until
1981. Ms. Regas has played an active role in several other family businesses
including a hotel and a restaurant.
E. Byron Richardson, Class I Director, has been in the bank consulting
industry since 1983. He is one of the founding owners of Bank Resources, Inc.
(and its predecessors) where he has assisted with the formation of approximately
50 banks and bank holding companies. Mr. Richardson has consulted with financial
institutions and de novo banks in the United States, Russia, South America, and
the Pacific Rim. Mr. Richardson began his banking career in 1970 with Columbus
Bank & Trust Company, Columbus, Georgia (n/k/a Total Systems). In 1996, Mr.
Richardson was a guest speaker at the Viet Nam Payment Systems and Technology
Conference hosted by the Central Bank of Viet Nam and IBM. In 1997, Mr.
Richardson was a member of the faculty of the BAI Graduate School of Banking at
the University of Wisconsin. From 1989 to 1995, he was an organizer, bank
director, chairman of the investment/asset liability committee, and holding
company director of a de novo bank in North Carolina. His education includes
Columbus State University, Columbus, Georgia and Florida State University,
Tallahassee, Florida. (Mr. Richardson is not an organizer.)
Kenneth K. Thompson, Class II Director, is an attorney with a practice
based in Lehigh Acres, Florida. He received a Bachelor of Arts degree in History
from the University of Georgia in 1975 where he graduated with honors. He
graduated from the School of Law at the University of Georgia in 1979, where he
was a recent development editor of the Georgia Journal of Internal and
Comparative Law. Mr. Thompson was admitted to the State Bar of Georgia in 1979
and the State Bar of Florida in 1982. His primary practice areas are family law,
criminal law, probate (estates), and real property. He has been a title agent
with Attorney's Title Insurance Fund, Inc. since 1997. He has been in a sole
practice since 1994 and his representative clients include the Collier County
Housing Authority and the Immokalee Water and Sewer District. Mr. Thompson is an
active member of the Lehigh Acres Rotary and is a board member and
past-president of the Lehigh Acres Chamber of Commerce. He also serves of the
board of the Family Health Services of Southwest Florida.
Lloyd J. Weber, Class III Director, will be the President and CEO of
the bank and the holding company. He is a seasoned banker with over thirty years
experience in lending, operations, strategic planning, and marketing. Mr. Weber
opened the Pan American Bank-Inverray as Vice-President and Cashier and later
served as its President, CEO, and director. He has held various positions with
SunBank-Okeechobee (and its predecessor) including Chairman of the Board,
President, CEO and Senior Loan Officer. Mr. Weber also held the positions of
Senior Vice President and Regional Manager of Sun Bank's Cape Coral offices in
Southwest Florida. Mr. Weber was a partner with Loan Review Systems of Florida
which specialized in bank asset quality. Most recently he served as Senior Vice
President and Senior Loan Officer of Lee County for Florida Community Bank in
Lehigh Acres. Mr. Weber was named 1997 Ambassador of the Year by the Lehigh
Acres Chamber of Commerce for his community service. He is currently the Vice
President of the Lehigh Acres Chamber of Commerce and is scheduled to be
President in 2001.
Kenneth C. Wolfe, Class III Director, is the president and owner of
Charles Wolfe & Sons of Florida, Inc., parent company of Data Storage Services,
Data Recycling, and Data Mailroom Services. He is also President and owner of
KPM Properties, Inc., a homebuilder in Lehigh Acres, Florida. Mr. Wolfe is
active in the community where he serves as the Secretary on the Board of the
Harry Chapin Food Bank and Director of the Recovery Ministry at McGregor Baptist
Church. He has served in various capacities at the Salvation Army and
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he has coached CSA youth soccer and worked with youth sailing at the Edison
Sailing Center. Mr. Wolfe attended Sullivan County College in upstate New York
where he received a degree in business administration.
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Lloyd J. Weber for a
five year term pursuant to which Mr. Weber will serve as the President and Chief
Executive Officer of the bank. The term of this agreement will commence on the
date the Bank opens for business. Mr. Weber will receive an annual salary of
$96,000, plus his yearly medical insurance premium. He is eligible for an annual
cash performance bonus equal to 5% of the bank's net income, not to exceed 15%
of Mr. Weber's annual salary, in the event specified bank performance goals are
attained. Mr. Weber is also eligible to participate in any management incentive
program of the bank or any long-term equity incentive program and will be
eligible for grants of stock options and other awards under these programs. Upon
the closing of the offering (or as soon thereafter as an appropriate stock
option plan is adopted by the Lehigh Acres Bancshares), Mr. Weber will be
granted an option to purchase 25,000 shares of Common Stock at $10.00 per share.
The options will vest equally over a three-year period and will have a term of
ten years. Additionally, Mr. Weber will participate in the Bank's retirement,
welfare and other benefit programs and is entitled to a life insurance policy
and an accident liability policy and reimbursement for automobile expenses, club
dues, and travel and business expenses. Mr. Weber's employment agreement also
provides that following termination of his employment with the Bank and for a
period of twelve months thereafter, Mr. Weber, may not (i) engage in the
business of banking within a fifty-mile radius of the bank's offices, (ii)
solicit major customers of the bank for the purpose of providing financial
services, or (iii) disclose the names or addresses of the bank's customers to
any other person or entity.
DIRECTOR COMPENSATION
We do not intend to pay directors' fees until the bank is profitable.
However, we reserve the right to pay directors' fees.
STOCK OPTION PLAN
After the offering, we expect to adopt a stock option plan which will
permit Lehigh Acres Bancshares to grant options to its officers, directors, and
employees. We anticipate that we will initially authorize the issuance of a
number of shares under the stock option plan equal to 15% of the shares
outstanding after the offering. We will not issue stock options at less than the
fair market value of the common stock on the date of grant.
STOCK WARRANTS
In recognition of the financial risk and organizational risk they have
undertaken in organizing the bank, for each share of common stock an organizer
purchases in the offering, the organizer will also receive, for no additional
consideration, a warrant to purchase one share of Common Stock for $10.00 per
share. The warrants, which will be represented by separate warrant agreements,
will become exercisable on the later of the date that the bank opens for
business and one year from the date of this prospectus and will be exercisable
in whole or in part during the ten year period following that date. The warrants
and shares issued pursuant to the exercise of such warrants will be
transferable, subject to compliance with applicable securities laws. If the
Office of the Comptroller of the Currency issues a capital directive or other
order requiring the bank to obtain additional capital, the warrants will be
forfeited if not immediately exercised.
EXCULPATION AND INDEMNIFICATION
The Florida Business Corporation Act authorizes a company to indemnify
its directors and officers in certain instances against certain liabilities
which they may incur by virtue of their relationship with the company. As
permitted by the Florida Business Corporation Act, Lehigh Acres Bancshares's
articles of incorporation contain a provision which, subject to certain limited
exceptions, limits the liability of a director for any breach of duty as a
director. There is no limitation of liability for:
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- a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful;
- a transaction from which the director derived an improper personal
benefit;
- liability imposed under Section 607.0834 (or any successor
provision or redesignation thereof) of the Florida Business
Corporation Act (the "Act"); or
- willful misconduct or a conscious disregard for the best interest
of the company in a proceeding by the company, or a company
shareholder.
In addition, if such act is amended to authorize further elimination or
limitation of the liability of director, then the liability of each director
shall be eliminated or limited to the fullest extent permitted by such
provisions, as so amended, without further action by the shareholders, unless
the law requires such action. The provision does not limit the right of the
company or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
Lehigh Acres Bancshares' bylaws provide that it shall indemnify each of
its directors and officers to the fullest extent provided by law, and that
indemnity will include advances for expenses and costs incurred during the
course of a covered action.
Our board of directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The board of directors
intends to extend indemnification rights to all of its executive officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
We expect to have banking and other transactions in the ordinary course
of business with the organizers, directors, and officers and their affiliates,
including members of their families or corporations, partnerships, or other
organizations in which such organizers, officers, or directors have a
controlling interest, on substantially the same terms, including price, or
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. Such transactions are not expected to
involve more than the normal risk of collectibility nor present other
unfavorable features. Loans to individual directors and officers must also
comply with the bank's lending policies and statutory lending limits, and
directors with a personal interest in any loan application will be excluded from
the consideration of such loan application. We intend for all of our
transactions with organizers or other affiliates to be on terms no less
favorable than could be obtained from an unaffiliated third party and to be
approved by a majority of our disinterested directors.
CONSULTING AND PROFESSIONAL RELATIONSHIPS
We have entered into agreements with three of our organizers for the
provision of professional services. Lloyd Weber is providing consulting and
organizational services to us prior to the opening of the bank. We have entered
into consulting agreements with Mr. Weber in order to retain his services. We
paid him $80,000 in 1998 and $32,000 to date in 1999, plus health insurance
benefits. No compensation was paid to Mr. Weber prior to 1998. We have entered
into an employment agreement with Mr. Weber that will commence when the bank
opens for business, please see "Employment Agreements" on page 35. Byron
Richardson is also providing bank consulting services to us. We have paid him
$35,000 to date and upon the successful completion of the offering, we will
grant Mr. Richardson options to purchase 3,000 shares of our common stock for
$10.00 per share. These options must be exercised within 10 years of the date of
their grant. In the event we do not complete the offering, and we do not issue
the options, we will pay Mr. Richardson $4,200. Kenneth Thompson, Esquire, an
attorney
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licensed to practice in Florida, is providing legal services to us in connection
with the organization of the bank. In consideration of his efforts, we have
agreed to pay Mr. Thompson $10,000 when the bank opens for business. This
obligation is contingent upon the successful completion of the offering. If we
do not complete the offering, we will not pay Mr. Thompson. We believe that
these transactions are on terms substantially the same as or better than those
prevailing at the time for comparable transactions with unrelated parties.
MANAGEMENT RELATIONSHIPS
Micki J. Regas is the son of Patricia A. Regas.
DESCRIPTION OF CAPITAL STOCK OF
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
GENERAL
The authorized capital stock of Lehigh Acres Bancshares consists of
10,000,000 shares of common stock, par value $0.01 per share, and 10,000,000
shares of preferred stock, par value $0.01 per share. The following summary
describes the material terms of Lehigh Acres Bancshares' capital stock.
COMMON STOCK
Holders of shares of the common stock are entitled to receive such
dividends as may from time to time be declared by the board of directors out of
funds legally available for that purpose. We do not plan to declare any
dividends in the immediate future. See "Dividend Policy." Holders of common
stock are entitled to one vote per share on all matters on which they are
entitled to vote and do not have any cumulative voting rights. Shareholders have
no preemptive, conversion, redemption or sinking fund rights. In the event of a
liquidation, dissolution or winding-up of the company, holders of common stock
are entitled to share equally and ratably in the assets of the company, if any,
remaining after the payment of all debts and liabilities of the company and the
liquidation preference of any outstanding preferred stock. The outstanding
shares of common stock are, and the shares of common stock offered by the
company under this document when issued will be, fully paid and nonassessable.
The rights, preferences and privileges of holders of common stock are subject to
any classes or series of preferred stock that the company may issue in the
future.
PREFERRED STOCK
Our board of directors has the authority under our articles of
incorporation, without the approval of or any action by the shareholders, to
issue up to 10,000,000 shares of preferred stock. Our board of directors also
has the authority to designate the series and any preferences, powers,
limitations, and relative rights of each issuance of preferred stock, and these
rights may be more favorable than those granted to holders of our common stock.
Issuances of preferred stock, while providing us with flexibility in connection
with general corporate purposes, could have an adverse effect on the rights of
holders of our common stock (for example, the issuance of any preferred stock
with voting or conversion rights may adversely affect the voting power of the
holders of common stock). The designation of any preferred stock with greater
rights, privileges, and preferences than those applicable to the common stock
could adversely affect the voting power, market price, and other rights and
privileges of the common stock and could hinder or delay actions which the
holders of common stock might desire, such as the removal of directors,
attempted tender offers, proxy contests or takeovers, or other attempts to
change control of the company. We do not have any current plans to issue any
shares of preferred stock, and will not issue preferred stock to organizers on
terms more favorable than those on which it issues preferred stock to
shareholders other than organizers.
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ANTI-TAKEOVER EFFECTS
The provisions of the articles, the bylaws, and Florida law summarized
in the following paragraphs may have anti-takeover effects and may delay, defer,
or prevent a tender offer or takeover attempt that a shareholder might consider
to be in such shareholder's best interest, including those attempts that might
result in a premium over the market price for the shares held by shareholders,
and may make removal of management more difficult.
Authorized but Unissued Stock. The authorized but unissued shares of
common stock and preferred stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the board of directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of Lehigh Acres Bancshares by means of a proxy contest, tender
offer, merger or otherwise, and thus protect the continuity of the company's
management.
Number of Directors. The bylaws provide that the number of directors
shall be fixed from time to time by resolution by at least a majority of the
directors then in office, but may not consist of fewer than 5 nor more than 25
members.
Classified Board of Directors. The articles and bylaws divide the board
of directors into three classes of directors serving staggered three-year terms.
As a result, approximately one-third of the board of directors will be elected
at each annual meeting of shareholders. The classification of directors,
together with the provisions in the articles and bylaws described below that
limit the ability of shareholders to remove directors and that permit the
remaining directors to fill any vacancies on the board of directors, will have
the effect of making it more difficult for shareholders to change the
composition of the board of directors. As a result, at least two annual meetings
of shareholders may be required for the shareholders to change a majority of the
directors, whether or not a change in the board of directors would be beneficial
and whether or not a majority of shareholders believe that such a change would
be desirable.
Removal of Directors and Filling Vacancies. The bylaws provide that all
vacancies on the board of directors, including those resulting from an increase
in the number of directors, may be filled by a majority of the remaining
directors, even if they do not constitute a quorum. When one or more directors
resign from the board of directors effective at a future date, a majority of
directors then in office, including the directors who are to resign, may vote on
filling the vacancy.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The bylaws establish advance notice procedures with regard to
shareholder proposals and the nomination, other than by or at the direction of
the board of directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of shareholder proposals and
shareholder nominations for the election of directors at any meeting of
shareholders must be in writing and be received by each director not later than
twenty-four hours prior to the meeting when delivered personally or by telecopy
or at least two days prior to the meeting when delivered by mail. We may reject
a shareholder proposal or nomination that is not made in accordance with such
procedures.
Nomination Requirements. Pursuant to the bylaws, we have established
certain nomination requirements for an individual to be elected as a director,
including that the nominating party provide (i) notice that such party intends
to nominate the proposed director; (ii) the name of and certain biographical
information on the nominee; and (iii) a statement that the nominee has consented
to the nomination. The chairman of any shareholders' meeting may, for good cause
shown, waive the operation of these provisions. These provisions could reduce
the likelihood that a third party would nominate and elect individuals to serve
on the board of directors.
Control Share Act and Affiliated Transaction/Fair Price Act. Lehigh
Acres Bancshares is subject a provision under Florida law which may deter or
frustrate unsolicited attempts to acquire certain Florida corporations. These
statutes, commonly referred to as the "Control Share Act" and the "Fair Price
Act" apply to
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most public corporations organized in Florida, unless the corporation has
specifically elected to opt out of such provisions. Lehigh Acres has elected to
opt out of the "Control Share Act." The Fair Price Act generally requires that
certain transactions between a public corporation and an affiliate must be
approved by the disinterested directors or by two-thirds of the disinterested
shareholders, not including those shares beneficially owned by an "interested
shareholder." The Control Share Act generally provides that shares of a public
corporation acquired in excess of certain specific thresholds will not possess
any voting rights unless such voting rights are approved by a majority vote of
the corporation's disinterested shareholders. Lehigh Acres Bancshares decision
not to opt out of the Fair Price Act could result in it being less attractive to
a potential acquirer and/or result in shareholders receiving less for their
shares that otherwise might be available in the event of an unsolicited takeover
attempt.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have a minimum of 600,000 and
a maximum of 1,000,000 shares of common stock outstanding. The shares sold in
this offering will be freely tradable, without restriction or registration under
the Securities Act of 1933, except for shares purchased by "affiliates" of
Lehigh Acres Bancshares, which will be subject to resale restrictions under the
Securities Act of 1933. An affiliate of the issuer is defined in Rule 144 under
the Securities Act of 1933 as a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with the issuer. Rule 405 under the Securities Act of 1933 defines the term
"control" to mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of the person whether through
the ownership of voting securities, by contract or otherwise. Directors will
likely be deemed to be affiliates. These securities held by affiliates may be
sold without registration in accordance with the provisions of Rule 144 or
another exemption from registration.
In general, under Rule 144, an affiliate of the company or a person
holding restricted shares may sell, within any three-month period, a number of
shares no greater than 1% of the then outstanding shares of the common stock or
the average weekly trading volume of the common stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers' transactions," as defined in the Securities
Act of 1933, and the person selling the securities may not solicit orders or
make any payment in connection with the offer or sale of securities to any
person other than the broker who executes the order to sell the securities. This
requirement may make the sale of the common stock by affiliates of Lehigh Acres
Bancshares pursuant to Rule 144 difficult if no trading market develops in the
common stock. Rule 144 also requires persons holding restricted securities to
hold the shares for at least one year prior to sale.
LEGAL MATTERS
The validity of the common stock offered by this document will be
passed upon by Nelson, Mullins, Riley & Scarborough, L.L.P., Atlanta, Georgia.
Bradley & Riley PC, Cedar Rapids, Iowa will pass upon certain legal matters in
connection with the offering by the sales agent.
EXPERTS
Lehigh Acres Bancshares' financial statements dated June 21, 1999 and
for the period from April 14, 1998 (inception), until December 31, 1998 have
been audited by Francis & Co., CPA, as stated in their report appearing
elsewhere herein, and have been so included in reliance on the report of Francis
and Company given upon their authority as an expert in accounting and auditing.
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ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2
(together with all amendments, exhibits, schedules and supplements, the
"Registration Statement"), under the Securities Act of 1933 and the rules and
regulations under the Act, for the registration of the common stock offered.
This prospectus, which forms a part of the Registration Statement, does not
contain all of the information included in the Registration Statement. For
further information with respect to Lehigh Acres Bancshares, Lehigh Acres Bank,
and the common stock, you should refer to the Registration Statement and the
exhibits attached.
You can examine and obtain copies of the Registration Statement at the
Public Reference Section of the SEC, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains a Web site at http://www.sec.gov
that contains all of the reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC using
the EDGAR filing system, including Lehigh Acres Bancshares.
We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC. You should only rely only on
information in this prospectus and in our related Registration Statement in
making an investment decision. If other available information is inconsistent
with information in this prospectus, including information in public files or
provided by the Office of the Comptroller of the Currency and the FDIC, such
other information is superseded by the information in this prospectus.
Projections appearing in the applications to such agencies were based on
assumptions that the organizers believed were reasonable at the time, but which
may have changed or otherwise be wrong. Lehigh Acres Bancshares and Lehigh Acres
Bank specifically disclaim all projections for purposes of this prospectus and
caution prospective investors against placing reliance on them for purposes of
making an investment decision. Statements contained in this prospectus regarding
the contents of any contract or other document referred to are not necessarily
complete. If such contract or document is an exhibit to the Registration
Statement, you may obtain and read such document or contract for more
information.
As a result of this offering, Lehigh Acres Bancshares will become a
reporting company subject to the full informational requirements of the
Securities Exchange Act of 1934. We will fulfill our obligations with respect to
these requirements by filing periodic reports and other information with the
SEC, and we will furnish our shareholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each fiscal year containing unaudited summary financial information. Our fiscal
year ends on December 31.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Independent Auditors' Report...............................................................................F-2
Balance Sheet as of December 31, 1998......................................................................F-3
Statement of Operations from Inception,
April 14, 1998 to December 31, 1998
and for 3 months ended June 30, 1999.....................................................................F-4
Statement of Operations from Inception,
April 14, 1998, to December 31, 1998 and
for 6 months ended June 30, 1999.........................................................................F-5
Statement of Cash Flows from Inception,
April 14, 1998, to December 31, 1998.....................................................................F-6
Statement of Changes in Stockholders' Equity from
Inception, April 14, 1998, to December 31, 1998..........................................................F-7
Notes to Financial Statements..............................................................................F-8
</TABLE>
41
<PAGE> 42
FRANCIS
& CO., CPAs
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Lehigh Acres First National Bancshares, Inc. (in organization)
Lehigh Acres, Florida
We have audited the accompanying balance sheet of Lehigh Acres First
National Bancshares, Inc., (in organization) Lehigh Acres, Florida, (the
"Company") a development stage enterprise, as of December 31, 1998 and the
related statements of operations, changes in stockholders' equity and cash flows
for the period from April 14, 1998 (date of inception) to December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides 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 Lehigh Acres First
National Bancshares, Inc. (in organization) as of December 31, 1998, and the
results of its operations and its cash flows for the period from April 14, 1998
(date of inception) to December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Francis & Co., CPAs
------------------------------------
Francis & Co., CPAs
Atlanta, Georgia
June 21, 1999
4400 Roswell Road Bldg. 142, Suite 301 Marietta, GA 30062
Tel: 770/650-1180 Fax: 770/650-8299
42
<PAGE> 43
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
- ------ June 30 December 31,
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Cash $ 2,308 $ 51,476
Deferred registration costs 23,319 --
Other assets 1,895 2,911
--------- ---------
Total Assets $ 27,522 $ 54,387
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Advances from organizers $ 30,000 $ 209,000
Accrued expenses 11,998 --
--------- ---------
Total Liabilities $ 41,998 $ 209,000
--------- ---------
Commitments and contingencies (Note 3)
Stockholders' Equity (Note 1):
Common stock, $.01 par value,
10,000,000 shares authorized,
18,000 shares and 100 shares issued
and outstanding at June 30, 1999 and
December 31, 1998, respectively $ 180 $ 1
Paid-in-capital 179,820 999
(Deficit) accumulated during
the development stage (194,476) (155,613)
--------- ---------
Total Stockholders' Equity (14,476) (154,613)
--------- ---------
Total Liabilities and
Stockholders' Equity $ 27,522 $ 54,387
========= =========
</TABLE>
Refer to notes to the financial statements.
43
<PAGE> 44
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the From
three-months Inception
ended June 30, April 14,
1999 1998 1998 through
-------- -------- December 31,
(Unaudited) 1998
--------------------------- ------------
<S> <C> <C> <C>
Revenues:
Interest income $ 191 $ 511 $ 2,291
-------- -------- ---------
Total revenues 191 511 2,291
-------- -------- ---------
Expenses:
Organizing consultant $ 19,500 $ 32,000 $ 80,000
Organizational expenses 799 37,239 68,868
Insurance expense 1,269 1,615 4,040
Advertising and promotional 202 100 945
Travel and entertainment 1,385 2,436 2,990
Miscellaneous other expenses 2,596 351 1,061
-------- -------- ---------
Total expenses $ 25,751 $ 73,741 157,904
-------- -------- ---------
Net (loss) $(25,560) $(73,230) $ (155,613)
======== ======== =========
Basic (loss) per share (Note 2) $ (15.27) $(732.30) $(1,556.13)
======== ======== =========
</TABLE>
Refer to notes to the financial statements.
44
<PAGE> 45
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the From
six-months Inception,
ended June 30, April 14,
1999 1998 1998 through
-------- -------- December 31,
(Unaudited) 1998
--------------------------- ------------
<S> <C> <C> <C>
Revenues:
Interest income $ 598 $ 511 $ 2,291
-------- -------- ---------
Total revenues 598 511 2,291
-------- -------- ---------
Expenses:
Organizing consultant $ 31,500 $ 32,000 $ 80,000
Organizational expenses 1,029 37,239 68,868
Insurance expense 2,517 1,615 4,040
Advertising and promotional 202 100 945
Travel and entertainment 1,385 2,436 2,990
Miscellaneous other expenses 2,828 351 1,061
-------- -------- ---------
Total expenses $ 39,461 $ 73,741 157,904
-------- -------- ---------
Net (loss) $(38,863) $(73,230) $ (155,613)
======== ======== =========
Basic (loss) per share (Note 2) $ (43.57) $(732.30) $(1,556.13)
======== ======== =========
</TABLE>
Refer to notes to the financial statements.
45
<PAGE> 46
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the From
six-months Inception,
ended June 30, April 14,
1999 1998 1998 through
-------- -------- December 31,
(Unaudited) 1998
---------------------------- ------------
<S> <C> <C> <C>
Cash flows from pre-operating
activities of
the development stage:
Net (loss) $ (38,863) $ (73,230) $(155,613)
Adjustments to reconcile net
(loss) to net cash used by
pre-operating activities
of the development stage:
Decrease (increase)
in other assets 1,016 (158) (2,911)
(Decease) in payables (167,002) -- --
--------- --------- ---------
Net cash used by pre-operating
activities of the development stage $(204,849) $ (73,388) $(158,524)
--------- --------- ---------
Cash flows from investing activities:
(Increase) in deferred
registration costs $ (23,319) -- --
--------- --------- ---------
Net cash used in
investing activities $ (23,319) -- --
--------- --------- ---------
Cash flows from financing activities:
Issuance of common stock $ 179,000 $ 1,000 $ 1,000
Increase in borrowings -- 110,000 209,000
--------- --------- ---------
Net cash provided from
financing activities $ 179,000 $ 111,000 $ 210,000
--------- --------- ---------
Net increase (decrease) in cash $ (49,168) $ 37,612 $ 51,476
Cash at beginning of period 51,476 -- --
--------- --------- ---------
Cash at end of period $ 2,308 $ 37,612 $ 51,476
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ -- $ -- $ --
========= ========= =========
Income taxes $ -- $ -- $ --
========= ========= =========
</TABLE>
Refer to notes to the financial statements.
46
<PAGE> 47
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION (APRIL 14, 1998) TO DECEMBER 31, 1998 (AUDITED)
AND FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
(Deficit)
Common Accumulated
Stock Additional During Total
$.01 Paid-in- the Development Stockholders'
Par Value Capital Stage Equity
--------- ------- ----- ------
<S> <C> <C> <C> <C>
Issuance of
100 shares
of Common stock $ 1 $ 999 $ -- $ 1,000
Net (loss) -- -- (155,613) (155,613)
---- -------- --------- ---------
Balance,
December 31, 1998 1 999 (155,613) (154,613)
---- -------- --------- ---------
Issuance of
17,900 shares
of Common Stock 179 178,821 -- 179,000
---------
Net (loss) -- -- (38,863) (38,863)
---- -------- --------- ---------
Balance,
June 30, 1999 $180 $179,820 $(194,476) $ (14,476)
==== ======== ========= =========
</TABLE>
Refer to notes to the financial statements.
47
<PAGE> 48
NOTE 1 - SUMMARY OF ORGANIZATION
Lehigh Acres First National Bancshares, Inc. (in organization)
(hereinafter, the "Company") was incorporated in the State of Florida on May 19,
1999 for the purpose of becoming a bank holding company with respect to a
proposed de novo bank, Lehigh Acres First National Bank (the "Bank") to be
located in Lehigh Acres, Florida. Prior to the formation of the Company, a group
of organizers, on April 14, 1998, formed a separate company, Lehigh One, Inc.,
to be used as a tool to facilitate in the process of organizing and forming both
the Company and the Bank. All assets, liabilities, rights, revenues and expenses
acquired, incurred or undertaken by Lehigh One, Inc. from inception (April 14,
1998) have been transferred, by mutual agreement of the Boards of Directors of
both Lehigh One, Inc. and the Company, to the Company. Accordingly, all
financial transactions undertaken by Lehigh One, Inc. during 1998 and 1999 are
reflected in the Company's financial statements as of June 30, 1999 and December
31, 1998.
On March 30, 1999, the Company received preliminary approval from the
Office of the Comptroller of the Currency (the "OCC") to charter a bank, and on
April 2, 1999, the Company received preliminary approval from the Federal
Deposit Insurance Corporation (the "FDIC") to insure deposits up to $100,000 per
depositor. The Federal Reserve Board (the "FRB") approved our application to
form a bank holding company on August 13, 1999. When all regulatory
applications are approved and the minimum stock sale is successfully completed,
the Company will acquire 100 percent of the voting stock of the Bank by
injecting a minimum of $5.0 million into the Bank's capital accounts.
The Company is authorized to issue up to 10.0 million shares of its
$.01 par value per share common stock ("Common Stock") . Each share is entitled
to one vote and shareholders have no preemptive, cumulative voting or conversion
rights. The organizers as a group capitalized the Company by acquiring 18,000
shares of the Company's Common Stock for an aggregate amount of $180,000. The
organizers intend to purchase an additional 99,000 shares of the Company's
Common Stock in the Offering. As of June 30, 1999 and December 31, 1998, there
were 18,000 shares and 100 shares of the Company's Common Stock issued and
outstanding, respectively.
The Company is also authorized to issue of up to 10.0 million shares of
its $.01 par value per share preferred stock. The Company's Board of Directors
may, without further action by the shareholders, direct the issuance of
preferred stock for any proper corporate purpose with preferences, voting
powers, conversion rights, qualifications, special or relative rights and
privileges which could adversely affect the voting power or other rights of
shareholders of Common Stock. As of June 30, 1999 and December 31, 1998, there
were no shares of the Company's preferred stock issued or outstanding.
The Company's Articles of Incorporation and Bylaws contain certain
provisions that might be deemed to have potential defensive "anti takeover"
effects. These certain provisions include: (i) provisions relating to meetings
of shareholders which limit who may call meetings and what matters will be voted
upon; (ii) the ability of the Board of Directors to issue additional shares of
authorized Common Stock and preferred stock without shareholder approval, thus
retaining the ability to dilute any potential acquirer attempting to gain
control by purchasing Company stock; (iii) a staggered Board of Directors,
limiting the ability to change the members of the Board; and (iv) a provision
that individuals affiliated with the Company's competitors may not qualify to
serve on its Board.
The Company has filed a Registration Statement on Form SB-2 with
the Securities and Exchange Commission offering for sale a minimum of 600,000
and maximum of 1,000,000 shares of its $.01 par value Common Stock (the
"Offering"). The sales price for each share of Common Stock is $10.00. All
subscription proceeds will be held by an Escrow Agent pending acceptance of
subscriptions, completion of the Offering, and the receipt of preliminary
approvals from the OCC, FDIC and the FRB. If the sale of the minimum (600,000)
shares of Common Stock is not accomplished by the expiration date, as extended,
all subscriptions will be canceled and all proceeds returned, with interest, to
the subscribers. If the sale of the minimum (600,000) shares
<PAGE> 49
of Common Stock is accomplished and all final regulatory approvals are obtained,
the Company will capitalize the Bank with at least $5.0 million immediately
prior to commencement of banking operations.
The organizers of the Company will receive one warrant, at no
additional cost, for each share of Common Stock purchased by that organizer in
the Offering. Each warrant entitles its holder to purchase one share of the
Company's Common Stock for $10.00 for a period of ten years from the later of
(i) the date the Bank opens for business or (ii) one year after the date of its
Offering prospectus. The warrants will vest immediately on the above date, as
applicable, and may be exercised either in whole or in part. All warrants are
subject to approval by the banking regulatory agencies.
The Company is a development stage enterprise as defined by the
Financial Accounting Standards Board Statement No. 7, "Accounting and Reporting
by Development Stage Enterprises," as it devotes substantially all its efforts
to establishing a new business, its planned principal operations have not
commenced and there has been no significant revenue from the planned principal
operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting. The accounting and reporting policies of the
Company conform to generally accepted accounting principles and to general
practices in the banking industry. The Company uses the accrual basis of
accounting by recognizing revenues when they are earned and expenses in the
period incurred, without regard to the time of receipt or payment of cash. The
Company has adopted a fiscal year that ends on December 31, effective for the
period ended December 31, 1998.
Organizational Expenses. Organizational costs are costs that have been
incurred in the expectation that they will generate future revenues or otherwise
benefit periods after the Company reaches the operating stage. Organizational
costs generally include incorporation, legal and accounting fees incurred in
connection with establishing the Company. In accordance with recent accounting
pronouncements, all organizational expenses have been expensed when incurred.
Deferred Registration Costs. Deferred registration costs are deferred
and incremental costs incurred by the Company in connection with the
underwriting and issuance of its own Common Stock. Deferred registration costs
do not include any allocation of salaries, overhead or similar costs. The
Company estimates that it will incur and pay commissions associated with the
sale of stock in the Offering of approximately $326,400 on the minimum 600,000
shares and $646,400 on the maximum 1,000,000 shares. In addition to the
underwriting commissions described above, the Company expects its other deferred
registration costs to approximate $110,000. In a successful offering, deferred
registration costs are deducted from the Company's paid-in-capital account.
Registration costs associated with an unsuccessful offering are charged to
operations in the period during which the offering is deemed unsuccessful.
Income Taxes. The Company will be subject to taxation whenever taxable
income is generated. As of June 30, 1999 and December 31, 1998, no income taxes
had been accrued since no taxable income had been generated.
Basic (Loss) Per Share. For the period from Inception (April 14, 1998)
through December 31, 1998, basic loss per share amounted to $ (1,556.13) . The
loss per share was calculated using 100 shares as the average number of shares
outstanding during the period.
Basic loss per share of $(15.27) and $(43.57) is based on the average
number of shares outstanding of 1,674 and 892 for the three-month and six-month
periods ended June 30, 1999, respectively. Note that the above result may not be
indicative of future performance since planned principal operations have not
commenced.
Statement of Cash Flows. The statement of cash flows was prepared using
the indirect method. Under this method, net loss was reconciled to net cash
flows from pre-operating activities by adjusting for the effects of current
assets and short term liabilities.
<PAGE> 50
NOTE 3 - COMMITMENTS AND CONTINGENCIES
On June 10, 1999, the Company obtained a one-year, $250,000 line of
credit ("LOC") at a floating rate of interest of prime less one percent. The LOC
was obtained in order to fund pre-operating activities. As of June 30, 1999, no
funds had been drawn against the LOC.
In connection with the Company's formation and the organization of its
subsidiary Bank, the Company has entered into three separate agreements with a
bank consulting firm, a law firm and an accounting firm to assist it in: (i)
preparing and filing all organizational and incorporation papers; (ii) preparing
and filing applications with the bank regulatory authorities concerning the
formation of a bank holding company and the organization of a Federally
chartered bank; (iii) preparing a Registration Statement on Form SB-2, including
the financial audit and filing same with the Securities and Exchange Commission;
and (iv) drafting of employment agreements, stock option plans and other matters
relating to compensation. The aggregate cost of the above services is estimated
to approximate $145,000 and may vary depending upon the degree of complexity and
time spent on the above projects.
The bank consulting firm mentioned above is 100% owned by a certain
organizer of the Company. The agreement with the bank consulting firm estimates
the cost of its services to approximate $35,000 plus out of pocket expenses. In
addition, this organizer will receive options to purchase 3,000 shares of the
Company's Common Stock. Each option will entitle the organizer to purchase one
share of the Company's Common Stock for $10.00 per share. The options will be
exercisable for a period of ten years from the date the Bank opens for business.
In the event that (i) the minimum offering (600,000 shares) is not met, or (ii)
the options are not awarded for any reason within six months after the Bank
opens for business, the Company will compensate this organizer the amount of
$4,200. From inception (April 14, 1998) through June 30, 1999 and December 31,
1998, the bank consulting firm had been paid $36,361 and $35,332, respectively.
On April 16, 1998, the Company entered into a consulting agreement
("Consulting Agreement I") with one of its organizers who will serve as the
Company's and the Bank's President and CEO (the "CEO"). Consulting Agreement I
requires the CEO to provide consulting services in connection with the
organization of the Company and the proposed Bank. Consulting Agreement I was
for a term of nine months and provided other customary benefits such as health,
life and disability insurance, with cost not exceeding $600 per month. For
calendar year 1998, the CEO was paid $80,000 pursuant to Consulting Agreement I.
On January 16, 1999, the Company entered into a consulting agreement
("Consulting Agreement II") with its CEO. Consulting Agreement II, which
replaced Consulting Agreement I, became effective January 16, 1999 and is for a
term of up to fifteen months. During the six months ended June 30, 1999, the CEO
was compensated $31,500 pursuant to Consulting Agreement II.
On October 9, 1998, the Company entered into an employment agreement
(the "Employment Agreement") with the CEO. The Employment Agreement will
commence when the proposed Bank opens for business. The Employment Agreement is
for a term of five years. Under the terms of the Employment Agreement, the CEO,
for his services and efforts, will be paid an annual base salary of $96,000 plus
performance bonuses of up to 15% of the base salary. The Employment Agreement
provides for other customary benefits, such as health, life and disability
insurance. Also, upon the Bank's opening for business and the Board's adoption
of a stock option plan, the CEO will be granted options to purchase 25,000
shares of the Company's Common Stock at a price of $10.00 per share. The options
will vest equally over a three year period and will have a term of ten years.
The Company entered into two lease agreements with two unrelated
parties. Both agreements cover the same facility from which the proposed Bank
will operate. The first agreement obligates the Company to pay $6,486 for each
of the initial eleven months beginning July 1, 1999 and $7,252 per month
thereafter until May 31, 2005. The second agreement obligates the Company to pay
$7,977 per month for five years beginning June 1, 2005 and $8,775 per month for
five years beginning June 1, 2010. The second agreement also contains two
additional five year options to renew. The first option, if exercised, obligates
the Company to pay $9,652 per
<PAGE> 51
month beginning June 1, 2015. The second option, if exercised, obligates the
Company to pay $10,618 per month beginning June 1, 2020. In addition to the
monthly lease payments, the Company is obligated to pay sales tax, repairs and
maintenance, insurance and property tax.
Please refer to Note 1 concerning warrants to be issued to organizers.
NOTE 4 - RELATED PARTY TRANSACTIONS
A group of fourteen individuals advanced $209,000 to the Company in
order to fund the Company's pre-operating expenses. These funds were advanced
interest-free. No imputed interest was charged to operations in the Company's
financial statements as of and for the periods ended June 30, 1999 and December
31, 1998. Of the above advance of $209,000, on June 22, 1999, $179,000 was
converted into 17,900 shares of the Company's Common Stock.
Under an agreement dated June 26, 1998, an organizer was engaged to
review certain contracts, leases and documents relevant to the organization of
the Company. This organizer, upon a successful completion of the sale of at
least the minimum Offering (600,000 shares), will receive the sum of $10,000 in
consideration for services rendered. As of June 30, 1999 and December 31, 1998,
no accrual was recorded and no payments had been paid with respect to this
agreement.
Please refer to Note 1 regarding all assets, liabilities, rights,
revenues and expenses acquired, incurred or undertaken by Lehigh One, Inc., all
of which have been assumed and transferred to the Company.
Please refer to Note 1 for a discussion concerning the organizers,
warrants.
Please refer to Note 3 for a discussion concerning an agreement with a
bank consulting firm owned 100% by a certain organizer of the Company.
Please refer to Note 3 for discussions concerning the CEO's Employment
Agreement, Consulting Agreement I and Consulting Agreement II.
NOTE 5 - UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements and related notes and schedules as of June 30,
1999 and 1998, and for the three and six-month periods then ended are unaudited.
However, in the opinion of the Company's management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
those financial statements have been included. Operating results for the
six-month period ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
<PAGE> 52
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
STOCK ORDER FORM/SUBSCRIPTION AGREEMENT
TO: Diane Anderson
Berthel Fisher & Company
Corporate Office
100 Second Street, N.E.
Cedar Rapids, Iowa 52407-4250
Ladies and Gentlemen:
You have informed me that Lehigh Acres First National Bancshares, Inc.,
a Florida corporation, is offering up to 1,000,000 shares of its common stock,
at a price of $10.00 per share payable as provided herein and as described in
and offered pursuant to the prospectus furnished with this Subscription
Agreement to the undersigned.
1. SUBSCRIPTION. Subject to the terms and conditions included, the
undersigned tenders this subscription, together with payment in United States
currency by check, bank draft, or money order payable to "The Independent
Bankers' Bank of Florida as escrow agent for Lehigh Acres First National
Bancshares, Inc." the amount indicated below, representing the payment of $10.00
per share for the number of shares of common stock indicated below. The total
subscription price must be paid at the time the Subscription Agreement is
executed.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that Lehigh
Acres First National Bancshares, Inc. shall have the right to accept or reject
this subscription in whole or in part, for any reason whatsoever. Lehigh Acres
First National Bancshares, Inc. may reduce the number of shares for which the
undersigned has subscribed, indicating acceptance of less than all of the shares
subscribed on its written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned acknowledges that he or she has
received a copy of the prospectus. This Subscription Agreement creates a legally
binding obligation and the undersigned agrees to be bound by the terms of this
Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription
Agreement is tendered to Lehigh Acres First National Bancshares, Inc., it may
not be withdrawn and that this Agreement shall survive the death or disability
of the undersigned.
BY EXECUTING THIS AGREEMENT, THE SUBSCRIBER IS NOT WAIVING ANY RIGHTS HE OR SHE
MAY HAVE UNDER FEDERAL SECURITIES LAWS, INCLUDING THE SECURITIES ACT OF 1933 AND
THE SECURITIES EXCHANGE ACT OF 1934.
THE SHARES OF COMMON STOCK OFFERED HERE ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1
<PAGE> 53
Please indicate in the space provided below the exact name or names and
address in which the stock certificate representing shares subscribed for
hereunder should be registered.
<TABLE>
<S> <C>
- -------------------------------------------- ------------------------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please Print)
for (at least 100 shares and no more than
5% of the minimum offering)
$
------------------------------------------- ------------------------------------------------------------
Total Subscription Price at Please indicate form of ownership desired (individual,
$10.00 per share (funds must be enclosed) joint tenants with right of survivorship, tenants in
common, trust corporation, partnership, custodian, etc.)
Date: (L.S.)
--------------------------------------- -----------------------------------------------------
Signature of Subscriber(s)
- -------------------------------------------- (L.S.)
Social Security Number or Federal -----------------------------------------------------
Taxpayer Identification Number Signature of Subscriber(s)
Street (Residence) Address IRA Custodian (if applicable):
- -------------------------------------------- -----------------------------------------------------
- -------------------------------------------- -----------------------------------------------------
- -------------------------------------------- -----------------------------------------------------
City, State and Zip Code Name, City, State and Zip Code
</TABLE>
When signing as attorney, trustee, administrator, or guardian, please
give your full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
TO BE COMPLETED BY LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.:
Accepted as of __________________, _______, as to ___________ shares.
LEHIGH ACRES FIRST NATIONAL BANCSHARES, INC.
--------------------------------------------
By:
Title:
A-2
<PAGE> 54
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the escrow agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9 below.
Under federal income tax law, any person who is required to furnish his
or her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained from the IRS. Certain taxpayers, including all corporations, are not
subject to these backup withholding and reporting requirements.
If the shareholder has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in the near future, "Applied For" should be
written in the space provided for the TIN on the Substitute Form W-9.
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) The number shown on
this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject to
backup withholding because: (a) I am exempt from backup withholding; or (b) I
have not been notified by the Internal Revenue Service ("IRS") that I am subject
to backup withholding as a result of a failure to report all interest or
dividends; or (c) the IRS has notified me that I am no longer subject to backup
withholding.
You must cross out item (ii) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from
the IRS that you are not longer subject to backup withholding, do not cross out
item (ii).
Each subscriber should complete this section.
- ---------------------------------- -----------------------------------
Signature of Subscriber Signature of Subscriber
- ---------------------------------- -----------------------------------
Printed Name Printed Name
- ---------------------------------- -----------------------------------
Social Security or Employer Social Security or Employer
Identification No. Identification No.
A-3
<PAGE> 55
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Summary...........................................3
Risk Factors......................................5
The Offering......................................9
Use of Proceeds..................................12
Capitalization...................................15
Dividend Policy .................................15
Plan of Operation................................16
Proposed Business................................18
Supervision and Regulation.......................24
Management.......................................31
Certain Relationships and Related Transactions...36
Description of Capital Stock.....................37
Legal Matters....................................39
Experts..........................................39
Additional Information...........................40
Index to Financial Statements...................F-1
Subscription Agreement..........................A-1
</TABLE>
--------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE
HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE
DATE ON THE COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE.
UNTIL ____________________, ALL DEALERS THAT EFFECT TRANSACTIONS IN
THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED
TO DELIVER A PROSPECTUS.
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1,000,000 SHARES
COMMON STOCK
LEHIGH ACRES FIRST
NATIONAL BANCSHARES,
INC.
A PROPOSED HOLDING COMPANY FOR
LEHIGH ACRES FIRST NATIONAL BANK
PROSPECTUS
[INSERT SALES AGENT LOGO]
September 14, 1999
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