<PAGE>
As filed with Securities and Exchange Commission on December 14, 2000
Registration Statement No. 333-_______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
Form SB-2
Registration Statement Under The Securities Act of 1933
----------------------
Penn Mar Bancshares, Inc.
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C> <C>
Maryland 6021 52-2196765
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
135 East Main Street
Westminster, Maryland 21157
410-848-4460
(Address and telephone number of principal executive offices and principal place
of business)
<TABLE>
<S> <C>
J. Geoffrey Sturgill, Jr., Chairman and Copies To:
President Melissa Allison Warren, Esquire
Penn Mar Bancshares, Inc. Frank C. Bonaventure, Jr., Esquire
135 East Main Street Ober, Kaler, Grimes & Shriver
Westminster, Maryland 21157 A Professional Corporation
410-848-4460 120 E. Baltimore Street
Baltimore, Maryland 21202
410-347-7684
</TABLE>
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Dollar Proposed Proposed maximum
Title of each class of amount to be maximum aggregate Amount of
securities to be registered registered offering price offering price registration fee
per unit
<S> <C> <C> <C> <C>
Common Stock, $0.01 par 1,000,000 $10.00 $10,000,000 $2,640
value Shares
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Subject To Completion, Dated December 14, 2000
500,000 Shares (Minimum)
1,000,000 Shares (Maximum)
Penn Mar Bancshares, Inc.
Common Stock
$10.00 Per Share
___________________________
This is an initial public offering of shares of common stock of Penn Mar
Bancshares, Inc. We are offering these shares to fund the start-up of a new
Maryland state-chartered commercial bank. The offering price will be $10.00 per
share. We will not apply for listing of the common stock on any stock exchange
or on The Nasdaq Stock Market. No public market currently exists for our common
stock .
Because we are selling these shares on a best efforts, minimum/maximum
basis, we will not sell any shares unless we receive subscriptions for at least
500,000 shares and obtain regulatory approvals to begin banking operations.
Until we receive subscriptions for 500,000 shares and final regulatory approvals
to open the new bank, investors' money will be deposited in an escrow account
with Atlantic Central Bankers Bank. The minimum share purchase is 1,000 shares,
although we may permit smaller purchases at our discretion. This offering will
end on [3 months after effective date], or earlier if we sell all of the shares
before that date. In addition, we have the option to extend the offering until
[3 months after date in last sentence]. We will not extend the offering
beyond______________.
___________________________
Investing in the common stock involves substantial risk. You should read
carefully the section called "Risk Factors" beginning on page 3 of this
Prospectus.
We will not engage a broker-dealer to sell the common stock in this
offering. Therefore, we will receive all of the offering proceeds without
deducting any commissions or fees.
<TABLE>
<CAPTION>
Per Total Total
Share Minimum Maximum
----------- ------------ -----------
<S> <C> <C> <C>
Public Offering Price................................ $10.00 $5,000,000 $10,000,000
Underwriting Discounts and Commissions............... None None None
Proceeds to Penn Mar Bancshares, Inc................. $10.00 $5,000,000 $10,000,000
</TABLE>
__________________________________________
The common stock does not represent a deposit account or other obligation
of our proposed banking subsidiary. The common stock is not and will not be
insured by the Federal Deposit Insurance Corporation or any other government
agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is ___________
RED HERRING LEGEND:
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
PROSPECTUS SUMMARY
Because this is a summary, it does not contain all of the information that
may be important to you. You should read carefully the entire Prospectus,
including the information under "Risk Factors," before making any decision to
buy our common stock.
Penn Mar Bancshares, Inc. and Penn Mar Community Bank
Penn Mar Bancshares, Inc. was incorporated in Maryland on October 7, 1999,
to operate as a bank holding company. Subject to regulatory approvals, we will
use at least $5,000,000 of the net proceeds of this offering to purchase all of
the shares of the common stock of a proposed Maryland state-chartered commercial
bank to be named Penn Mar Community Bank.
A group of individuals active in business, professional, banking, financial
and charitable activities in Carroll, Frederick, and Howard Counties in Maryland
and in Southern Pennsylvania are organizing Penn Mar Community Bank because they
believe that the banking needs of certain segments of these communities are not
being served adequately by existing banks. In particular, Penn Mar Community
Bank will emphasize meeting the banking needs of small and mid-sized businesses,
the owners of these businesses and their employees and business professionals.
Penn Mar Community Bank has not yet opened and will not do so unless we complete
this offering and obtain the approvals of the Maryland State Commissioner of
Financial Regulation, the Board of Governors of the Federal Reserve System and
the Federal Deposit Insurance Corporation.
We anticipate that Penn Mar Community Bank will open in the second quarter
of 2001, although we may encounter any number of delays. The main office of Penn
Mar Bancshares, Inc. is located at 135 East Main Street, Westminster, Maryland
21157, and our telephone number is (410) 848-4460. Penn Mar Community Bank
proposes to establish its main banking office in Westminster, Maryland at 309
Woodward Road, Westminster, Maryland 21157. In addition, Penn Mar Community Bank
may establish a branch office in Frederick, Maryland. See "Proposed Business of
Penn Mar Bancshares, Inc." and "Proposed Business of Penn Mar Community Bank"
for more information about us, our proposed banking subsidiary and our business
plans.
The Offering
Shares Offered Minimum of 500,000 and maximum of 1,000,000 shares of
common stock. We must receive acceptable subscriptions
for a minimum of 500,000 shares and obtain regulatory
approvals to open the new bank before we will sell any
shares in this offering.
Subscription Price $10.00 per share.
Termination Date [3 months after effective date], unless we terminate
the offering earlier or extend it to a date not later
than [3 months after first date].
Minimum Subscription 1,000 shares ($10,000), although we may permit smaller
subscriptions at our discretion.
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Maximum Subscription Twenty percent (20%) of the total number of shares sold
in the offering. If an entity will own five percent
(5%) or more or an individual will own ten percent
(10%) or more of the common stock outstanding after the
offering, the entity or individual must file certain
information or applications with bank regulatory
agencies prior to purchasing shares in the offering. We
may reduce or reject, in whole or in part, any
subscription at our sole discretion. See "The
Offering."
Gross Proceeds of the
Offering $5,000,000 if the minimum number of shares are
subscribed. $10,000,000 if the maximum number of shares
are subscribed.
Use of Proceeds We will use at least $5,000,000 of the proceeds of this
offering to purchase all of the shares of common stock
of Penn Mar Community Bank. If we do not contribute
additional proceeds to Penn Mar Community Bank upon
closing of the offering, we will invest those funds in
insured bank deposits and/or short-term U.S. government
and agency securities until we use those funds for
corporate purposes or to make future contributions to
Penn Mar Community Bank's capital.
Penn Mar Community Bank will spend the funds received
from Penn Mar Bancshares, Inc. to furnish and equip
facilities for Penn Mar Community Bank and for working
capital and general corporate purposes of Penn Mar
Community Bank. See "Use of Proceeds."
Risk Factors
An investment in the common stock involves substantial risk. You should
carefully read the section called "Risk Factors."
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<PAGE>
RISK FACTORS
An investment in the common stock involves substantial risks. You should
carefully read the following, together with the other information in this
Prospectus, before making a decision to purchase the common stock.
We Have No Operating History Upon Which To Evaluate Our Future Success, And
We Do Not Expect To Be Profitable Initially. Penn Mar Bancshares, Inc. and Penn
Mar Community Bank are in the process of organization and neither has any prior
operating history. Our profitability will depend on the results of operations of
our principal asset, Penn Mar Community Bank. We expect that Penn Mar Community
Bank will incur operating losses during its initial years of operation and may
not achieve profitability, if at all, for at least two years. If we decide to
open additional offices, that decision may further delay profitability because
of the increased expenses of expansion and because the new offices may not
enhance our results of operations as anticipated.
We Will Depend Heavily On Our Key Personnel, Including J. Geoffrey
Sturgill, Jr. Kevin P. Huffman And Daniel E. Dutterer, And Our Business Could
Suffer If Something Were To Happen To Any Of These Officers Or If Any Of Them
Were To Leave. Mr. Sturgill is the president and chairman of the board of
directors of Penn Mar Bancshares, Inc. and will be the secretary, treasurer, and
chairman of the board of directors of Penn Mar Community Bank. Mr. Huffman is
the vice president and secretary of Penn Mar Bancshares, Inc. and will be the
president and chief executive officer of Penn Mar Community Bank. Mr. Dutterer
is the treasurer of Penn Mar Bancshares, Inc. and will be the vice president of
Penn Mar Community Bank. All three of these individuals will provide valuable
services to us and would be difficult to replace. In addition, we expect these
officers will develop business and maintain customer relationships. If any of
these individuals were to leave for any reason, our business could suffer.
Our Lending Strategy Involves Risks Resulting From Our Choice Of Loan
Portfolio. We expect that Penn Mar Community Bank's loan portfolio will be made
up largely of commercial business loans and commercial real estate loans for
owner-occupied properties. Penn Mar Community Bank will also offer construction
loans, consumer loans and mortgage loans for owner-occupied residential
properties, although we expect that some of the residential mortgage loans may
be sold in the secondary market. Commercial business and commercial real estate
loans generally carry a higher degree of credit risk than do residential
mortgage loans because of several factors including larger loan balances,
dependence on the successful operation of a business or a project for repayment,
or loan terms with a balloon payment rather than full amortization over the loan
term. See "Proposed Business of Penn Mar Community Bank--Loan Portfolio" for
more information about our proposed loan portfolio and the associated lending
risks.
Future Provisions For Loan Losses Could Adversely Affect Our Results Of
Operations. Penn Mar Community Bank will maintain an allowance for loan losses
to provide for possible loan defaults and nonperformance. The allowance will be
based on, among other things, prior experience with loan losses and an
evaluation of the risks in the current portfolio. Because Penn Mar Community
Bank is a new bank with no prior loan experience, future adjustments may be
necessary if economic, operating and other conditions differ substantially from
the assumptions used in making the initial allowance determinations. In
addition, we anticipate that Penn Mar Community Bank's allowance for loan losses
will increase in the future as it expands its lending
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<PAGE>
activities. Also, regulatory agencies may require Penn Mar Community Bank to add
to the allowance based on their judgments when they conduct examinations of Penn
Mar Community Bank.
We Cannot Guarantee That Our Main Branch Building Will Be Completed Or That
We Will Be Able to Build the Frederick, Maryland Branch. 309 Woodward, LLC, a
company owned by five of our directors, has entered into a construction contract
for the construction of a 4,500 square foot building which will house our
executive offices and main bank branch. As of the date of this Prospectus
[describe status of construction]. There can be no assurance that the bank
building will be completed or that construction will proceed without delay. In
addition, we have entered into a lease with Riverside Development, LLC, a
company owned by one of our directors, for a parcel of land in Frederick,
Maryland, upon which we intend to build the Frederick branch of Penn Mar
Community Bank. However, we will not have funds sufficient to build the
Frederick branch if we do not raise at least $7,000,000 in this offering. In
addition, neither we nor Riverside Development, LLC has entered into a
construction contract for the construction of a banking facility on the
Frederick property, and no assurance can be given that a contract can be
obtained on terms favorable to us or that construction of a branch building can
be completed. If we are not able to complete our main branch in a timely manner,
our start up operations and growth will be slower. Further, if we are not able
to open a Frederick branch, our growth strategies will not be realized.
We Cannot Guarantee That Our Expansion Strategies Will Be Successful. We
may expand our business in the future by opening additional offices in strategic
market locations outside of Carroll County, Frederick County, and Howard County
in Maryland and Southern Pennsylvania and will consider other opportunities when
they arise. At this time, we have not identified any new market locations or
other opportunities. Our success in expanding our business will depend on, among
other things, our ability to obtain regulatory approvals, our access to capital,
our ability to manage growth and our ability to attract and train qualified
employees. We cannot guarantee that we will be able to do any of these things.
See "Proposed Business of Penn Mar Community Bank" for more information about
our business plans.
Government Regulation Might Negatively Impact Our Operating Results. Penn
Mar Bancshares, Inc. and Penn Mar Community Bank will operate in a highly
regulated environment and will be subject to examination, supervision and
comprehensive regulation by federal and state regulatory agencies. Banking
regulations, designed primarily for the safety of depositors, may limit the
growth of Penn Mar Community Bank and the return to investors by restricting
activities such as the payment of dividends; mergers with, or acquisitions by,
other institutions; investments; loans and interest rates; interest rates paid
on deposits and the creation of branch offices. Laws and regulations could
change at any time, and changes could adversely affect our business. In
addition, the cost of compliance with regulatory requirements could adversely
affect our ability to operate profitably. See "Supervision and Regulation" for
more information about applicable banking regulations.
Our Lending Limit May Limit Our Growth. We will be limited in the amount we
can loan to a single borrower by the amount of Penn Mar Community Bank's
capital. Specifically, under current law, we may lend up to 15% of Penn Mar
Community Bank's unimpaired capital and surplus to any one borrower.
Furthermore, until Penn Mar Community Bank is profitable, our capital will
decrease which will result in a decrease to our lending limit. Our lending limit
will be significantly less than that of many of our competitors and may
discourage potential borrowers
4
<PAGE>
who have credit needs in excess of our lending limit to do business with us. We
intend to accommodate larger loans by selling participations in those loans to
other financial institutions, but this strategy may not succeed.
Penn Mar Community Bank Will Face Substantial Competition Which Could
Adversely Affect Our Growth And Operating Results. Penn Mar Community Bank will
operate in a competitive market for financial services and will face intense
competition from other financial institutions both in making loans and in
attracting deposits. Many of these financial institutions have been in business
for many years, are significantly larger, have established customer bases, have
greater financial resources and lending limits than will Penn Mar Community
Bank, and are able to offer certain services that Penn Mar Community Bank will
not be able to offer. See "Proposed Business of Penn Mar Community Bank--
Competition" for more information about competition in our market area.
Penn Mar Community Bank's Ability To Compete May Suffer If It Cannot Take
Advantage Of Technology Because It Will Not Have A Large Branch Network. Our
business strategy relies less on our customers' access to a large branch network
and more on access to technology and personal relationships. Further, the market
for financial services is increasingly affected by advances in technology,
including developments in telecommunications, data processing, computers,
automation, PC banking with Internet access, telephone banking, debit cards and
so-called "smart" cards. Our ability to compete successfully may depend on the
extent to which we can take advantage of technological changes and the extent to
which our customers embrace technology to do their banking transactions. More
information about our plans to provide these types of services appears under the
caption "Proposed Business of Penn Mar Community Bank--Other Banking and
Financial Services."
Our Board Of Directors Established An Arbitrary Offering Price, Which May
Not Reflect The Value Of An Investment In Our Stock. Our board of directors
arbitrarily determined the offering price of the shares offered by this
Prospectus. We did not engage an independent investment banking firm to assist
in determining the offering price. The $10.00 per share price bears no
relationship to the assets, earnings, book value or other established measures
of value of Penn Mar Bancshares, Inc. or Penn Mar Community Bank. In fixing the
price, the board considered primarily the subscription prices of securities
offered by other newly organized financial institutions and bank holding
companies.
We Do Not Intend To Pay Dividends In The Foreseeable Future. Penn Mar
Community Bank will be the wholly owned subsidiary of Penn Mar Bancshares, Inc.
and, initially, will be our principal source of revenue. We anticipate that Penn
Mar Community Bank will incur losses during its initial phase of operations, and
we do not expect to pay any dividends for the foreseeable future. Even if Penn
Mar Community Bank and Penn Mar Bancshares, Inc. have earnings in an amount
sufficient to pay dividends, we intend to reinvest earnings for the purpose of
funding the growth of Penn Mar Bancshares, Inc. and Penn Mar Community Bank. See
"Dividend Policy" and "Supervision and Regulation--State Bank Regulation--
Dividends" for information about factors affecting our ability to pay dividends.
5
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If We Don't Sell The Minimum Offering Or Obtain Regulatory Approvals
Necessary to Open Penn Mar Community Bank, You Will Have Lost The Use Of Your
Subscription Funds While They Are Held In Escrow. The common stock is being sold
through certain directors and officers of Penn Mar Bancshares, Inc. No broker-
dealer will assist us in the offering. Because the offering is not underwritten,
the sale of the minimum number of shares is not guaranteed. If the minimum
number of shares is not subscribed for, or if we are unable to obtain regulatory
approvals necessary to open Penn Mar Community Bank, subscriber funds will be
returned with interest, but subscribers will have lost the ability to invest
their funds in a higher yielding investment during the offering.
We May Not Be Successful In Establishing A New Bank. As a newly organized
institution we rely on our officers and directors to locate and establish
appropriate facilities for Penn Mar Community Bank, hire staff, develop and
implement marketing and business development strategies and identify and
evaluate potential lines of business in addition to Penn Mar Community Bank's
core commercial banking functions. The Board of Directors and officers will have
substantial discretion in these matters, and we cannot guarantee that they will
be successful in establishing a new bank in a competitive market.
We Do Not Expect That Our Stock Will Have An Active Trading Market. While
the common stock will be freely transferable by most investors in this offering
immediately upon issuance, we do not anticipate an active market for trading
following this offering. You should only invest in the common stock if you have
a long-term investment objective. If an active market does not develop, you may
not be able to sell your shares promptly or perhaps at all. At this time, we do
not intend to list the common stock on any national securities exchange or on
The Nasdaq Stock Market. See "The Offering--Limited Market for Shares" for more
information about trading of our shares.
Penn Mar Bancshares, Inc. Management And Their Affiliates May Have The
Power To Block Certain Stockholder Approvals. The directors and officers
currently own 91,346 shares of common stock. The directors and officers will own
approximately 18.27% of the shares if the minimum number of shares is sold and
approximately 9.13% of the shares if the maximum number of shares is sold.
Although the directors and officers do not anticipate purchasing shares in the
offering, directors and officers or persons related or affiliated with them may
purchase additional shares in the offering and may purchase shares upon the
exercise of warrants or options which have or may be granted to them. If more
than 20% of the shares outstanding after the offering are held by directors,
officers and their affiliates, then this group could, by voting against a
proposal submitted to stockholders, block the approval of any proposal which
requires the affirmative vote of 80% of the stockholders. Those proposals
include certain business combinations and charter amendments. See "Description
of Capital Stock" for more information about stockholder voting and other
charter provisions.
Because Provisions Of Our Charter and Bylaws May Have The Effect Of Making
It Difficult For Existing Stockholders Or An Acquiror Of Our Stock To Remove
Existing Management, Stockholders May Not Be Able To Remove Directors With Whom
They Disagree And May Not Have The Opportunity To Receive A Premium For Their
Shares As Part Of A Takeover Transaction. Our charter and bylaws provide that at
the first annual meeting of stockholders, the directors will be divided into
three classes with each director, after an initial phase in period, serving for
a period of three years. Our charter and bylaws also provide that a director may
only be removed by the affirmative vote of 80% of the votes entitled to be cast,
and
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Maryland law provides that our directors may only be removed for cause. As a
result of these provisions, stockholders would not be able to remove existing
management even if the stockholders were dissatisfied with the conduct of
management, and acquirors of more than a majority of Penn Mar Bancshares, Inc.'s
common stock would not immediately be able to replace existing management with
their own nominees.
If We Issue Additional Stock In The Future, Your Percentage Of Ownership Of
Penn Mar Bancshares, Inc. Will Be Reduced. As a stockholder of Penn Mar
Bancshares, Inc., you will not have preemptive rights with respect to the
issuance of additional shares of common stock or the issuance of any other class
of stock. This means that if we decide to issue additional shares of stock, you
will not automatically be entitled to purchase additional shares to maintain
your percentage ownership. In addition, if we sell additional shares in the
future, it is possible that those shares may be issued on terms more favorable
than the terms of this offering.
The Exercise Of Warrants And Stock Options Will Cause Dilution And May
Adversely Affect The Value Of The Common Stock. We have issued to purchasers in
the organizational offering warrants to purchase one share of common stock at
$10.00 per share for every one share that they purchased in the organizational
offering. Because 91,346 shares of common stock were purchased in the
organizational offering, we issued warrants to purchase 91,346 shares of common
stock. In addition, after the offering, we intend to adopt a stock option plan,
which will permit us to grant options to our officers, directors and employees.
The exercise of warrants or options would dilute your ownership interest in Penn
Mar Bancshares, Inc. See "Certain Transactions" for more information about the
warrants and options.
Some of the information in this Prospectus may include "forward-looking
statements." These statements use words such as "may," "will," "expect,"
"anticipate," "plan," "estimate" or similar words, and they discuss our future
expectations, projections of financial results or strategies that are subject to
risks and uncertainties. When you read a forward-looking statement, you should
keep in mind the risk factors described above and any other information
contained in this Prospectus, which identifies a risk or uncertainty. Our actual
results and the actual outcome of our expectations and strategies could be
different from what we have described in this Prospectus because of these risks
and uncertainties.
PENN MAR BANCSHARES, INC. AND PENN MAR COMMUNITY BANK
Penn Mar Bancshares, Inc. was incorporated under the laws of the State of
Maryland on October 7, 1999 to operate as a bank holding company. We will file
an application with the Board of Governors of the Federal Reserve System
("Federal Reserve Board") for approval to become a bank holding company pursuant
to the Bank Holding Company Act of 1956, and to purchase all of the capital
stock to be issued by Penn Mar Community Bank.
We have filed an application to organize Penn Mar Community Bank with the
Maryland State Commissioner of Financial Regulation (the "Commissioner"). The
application assumes the sale of all of the shares of Penn Mar Community Bank's
common stock to Penn Mar Bancshares, Inc. for an aggregate price of $5,000,000.
Depending on the amount of money we raise in the offering in excess of the
minimum offering, we may purchase additional shares of common stock of Penn Mar
Community Bank, or otherwise contribute additional proceeds to Penn Mar
Community Bank, or retain a portion of the additional proceeds in Penn Mar
Bancshares, Inc. See "Use of Proceeds." Penn Mar Community Bank will file an
application for insurance of its
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deposits with the Federal Deposit Insurance Corporation ("FDIC"), and will file
an application with the Federal Reserve Board to become a member of the Federal
Reserve System.
We anticipate that Penn Mar Community Bank will open in the second quarter
of 2001. However, our ability to meet the targeted opening date depends upon a
number of factors, which may be beyond our control, including the timely
completion of this offering and the receipt of approvals by the bank regulatory
agencies. Any delay in the commencement of operations could increase the
estimated pre-opening expenses of Penn Mar Community Bank.
Penn Mar Bancshares, Inc. and Penn Mar Community Bank have not commenced
active business operations and neither will do so unless this offering is
successfully completed and Penn Mar Community Bank meets the conditions of the
Commissioner to commence the business of banking and of the FDIC to receive
deposit insurance. Penn Mar Bancshares, Inc. also must obtain approval from the
Federal Reserve Board to become a bank holding company. Lastly, Penn Mar
Community Bank must obtain approval from the Federal Reserve Board to become a
member of the Federal Reserve System.
THE OFFERING
General
We are offering for sale a minimum of 500,000 and a maximum of 1,000,000
shares of common stock at a price of $10.00 per share. No shares will be sold
unless we receive acceptable subscriptions for a minimum of 500,000 shares and
we obtain final approvals from bank regulators to begin banking operations.
We must receive subscriptions to purchase shares no later than 5:00 p.m.,
Eastern time, on [3 months after the effective date], unless we elect to
terminate or extend the offering. We reserve the right to terminate the offering
at any time prior to __________, or to extend the expiration date to
_____________. Investors must subscribe to purchase a minimum of 1,000 shares
(for a minimum investment of $10,000), subject to our right to permit smaller
subscriptions at our discretion. If an entity will own five percent (5%) or more
or an individual will own ten percent (10%) or more of the common stock
outstanding after the offering, the entity or individual must file certain
information or applications with bank regulatory agencies prior to purchasing
shares in the offering.
We will not engage a broker-dealer and will not pay any underwriting
discounts or commissions for the sale of the shares. Directors and officers of
Penn Mar Bancshares, Inc. will solicit subscriptions from prospective
stockholders. The directors and officers will not receive any special
compensation for such services but will be reimbursed for reasonable expenses.
Method of Subscription
If you wish to purchase shares, you must complete and sign the Subscription
Agreement accompanying this Prospectus and deliver the completed Subscription
Agreement to Penn Mar Bancshares, Inc. prior to the termination date of the
offering, together with payment in full of the subscription price of all shares
subscribed for. Such payment must be by check or bank draft drawn upon a U.S.
bank, payable to "Atlantic Central Bankers Bank, Escrow Agent for Penn Mar
Bancshares, Inc." If you wish to wire funds to our escrow account, you may call
Penn Mar
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Bancshares, Inc. at (410) 848-4460 to obtain wiring instructions. If paying by
uncertified personal check, you should allow at least five business days prior
to the termination date for the funds to clear.
We will deposit all funds in the Penn Mar Bancshares, Inc. escrow account.
Pending closing of the offering, funds will be invested in bank accounts, short-
term certificates of deposit or short-term securities issued or guaranteed by
the United States government.
The address to which Subscription Agreements and payment of the
subscription price should be delivered is:
Penn Mar Bancshares, Inc.
135 East Main Street
Westminster, Maryland 21157
Attention: J. Geoffrey Sturgill, Jr.
Telephone No.: (410) 848-4460
We recommend that you send your Subscription Agreement and payment by
registered mail, return receipt requested, and allow a sufficient number of days
for delivery and clearance of payment prior to the termination date of the
offering.
THE FULL SUBSCRIPTION PRICE FOR THE SHARES SUBSCRIBED FOR MUST BE INCLUDED
WITH THE SUBSCRIPTION AGREEMENT. FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE
WITH THE SUBSCRIPTION AGREEMENT MAY CAUSE US TO REJECT THE SUBSCRIPTION.
Escrow Account; Return of Funds Upon Failure to Complete the Offering or Upon
Liquidation
We established an escrow account at Atlantic Central Bankers Bank, Camp
Hill, Pennsylvania, for deposit of all subscription funds. Atlantic Central
Bankers Bank is a state chartered banker's bank subject to examination and
regulation by the Department of Banking of the Commonwealth of Pennsylvania.
Subscription funds may be invested temporarily in bank accounts, short-term
certificates of deposit or short-term securities issued or guaranteed by the
United States government. If the offering is not completed for any reason, all
subscription funds will be returned to investors together with their respective
pro-rata share of any interest earned on the subscription funds.
Penn Mar Bancshares, Inc. does not have the right to break escrow, receive
the funds in the escrow account and issue shares of common stock to subscribers
until we receive acceptable subscriptions for 500,000 shares and all necessary
regulatory approvals for Penn Mar Community Bank to open for business.
We cannot guarantee that Penn Mar Community Bank will receive final
approval from all applicable regulatory agencies to commence business. If Penn
Mar Community Bank does not receive final approval from all applicable
regulatory agencies to commence business or if the minimum offering is not sold,
all subscription funds will be returned to investors together with their
respective pro-rata share of any interest earned on the subscription funds.
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Acceptance, Cancellation and Refunding of Subscriptions
Although subscribers may not revoke their subscriptions, Subscription
Agreements are not binding on us until we accept them and we authorize the
release of offering proceeds from escrow. We reserve the right to reject, at our
sole discretion, any Subscription Agreement or to allot a smaller number of
shares than the number for which a person has subscribed. In addition, we
reserve the right to cancel any subscription, for any reason in our sole
discretion, before we authorize the release of offering proceeds from escrow. In
determining the number of shares to allot to each subscriber in the event the
offering is oversubscribed or otherwise, we may take into account the order in
which subscriptions were received; a subscriber's potential to do business with,
or to direct customers to, Penn Mar Community Bank; our desire to have a broad
distribution of stock ownership; and legal or regulatory restrictions.
If we reject all or a portion of any subscription, or if we cancel all or a
portion of any subscription before offering proceeds are released from escrow,
the escrow agent will promptly refund to the subscriber the amount submitted, or
the rejected or canceled portion thereof, without interest or deduction. If for
any reason the offering is not completed, all subscription funds will be
promptly refunded to subscribers together with their respective pro-rata share
of any interest earned on the subscription funds. After all refunds have been
made, the escrow agent, Penn Mar Bancshares, Inc., Penn Mar Community Bank and
their respective directors, officers and agents will have no further liability
to subscribers.
Certificates representing shares duly subscribed and paid for will be
issued by Penn Mar Bancshares, Inc. as soon as practicable after funds are
released to Penn Mar Bancshares, Inc. by the escrow agent.
Limited Market for Shares
Except for shares held by Penn Mar Bancshares, Inc.'s directors and certain
officers, the shares sold in the offering will be freely transferable
immediately upon issuance and will not be subject to any transfer restrictions.
However, we do not anticipate that an active trading market for the shares will
develop in the foreseeable future. The shares will not be listed initially on
any stock exchange or be designated for trading on The Nasdaq Stock Market
Inc.'s quotation system, although we plan to apply to have the shares listed on
an exchange or designated for trading on Nasdaq once Penn Mar Bancshares, Inc.
meets the requirements for approval of such an application. We cannot predict
when Penn Mar Bancshares, Inc. will meet the requirements or whether our
application would be accepted. Even if our application is accepted, we cannot
guarantee that an active trading market will ever develop.
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USE OF PROCEEDS
Penn Mar Bancshares, Inc. has issued 91,346 shares in its organizational
offering at the offering price of $10.00 per share. The gross proceeds from the
organizational offering were $966,519 and the net proceeds after giving effect
to the redemption of 45,000 shares were $913,346 . We will pay all of the
organizational expenses of Penn Mar Bancshares, Inc. and Penn Mar Community Bank
and the expenses of this initial public offering from the proceeds of the
organizational offering. We estimate that offering costs of $250,000 will be
incurred for this initial public offering. We estimate that the organizational
expenses, such as salaries, payroll taxes, lease payments, consulting fees,
filing fees, legal fees and meeting costs will be $375,000, assuming we can
begin banking operations no later than April 15, 2001.
We will use $5,000,000 of the proceeds of this initial public offering if
the minimum number of shares is sold or $8,000,000 if the maximum number of
shares is sold, to purchase all of the common stock of Penn Mar Community Bank.
If the maximum number of shares is sold, the balance of the proceeds, estimated
to be $2,000,000, will be invested in insured bank deposits and/or short-term
U.S. government or agency securities until we use those funds for general
corporate purposes. However, we may decide to contribute all or a portion of the
balance of the proceeds to Penn Mar Community Bank.
Penn Mar Community Bank will apply the proceeds from the sale of its
capital stock to Penn Mar Bancshares, Inc. to pay for leasehold and equipment
expenses estimated to be $400,000 if the minimum number of shares is sold, or
$550,000 if the maximum number of shares is sold. The balance of the proceeds,
estimated to be $4,600,000 if the minimum number of shares is sold, or
$7,450,000 if the maximum number of shares is sold, will be used to fund lending
and investment activities and for general corporate purposes.
The following table reflects the anticipated allocation of the proceeds of this
offering:
<TABLE>
<CAPTION>
Percentage Percentage
Minimum of Maximum of
Amount Proceeds Amount Proceeds
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
PENN MAR BANCSHARES, INC.
Offering Proceeds $5,000,000 $10,000,000
Purchase of Stock of Bank/Capital Contributions $5,000,000 100% $ 8,000,000 80%
Working Capital $ 0 0% $ 2,000,000 20%
PENN MAR COMMUNITY BANK
Proceeds of Capital Contributions from
Penn Mar Bancshares, Inc. $5,000,000 100% $ 8,000,000 100%
Leasehold and Equipment Acquisition $ 400,000 8% $ 550,000 7%
Working Capital $4,600,000 92% $ 7,450,000 93%
</TABLE>
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CAPITALIZATION
The following table shows Penn Mar Bancshares, Inc.'s capitalization as of
August 31, 2000 and the pro forma consolidated capitalization of Penn Mar
Bancshares, Inc. and Penn Mar Community Bank as adjusted to give effect to (i)
the sale of 500,000 shares and (ii) the sale of 1,000,000 shares, at a price of
$10.00 per share. The estimated offering expenses of $250,000 and estimated pre-
opening expenses in an aggregate amount of $375,000 will be paid from the
proceeds of the organizational offering.
<TABLE>
<CAPTION>
Stockholders' equity: August 31, 2000 Minimum Number Maximum Number Of
Of Shares Sold Shares Sold
---------------- --------------- ------------------
<S> <C> <C> <C>
Common Stock, $0.01 par value;
9,000,000 shares authorized; 91,346
shares outstanding; 591,346 shares
outstanding (minimum offering); and
1,091,346 shares outstanding
(maximum offering)................... $ 913 $ 5,913 $ 10,913
Preferred Stock, $0.01 par value;
1,000,000 shares authorized; no
shares outstanding................... - - -
Additional paid-in capital(1)......... $ 965,606 $5,960,606 $10,955,606
--------- ---------- -----------
Deficit accumulated during
development stage.................... (228,208) (600,000) (600,000)
--------- ---------- -----------
Total stockholders' equity............ $ 738,311 5,366,519 $10,366,519
========= ========== ===========
Net tangible book value per share(2) $ 8.08 $ 9.08 $ 9.50
</TABLE>
(1) This represents 91,346 shares of common stock sold in the organizational
offering after giving effect to the redemption of 45,000 shares for an
aggregate redemption price of $396,941.
(2) Investors are likely to experience additional dilution due to operating
losses expecting to be incurred during the first few years of operations.
DIVIDEND POLICY
We expect that Penn Mar Bancshares, Inc. will retain all earnings, if any,
in order to provide more funds to operate and expand our business and,
therefore, we have no plans to pay any cash dividends for the foreseeable
future. If we decide to pay dividends in the future, our ability to do so will
depend on the ability of Penn Mar Community Bank to pay dividends to Penn Mar
Bancshares, Inc. Penn Mar Community Bank cannot pay dividends to Penn Mar
Bancshares, Inc. unless it complies with certain regulatory requirements
regarding the payment of dividends by a state-chartered commercial bank. See
"Supervision and Regulation--State Bank Regulation--Dividends." In addition, we
would consider a number of other factors, including our earnings
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prospects, financial condition and cash needs before deciding to pay dividends.
If you are looking for an investment that pays dividends, you should not invest
in this offering.
PROPOSED BUSINESS OF PENN MAR BANCSHARES, INC.
Penn Mar Bancshares, Inc. expects to file an application to become a bank
holding company with the Federal Reserve Board after receiving preliminary
approval from the Commissioner. We know of no reason why the approval from the
Federal Reserve Board or the Commissioner would not be received, but we cannot
predict when such approval will be received, or if the Federal Reserve Board or
Commissioner will impose any conditions on its approval.
Our principal asset will be our investment in all of the issued and
outstanding capital stock of Penn Mar Community Bank and Penn Mar Community
Bank's principal business will be commercial banking. With the prior approval of
the Federal Reserve Board, we may engage in non-banking activities closely
related to the business of banking. For example, with such approval, we could
make and service loans through a consumer finance subsidiary, or provide other
types of commercial financing. Further, the Federal Reserve Board allows bank
holding companies to give investment or financial advice, lease personal or real
property, provide data processing and courier services, or invest in small
business investment companies, among other permissible activities. Other than
our intent to engage in commercial banking through Penn Mar Community Bank, we
are not actively seeking other business opportunities at this time. However, if
a favorable opportunity is presented, we would consider it.
PROPOSED BUSINESS OF PENN MAR COMMUNITY BANK
General
As of the date of this Prospectus, Penn Mar Community Bank has not been
authorized to conduct its banking business and has not engaged in any
operations. The issuance of a charter by the Commissioner and the approval of
deposit insurance by the FDIC will be dependent upon Penn Mar Bancshares, Inc.'s
and Penn Mar Community Bank's compliance with certain conditions and procedures,
including the sale of Penn Mar Community Bank's stock to Penn Mar Bancshares,
Inc., the completion of Penn Mar Community Bank's business premises, the
purchase of certain fidelity and other insurance, the hiring of staff and the
adoption of certain operating procedures and policies. When all conditions have
been satisfied, Penn Mar Community Bank will open for business with its main
office in Westminster, Maryland. Penn Mar Community Bank will accept checking
and savings deposits and will offer a wide range of commercial and industrial,
real estate, consumer and residential mortgage loans.
Significant changes have occurred in the banking industry as a whole. More
importantly in northern Maryland (Carroll and Frederick counties) and south
central Pennsylvania (Adams and York Counties), these changes have severely
limited the choices that small businesses and consumers can make pertaining to
their banking relationship. The consolidations that have occurred in our area
have led to fewer, much larger banking institutions that tend to focus on large
corporate customers, standardized and generic loan and deposit products and
other "fee yielding" services. These organizations also deliver their products
in a much less personalized manner that in most cases does little to service the
typical small and medium size business customer as well as the individual
customer.
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It is our belief that the markets referred to above deserve extremely
personalized and high quality banking relationships. It is the focus and
determination of the management of Penn Mar Bancshares, Inc. to bring this high
quality service back to our area to give our potential customers the type of
banking relationship they deserve.
Penn Mar Community Bank will be a locally owned, locally managed commercial
bank that will meet the financial needs of a targeted population. Specifically,
we will target our commercial and industrial banking services to small and mid-
sized businesses and will target our retail banking services to the owners of
these businesses and their employees and to business professionals.
We will seek to distinguish ourselves by
. Offering highly personalized services to our customers.
. Maximizing convenience for our customers by combining technology with
relationship banking.
. Instituting a system whereby loan decisions can be made quickly.
Bank Location and Market Area
Penn Mar Community Bank's headquarters will be located in Westminster,
Maryland. From this location, we intend to serve Carroll, Frederick, and Howard
Counties as well as a portion of Adams and York Counties in Southern
Pennsylvania. This is a busy commercial area with a stable population of over
818,591 according to data available from the U.S. Census Bureau for these
counties. We estimate that this area is home to at least 20,325 businesses and
over 334,051 employees. This area includes approximately 242,043 households. The
average median household income in these counties ranges between $40,521 and
$64,939. Westminster, which is the county seat of Carroll County, is the center
of this commercial activity.
If we raise sufficient funds in this offering, we may establish a branch
office in Frederick, Maryland. From this location, we intend to service Western
Maryland as well as a portion of Southern Pennsylvania. Frederick is located in
Frederick County which has a population of approximately 190,869 residents
according to data available from the U.S. Census Bureau. We estimate that
Frederick County is home to at least 4,757 businesses and over 64,193 employees.
Frederick, which is the county seat of Frederick County, is the center of this
commercial activity.
Loan Portfolio
Penn Mar Community Bank will offer a broad range of loans, including
commercial and industrial loans, real estate loans, consumer loans and
residential mortgage and home equity loans. We anticipate that commercial
business and commercial real estate loans for owner-occupied properties will be
Penn Mar Community Bank's primary loan products.
The goal of Penn Mar Community Bank's lending program will be to meet the
credit needs of our client base while using sound credit principles to protect
the quality of our assets. Our business and credit strategy will be relationship
driven, and Penn Mar Community Bank will
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strive to provide a reliable source of credit, a variety of lending alternatives
and sound business advice.
Assuming the sale of the minimum number of shares in the offering, Penn Mar
Community Bank will have a legal lending limit of approximately $870,000 to any
one borrower, which would constitute approximately 15% of Penn Mar Community
Bank's unimpaired capital and surplus. We intend to originate loans and to
participate with other lenders in loans that exceed Penn Mar Community Bank's
lending limits. We do not believe that loan participations that Penn Mar
Community Bank purchases will necessarily pose any greater risk of loss than
loans that Penn Mar Community Bank originates.
The following is a description of the types of loans we expect to have in
our loan portfolio and the anticipated risks associated with each type of loan:
. Commercial and industrial loans for business purposes including
working capital, equipment purchases, lines of credit and government
contract financing. Asset-based lending, accounts receivable financing and
lease financing also will be available. We estimate that commercial loans
will constitute approximately 50% of Penn Mar Community Bank's loan
portfolio. Initially, we intend to target small and mid-sized businesses in
our market area. Unlike residential mortgage loans, which generally are
made on the basis of the borrower's ability to repay using his or her
employment and other income and which are secured by real property which
can be valued easily, commercial business loans are riskier and typically
are made on the basis of the borrower's ability to make repayment from the
cash flow of the borrower's business. As a result, the availability of
funds for the repayment of commercial business loans depends substantially
on the success of the business itself. Further, the collateral securing the
loans may depreciate over time, may be difficult to appraise and may
fluctuate in value based on the success of the business.
. Real estate loans, including land development and construction loan
financing, primarily for owner-occupied premises. We estimate that real
estate loans will constitute approximately 20% of Penn Mar Community Bank's
loan portfolio.
Commercial real estate loans usually are larger and present more risk
than do residential mortgage loans. Because payments on loans secured by
commercial real estate depend on the successful operation or management of
the properties that secure the loans, repayment is affected significantly
by downturns in the real estate market or in the economy.
Construction loans generally involve a higher degree of credit risk
than residential mortgage loans. Risk of loss on a construction loan
depends largely upon the accuracy of the initial estimate of the property's
value at completion of construction or development compared with the
estimated cost of construction and, in the case of owner-occupied premises,
the success of the owner's business. If the estimate of value proves to be
inaccurate, the value of the project when completed could be insufficient
to ensure full repayment of the loan.
. Consumer loans including automobile and personal loans. In addition,
Penn Mar Community Bank will offer personal lines of credit. We estimate
that consumer loans will
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<PAGE>
constitute approximately 15% of Penn Mar Community Bank's loan portfolio.
Our consumer loans will be targeted to business owners and their employees
and business professionals.
Consumer loans may present greater credit risk than residential
mortgage loans because many consumer loans are unsecured or are secured by
rapidly depreciating assets, such as automobiles. Repossessed collateral
for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance because of the greater likelihood
of damage, loss or depreciation. Consumer loan collections depend on the
borrower's continuing financial stability. If a borrower suffers personal
financial difficulties, the loan may not be repaid. Also, various federal
and state laws, including bankruptcy and insolvency laws, may limit the
amount Penn Mar Community Bank can recover on such loans.
. Residential mortgage loans, including first and second mortgage loans
and home equity loans secured by single-family owner-occupied residences.
We estimate that residential mortgage loans will constitute approximately
15% of Penn Mar Community Bank's loan portfolio. Like our consumer loans,
our residential mortgage loans will be targeted to business owners and
their employees and business professionals.
We expect that the residential mortgage loans will adhere to standards
developed by FNMA/FHLMC. We intend to require private mortgage insurance
for loans in excess of 80% of a property's value and, generally, do not
anticipate making loans with loan-to-value ratios in excess of 90%. We
anticipate that fixed-rate, conforming residential mortgage loans will be
sold to the secondary market at origination. We anticipate selling
participations in nonconforming, nonstandard loans, such as ARM loans.
Therefore, we expect to sell those loans which have a lower degree of risk
relative to the other types of loans that we expect to make.
Deposits
Penn Mar Community Bank will offer a wide range of interest bearing and
non-interest bearing accounts, including commercial and retail checking
accounts, money market accounts, individual retirement accounts, interest
bearing statement savings accounts and certificates of deposit with fixed and
variable rates and a range of maturity date options.
Penn Mar Community Bank will pay competitive interest rates on time and
savings deposits. As a new bank, we believe that we will have a competitive
advantage over some of the larger, more established banks in our market area
with respect to the interest rates paid on our deposits. Specifically, we may be
able to set our initial deposit rates higher than those of more established
banks because, unlike an existing bank, our rates will not have to compete
against the deposit rates earned by existing customers.
Other Banking and Financial Services
We intend to offer commercial customers cash management services such as
sweep accounts, account reconciliation and wire transfers of funds.
Additionally, we intend to make available telephone banking, ATM/debit cards,
safe deposit boxes, after-hours deposit services,
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<PAGE>
travelers checks, direct deposit of payroll and automatic drafts for various
accounts. These services will be provided either directly by us or through
correspondent banking relationships.
In addition, we propose to offer to Penn Mar Community Bank's customers the
ability to access information about their accounts and view information about
Penn Mar Community Bank's services and products on Penn Mar Community Bank's
website, which will be located at www.pennmarbanc.com. In the future, we
-------------------
expect, subject to regulatory approval, that the website will permit customers
to make transfers of funds among accounts, pay bills, download information to
financial software packages, send e-mail to Penn Mar Community Bank personnel
and apply for banking products, such as the opening of an account. At this time
we have not entered into any contracts to provide this internet service to Penn
Mar Community Bank customers and there are no assurances that such contracts
will be signed or that the internet service will be established.
We do not anticipate that Penn Mar Community Bank will exercise trust
powers during its initial years of operation. However, we may enter into
correspondent banking relationships with strategic partners that will provide
trust services to our customers.
Penn Mar Community Bank will consider offering additional banking products
and services as warranted by customer demand. We believe that our data
processing capability, which will be provided through a third party vendor, will
be more than adequate to support the introduction of new products and services.
Source of Business
Quick decision making and listening to our customer's individual needs are
the foundation of Penn Mar Community Bank's business development strategies.
Initially, we will build our customer base from stockholders, officers and
directors. We also expect to capitalize upon the extensive business and
personal contacts and relationships of our officers and directors. To introduce
new customers to Penn Mar Community Bank, we will aggressively market ourselves
to business owners and professionals and their organizations.
Asset Management
Consistent with Penn Mar Community Bank's objective to serve the needs of
small and mid-sized businesses, we expect that our assets will be concentrated
in commercial loans. In accordance with the requirements of prudent banking
practices, we also will invest assets, in amounts we believe to be adequate, in
high-grade securities to provide liquidity and safety. Loans will be targeted at
80% or less of deposits (excluding repurchase agreements), and structured
generally with variable rates and/or fixed rates with short maturities with a
loan to asset ratio of 75%. Investment securities will primarily be United
States treasury securities and securities of the United States government or
"quasi-government" agencies and certificates of deposits of FDIC-insured
institutions.
The risk of nonpayment (or deferred payment) of loans is inherent in
commercial banking. Penn Mar Community Bank's marketing focus on small to mid-
sized businesses may result in Penn Mar Community Bank assuming lending risks
that are different from those associated with loans to larger companies.
Management of Penn Mar Community Bank will carefully evaluate all loan
applications and will attempt to minimize credit risk exposure by utilizing
thorough loan
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<PAGE>
application, approval and monitoring procedures. However, we cannot guarantee
that those procedures will significantly reduce our lending risks.
Competition
Deregulation of financial institutions and acquisitions of banks across
state lines has resulted in widespread changes in the financial services
industry. In our Carroll, Frederick, and Howard County market areas in Maryland,
as well as in Southern Pennsylvania, we will face strong competition from large
banks headquartered within and outside of Maryland and Pennsylvania. In
addition, we will compete with other community banks, savings and loan
associations, credit unions, mortgage companies, finance companies and others
providing financial services. Many of our competitors can finance extensive
advertising campaigns, maintain extensive branch networks and technology
investments, and offer services that we cannot or will not offer initially.
Also, larger institutions have substantially higher lending limits than Penn Mar
Community Bank will have. Some of our competitors have other advantages, such as
tax exemption in the case of credit unions, and lesser regulation in the case of
mortgage companies and finance companies.
Employees
We anticipate that Penn Mar Community Bank initially will employ
approximately 11 people, including officers of Penn Mar Community Bank. If Penn
Mar Community Bank decides to open a branch in Frederick, Maryland, more
employees would need to be hired.
Properties
Westminster, Maryland
On May 16, 2000, Penn Mar Bancshares, Inc. entered into a contract to
purchase 1.73 acres of land in Westminster, Maryland, upon which the main branch
of Penn Mar Community Bank is to be built. The purchase price for the property
was $391,500. Penn Mar Bancshares, Inc. paid a deposit of $39,150. Subsequently,
Penn Mar Bancshares, Inc. assigned its rights in the purchase contract to 309
Woodward, LLC, a company owned by five of the directors of Penn Mar Bancshares,
Inc. 309 Woodward, LLC has obtained a construction/permanent loan for this
facility, pursuant to which the property is subject to a deed of trust in favor
of 309 Woodward, LLC's lender.
On August 15, 2000, 309 Woodward, LLC signed a construction contract for
the design and construction of a new 4,500 square foot bank building. The
initial price of the construction contract is $726,375. As of the date of this
Prospectus, [describe status of construction].
On November 8, 2000, Penn Mar Bancshares, Inc. entered into a lease with
309 Woodward, LLC for the 4,500 square foot building that will house the
executive offices and serve as the main branch of Penn Mar Community Bank. The
lease term begins on the earlier of the date that the bank opens for business in
the new building, or the first day of the first month after the date when 309
Woodward, LLC notifies us that the building is substantially completed. The
lease has a seven-year term, and may be renewed for three additional terms of
five years each. We will pay base rent of $35.00 per square foot in the first
year of the lease term, and base rent
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<PAGE>
will increase after the first year based on increases in the Consumer Price
Index for Urban Wage Earners and Clerical Workers for the Washington-Baltimore
area. We will also pay for taxes, insurance and utilities, as well as building
and grounds maintenance. 309 Woodward LLC has not reimbursed Penn Mar
Bancshares, Inc. for the $39,150 deposit paid on the purchase price of the
Westminster property, and this amount will be treated as pre-paid rent under the
lease. See "Certain Transactions - 309 Woodward, LLC."
Frederick, Maryland
Riverside Property Development, LLC, a company owned solely by Jeffrey
Hurwitz, a director of Penn Mar Bancshares, Inc., has purchased nine-tenths of
an acre of property in Frederick, Maryland, upon which we may build a bank
branch if we raise sufficient capital in this offering. We have entered into a
lease for the property with Riverside Property Development, LLC beginning
November 15, 2000, for a term of one year. We will pay annual base rent of
$50,400, in monthly installments of $4,200. We have the option to renew the
lease for four one-year terms, with a final renewal option for a seven-year
term. Base rent will be increased in subsequent terms based on the Consumer
Price Index for Urban Wage Earners and Clerical Workers for the Washington-
Baltimore area. We will also pay for taxes and maintenance of the grounds.
Under the lease, we have the right, in our sole discretion, to construct
and occupy a building on the property. We have not yet developed any plans or
specifications or entered in to any agreements for such construction. If a
building is constructed, we will also be responsible for payment of utilities,
insurance and building maintenance.
MANAGEMENT'S PLAN OF OPERATION
General
As of the date of this Prospectus, neither Penn Mar Bancshares, Inc. nor
Penn Mar Community Bank has commenced operations or engaged in any activities
except those related to the organization and capitalization of Penn Mar
Bancshares, Inc. and Penn Mar Community Bank. These limited activities have been
financed solely by Penn Mar Bancshares, Inc.'s sale of an aggregate of 91,346
shares of common stock at a purchase price of $10.00 per share in its
organizational offering. We expect that the capital provided by these sales will
be sufficient to meet our needs pending completion of this initial public
offering. If the capital provided by the organizational offering is not
sufficient to meet our needs, we intend to obtain a loan from a financial
institution. As of the date of this Prospectus, we have no loan commitment from
any financial institutions and no assurance can be given that we would be able
to obtain additional funding on favorable terms.
Once Penn Mar Community Bank opens, expected in the second quarter of 2001,
we will begin the banking operations described in this Prospectus under the
caption "Proposed Business of Penn Mar Community Bank." We expect that Penn Mar
Community Bank will incur approximately $400,000 in expenses in leasehold
improvements for its offices and for furniture, fixtures and equipment for the
offices. We will contract with an outside vendor for Penn Mar Community Bank's
data processing. We anticipate a one-time capital expenditure of $275,000
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<PAGE>
and annual costs in our first year of operations of approximately $70,000 for
data processing services.
We believe that the proceeds of this offering ($5,000,000 if the minimum
number of shares is sold and $10,000,000 if the maximum number of shares is
sold) and the proceeds from the organizational offering will be sufficient to
fund the expenses of establishing and opening Penn Mar Community Bank, and Penn
Mar Community Bank's and Penn Mar Bancshares, Inc.'s operations for at least 12
months after the offering. We do not anticipate a need to raise additional
capital during that period. See "Use of Proceeds."
SUPERVISION AND REGULATION
Both Penn Mar Bancshares, Inc. and Penn Mar Community Bank will be subject
to extensive state and federal banking regulations that impose restrictions on
and provide for general regulatory oversight of our operations. These laws are
generally intended to protect depositors and not shareholders. The following
references to the laws and regulations under which Penn Mar Bancshares, Inc. and
Penn Mar Community Bank are regulated are brief summaries thereof, do not
purport to be complete, and are qualified in their entirety by reference to such
laws and regulations. We cannot predict the nature or the extent of the effect
on our business and earnings that new federal or state legislation may have in
the future.
Federal Bank Holding Company Regulation
Penn Mar Bancshares, Inc. will be registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended. As such, Penn Mar
Bancshares, Inc. will be subject to regulation and examination by the Federal
Reserve Board, and is required to file periodic reports and any additional
information that the Federal Reserve Board may require. The Bank Holding Company
Act imposes certain restrictions upon Penn Mar Bancshares, Inc. regarding the
acquisition of substantially all of the assets of, or direct or indirect
ownership or control of any bank of which it is not already the majority owner,
or, with certain exceptions, of any company engaged in non-banking activities.
The status of Penn Mar Bancshares, Inc. as a registered bank holding
company under the Bank Holding Company Act does not exempt it from certain
federal and state laws and regulations applicable to corporations generally,
including, without limitation, certain provisions of the federal securities
laws.
The Federal Reserve Board must approve, among other things, the acquisition
by a proposed bank holding company of control of more than five percent (5%) of
the voting shares, or substantially all the assets, of any bank, or the merger
or consolidation by a bank holding company with another bank holding company.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
the restrictions on interstate acquisitions of banks by bank holding companies
were repealed as of September 29, 1995. The effect of the repeal of these
restrictions is that, subject to certain time and deposit base requirements,
Penn Mar Bancshares, Inc. may acquire a bank located in Maryland or any other
state, and a bank holding company located outside of Maryland can acquire any
Maryland-based bank holding company or bank.
Unless it chooses to become a financial holding company, as further
described below, a bank
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<PAGE>
holding company generally is prohibited from acquiring control of any voting
shares of any company which is not a bank or bank holding company and from
engaging directly or indirectly in any activity other than banking, or managing
or controlling banks or furnishing services for its authorized subsidiaries.
There are limited exceptions. A bank holding company may, for example, engage in
activities that the Federal Reserve Board has determined by order or regulation
to be so closely related to banking or managing or controlling banks as to be
"properly incident thereto." In making such a determination, the Federal Reserve
Board is required to consider whether the performance of such activities can
reasonably be expected to produce benefits to the public, such as convenience,
increased competition or gains in efficiency, which outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. The Federal
Reserve Board is also empowered to differentiate between activities commenced de
novo and activities commenced by the acquisition, in whole or in part, of a
going concern. Some of the activities that the Federal Reserve Board has
determined by regulation to be closely related to banking include servicing
loans, performing certain data processing services, acting as a fiduciary,
investment or financial advisor, and making investments in corporations or
projects designed primarily to promote community welfare.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by statute on any extensions of credit to the bank holding
company or any of its subsidiaries, or investments in their stock or other
securities, and on taking such stock or securities as collateral for loans to
any borrower. Further, a bank holding company and any subsidiary bank are
prohibited from engaging in certain tie-in arrangements in connection with the
extension of credit. In 1997, the Federal Reserve Board adopted amendments to
its Regulation Y, creating exceptions to the Bank Holding Company Act's anti-
tying prohibitions that give bank subsidiaries of holding companies greater
flexibility in packaging products and services with their affiliates.
In accordance with Federal Reserve Board policy, Penn Mar Bancshares, Inc.
is expected to act as a source of financial strength to Penn Mar Community Bank
and to commit resources to support Penn Mar Community Bank in circumstances in
which Penn Mar Bancshares, Inc. might not otherwise do so. The Federal Reserve
Board may require a bank holding company to terminate any activity or relinquish
control of a non-bank subsidiary (other than a non-bank subsidiary of a bank)
upon the Federal Reserve'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 non-bank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act ("GLBA"). Effective March 11, 2000, pursuant to authority granted
under the GLBA, a bank holding company may elect to become a financial holding
company and thereby engage in a broader range of financial and other activities
than are permissible for traditional bank holding companies. In order to qualify
for the election, all of the depository institution subsidiaries of the bank
holding company must be well capitalized and well managed, as defined by
regulation, and all of its depository institution subsidiaries must have
achieved a rating of satisfactory or better with respect to meeting community
credit needs.
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Pursuant to the GLBA, financial holding companies will be permitted to
engage in activities that are "financial in nature" or incidental or
complementary thereto, as determined by the Federal Reserve Board. The GLBA
identifies several activities as "financial in nature," including, among others,
insurance underwriting and agency, investment advisory services, merchant
banking and underwriting, and dealing or making a market in securities. Being
designated a financial holding company will allow insurance companies,
securities brokers and other types of financial companies to affiliate with
and/or acquire depository institutions. Penn Mar Bancshares, Inc. does not
intend at this time to become a financial holding company.
The Federal Reserve Board imposes risk-based capital measures on bank
holding companies in order to insure their capital adequacy. As a bank holding
company with less than $150,000,000 in assets, Penn Mar Bancshares, Inc. is
currently exempt from most of these risk-based capital measures. However, the
Federal Reserve Board still requires that Penn Mar Bancshares, Inc. remain
adequately capitalized and have the ability to retire any debt within 25 years
from the date it is incurred.
Penn Mar Bancshares, Inc., as a bank holding company, is subject to
dividend regulations of the Federal Reserve System. In general, a small bank
holding company that has a debt to equity ratio greater than 1:1 is not expect
to pay corporate dividends until such time as its debt to equity ratio decline
to 1:1 or less and its bank subsidiary is otherwise well managed, well
capitalized and not under any supervisory order. Penn Mar Bancshares, Inc., at
its inception, will be deemed to be a small bank holding company. Penn Mar
Bancshares, Inc will not have a debt to equity ratio that is greater than 1:1.
State Bank Holding Company Regulation
Penn Mar Bancshares, Inc. will be a Maryland-chartered bank holding company
and will be subject to various restrictions on its activities as set forth in
Maryland law, in addition to those restrictions set forth in federal law.
Under Maryland law, an existing bank holding company that desires to
acquire a Maryland state-chartered bank or trust company, a federally-chartered
bank with its main office in Maryland, or a bank holding company that has its
principal place of business in Maryland, must file an application with the
Commissioner. In approving the application, the Commissioner must consider
whether the acquisition may be detrimental to the safety and soundness of the
entity being acquired or whether the acquisition may result in an undue
concentration of resources or a substantial reduction in competition in
Maryland. The Commissioner may not approve an acquisition if, on consummation of
the transaction, the acquiring company, together with all its insured depository
institution affiliates, would control 30% or more of the total amount of
deposits of insured depository institutions in Maryland. The Commissioner has
authority to adopt by regulation a procedure to waive this requirement for good
cause. In a transaction for which approval of the Commissioner is not required
due to an exemption under Maryland law, or for which federal law authorizes the
transaction without application to the Commissioner, the parties to the
acquisition must provide written notice to the Commissioner at least 15 days
before the effective date of the acquisition.
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State Bank Regulation
General
Penn Mar Community Bank will be a Maryland chartered trust company
exercising the powers of a Maryland chartered commercial bank. Penn Mar
Community Bank has no current plans to exercise trust powers and its regulatory
structure will be the same as Maryland chartered commercial banks. Penn Mar
Community Bank will be a member of the Federal Reserve System (a "state member
bank") and its deposit accounts will be insured by the Bank Insurance Fund of
the FDIC. Penn Mar Community Bank will be subject to regulation, supervision and
regular examination by the Maryland Commissioner of Financial Regulation and the
Federal Reserve Board. The laws and regulations governing Penn Mar Community
Bank generally have been promulgated to protect depositors and the deposit
insurance funds, and not for the purpose of protecting stockholders.
The Maryland Commissioner of Financial Regulation is required to regularly
examine each state chartered bank. The approval of the Maryland Commissioner of
Financial Regulation is required to establish or close branches, to merge with
another bank, to issue stock or to undertake many other activities. Any Maryland
bank that does not operate in accordance with the regulations, policies and
directives of the Maryland Commissioner of Financial Regulation is subject to
sanctions. The Maryland Commissioner of Financial Regulation may under certain
circumstances suspend or remove directors or officers of a bank who have
violated the law, conducted a bank's business in a manner which is unsafe,
unsound or contrary to the depositors' interests, or been negligent in the
performance of their duties.
The GLBA authorizes expanded activities for state member banks, but
requires that any expanded activities (with the exception of underwriting
municipal revenue bonds and other state and local obligations) be conducted in a
new entity called a "financial subsidiary" that is a subsidiary of a bank rather
than a bank itself. A financial subsidiary may engage in any activities in which
a financial holding company or a financial holding company's non-bank
subsidiaries may engage, except that a financial subsidiary may not underwrite
most insurance, engage in real estate development or conduct merchant banking
activities. A financial subsidiary may be established through acquisition or de
novo. Penn Mar Community Bank does not currently intend to establish a financial
subsidiary.
Other Powers
Maryland has enacted a parity act or so called "wild card" statute, the
purpose of which is to place Maryland commercial banks on parity with national
banks. Thus, any activity that may be engaged in by a national bank would also
be available to a Maryland commercial bank. Some of these activities may require
the prior approval of the Maryland Commissioner of Financial Regulation.
Dividends
The principal source of Penn Mar Bancshares, Inc.'s revenues will be
derived from dividends received from Penn Mar Community Bank. The amount of
dividends that may be paid
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by Penn Mar Community Bank to Penn Mar Bancshares, Inc. depends on Penn Mar
Community Bank's earnings and capital position and is limited by statute,
regulations and policies. As a Maryland state-chartered bank, Penn Mar Community
Bank may only pay cash dividends from its undivided profits, then on hand, after
deducting due or accrued expenses, including provisions for interest, taxes,
loan losses and bad debts. Penn Mar Community Bank may only declare dividends
out of surplus if its surplus is in excess of 100% of its required capital and
the Commissioner approves the payment. If the surplus account is less than 100
percent, Penn Mar Community Bank may only declare or pay cash dividends that are
less than 90 percent of its net earnings.
Penn Mar Community Bank may not declare a dividend in stock if, after the
increase in capital stock, its surplus is not equal to at least 20 percent of
its capital stock following the increase. If, after the increase in capital
stock to pay the dividend, surplus is less than 100 percent of capital stock,
Penn Mar Community Bank will have to annually transfer to surplus a minimum of
10 percent of its net earnings until its surplus account reaches 100 percent of
its increased capital stock.
Branches
With the approval of the Maryland Commissioner of Financial Regulation,
bank branches may be established in any city or town in Maryland. In addition,
Maryland-chartered commercial banks may operate automated teller machines at any
of their offices or, with the Maryland Commissioner of Financial Regulation's
approval, anywhere in Maryland. Maryland chartered commercial banks may also
operate ATMs outside of Maryland if permitted to do so by the law of the
jurisdiction in which the ATM is located.
Interstate Branching and Acquisitions
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, interstate acquisitions of branches are permitted if the law of the state
in which the branch is located permits such acquisitions. Maryland law allows
for Maryland chartered financial institutions to be acquired by out of state
banks, provided the home states of the acquiring institutions grant Maryland
banks reciprocal rights.
Federal Bank Regulation
Capital Adequacy
The Federal Reserve Board and the FDIC have adopted risk based capital
adequacy guidelines pursuant to which they assess the adequacy of capital in
examining and supervising banks and bank holding companies and in analyzing bank
regulatory applications. Risk-based capital requirements determine the adequacy
of capital based on the risk inherent in various classes of assets and off-
balance sheet items.
State member banks are expected to meet a minimum ratio of total qualifying
capital (the sum of core capital (Tier 1) and supplementary capital (Tier 2)) to
risk weighted assets (a "Total Risk-Based Capital Ratio") of 8%. At least half
of this amount (4%) should be in the form of core
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capital. These requirements will apply to Penn Mar Community Bank and Penn Mar
Bancshares, Inc. (as a bank holding company) once its total assets equal
$150,000,000 or more, if it engages in certain highly leveraged activities or if
it has publicly held debt securities.
Tier 1 capital generally consists of the sum of common stockholders' equity
and perpetual preferred stock (subject in the case of the latter to limitations
on the kind and amount of such stock which may be included as Tier 1 capital),
less goodwill and certain other intangibles. Tier 2 capital consists of the
following: hybrid capital instruments, perpetual preferred stock which is not
otherwise eligible to be included as Tier 1 capital, term subordinated debt and
intermediate-term preferred stock, and, subject to limitations, general
allowances for loan losses. Assets are adjusted under the risk-based guidelines
to take into account different risk characteristics, with the categories ranging
from 0% (requiring no risk-based capital) for assets such as cash, to 100% for
the bulk of assets which are typically held by a bank, including certain multi-
family residential and commercial real estate loans, commercial business loans
and consumer loans. Residential first mortgage loans on one-to-four family
residential real estate and certain seasoned multi-family residential real
estate loans which are not 90 days or more past-due or non-performing and which
have been made in accordance with prudent underwriting standards are assigned a
50% level in the risk-weighing system, as are certain privately-issued mortgage-
backed securities representing indirect ownership of such loans. Off-balance
sheet items also are adjusted to take into account risk characteristics.
On February 17, 2000, the Federal Reserve Board, in conjunction with the
other banking agencies, issued proposed changes to the risk based capital
measures regarding recourse and direct capital measures. The proposal would
amend the current measures to more closely align how recourse obligations,
direct credit substitutes and securitized transactions are treated. Until
finalized, it cannot be determined what, if any, impact the proposed changes
will have on Penn Mar Community Bank's operations.
In addition to the risk-based capital requirements, the Federal Reserve
Board has established a minimum 3.0% Leverage Capital Ratio (Tier 1 Capital to
total average assets) requirement for the most highly-rated banks, with an
additional cushion of at least 100 to 200 basis points for all other banks,
which effectively increases the minimum Leverage Capital Ratio for such other
banks to 4.0% - 5.0% or more. The highest-rated banks are those that are not
anticipating or experiencing significant growth and have well diversified risk,
including no undue interest rate risk exposure, excellent asset quality, high
liquidity, good earnings and, in general, those which are considered a strong
banking organization. A bank having less than the minimum Leverage Capital Ratio
requirement shall, within 60 days of the date as of which it fails to comply
with such requirement, submit a reasonable plan describing the means and timing
by which the bank shall achieve its minimum Leverage Capital Ratio requirement.
A bank which fails to file such a plan is deemed to be operating in an unsafe
and unsound manner, and could be subject to a cease-and-desist order.
Any insured depository institution with a Leverage Capital Ratio that is
less than 2.0% is deemed to be operating in an unsafe or unsound condition
pursuant to Section 8(a) of the Federal Deposit Insurance Act (the "FDIA") and
is subject to potential termination of deposit insurance. However, such an
institution will not be subject to an enforcement proceeding solely on account
of its capital ratios if it has entered into and is in compliance with a written
agreement to increase
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its Leverage Capital Ratio and to take such other action as may be necessary for
the institution to be operated in a safe and sound manner. The capital
regulations also provide, among other things, for the issuance of a capital
directive, which is a final order issued to a bank that fails to maintain
minimum capital or to restore its capital to the minimum capital requirement
within a specified time period. Such a directive is enforceable in the same
manner as a final cease-and-desist order.
Penn Mar Community Bank will also be a member of the Federal Reserve
System. As a member bank, Penn Mar Community Bank is subject to Federal Reserve
dividend regulations, in addition to Maryland statutes and policies of the
Commissioner. As a member bank, unless specifically allowed to do so by the
Federal Reserve Board, Penn Mar Community Bank will be unable to declare or pay
a dividend if during a calendar year the total of all dividends declared,
including the proposed dividend, is in excess of the sum of its net income
during the current calendar year and the retained net income of the two prior
calendar years.
As a member bank, Penn Mar Community Bank also may not declare or pay a
dividend that would exceed its reported undivided profits, unless Penn Mar
Community Bank receives the prior approval of its board of directors, as well as
the approval of two-thirds of its shareholders. As Penn Mar Bancshares, Inc.
will be the sole stockholder of Penn Mar Community Bank, Penn Mar Bancshares
will have to approve the payment of a dividend by Penn Mar Community Bank under
these circumstances. Penn Mar Community Bank, if it has capital in excess of the
minimum amount of capital required by state and federal law, may transfer excess
capital into its undivided profits account for the purpose of paying dividends.
In order to do so, 1) the amount of profits transferred must have come from
earnings in prior periods, excluding earnings transferred as a result of stock
dividends, 2) Penn Mar Community Bank's board of directors must approve the
transaction and 3) the Federal Reserve Board must approve the transfer of
profits.
If Penn Mar Community Bank pays a dividend in contravention of the
foregoing conditions, Penn Mar Bancshares, Inc. as the sole shareholder of Penn
Mar Community Bank, would be liable for the full amount of the dividend to the
extent that the dividend left Penn Mar Community Bank undercapitalized, its
surplus was below the level of its capital and or the amount was otherwise
improperly paid. Penn Mar Community Bank could also face additional
administrative sanctions for improperly paying a dividend, such as restrictions
on the payment of future dividends, the imposition of civil money penalties on
itself and or its senior management and directors by both the Commissioner and
the Federal Reserve System and other prompt corrective action measures.
Prompt Corrective Action
Under Section 38 of the FDIA, each federal banking agency is required to
implement a system of prompt corrective action for the institutions that it
regulates. Under applicable regulations, a bank will be deemed to be: (i) "well
capitalized" if it has a Total Risk Based Capital Ratio of 10% or more, a Tier 1
Risk-Based Capital Ratio of 6% or more, a Leverage Capital Ratio of 5% or more
and is not subject to any written capital order or directive; (ii) "adequately
capitalized" if it has a Total Risk Based Capital Ratio of 8% or more, a Tier 1
Risk Based Capital Ratio of 4% or more and a Leverage Capital Ratio of 4% or
more (3% under certain circumstances); (iii) "undercapitalized" if it has a
Total Risk Based Capital Ratio that is less than 8%, a Tier 1 Risk-Based Capital
Ratio that is less
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than 4% or a Leverage Capital Ratio that is less than 4% (3.0% under certain
circumstances); (iv) "significantly undercapitalized" if it has a Total Risk
Based Capital Ratio that is less than 6%, a Tier 1 Risk Based Capital Ratio that
is less than 3% or a Leverage Capital Ratio that is less than 3%; and (v)
"critically undercapitalized" if it has a ratio of tangible equity to total
assets that is equal to or less than 2%. We believe that Penn Mar Community Bank
will be a "well capitalized" bank if we sell either the minimum or maximum
number of shares in the offering.
An institution generally must file a written capital restoration plan which
meets specified requirements with an appropriate federal banking agency within
45 days of the date the institution receives notice or is deemed to have notice
that it is undercapitalized, significantly undercapitalized or critically
undercapitalized. The federal banking agency must provide the institution with
written notice of approval or disapproval within 60 days after receiving the
capital restoration plan, subject to extensions by the applicable agency.
An institution that is required to submit a capital restoration plan must
concurrently submit a performance guaranty by each company that controls the
institution. Such guaranty is limited to the lesser of (i) an amount equal to 5%
of the institution's total assets at the time the institution was notified or
deemed to have notice that it was undercapitalized or (ii) the amount necessary
at such time to restore the relevant capital measures of the institution to the
levels required for the institution to be classified as adequately capitalized.
Such a guaranty expires after the federal banking agency notifies the
institution that it has remained adequately capitalized for each of four
consecutive calendar quarters. An institution which fails to submit a written
capital restoration plan within the requisite period, including any required
performance guaranty, or fails in any material respect to implement a capital
restoration plan, is subject to the restrictions contained in Section 38 of the
FDIA which are applicable to significantly undercapitalized institutions.
A "critically undercapitalized institution" will be placed in
conservatorship or receivership within 90 days unless the FDIC formally
determines that forbearance from such action would better protect the deposit
insurance fund. Unless the FDIC or another appropriate federal banking
regulatory agency makes specific further findings and certifies that the
institution is viable and is not expected to fail, an institution that remains
critically undercapitalized on average during the fourth calendar quarters after
the date it becomes critically undercapitalized must be placed in receivership.
The general rule is that the FDIC will be appointed as receiver within 90 days
after a bank becomes critically undercapitalized unless extremely good cause is
shown and an extension is agreed to by the federal regulators. In general, good
cause is defined as capital that has been raised and is imminently available for
infusion into Penn Mar Community Bank except for certain technical requirements
that may delay the infusion for a period of time beyond the 90 day time period.
Immediately upon becoming undercapitalized, an institution becomes subject
to the provisions of Section 38 of the FDIA, which (i) restrict payment of
capital distributions and management fees; (ii) require that the appropriate
federal banking agency monitor the condition of the institution and its efforts
to restore its capital; (iii) require submission of a capital restoration plan;
(iv) restrict the growth of the institution's assets; and (v) require prior
approval of certain expansion proposals. The appropriate federal banking agency
for an undercapitalized institution also may take any number of discretionary
supervisory actions if the agency determines that any of these actions is
necessary to resolve the problems of the institution at the
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least possible long-term cost to the deposit insurance fund, subject in certain
cases to specified procedures. These discretionary supervisory actions include
requiring the institution to raise additional capital; restricting transactions
with affiliates; requiring divestiture of the institution or the sale of the
institution to a willing purchaser; and any other supervisory action that the
agency deems appropriate. These and additional mandatory and permissive
supervisory actions may be taken with respect to significantly undercapitalized
and critically undercapitalized institutions.
Additionally, under Section 11(c)(5) of the FDIA, a conservator or receiver
may be appointed for an institution where: (i) the institution's obligations
exceed its assets; (ii) there is substantial dissipation of the institution's
assets or earnings as a result of any violation of law or any unsafe or unsound
practice; (iii) the institution is in an unsafe or unsound condition; (iv) there
is a willful violation of a cease-and-desist order; (v) the institution is
unable to pay its obligations in the ordinary course of business; (vi) losses or
threatened losses deplete all or substantially all of an institution's capital,
and there is no reasonable prospect of becoming "adequately capitalized" without
assistance; (vii) there is any violation of law or unsafe or unsound practice or
condition that is likely to cause insolvency or substantial dissipation of
assets or earnings, weaken the institution's condition, or otherwise seriously
prejudice the interests of depositors or the insurance fund; (viii) an
institution ceases to be insured; or (ix) the institution is undercapitalized
and has no reasonable prospect that it will become adequately capitalized, fails
to become adequately capitalized when required to do so, or fails to submit or
materially implement a capital restoration plan.
Regulatory Enforcement Authority
Federal banking law grants substantial enforcement powers to federal
banking regulators. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders and to initiate injunctive actions against banking organizations and
institution-affiliated parties. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with regulatory
authorities.
Community Reinvestment Act
The Community Reinvestment Act ("CRA") requires that, in connection with
examinations of financial institutions within their respective jurisdictions,
the Federal Reserve Board, the FDIC, the Office of the Comptroller of the
Currency or the Office of Thrift Supervision shall evaluate the record of the
financial institutions in meeting the credit needs of their local communities,
including low and moderate income neighborhoods, consistent with the safe and
sound operation of those institutions. The CRA does not establish specific
lending requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
An institution's CRA activities are considered in, among other things,
evaluating mergers, acquisitions and applications to open a branch or facility,
as well as determining whether the institution will be permitted to exercise
certain of the powers allowed by the GLBA. The CRA also requires all
institutions to make public disclosure of their CRA ratings.
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MANAGEMENT
Directors and Executive Officers
Penn Mar Bancshares, Inc.'s directors and executive officers and Penn Mar
Community Bank's proposed directors and executive officers are as follows:
Name Age Position
---- --- --------
James Geoffrey Sturgill, Jr. 36 Chairman and President of Penn Mar
Bancshares, Inc. and Chairman,
Secretary and Treasurer of Penn Mar
Community Bank
Kevin P. Huffman 40 Vice President and Secretary of Penn
Mar Bancshares, Inc. and President and
Chief Executive Officer of Penn Mar
Community Bank, Director of Penn Mar
Bancshares, Inc. and Penn Mar
Community Bank
Daniel E. Dutterer 37 Treasurer of Penn Mar Bancshares, Inc.
and Executive Vice President of Penn
Mar Community Bank, Director of Penn
Mar Bancshares, Inc. and Penn Mar
Community Bank
Richard W. Geisendaffer 68 Director of Penn Mar Bancshares, Inc.
and Penn Mar Community Bank
Vishnampet S. Jayanthinathan 52 Director of Penn Mar Bancshares, Inc.
and Penn Mar Community Bank
Ronald Krablin, M.D. 56 Director of Penn Mar Bancshares, Inc.
and Penn Mar Community Bank
Jeffrey I. Hurwitz 45 Director of Penn Mar Bancshares, Inc.
and Penn Mar Community Bank
Kevin E. Dayhoff 47 Director of Penn Mar Bancshares, Inc.
and Penn Mar Community Bank
Penn Mar Bancshares, Inc. has a classified board of directors whereby one-
third of the members will be elected each year at Penn Mar Bancshares, Inc.'s
Annual Meeting of Stockholders. After an initial phase-in period and upon
election, each director serves for a term of three years. See "Description of
Capital Stock--Anti-Takeover Provisions" for more information about Penn Mar
Bancshares, Inc.'s classified board of directors. Penn Mar Bancshares, Inc.'s
officers are appointed by the board of directors and hold office at the will of
the board or as otherwise provided in an employment agreement between an officer
and Penn Mar Bancshares, Inc.
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Each of Penn Mar Community Bank's proposed directors, upon approval by the
Commissioner, is expected to serve until Penn Mar Community Bank's first
stockholders' meeting, which will be held shortly after Penn Mar Community Bank
receives its bank charter. As Penn Mar Bancshares, Inc. will be the sole
stockholder of Penn Mar Community Bank, it is expected that each director of
Penn Mar Bancshares, Inc. will be elected to serve as a director of Penn Mar
Community Bank. After the first stockholders' meeting, directors of Penn Mar
Community Bank will serve for a term of one year and will be elected each year
at Penn Mar Community Bank's Annual Meeting of Stockholders. Penn Mar Community
Bank's officers will be appointed by its board of directors and will hold office
at the will of the board or as otherwise provided in an employment agreement
between an officer and Penn Mar Community Bank.
James Geoffrey Sturgill, Jr. serves as chairman of the board of directors
and president of Penn Mar Bancshares, Inc. and will serve as chairman of the
board of directors, secretary, and treasurer of Penn Mar Community Bank. Mr.
Sturgill has been a certified public accountant in Maryland since 1991 and in
Pennsylvania since 1998. Since 1993, Mr. Sturgill has been a partner of
Sturgill & Associates, LLP, a regional CPA firm with offices in Gettysburg,
Pennsylvania and Westminster, Columbia and Gaithersburg Maryland. Mr. Sturgill
is a member of the American Institute of Certified Public Accountants as well as
the Maryland and Pennsylvania Societies of Certified Public Accountants. As
part of his civic pursuits, Mr. Sturgill is the treasurer and chief financial
officer for the Gettysburg Equestrian Center. Mr. Sturgill also is the vice
chairman of the Gettysburg Health Care Corporation and has been a director of
the Adams County Industrial Development Authority and the Adams County Economic
Development Corporation.
Kevin P. Huffman serves as vice president and secretary of Penn Mar
Bancshares, Inc. and will serve as president and chief executive officer of Penn
Mar Community Bank. He is also a director of Penn Mar Bancshares, Inc. and will
serve as a director of Penn Mar Community Bank. Mr. Huffman has more than 20
years experience in the financial services industry. His executive banking
experience includes day-to-day oversight of commercial and retail banking
activities, as well as strategic planning, credit policy, regulatory compliance
and product development at both the bank and holding company levels. Mr. Huffman
was most recently the Executive Vice President, Chief Operating Officer and
Director of Patapsco Valley Bancshares, Inc. and Commercial and Farmers Bank
from 1996 until March 2000. This $200 million community financial services
company also operated a mortgage banking subsidiary, an insurance agency and an
electronic data processing company. From 1988 until 1992, Mr. Huffman was Vice
President and part of senior management for Elkridge National Bank, a community
bank based in Howard County, Maryland.
A native to the Maryland area, Mr. Huffman received his undergraduate
degree from the University of Maryland at College Park. He is also a graduate
of the Bank Administration Institute's Banking School at the University of
Wisconsin. In addition to his professional accomplishments, Mr. Huffman has
been an active member in a number of community projects including: (i) Partner
with Youth Program (a school/ business partnership program where a bank works
with individual schools to teach elementary children how to run a bank and
encourage student savings); (ii) member of the Board of Managers of the Howard
County YMCA; and (iii) an active coach for the Soccer Association of Columbia.
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Daniel E. Dutterer serves as Treasurer of Penn Mar Bancshares, Inc. and
will serve as Executive Vice President of Penn Mar Community Bank. He is also a
director of Penn Mar Bancshares, Inc. and will be a director of Penn Mar
Community Bank. Mr. Dutterer has more than 18 years experience in the banking
industry. From 1982 through 1997, Mr. Dutterer filled various roles with
Westminster Bank and Trust Company of Carroll County. He began his career there
as a teller and finished as Senior Vice President and Chief Financial Officer
responsible for the Branch/Retail Network, Human Resources, Accounting, Planning
and Risk Management. Additionally, Mr. Dutterer was an active member of the
bank's loan committee that was responsible for major credit decisions as well as
setting policy. Following his employment with Westminster Bank and Trust
Company of Carroll County, Mr. Dutterer served as Vice President of the
Management Accounting area for Mercantile Safe Deposit and Trust Company until
June 2000. In this position, Mr. Dutterer's responsibilities included Corporate
Planning & Budgeting, Risk Management and Management Reporting.
Mr. Dutterer is a life long resident of Carroll County. He graduated from
the University of Maryland, University College in 1987 with a Bachelor of
Science degree in Business Management. In 1994, Mr. Dutterer received a Masters
of Business Administration from Mount St. Mary's College. Mr. Dutterer is also
a Certified Public Accountant. In addition to his professional accomplishments,
Mr. Dutterer is active in youth sports and various other community
organizations.
Richard W. Geisendaffer is a director of Penn Mar Bancshares, Inc. and will
be a director of Penn Mar Community Bank. Mr. Geisendaffer is a trained
computer programmer and spent over 15 years working for Hobelman Port Services,
Inc. as a regional terminal director. Mr. Geisendaffer directed the processing
of over 120,000 import/export vehicles annually at two terminals located in
Baltimore, Maryland. Since 1997, Mr. Geisendaffer has been retired.
Vishnampet S. Jayanthinathan is a director of Penn Mar Bancshares, Inc. and
will be a director of Penn Mar Community Bank. Since 1994, Mr. Jayanthinathan
has been the president and chief executive officer of Engineering Systems
Solutions, a computer systems integration company in Frederick, Maryland. Mr.
Jayanthinathan is also the president of Rajan, LLC, a company that invests in
real estate in the Frederick, Maryland area. Mr. Jayanthinathan has been
involved with Rajan, LLC since 1997.
Ronald Krablin, M.D. is a director of Penn Mar Bancshares, Inc. and will be
a director of Penn Mar Community Bank. Dr. Krablin is a board certified general
internist and is president of Gettysburg Internal Medicine Association, Inc.
Dr. Krablin has privileges at Gettysburg Hospital, part of WellSpan Health which
provides health care in York, Adams and surrounding counties of Pennsylvania and
Northern Maryland. Dr. Krablin has held numerous positions at Gettysburg
Hospital including medical staff president, and currently is the medical
director of his group's in-patient service, the cardiology laboratory, the
Critical Care Unit, and the outpatient service of Cardiac Rehabilitation. Dr.
Krablin also sits on the WellSpan board of directors. Dr. Krablin received his
Bachelor of Science in Chemistry from Antioch College and his medical degree
from Penn State University. Following his graduation from medical school, Dr.
Krablin completed his residency and special work in Cardiology at Penn State
University Hershey Medical Center.
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Jeffrey I. Hurwitz is a director of Penn Mar Bancshares, Inc. and will be a
director of Penn Mar Community Bank. Mr. Hurwitz is president and owner of
Colonial Jewelers, Inc., a retail jewelry business in Frederick, Maryland. He
serves on the Special Gifts Committee of Frederick Memorial Hospital, and is a
member of their Order of the Good Samaritan. Mr. Hurwitz is also a member of
the board of directors of the Greater Frederick Development Commission and past
president of the Downtown Frederick Association. He currently serves as
president of the Frederick Cotillion Club. Mr. Hurwitz is also General Partner
in the Hurwitz Family Limited Partnership, a real estate partnership, and
directs an endowment fund through the Community Foundation of Frederick. He is
a graduate Gemologist of the Gemological Institute of America and a Certified
Gemologist of the American Gem Society.
Kevin E. Dayhoff is a director of Penn Mar Bancshares, Inc. and will be a
director of Penn Mar Community Bank. Mr. Dayhoff, a Carroll County native, is a
self-employed artist and businessman. He owned and operated Kevin E. Dayhoff &
Co., a landscape design, contracting and nursery stock farm, from 1974 to 1999.
Currently, Mr. Dayhoff is a Westminster City Councilman. Additionally, Mr.
Dayhoff is a board member of the Westminster Cemetery Company and was elected to
the Maryland Municipal League Board of Directors in June 2000. Mr. Dayhoff
attended Elon College and is currently a Bachelor's Degree candidate in Public
Policy Administration and Analysis at Western Maryland College. Mr. Dayhoff has
been an active participant in a number of community activities, taught at
Carroll Community College and has served on a number of business, state and
county government advisory boards.
Director Compensation
Penn Mar Bancshares, Inc. currently does not pay directors fees. Beginning
in the first month of operations, directors will receive fees for their
services, and will be reimbursed for expenses incurred in connection with their
service as directors. Directors will receive $150.00 for each board meeting
attended and $100.00 for each committee meeting attended. We expect that these
directors fees will be paid in shares of common stock, valued at $10.00 per
share, for the foreseeable future.
We expect that Penn Mar Community Bank will pay Mr. Sturgill $25,000
annually, in connection with his duties as Chairman of the Board of Penn Mar
Community Bank. This amount is payable in cash or shares of Penn Mar
Bancshares, Inc. common stock at Mr. Sturgill's option. Mr. Sturgill is not a
party to an employment or consulting agreement with either Penn Mar Bancshares,
Inc. or Penn Mar Community Bank and he could resign at any time for any reason
or be removed if the board of directors deems it in the best interests of Penn
Mar Bancshares, Inc. or Penn Mar Community Bank.
Employment and Executive Compensation Arrangements
Penn Mar Bancshares, Inc. has entered into written employment agreements
with Kevin P. Huffman, effective as of April 1, 2000 and Daniel E. Dutterer,
effective as of September 1, 2000. Under these agreements, Mr. Huffman will
serve as the vice president and secretary of Penn Mar Bancshares, Inc. at an
initial annual base salary of $85,000, subject to annual review and Mr. Dutterer
will serve as treasurer of Penn Mar Bancshares, Inc. at an initial annual base
salary of $100,000, subject to annual review.
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Penn Mar Bancshares, Inc. may terminate either employment agreement without
cause upon 30 days' prior written notice and may terminate either employment
agreement for cause at any time without prior notice. Mr. Huffman and Mr.
Dutterer may terminate their employment agreements at any time upon 30 days'
prior written notice. Both Mr. Huffman's and Mr. Dutterer's agreement with Penn
Mar Bancshares, Inc. will terminate, unless extended by the parties' mutual
agreement, on the effective date of employment agreements between Mr. Huffman
and Mr. Dutterer, as the case may be, and Penn Mar Community Bank, or on the
date Penn Mar Bancshares, Inc.'s board of directors decides to terminate this
offering.
On the date that Penn Mar Community Bank opens for business, Mr. Huffman
and Mr. Dutterer will enter into employment agreements with Penn Mar Community
Bank. Under these agreements, Mr. Huffman will serve as the president of Penn
Mar Community Bank at an initial annual base salary of $125,000, subject to
annual review. In addition, he will receive one lump sum payment which will be
calculated by multiplying $3,333 times the number of full months between the
commencement date of the employment agreement between Mr. Huffman and Penn Mar
Bancshares, Inc. and the opening of Penn Mar Community Bank, plus an additional
amount for any portion of a month during such period pro rated on a per diem
basis. Mr. Dutterer will serve as the executive vice president of Penn Mar
Community Bank at an initial base salary of $100,000, subject to annual review.
Each agreement will have an initial term of three years, automatically renewable
for one-year terms unless written notice is provided by either party 90 days
before expiration of a term.
Penn Mar Community Bank may terminate either employment agreement without
cause upon 30 days' prior written notice and may terminate either employment
agreement for cause at any time without prior notice. Mr. Huffman and Mr.
Dutterer may terminate their employment agreements at any time upon 30 days'
prior written notice. In the event Mr. Huffman or Mr. Dutterer are terminated
without cause, they will continue to receive salary payments for the remainder
of their employment term or until such time as they have found comparable
employment. Both Mr. Huffman and Mr. Dutterer are required to use their best
efforts to obtain comparable employment. If Mr. Huffman and Mr. Dutterer are
not able to find comparable employment, any compensation they receive from any
employment during the remaining term of their employment agreements is deducted
from any continued salary.
Pursuant to their agreements, if Mr. Huffman or Mr. Dutterer are employed
by Penn Mar Community Bank on the date of a "change of control," Mr. Huffman is
entitled to a payment of $250,000 from Penn Mar Community Bank and Mr. Dutterer
is entitled to a payment of $200,000 from Penn Mar Community Bank. The
employment agreements define "change of control" as (i) the acquisition by any
person of forty percent (40%) or more of the outstanding shares of common stock
of Penn Mar Community Bank or Penn Mar Bancshares, Inc.; (ii) the election of a
majority of the members of the board of directors who were not approved or
nominated by then incumbent board; or (iii) the approval by the stockholders of
Penn Mar Community Bank or Penn Mar Bancshares, Inc. of (a) a reorganization,
merger or consolidation of Penn Mar Community Bank or Penn Mar Bancshares, Inc.,
(b) a liquidation or dissolution of Penn Mar Community Bank or Penn Mar
Bancshares, Inc. or (c) the sale or other disposition of all or substantially
all of the assets of Penn Mar Community Bank or Penn Mar Bancshares, Inc.
In their employment agreements with Penn Mar Community Bank, Mr. Huffman
and Mr. Dutterer agree that for a period of six months after employment with
Penn Mar Community Bank or any affiliate, they will not, directly or indirectly,
own, operate or otherwise be associated with,
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any financial institution which is located in Frederick, Carroll or Howard
Counties or Penn Mar Community Bank's market area, whichever is larger. Mr.
Huffman and Mr. Dutterer also agree that for a period of one year after
employment with Penn Mar Community Bank or any affiliate, they will not (i)
solicit any person or entity which at the time of their termination was, or
within one year prior thereto had been, a customer of Penn Mar Community Bank or
any of its affiliates or (ii) solicit the employment of any person who was
employed by Penn Mar Community Bank or any of its affiliates on a full or part
time basis at the time of their termination of employment, unless such person
(a) was involuntarily discharged by Penn Mar Community Bank or the affiliate or
(b) voluntarily terminated his relationship with Penn Mar Community Bank or the
affiliate prior to Mr. Huffman's or Mr. Dutterer's termination of employment.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the ownership of Penn Mar Bancshares, Inc.'s
common stock by its directors, executive officers and persons known to own more
than five percent (5%) of the common stock as of the date of this Prospectus.
Unless otherwise noted below, we believe that each person named in the table has
or will have the sole voting and sole investment power with respect to each of
the shares of common stock reported as owned by such person.
Name and Address of Number of Shares/(1)/ Percentage of Total
------------------- --------------------- -------------------
Beneficial Owner
----------------
J. Geoffrey Sturgill, Jr./(2)/
32 Wortz Drive 24,846 27.20%
Fairfield, PA 17320
Richard W. Geisendaffer
207 Glenwood Road 20,000 21.89%
Bel Air, MD 21014
Vishnampet S. Jayanthinathan
5216 Ernie Lane 10,000 10.95%
Frederick, MD 21703
Kevin P. Huffman
7721 Sandstone Court 5,000 5.47%
Ellicott City, MD 21043
Jeffrey I. Hurwitz
1 South Market Place 10,000 10.95%
Frederick, MD 21701
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Name and Address of Number of Shares/(1)/ Percentage of Total
------------------- --------------------- -------------------
Beneficial Owner
----------------
Ronald Krablin IRA
47 Spruce Drive 10,000 10.95%
Gettysburg, PA 17325
Daniel E. Dutterer
3301 Black Steer Drive 1,500 1.64%
Finksburg, MD 21048
Kevin E. Dayhoff
P.O. Box 124 10,000 10.95%
Westminster, MD 21158-0124
Executive Officers and
Directors as a Group (8 persons) 91,346 100%
(1) Does not reflect shares issuable upon exercise of warrants, since the
warrants are not exercisable until the later of the date Penn Mar
Community Bank opens for business or one year from the termination of
this offering. See "Certain Transactions--Warrants."
(2) Includes 1,846 shares held for Mr. Sturgill's account under a 401(k)
plan established by Sturgill & Associates, LLP.
The directors and officers may purchase shares in the offering if necessary
to permit Penn Mar Bancshares, Inc. to complete the minimum offering of 500,000
shares, and they may purchase additional shares even if Penn Mar Bancshares,
Inc. sells the minimum offering although no such purchases are anticipated at
this time. Any shares purchased by the directors and officers in excess of their
original commitments will be purchased for investment and not with a view to the
resale of those shares.
CERTAIN TRANSACTIONS
Warrants
Prior to this offering, the organizers of Penn Mar Bancshares, Inc. and
Penn Mar Community Bank purchased an aggregate of 91,346 shares of our common
stock at a purchase price of $10.00 per share. These shares were issued without
registration under the Securities Act of 1933, as amended, in reliance of the
exemption provided by Section 4(2) of the Securities Act and the rules of the
Securities and Exchange Commission promulgated under Section 4(2). The primary
purpose of this "organizational offering" was to provide Penn Mar Bancshares,
Inc. with the capital necessary to fund our initial organizational and operating
expenses.
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In recognition of the financial and organizational risk undertaken by the
purchasers in the organizational offering, each purchaser in the organizational
offering received, for no additional consideration, a warrant to purchase one
share of common stock at $10.00 per share for every one share that they
purchased in the organizational offering. As a result, we issued warrants to
purchase an aggregate of 91,346 shares of common stock to the purchasers in the
organizational offering.
The warrants become exercisable on the later of the date that Penn Mar
Community Bank opens for business or one year from the termination date of this
offering and are exercisable in whole or in part until that date which is ten
years from the date of this Prospectus. The warrants and the shares issuable
upon the exercise of the warrants are transferable subject to compliance with
applicable securities laws. If the Commissioner or the FDIC issues a capital
directive or other order requiring Penn Mar Community Bank to obtain additional
capital, the warrants are forfeited if not immediately exercised.
Real Property
Westminster, Maryland
We have entered into a lease with 309 Woodward, LLC, a company owned by
five of the directors of Penn Mar Bancshares, Inc., for the property in
Westminster, Maryland upon which we propose to construct a building to house our
executive offices and the main branch of Penn Mar Community Bank. We will pay
309 Woodward, LLC annual base rent of $35 per square foot during the first year
of the lease term. The first year's annual base rent will total $157,500,
assuming the building is 4,500 square feet, as anticipated. As described
earlier in this Prospectus, under the caption "Proposed Business of Penn Mar
Community Bank - Properties," base rent will increase each year. We will also
pay 309 Woodward, LLC for insurance costs incurred by that company. In
addition, we will pay taxes, utilities, and maintenance expenses, although those
amounts will be paid directly rather than as reimbursements to 309 Woodward, LLC
for the payment of such expenses. The lease has an initial term of seven years,
and we have the right to renew the lease for three additional terms of five
years.
Messrs. Sturgill, Huffman, Geisendaffer, Krablin and Dutterer are the
owners of 309 Woodward, LLC, and each holds an equal interest in that company.
Frederick, Maryland
We have entered into a lease with Riverside Property Development, LLC, a
company owned solely by Jeffrey Hurwitz, a director of Penn Mar Bancshares,
Inc., for the property in Frederick, Maryland upon which we may construct a
building to house the Frederick branch of Penn Mar Community Bank if we raise
sufficient funds in this offering. We will pay Riverside Property Development,
LLC annual base rent of $50,400 during the first year of the lease term. As
described earlier in this Prospectus, under the caption "Proposed Business of
Penn Mar Community Bank - Properties," this lease has an initial term of one
year, and we have the option to renew for four additional terms of one year, and
a final term of seven years. During any renewal term, base rent will increase.
In addition, we will pay taxes and maintenance expenses on the property. If a
building is constructed on the property, we will pay Riverside Property
Development, LLC for insurance costs incurred by that company, and we will pay
utilities and
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building maintenance expenses directly to the providers of such services.
Banking Transactions
We anticipate that our directors and officers and the business and
professional organizations with which they are associated will have banking
transactions with Penn Mar Community Bank in the ordinary course of business.
It will be our policy that any loans and loan commitments will be made in
accordance with applicable laws and on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons of comparable credit standing. Loans to
directors and officers must comply with Penn Mar Community Bank's lending
policies and statutory lending limits, and directors with a personal interest in
any loan application will be excluded from considering any such loan
application.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of nine million (9,000,000) shares of
common stock, $0.01 par value, and one million (1,000,000) shares of preferred
stock, $0.01 par value. As of the date of this Prospectus, 91,346 shares of
common stock are issued and outstanding and held by seven stockholders of
record. The following summary of certain terms of the common stock and
preferred stock is not complete and you may refer to our charter and bylaws,
copies of which are available upon request for inspection, for further
information.
In general, stockholders or subscribers for our stock have no personal
liability for the debts and obligations of Penn Mar Bancshares, Inc. because of
their status as stockholders or subscribers, except to the extent that the
subscription price or other agreed consideration for the stock has not been
paid.
Common Stock
We are authorized to issue nine million (9,000,000) shares of common stock,
par value $0.01 per share. Upon completion of the offering, including the
shares of common stock currently issued and outstanding, a minimum of 591,346
and a maximum of 1,091,346 shares of common stock will be issued and
outstanding. The outstanding shares of common stock currently are, and the
shares of common stock to be issued in the offering will be, upon payment as
described in this Prospectus, fully paid and non-assessable. Subject to all the
rights of holders of any other class or series of stock, holders of common stock
are entitled to receive dividends if and when the Board of Directors of Penn Mar
Bancshares, Inc. declares dividends from funds legally available. In addition,
holders of common stock share ratably in the net assets of Penn Mar Bancshares,
Inc. upon the voluntary or involuntary liquidation, dissolution or winding up of
Penn Mar Bancshares, Inc., after distributions are made to anyone with more
senior rights.
In general, each outstanding share of common stock entitles the holder to
vote for the election of directors and on all other matters requiring
stockholder action, and each share is entitled to one vote. There is no
cumulative voting in the election of directors, which means that the holders of
a majority of the outstanding shares of common stock can elect all of the
directors
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then standing for election and the holders of the remaining shares will not be
able to elect any directors.
Holders of common stock have no conversion, sinking fund, redemption rights
or preemptive rights to subscribe to any securities of Penn Mar Bancshares, Inc.
or Penn Mar Community Bank.
Our charter grants to the board of directors the right to classify or
reclassify any unissued shares of common stock from time to time by setting or
changing the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption. Accordingly, the board of directors could authorize
the issuance of additional shares of common stock with terms and conditions
which could have the effect of discouraging a takeover or other transaction
which some of our stockholders might believe to be in their best interests or in
which they might receive a premium for their shares of common stock over the
market price of such shares. As of the date hereof, we have no plans to
classify or reclassify any unissued shares of the common stock.
Preferred Stock
We are authorized to issue one million (1,000,000) shares of preferred
stock, par value $0.01 per share. Shares of preferred stock may be issued from
time to time by the board of directors in one or more series. Prior to issuance
of shares of each series of preferred stock, the board of directors is required
by the Maryland General Corporation Law ("MGCL") to fix for each series the
designation, preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption. The board of directors could authorize the issuance
of shares of preferred stock with terms and conditions which could have the
effect of discouraging a takeover or other transaction which some of our
stockholders might believe to be in their best interests or in which they might
receive a premium for their shares of common stock over the market price of such
shares. As of the date hereof, we have no present plans to issue any preferred
stock.
Anti-Takeover Provisions
Extraordinary Transactions. Pursuant to the MGCL, a corporation generally
cannot amend its charter (except in compliance with specific provisions of the
MGCL), consolidate, merge, sell, lease or exchange all or substantially all of
its assets, engage in a share exchange or liquidate, dissolve or wind-up unless
such acts are approved by the affirmative vote of at least two-thirds of the
shares entitled to vote on the matter, unless a lesser or greater percentage is
set forth in the corporation's charter. Our charter requires that some of these
matters be approved by the affirmative vote at least 80% of all the votes
entitled to be cast.
Classification of the Board of Directors. Our charter and bylaws provide
that we shall have at least three directors, and that the number of directors
may be increased or decreased by the board of directors. As of the date of this
Prospectus, the board of directors has set the number of directors at eight. At
the first annual meeting of the stockholders, the directors will be divided into
three classes -- Class A, Class B and Class C -- each class to consist of an
equal number of directors, or as nearly equal as possible. Each director will
serve for a term ending on the date of
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the third annual meeting following the annual meeting at which such director was
elected. However, the Class A directors first chosen will hold office until the
first annual meeting following their election or appointment, the Class B
directors first chosen will hold office until the second annual meeting
following their election or appointment, and the Class C directors first chosen
will hold office until the third annual meeting following their election or
appointment. We believe that classification of the board of directors will help
to assure the continuity and stability of Penn Mar Bancshares, Inc.'s business
strategies and policies as determined by the board of directors.
Removal of Directors. Our charter and bylaws provide that a director may
only be removed by the affirmative vote of at least 80% of the votes entitled to
be cast on the matter. Furthermore, the MGCL provides that if a corporation's
directors are divided into classes, a director may only be removed for cause.
Summary of Anti-takeover Provisions. The above-described provisions
included in our charter and bylaws are designed to encourage potential acquirors
to negotiate directly with our board of directors and to discourage takeover
attempts. Such provisions may discourage non-negotiated takeover attempts which
certain stockholders could deem to be in their best interests.
For example, the classified director provision could have the effect of
making the removal of incumbent directors more time consuming and difficult,
which could discourage a third party from making a tender offer or otherwise
attempting to obtain control of Penn Mar Bancshares, Inc., even though such an
attempt might be beneficial to Penn Mar Bancshares, Inc. and its stockholders.
In general, more than one annual meeting of stockholders will be required to
effect a change in a majority of the board of directors. Thus, the classified
board provision could increase the likelihood that incumbent directors will
retain their positions. Holders of common stock have no right to cumulative
voting for the election of directors. Consequently, at each annual meeting of
stockholders, the holders of a majority of the shares of common stock will be
able to elect all of the successors of the class of directors whose term expires
at that meeting.
The charter and bylaw provision that directors may be removed only by the
affirmative vote of at least 80% of the votes entitled to be cast on the matter,
the provision of the MGCL that provides that class directors may only be removed
for cause and the provision in the Bylaws authorizing the board of directors to
fill vacant directorships, precludes stockholders from removing incumbent
directors except for cause and upon a substantial affirmative vote and filling
the vacancies created by such removal with their own nominees.
Business Combinations. Under the MGCL, certain "business combinations"
between a Maryland corporation and an "Interested Stockholder" (as described in
the MGCL) are prohibited for five years after the most recent date on which the
Interested Stockholder became an Interested Stockholder, unless an exemption is
available. Thereafter a business combination must be recommended by the board
of directors of the corporation and approved by the affirmative vote of at
least: (i) 80% of the votes entitled to be cast by holders of outstanding voting
shares of the corporation and (ii) two-thirds of the votes entitled to be cast
by holders of outstanding voting shares of the corporation other than shares
held by the Interested Stockholder with whom the business combination is to be
effected, unless the corporation's stockholders receive a minimum
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price (as described in the MGCL) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of Maryland law do not apply,
however, to business combinations that are approved or exempted by the board of
directors prior to the time that the Interested Stockholder becomes an
Interested Stockholder. They also do not apply if the company has fewer than 100
beneficial owners of stock.
Control Share Acquisitions. The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the shares
entitled to be voted on the matter, excluding shares of stock owned by the
acquirer or by officers or directors who are employees of the corporation.
"Control shares" are voting shares of stock which, if aggregated with all other
such shares of stock previously acquired by the acquirer, or in respect of which
the acquirer is able to exercise or direct the exercise of voting power except
solely by virtue of a revocable proxy, would entitle the acquirer to exercise
voting power in electing directors within one of the following ranges of voting
power: (i) one-tenth or more but less than one-third; (ii) one-third or more but
less than a majority or (iii) a majority of all voting power. Control shares do
not include shares the acquiring person is then entitled to vote as a result of
having previously obtained stockholder approval. A "control share acquisition"
means the acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses and
delivery of an "acquiring person statement"), may compel the corporation's board
of directors to call a special meeting of stockholders to be held within 50 days
of demand to consider the voting rights of the shares. If no request for a
meeting is made, the corporation may itself present the question at any
stockholders' meeting.
Unless the charter or bylaws provide otherwise, if voting rights are not
approved at the meeting or if the acquiring person does not deliver an acquiring
person statement within 10 days following a control share acquisition then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition or of any meeting of stockholders at which the voting rights of such
shares are considered and not approved. Moreover, unless the charter or bylaws
provides otherwise, if voting rights for control shares are approved at a
stockholders' meeting and the acquirer becomes entitled to exercise or direct
the exercise of a majority or more of all voting power, other stockholders may
exercise appraisal rights. The fair value of the shares as determined for
purposes of such appraisal rights may not be less than the highest price per
share paid by the acquirer in the control share acquisition.
Transfer Agent
At present, we intend to serve as our own transfer agent after the
offering.
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SHARES ELIGIBLE FOR FUTURE SALE
No market exists now for our shares, and we do not expect one to develop in
the foreseeable future. However, if a market did develop, the sale of a
substantial number of shares in that market could decrease the prevailing market
price of our stock and also could impair our ability to raise more funds in the
future. All shares sold in this offering will be freely tradable without
restriction, except for any shares purchased by an "affiliate" of Penn Mar
Bancshares, Inc. Those shares, along with the 91,346 shares of our common stock
sold in the organizational offering, may not be resold unless they are
registered or sold pursuant to an exemption from registration including that set
forth in Securities and Exchange Commission Rule 144.
As of the date of this Prospectus, we have 91,346 shares of common stock
outstanding and have issued warrants to purchase up to 91,346 shares of common
stock. The shares issuable upon exercise of the warrants and the 91,346 shares
of common stock sold in the organizational offering will constitute "restricted
securities" within the meaning of Rule 144. The shares sold in the
organizational offering may be resold subject to the volume and other
limitations of Rule 144 beginning in November 2000. The shares sold in the
organizational offering may be resold without restriction by persons who are not
affiliates of Penn Mar Bancshares, Inc. beginning in November 2001.
All of Penn Mar Bancshares, Inc.'s officers and directors are considered
"affiliates" within the meaning of Rule 144 and will, therefore, be subject to
the applicable resale limitations of that rule with respect to the shares
purchased in this offering. In general, the number of shares that can be sold
by each affiliate in brokers' transactions (as that term is used in Rule 144)
within any three month period may not exceed the greater of (i) one percent (1%)
of the outstanding shares as shown by the most recent report or statement
published by Penn Mar Bancshares, Inc. or (ii) the average weekly reported
volume of trading in the shares on all national securities exchanges and/or
reported through the automated quotation system of a registered securities
association during the four calendar weeks preceding the sale.
LEGAL MATTERS
The validity of the shares of common stock offered by this Prospectus will
be passed upon for Penn Mar Bancshares, Inc. by Ober, Kaler, Grimes & Shriver, a
Professional Corporation, Baltimore, Maryland.
EXPERTS
The audited financial statements of Penn Mar Bancshares, Inc., dated as of
August 31, 2000 and for the period from October 7, 1999 (date of inception) to
August 31, 2000 included in this Prospectus have been included in reliance upon
the report of Rowles & Company, LLP, independent certified public accountants,
and upon the authority of that firm as experts in accounting and auditing.
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HOW TO FIND ADDITIONAL INFORMATION
We are a newly organized company and to date have not engaged in any
business operations other than those activities necessary to engage in this
offering and to organize and capitalize Penn Mar Bancshares, Inc. and Penn Mar
Community Bank. We are not currently required to file reports with the
Securities and Exchange Commission, although we will do so after this offering.
We will furnish stockholders with annual reports containing audited financial
statements. We may also send other reports to keep stockholders informed of our
business.
We have filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission, and this Prospectus was included in the Registration
Statement. This Prospectus does not contain all of the information contained in
the Registration Statement. You can read the Registration Statement and the
exhibits to the Registration Statement at the following public reference
facilities of the Securities and Exchange Commission: 450 Fifth Street, NW,
Room 1024, Washington, DC 20549; 7 World Trade Center, Suite 1300, New York, New
York 10048 and the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You can obtain copies of the Registration
Statement and the exhibits for a fee from the Public Reference Room of the
Securities and Exchange Commission, 450 Fifth Street, NW, Room 1024,Washington,
DC 20549. You may call 1-800-SEC-0330 to obtain information on the operation of
the Public Reference Rooms. These materials also may be accessed via the
Securities and Exchange Commission's Internet website. The address of that
website is http://www.sec.gov.
-------------------
No one is authorized to give you information that is not included in this
Prospectus. If someone gives you any other information, you should not rely
upon it because we may not have authorized the use of that information. We may
deliver this Prospectus to a prospective investor and/or sell shares of common
stock in this offering even if the information in this Prospectus changes after
the date on the cover of the Prospectus.
This Prospectus is not an offer to sell the common stock and is not a
solicitation of an offer to buy the common stock in any state where the offer or
sale is not permitted.
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report................................................ F-2
Balance Sheets.............................................................. F-3
Statements of Loss.......................................................... F-4
Statements of Changes in Stockholders' Equity............................... F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
F-1
<PAGE>
Report of Independent Auditors
The Organizers
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Westminster, Maryland
We have audited the accompanying balance sheets of Penn Mar Bancshares, Inc.
(A Development Stage Company) as of August 31, 2000 and December 31, 1999, and
the related statements of loss, changes in stockholders' equity, and cash flows
for the eight month and eleven month periods ended August 31, 2000 and the three
month period ended December 31, 1999. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Penn Mar Bancshares, Inc. (A
Development Stage Company) as of August 31, 2000 and December 31, 1999, and the
results of its operations and cash flows for the eight month and eleven month
periods ended August 31, 2000 and the three month period ended December 31,
2000, in conformity with generally accepted accounting principles.
/s/ Rowles & Company, LLP
-------------------------
Baltimore, Maryland
September 15, 2000
F-2
<PAGE>
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
August 31, 2000 December, 31, 1999
-------------------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Cash and cash equivalents $ 738,727 $848,639
Premises and equipment 3,210 -
Accrued interest - 1,654
Deposits 39,150 4,500
Deferred and prepaid income taxes 1,615 -
--------- --------
$ 782,702 $854,793
========= ========
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $ 44,391 $ 15,891
--------- --------
Stockholders' and subscribers' equity
Common stock, par value $.01 per share; authorized
9,000,000 shares, issued and outstanding 91,346 at
August 31, 2000 and 92,619 at December 31, 1999 913 926
Preferred stock, par value $.01 per share; authorized
1,000 shares, none issued and outstanding - -
Additional paid-in capital 965,606 925,262
Deficit accumulated during the development stage (228,208) (87,286)
--------- --------
738,311 838,902
--------- --------
$ 782,702 $854,793
========= ========
</TABLE>
F-3
<PAGE>
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Statements of Loss
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Eight Months Three Months Eleven Months
Ended Ended From Inception
August 31, December 31, to August 31,
2000 1999 2000
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and dividend revenue $ 29,537 $ 6,299 $ 35,836
--------- ------------ ------------
Expenses
Salary and benefits 38,983 - 38,983
Legal and consultant fees 116,423 88,440 204,863
Other operating 15,053 5,145 20,198
--------- ------------ ------------
170,459 93,585 264,044
--------- ------------ ------------
Net loss $(140,922) $ (87,286) $ (228,208)
========= ============ ============
Basic and diluted loss per share $ (1.54) $ (0.96) $ 2.50
========= ============ ============
</TABLE>
F-4
<PAGE>
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
Eleven-Month Period
From Inception to August 31, 2000
<TABLE>
<CAPTION>
Common Additional
Number of Common stock paid-in
shares stock subscribed capital Deficit
--------- --------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Issuance of stock 92,619 $ 926 $ - $ 925,262 $ -
Net loss - - - - (87,286)
---------- --------- --------------- ------------ -----------
Balance, December 31, 1999 92,619 926 - 925,262 (87,286)
Redemption of stock (45,000) (450) - (396,491) -
Issuance of stock 43,727 437 - 436,835 -
Net loss - - - - (140,922)
---------- --------- --------------- ------------ -----------
Balance, August 31, 2000 91,346 $ 913 $ - $ 965,606 $ (228,208)
========== ========= =============== ============ ===========
</TABLE>
F-5
<PAGE>
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Eight Months Three Months Eleven Months
Ended Ended From Inception
August 31, December 31, to August 31,
2000 1999 2000
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Interest and dividends received $ 31,191 $ 4,645 $ 35,836
Cash paid for operating expenses (142,657) (77,694) (220,351)
---------- --------- ------------
(111,466) (73,049) (184,515)
---------- --------- ------------
Cash flows from investing activities
Cash paid for premises and equipment (4,127) - (4,127)
Deposits (34,650) (4,500) (39,150)
---------- --------- ------------
(38,777) (4,500) (43,277)
---------- --------- ------------
Cash flows from financing activities
Common stock sold 437,272 926,188 1,363,460
Common stock redeemed (396,941) - (396,941)
---------- --------- ------------
40,331 926,188 966,519
---------- --------- ------------
Net increase in cash and cash equivalents (109,912) 848,639 738,727
Cash and cash equivalents at beginning of period 848,639 - -
---------- --------- ------------
Cash and cash equivalents at end of period $ 738,727 $ 848,639 $ 738,727
========== ========= ============
Reconciliation of net loss to
net cash provided by operating activities
Net loss $ (140,922) $ (87,286) $ (228,208)
Adjustments to reconcile net loss to net cash used
in operating activities
Deferred income taxes (1,615) - (1,615)
Depreciation and amortization 917 - 917
Decrease (increase)in accrued interest 1,654 (1,654) -
Increase in accounts payable and accrued expenses 28,500 15,891 44,391
---------- --------- ------------
$ (111,466) $ (73,049) $ (184,515)
========== ========= ============
</TABLE>
F-6
<PAGE>
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Notes to Financial Statements
1. Organization
Penn Mar Bancshares, Inc. (the Company) was incorporated under the laws
of the State of Maryland on October 7, 1999, primarily to hold all the
capital stock of a proposed new bank with the name Penn Mar Community Bank
(the Bank). The Bank is being organized as a Maryland state-chartered
commercial bank. The Bank will engage in general commercial banking
operations from its headquarters in Westminster, Maryland and anticipates
that it will open for business in the second quarter of 2001.
At the date of these financial statements, the Company has not begun
operations but has raised capital through an organizational stock offering.
2. Summary of Significant Accounting Policies
The accounting and reporting policies in the financial statements
conform to generally accepted accounting principals and to general
practices within the banking industry. Management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. These estimates and assumptions may affect the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from these estimates.
Cash equivalents
For purpose of reporting cash flows, cash and cash equivalents include
deposit accounts and funds invested overnight.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over estimated useful lives, using the straight-
line method.
Expenses of stock offering
Fees, commissions, and other direct expenses of the stock offering are
charged to the capital surplus account when incurred.
Income taxes
The Company incurred federal and state income taxes for the period ended
December 31, 1999. The deficit accumulated during the development stage is
generally available to offset the taxable income reported for the period
ended December 31, 1999 and future taxable income.
Expenses incurred during the period before business commences are
deferred for income tax purposes. These expenses will be deducted over
sixty months beginning with the month business commences.
F-7
<PAGE>
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Continued)
3. Lease Commitment
The Company leases real estate under two noncancellable operating
leases. The first lease, for land and a building to be built, commences January
1, 2001 and is for a term of seven years. This lease contains three five-year
options to renew. The initial annual rent of $157,500 is adjusted each year by
the increase in the consumer price index. The second lease, for land only,
commences on November 15, 2000, and is for a term of one year. This lease
contains an option to renew for four additional one-year terms followed by an
option to renew for one seven-year term.
Future minimum payments of noncancellable operating leases with terms
exceeding one year are as follows:
2001 $ 157,500
2002 157,500
2003 157,500
2004 157,500
2005 157,500
Remaining years 315,000
----------
Total $1,102,500
==========
4. Premises and Equipment
Premises and equipment follows:
2000 1999
------------------------------------------------------------------
Equipment cost $4,127 $ -
------ -----
4,127 -
Accumulated depreciation 917 -
------ -----
$3,210 $ -
====== =====
Depreciation expense was $917 for the eight months ended August 31, 2000.
The Company had contracted to purchase a parcel of land in Westminster
for $391,500 that will be the initial site of the bank. The Company
assigned this contract to a limited liability company comprised of five of
the organizing directors that will construct the building to be used by the
Bank.
F-8
<PAGE>
Penn Mar Bancshares, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Continued)
5. Initial Stock Offering
The Company intends to issue between 500,000 and 1,000,000 shares of
common stock at $10 per share. The organizers of the Company and other
entities controlled by the organizers purchased 91,346 shares of common
stock in the organizational offering which included warrants to purchase
one share of common stock for each share that they purchased in the
organizational offering. Subject to regulatory approval, the warrants will
be exercisable at a price of $10 per share on the later of the date that
Penn Mar Community Bank opens for business or one year from the termination
date of the initial public offering and are exercisable in whole or in part
until that date which is ten years from the date of the Prospectus.
F-9
<PAGE>
EXHIBIT A
---------
SUBSCRIPTION AGREEMENT
This Subscription Agreement is entered into in connection with the offer
and sale (the "Offering") of up to 1,000,000 shares (the "Shares") of Common
Stock, par value $0.01 per share, of Penn Mar Bancshares, Inc., a corporation
incorporated under the laws of the State of Maryland (the "Company"), for a
purchase price of $10.00 per share.
WITNESSETH:
1. Purchase of Shares. The undersigned agrees to purchase the number of
------------------
Shares set forth below and tenders the amount required to purchase such number
of Shares by check, bank draft or money order drawn to the order of "Atlantic
Central Bankers Bank, Escrow Agent for Penn Mar Bancshares, Inc."
2. Acknowledgments. The undersigned acknowledges and agrees that:
---------------
(a) The Company has established a minimum subscription of 1,000 shares
($10,000).
(b) The undersigned has received a copy of the Company's Prospectus dated
_______________ (the "Prospectus"). By executing this Subscription Agreement,
the undersigned acknowledges and agrees to all of the terms and conditions of
the Offering as described in the Prospectus. This Subscription Agreement is not
binding on the Company until accepted by the Company and until the Company
authorizes the release of offering proceeds by the Escrow Agent. The Company
reserves the right to accept or reject, in whole or in part and at its sole
discretion, any Subscription Agreement. The Company shall notify the subscriber
by mail of its acceptance or rejection, in whole or in part, of this
Subscription Agreement.
(c) Subscriptions are binding on subscribers and may not be revoked by
subscribers except with the consent of the Company.
(d) The Company reserves the right to cancel accepted Subscription
Agreements at any time and for any reason until the satisfaction of the
conditions of the Offering.
(e) The Company may, in its sole discretion, allocate shares among
subscribers in the event of an oversubscription for the Shares.
3. Representations and Warranties. The undersigned represents and warrants
------------------------------
that he/she:
(a) Is aware that no federal or state agency has made any finding or
determination as to the fairness for public investment in, or any recommendation
or endorsement of, the Shares.
(b) Understands that the Company has no financial or operating history and
that the Shares, as an investment, involve a high degree of risk, as described
in the Prospectus.
A-1
<PAGE>
(c) Is aware that (i) there is no market for the Shares and that there can
be no assurance that a market will develop and (ii) it may not be possible to
liquidate his/her investment in the Shares readily.
(d) Has adequate means of providing for his/her current needs and possible
personal contingencies and has no need for liquidity in this investment.
(e) Has carefully read the entire Prospectus, particularly the "Risk
Factors" section therein.
(f) Is a resident of Maryland, Pennsylvania, Florida or Virginia.
THE COMMON STOCK DOES NOT REPRESENT A DEPOSIT ACCOUNT OR OTHER OBLIGATION
OF OUR PROPOSED BANKING SUBSIDIARY. THE COMMON STOCK IS NOT AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
The Shares purchased by the undersigned shall be registered as specified
below. If Shares are to be issued in more than one name, please specify whether
ownership is to be as tenants in common, joint tenants with right of
survivorship, community property, etc. If Shares are to be held in joint
ownership, all joint owners should sign this Subscription Agreement. If Shares
are to be issued in the name of one person for the benefit of another, please
indicate whether registration should be as trustee or custodian for such other
person.
A-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on the date set forth below.
Date:__________________ ____________________________________(SEAL)
Signature of Subscriber
Number of Shares Subscribed For: _________________________________
Total Subscription Price:
$________________________________
($10 Per Share)
Print Name(s) in which Shares _________________________________
Are to be Registered: _________________________________
Address of Subscriber: _________________________________
_________________________________
Social Security or
Taxpayer Identification Number: _________________________________
Telephone Number with Area Code: _________________________________
ACCEPTANCE
The foregoing subscription is hereby acknowledged and accepted as to
_____________ shares.
Date: __________________
Penn Mar Bancshares, Inc.
By:_________________________________
A-3
<PAGE>
No one has been authorized to give any information or to make any
representations in connection with this offering, other than those contained in
this Prospectus. You may not assume that we have authorized any other
information or representations. The delivery of this Prospectus and the sale of
our common stock does not mean that there has been no change in our affairs
since the date of this Prospectus. This Prospectus is not an offer to sell or a
solicitation of an offer to buy securities in any state where the offer or sale
is not permitted.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary 1
Risk Factors 3
Penn Mar Bancshares, Inc. and
Penn Mar Community Bank 7
The Offering 8
Use of Proceeds 11
Capitalization 12
Dividend Policy 12
Proposed Business of Penn Mar Bancshares, Inc. 13
Proposed Business of Penn Mar Community Bank 13
Management's Plan of Operation 19
Supervision and Regulation 20
Management 29
Securities Ownership of Certain Beneficial Owners
and Management 34
Certain Transactions 35
Description of Capital Stock 37
Shares Eligible for Future Sale 41
Legal Matters 41
Experts 41
How to Find Additional Information 42
Index to Financial Statements F-1
Exhibit A - Subscription Agreement A-1
</TABLE>
Until _____________________________, 2000, all dealers that effect transactions
in these securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers'
obligations to deliver a Prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
Penn Mar Bancshares, Inc.
[LOGO]
Common Stock
$10.00 Per Share
500,000 Shares (Minimum)
1,000,000 Shares (Maximum)
______________________
PROSPECTUS
______________________
[Date]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article Seventh of the Company's Articles of Incorporation provides that
Penn Mar Bancshares, Inc. shall, to the full extent permitted by the Maryland
General Corporation Law, indemnify a director or officer of Penn Mar Bancshares,
Inc. who is or was a party to any proceeding by reason of the fact that he is or
was a director or officer of Penn Mar Bancshares, Inc.
The Maryland General Corporation Law provides, in pertinent part, as
follows:
2-418 Indemnification of directors, officers, employees and agents.
(a) Definitions. -- In this section the following words have the meanings
indicated.
(1) "Director" means any person who is or was a director of a
corporation and any person who, while a director of a corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign predecessor entity
of a corporation in a merger, consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the office of
director in the corporation; and
(ii) When used with respect to a person other than a director
as contemplated in subsection (j), the elective or appointive office in the
corporation held by the officer, or the employment or agency relationship
undertaken by the employee or agent in behalf of the corporation.
(iii) "Official capacity" does not include service for any
other foreign or domestic corporation or any partnership, joint venture, trust,
other enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative.
II-1
<PAGE>
(b) (1) Permitted indemnification of director. -- A corporation may
indemnify any director made a party to any proceeding by reason of service in
that capacity unless it is established that:
(i) The act or omission of the director was material to the
matter giving rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal
benefit in money, property, or services; or
(iii) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful.
(2) (i) Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of
the corporation, indemnification may not be made in respect of any proceeding in
which the director shall have been adjudged to be liable to the corporation.
(3) (i) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet the
requisite standard of conduct set forth in this subsection.
(ii) The termination of any proceeding by conviction, or a plea
of nolo contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttal presumption that the director did not meet that
standard of conduct.
(4) A corporation may not indemnify a director or advance expenses
under this Section for a proceeding brought by that director against the
corporation, except:
(i) For a proceeding brought to enforce indemnification under
this section; or
(ii) If the charter or bylaws of the corporation, a resolution
of the board of directors of the corporation, or an agreement approved by the
board of directions of the corporation to which the corporation is a party
expressly provide otherwise.
(c) No indemnification of director liable for improper personal benefit.
-- A director may not be indemnified under subsection (b) of this section in
respect of any proceeding charging improper personal benefit to the director,
whether or not involving action in the director's official
II-2
<PAGE>
capacity, in which the director was adjudged to be liable on the basis that
personal benefit was improperly received.
(d) Required indemnification against expenses incurred in successful
defense. -- Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise,
in the defense of any proceeding referred to in subsection (b) of this section
shall be indemnified against reasonable expenses incurred by the director in
connection with the proceeding.
(2) A court of appropriate jurisdiction upon application of a
director and such notice as the court shall require, may order indemnification
in the following circumstances:
(i) If it determines a director is entitled to reimbursement
under paragraph (1) of this subsection, the court shall order indemnification,
in which case the director shall be entitled to recover the expenses of securing
such reimbursement; or
(ii) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances, whether
or not the director has met the standards of conduct set forth in subsection (b)
of this section or has been adjudged liable under the circumstances described in
subsection (c) of this section, the court may order such indemnification as the
court shall deem proper. However, indemnification with respect to any
proceeding by or in the right of the corporation or in which liability shall
have been adjudged in the circumstances described in subsection (c) shall be
limited to expenses.
(3) A court of appropriate jurisdiction may be the same court in
which the proceeding involving the director's liability took place.
(e) (1) Determination that indemnification is proper. -- Indemnification
under subsection (b) of this section may not be made by the corporation unless
authorized for a specific proceeding after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in subsection (b) of this
section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the proceeding, or, if such
a quorum cannot be obtained, then by a majority vote of a committee of the board
consisting solely of two or more directors not, at the time, parties to such
proceeding and who were duly designated to act in the matter by a majority vote
of the full board in which the designated directors who are parties may
participate;
(ii) By special legal counsel selected by the board of
directors or a committee of the board by vote as set forth in subparagraph (i)
of this paragraph, or, if the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be
II-3
<PAGE>
established, by a majority vote of the full board in which directors who are
parties may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified in subparagraph (ii) of paragraph (2) of this
subsection for selection of such counsel.
(4) Shares held by directors who are parties to the proceeding may
not be voted on the subject matter under this subsection.
(f) (1) Payment of expenses in advance of final disposition of action.
--Reasonable expenses incurred by a director who is a party to a proceeding may
be paid or reimbursed by the corporation in advance of the final disposition of
the proceeding upon receipt by the corporation of:
(i) A written affirmation by the director of the director's
good faith belief that the standard of conduct necessary for indemnification by
the corporation as authorized in this section has been met; and
(ii) A written undertaking by or on behalf of the director to
repay the amount if it shall ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph (ii) of paragraph (1)
of this subsection shall be an unlimited general obligation of the director but
need not be secured and may be accepted without reference to financial ability
to make the repayment.
(3) Payments under this subsection shall be made as provided by the
charter, bylaws or contract or as specified in subsection (e) of this section.
(g) Validity of indemnification provision.--The indemnification and
advancement of expenses provided or authorized by this section may not be deemed
exclusive of any other rights, by indemnification or otherwise, to which a
director may be entitled under the charter, the bylaws, a resolution of
stockholders or directors, an agreement or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(h) Reimbursement of director's expenses incurred while appearing as
witness.--This section does not limit the corporation's power to pay or
reimburse expenses incurred by a director in connection with an appearance as a
witness in a proceeding at a time when the director has not been made a named
defendant or respondent in the proceeding.
(i) Director's service to employee benefit plan.--For purposes of this
section:
II-4
<PAGE>
(1) The corporation shall be deemed to have requested a director to
serve an employee benefit plan where the performance of the director's duties to
the corporation also imposes duties on, or otherwise involves services by, the
director to the plan or participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law shall be deemed fines; and
(3) Action taken or omitted by the director with respect to an
employee benefit plan in the performance of the director's duties for a purpose
reasonably believed by the director to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
(j) Officer, employee or agent. -- Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and to the
extent provided in subsection (d) of this section for a director and shall be
entitled, to the same extent as a director, to seek indemnification pursuant to
the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that it may indemnify
directors under this section; and
(3) A corporation, in addition, may indemnify and advance expenses
to an officer, employee, or agent who is not a director to such further extent,
consistent with law, as may be provided by its charter, bylaws, general or
specific action of its board of directors or contract.
(k) (1) Insurance or similar protection. -- A corporation may purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the corporation, or who, while a director,
officer, employee, or agent of the corporation, is or was serving at the request
of the corporation as a director, officer, partner, trustee, employee, or agent
of another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan against any liability asserted
against and incurred by such person in any such capacity or arising out of such
person's position, whether or not the corporation would have the power to
indemnify against liability under the provisions of this section.
(2) A corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, not inconsistent with this section.
(3) The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
(l) Report of indemnification to stockholders.--Any indemnification
of, or advance of expenses to, a director in accordance with this section, if
arising out of a proceeding by or in the right of the corporation, shall be
reported in writing to the stockholders with the notice of the next
stockholders' meeting or prior to the meeting.
II-5
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Company in connection with the
offering described in this Registration Statement (other than underwriting
discounts and commissions) are as follows:
SEC Registration Fee $ 2,640
*Blue Sky Filing Fees and Expenses
(Including counsel fees) $ 4,438
*Legal Fees
*Broker-dealer Fees and Expenses
*Printing and Engraving
(Including Edgar filing expenses)
*Accounting Fees and Expenses
*Other Expenses (including $1,000 escrow
agent fee)
*TOTAL $250,000
*To be provided by amendment
Item 26. Recent Sales of Unregistered Securities.
From October 20, 1999 to June 30, 2000, Penn Mar Bancshares, Inc. sold an
aggregate of 136,346 shares of its common stock to the organizers of Penn Mar
Bancshares, Inc. and Penn Mar Community Bank and certain other accredited
investors. The price per share was $10.00 for an aggregate purchase price of
$1,363,460. Between March 28, 2000 and June 14, 2000, Penn Mar Bancshares, Inc.
redeemed 45,000 shares of common stock for an aggregate redemption price of
$396,941. Therefore, the gross proceeds from the organizational offering were
$966,519. There were no underwriting discounts or commissions paid with respect
to these transactions. All sales were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder.
Item 27. Exhibits.
3.1 Articles of Incorporation of Penn Mar Bancshares, Inc.
3.2 Bylaws of Penn Mar Bancshares, Inc.
4.1 Rights of Holders of Common Stock (as contained in the Articles of
Incorporation included herein as Exhibit 3.1)
4.2 Form of Common Stock Certificate
4.3 Form of Warrant
*5.1 Opinion of Ober, Kaler, Grimes & Shriver, a Professional Corporation, as to
legality of Common Stock
10.1 Form of Amended and Restated Employment Agreement between Penn Mar
Bancshares, Inc. and Kevin P. Huffman
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<PAGE>
10.2 Form of Employment Agreement between Penn Mar Community Bank and Kevin P.
Huffman
10.3 Form of Employment Agreement between Penn Mar Bancshares, Inc. and Daniel
E. Dutterer
10.4 Form of Employment Agreement between Penn Mar Community Bank and Daniel E.
Dutterer
10.5 Office Lease Agreement dated November 8, 2000 between Penn Mar Bancshares,
Inc. and 309 Woodward, LLC
10.6 Office Lease Agreement dated November 28, 2000 between Penn Mar
Bancshares, Inc. and Riverside Property Development, LLC
*23.1 Consent of Ober, Kaler, Grimes & Shriver, a Professional Corporation
(contained in their opinion included herein as Exhibit 5.1)
23.2 Consent of Rowles & Company
24 Power of Attorney (contained herein on page II-8)
27 Financial Data Schedules
99.1 Form of Subscription Agreement (contained herein on page A-1)
99.2 Form of Escrow Agreement between Penn Mar Bancshares, Inc. and Atlantic
Central Bankers Bank
* To be filed by amendment.
Item 28. Undertakings.
The Registrant hereby undertakes that it will:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together represent a
fundamental change in the information in the registration statement; and (iii)
include any additional or changed material information on the plan of
distribution.
(2) for determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
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<PAGE>
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Baltimore, Maryland on December 13, 2000.
Penn Mar Bancshares, Inc.
By: /s/ J. Geoffrey Sturgill, Jr.
------------------------------
J. Geoffrey Sturgill, Jr.
President and Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints J. Geoffrey Sturgill, Jr. as his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to the Registration Statement on Form
SB-2 of Penn Mar Bancshares, Inc., and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto each of said attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
necessary or advisable to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitutes,
may lawfully do or cause to be done by virtue thereof. This power of attorney
may be executed in counterparts.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
Name Position Date
---- -------- ----
/s/ J. Geoffrey Sturgill, Jr. Director, President and December 13, 2000
----------------------------- Chairman (Principal
J. Geoffrey Sturgill, Jr. Executive Officer)
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<PAGE>
Name Position Date
---- -------- ----
/s/ Kevin P. Huffman Director, Vice President December 13, 2000
-------------------- and Secretary
Kevin P. Huffman
/s/ Richard W. Geisendaffer Director December 13, 2000
---------------------------
Richard W. Geisendaffer
/s/ Ronald Krablin, M.D. Director December 13, 2000
------------------------
Ronald Krablin, M.D.
/s/ Vishnampet S. Jayanthinathan Director December 13, 2000
--------------------------------
Vishnampet S. Jayanthinathan
/s/ Jeffrey I. Hurwitz Director December 13, 2000
-----------------------
Jeffrey I. Hurwitz
/s/ Daniel E. Dutterer Director and Treasurer December 13, 2000
---------------------- (Principal Accounting and
Daniel E. Dutterer Financial Officer)
/s/ Kevin E. Dayhoff Director December 13, 2000
--------------------
Kevin E. Dayhoff
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<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation of Penn Mar Bancshares, Inc.
3.2 Bylaws of Penn Mar Bancshares, Inc.
4.1 Rights of Holders of Common Stock (as contained in the Articles of
Incorporation included herein as Exhibit 3.1)
4.2 Form of Common Stock Certificate
4.3 Form of Warrant
*5.1 Opinion of Ober, Kaler, Grimes & Shriver, a Professional Corporation, as
to legality of Common Stock
10.1 Form of Amended and Restated Employment Agreement between Penn Mar
Bancshares, Inc. and Kevin P. Huffman
10.2 Form of Employment Agreement between Penn Mar Community Bank and Kevin P.
Huffman
10.3 Form of Employment Agreement between Penn Mar Bancshares, Inc. and Daniel
E. Dutterer
10.4 Form of Employment Agreement between Penn Mar Community Bank and Daniel E.
Dutterer
10.5 Office Lease Agreement dated November 8, 2000 between Penn Mar Bancshares,
Inc. and 309 Woodward, LLC
10.6 Office Lease Agreement dated November 28, 2000 between Penn Mar
Bancshares, Inc. and Riverside Property Development, LLC
*23.1 Consent of Ober, Kaler, Grimes & Shriver, a Professional Corporation
(contained in their opinion included herein as Exhibit 5.1)
23.2 Consent of Rowles & Company
24 Power of Attorney (contained herein on page II-8)
27 Financial Data Schedule
99.1 Form of Subscription Agreement (contained herein on page A-1)
99.2 Form of Escrow Agreement between Penn Mar Bancshares, Inc. and Atlantic
Central Bankers Bank
*To be filed by amendment.
