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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 2000
REGISTRATION NO. 333-34254
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LAFAYETTE COMMUNITY BANCORP
(NAME OF SMALL BUSINESS ISSUER AS IN ITS CHARTER)
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INDIANA 6021 35-2082918
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employee
incorporation or organization) Classification Code Number) Identification Number)
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2 NORTH 4TH STREET
LAFAYETTE, INDIANA 47901
(765) 420-8111
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF BUSINESS)
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DAVID R. ZIMMERMAN, PRESIDENT
LAFAYETTE COMMUNITY BANCORP
2 NORTH 4TH STREET
LAFAYETTE, INDIANA 47901
(765) 420-8111
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
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TIMOTHY M. HARDEN, ESQ. M. PATRICIA OLIVER, ESQ.
JOHN W. TANSELLE, ESQ. DANIEL G. BERICK, ESQ.
Krieg DeVault Alexander & Capehart, LLP Squire, Sanders & Dempsey L.L.P.
2800 One Indiana Square 4900 Key Tower
Indianapolis, Indiana 46204-2017 127 Public Square
(317) 636-4341 Cleveland, Ohio 44114-1304
(216) 479-8500
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
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TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SECURITY PRICE REGISTRATION FEE
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Common Shares, without par value 1,200,000 $10.00 12,000,000 $3,168
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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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INITIAL PUBLIC OFFERING
PROSPECTUS
LAFAYETTE COMMUNITY BANCORP
LAFAYETTE COMMUNITY BANCORP
900,000 TO 1,200,000 COMMON SHARES TO THE PUBLIC AT
$10.00 PER SHARE
We are offering for sale to the public with this prospectus a minimum of
900,000 and a maximum of 1,200,000 common shares at a price of $10.00 per share
to fund the start-up of a new community bank to be named Lafayette Community
Bank. Lafayette Community Bancorp will be the holding company and sole
shareholder of Lafayette Community Bank. The minimum subscription is 500 shares
or $5,000. This is our initial public offering and no market currently exists
for our shares. We intend to apply to have our common shares listed on the OTC
bulletin board under the symbol "LCB".
Keefe, Bruyette & Woods, Inc. has agreed to serve as our sales agent and
use its best efforts to solicit subscriptions for our shares. The offering is
scheduled to end on , 2000, but we may extend the offering to
, 2000, at the latest. All of the money which we receive will be
placed with our escrow agent, The Farmers & Merchants Bank of Boswell, Indiana,
47921, which will hold the money until we sell at least 900,000 shares. If we do
not succeed in selling at least 900,000 shares before the end of the offering
period and the extension period, we will promptly return all funds received to
the subscribers, with interest.
TERMS OF THE OFFERING
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MINIMUM OFFERING MAXIMUM OFFERING
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PER SHARE TOTAL PER SHARE TOTAL
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Public offering price........ $10.00 $9,000,000 $10.00 $12,000,000
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Sales agent commissions...... 0.54 490,000 0.58 700,000
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Offering expenses............ 0.35 311,000(1) 0.26 311,000(1)
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Net Proceeds................. 9.11 8,199,000 9.16 10,989,000
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(1) Amount includes the following: SEC, Nasdaq and NASD registration and filing
fees, printing and mailing costs, fees and expenses of counsel, accounting
and related expenses, Blue Sky fees and expenses and other miscellaneous
expenses associated with the offering.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE .
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THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
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KEEFE, BRUYETTE & WOODS, INC.
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This prospectus is dated , 2000.
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TABLE OF CONTENTS
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PAGE
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Questions and Answers....................................... 3
Prospectus Summary.......................................... 4
Risk Factors................................................ 7
Forward-Looking Statements.................................. 11
Use of Proceeds............................................. 11
Plan of Distribution........................................ 12
Business.................................................... 16
Description of Property..................................... 21
Plan of Operation........................................... 22
Supervision and Regulation.................................. 23
Management.................................................. 31
Principal Shareholders...................................... 37
Description of Securities................................... 37
Sales Agent................................................. 42
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................ 42
Shares Eligible for Future Sale............................. 42
Legal Matters............................................... 43
Experts..................................................... 43
Where You Can Find More Information......................... 43
Financial Statements........................................ F-1
APPENDIX A.................................................. A-1
APPENDIX B.................................................. B-1
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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' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
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QUESTIONS AND ANSWERS
Q. WHY IS LAFAYETTE COMMUNITY BANCORP OFFERING THESE SECURITIES AND WHY HAS IT
CHOSEN THIS TIME FOR THE OFFERING?
A. We are offering these shares to fund the start-up of a community bank with
banking operations initially located in Tippecanoe County, Indiana. We
believe that an opportunity exists in this market because of recent
consolidation in the banking industry.
Q. ONCE I HAVE READ THIS PROSPECTUS AND DETERMINED THAT I WOULD LIKE TO BUY
SOME SHARES, HOW DO I SUBSCRIBE?
A. You must complete and return the Stock Order Form attached as Appendix A to
this prospectus and enclose a check or money order payable to "The Farmers &
Merchants Bank, Trust No. 40-4410-2" for your entire subscription in the
enclosed reply envelope.
Q. WHEN WILL THE OFFERING EXPIRE AND HOW SOON SHOULD I SEND IN MY SUBSCRIPTION?
A. Send in your subscription as soon as possible. This offering expires at 5:00
p.m. Eastern Time on , 2000 unless we decide to extend it to
, 2000. All subscriptions with payments must be received by the
expiration date of the offering.
Q. HOW MANY SHARES MAY I PURCHASE?
A. The minimum purchase is 500 shares and the maximum purchase is 50,000
shares. However, we reserve the right to reject all or any part of any
subscription, including subscriptions for a greater or lesser amount.
Q. CAN I PURCHASE THROUGH AN IRA OR OTHER QUALIFIED RETIREMENT PLAN?
A. Yes. The administrator or trustee will need to fill out the appropriate
forms and return them on a timely basis.
Q. IS THIS OFFERING REGISTERED IN ALL 50 STATES?
A. No. At this time we plan to register in Indiana, Ohio, Michigan, Idaho,
Illinois, Kentucky, Maryland, Oklahoma and Florida. We may register in
additional states depending on interest in the offering. If you are not a
resident of any of these states, please call the Keefe, Bruyette & Woods,
Inc. Stock Information Center at (877) 298-6520 before subscribing.
Q. IF MY SUBSCRIPTION IS ACCEPTED, WHEN WILL I RECEIVE MY SHARES?
A. We will mail you share certificates promptly after the closing of the
offering.
Q. CAN I GET MY MONEY BACK AFTER I HAVE MAILED MY SUBSCRIPTION?
A. No, unless we do not close the offering, in which case we will refund your
full subscription.
Q. WHEN WILL I RECEIVE DIVIDENDS?
A. You will not receive any dividends in the foreseeable future. We plan to
reinvest our earnings in our business.
Q. WHO CAN I CALL IF I HAVE FURTHER QUESTIONS?
A. For answers to any other questions, we encourage you to read this
prospectus. If you still have questions, please call the Keefe, Bruyette &
Woods, Inc. Stock Information Center at (877) 298-6520 between 8:30 a.m. and
5:30 p.m., Eastern time, Monday through Friday.
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PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this
prospectus regarding the significant aspects of the proposed transaction.
Because this is a summary, it may not contain all of the information you should
consider before investing in our common shares. You should carefully read this
entire prospectus.
THE COMPANIES
LAFAYETTE COMMUNITY BANCORP AND LAFAYETTE COMMUNITY BANK
We incorporated Lafayette Community Bancorp in January of 1999 to serve as
the holding company for Lafayette Community Bank, a new bank to be chartered by
the State of Indiana. Our principal executive office will be located at 2 North
4th Street, Lafayette, Indiana 47901, (765) 420-8111. Lafayette Community Bank
will focus on the local community, emphasizing personal service to individuals
and businesses in the Tippecanoe County, Indiana market, primarily consisting of
the communities of Lafayette and West Lafayette. We have filed for regulatory
approval to open Lafayette Community Bank with the Indiana Department of
Financial Institutions, and for deposit insurance with the FDIC. We have also
filed for approval of the Federal Reserve Board to become a bank holding company
and acquire all of the stock of Lafayette Community Bank. We expect to receive
all final regulatory approvals, and to open for business, in the second quarter
of 2000. However, we cannot assume when, if ever, such approvals will be
received or what, if any, conditions such approvals may contain. See "Risk
Factors" beginning on page .
OUR MARKET OPPORTUNITIES
We believe an opportunity exists as a result of the consolidation in the
banking industry. We believe this consolidation has created an attractive market
for community banks. Larger financial institutions do not generally provide the
personalized service expected or demanded by many small to medium-sized
businesses and their principals. Members of our executive management team have
had established careers in the financial services industry and recognize this
market opportunity. We have selected Tippecanoe County, Indiana for our initial
activities because of our management team's extensive experience in this market,
local customer relationships, and what we believe to be the area's favorable
economic and demographic environment.
OUR ORGANIZERS AND MANAGEMENT TEAM
Our organizers consist of eight businesspeople who reside and work in
Tippecanoe County, Indiana. As a group, they have significant banking and
business experience, a high level of community involvement and many close
personal ties to our planned market area. The organizers have already invested a
total of $10,000 by purchasing 1,000 shares, at $10.00 per share, prior to this
offering. The organizers are not expected to invest additional funds in
Lafayette Community Bancorp prior to this offering. If we do not successfully
complete this offering, our organizers will lose some, if not all, of their
initial investment. We expect our organizers, directors and advisory board
members will purchase not less than approximately 210,000 shares in this
offering.
Our executive management team includes individuals who have significant
experience serving our target markets. David R. Zimmerman, the President and
Chief Executive Officer of Lafayette Community Bancorp, has over seventeen years
of banking experience in the Lafayette market. Prior to founding Lafayette
Community Bancorp, Mr. Zimmerman served as Vice-President -- Commercial Lending
of Lafayette Bank & Trust, a commercial bank in Lafayette, Indiana with assets
in excess of $650 million. Michael T. Mootz, the Senior Vice-President,
Controller, and J. Michael Pechin, the Senior Vice-President, Senior Loan
Officer, respectively, of Lafayette Community Bank have over 23 combined years
of banking experience in the financial institutions industry. Prior to joining
Lafayette Community Bank, Mr. Mootz served as Assistant Vice-President,
Controller of Peoples Bank & Trust of Indianapolis, Indiana. Mr. Pechin served
as Vice-President of Lafayette Bank & Trust and Company of Lafayette, Indiana.
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OUR BANKING PHILOSOPHY
Our retail banking strategy provides for a wide range of basic banking
products and services that are reasonably priced and easily understood by
customers, with an emphasis on technology and electronic self-service features.
Our lending strategy is focused on small to medium-sized businesses, with 70% of
the loan portfolio projected to be in commercial loans.
OUR ADVANTAGES
We believe that we are well positioned to capitalize on the market
opportunity created by the consolidation in the banking industry for the
following reasons:
- Experienced Management Team. Our executive management team has
significant banking experience which has allowed them to develop valuable
customer relationships within our target markets.
- Local Decision Making. Our management structure is organized to retain
local decision-making authority so that our officers will be able to
provide our customers with expedited loan decisions.
- Personalized Service. Our staff is committed to providing the type of
personalized service not generally available at larger financial
institutions.
- Competitive Technology. Our decision to have third parties provide us
with competitive technology and ongoing upgrades is expected to provide
us with cost efficiencies in addition to improving customer service.
Moreover, our ability to invest in the latest technologies without having
to incur the additional financial and operational costs associated with
converting and upgrading existing systems may provide us a technological
advantage over our established competitors. While many of our competitors
have substantially greater resources to invest in technology, which may
permit them to operate at a lower cost than us, we believe that we may
have an initial advantage over our competitors by being able to invest in
the latest technologies without having to incur the additional
operational and financial costs associated with converting and upgrading
existing systems.
- Customized Products and Services. Our close, personalized service will
afford us the opportunity and flexibility to provide customized and
individualized products and services to our customers.
OUR BUSINESS STRATEGY
We will implement our strategy by:
- targeting small and medium-sized business customers who demand high
levels of personalized attention and customer service;
- staffing banking centers with community-minded and responsive management
teams that will have significant local decision-making authority;
- enhancing private banking relationships by offering a broad spectrum of
products and services; and
- utilizing technology and self-service features.
TERMS OF THE OFFERING
Common shares offered...... 900,000 to 1,200,000.
Common shares outstanding
after the offering......... 901,000 to 1,201,000. This amount includes the
common shares offered with this prospectus and 100
shares purchased by David R. Zimmerman prior to
this offering and the subsequent 10 for 1 stock
split with respect to those 100 shares.
Price per share............ $10.00
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Use of net proceeds after
the payment of sales
commissions and offering
expenses................. The offering is expected to generate $8.20 million
to $10.99 million, depending on the size of the
offering. A minimum of $7.50 million will be used
to provide initial working capital for Lafayette
Community Bank, which will be placed in short-term
investments and available for loans to Lafayette
Community Bank customers. The remaining amount will
be used as working capital for Lafayette Community
Bancorp.
Expiration date............ , 2000, but may be extended an
additional 45 days to , 2000 at
Lafayette Community Bancorp's discretion.
Purchase limitations....... The minimum purchase is 500 shares and the maximum
purchase is 50,000 shares. However, we reserve the
right to reject all or any part of any
subscription. In determining which subscriptions to
accept, we may take into account any factors we
believe may be relevant, including the order in
which subscriptions are received, a subscriber's
potential to do business with Lafayette Community
Bank and factors that may cause an aggregation of
ownership under federal banking regulations.
Escrow arrangement......... Funds received from subscribers in connection with
the offering will be placed with Lafayette
Community Bancorp's escrow agent, The Farmers &
Merchants Bank of Boswell, Indiana, which will hold
the funds until at least 900,000 shares are sold.
If at least 900,000 shares are not sold before the
end of the offering period and the extension
period, Lafayette Community Bancorp will return all
funds received to the subscribers, with interest.
Further information........ Please call the Keefe, Bruyette and Woods, Inc.
Stock Information Center at (877) 298-6520.
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RISK FACTORS
An investment in our common shares involves a significant degree of risk
and you should not invest in the offering unless you can afford to lose some or
even all of your investment. You should consider these risk factors together
with all the other information included in this prospectus before you decide to
purchase our common shares.
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR FUTURE
PERFORMANCE.
We incorporated Lafayette Community Bancorp in January, 1999 and have not
yet engaged in any banking operations. Because Lafayette Community Bank has not
yet opened, we do not have historical financial data and similar information
which would be available for a financial institution that has a history of
operations. Our prospects must be evaluated in light of the risks, expenses and
difficulties frequently encountered by companies in their early stages of
development. We may not successfully address the following:
- building our customer base;
- developing and retaining customer loyalty;
- responding to competitive developments;
- attracting, retaining and motivating qualified management and employees;
- upgrading our technologies, products and services;
- penetrating our identified markets; and
- providing quality and personal service.
BECAUSE WE WILL INCUR ORDINARY START-UP COSTS THAT ARE NORMALLY ASSOCIATED WITH
THE FORMATION OF A BANK, WE EXPECT LOSSES IN OUR FIRST TWENTY-FOUR TO THIRTY-SIX
MONTHS OF OPERATIONS.
As a result of start-up expenditures and the time it will take to develop a
deposit base and loan portfolio, we expect to operate at a loss during our
start-up period. We do not expect to be profitable for at least the first
twenty-four to thirty-six months of operations. We anticipate that cumulative
losses during the period from inception through December 1, 2001 will exceed
$1.3 million and could be higher. We cannot guarantee that we will ever operate
profitability. If we do not reach profitability and recover our accumulated
operating losses, you will likely suffer a significant decline in, or total loss
of, the value of your common shares. Shareholders will not be liable for any
losses, however, beyond their investment.
WE WILL BE COMPETING WITH MANY LARGER FINANCIAL INSTITUTIONS THAT HAVE FAR
GREATER FINANCIAL RESOURCES THAN WE HAVE, WHICH COULD PREVENT US FROM ATTRACTING
CUSTOMERS AND MAY CAUSE US TO HAVE TO PAY HIGHER INTEREST RATES TO ATTRACT AND
MAINTAIN CUSTOMERS.
We will encounter strong competition from existing banks and other types of
financial institutions operating in the Tippecanoe County area and elsewhere. We
will compete with other bank holding companies, state and national commercial
banks, savings and loan associations, consumer finance companies, credit unions,
securities brokerages, insurance companies, mortgage banking companies, money
market mutual funds, asset-based non-bank lenders and other financial
institutions. Some of these competitors have been in business for a long time
and have already established their customer base and name recognition. Most are
larger than we will be and have greater financial and personnel resources than
we will have. Some are large super-regional and regional banks, like Bank One,
Fifth Third Bank, Huntington National Bank, National City Bank of Indiana and
Union Planters Bank. These institutions offer services, such as extensive and
established branch networks and trust services, that we either do not expect to
provide or will not provide for some time. Due to this competition, we may have
to pay higher rates of interest to attract deposits. In addition, competitors
that are not depository institutions are generally not subject to the extensive
regulations that will apply to our bank.
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BECAUSE WE DO NOT HAVE PROVEN HISTORY OF SUCCESS, OUR ACCOMPLISHMENTS LARGELY
DEPENDS UPON THE SKILL AND EXPERIENCE OF OUR SENIOR MANAGEMENT TEAM.
The success of our business will depend upon the services of David R.
Zimmerman, our President and Chief Executive Officer, Michael T. Mootz, Senior
Vice-President, Controller and J. Michael Pechin, Senior Vice-President, Senior
Loan Officer. Our business would suffer if we lost the services of any of these
individuals. We have entered into a three year employment agreement with Mr.
Zimmerman, with an automatic one year renewal. Neither Mr. Mootz nor Mr. Pechin
has an employment agreement with us. We have key man life insurance in the
amount of $1 million with respect to Mr. Zimmerman but not on any of our other
officers. Our future success also depends on our ability to identify, attract
and retain qualified senior officers and other employees in our identified
market.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of Lafayette Community Bank's capital. The legal lending limit is 15% of
Lafayette Community Bank's capital and surplus. At a minimum, we expect that our
initial lending limit will be approximately $1.10 million immediately following
the offering. Until Lafayette Community Bank is profitable, our capital level
will decline and therefore so will our lending limit. Our lending limit will be
significantly less than the limit for most of our competitors and may affect our
ability to seek relationships with larger businesses in our market area. We
intend to accommodate larger loans by selling participations in those loans to
other financial institutions. We cannot guarantee, however, that we will succeed
in attracting or maintaining customers seeking larger loans or that we will be
able to engage in participation of these loans on favorable terms.
OUR BOARD AND MANAGEMENT WILL HAVE BROAD DISCRETION IN USING THE NET PROCEEDS OF
THE OFFERING AND MAY NOT ALLOCATE ALL OF THESE PROCEEDS IN THE MOST PROFITABLE
MANNER.
Upon completion of the offering and after payment of the sales agent's
commission, we intend to pay the estimated offering expenses of approximately
$311,000 and start-up expenses of approximately $350,000. We expect to
contribute a minimum of $7.50 million to the capital of Lafayette Community Bank
to support the growth of its loan portfolio by increasing its legal lending
limit. The timing and specific application of these proceeds will remain in the
sole discretion of our board and management. Although we intend to utilize these
funds to serve Lafayette Community Bancorp's best interest, we cannot assure you
that our allocation will ultimately reflect the most profitable application of
these proceeds.
IF OUR REGULATORY APPROVALS ARE DELAYED OR DENIED, YOU COULD LOSE YOUR
INVESTMENT.
Before we can open for business, we must obtain final approval from the
Federal Reserve Board, FDIC and the Indiana Department of Financial
Institutions. We expect to obtain all regulatory approvals by, and open for
business in, the second quarter of 2000. Any delay in commencing operations will
increase pre-opening expenses and accumulated losses and postpone realization of
potential revenue. If we ultimately do not receive the regulatory approvals to
open Lafayette Community Bank, we will return all subscription funds, with
interest, to our investors.
FUTURE SALES OF OUR COMMON SHARES COULD DECREASE THE MARKET VALUE OF YOUR
SHARES.
Sales of a substantial number of common shares in the public market
following this offering, or the perception that such sales could occur, could
decrease the market value of your common shares. After the offering, we will
have at least 901,000 common shares outstanding. In addition, we plan to
establish stock option plans under which we will reserve options to purchase, in
aggregate, up to 15% of our common shares from time to time. The shares being
sold in this offering will be eligible for sale in the open market without
restriction, except for shares purchased by "affiliates" as that term is defined
in Rule 144 of the Securities Act. Our officers, directors and advisory board
members, who own, in the aggregate, 1,000 common shares and who will purchase
not less than approximately 210,000 common shares in this offering, have agreed
not to sell any
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of their shares for 180 days following the closing of the offering without the
prior written consent of the sales agent. Following the expiration of this 180
day lock-up period, these shares will be eligible for sale in the public market
subject to compliance with volume limitations and other conditions of Rule 144.
The market price of your shares could decline based on the sale or availability
for sale of shares now held by our existing shareholders or of shares which may
be issued under our stock option plans.
OUR COMMERCIAL LOAN CONCENTRATION INCREASES THE RISK OF DEFAULTS BY OUR
BORROWERS.
We will make various types of loans, including commercial, consumer,
residential mortgage and construction loans. We anticipate that approximately
70% of Lafayette Community Bank's loans will be commercial loans, and 30% will
be consumer/personal, although the actual percentage may vary. Commercial
lending is more risky than residential mortgage lending because loan balances
are greater and the borrower's ability to repay is contingent on the success of
the borrower's business. The risk of loan defaults by borrowers is unavoidable
in the banking industry. We will try to limit our exposure to this risk by
limiting our exposure to owner-operated properties and to businesses with an
established operating history, by carefully monitoring the amount of loans we
make within specific industries, and through other prudent lending practices,
but we will not be able to eliminate this risk. Substantial credit losses could
result in our insolvency, which could cause you to lose your entire investment.
BECAUSE THERE IS NO PRECISE METHOD OF PREDICTING LOAN LOSSES, OUR ALLOWANCE FOR
LOAN LOSSES MAY NOT BE SUFFICIENT TO ABSORB ACTUAL LOSSES.
There is no precise method of predicting loan losses. We can not assure you
that our allowance for loan losses will be sufficient to absorb our actual loan
losses. Excess loan losses will harm our business. We will attempt to maintain
an appropriate allowance for loan losses to absorb the losses we expect to
experience in our loan portfolio. We will periodically determine the amount of
the allowance for loan losses based upon consideration of several factors,
including:
- an ongoing review of the quality, mix and size of our overall loan
portfolio;
- historical loan loss experience;
- evaluation of non-performing loans;
- assessment of economic conditions and their effects on our existing
portfolio; and
- the amount and quality of collateral, including guarantees, securing
loans.
The following factors, however, make our evaluation of our allowance for
loan losses more subjective than if our bank had an established operating
history:
- our lack of an operating history may prevent management from accurately
predicting loan losses based on historical experience;
- the local economy has not experienced any significant recessionary
periods over the past five (5) years; and
- because of our small business focus, the principals of the small
businesses may have several different types of loans with Lafayette
Community Bank and a default on one of these loans may have an adverse
effect on the other loans.
Because of these factors, we may have a higher risk, in comparison to banks
with established operating histories, that our loan allowance will not be
adequate to absorb future loan losses.
TO THE EXTENT WE CANNOT ATTRACT SUFFICIENT DEPOSITS TO FUND OUR ANTICIPATED LOAN
GROWTH, WE MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH COULD DILUTE YOUR
OWNERSHIP INTEREST.
We anticipate that we will need to attract significant levels of deposits
to fund our anticipated loan growth. Our ability to attract and maintain such
deposit levels will depend on our ability to attract new deposit
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customers. To the extent that funds generated by our deposit customers are
insufficient to fund our loan growth, we may need to raise additional funds
through public or private financings. We cannot assure you that we would be able
to obtain these funds on terms that are favorable to us. If we do sell
additional common shares in the future to raise capital, the sale could
significantly dilute your ownership interest.
WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
OUTSTANDING AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE
THE SHARES AFTER THE OFFERING.
Initially, there will be no established market for our common shares. We
cannot guarantee:
- that any market for our common shares will develop;
- that any market for our common shares that develops will be liquid;
- that you will be able to sell the common shares you buy in this offering;
or
- that you will be able to sell the common shares you buy in this offering
at any particular price.
After the offering, we will encourage broker-dealers to buy and sell orders
for our common shares on the Over-the-Counter Bulletin Board. However, the
trading markets on the OTC Bulletin Board lack the depth, liquidity, and
orderliness necessary to maintain a liquid market. We do not expect a liquid
market for our common shares to develop for several years, if at all. A public
market having depth and liquidity depends on having enough buyers and sellers at
any given time. Because this is a relatively small offering, we do notexpect to
have enough shareholders or outstanding shares to support an active trading
market. Accordingly, investors should consider the potential illiquid and
long-term nature of an investment in our common shares.
BECAUSE THE OFFERING PRICE WAS DETERMINED ARBITRARILY AND MAY NOT REFLECT THE
MARKET PRICE OF OUR SHARES, IT IS POSSIBLE THAT YOU MIGHT BE OVERPAYING OR
UNDERPAYING FOR THE SHARES.
The offering price of $10.00 per share was arbitrarily determined by
Lafayette Community Bancorp in consultation with Keefe, Bruyette & Woods. The
price is not based upon earnings or any history of operations and does not
necessarily indicate the present or anticipated value of our common shares. The
market price of our common shares after the offering could be lower or higher
than the offering price.
OUR ORGANIZERS AND DIRECTORS WILL OWN A SIGNIFICANT NUMBER OF COMMON SHARES,
WHICH WILL ALLOW THEM TO CONTROL THE MANAGEMENT OF LAFAYETTE COMMUNITY BANCORP.
We expect that our organizers, directors and advisory board members will
own not less than approximately 210,000 common shares after this offering, which
will equal approximately 18% of the total number of shares, assuming the
offering is fully subscribed. To the extent that our organizers, directors and
advisory board members vote together, they will have the ability to exert
significant influence over the election of our board of directors, as well as
our policies and business affairs, and their interests may not be the same as
yours.
THE EXERCISE OF STOCK OPTIONS WILL CAUSE DILUTION AND MAY DECREASE THE VALUE OF
YOUR SHARES.
We plan to reserve 180,000 shares of common stock of Lafayette Community
Bancorp for issuance under stock option plans which we plan to establish. The
exercise of these options at an assumed exercise price of $10.00 per share will
reduce your proportionate interest in Lafayette Community Bancorp by
approximately 20% (assuming a minimum offering) or 15% (assuming a maximum
offering) per share. See "Capitalization -- Impact of Stock Options on Dilution"
beginning on page .
YOU WILL NOT RECEIVE DIVIDENDS IN THE FORESEEABLE FUTURE.
We do not intend to pay dividends on our common shares for the foreseeable
future. Instead, we intend to reinvest our earnings in our business.
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<PAGE> 12
OUR ARTICLES OF INCORPORATION AND BY-LAWS CONTAIN PROVISIONS THAT COULD DETER
TAKEOVER ATTEMPTS, EVEN AT A PRICE ATTRACTIVE TO SHAREHOLDERS.
Our articles of incorporation and by-laws, along with applicable Indiana
and federal law, may make it difficult to change or gain control of Lafayette
Community Bancorp, even at an attractive price to shareholders. As a result,
shareholders who might desire to participate in such a transaction may not have
an opportunity to do so. These provisions may reduce the market price of our
shares. Some of these provisions may also make the removal of the current board
of directors or management more difficult. These provisions include:
- restrictions on the acquisition of Lafayette Community Bancorp's equity
securities;
- the classification of the terms of the members of the board of directors;
- shareholders meeting restrictions;
- the ability of our board of directors to issue serial preferred shares
and additional common shares without shareholder approval; and
- supermajority provisions for the approval of specified business
combinations.
See "Description of Securities" beginning on page .
IF WE DO NOT SELL THE MINIMUM OFFERING, YOU WILL HAVE LOST THE USE OF YOUR
SUBSCRIPTION FUNDS WHILE THEY ARE HELD IN ESCROW.
Keefe, Bruyette & Woods has agreed to sell our shares on a best efforts
basis. We cannot assure you that Keefe, Bruyette & Woods will sell the minimum
of 900,000 shares or the maximum of 1,200,000 shares. If we do not sell at least
900,000 shares before , 2000 (or , 2000 in the event we
decide to extend the offering) we will not close the offering and we will return
all subscription funds, with interest. See "Plan of Distribution" beginning on
page .
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus, including the summary, contains
"forward-looking statements" concerning Lafayette Community Bancorp and
Lafayette Community Bank and their operations, performance, financial condition
and likelihood of success.
You can identify these statements by use of terms such as "expect,"
"believe," "goal," "plan," "intend," "estimate," "may," and "will" or similar
words. These forward-looking statements involve known and unknown risks,
uncertainties and other factors, including those described in the "Risk Factors"
section and other parts of this prospectus, that could cause our actual results
to differ materially from those anticipated in these forward-looking statements.
USE OF PROCEEDS
We estimate that we will receive net proceeds of between $8.20 million and
$10.99 million, depending on the size of the offering, after deducting
commissions and estimated offering expenses. The following two paragraphs
describe our proposed use of proceeds based on our present plans and business
conditions.
USE OF PROCEEDS BY LAFAYETTE COMMUNITY BANCORP.
The following table shows the anticipated use of the proceeds by Lafayette
Community Bancorp. We describe Lafayette Community Bank's anticipated use of
proceeds in the following section. As shown, at a minimum, we will use $7.50
million to capitalize Lafayette Community Bank. We will initially invest the
remaining proceeds in United States government securities. In the long term, we
will use these remaining proceeds for operational expenses and other general
corporate purposes, including the provision of additional
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<PAGE> 13
capital to Lafayette Community Bank, if necessary. We may also use the proceeds
to expand, for example, by opening additional facilities or acquiring other
financial institutions. We currently have no expansion plans.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING OFFERING
-------- --------
<S> <C> <C>
Gross Proceeds from offering................................ $9,000,000 $12,000,000
Sales agent commission and offering expenses................ 801,000 1,011,000
Start-up expenses(1)........................................ 350,000 350,000
Investment in capital stock of Lafayette Community Bank..... 7,500,000 9,989,000
Remaining proceeds.......................................... $ 349,000 $ 650,000
</TABLE>
-------------------------
(1) Start-up expenses consist of payroll, occupancy, advertising, supplies and
other expenses incurred while getting Lafayette Community Bank ready for
opening. Loans from another unrelated financial institution which were used
to finance interim start-up expenses and which bear interest at the prime
rate, will be repaid promptly following the completion of the offering.
USE OF PROCEEDS BY LAFAYETTE COMMUNITY BANK.
The following table shows the anticipated use of the proceeds by Lafayette
Community Bank. All proceeds received by Lafayette Community Bank will be in the
form of an investment in its capital stock by Lafayette Community Bancorp, as
described above. The table shows the cost of the temporary and permanent
facilities for a period of twelve months from the completion of the offering.
Furniture, fixtures, and equipment will be capitalized and amortized over the
estimated useful lives of the assets. Lafayette Community Bank will use the
remaining proceeds to make loans, purchase securities, and otherwise conduct its
business.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING OFFERING
-------- --------
<S> <C> <C>
Investment by Lafayette Community Bancorp in Lafayette
Community Bank's capital stock............................ $7,500,000 $9,989,000
Furniture, fixtures and equipment........................... 791,000 791,000
Remaining proceeds.......................................... $6,709,000 $9,198,000
</TABLE>
DETERMINATION OF OFFERING PRICE.
The offering price for the common shares were arbitrarily determined by
Lafayette Community Bancorp in consultation with our sales agent. This price is
not based upon earnings or any history of operations. In determining the
offering amount, we took into account the following factors:
- capital requirements of the FDIC and the Indiana Department of Financial
Institutions for Lafayette Community Bank;
- expenses related to the simultaneous opening of two separate banking
offices; and
- general market conditions for the sale of securities.
PLAN OF DISTRIBUTION
GENERAL.
We will offer the shares to the public for a period of sixty days ending on
, 2000. We may, however, in our discretion, extend this offering
period by forty-five days to , 2000. We have engaged Keefe, Bruyette
& Woods, Inc. to consult with and advise us with respect to the offering. Keefe,
Bruyette & Woods has agreed to use its best efforts to solicit subscriptions and
purchase orders for our shares. Keefe, Bruyette & Woods will have no obligation
to take or purchase any of our shares in the offering. See "Capitalization" on
page .
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<PAGE> 14
Shares will be offered primarily to persons who reside in the State of
Indiana. We also plan to register this offering in Ohio, Michigan, Idaho,
Illinois, Kentucky, Maryland, Oklahoma and Florida. If you are not a resident of
one of these states, please call the Keefe, Bruyette & Woods, Inc. Stock
Information Center at (877) 298-6520 before subscribing. We will provide persons
indicating an interest in acquiring our shares with a copy of this prospectus
prior to our acceptance of any subscription funds. We will conduct our first
closing only if the conditions required to close the minimum offering have been
met. In the event that we do not receive regulatory approval from the
appropriate regulatory agencies, or we are otherwise unable to complete the
offering, we will return all subscription funds, with interest, to investors.
CONDITIONS OF THE OFFERING.
The offering will expire at 5:00 p.m. Eastern Time on , 2000
unless extended by us to , 2000. The offering is expressly
conditioned upon fulfillment of the following conditions within the offering
period. The offering conditions, which may not be waived, are as follows:
- subscriptions for not less than $9,000,000 shall have been deposited with
the escrow agent; and
- Lafayette Community Bancorp shall not have canceled this offering prior
to the time funds are withdrawn from the escrow account.
ESCROW OF SUBSCRIPTION FUNDS.
All accepted subscription funds and documents tendered by investors will be
placed in an escrow account with The Farmers & Merchants Bank of Boswell,
Indiana, pursuant to the terms of the Escrow Agreement, a form of which is
attached to this prospectus as Appendix B. Upon receipt of a certification from
Lafayette Community Bancorp during the offering period that subscriptions
totaling not less than $9,000,000, including subscriptions from our organizers
and management, have been received and fully collected, the escrow agent will
release to Lafayette Community Bancorp all subscription funds, together with
accrued interest.
Prior to the disposing of the escrow account, the escrow agent may invest
subscription funds in direct obligations of the United States Government, in
short-term insured certificates of deposit and/or money market management trusts
for short-term obligations of the United States Government, with maturities not
to exceed sixty days. Lafayette Community Bancorp will invest the subscription
funds in a similar manner after breaking escrow and prior to the time that it
infuses capital into Lafayette Community Bank. The escrow agent, by accepting
its appointment, in no way endorses the purchase of our shares by any person.
In the event the offering conditions are not met within the offering period
or if we terminate the offering prior to withdrawing the subscription funds, the
escrow agent will promptly return to the subscribers their subscription funds,
together with their allocable share of interest, if any, earned on the
investment of the escrow account, and without deduction of offering expenses.
The latest date to which the subscription funds might be held in escrow prior to
their return in the event the minimum offering is not reached or final
regulatory approval to commence operations is not granted is , 2000
(or , 2000 in the event that we decide to extend the offering).
METHOD OF SUBSCRIPTION.
We may cancel this offering for any reason at any time prior to the release
of subscription funds from the escrow account in the event that we elect to
cancel the offering in its entirety.
The minimum subscription is 500 shares and the maximum subscription is
50,000 shares. We may, however, accept subscriptions for more than 50,000 shares
in order to reach the minimum offering amount.
In order to purchase shares you must:
- complete and sign the Stock Order Form, an example of which is attached
as Appendix A to this prospectus;
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<PAGE> 15
- make full payment for your subscription in United States currency by
check or money order payable to "The Farmers & Merchants Bank, Trust No.
40-4410-2"; and
- return your Stock Order Form and full payment to Farmers & Merchants Bank
in the enclosed reply envelope before the expiration date of the
offering.
Failure to pay the full subscription price shall entitle Lafayette
Community Bancorp to disregard the subscription. No subscription agreement is
binding until accepted by Lafayette Community Bancorp, which may, in its sole
discretion, refuse to accept any subscription for shares, in whole or in part,
for any reason whatsoever. In determining which subscriptions to accept, we may
take into account any factors we believe may be relevant, including the order in
which subscriptions are received, a subscriber's potential to do business with
Lafayette Community Bank, and factors that may cause an aggregation of ownership
under federal banking regulations. No subscription will be deemed accepted until
we deliver written notification of acceptance to the subscriber. After a
subscription is accepted and proper payment received, we will not cancel such
subscription, unless all accepted subscriptions are canceled.
Once we accept a subscription, it cannot be withdrawn. Payment from any
subscriber for shares in excess of the number of shares allocated to such
subscriber, if any, will be refunded by mail, without interest, within ten days
of the date of rejection.
Certificates representing common shares of Lafayette Community Bancorp,
duly authorized and fully paid, will be issued as soon as practicable after
subscription funds are released to Lafayette Community Bancorp from the escrow
account.
DIVIDEND POLICY.
We do not expect to pay any dividends in the foreseeable future. Any
profits we earn will be retained and used to finance our growth. We have no
current plans to initiate payment of cash dividends, and future dividend policy
will depend on Lafayette Community Bank's earnings, capital requirements,
financial condition and other factors deemed relevant by our board of directors.
Our ability to pay any cash dividends will depend primarily on Lafayette
Community Bank's ability to pay dividends to Lafayette Community Bancorp, which
depends on the profitability of Lafayette Community Bank. In order to pay
dividends, Lafayette Community Bank must comply with the requirements of all
applicable laws and regulations. See "Supervision and Regulation -- Lafayette
Community Bank -- Dividends" on page and "Supervision and Regulation-Lafayette
Community Bank -- Capital Regulations" on page . In addition to the
availability of funds from Lafayette Community Bank, our dividend policy is
subject to the discretion of our board of directors and will depend upon a
number of factors, including future earnings, financial condition, cash needs,
and general business conditions.
CAPITALIZATION.
The following table sets forth the estimated capitalization of Lafayette
Community Bancorp as of March 31, 2000, and as adjusted to give effect to the
sale of the minimum and maximum number of
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<PAGE> 16
common shares offered with this prospectus, at an assumed offering price of
$10.00 per share, net of estimated offering expenses. This table does not
include potential dilution for exercise of stock options.
<TABLE>
<CAPTION>
AS ADJUSTED
MINIMUM MAXIMUM
ACTUAL OFFERING OFFERING
------ ----------- --------
<S> <C> <C> <C>
SHAREHOLDERS EQUITY
Common shares -- no par value, 1,000 shares issued
and outstanding; 901,000 shares issued and
outstanding as adjusted (minimum); 1,201,000 shares
issued and outstanding (maximum)(2)................ $ 10,000 $8,209,000(1) $10,999,000(1)
Deficit accumulated during the development stage..... (174,413) (174,413) (174,413)
Total shareholders' deficit equity............ $(164,413) $8,034,587 $10,824,587
</TABLE>
-------------------------
(1) Represents the sale of 900,000 shares at $10.00 per share less estimated
offering expenses and commissions of approximately $ 801,000 (minimum) and
1,200,000 shares at $10.00 per share less estimated offering expenses of $
1,011,000 (maximum).
(2) Represents the total number of common shares outstanding after giving effect
to a 10 to 1 stock split concerning the 100 shares purchased by Mr.
Zimmerman prior to this offering.
Our organizers, directors and advisory board members have indicated that
they intend to purchase not less than approximately 210,000 shares in this
offering.
IMPACT OF STOCK OPTIONS ON DILUTION.
Lafayette Community Bancorp will adopt separate stock option plans
providing for (1) the grant of non-qualified stock options to directors of
Lafayette Community Bancorp and Lafayette Community Bank; and (2) the grant of
both qualified and nonqualified stock options to key employees of Lafayette
Community Bancorp and Lafayette Community Bank. The following illustrates basic
concepts regarding the potential impact of stock options on dilution.
- For nonqualified stock options, a gain is measured on the exercise date
between the market value and exercise price of the shares, which is
recognized by the individual as compensation. Additionally, Lafayette
Community Bancorp receives a tax deduction for the amount of gain
recognized by the individual. This tax savings is treated as additional
payment for the shares and is directly credited to the capital accounts
of Lafayette Community Bancorp.
- For qualified options, no gain is recognized by the individual until the
shares acquired upon exercise of the option is sold. The gain is measured
on the date the shares are sold between the sales price of the shares and
the exercise price of the option. Lafayette Community Bancorp receives no
tax deduction in connection with qualified options.
We have not yet granted any options. Assuming the maximum offering and a
grant of 180,000 options exercised at $10.00 per share, we would receive a total
of approximately $1,800,000 in new capital and would issue 180,000 shares. This
would reduce your proportionate interest in Lafayette Community Bancorp by
approximately 15%.
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<PAGE> 17
BUSINESS
BACKGROUND
At the end of 1990, according to data provided by the FDIC website at
http://www.fdic.gov., there were approximately 12,000 financial institutions in
the United States, which number declined to 8,000 by the end of 1998. This
industry consolidation was due, in large part, to larger institutions purchasing
smaller institutions and then closing redundant back-office services and
branches in the local and regional communities. This consolidation continues in
the financial markets and has resulted in the dominance of large commercial
banks. At the same time, consolidation also provides a tremendous opportunity
for local community banks to fill a void. In 1994 there were 50 de novo
community banks chartered in the United States. By 1998 this figure rose to 190
de novo banks.
We believe that industry consolidation has created significant
opportunities in the Tippecanoe County, Indiana communities for us to satisfy
the needs of the small businesses, professionals and individuals. The idea to
charter a new bank was originally formulated by the organizers as a result of
market consolidation in the Tippecanoe County, Indiana areas. The Lafayette
Community Bank will provide the small businesses in our service area a
community-based banking alternative to the large institutions. The organizers
and senior management have had significant experience in the financial industry
either directly or through experience as directors of financial institutions.
The experience and community connections of all eight organizers and senior
management and their knowledge of the Tippecanoe County, Indiana markets led
them to identify the need for a locally chartered, owned and operated community
bank that would be service-driven and technologically advanced and capable of
serving the small businesses of Tippecanoe County, Indiana.
The directors and management hold strong ties to the community. The
directors are all experienced entrepreneurs and business owners who are active
participants in the community. The combination of these individuals offers a
blend of banking background and non-banking business experience that we believe
will contribute to our overall success. Lafayette Community Bank will also
establish our advisory board composed of additional community and business
leaders to provide further input to management.
BUSINESS STRATEGY.
The primary service area to be served by Lafayette Community Bancorp is
Tippecanoe County, Indiana within which the cities of Lafayette and West
Lafayette are located. The combined population of Lafayette and West Lafayette
is approximately 73,000. This primary service area represents the geographic
areas from which we expect to generate the majority of our business. The primary
employers in the service area include Purdue University, Wabash National,
Subaru-Isuzu Automotive, Inc., Caterpillar, Inc., Home Hospital, Fairfield
Manufacturing, Alcoa and Eli Lilly & Co. We will also seek business in Benton
County, White County, Carroll County, Clinton County, Montgomery County, Warren
County and Fountain County, Indiana.
There are no unusual customer groups in the Tippecanoe County market area.
Purdue University is within our service area and its presence is evident in the
demographic characteristics; however, Tippecanoe County has a diversified
economic base that we believe is not overly dependent on any single industry.
Lafayette Community Bank intends to operate as a full-service financial
institution with an emphasis on serving small businesses, professionals and
individuals. Therefore, Lafayette Community Bank's product and service line will
consist of all traditional banking activities, including the following:
- LENDING: Lafayette Community Bank will offer loans to individuals,
partnerships, and limited liability companies or other corporate
borrowers for a variety of purposes. Our anticipated commercial lending
will focus on small and medium-sized businesses and will include lines of
credit, term loans, equipment loans, letters of credit, commercial real
estate, construction, and Small Business Administration lending. Loan
products will also include consumer loans, secured and unsecured, auto
loans, home equity lines of credit, home improvement loans, general lines
of credit including overdraft lines, and mortgage lending. Lafayette
Community Bank may also offer loans in excess of its lending limit by
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<PAGE> 18
selling participations in those loans to correspondent banks. We
anticipate that Lafayette Community Bank will set up the capability to
sell loans in the secondary market. The volume of loans to be sold will
be determined based on asset/liability and capital positions.
- DEPOSIT: Deposit products will include interest-bearing and non-interest
bearing checking accounts, money market savings accounts, certificates of
deposit, regular savings accounts, individual retirement accounts, and
cash management services.
- OPERATIONS/OTHER: Lafayette Community Bank will offer ATM services and
direct deposit services, and will offer Internet banking services to both
retail and commercial customers. Further, while it is our opinion that
the market would support trust services, Lafayette Community Bank will
not initially offer trust services.
PROPOSED LENDING PRACTICES
Lafayette Community Bank expects to make loans to individuals and
businesses located within its proposed market area. Lafayette Community Bank
anticipates that its loan portfolio will consist of commercial loans (70%),
residential mortgage loans (20%) and consumer/personal loans (10%), although
these percentages are approximations and the actual percentages may vary.
Lafayette Community Bank anticipates that its legal lending limit under
applicable regulations will be approximately $1.10 million immediately following
the offering if the maximum number of shares are sold, based on the legal
lending limit of 15% of capital and surplus.
COMMERCIAL LOANS. We will make commercial loans primarily to small and
medium-sized businesses. These loans will be either secured or unsecured and we
expect our borrowers to use them for general operating purposes, acquisition of
fixed assets including real estate, purchases of equipment and machinery,
financing of inventory and accounts receivable, as well other general corporate
purposes. Lafayette Community Bank will generally look to a borrower's business
operations as the principal source of repayment, but will also receive, when
appropriate, mortgages on real estate, security interests in inventory, accounts
receivable and other personal property and/or personal guarantees. In addition,
Lafayette Community Bank expects that approximately 75% of its commercial loans
will be secured by first mortgages on commercial real estate and that the
majority of Lafayette Community's commercial loans that are not mortgage loans
will be secured by liens on equipment, inventory and/or other assets of the
commercial borrower.
Commercial lending involves more risk than residential lending because loan
balances are greater and repayment is dependent upon the borrower's business.
Lafayette Community Bank will attempt to minimize the risks associated with
these transactions by generally limiting its exposure to owner-operated
properties of customers with an established profitable history. In many cases,
risk will be further reduced by limiting the amount of credit to any one
borrower to an amount less than Lafayette Community Bank's legal lending limit
and avoiding certain types of commercial real estate financings, such as loans
secured by properties causing environmental concerns.
RESIDENTIAL MORTGAGE LOANS. Lafayette Community Bank expects to originate
residential mortgage loans, which are generally long-term, with either fixed or
variable interest rates. Lafayette Community Bank's anticipated general policy
will be to retain all or a portion of its variable interest rate mortgage loans
in its loan portfolio and to sell all fixed rate loans in the secondary market.
This policy is subject to review by management and may be revised as a result of
changing market and economic conditions and other factors. Lafayette Community
Bank also expects to offer home equity loans. Lafayette Community Bank does not
expect to retain servicing rights with respect to the majority of the
residential mortgage loans that it originates. We anticipate, but cannot assure
you, that substantially all of Lafayette Community Bank's residential real
estate loans will be secured by first liens on real estate and that the majority
of Lafayette Community Bank's personal loans will be home equity loans secured
by second liens on real estate.
PERSONAL LOANS AND LINES OF CREDIT. Lafayette Community Bank will make
personal loans and lines of credit available to consumers for various purposes,
such as the purchase of automobiles, boats and other recreational vehicles, and
the making of home improvements and personal investments. Lafayette Community
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<PAGE> 19
Bank expects to retain all of such loans. Depending, in part, on the level of
demand among Lafayette Community Bank's customers and other considerations,
Lafayette Community Bank may consider offering credit card services.
Consumer loans generally have shorter terms and higher interest rates than
residential mortgage loans and, except for home equity lines of credit, usually
involve more credit risk than mortgage loans because of the type and nature of
the collateral. Consumer lending collections are dependent on a borrower's
continuing financial stability and are thus likely to be adversely affected by
the borrower's job loss, illness or personal bankruptcy. In many cases,
repossessed collateral for a defaulted consumer loan will not provide an
adequate source of repayment of the outstanding loan balance because of
depreciation of the underlying collateral. Lafayette Community Bank intends to
underwrite its loans carefully, with a strong emphasis on the amount of the down
payment, credit quality, employment stability and monthly income. These loans
will have a monthly repayment schedule with the payment amount tied to the
borrower's periodic income. Lafayette Community Bank believes that the generally
higher yields earned on consumer loans will help compensate for the increased
credit risk associated with such loans and that consumer loans will be important
to its efforts to serve the credit needs of its customer base.
LOAN POLICIES. Although Lafayette Community Bank intends to take a
progressive and competitive approach to lending, it will stress high quality in
its loans. Because of Lafayette Community Bank's local nature, management
believes that quality control should be achievable while still providing prompt
and personal service. The Bank will adopt written loan policies that will
contain general lending guidelines and will be subject to periodic review and
revision by the Bank's Loan Committee and its board of directors. These policies
will concern loan administration, documentation, approval and reporting
requirements for various types of loans.
Lafayette Community Bank will seek to make sound loans while recognizing
that lending money involves a degree of business risk. The Bank's loan policies
will be designed to assist Lafayette Community Bank in managing the business
risk involved in making loans. These policies will provide a general framework
for the Bank's loan operations while recognizing that not all loan activities
and procedures can be anticipated. The Bank's loan policies will instruct
lending personnel to use care and prudent decision making and to seek the
guidance of the Senior Vice President of Lending or President and Chief
Executive Officer of Lafayette Community Bank where appropriate.
The Bank's loan policies will include procedures for oversight and
monitoring of its lending practices and loan portfolio. The Bank will have a
Loan Committee comprised initially of Mr. Zimmerman and other appropriate
lending personnel. Initially, Mr. Zimmerman will have individual signatory
authority for loans up to $250,000 and joint signatory authority, along with J.
Michael Pechin, for loans up to $550,000. These limits will be subject to review
and revision by the Bank's board of directors and its Loan Committee will be
responsible for approving all loans that exceed the established limits for the
senior officers.
The Bank's loan policies will provide guidelines for loan-to-value ratios
that limit the size of certain types of loans to a maximum percentage of the
value of the collateral securing the loans, which percentage varies by the type
of collateral, including the following maximum loan-to-value ratios:
- raw land (65%)
- improved residential real estate lots (75%)
- owner-occupied commercial real estate (80%)
- non-owner occupied commercial real estate (80%)
- first mortgages on residences (80%)
- junior mortgages (i.e., second mortgages that are subordinate to a first
mortgage loan) on residences (90%)
The Bank's loan policies will also include other underwriting standards for
loans secured by liens on real estate. These underwriting standards are designed
to determine the maximum loan amount that a borrower
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<PAGE> 20
has the capacity to repay based upon the type of collateral securing the loan
and the borrower's income. For owner-occupied residential real estate mortgages,
the monthly payments on the loan will not exceed 28% of the borrower's monthly
income. For owner-occupied commercial real estate mortgages, the annual
payments, combined with the borrower's other required debt payments, will not
exceed 80% of the borrower's net annual projected cash flow. In addition, the
loan policies will require that the Bank obtain a written appraisal by a state
certified appraiser for loans secured by real estate in excess of $250,000,
subject to certain limited exceptions. The appraiser must be selected by
Lafayette Community Bank and must be independent and licensed. For loans secured
by real estate that are less than $250,000, the Bank may elect to conduct an in-
house real estate evaluation. The Bank's loan policies will also include maximum
amortization schedules and loan terms for each category of loans secured by
liens on real estate. Loans secured by commercial real estate will be subject to
a maximum term of 10 years and a maximum amortization schedule of 20 years.
Loans secured by residential real estate with variable interest rates will have
a maximum term and amortization schedule of 25 years. The Bank will, at its
option, sell to the secondary market loans secured by residential real estate
with fixed interest rates, thereby reducing the interest rate risk and credit
risk to Lafayette Community Bank. Loans secured by vacant land will be subject
to a maximum term of 3 years and a maximum amortization schedule of 10 years.
The Bank's loan policies will also establish a limit on the aggregate
amount of loans to any one borrower. These loan policies will provide that no
loan shall be granted where the aggregate liability of the borrower to the Bank
will exceed 15% of the Bank's total equity, or $1.10 million. This internal
lending limit will be subject to review and revision by the board of directors
from time to time.
In addition, Lafayette Community Bank's loan policies will provide
guidelines for:
- personal guarantees;
- environmental policy review;
- loans to employees, executive officers and directors;
- problem loan identification;
- maintenance of a loan loss reserve; and
- other matters relating to Lafayette Community Bank's lending practices.
Lending money is an essential part of the banking business. However,
borrowers do not always repay their loans. The risk of non-payment is affected
by:
- credit risks of a particular borrower;
- changes in national, regional, or local economic and industry conditions;
- the duration of the loan; and
- in the case of a collateralized loan, uncertainties as to the future
value of the collateral.
Generally, commercial/industrial, construction and commercial real estate
loans present a greater risk of non-payment by a borrower than other types of
loans. We anticipate that approximately 75% of our commercial loans will be
commercial real estate loans secured by a first lien. While this does not
represent a greater percentage of these types of loans in our portfolio than in
the portfolios of our competitors, the comparative youth of our portfolio may
increase our risk of non-payment. This is because most defaults occur early in
the term of a loan.
DEPOSITS.
The Bank intends to offer a broad range of deposit products, including
checking, business checking, savings and money market accounts, certificates of
deposit and direct-deposit services. Transaction accounts and certificates of
deposit will be tailored to the primary market area at rates competitive with
those offered in Tippecanoe County. All deposit accounts will be insured by the
FDIC up to the maximum amount permitted
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by law. Lafayette Community Bank intends to solicit those accounts from
individuals, businesses, associations, financial institutions and government
entities.
MARKETING STRATEGY.
The marketing strategy for Lafayette Community Bank involves two primary
components: capitalizing on the competitive advantages of community banking, and
utilizing technology to provide high-quality service to businesses and
residents. We believe that, as a community bank, our growth will be furthered
due to strategic advantages that include:
- higher level of personalized customer service;
- positive customer perception of local ownership and local management;
- focus on small-business banking; and
- typically lower service charges and more favorable interest rates.
We face significant competition from larger regional banks in our market
area. Therefore, the marketing focus of Lafayette Community Bank will be to
highlight the competitive advantages of being a locally chartered and managed
community bank and to utilize the advantages discussed above to generate growth.
We intend to offer competitive rates and fees, but not to necessarily be the
lowest cost provider in each market. The features and pricing of our products
and services will be competitive; however, we intend to compete on service
rather than on rates and fees. We believe that the likelihood of success for
this strategy is enhanced by the experience, qualifications, and community
involvement of the proposed management and directors.
The second component of our marketing strategy will be to utilize
technology where appropriate to provide convenience and service to our retail
and commercial customers. We believe that we may have an advantage over our
competitors by being able to invest in the latest technologies without having to
incur the additional financial and operational costs associated with converting
and upgrading existing systems. We intend to provide products and services via
the Internet, including cash management services to our retail and commercial
customers.
We believe that, by using a combination of the competitive advantages of
community banking and the convenience of technology, Lafayette Community Bank
will be able to meet the needs of businesses and residents in Tippecanoe County,
Indiana and surrounding areas.
COMPETITION.
TIPPECANOE COUNTY, LAFAYETTE/WEST LAFAYETTE. As of June 30, 1999, the
primary service area of Tippecanoe County was served by 48 financial institution
offices, 44 of which were bank or savings and loan offices. Total deposits in
Lafayette/West Lafayette increased by 0.7% or $10.5 million, between June 30,
1998 and June 30, 1999. Deposits from June 1998 to June 1999 increased by nearly
3% or $50 million.
The most significant competitive change that has occurred in Lafayette/West
Lafayette was the acquisition of NBD, N.A. by Union Planters Bank, N.A. in 1999,
which affected nearly 20% of deposits in Lafayette/West Lafayette.
Total deposits in Tippecanoe County grew by more than 4% between 1997 and
1999, reaching $1.5 billion in June 1999. Lafayette/West Lafayette represents
approximately 80% percent of total deposits in Tippecanoe County.
SUMMARY. In reviewing the competitive nature of the Tippecanoe County
market, there are two positive characteristics that suggest the potential for
success of Lafayette Community Bank. First, the market has a significant deposit
base, which has provided growth for the majority of financial institutions
serving the areas. The overall size of the deposit base in the market suggests
the opportunity for Lafayette Community Bank to generate deposit growth. Second,
the presence of locally-owned and managed community banks in the market is
limited. Larger regional banks hold nearly 68% percent of market share in
Tippecanoe County. While the
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larger regional banks in the markets are strong, we believe that Lafayette
Community Bank will attract business by offering a higher level of customer
service and by benefiting from positive customer perception of local ownership,
local management, and community involvement. Though no assurances can be given,
we believe that the large share of deposits held by the larger regional banks
provide Lafayette Community Bank with the opportunity to effectively position
itself as a stable and attractive community banking alternative.
COMMUNITY INVOLVEMENT.
We realize that our success will be dependent on the success of the local
communities of Tippecanoe County, Indiana. We plan to attract and maintain
support in the community through the following three methods:
- Public offering -- This public offering of our shares will give residents
in the community an opportunity to have an ownership interest in
Lafayette Community Bancorp from its inception and be part of its future
success.
- Community participation -- Our directors, officers and advisory directors
are currently and will continue to be members of civic, social and
religious organizations, through which we will maintain regular contact
with various leaders throughout the community. This type of association
will provide a forum for exchange of thoughts and ideas regarding a
variety of subjects, including identification of community needs and ways
in which we can assist.
- Community communication -- We plan to maintain consistent, ongoing
communication with Tippecanoe County, Indiana residents. We will use
advertising and public relations tools to consistently inform the
communities of our products, services and involvement in local activities
and community development.
EMPLOYEES.
We anticipate that, when Lafayette Community Bank opens for business, it
will employ approximately twelve full-time employees and five part-time
employees. Initially, the executive officers of Lafayette Community Bank will
consist of three individuals, the Chief Executive Officer and President, the
Senior Vice-President of Lending, and Senior Vice-President and Controller. The
remaining employees will provide personal banking services to customers and
staff support in the areas of accounting, lending and operations. Other
non-banking services such as data processing, compliance and internal audit will
be outsourced to companies specializing in these areas.
We expect that total compensation for Lafayette Community Bank's employees
for the first year of operations will be approximately $517,000. We have no
plans for any significant increases in compensation for the second and third
years unless significant increases in deposits and loans occur that would
require additional staff. We also intend to provide employees with benefit
programs, including medical insurance, paid vacation time and sick leave, and
employee stock options.
LITIGATION.
We are not a party to any pending legal proceedings.
DESCRIPTION OF PROPERTY
Our headquarters and the main office banking center will be located at 2
North 4th Street, Lafayette, Indiana 47901. We have entered into a five-year
lease agreement for the property, with two five-year renewal options. The
two-story brick and frame structure contains approximately four thousand square
feet per level. The annual base rent is approximately $78,000. The facility will
include a vault, safe deposit boxes, personal banker stations, an automated
teller machine, a night depository drop and drive-up teller stations.
We have also entered into a lease for a branch office facility at 2136
Greenbush Street, Lafayette, Indiana 47905. The facility will be used as a
branch office once we receive our charter.
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PLAN OF OPERATION
We formed Lafayette Community Bancorp to own and hold all of the common
stock of Lafayette Community Bank. In November of 1999, our organizers filed
applications with the Indiana Department of Financial Institutions and with the
FDIC to receive an Indiana state bank charter and federal deposit insurance.
Whether the Indiana Department of Financial Institutions and FDIC grant us a
charter and deposit insurance will depend upon, among other things, our
compliance with legal requirements imposed by Indiana law and the FDIC,
including capitalization of Lafayette Community Bank with at least a specified
minimum amount of capital which we believe will be approximately $7.5 million.
Upon receipt of these regulatory approvals from the Indiana Department of
Financial Institutions and the FDIC, we will file an application with the
Federal Reserve Board to become a bank holding company, which must be approved
before we can acquire the capital stock of Lafayette Community Bank. We expect
to receive all required regulatory approvals by the second quarter of 2000.
Our profitability will be dependent upon the successful operations of
Lafayette Community Bank. New banks are typically not profitable in the first
year of operation and sometimes do not become profitable for several years, if
at all. At March 31, 2000, our accumulated deficit was $164,413. We will
continue to incur pre-opening expenses until Lafayette Community Bank commences
operations. We expect to incur total pre-opening expenses of approximately
$350,000. Based upon industry standards, management's experience and current
market demand, we believe that Lafayette Community Bank will begin to be
profitable in the third quarter of the second year of operations. We cannot
assure you, however, that Lafayette Community Bank will be profitable, or if
profitable, that its earnings will be comparable to those of similar banking
institutions. Please refer to the "Risk Factors" section of this prospectus for
a more detailed explanation of the risks associated with the purchase of our
common stock.
We face stiff competition in making loans and attracting deposits in our
service area. In order to overcome this competitive environment, we plan to
become the premier community based financial institution in our service areas by
providing personalized bank products and traditional bank services to
individuals, small businesses, professionals and other local organizations. We
intend to employ professional and consumer friendly individuals who can "think
outside of the box". While Lafayette Community Bank will provide personal
computer banking and telephone banking for customers who want this convenience,
customers will still be able to talk with employees and have their transactions
handled by employees who have the authority and knowledge to take care of them.
We plan to open Lafayette Community Bank with approximately twelve full-time
employees and five part-time employees and expect that this number of employees
will be sufficient for our first three years of operations.
Our operating principles are based on superior customer service through
knowledgeable employees and efficient operating systems and technology. Policies
and procedures will be tailored to the local markets rather than larger regional
or state areas.
Our directors and management plan to focus on the small businesses within
our market, residential real estate mortgages and a growing consumer market.
They will rely principally on themselves, advisory directors, shareholders,
management and employees for business development.
Over the next twenty-four to thirty-six months, we plan to continue to
offer competitive products in our market and do not expect to have any trouble
satisfying our cash requirements for funding loans. We do not plan to pay the
highest rates on deposits, but feel we can compete by offering exceptional
customer service. At the same time we do not expect to charge the lowest rates
and fees on our loans. We will work with customers to design products and
systems that will meet their individual needs, without just being another low
cost provider.
Assuming this offering is fully subscribed, we do not presently anticipate
any need to raise additional capital for the next five years.
We anticipate that expenditures for furniture, fixtures, and equipment will
be approximately $791,000 in the first year of operation. Our largest
expenditure items will be for bank equipment such as vaults, safe
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deposit boxes, ATMs, personal computers, teller equipment and leasehold
improvements. These expenditures are expected to meet our needs for the next few
years.
SUPERVISION AND REGULATION
Both Lafayette Community Bancorp and Lafayette Community Bank will operate
in highly regulated environments and will be subject to supervision and
regulation by several governmental regulatory agencies, including the Federal
Reserve Board, the FDIC, and the Indiana Department of Financial Institutions.
The laws and regulations established by these agencies are generally intended to
protect depositors, not shareholders. The following summary is qualified by
reference to the statutory and regulatory provisions discussed. Changes in
applicable laws or regulations may have a material effect on our business and
prospects. Beginning with the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 and following with the FDIC Improvement Act
of 1991, numerous additional changes have been proposed. Moreover, we will also
be subject to changes in federal and state law, regulations, governmental
policies, income tax laws and accounting principles. Deregulation could
adversely affect the banking industry as a whole, including our operations.
Accordingly, our operations may be affected by legislative changes and the
policies of various regulatory authorities.
For example, on November 12, 1999, the President signed into law the
Financial Services Modernization Act, which is comprehensive legislation that
modernizes the financial services industry for the first time in decades. The
legislation permits bank holding companies to conduct essentially unlimited
securities and insurance activities, in addition to other activities determined
by the Federal Reserve Board to be related to financial services. As a result,
Lafayette Community Bancorp would be able to underwrite and sell securities and
insurance. It would also be able to acquire, or be acquired by, brokerage firms
and insurance underwriters. We have not had an opportunity to assess the impact
of the legislation on our operations, but at the present time we do not
anticipate significant changes in our anticipated products or services. We
cannot predict the effect that fiscal or monetary policies, economic control, or
new federal or state legislation may have in the future on our business and
earnings.
LAFAYETTE COMMUNITY BANCORP.
Because we will own the outstanding capital stock of Lafayette Community
Bank, we will be deemed a bank holding company under the federal Bank Holding
Company Act of 1956.
THE BANK HOLDING COMPANY ACT. Under the Bank Holding Company Act, Lafayette
Community Bancorp will be subject to periodic examination by the Federal Reserve
and required to file periodic reports of its operations and any additional
information that the Federal Reserve may require. Our activities at the bank
holding company level will be limited to:
- banking, managing or controlling banks;
- furnishing services to or performing services for its subsidiaries; and
- engaging in other activities that the Federal Reserve determines to be so
closely related to banking, managing, or controlling banks as to be a
proper incident thereto.
INVESTMENTS, CONTROL, AND ACTIVITIES. With some limited exceptions, the
Bank Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5%
of the voting shares of such bank (unless it already owns or controls the
majority of such shares); or
- merging or consolidating with another bank holding company.
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In addition, and subject to some exceptions, the Bank Holding Company Act
and the Change in Bank Control Act, together with regulations thereunder,
require Federal Reserve approval prior to any person or company acquiring
"control" of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more, but less than 25%, of any class of voting
securities and either Lafayette Community Bancorp has registered securities
under Section 12 of the Securities Exchange Act of 1934 or no other person owns
a greater percentage of that class of voting securities immediately after the
transaction. Our common shares will be registered under sec. 15(d) of the
Securities Exchange Act of 1934 upon the first closing of this offering. The
regulations provide a procedure for challenge of the rebuttable control
presumption.
Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
activities to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:
- making or servicing loans and certain types of leases;
- engaging in certain insurance and discount brokerage activities;
- performing certain data processing services;
- acting in certain circumstances as a fiduciary or investment or financial
adviser;
- owning savings associates; and
- making investment in certain corporations or projects designed primarily
to promote community welfare.
The Federal Reserve Board imposes capital requirements on Lafayette
Community Bancorp under the Bank Holding Company Act, including a minimum
leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted
assets. These requirements are described below under "Capital Regulations."
Subject to its capital requirements and certain other restrictions, Lafayette
Community Bancorp is able to borrow money to make a capital contribution to
Lafayette Community Bank, and these loans may be repaid from dividends paid from
Lafayette Community Bank to Lafayette Community Bancorp.
Lafayette Community Bancorp is a corporation separate and distinct from
Lafayette Community Bank. Because most of Lafayette Community Bancorp's revenues
will be received by it in the form of dividends or interest paid by Lafayette
Community Bank, our ability to pay dividends will be subject to regulatory
restrictions as described below in "Lafayette Community Bank -- Dividends." The
Federal Reserve has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the Federal Reserve
expressed its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends exceeding its net income or which could only be
funded in ways that weakened the bank holding company's financial health, such
as by borrowing. Additionally, the Federal Reserve possesses enforcement powers
over bank holding companies and their non-bank subsidiaries to prevent or remedy
actions that represent unsafe or unsound practices or violations of applicable
statutes and regulations. Among these powers is the ability to proscribe the
payment of dividends by banks and bank holding companies. The FDIC possesses
similar enforcement powers over the Bank as an incident of the deposit insurance
it provides to the Bank's depositors. The "prompt corrective action" provisions
of the FDIC Improvement Act impose further restrictions on the payment of
dividends by insured banks which fail to meet specified capital levels and, in
some cases, their parent bank holding companies. As described below in
"Description of Securities," in addition to the restrictions on dividends
imposed by the Federal Reserve, the laws of the State of Indiana impose certain
restrictions on the declaration and payment of dividends by Indiana corporations
such as Lafayette Community Bancorp.
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Lafayette Community Bancorp is also able to raise capital for contribution
to Lafayette Community Bank by issuing securities without having to receive
regulatory approval, subject to compliance with federal and state securities
laws.
SOURCE OF STRENGTH. In accordance with Federal Reserve Board policy,
Lafayette Community Bancorp will be expected to act as a source of financial
strength to Lafayette Community Bank and to commit resources to support
Lafayette Community Bank in circumstances in which Lafayette Community Bancorp
might not otherwise do so. Under the Bank Holding Company Act, the Federal
Reserve Board may require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary, other than a nonbank subsidiary of a
bank, upon the Federal Reserve Board's determination that such activity or
control constitutes a serious risk to the financial soundness or stability of
any subsidiary depository institution of the bank holding company. Further,
federal bank regulatory authorities have additional discretion to require a bank
holding company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.
LAFAYETTE COMMUNITY BANK.
Lafayette Community Bank will operate as an Indiana-chartered banking
corporation subject to examination by the Indiana Department of Financial
Institutions. Deposits in Lafayette Community Bank will be insured by the FDIC
up to a maximum amount, which is generally $100,000 per depositor subject to
aggregation rules.
The Indiana Department of Financial Institutions and the FDIC will regulate
or monitor virtually all areas of Lafayette Community Bank's operations,
including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
- interest rates or fees chargeable on loans;
- establishment of branches;
- corporate reorganizations;
- maintenance of books and records; and
- adequacy of staff training to carry on safe lending and deposit gathering
practices.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate, as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement,
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report of condition or any other report of any insured depository institution.
The FDIC Improvement Act also requires the federal banking regulatory agencies
to prescribe, by regulation, standards for all insured depository institutions
and depository institution holding companies relating, among other things, to
the following:
- internal controls;
- information systems and audit systems;
- loan documentation;
- credit underwriting;
- interest rate risk exposure; and
- asset quality.
DEPOSIT INSURANCE. The FDIC establishes rates for the payment of premiums
by federally insured banks and thrifts for deposit insurance. A separate Bank
Insurance Fund and Savings Association Insurance Fund are maintained for
commercial banks and savings associations with insurance premiums from the
industry used to offset losses from insurance payouts when banks and thrifts
fail. In 1993, the FDIC adopted a rule which established a risk-based deposit
insurance premium system for all insured depository institutions. Under this
system, until mid-1995 depository institutions paid to the Bank Insurance Fund
or the Savings Association Insurance Fund from $0.23 to $0.31 per $100 of
insured deposits (depending on capital levels and risk profile, as determined by
the institution's primary federal regulator) on a semiannual basis. Once the
Bank Insurance Fund reached its legally mandated reserve ratio in mid-1995, the
FDIC lowered and eventually eliminated premiums for well-capitalized banks, with
a minimum semiannual assessment of $1,000. However, in 1996 Congress enacted the
Deposit Insurance Funds Act of 1996, which eliminated even this minimum
assessment. It also separated the Financial Corporation (FICO) assessment to
service the interest on its bond obligations. The amount assessed on individual
institutions, including Lafayette Community Bank, by FICO is in addition to the
amount paid for deposit insurance according to the risk-related assessment rate
schedule. Increases in deposit insurance premiums or changes in risk
classification will increase Lafayette Community Bank's cost of funds, and we
may not be able to pass these costs on to our customers.
TRANSACTIONS WITH AFFILIATES AND INSIDERS. Lafayette Community Bank will be
subject to the provisions of Section 23A of the Federal Reserve Act, which
places limits on the amount of loans or extensions of credit to, or investments
in, or certain other transactions with, affiliates and on the amount of advances
to third parties collateralized by the securities or obligations of affiliates.
The aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of Lafayette Community Bank's capital and surplus and, as to
all affiliates combined, to 20% of Lafayette Community Bank's capital and
surplus. Furthermore, within the foregoing limitations as to amount, each
covered transaction must meet specified collateral requirements. Compliance is
also required with certain provisions designed to avoid the taking of low
quality assets.
Lafayette Community Bank will also be subject to the provisions of Section
23B of Federal Reserve Act which, among other things, prohibits an institution
from engaging in certain transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies. Lafayette Community Bank
will be subject to certain restrictions on extensions of credit to executive
officers, directors, certain principal shareholders, and their related
interests. Such extensions of credit:
- must be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable
transactions with third parties; and
- must not involve more than the normal risk of repayment or present other
unfavorable features.
DIVIDENDS. As a state-chartered commercial bank organized under Indiana
law, Lafayette Community Bank may pay dividends from its undivided profits in an
amount declared by its board of directors, subject to prior approval of the
Indiana Department of Financial Institutions if the proposed dividend, when
added to all prior dividends declared during the current calendar year, would be
greater than the current year's "net profits" and retained "net profits" for the
previous two calendar years.
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The FDIC Improvement Act generally prohibits a depository institution from
making any capital distribution (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. The FDIC may prevent an insured bank from paying
dividends if the bank is in default of payment of any assessment due to the
FDIC. In addition, payment of dividends by a bank may be prevented by the
applicable federal regulatory authority if such payment is determined, by reason
of the financial condition of such bank, to be an unsafe and unsound banking
practice.
BRANCHING AND ACQUISITIONS. Branching by Lafayette Community Bank is
subject to the jurisdiction, and requires the prior approval, of the FDIC and
the Indiana Department of Financial Institutions. Under current law, banks
chartered by the State of Indiana may establish branches throughout the state
and in other states. Congress authorized interstate branching, with certain
limitations, beginning in 1997. In 1996, the Indiana General Assembly adopted
statutes authorizing Indiana financial institutions to establish one or more
branches in states other than Indiana through interstate merger transactions and
to establish one or more interstate branches through de novo branching or the
acquisition of a branch.
Bank holding companies, such as Lafayette Community Bancorp, are prohibited
by the Bank Holding Company Act from acquiring direct or indirect control of
more than 5% of the outstanding shares of any class of voting stock or
substantially all of the assets of any bank or savings association or merging or
consolidating with another bank holding company without prior approval of the
Federal Reserve. Additionally, Lafayette Community Bancorp is prohibited by the
Bank Holding Company Act from engaging in or from acquiring ownership or control
of more than 5% of the outstanding shares of any class of voting stock of any
company engaged in a nonbanking business unless such business is determined by
the Federal Reserve to be so closely related to banking as to be a proper
incident thereto. The Bank Holding Company Act does not place territorial
restrictions on the activities of such nonbanking-related activities.
The Bank Holding Company Act specifically authorizes a bank holding
company, upon receipt of appropriate approvals from the Federal Reserve and the
Director of the Office of Thrift Supervision, to acquire control of any savings
association or thrift holding company. Similarly, a thrift holding company may
acquire control of a bank. A savings association acquired by a bank holding
company cannot continue any non-banking activities not authorized for bank
holding companies.
INTERSTATE BANKING. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 allows bank holding companies to acquire banks anywhere
in the United States subject to certain state restrictions, and permits an
insured bank to merge with an insured bank in another state without regard to
whether such merger is prohibited by state law. Additionally, an out-of-state
bank may acquire the branches of an insured bank in another state without
acquiring the entire bank; provided, however, that the law of the state where
the branch is located permits such an acquisition. Bank holding companies also
may merge existing bank subsidiaries located in different states into one bank.
An insured bank subsidiary may act as an agent for an affiliated bank or
savings association in offering limited banking services (receive deposits,
renew time deposits, close loans, service loans and receive payments on loans
obligations) both within the same state and across state lines.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could result in the imposition of
additional requirements and limitations on Lafayette Community Bank.
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OTHER REGULATIONS. Interest and other charges collected or contracted for
by Lafayette Community Bank are subject to state usury laws and federal laws
concerning interest rates. Lafayette Community Bank's loan operations are also
subject to federal laws applicable to credit transactions, such as the:
- Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers;
- Home Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to
determine whether a financial institution is fulfilling its obligation to
help meet the housing needs of the community it serves;
- Equal Credit Opportunity Act, prohibiting discrimination on the basis of
race, creed or other prohibited factors in extending credit;
- Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
- Fair Debt Collection Act, governing the manner in which consumer debts
may be collected by collection agencies; and
- rules and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws.
The deposit operations of Lafayette Community Bank also are subject to the:
- Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures
for complying with administrative subpoenas of financial records; and
- Electronic Funds Transfer Act, and Regulation E issued by the Federal
Reserve Board to implement that Act, which governs automatic deposits to
and withdrawals from deposit accounts and customers' rights and
liabilities arising from the use of automated teller machines and other
electronic banking service.
Our results of operations will be materially affected by the monetary and
fiscal policies of the federal government and the regulatory policies of
governmental authorities. Our profitability will be dependent to a large extent
on our net interest income, which is the difference between our income on
interest-earning assets, such as loans, and our expense on interest-bearing
liabilities, such as deposits. A change in market interest rates could adversely
affect our earnings. Consequently, we will be particularly sensitive to interest
rate fluctuations. We plan to sell to in secondary market all fixed rate loans
secured by residential real estate in order to reduce interest rate risk.
CAPITAL REGULATIONS. The federal bank regulatory authorities have adopted
risk-based capital guidelines for banks and bank holding companies that are
designed to make regulatory capital requirements more sensitive to differences
in risk profiles among banks and bank holding companies and account for
off-balance sheet items. The guidelines are minimums, and the federal regulators
have noted that banks and bank holding companies contemplating significant
expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios in excess of the minimums. We have not received any
notice indicating that either Lafayette Community Bancorp or Lafayette Community
Bank will be subject to higher capital requirements. The current guidelines
require all bank holding companies and federally-regulated banks to maintain a
minimum risk-based total capital ratio equal to 8%, of which at least 4% must be
Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them
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to asset equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is equal to Tier 1 capital as a percentage of average total assets
less intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The minimum required leverage ratio for top-rated institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory scheme
designed to promote early intervention for troubled banks which requires the
FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
Lafayette Community Bank must not be under any order or directive from the
appropriate regulatory agency to meet and maintain a specific capital level.
Initially, we will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can treat
an institution as if it were in the next lower category if the agency
determines, after notice and an opportunity for hearing, that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan;
- raise additional capital;
- restrict their growth, deposit interest rates, and other activities;
- improve their management;
- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow at a
rapid pace, a premature "squeeze" on capital could occur making a capital
infusion necessary. The requirements could impact our ability to pay dividends.
Our capital levels will initially be more than adequate; however, rapid growth,
poor loan portfolio performance, poor earnings performance, or a combination of
these factors could change our capital position in a relatively short period of
time.
The FDIC Improvement Act requires the federal banking regulators to revise
the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.
Failure to meet these capital requirements would mean that a bank would be
required to develop and file a plan with its primary federal banking regulator
describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of
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<PAGE> 31
any application that requires the consideration of capital adequacy, such as a
branch or merger application, unless the bank could demonstrate a reasonable
plan to meet the capital requirement within a reasonable period of time.
ENFORCEMENT POWERS. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such violations. Criminal penalties for some financial
institution crimes have been increased to twenty years. In addition, regulators
are provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions
include the termination of deposit insurance. Furthermore, banking agencies'
power to issue cease-and-desist orders were expanded. Such orders may, among
other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications or
guarantees against loss. A financial institution may also be ordered to restrict
its growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS. On November 12, 1999, the President of the
United States signed into law the Financial Services Modernization Act of 1999
which contains a number of provisions that will fundamentally alter the banking
and financial services industries. The Financial Services Modernization Act
repeals Section 20 of the Banking Act of 1933, commonly known as the
Glass-Steagall Act, which generally has separated commercial from investment
banking. This new law will also, for the first time, allow banks, securities
firms and insurance companies to affiliate in a new financial holding company
structure.
Under the Financial Services Modernization Act, national bank affiliates
will be able to conduct a broad range of financial activities, including
providing insurance and securities services. However, the national bank must be
well-capitalized and well-managed. In addition, insurance and securities
activities will be functionally regulated. For example, the Securities and
Exchange Commission will regulate most national bank affiliates' securities
activities and the states will regulate their insurance activities. This new law
preserves the thrift charter, but bars new unitary thrift holding companies from
approval that were applied for after May 4, 1999.
Neither Lafayette Community Bancorp nor Lafayette Community Bank can
predict what impact the Financial Services Modernization Act will have on
financial institutions. One consequence may be increased competition from large
financial services companies that, under this new law, will be permitted to
provide many types of financial services to customers.
EFFECT OF GOVERNMENTAL MONETARY POLICIES. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.
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<PAGE> 32
MANAGEMENT
DIRECTORS AND OFFICERS.
Set forth below is information regarding Lafayette Community Bancorp's and
Lafayette Community Bank's executive officers and directors. Our articles of
incorporation provide for a classified board of directors, so that, as nearly as
possible, one-third of the directors will be elected each year to serve three
year terms. The terms of office of the classes of directors expire as follows:
Class I at the 2003 annual meeting of shareholders, Class II at the 2002 annual
meeting of shareholders and Class III at the 2001 annual meeting of
shareholders. Executive officers serve at the discretion of the board of
directors, a summary of the background and experience of each of these
individuals is set forth below.
David R. Zimmerman, age 41, Director, President and Chief Executive Officer
of Lafayette Community Bancorp, will be the President and Chief Executive
Officer of Lafayette Community Bank. Mr. Zimmerman has over 17 years of
experience in the banking industry which began in 1984 with Lafayette Bank &
Trust, Lafayette, Indiana. Mr. Zimmerman was the Vice-President, Commercial
Lending when he left Lafayette Bank & Trust in 1999 to form Lafayette Community
Bancorp. Prior to his experience with Lafayette Bank & Trust, he attended Purdue
University, obtaining an undergraduate degree in Finance. Mr. Zimmerman has
attended numerous banking and financial institution management courses with the
American Institute of Banking and the Bank Administration Institute,
respectively. Mr. Zimmerman has lived in Lafayette for 20 years. His past and
present civic activities include involvement with Junior Achievement, the
Lafayette Rotary Club, the Relators Association, the Greater Lafayette Builders
Association, the Lafayette Chamber of Commerce, the United Way, Legal Aid and
the Downtown Business Center.
Edward Chosnek, age 52, senior attorney and majority owner of the
Lafayette, Indiana law firm of Pearlman, Chosnek, Morrissey & Hopson, P.C.
currently serves as Chairman of the Board of Directors of Lafayette Community
Bancorp. Mr. Chosnek attended Purdue University, obtaining an undergraduate
degree in Pre-Law, and Indiana University, where he obtained his law degree. He
has lived in Lafayette for 51 years. He is active in the Indiana State and
American Bar Associations, the Association of Trial Lawyers of America, the
Indiana Bar Foundation, the Tippecanoe County Bar Association, the Private Panel
Bankruptcy Trustees, Tippecanoe Legal Aid Association, the Tippecanoe County
Historical Association and the Lafayette Chamber of Commerce.
John R. Basham, II, age 53, Director, owner and operator of Basham Rentals,
Lafayette, Indiana, is a lifelong resident of Lafayette. Mr. Basham worked at
Eli Lilly & Co. from 1969-97 during which time he served as Senior Environmental
Control Operator. His community activities include involvement in the Acting
Theatre, the Colt World Series, the Purdue University All-American Club and
Vision 21.
Donald J. Ehrlich, age 62, is Director, President, Chief Executive Officer
and Chairman of the Board of Wabash National Corporation, Lafayette, Indiana.
Mr. Ehrlich has been associated with Wabash National Corporation since 1985. Mr.
Ehrlich presently serves on the board of directors of Danaher Corporation,
Washington, D.C., a real estate company, in addition to serving as a board
member of Indiana Secondary Market, a student loan service company. He attended
Purdue University. Currently, Mr. Ehrlich serves as a director for the Danaher
Corporation, the Indiana Secondary Market and the Truck Trailer Manufacturer's
Association and serves on the Advisory Council for Purdue University. In 1992,
Mr. Ehrlich was voted National Entrepreneur of the Year by Inc., Magazine,
Merrill Lynch and Ernst & Young, LLP.
Steven Hogwood, age 43, Director, owns and operates as a franchisee
numerous fast-food restaurants in the Lafayette area. Mr. Hogwood served as
Executive Director of Operations of the McDonald Corporation, Oakbrook, Illinois
from 1976-1995. He attended Rhema Bible College, Tulsa, Oklahoma, obtaining a
Bachelor degree. Currently, Mr. Hogwood serves as a director for the Indiana
Business College and Junior Achievement of White County, Indiana and is the
Chairman for Public Relations for the Indianapolis, Indiana area. He is the
former President of Black McDonald's Operators Association, as well as the
former Vice-President of Indiana McDonald's Operators Association.
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Connie L. Koleszar, age 41, Director, currently serves as Assistant
Secretary and Director of Investor Relations of Wabash National Corporation,
Lafayette, Indiana. Ms. Koleszar has been associated with Wabash National
Corporation since 1985. She attended Ivy Technical College, completing the legal
secretary program in 1980. Ms. Koleszar serves on the Community Relations
Committee at Wabash National Corporation.
Thomas A. McDonald, age 34, Director, is self-employed in the residential
and commercial real estate business in and around the Lafayette area. Mr.
McDonald is a lifelong resident of Lafayette. He attended Purdue University. His
past and present community activities includes involvement in the United Way and
the Lafayette YMCA. Mr. McDonald formerly served as a board member for the
Industrial Credit Union.
Steven W. Norfleet, age 50, Director, is President and owner of Norfleet
Builders, a residential and commercial building and development company located
in Lafayette, Indiana. Mr. Norfleet has been a lifelong resident of Lafayette.
Mr. Norfleet is a director of the Lafayette Greater Progress. He is a former
director of Homebuilders Association and is a Life Member of the Indiana Street
Route Association.
Michael T. Mootz, age 41, will be the Senior Vice-President, Controller of
Lafayette Community Bank. Mr. Mootz has approximately 12 years of experience in
the banking industry which began in 1988 with Peoples Bank & Trust Company,
Indianapolis, Indiana. Mr. Mootz was the Assistant Vice-President, Accounting
Manager when Peoples Bank & Trust was acquired by Fifth-Third Bank in November,
1999. Prior to his experience with Peoples Bank & Trust and Fifth-Third Bank, he
attended Indiana University Purdue University -- Indianapolis, obtaining an
undergraduate degree in Business Finance. Mr. Mootz was born and raised in
Indiana.
J. Michael Pechin, age 33, will be the Senior Vice-President, Senior Loan
Officer of Lafayette Community Bank. Mr. Pechin has over 11 years of experience
in the banking industry which began in 1989 with Lafayette Bank & Trust Company,
Lafayette, Indiana. Mr. Pechin was the Vice-President, Commercial Loan Officer
when he left Lafayette Bank & Trust in March, 2000. Prior to his experience with
Lafayette Bank & Trust Company, he attended Illinois Benedictine College, Lisle,
Illinois, obtaining undergraduate degrees in business and economics. Mr. Pechin
has lived in the Lafayette area for 29 years. His past and present civic
activities include President and past board member of the Tippecanoe County
Mental Health Association, past treasurer of the Lafayette Chapter NARI and
involvement in St. Lawrence grade school athletics.
GENERAL.
Initially, our board will consist of eight directors, seven of whom will be
independent directors. The directors will be divided into three classes,
designated Class I, Class II and Class III. Each class will consist, as nearly
as possible, of one third of the total number of directors constituting the
entire board of directors. In accordance with our Articles of Incorporation, the
initial term of office of directors of Class I will expire at the annual meeting
of the shareholders to be held in 2003 and when their respective successors are
duly elected and qualified; the initial term of the office of directors of Class
II will expire at the annual meeting of shareholders to be held in 2002 and when
their respective successors are duly elected and qualified; and the initial term
of the office of directors of Class III will expire at the annual meeting of
shareholders to be held in 2001 and when their respective successors are duly
elected and qualified. Currently, Messrs. Chosnek, Ehrlich, Norfleet and
Zimmerman and Ms. Koleszar comprise Class II. Messrs. Basham, Hogwood and
McDonald comprise Class III. Class I currently has no directors.
At each annual meeting of shareholders, successors to the directors whose
term expires at the annual meeting will be elected for three-year terms. If the
number of directors is changed, an increase or decrease will be apportioned
among the classes so as to maintain the number of directors to fill a vacancy
resulting from an increase in such class will hold office for a term that will
coincide with the remaining term of that class, but in no event will a decrease
in the number of directors shorten the term of any incumbent director. Any
director elected to fill a vacancy not resulting in an increase in the number of
directors will have the same remaining term as that of his predecessor. Except
in the case of removal from office, any vacancy on the board of directors will
be filled by a majority vote of the remaining directors then in office. The
executive officers of
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Lafayette Community Bancorp and Lafayette Community Bank are elected annually by
the board of directors following the annual meeting of shareholders and serve at
the pleasure of the board.
COMMITTEES OF THE BOARD OF DIRECTORS.
The Bank's board of directors has established five committees. These
committees will meet with management on a regularly scheduled basis to review
the Bank's policies, procedures and operating performance on particular
functional areas. The activities of all committees are reviewed by the board of
directors. These committees are established in accordance with the bylaws of
Lafayette Community Bank, which may be changed from time to time by a majority
vote of Lafayette Community Bank board of directors.
The Senior Loan and Investment Committee consists of those individuals who
comprise the Lafayette Community Bancorp board of directors, in addition to
Michael T. Mootz and J. Michael Pechin, who are executive officers of the Bank.
The primary responsibilities of the Senior Loan and Investment Committee are to
review and approve loans over particular limits and enforce, review and approve
changes to Lafayette Community Bank's lending policies and procedures.
The Executive Committee is comprised of four directors. The directors
currently serving on this Committee are Messrs. Zimmerman, Chosnek, Ehrlich and
Norfleet. The Executive Committee meets as needed, and its primary
responsibilities include exercising the authority of the board of directors in
between board meetings, to the extent permitted by law. The Executive Committee
is also responsible for establishing investment, liquidity, and asset and
liability policies, and review the investment portfolio and liquidity and
asset/liability position.
The Compensation Committee is comprised of four directors, with its primary
responsibilities being the review of personnel policies and practices and
evaluation of senior management. The directors currently serving on the
Compensation Committee are Messrs. Zimmerman, Chosnek, Ehrlich and Norfleet.
The Audit/Compliance Committee is comprised of four directors, with its
primary responsibilities being the review of internal and external auditors'
reports, the review of internal loan review reports, evaluation of the internal
auditor and independent accountants, and the review of regulatory examination
results. The directors currently serving on this Audit/Compliance Committee are
Messrs. Zimmerman, Chosnek, Ehrlich and Hogwood.
ADVISORY BOARD.
The Bank's board of directors has established an advisory board. The
advisory board will meet with the Bank's management on a regularly scheduled
basis. The activities of the advisory board are reviewed by the Bank's board of
directors. The advisory board is established in accordance with the bylaws of
the Bank, which may be changed from time to time by a majority vote of the
Bank's board of directors. Our company's board of directors has selected Jack
Corns, Jim Keene, Ronald Melichar, Dick Murray, Sandy Pearlman, Robert
Roswarski, Harvey James (Ike) Tarvin, and Don Teder to comprise the advisory
board. A brief summary of the background of each of these individuals is set
forth below.
Jack Corns is a graduate of East Tipp High School and the Purdue University
Krannert School of Business, majoring in economics. He is retired from Alcoa,
where he served as Chief Mill Accountant, and currently owns and operates C&N
Enterprises, a property management company. Mr. Korns is a former officer of the
National Association of Accountants and former President of Aqua Pure. He is a
current member of the Conservation Club and a developer of the Deer Haven
subdivision.
Jim Keene is a member of the Lafayette Chamber of Commerce and the Builders
Association of Greater Lafayette. He attended Indiana University, majoring in
marketing. He also has a graduate degree in finance from the Indiana University
School of Business.
Ronald Melichar is currently, and has been since 1985, a Judge in the
Tippecanoe Circuit Court. He obtained his undergraduate degree from the
University of Notre Dame and earned his law degree from Indiana University. He
currently sits on the board of directors of the Friendship House.
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Dick Murray is a current board member of the Jefferson High Booster Club
and a sustaining member and annual contributor to the Boy Scouts, Girl Scouts,
YMCA and the Boys & Girls Club of Lafayette. Mr. Murray is a former assistant
Scoutmaster for Boy Scout Troop 313 and has been actively involved in youth
athletics, having coached in the Greater Lafayette Soccer Club, the Murdock
Youth Baseball League and the Mustang, Bronco and Pony League baseball
organizations.
Sandy Pearlman is a member of the Indiana Lawyers Auxiliary and currently
serves as a member on the board of directors of the Lafayette Symphony
Foundation. She formerly served as a member of the United Way Board and has
previous affiliations with Friends of Downtown Lafayette, the Allocation
Committee for United Way, the Downtown Business Board, the St. Elizabeth
Hospital Auxiliary, the Purdue Woman's Club and the Legal Aid board of
directors.
Robert Roswarski is currently Vice President of Hedgewood Neighborhood
Association and a member of Carpenters Union #215.
Harvey James (Ike) Tarvin is President of Lighthouse, Inc. He is a member
of Who's Who of Executives and Professionals and is a former member of the
Illinois Manufacturing Housing Board. He formerly served as Executive President
of Goldman & Associates, as well as President of the McLeon County Chapter
Manufacturing Housing & Community board of directors.
Don Teder, a certified insurance counselor, is a member of the Professional
Insurance Association, the Lafayette Chamber of Commerce and the Day Bread
Rotary. Mr. Teder graduated from Purdue University.
COMPENSATION OF DIRECTORS.
Employee directors of Lafayette Community Bancorp, other than Mr.
Zimmerman, will receive no compensation for their services as directors. Mr.
Zimmerman will receive $200 for each Lafayette Community Bancorp Board of
Directors meeting attended and $25 for each committee meeting attended.
Non-employee directors of Lafayette Community Bancorp will receive reimbursement
of reasonable expenses incurred in serving as a director. In addition, subject
to compliance with the restrictions and requirements of the FDIC stock benefit
plan policy, each non-employee director of Lafayette Community Bancorp will
receive $250 for each meeting of the Board of Directors attended and $50 for
each committee meeting attended. Additionally, the Chairman of the board of
directors of Lafayette Community Bancorp will receive $10,000 per year.
EXECUTIVE COMPENSATION.
Lafayette Community Bancorp and David R. Zimmerman have entered into a
three-year employment agreement to retain Mr. Zimmerman as its Chief Executive
Officer and President. The employment agreement renews automatically for an
additional year unless either party furnishes the other of its intent to
terminate the agreement. Mr. Zimmerman's employment agreement commenced on
January 1, 2000. If we do not commence the operations of Lafayette Community
Bank, we must continue paying Mr. Zimmerman under his employment agreement for a
period of three years from the commencement date of his agreement.
Mr. Zimmerman will receive an annual base salary of $105,000 and will be
eligible for bonuses at the discretion of the board of directors. Mr. Zimmerman
will also be eligible to participate in all employee benefit plans, stock option
plans, health insurance and other fringe benefits commensurate with their
positions.
The employment agreement entitles Mr. Zimmerman to a payment equal to 2.99
times his then base compensation if termination occurs within two years of a
"change in control", as defined in the agreement. In addition, all previously
granted stock options will vest in the event of a termination of employment upon
a change in control.
DIRECTORS' AND KEY EMPLOYEES' STOCK OPTION PLANS.
Lafayette Community Bancorp will adopt separate stock option plans for
Directors of Lafayette Community Bancorp and Lafayette Community Bank and for
officers and key employees of Lafayette Community Bancorp and Lafayette
Community Bank. Under the option plans, options for an aggregate not to
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exceed 180,000 shares of common stock of Lafayette Community Bancorp may be
granted. The Board of Directors of Lafayette Community Bancorp believes these
plans provide an important incentive to those who will be instrumental to the
success of Lafayette Community Bancorp and of Lafayette Community Bank and will
encourage such persons to continue their service with Lafayette Community
Bancorp and Lafayette Community Bank. A description of each of the plans is set
forth below but such descriptions are qualified in their entirety by reference
to the complete plans.
During the term of the options, the individuals who hold such options will
be given the opportunity to benefit if the value of the common shares increases.
In the event that the options are exercised, there may be some resulting
dilution in the per share book value of Lafayette Community Bancorp at the time
of exercise or issuance, and there will be a reduction in the percentage
ownership in Lafayette Community Bancorp by the other shareholders.
2000 Key Employees' Stock Option Plan. The Board of Directors of Lafayette
Community Bancorp adopted a stock option plan which provides for the grant of
incentive stock options within the meaning of Section 422 of the Code and of
nonqualified stock options. The plan provides for the award of stock options to
executive officers and key employees of Lafayette Community Bancorp and
Lafayette Community Bank. The exercise price per share for all options granted
under the plan will not be less than the greater of $10.00 per share or the fair
market value of a share on the date of grant. The plan was approved by the board
of directors of Lafayette Community Bancorp prior to the offering.
Options may be granted under the plan only to officers and other key
employees who are in positions to make significant contributions to the success
of Lafayette Community Bancorp. A committee consisting of individuals appointed
by the board of directors of Lafayette Community Bancorp will administer the
plan.
The stock option agreement between the Company and the optionee shall vest
in accordance with the following schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
VESTING DATE OPTIONS VESTED
------------ --------------
<S> <C>
First Anniversary of Date of Option Grant................... 20.0%
Second Anniversary of Date of Option Grant.................. 20.0%
Third Anniversary of Date of Option Grant................... 20.0%
Fourth Anniversary of Date of Option Grant.................. 20.0%
Fifth Anniversary of Date of Option Grant................... 20.0%
</TABLE>
Notwithstanding the above schedule, the committee may, in its discretion,
accelerate the time(s) at which all or any part of an option may be exercised.
In no event will any incentive stock options be exercisable later than ten years
after date of grant. No option will be granted under the plan after ,
2010.
A total of 96,000 shares of common stock of Lafayette Community Bancorp
have been reserved for issuance under the plan. No options are currently
outstanding under the plan.
2000 Directors' Stock Option Plan. The Board of Directors of Lafayette
Community Bancorp adopted a nonqualified stock option plan which provides for
the grant of nonqualified stock options to those individuals who serve as
Directors of Lafayette Community Bancorp or Lafayette Community Bank. The
Directors' plan was also approved by the board of directors of Lafayette
Community Bancorp prior to the offering. A committee consisting of individuals
appointed by the board of directors of Lafayette Community Bancorp will
administer the plan.
The Directors' plan provides for the grant of nonqualified stock options
with an exercise price per share of the greater of the public offering price of
$10.00 per share or the fair market value of a share on the date of grant.
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The stock option agreement between the Company and the optionee shall vest
in accordance with the following schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
VESTING DATE OPTIONS VESTED
------------ --------------
<S> <C>
First Anniversary of Date of Option Grant................... 20.0%
Second Anniversary of Date of Option Grant.................. 20.0%
Third Anniversary of Date of Option Grant................... 20.0%
Fourth Anniversary of Date of Option Grant.................. 20.0%
Fifth Anniversary of Date of Option Grant................... 20.0%
</TABLE>
Notwithstanding the above schedule, the committee may, in its discretion,
accelerate the time(s) at which all or any part of an option may be exercised.
In no event will any incentive stock options be exercisable later than ten years
after date of grant. No option will be granted under the plan after ,
2010.
A total of 84,000 shares of common stock of Lafayette Community Bancorp
have been reserved for issuance under the plan. No options are currently
outstanding under the plan.
An individual will become eligible to receive grants of options under the
plan upon his election to a qualifying board of directors but will not receive
additional options because he is a member of more than one such board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We expect to have banking and other transactions in the ordinary course of
business with the organizers, directors, and officers and their affiliates,
including members of their families or corporation, partnerships, or other
organizations in which such organizers, officers, or directors have a
controlling interest, on substantially the same terms, including price, or
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. These transactions are also restricted by
our regulatory agencies, including the Federal Reserve Board. For a discussion
of the Federal Reserve Board regulations, please see "Transactions with
Affiliates and Insiders" on page . These transactions are not expected to
involve more than the normal risk of collectibility nor present other
unfavorable features.
Loans to individual directors and officers must also comply with Lafayette
Community Bank's lending policies, regulatory restrictions, and statutory
lending limits, and directors with a personal interest in any loan application
will be excluded from the consideration of such loan application. We intend for
all of our transactions with organizers or other affiliates to be on terms no
less favorable than could be obtained from an unaffiliated third party and to be
approved by a majority of our disinterested directors who will have access, at
Lafayette Community Bank's expense, to Lafayette Community Bank's or independent
counsel.
The members of the Board of Directors of Lafayette Community Bancorp have
formed a separate limited liability company (unrelated to Lafayette Community
Bancorp) to acquire the proposed Bank property and will, in turn, lease the
property to Lafayette Community Bank at or below market rate. At the inception
of the lease, Lafayette Community Bancorp received a report from an independent
property consultant that the terms and conditions of the lease fall within a
reasonable range of market terms.
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PRINCIPAL SHAREHOLDERS
The following table gives information about the anticipated beneficial
ownership of Lafayette Community Bancorp capital stock after the offering by:
- each person expected to own more than 5% of Lafayette Community Bancorp's
common shares;
- each of Lafayette Community Bancorp's executive officers and directors;
and
- all of Lafayette Community Bancorp's executive officers and directors as
a group.
<TABLE>
<CAPTION>
PERCENT OF
COMMON PERCENT OF CLASS CLASS
NAME SHARES(1) (MINIMUM) (MAXIMUM)
---- --------- ---------------- ----------
<S> <C> <C> <C>
Directors and executive officers:
David R. Zimmerman..................................... 25,000 2.8% 2.1%
Edward Chosnek......................................... 25,000 2.8% 2.1%
John R. Basham II...................................... 10,000 1.1% 0.8%
Donald J. Ehrlich...................................... 25,000 2.8% 2.1%
Steven Hogwood......................................... 25,000 2.8% 2.1%
Connie L. Koleszar..................................... 5,000 0.6% 0.4%
Thomas A. McDonald..................................... 25,000 2.8% 2.1%
Steven W. Norfleet..................................... 25,000 2.8% 2.1%
Directors and executive officers as a group:............. 165,000 18.31% 13.74%
</TABLE>
-------------------------
(1) Reflects common shares purchased prior to this offering (as adjusted for the
stock split), and the minimum amount of common shares to be purchased in
this offering.
DESCRIPTION OF SECURITIES
GENERAL.
We are authorized to issue up to 10,000,000 common shares, without par
value, and 1,000,000 preferred shares, also without par value. We have no
preferred shares outstanding as of the date of this offering. Upon completion of
this offering, we will have up to 1,201,000 common shares outstanding.
Common shareholders are entitled to one vote per share on all matters
submitted to a vote of shareholders, and do not have the right to vote
cumulatively in the election of directors. Except for (1) supermajority votes
required for approval of certain business combinations, removal of directors and
certain other matters, and (2) certain corporate actions that must be approved
by a majority of the outstanding votes of the relevant voting group under the
Indiana Business Corporation Law discussed below, the affirmative vote of the
holders of a majority of the votes cast at a meeting of shareholders at which a
quorum is present is sufficient to approve matters submitted for shareholder
approval, except that directors are elected by a plurality of the votes cast.
There is no provision for cumulative voting with respect to the election of
directors. Accordingly, the holders of more than 50% of the outstanding shares
of common stock, if they choose to do so, can elect all of the directors.
Our board of directors has full discretion to determine the payment of
dividends on common shares. Common shareholders will have equal rights to
receive dividends ratably, as and when declared by the board of directors out of
funds legally available for dividends, subject to the dividend rights of serial
preferred shares that may be issued in the future. In the event of any
liquidation, dissolution or winding-up of Lafayette Community Bancorp, common
shareholders will receive the assets of Lafayette Community Bancorp available
for distribution after the satisfaction of all liabilities.
Lafayette Community Bancorp common shareholders do not have preemptive or
preferential rights to purchase or subscribe to any shares or other securities
of Lafayette Community Bancorp. Lafayette Community Bancorp may be required to
provide additional capital to Lafayette Community Bank in the
37
<PAGE> 39
future in the event that the regulating body for Lafayette Community Bank
determines such capital infusion is necessary. In such event, in order to obtain
such capital, Lafayette Community Bancorp may seek additional funds from
existing shareholders, borrow additional funds from a bank or other lender or
have an equity offering of additional shares of common stock or other securities
of Lafayette Community Bancorp.
All of the common shares issued pursuant to this offering will be validly
issued, fully paid and nonassessable. Lafayette Community Bancorp acts as its
own transfer agent and registrar.
PREFERRED SHARES.
The authorized preferred share is available for issuance from time to time
at the discretion of the board of directors without shareholder approval. The
board of directors has the authority to prescribe for each series of preferred
shares it establishes the number of shares in that series, the number of votes,
if any, to which the shares in that series are entitled, the consideration for
the shares in that series, and the designations, powers, preferences and other
rights, qualifications, limitations or restrictions of the shares in that
series. Depending upon the rights prescribed for a series of preferred shares,
the issuance of preferred shares could have an adverse effect on the voting
power of the holders of common shares and could adversely affect holders of
common shares by delaying or preventing a change in control of us, making
removal of our present management more difficult or imposing restrictions upon
the payment of dividends and other distributions to the holders of common
shares.
INDIANA LAW RESTRICTIONS.
Under the Indiana Business Corporation Law, several provisions could affect
the acquisition of the common shares or of control of Lafayette Community
Bancorp after completion of the offering. The Business Combinations Chapter of
the Indiana Business Corporation Law prohibits certain business combinations,
including mergers, sales of assets, recapitalizations and reverse stock splits,
between certain Indiana corporations and a 10% or greater shareholder for five
years following the date on which the shareholder obtained a 10% or greater
ownership interest, unless the acquisition was approved in advance of that date
by the board of directors. In addition, if prior approval is not obtained, the
company and such shareholder may not consummate a business combination unless a
majority of disinterested shareholders approve the transaction or all
shareholders receive a price per share determined in accordance with the
Business Combinations Chapter. The Business Combinations Chapter does not apply
to a company if its stock is not registered under Section 12 of the Securities
Exchange Act, unless the articles of incorporation affirmatively elect to be
governed by the Business Combinations Chapter. Because the stock of Lafayette
Community Bancorp is not registered under Section 12 of the Securities Exchange
Act and our Articles of Incorporation do not provide that the Business
Combinations Chapter will apply to us, we currently do not have the protection
afforded by this law. However, if Lafayette Community Bancorp has more than 100
shareholders and registers the common shares under Section 12 of the Securities
Exchange Act, we will enjoy the protection provided by the Business Combinations
Chapter.
In addition to the Business Combinations Chapter, the Indiana Business
Corporation Law also contains a Control Share Acquisition Chapter which,
although different in structure from the Business Combinations Chapter, may have
a similar effect of discouraging or making more difficult a hostile takeover of
an Indiana corporation. This provision, however, may also have the effect of
discouraging premium bids for outstanding shares. The Control Share Acquisition
Chapter provides that, unless otherwise provided in a corporation's articles of
incorporation or by-laws, shares acquired in certain acquisitions of the
corporation's stock will be accorded voting rights only if a majority of the
disinterested shareholders approves a resolution granting the potential acquiror
the ability to vote such shares. An Indiana corporation is subject to the
Control Share Acquisition Chapter if it has 100 or more shareholders and its
principal place of business is in Indiana. An Indiana corporation otherwise
subject to the Control Share Acquisition Chapter may elect not to be governed by
the statute by so providing in its articles of incorporation or by-laws.
Lafayette Community Bancorp has not made an election and therefore will be
subject to the statute (assuming that it has 100 or more shareholders).
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<PAGE> 40
The Indiana Business Corporation Law specifically authorizes directors, in
considering the best interests of a corporation, to consider the effects of any
action on shareholders, employees, suppliers and customers of the corporation on
the communities in which offices or other facilities of the corporation are
located and any other factors the directors consider pertinent. As described
below, Lafayette Community Bancorp's Articles of Incorporation contain a
provision having a similar effect. Under the Indiana Business Corporation Law,
directors are not required to approve a proposed business combination or other
corporate action if the directors determine in good faith, after considering and
weighing as they deem appropriate the effects of such action on the
corporation's constituents, that such approval is not in the best interest of
the corporation. The Indiana Business Corporation Law specifies that, in making
these determinations, directors are not required to consider the effects of a
proposed corporation action on any particular corporate constituent group or
interest (including the amounts that might be paid to shareholders) as a
dominant or controlling factor. The Indiana Business Corporation Law explicitly
provides that the different or higher degree of scrutiny imposed in Delaware and
certain other jurisdictions upon director actions taken in response to potential
changes in control will not apply.
In taking or declining to take any action or in making any recommendation
to a corporation's shareholders with respect to any matter, directors are
authorized under the Indiana Business Corporation Law to consider both the
short-term and long-term interests of the corporation as well as interests of
other constituencies and other relevant factors. Any determination made with
respect to the foregoing by a majority of disinterested directors shall
conclusively be presumed to be valid unless it can be demonstrated that such
determination was not made in good faith.
Because of the foregoing provisions of the Indiana Business Corporation
Law, the board of directors will have flexibility in responding to unsolicited
proposals to acquire Lafayette Community Bancorp. This could make it more
difficult for an acquiror to gain control of Lafayette Community Bancorp in a
transaction not approved by the Board.
The Indiana Business Corporation Law also imposes restrictions in
connection with shareholder derivative proceedings. The Indiana Business
Corporation Law provides that if a shareholder of a corporation files a
derivative complaint, the corporation's board of directors may establish a
committee of disinterested directors or other disinterested persons to
investigate the complaint. The Indiana Business Corporation Law authorizes a
stay of any court proceedings on the complaint until the investigation of such
committee is completed. If the committee determines that pursuit of the claim
through the derivative proceeding would not be in the best interests of the
corporation, then the committee can terminate the derivative proceeding. The
conclusion of the committee is determinative unless the shareholder who filed
the complaint can demonstrate that the committee was not disinterested or did
not act in good faith.
CHANGE IN BANK CONTROL.
It is unlawful for a person to offer to buy shares, without the prior
approval of the Federal Reserve, if the purchase of such shares would give the
purchaser control of Lafayette Community Bancorp. Control is defined to mean the
direct or indirect power (1) to vote 25% or more of the outstanding shares, or
(2) to direct or cause the direction of the management and policies of Lafayette
Community Bancorp, whether through ownership of voting securities, by contract
or otherwise; provided that no individual will be deemed to control Lafayette
Community Bancorp solely on account of being a director, officer or employee of
Lafayette Community Bancorp. Persons who directly or indirectly own or control
10% or more of a company's outstanding shares are presumed to control the
company.
ARTICLES OF INCORPORATION.
Staggered board of directors. The board of directors is divided into three
classes, designated as Class I, Class II and Class III, with each class being
comprised of as nearly an equal number of directors as possible. The directors
in Class I hold office initially for a term of one year; the directors in Class
II hold office initially for a term of two years; and the directors in Class III
hold office initially for a term of three years. Upon
39
<PAGE> 41
expiration of the respective initial terms and thereafter, the directors in each
of the classes shall be elected to serve for terms of three years and until
their successors have been elected and qualified.
Staggered terms of directors tend to promote continuity of management
because only one-third of the directors will be elected at annual meetings. In
addition, the staggered terms will ensure that two-thirds of the directors have
at least one year of experience on the board of directors, which helps assure
that the board of directors consists of persons with experience.
Staggered terms may tend to perpetuate present management by making it more
difficult for a shareholder to make immediate changes in the composition of a
majority of the board of directors. Because the terms of only one-third of the
directors expire each year, it would require at least two annual meetings of
shareholders in order to effect a change in a majority of the directors.
Shareholders may find the provision for staggered terms disadvantageous to
the extent that it may tend to discourage or render it more difficult for a
person to acquire control because a person who acquires control of a company may
desire to remove and replace directors immediately.
This provision may not be altered, amended or repealed without the prior
approval of the holders of outstanding shares of stock representing at least 67%
of the votes entitled to be cast.
Residency Requirements for Directors. The Articles of Incorporation provide
that a director must reside within fifty (50) miles of the main office of
Lafayette Community Bancorp. This provision is consistent with our philosophy
that we should be responsive to and aware of the needs of the communities which
we serve. This provision may discourage a person from seeking to acquire control
of Lafayette Community Bancorp if such person did not reside within the State of
Indiana.
This provision may not be altered, amended or repealed without the prior
approval of the holders of outstanding shares representing at least 67% of the
votes entitled to be cast.
Removal of Directors. The Articles of Incorporation provide that a director
may only be removed from office with cause prior to the expiration of his term
only upon the affirmative vote of the holders of at least 67% of the outstanding
shares of stock entitled to vote for the election of directors.
This provision may not be altered, amended or repealed without the approval
of the holders of outstanding shares of stock representing at least 67% of the
votes entitled to be cast.
Certain Business Combinations. The Articles of Incorporation provide for
certain voting requirements for the approval by the board of directors or the
shareholders of certain business combinations. A "Business Combination" as
defined in the Articles includes any merger, consolidation or share exchange of
Lafayette Community Bancorp with or into any other corporation; any sale, lease,
exchange, pledge, transfer or other disposition, in one transaction or a series
of transactions, of a material portion of the assets of Lafayette Community
Bancorp; and any liquidation or dissolution of Lafayette Community Bancorp or
any material subsidiary of Lafayette Community Bancorp.
The Articles provide that the affirmative vote of the holders of at least
67% of the outstanding shares of stock entitled to vote is required to approve a
Business Combination if the Business Combination is not first approved by the
affirmative vote of at least two-thirds of the members of the board of directors
who have held office for at least one year. If, however, at least two-thirds of
such members of the board of directors approves, and recommends approval to
shareholders of, the proposed Business Combination, then only the affirmative
vote of a majority of the outstanding shares of stock entitled to vote is
required to approve the Business Combination.
The board of directors believes that it is in the best interests of
shareholders to encourage persons seeking to complete a Business Combination to
enter into negotiations with the board relating to such a transaction. The board
further believes that attempts to gain control of Lafayette Community Bancorp,
in certain instances, may not be beneficial to the interests of Lafayette
Community Bancorp and our shareholders because such attempts may be structured
in such a manner so as not to provide the board with adequate time and
information necessary to evaluate a proposal, to study alternative proposals and
to seek to obtain the best
40
<PAGE> 42
possible terms of any such Business Combination. We believe this provision will
permit us to have adequate time to consider appropriate financial and
non-financial factors permitted by law in determining whether to approve a
Business Combination.
This provision may tend to discourage or render it more difficult for a
person to acquire control of Lafayette Community Bancorp, even if such a
transaction might generally be favorable to the interests of shareholders. This
provision may also tend to perpetuate present management in that if a certain
number of directors do not approve a proposed Business Combination it may be
more difficult to obtain the 67% shareholder approval requirement. In addition,
this provision may give directors and minority shareholders veto power over a
Business Combination which a majority of the shareholders may believe is
desirable.
This provision may not be altered, amended or repealed without the approval
of the holders of outstanding shares of stock of Lafayette Community Bancorp
representing at least 67% of the votes entitled to be cast.
Non-Financial Considerations. In deciding whether to approve a Business
Combination or a tender or exchange offer, the Articles of Incorporation require
the board to consider a number of factors in addition to the adequacy of the
consideration to be paid. These factors may include the social and economic
effects of the transaction on Lafayette Community Bancorp, on its subsidiaries,
employees, depositors and customers and on the communities in which Lafayette
Community Bancorp or its subsidiaries may conduct business or be located. The
directors will be charged with the responsibility of inquiring into the business
and financial condition, results of operation and earnings potential of the
interested party and to include an examination of the debt service or other
financial obligations entered into by the interested or acquiring party, and the
effect such conditions will have on Lafayette Community Bancorp, its
subsidiaries and the community. Furthermore the competence, experience and
integrity of the management of the acquiring party will be thoroughly analyzed.
These factors may also include the adequacy of the consideration offered in
relation to the current market price of the outstanding securities of Lafayette
Community Bancorp, the current value of Lafayette Community Bancorp in a freely
negotiated transaction and the board's estimate of the future value of Lafayette
Community Bancorp as an independent going concern, including the unrealized
value of its properties and assets.
This provision may discourage or make more difficult an attempt by a
potential acquiring party to effect a Business Combination without giving the
board an opportunity to consider and approve the full consequences of the
proposed transaction. The board also believes that its obligation to evaluate a
Business Combination with an interested party extends beyond merely comparing
the consideration offered to the market price of Lafayette Community Bancorp's
stock at the time of the offer. While such a comparison is important, it is the
board's view that this one factor alone should not be determinative when
evaluating either the financial benefits or overall desirability of a particular
Business Combination. This provision recognizes the board's obligations to
evaluate a Business Combination in light of all relevant financial, as well as
non-financial, criteria, including the legal and economic effect on the
depositors and customers of Lafayette Community Bancorp and Lafayette Community
Bank, on the communities which Lafayette Community Bancorp and Lafayette
Community Bank serve and on Lafayette Community Bancorp's business and
properties.
The board believes that corporations in general, and banks in particular,
occupy positions of special trust in the communities in which they are located
and operate. It is a concern of the board that Lafayette Community Bancorp be
managed in the interests of the community which is served by the Lafayette
Community Bank and that Lafayette Community Bank maintain its integrity as a
locally-owned institution in the community. The board also believes that this is
in the best interests of Lafayette Community Bancorp and its shareholders.
This provision may not be altered, amended or repealed without the approval
of the holders of outstanding shares of stock of Lafayette Community Bancorp
representing at least 67% of the votes entitled to be cast.
41
<PAGE> 43
SALES AGENT
We have engaged Keefe, Bruyette & Woods, Inc. to serve as our sales agent
in connection with this offering, pursuant to a Sales Agency Agreement dated
, 2000. Keefe, Bruyette & Woods was chosen because of its general
experience in the financial services industry and because of its experience in
transactions involving community offerings.
Keefe, Bruyette & Woods has provided advice to us regarding the structure
of the offering and the marketing of our shares. Keefe, Bruyette & Woods will
use its best efforts to solicit subscriptions and purchase orders for our
shares.
Keefe, Bruyette & Woods has not prepared any report or opinion constituting
a recommendation or advice to us, nor has it prepared an opinion as to the
fairness of the offering price or the terms of the offering. Keefe, Bruyette &
Woods expresses no opinion as to the prices at which shares to be distributed in
connection with the offering may trade if and when they are issued at any future
time.
As compensation for their services, we have agreed to pay Keefe, Bruyette &
Woods as follows:
- an initial advisory fee of $10,000;
- a sales commission equal to 4.0% of the aggregate sales price of the
shares sold to investors who are included on the lists provided to Keefe,
Bruyette & Woods by our directors; and
- a sales commission equal to 7.0% of the aggregate sales price of the
shares sold to investors who are not included on the lists provided to
Keefe, Bruyette & Woods by our directors.
No commission will be charged by Keefe, Bruyette & Woods for orders
submitted by directors of Lafayette Community Bancorp. In addition, in the event
that selected dealers are used to facilitate sales of stock, such dealers will
be paid a fee in an amount competitive with underwriting discounts charged for
comparable amounts of stock sold at a comparable price per share in a similar
market environment. It is anticipated such fees may range from five percent to
seven percent of the amount of the order and will be paid by Keefe, Bruyette &
Woods from its fee, and not in addition to its fee.
We have agreed to indemnify, defend and hold harmless Keefe, Bruyette &
Woods, its officers, employees, agents and controlling persons, against all
claims, losses, actions, judgments, damages and expenses arising from its
engagement with Keefe, Bruyette & Woods, including liabilities under the federal
securities laws, provided that indemnification shall not be provided for such
matters if due to the gross negligence of Keefe, Bruyette & Woods, and to
contribute payments to Keefe, Bruyette & Woods should Keefe, Bruyette & Woods be
required to make payments in connection with any such claims or liabilities.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Indiana law provides for the indemnification of officers and directors
against liability and expenses that may be incurred by them in the event of an
action against them as a result of their service for or on behalf of Lafayette
Community Bancorp. Our regulations contain specific provisions with regard to
indemnification of our directors and officers, in compliance with the general
provisions of Indiana law. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, Lafayette Community Bancorp had 1,000
common shares outstanding held by David R. Zimmerman. Upon completion of this
offering, we will have a minimum of 901,000 and a maximum of 1,201,000 common
shares outstanding. All of these shares will be freely transferable without
42
<PAGE> 44
restriction of future registration, except for the approximately 210,000 common
shares purchased by Lafayette Community Bancorp directors, executive officers
and affiliates, as defined in Rule 144 of the Securities Act.
In general, under Rule 144, an affiliate may sell shares within any three
month period in an amount limited to the greater of 1% of the outstanding shares
or the average weekly trading volume of the shares over the four week period
immediately preceding the sale. Rule 144 sales are also subject to the holding
periods, notice requirements, manner of sale restrictions and information
requirements.
In addition to any other restrictions, Lafayette Community Bancorp
officers, directors and advisory board members have agreed with the sales agent
not to sell their shares for 180 days after the closing of the offering.
LEGAL MATTERS
The validity of the common shares offered with this prospectus has been
passed upon for Lafayette Community Bancorp by the law firm Krieg DeVault
Alexander & Capehart, LLP. Certain legal matters relating to this offering will
be passed upon for the sales agent by Squire, Sanders & Dempsey L.L.P.,
Cleveland, Ohio. Squire, Sanders & Dempsey L.L.P. will rely, as to all matters
of Indiana law, on the opinion of Krieg DeVault Alexander & Capehart, L.L.P.
EXPERTS
The balance sheet of Lafayette Community Bancorp as of December 31, 1999
and the related statement of operations, changes in shareholders' deficit and
cash flows for the period from January 29, 1999, the date of inception, to
December 31, 1999, included in this prospectus and in the Registration Statement
have been audited by Crowe, Chizek and Company, LLP, independent public
accountants, as set forth in their report dated March 10, 2000 which appears
elsewhere herein and in the Registration Statement. All such financial
statements have been included herein in reliance upon such reports given upon
the authority of such firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Upon the completion of this offering, Lafayette Community Bancorp will be
required to file annual, quarterly and current reports, and other information
with the SEC. You may read and copy the registration statement and any other
documents filed by Lafayette Community Bancorp at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information regarding
the operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Our filings are also available to the public at the SEC's
Internet site located at http://www.sec.gov.
This prospectus is part of the registration statement and does not contain
all of the information included in the registration statement. Whenever a
reference is made in this prospectus to any contract or other document of
Lafayette Community Bancorp, the reference may not be complete and you should
refer to the exhibits that are a part of the registration statement for a copy
of the contract or document.
After the offering, we expect to provide annual reports to our shareholders
that include financial information examined and reported on by our independent
public accountants.
Requests for these documents should be directed to David R. Zimmerman at
(765) 420-8111.
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<PAGE> 45
LAFAYETTE COMMUNITY BANCORP
(A DEVELOPMENT STAGE COMPANY)
LAFAYETTE, INDIANA
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
CONTENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
REPORT OF INDEPENDENT AUDITORS............................ F-2
BALANCE SHEET AS OF DECEMBER 31, 1999..................... F-3
STATEMENT OF OPERATIONS FOR THE PERIOD FROM JANUARY 29,
1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999.......... F-4
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT FOR THE
PERIOD FROM JANUARY 29, 1999 (DATE OF INCEPTION) TO
DECEMBER 31, 1999...................................... F-5
STATEMENT OF CASH FLOWS FOR THE PERIOD FROM JANUARY 29,
1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999.......... F-6
NOTES TO FINANCIAL STATEMENTS............................. F-7
FINANCIAL STATEMENTS AS OF MARCH 31, 2000
BALANCE SHEET AS OF MARCH 31, 2000........................ F-9
STATEMENT OF OPERATIONS FOR THE PERIOD FROM JANUARY 1,
2000 TO MARCH 31, 2000................................. F-10
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT FOR THE
PERIOD FROM JANUARY 1, 2000 TO MARCH 31, 2000.......... F-11
STATEMENT OF CASH FLOWS FOR THE PERIOD FROM JANUARY 1,
2000 TO MARCH 31, 2000................................. F-12
NOTE TO FINANCIAL STATEMENTS.............................. F-13
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Lafayette Community Bancorp
Lafayette, Indiana
We have audited the accompanying balance sheet of Lafayette Community
Bancorp (a corporation in the development stage) as of December 31, 1999 and the
related statements of operations, changes in shareholders' deficit and cash
flows for the period from January 29, 1999 (date of inception) to December 31,
1999. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lafayette Community Bancorp
(a corporation in the development stage) as of December 31, 1999, and the
results of its operations and its cash flows for the period from January 29,
1999 (date of inception) to December 31, 1999 in conformity with generally
accepted accounting principles.
Crowe, Chizek and Company LLP
Indianapolis, Indiana
March 10, 2000
F-2
<PAGE> 47
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Cash...................................................... $ 4,090
Other assets.............................................. 10,158
Deferred offering costs................................... 20,639
--------
$ 34,887
========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities
Note payable.............................................. $ 80,000
Accrued expenses.......................................... 26,123
--------
Total liabilities.................................... 106,123
--------
Shareholder's deficit
Common stock, no par value: 10,000,000 shares authorized;
1,000 shares issued and outstanding.................... 10,000
Preferred stock -- no par value; 1,000,000 shares
authorized; zero shares issued and outstanding......... --
Deficit accumulate during the development stage........... (81,236)
--------
Total shareholders' deficit.......................... (71,236)
--------
$ 34,887
========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 48
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 29, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
OPERATING EXPENSES
Interest expense.......................................... $ 827
Salaries and benefits..................................... 25,961
Occupancy and equipment................................... 2,636
Legal and professional fees............................... 47,410
Telephone................................................. 1,268
Other..................................................... 3,134
Total operating expenses............................. $ 81,236
========
Loss before income taxes.................................. (81,236)
Provision for income taxes................................ --
NET LOSS.................................................. $(81,236)
NET LOSS PER SHARE........................................ $(208.83)
========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 49
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE PERIOD FROM JANUARY 29, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
DEVELOPMENT
COMMON STOCK STAGE TOTAL
------------ ----------- -----
<S> <C> <C> <C>
BALANCE AT INCEPTION (JANUARY 29, 1999)................... $ -- $ -- $ --
Issuance of common stock.................................. 10,000 -- 10,000
Net loss.................................................. -- (81,236) (81,236)
------- -------- --------
BALANCE DECEMBER 31, 1999................................. $10,000 $(81,236) $(71,236)
======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 50
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 29, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(81,236)
Adjustments to reconcile net loss to net cash from
operating activities
Change in other assets................................. (10,158)
Change in accrued expenses............................. 26,123
Net cash from operating activities................... (65,271)
CASH FLOWS FROM FINANCING ACTIVITIES
Draws on note payable..................................... 80,000
Deferred offering costs................................... (20,639)
Sale of common stock...................................... 10,000
Net cash from financing activities................... 69,361
Net increase in cash........................................ 4,090
Cash at beginning of period................................. --
--------
CASH AT END OF PERIOD....................................... $ 4,090
========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 51
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Lafayette Community Bancorp (Bancorp) was incorporated on
January 29, 1999 to become a regulated bank holding company by chartering and
capitalizing a wholly owned Indiana bank subsidiary, Lafayette Community Bank
(Bank), to be located in Lafayette, Indiana. The Bancorp intends to raise
between $9,000,000 and $12,000,000 through the public offering of between
900,000 and 1,200,000 shares of the Company's common stock, at $10 per share.
Proceeds will be reduced by sales discounts and offering costs. Proceeds from
the offering will be used to capitalize the Bank and provide working capital.
Initiating business is contingent upon a number of factors including the
successful completion of the public offering and the receipt of required
regulatory approvals to establish the Bank
Nature of Business: The Bank intends to generate commercial, mortgage and
installment loans and receive deposits from customers located in Tippecanoe and
contiguous counties in Indiana.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and the disclosures provided and future results could differ.
Deferred Offering Costs: Deferred offering costs include legal, consulting
and accounting costs incurred in connection with the registration of the
Corporation's common stock. Those costs will be charged against the stock
proceeds or, if the offering is not successful, charged to expense.
Legal and Professional Fees: These expenses are costs incurred to organize
the Bancorp and to pursue gaining regulatory approval to charter the Bank. They
are being expensed as they are incurred.
Per Share Data: Loss per share is computed based upon the weighted average
number of shares outstanding during the period. The Bancorp was initially
capitalized on August 10, 1999. The number of shares used to compute the 1999
loss per share was 389.
NOTE 2 -- NOTE PAYABLE
Bancorp has a $250,000 bank line of credit with a balance of $80,000 at
December 31, 1999. The line was originated on August 24, 1999 and matures August
24, 2000. Principal and interest are payable at maturity. The line is secured by
the guarantee of four directors and is to be used to fund pre-opening
expenditures of the Bancorp.
NOTE 3 -- COMMITMENTS
Bancorp leases office space from a director on a month to month basis. Rent
is $250 per month and expense recorded during 1999 was $1,000. Bancorp entered
into a noncancellable lease agreement for branch office space for the Bank. The
lease term runs through March 31, 2005 and rent commences April 1, 2000. Annual
rental payments are $21,250.
Bancorp intends to enter into a lease agreement for a main office facility
with a partnership comprised of directors. The terms of the agreement have not
yet been finalized.
Effective January 1, 2000, Bancorp entered into an employment agreement
with the Chief Executive Officer. The agreement has a three year term and
automatically extends for one year on the anniversary date of the agreement,
absent action by either party. The agreement entitles the Chief Executive
Officer to a payment equal to 2.99 times his then base compensation if
termination occurs within two years of a "change in control", as defined.
F-7
<PAGE> 52
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999
NOTE 4 -- STOCK OPTION PLANS
Bancorp intends to establish director and employee stock option plans and
allocate 180,000 of the outstanding shares of Bancorp to be eligible for grant
under these plans. No options have been granted. Options will be granted by a
Board committee and will be at the greater of the offering price or the current
fair market value of Bancorp stock. The plans provide for a five year, pro rata
vesting schedule with respect to all options granted.
NOTE 5 -- INCOME TAXES
For the period ended December 31, 1999, Bancorp recorded a net loss of
$81,236. As the Bancorp is in the development stage, these expenses are not
currently deductible for income tax purposes. Upon initiation of business, these
expenses would be deductible and Bancorp expects to have operating loss
carryforwards for income tax purposes which could be utilized to offset
otherwise taxable income during a 15 year period. No tax benefit or deferred tax
asset is being recorded, as the value of these benefits depends upon the Bancorp
successfully initiating its business and becoming profitable.
F-8
<PAGE> 53
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash...................................................... $ 4,707
Other assets.............................................. 8,880
Deferred offering costs................................... 28,532
---------
Total Assets........................................... $ 42,119
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities
Note payable.............................................. $ 175,000
Accrued expenses.......................................... 31,532
---------
Total liabilities...................................... 206,532
---------
Shareholder's deficit
Common stock, no par value: 10,000,000 shares authorized;
1,000 shares issued and outstanding.................... 10,000
Preferred stock -- no par value; 1,000,000 shares
authorized; zero shares issued and outstanding......... --
Deficit accumulate during the development stage........... (174,413)
---------
Total shareholders' deficit............................ (164,413)
---------
Total Liabilities and Shareholders' Deficit............ $ 42,119
=========
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 54
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 2000 TO MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
OPERATING EXPENSES
Interest expense.......................................... $ 2,090
Salaries and benefits..................................... 59,449
Occupancy and equipment................................... 5,448
Legal and professional fees............................... 15,370
Telephone................................................. 1,198
Other..................................................... 9,622
Total operating expenses............................. $ 93,177
========
Loss before income taxes.................................. (93,177)
Provision for income taxes................................ --
NET LOSS.................................................. $(93,177)
NET LOSS PER SHARE........................................ $ 93.18
========
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE> 55
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE PERIOD FROM JANUARY 1, 2000 TO MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
DEVELOPMENT
COMMON STOCK STAGE TOTAL
------------ ----------- -----
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 2000............................... $10,000 $ (81,236) $ (71,236)
Net loss................................................. -- (93,177) (93,177)
------- --------- ---------
BALANCE AT MARCH 31, 2000................................ $10,000 $(174,413) $(164,413)
======= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE> 56
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 2000 TO MARCH 31, 2000
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(93,177)
Adjustments to reconcile net loss to net cash from
operating activities
Change in other assets................................. 1,278
Change in accrued expenses............................. 5,409
Net cash from operating activities................... (86,490)
CASH FLOWS FROM FINANCING ACTIVITIES
Draws on note payable..................................... 95,000
Deferred offering costs................................... (7,893)
Net cash from financing activities................... 87,107
CASH FLOWS FROM OPERATING ACTIVITIES
Net change in cash........................................ 617
Cash at beginning of period............................... 4,090
--------
CASH AT END OF PERIOD....................................... $ 4,707
========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE> 57
LAFAYETTE COMMUNITY BANCORP
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Lafayette Community Bancorp (Bancorp) was incorporated on
January 29, 1999 to become a regulated bank holding company by chartering and
capitalizing a wholly owned Indiana bank subsidiary, Lafayette Community Bank
(Bank), to be located in Lafayette, Indiana. The Bancorp intends to raise
between $9,000,000 and $12,000,000 through the public offering of between
900,000 and 1,200,000 shares of the Company's common stock, at $10 per share.
Proceeds will be reduced by sales discounts and offering costs. Proceeds from
the offering will be used to capitalize the Bank and provide working capital.
Initiating business is contingent upon a number of factors including the
successful completion of the public offering and the receipt of required
regulatory approvals to establish the Bank.
Nature of Business: The Bank intends to generate commercial, mortgage and
installment loans and receive deposits from customers located in Tippecanoe and
contiguous counties in Indiana.
NOTE 2 -- GENERAL
These financial statements were prepared in accordance with the
instructions for interim financial reporting and, therefore, do not include all
of the disclosures necessary for a complete presentation of financial position,
results of operations and cash flows in conformity with generally accepted
accounting principles. These financial statements have been prepared on a basis
consistent with the annual financial statements and include, in the opinion of
management, all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results of operations and financial
position at the end of and for the periods presented.
NOTE 3 -- PER SHARE DATA
Loss per share is computed based upon the weighted average number of shares
outstanding which is 1,000 shares.
F-13
<PAGE> 58
APPENDIX A
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------------
STOCK ORDER FORM & ------------------
CERTIFICATION FORM (ON THE REVERSE SIDE) ( ------------------)
Stock Information Center ------------------
--------------------------------------------------------------------------------------------------------------
DEADLINE: The Subscription Offering ends at 5:00 P.M. EASTERN TIME, , 2000. Your Stock Order
Form and Certification Form, properly executed and with the correct payment, must be received at the address
on the bottom of this form by this deadline, or it will be considered void.
--------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
(1) Number of Shares Price Per Share (2) Total Amount Due
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
X $ ------------------------ = $
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The minimum number of shares that may be subscribed for is . The maximum
amount any person may purchase is shares. has reserved the right
to reject all or any part of any subscription.
<TABLE>
<S> <C>
--------------------------------------------------------------------
(3) METHOD OF PAYMENT
--------------------------------------------------------------------
[ ] Enclosed is a check, bank draft or money order payable to
"ESCROW AGENT as Escrow Agent for " in the amount
of $ .
(For wire information, call )
--------------------------------------------------------------------
(6) STOCK REGISTRATION -- FORM OF STOCK OWNERSHIP
--------------------------------------------------------------------
[ ] Individual [ ] Uniform Gift to Minors
[ ] Joint Tenants [ ] Uniform Transfer to Minors
[ ] Tenants in Common [ ] Corporation
[ ] Partnership [ ] Individual Retirement
[ ] Fiduciary/Trust Account
(under Agreement
Dated )
--------------------------------------------------------------------
(3) METHOD OF PAYMENT PURCHASER INFORMATION
--------------------------------------------------------------------
[ ] Enclosed is a check, bank d (4) [ ] Check here if you are a director, officer or employee
"ESCROW AGENT as Escrow Age of or a member of such person's immediately
of $ . family.
(For wire information, call (5) If purchasing through a broker/dealer, please list the
name, address and phone number below:
-------------------------------
(6) STOCK REGISTRATION -- FORM
-------------------------------
[ ] Individual [ ] Uniform Gift to Minors NAME:
[ ] Joint Tenants [ ] Uniform Transfer to Minors --------------------------------------------------------------
[ ] Tenants in Common [ ] Corporation STREET ADDRESS:
[ ] Partnership [ ] Individual Retirement --------------------------------------------------------------
[ ] Fiduciary/Trust Account CITY:
(under Agreement --------------------------------------------------------------
Dated ) STATE:
--------------------------------------------------------------
ZIP CODE:
--------------------------------------------------------------
PHONE NUMBER:
--------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
<S> <C>
-------------------------------------------------------------------------------------------------------------------
Name Social Security or Tax I.D.
-------------------------------------------------------------------------------------------------------------------
Name Daytime Telephone
-------------------------------------------------------------------------------------------------------------------
Street Address Evening Telephone
-------------------------------------------------------------------------------------------------------------------
City State Zip Code County of Residence
-------------------------------------------------------------------------------------------------------------------
</TABLE>
NASD AFFILIATION (this section only applies to those individuals who meet the
delineated criteria)
[ ] Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of
the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which an
NASD member or person associated with an NASD member has a beneficial
interest. To comply with conditions under which an exemption from the NASD's
Interpretation With Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD affiliation box: (1) not to sell,
transfer or hypothecate the shares subscribed for herein for a period of
three months following the issuance and (2) to report this subscription in
writing to the applicable NASD member within one day of the payment
therefor.
--------------------------------------------------------------------------------
ACKNOWLEDGMENT By signing below, I acknowledge receipt of the Prospectus dated
. I understand that I may not change or revoke my order once it is
received by the Escrow Agent. Under penalties of perjury, I further certify
that: (1) the social security number or taxpayer identification number given
above is correct; and (2) I am not subject to backup withholding. You must cross
out this item, (2) above, if you have been notified by the Internal Revenue
Service that you are subject to back up withholding because of under-reporting
interest or dividends on your tax return. BY SIGNING BELOW, I ALSO ACKNOWLEDGE
THAT I HAVE NOT WAIVED ANY RIGHTS UNDER THE SECURITIES ACT OF 1933 AND THE
SECURITIES EXCHANGE ACT OF 1934.
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
SIGNATURE THIS ORDER FORM TOGETHER WITH THE CERTIFICATION ------------------------------------------------------------
FORM MUST BE SIGNED AND DATED. THIS ORDER IS NOT VALID IF Signature Title (if
THE STOCK ORDER FORM AND CERTIFICATE FORM ARE NOT BOTH applicable) Date
SIGNED. YOUR ORDER WILL BE FILLED IN ACCORDANCE WITH THE ------------------------------------------------------------
PROVISIONS OF THE PROSPECTUS. When purchasing a custodian, Signature Title (if
corporate officer, etc., include your full title. If you applicable) Date
need help completing this Form, you may call . ------------------------------------------------------------
</TABLE>
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
--------------------------------------------------------------------------------
A-1
<PAGE> 59
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
Date Rec'd Order # Batch #
--- / --- / --- ------------------ ------------------
OFFICE USE Check # Category
------------------ ------------------
Amount $ Initials
------------------ ------------------
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
-----------------------------------------------------------------------------------------------------------------------
OFFICE USE
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION FORM
(This Form Must Accompany A Signed Stock Order Form)
I ACKNOWLEDGE THAT THE COMMON STOCK, NO PAR VALUE ("COMMON STOCK"), OF
("THE COMPANY") IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY
INSURED, AND IS NOT GUARANTEED BY OR BY THE FEDERAL GOVERNMENT.
I further certify that, before purchasing the Common Stock of the Company,
I received a copy of the PROSPECTUS DATED, . BY EXECUTING THIS
CERTIFICATION FORM, I HAVE NOT WAIVED ANY OF MY RIGHTS UNDER THE SECURITIES ACT
OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934.
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------------------------------
Signature Signature
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(NOTE: IF SHARES ARE TO BE HELD JOINT, BOTH PARTIES MUST SIGN)
Date:
------------------------------------------------------
Return This Form to:
A-2
<PAGE> 60
STOCK OWNERSHIP GUIDE
INSTRUCTIONS: See your legal advisor if you are unsure about the correct
registration of your stock.
INDIVIDUAL -- The shares are to be registered in an individual's name only.
You must not list beneficiaries for this ownership.
JOINT TENANTS -- Joint tenants with right of survivorship identifies two or
more owners. When shares are held by joint tenants with rights of survivorship,
ownership of the shares will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. You may not list beneficiaries for this
ownership.
TENANTS IN COMMON -- Tenants in common may also identify two or more
owners. When shares are held by tenants in common, upon the death of one
co-tenant, ownership of the shares will be held by the surviving co-tenant(s)
and by the heirs of the deceased co-tenant. All parties must agree to the
transfer or sale of shares held by tenants in common. You may not list
beneficiaries for this ownership.
INDIVIDUAL RETIREMENT ACCOUNT -- Individual Retirement Account ("IRA")
holders may make share purchases from their self-directed IRA's. The
administrator or trustee will need to fill out the appropriate forms and return
them on a timely basis.
UNIFORM GIFT TO MINORS -- For residents of many states, shares may be held
in the name of a custodian for the benefit of a minor under the Uniform Transfer
to Minors Act. For residents in other states, shares maybe held in a similar
type of ownership under the Uniform Gift to Minors Act of the individual states.
For either type of ownership, the minor is the actual owner of the shares with
the adult custodian being responsible for the investment until the child reaches
legal age.
On the first line, print the first name, middle initial and last name of
the custodian, with the abbreviation "CUSF" and "Unif Tran Min Act" or "Unif
Gift Min Act" after the name. Print the first name, middle initial and last name
of the minor on the second "NAME" line. Standard U.S. Postal Service state
abbreviations should be used to describe the appropriate state. For example,
shares held by John Doe as custodian for Susan Doe under the Ohio Transfer to
Minors Act will be abbreviated John Doe, CUST Susan Doe Unif Trans Min Act, OH.
USE THE MINOR'S SOCIAL SECURITY NUMBER. Only one custodian and one minor may be
designated.
CORPORATION/PARTNERSHIP -- Corporation/Partnerships may purchase shares.
Please provide the Corporation/Partnership's legal name and Tax I.D.
FIDUCIARY/TRUST -- Generally, fiduciary relationships (such as trusts,
estate, guardianships, etc.) are established under a form of trust agreement or
pursuant to a court order. Without legal document establishing a fiduciary
relationship, your shares may not be registered in a fiduciary capacity.
INSTRUCTIONS: One the first "NAME" line, print the first name, middle
initial and last name of the fiduciary if the fiduciary is an individual. If the
fiduciary is a corporation, list the corporate title on the first "NAME" line.
Following the name, print the fiduciary "title" such as trustee, executor,
personal representative, etc.
On the second "NAME" line, print either the name of the maker, donor or
testator OR the name of the beneficiary. Following the name, indicate the type
of legal document establishing the fiduciary relationship (agreement, court
order, etc). In the blank after "Under Agreement Dated", fill in the date of the
document governing the relationship. The date of the document need not be
provided for a trust created by a will.
An example of fiduciary ownership of stock in the case of a trust is: John
D. Smith, Trustee for Thomas A. Smith Trust Under Agreement Dated 06/09/87.
A-3
<PAGE> 61
ITEM INSTRUCTION
ITEMS 1 AND 2 -- Fill in the number of shares that you wish to purchase and
the total payment due. The amount due is determined by multiplying the number of
shares by the subscription price of $ PER SHARE. THE MINIMUM PURCHASE IS
SHARES. The maximum amount any person may purchase is shares.
has reserved the right to reject all or any part of any
subscription.
ITEM 3 -- Payment for shares may be made by check, bank draft or money
order made payable to " " DO NOT MAIL CASH. Your funds will be
returned promptly with interest if the offering is terminated. Payment may also
be made by wire transfer to the Escrow Agent. The phone number of the Escrow
Agent is . THE CONTACT PERSON IS .
ITEM 5 -- Please check this box if you are director, officer or employee of
or a member of such person's immediately family.
ITEM 6 -- The stock transfer industry has developed a uniform system of
shareholder registrations that we will use in the issuance of common
stock. Print the name(s) in which you want the shares registered and the mailing
address of the registration. Include the first name, middle initial and last
name of the shareholder. Avoid the use of two initials. Please omit words that
do not affect ownership rights, such as "Mrs.", "Mr.", "Dr.", "special account",
etc.
Enter the Social Security or Tax I.D. number of one registered owner. This
registered owner must be listed on the first "NAME" line. Be sure to include
your telephone number because we will need to contact you if we cannot execute
your order as given. Review the Stock Ownership Guide and refer to the
instructions for Uniform Gift to Minors/Uniform Transfer to Minors and
Fiduciaries.
A-4
<PAGE> 62
APPENDIX B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") entered into this day of
, 2000, by and between ("Escrow Agent"),
, and ("Company"), .
W I T N E S S E T H:
WHEREAS, the Company is in the process of forming a financial institution
("Bank"); and
WHEREAS, in connection with the formation or acquisition of the Bank, the
Company is offering up to shares of its common stock ("Shares") at
$ per Share in accordance with the terms and conditions set forth in
the Prospectus ("Prospectus") dated , (the
"Offering"); and
WHEREAS, the Prospectus sets forth as a term and condition of the Offering
that those potential investors desiring to purchase Shares must, among other
things, deliver a check for the full amount of the purchase price of the Shares
for which such investor has subscribed to the Company; and
WHEREAS, the check for payment of the subscription price for the Shares
which the investor has subscribed must be payable to the Escrow Agent, and will
be deposited into the escrow account contemplated by this Agreement all as
described in the Prospectus; and
WHEREAS, in connection with the Offering, the Company desires the Escrow
Agent to serve as escrow agent and the Escrow Agent desires to serve as escrow
agent, as set forth in the Prospectus.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Escrow Agent hereby agree as follows:
1. The Escrow Agent, upon receipt of any monies from the Company in
connection with the Offering, shall hold such monies as escrow agent for the
Company as follows:
a. Such funds shall be held by the Escrow Agent until funds in the
principal sum of not less than $ as payment for the sale of
Shares have been deposited therein in accordance with the
terms of the Prospectus. Escrow Agent shall promptly invest the funds in
certificates of deposit; any short-term or money market fund
available to such account through Escrow Agent's Trust Department; U.S.
Treasury notes or bills; or such other obligation, which obligation shall
be limited to an obligation guaranteed by the United States of America or
an agency thereof and rated in one of the top two rating categories by a
rating agency of national recognition, is considered prudent to safeguard
principal, earn a reasonable rate of interest and have funds available
within a reasonable time for distribution when required.
b. At any time and from time to time after at least $ have
been deposited in the escrow account as set forth above, upon the written
instruction of the Company, such funds, or a portion thereof, shall be
immediately transferred by the Escrow Agent to a new account in the name of
the Company ("Company's Account"), and immediately thereafter, the Company
shall have the sole authority to exercise complete dominion of the
Company's Account and shall have the right to disburse any funds deposited
therein in accordance with its absolute discretion. Any interest accrued on
funds transferred from the escrow account to the Company's Account will be
transferred to the Company's Account after deducting therefrom the amount
of the fees owed to Escrow Agent for its services as set forth herein. If
such fees are more than the accrued interest or the escrow account, the
difference shall be paid by the Company.
c. If funds in the aggregate amount of $ have been deposited
in the escrow account as set forth above, then such funds or the remaining
funds in the escrow account shall be immediately
B-1
<PAGE> 63
transferred by the Escrow Agent to the Company's Account, and immediately
thereafter, the Company shall have sole authority to exercise complete
dominion of the Company's Account and shall have the right to disburse any
funds deposited therein in accordance with its absolute discretion. Any
interest accrued on funds transferred from the escrow account to the
Company's Account shall be transferred to the Company's Account after
deducting therefrom the amount of the fees owed to Escrow Agent for its
services as set forth herein. If such fees are more than the accrued
interest on the escrow account, the difference shall be paid by the
Company.
d. If the sum of $ is not deposited in the escrow account by
, which date may be extended to by the
Company, then the Escrow Agent by or if
extended by the Company shall deliver and pay the entire balance of the
escrow account plus accrued interest, after first deducting from the
accrued interest the amount of fees owed to the Escrow Agent for its
services as set forth herein, to each of the investors in accordance with a
letter of instruction from the Company (in the form of Exhibit A attached
hereto) designating the name and address of each investor who is entitled
to receive such funds at that time the Escrow Agent is required to make
disbursement thereof by the Company. If the Escrow Agent's fees pursuant to
this Agreement are more than accrued interest on the escrow account, the
difference will be paid by the Company.
2. The duties and responsibilities of the Escrow Agent will be limited to
those expressly set forth herein, to hold escrow items and to deliver to
recipients under such conditions as herein set forth. The Escrow Agent shall be
fully protected from liability to the Company when relying in good faith on any
written notices, demand certificate or document received from the Company which
it reasonably believes to be genuine. The Escrow Agent shall not be liable to
the Company for any loss or damage not caused by the gross negligence or willful
misconduct of the Escrow Agent.
3. The Escrow Agent shall be compensated for its services as set forth in
Exhibit B attached hereto. Payment of such fee shall be made by deducting the
amount of the fee from any interest accrued on funds in the escrow account. If
accrued interest on the escrow account is not sufficient to fully pay the Escrow
Agent's or fees due pursuant to this paragraph 3, the fee will be paid by the
Company. All fees, charges and expenses are due and payable on or before the
termination date hereof.
4. The Escrow Agent may resign by giving 30 days prior notice in writing to
the Company. Upon written notice from the Company to the Escrow Agent of the
appointment of the succeeding escrow agent, the escrow funds, less any fees due
as provided herein, shall be forwarded to such successor escrow agent. In the
event 60 days elapse from the date of the Escrow Agent's notice of resignation,
and no successor escrow agent is appointed, the Escrow Agent shall forward the
balance of the escrow funds to the Company.
5. This Agreement shall be construed, enforced and administered in
accordance with the laws of the State of Indiana.
B-2
<PAGE> 64
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers this day of , .
By:
--------------------------------------
---------------------------, President
By:
--------------------------------------
Printed:
--------------------------------------
Its:
--------------------------------------
B-3
<PAGE> 65
EXHIBIT A
<TABLE>
<S> <C>
To: ------------------------------------, Escrow Agent Transmittal No. ---------------------
Cumulative Shareholders Record Date ---------------------------------
Account No. --------------------------------------
Name ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUBSCRIPTION NUMBER OF AMOUNT OF
NUMBER SHARES CHECK SHAREHOLDER
------------ --------- ----- -----------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF TOTAL
SHARES DEPOSIT
--------- -------
<S> <C> <C> <C>
Total This
Transmittal:
--- ------
Previous
Total:
--- ------
Cumulative
Total:
--- ------
By: -------------------------------------------------
--------------------------------------, President
</TABLE>
<PAGE> 66
EXHIBIT B
SCHEDULE OF CHARGES
BASE FEE
The base fee for services is $ per year charged at the
rate of $ per calendar quarter. A minimum of four (4) quarters ($ )
will be charged regardless of the Escrow term.
EXTRA STATEMENTS
The customer will be charged $ for all statements other than those
regularly issued on a quarterly and annual basis.
ACTIVITY FEE
Investment in short term or money market funds is available to the account
through . There is a charge of $ for each purchase or
sale.
Cash disbursements are charged at a rate of $ each.
ADMINISTRATIVE HOURS
Administrative hours will be charged at a rate of $ per hour after the
first hour each calendar quarter.
TERMINATION
There is no termination fee.
<PAGE> 67
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Indiana Business Corporation Law and our Articles of
Incorporation and Bylaws, our officers and directors are entitled to
indemnification against all liability and expense with respect to any civil or
criminal claim, action, suit or proceeding in which they are wholly successful.
If they are not wholly successful and even if they are adjudged liable or
guilty, they are entitled to indemnification if it is determined, with respect
to a civil action, by disinterested directors, a special legal counsel, or a
majority vote of the shares of our voting stock held by disinterested
shareholders, that they acted in good faith in what they reasonably believed to
be in our best interests. With respect to any criminal action, it must also be
determined that they had no reasonable cause to believe their conduct unlawful.
Under the Indiana Business Corporation Law, a director of our company
cannot be held liable for actions that do not constitute wilful misconduct or
recklessness. In addition, our Articles of Incorporation provide that our
directors shall be immune from personal liability for any action taken as a
director, or any failure to take any action, to the fullest extent permitted by
the applicable provisions of the Indiana Business Corporation Law from time to
time in effect and by general principles of corporate law. In addition, a
director of our company against whom a shareholders' derivative suit has been
filed cannot be held liable if a committee of disinterested directors of our
company, after a good faith investigation, determines either that the
shareholder has no right or remedy or that pursuit of that right or remedy will
not serve the best interests of our company.
At present, there are no claims, actions, suits or proceedings pending
where indemnification would be required under the above, and we are not aware of
any pending or threatened claims, actions, suits or proceedings which may result
in a request for such indemnification.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the common stock being registered, other than
underwriting discounts and commissions. All amounts shown are estimates, except
the Commission registration fee and the NASD filing fee, and assume sale of
1,200,000 shares in the offering.
<TABLE>
<S> <C>
Commission registration fee................................. $ 3,168
NASD filing fee............................................. 1,700
NASDAQ OTC listing fee...................................... 1,000
Printing and mailing expenses............................... 45,000
Fees and expenses of counsel................................ 130,000
Accounting and related expenses............................. 50,000
Blue Sky fees and expenses (including counsel fees)......... 30,000
Miscellaneous............................................... 50,132
--------
Total..................................................... $311,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
We have obtained an operating expense loan from The Farmers and Merchants
Bank of Boswell, Indiana, in the amount of $250,000, to cover certain expenses,
as disclosed in the prospectus. To the extent that such transactions would be
deemed to involve the offer or sale of a security, the registrant would claim
exemption including, without limitation, the exemption provided by Section 4(2)
of the Securities Act of 1933, for such transactions. In addition, on August 9,
1999, we sold 1000 shares of our common stock to Mr. Zimmerman for $10.00 per
share. Such transaction was exempt from the registration requirements of the
Securities Act of 1933, as amended, as it did not involve any public offering.
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<PAGE> 68
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 Form of Sales Agency Agreement
3.1* Amended and Restated Articles of Incorporation of Lafayette
Community Bancorp
3.2* Bylaws of Lafayette Community Bancorp
5 Opinion of Krieg DeVault Alexander & Capehart, LLP
10.1* Form of 2000 Directors' Stock Option Plan
10.2* Form of 2000 Key Employees' Stock Option Plan
10.3 Form of Lease Agreement by and between LCB Investments, LLC
and Lafayette Community Bancorp
10.4* Lease Agreement, dated October 4, 1999, by and between
Kimzay Greenwoods, Inc. and Lafayette Community Bancorp
10.5* Employment Agreement, dated December 20, 1999 by and between
Lafayette Community Bancorp and David R. Zimmerman
10.6* Promissory Note and Guaranty, dated August 24, 1999, by and
between The Farmers and Merchants Bank of Boswell, Indiana
and Lafayette Community Bancorp
10.7 Form of Escrow Agreement
23.1* Consent of Krieg DeVault Alexander & Capehart, LLP (included
in Opinion filed as Exhibit 5)
23.2 Consent of Crowe, Chizek and Company LLP
24 * Powers of Attorney
27 Financial Data Schedule (EDGAR filing only)
</TABLE>
* Filed with the original Registration Statement.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) The registrant will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities 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 Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question 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.
(3) The registrant will:
(i) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant under Rule 424(b)(1), or
(4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective; and
(ii) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time
as the initial bona fide offering of those securities.
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<PAGE> 69
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
Lafayette, State of Indiana, on June 9, 2000.
LAFAYETTE COMMUNITY BANCORP
By: /s/ DAVID R. ZIMMERMAN
------------------------------------
David R. Zimmerman, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
indicated on June 9, 2000.
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<C> <S>
/s/ DAVID R. ZIMMERMAN President (Chief Executive Officer) and Director
------------------------------------------------
David R. Zimmerman
/s/ MICHAEL T. MOOTZ Vice President and Controller (principal financial
------------------------------------------------ and accounting officer)
Michael T. Mootz
/s/ JOHN R. BASHAM, II* Director
------------------------------------------------
John R. Basham, II
/s/ EDWARD CHOSNEK* Director
------------------------------------------------
Edward Chosnek
/s/ DONALD J. EHRLICH* Director
------------------------------------------------
Donald J. Ehrilich
/s/ STEVEN HOGWOOD* Director
------------------------------------------------
Steven Hogwood
/s/ CONNIE L. KOLESZAR* Director
------------------------------------------------
Connie L. Koleszar
/s/ THOMAS A. MCDONALD* Director
------------------------------------------------
Thomas A. McDonald
/s/ STEVEN W. NORFLEET* Director
------------------------------------------------
Steven W. Norfleet
*By: /s/ MICHAEL T. MOOTZ
------------------------------------------
Michael T. Mootz, Attorney-in-fact
</TABLE>
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