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Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-06369
CAMCO FINANCIAL CORPORATION
PROSPECTUS
for
Up to 628,967 Shares of Common Stock,
Stockholders of Par Value $1.00 Per Share,
To be Issued in Connection with the Merger of
GF Bancorp, Inc.
with and into Camco Financial Corporation
GF BANCORP, INC.
PROXY STATEMENT
for
The Special Meeting of
GF Bancorp, Inc.
to be held on December 16, 1997,
at 8:00 a.m., local time,
at the offices of GF Bancorp, Inc.
One North Plum Street, Germantown, OH 45327
(the "GFBC Special Meeting")
This Prospectus and Proxy Statement constitutes both a Prospectus of
Camco Financial Corporation, a Delaware corporation ("Camco"), with respect to
628,967 shares of common stock of Camco, par value $1.00 per share (the "Camco
Shares"), that may be issued in connection with the proposed merger of GF
Bancorp, Inc., a Delaware corporation ("GFBC"), with and into Camco (the
"Merger") and the Proxy Statement of GFBC for use in connection with the
solicitation of proxies by the Board of Directors of GFBC to be used at the GFBC
Special Meeting. Stockholders will be asked at the GFBC Special Meeting to
consider and act upon a proposal to adopt the Agreement of Merger and Plan of
Reorganization dated July 28, 1997 (the "Agreement"), by and among Camco, GFBC,
First Federal Savings Bank of Washington Court House, a federal savings bank and
wholly-owned subsidiary of Camco ("First Federal"), and Germantown Federal
Savings Bank, a federal savings bank and wholly-owned subsidiary of GFBC
("Germantown Federal"). After the Merger is effective, pursuant to the
Agreement, Germantown Federal will be merged with and into First Federal (the
"Bank Merger").
In accordance with the terms and subject to the conditions of the
Agreement, each of the outstanding shares of common stock of GFBC, $0.01 par
value per share (the "GFBC Shares"), will be canceled and extinguished at the
time the Merger becomes effective, as specified in the Certificate of Merger
filed with the Secretary of State of Delaware (the "Effective Time"), in
consideration and exchange for a number of Camco Shares based on the Market
Value (hereinafter defined) of the issued and outstanding Camco Shares for a
period of time prior to the closing of the Merger (the "Exchange Ratio"). The
Market Value generally will be the mean of the average of the daily closing bid
and asked prices of Camco Shares as reported by The Nasdaq Stock Market
("Nasdaq") for the twenty most recent trading days ending on the date three days
prior to the closing of the Merger, as adjusted for any stock split, stock
dividend, recapitalization, combination, readjustment or other reclassification.
At the time the Agreement was signed the Exchange Ratio was 1.616 and would have
remained 1.616 so long as the Market Value of Camco Shares was not greater than
$20.99 and not less than $15.51. Based on changes in the Market Value of Camco
Shares prior to October 30, 1997, if the closing of the Merger had occurred on
October 30, 1997, the Exchange Ratio would have been 1.473 Camco Shares for each
GFBC Share. Further fluctuations in the Market Value of Camco Shares could
result in an increase or a decrease in the number and value of Camco Shares to
be received by GFBC stockholders in the Merger. See "THE MERGER - Exchange of
GFBC Shares."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS AND PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE CAMCO SHARES THAT ARE BEING OFFERED PURSUANT TO THIS PROSPECTUS AND
PROXY STATEMENT AND THAT WILL BE ISSUED UPON THE CONSUMMATION OF THE MERGER ARE
NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER STATE OR FEDERAL AGENCY.
A SIGNED AND RETURNED PROXY IN THE FORM OF THE ENCLOSED PROXY (A
"PROXY") THAT DOES NOT CONTAIN VOTING INSTRUCTIONS WILL BE VOTED FOR THE
ADOPTION OF THE AGREEMENT. ANY GFBC STOCKHOLDER WHO WISHES TO EXERCISE
DISSENTERS' RIGHTS ("GFBC DISSENTING STOCKHOLDERS") MUST EITHER (1) NOT RETURN A
SIGNED PROXY, OR (2) SIGN AND RETURN THE PROXY, VOTING AGAINST, OR ABSTAINING
FROM VOTING ON, THE ADOPTION OF THE AGREEMENT. SEE "RIGHTS OF GFBC DISSENTING
STOCKHOLDERS."
The date of this Prospectus and Proxy Statement is October 30, 1997.
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AVAILABLE INFORMATION
Camco is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Camco has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Camco Shares to be issued to GFBC
stockholders in the Merger. As permitted by the rules and regulations of the
Commission, this Prospectus and Proxy Statement omits certain information,
exhibits and undertakings contained in the Registration Statement. Reference is
made to the Registration Statement and to the exhibits thereto for further
information. Statements contained herein concerning such documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto, as well as the
reports, proxy statements and other information filed with the Commission by
Camco under the Exchange Act, may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Camco is an electronic filer, and the Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission at the following Web address: (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Camco with the Commission
under the Exchange Act, or, where indicated, certain portions thereof, are
incorporated herein by reference:
1. Camco's Annual Report on Form 10-KSB for the year ended December 31,
1996 (the "Camco Form 10-KSB");
2. Camco's Amendment No. 1 to the Annual Report on Form 10-KSB for the
year ended December 31, 1996 (the "Camco 10-KSB Amendment");
3. Camco's Quarterly Reports on Forms 10-Q for the periods ended March
31, 1997, and June 30, 1997 (the "Camco Forms 10-Q");
4. Camco's Current Report on Form 8-K dated July 28, 1997 (the "Camco
Form 8-K");
5. The information contained in Camco's Annual Report to Shareholders
for the 1996 fiscal year (the "1996 Annual Report") on pages 10 through 46 under
the captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Report of Independent Certified Public Accountants" and
"Audited Consolidated Financial Statements;" and
6. The information contained in Camco's Proxy Statement for its Annual
Meeting of Shareholders held on May 27, 1997 (the "1997 Proxy Statement"), on
pages 2 through 9 under the captions "VOTING SECURITIES AND OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT"; "BOARD OF DIRECTORS"; "OTHER EXECUTIVE
OFFICERS"; AND "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS."
All documents filed by Camco pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and Proxy Statement
and prior to the GFBC Special Meeting should be deemed to be incorporated by
reference into this Prospectus and Proxy Statement and to be part hereof from
the date of filing of such documents. See "AVAILABLE INFORMATION."
Any statement contained in a document incorporated or deemed to be
incorporated by reference should be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained herein (or in any other
subsequently
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filed document that is or is deemed to be incorporated by reference herein)
modifies or supersedes such previous statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded.
THIS PROSPECTUS AND PROXY STATEMENT IS ACCOMPANIED BY CAMCO'S 1996
ANNUAL REPORT, ITS 1997 PROXY STATEMENT AND ITS FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1997. EXCEPT FOR THE INFORMATION PROVIDED IN CAMCO'S 1996 ANNUAL REPORT
AND 1997 PROXY STATEMENT UNDER THE CAPTIONS SPECIFICALLY IDENTIFIED ABOVE, NO
INFORMATION CONTAINED ELSEWHERE IN EITHER THE 1996 ANNUAL REPORT OR THE 1997
PROXY STATEMENT IS INCORPORATED BY REFERENCE IN, AND SUCH INFORMATION SHALL NOT
CONSTITUTE A PART OF, THIS PROSPECTUS AND PROXY STATEMENT.
The information relating to Camco contained in this Prospectus and
Proxy Statement should be read together with the information in the documents
incorporated by reference.
The Agreement, which is included in Appendix A, is hereby incorporated
by reference into this Prospectus and Proxy Statement.
THIS PROSPECTUS AND PROXY STATEMENT INCORPORATES BY REFERENCE CERTAIN
DOCUMENTS OF CAMCO WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE
DOCUMENTS (WITHOUT EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO THIS PROSPECTUS AND PROXY STATEMENT) ARE AVAILABLE WITHOUT
CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER TO WHOM A COPY OF THIS
PROSPECTUS AND PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST.
REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO ANTHONY J. POPP, SENIOR VICE
PRESIDENT, CAMCO FINANCIAL CORPORATION, C/O MARIETTA SAVINGS BANK, 226 THIRD
STREET, P.O. BOX 837, MARIETTA, OHIO 45750-0837, (614) 373-2886. IN ORDER TO
ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED NO
LATER THAN DECEMBER 8, 1997.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND PROXY STATEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY CAMCO OR GFBC. NEITHER THIS PROSPECTUS AND PROXY
STATEMENT, NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED PURSUANT TO THIS
PROSPECTUS AND PROXY STATEMENT, CONSTITUTES AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS AND PROXY
STATEMENT OR THE SOLICITATION OF A PROXY IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION.
THE DELIVERY OF THIS PROSPECTUS AND PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF CAMCO OR GFBC SINCE THE DATE
OF THIS PROSPECTUS AND PROXY STATEMENT.
TABLE OF CONTENTS
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PAGE
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SUMMARY........................................................................................................1
Introduction.............................................................................................1
Parties to the Agreement.................................................................................1
Special Meeting of GFBC Stockholders.....................................................................3
Background and Reasons for the Merger....................................................................3
Opinion of McDonald & Company............................................................................4
Terms of the Merger......................................................................................4
Recommendation of the Board of Directors of GFBC.........................................................5
Comparison of Rights of Holders of Camco Shares and GFBC Shares..........................................5
Exchange of Certificates Evidencing GFBC Shares..........................................................5
Resale of Camco Shares by Affiliates of Camco and GFBC...................................................6
GFBC Dissenters' Rights..................................................................................6
COMPARATIVE STOCK PRICES AND DIVIDENDS.........................................................................6
SELECTED CONSOLIDATED FINANCIAL DATA...........................................................................8
COMPARATIVE PER SHARE DATA....................................................................................10
INTRODUCTION..................................................................................................11
BACKGROUND AND REASONS FOR THE MERGER.........................................................................11
Camco...................................................................................................11
GFBC....................................................................................................12
Opinion of McDonald & Company...........................................................................13
Recommendation of the Board of Directors of GFBC........................................................16
THE MERGER....................................................................................................16
Exchange of GFBC Shares.................................................................................16
Fractional Shares.......................................................................................17
Exchange of Certificates Evidencing GFBC Shares.........................................................17
Representations, Warranties and Covenants...............................................................18
Conditions..............................................................................................18
Effective Time of Merger................................................................................19
Effective Time of Bank Merger...........................................................................19
Termination and Amendment...............................................................................19
Interests of Certain Persons............................................................................19
Management and Operations of Camco Following the Consummation of the Merger.............................20
Resale of Camco Shares by Affiliates of Camco and GFBC..................................................20
Income Tax Consequences.................................................................................20
Accounting Treatment....................................................................................21
RIGHTS OF GFBC DISSENTING STOCKHOLDERS........................................................................22
SPECIAL MEETING OF GFBC STOCKHOLDERS..........................................................................22
Date, Time and Place....................................................................................22
Purpose of Meeting......................................................................................23
Shares Outstanding and Entitled to Vote and Record Date.................................................23
Vote Required...........................................................................................23
Voting and Solicitation and Revocation of Proxies.......................................................23
</TABLE>
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GFBC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................24
General.................................................................................................24
Financial Condition at June 30, 1997....................................................................24
Comparison of Results of Operations for the Three Months Ended June 30, 1997 and June 30, 1996..........25
Financial Condition at March 31, 1997...................................................................25
Comparison of Results of Operations for the Years Ended March 31, 1997 and March 31, 1996...............26
Asset and Liability Management..........................................................................27
Liquidity...............................................................................................31
Capital Resources.......................................................................................31
Impact of Inflation and Changing Prices.................................................................31
Impact of Recent Accounting Pronouncements..............................................................32
BUSINESS OF GFBC..............................................................................................32
BUSINESS OF GERMANTOWN FEDERAL................................................................................33
Lending Activities......................................................................................33
Originations and Purchases of Loans and Mortgage-Backed Securities......................................36
Mortgage-Backed Securities and Investment Activities....................................................40
Sources of Funds........................................................................................41
Competition.............................................................................................43
Subsidiary Activities...................................................................................43
Personnel...............................................................................................43
CHANGE IN ACCOUNTANTS.........................................................................................43
SECURITY OWNERSHIP OF GFBC....................................................................................44
REGULATION OF GFBC............................................................................................45
General.................................................................................................45
OTS Regulation..........................................................................................45
Federal Deposit Insurance Corporation...................................................................47
Transactions with Affiliates and Insiders...............................................................48
Change in Control.......................................................................................48
Holding Company Regulation..............................................................................48
Federal Reserve Requirements............................................................................49
Federal Home Loan Bank System...........................................................................49
Federal Taxation........................................................................................49
Ohio Taxation...........................................................................................51
Delaware Taxation.......................................................................................51
DESCRIPTION OF CAMCO SHARES...................................................................................52
Authorized Stock........................................................................................52
Special Meetings........................................................................................52
Preemptive Rights.......................................................................................52
Voting Rights...........................................................................................52
Board of Directors......................................................................................52
Antitakeover Provisions in the Certificate and By-laws..................................................52
COMPARISON OF RIGHTS OF HOLDERS OF CAMCO SHARES AND HOLDERS OF GFBC SHARES....................................53
Authorized Stock........................................................................................53
Director Nominations....................................................................................53
Antitakeover Provisions.................................................................................54
ANTITAKEOVER STATUTES APPLICABLE TO CAMCO AND GFBC............................................................54
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION............................................................55
LEGAL MATTERS.................................................................................................56
EXPERTS.......................................................................................................56
OTHER MATTERS.................................................................................................56
GF BANCORP, INC. CONSOLIDATED FINANCIAL STATEMENTS...........................................................F-1
</TABLE>
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APPENDICES:
APPENDIX A Agreement of Merger and Plan of Reorganization
dated July 28, 1997, by and among Camco Financial
Corporation, GF Bancorp, Inc., First Federal
Savings Bank of Washington Court House and
Germantown Federal Savings Bank
APPENDIX B Opinion of McDonald & Company Securities, Inc.,
dated October 30, 1997
APPENDIX C Delaware General Corporation Law ss. 262,
"Appraisal Rights"
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SUMMARY
The following is a summary of some of the matters to be considered in
connection with the GFBC Special Meeting and is qualified in its entirety by
reference to the more detailed information contained elsewhere in this
Prospectus and Proxy Statement, the Appendices attached hereto and the other
documents referred to herein.
INTRODUCTION
On July 28, 1997, Camco, GFBC, First Federal and Germantown Federal
entered into the Agreement. If the Agreement is adopted by the affirmative vote
of the holders of a majority of the issued and outstanding GFBC Shares and if
all other conditions to the consummation of the Merger are satisfied, GFBC will
merge with and into Camco. At the Effective Time, each of the outstanding GFBC
Shares will be canceled and extinguished in consideration and exchange for the
number of Camco Shares indicated by the Exchange Ratio, subject to certain
adjustments based on changes in the Market Value of Camco Shares prior to the
date of the closing of the Merger (the "Closing Date"). See "THE MERGER -
Exchange of GFBC Shares."
The Exchange Ratio was determined as a result of arms-length
negotiations between the Boards of Directors of Camco and GFBC. Such
negotiations commenced when Camco responded to GFBC's invitation to submit an
acquisition offer and Camco made an offer to GFBC based upon the consideration
by Camco of a number of factors, including the book value and earnings per share
of GFBC, the asset quality of GFBC and the exchange ratios involved in similar
transactions. Following such negotiations and a due diligence review of each
party by the other, Camco and GFBC agreed that GFBC stockholders would receive,
in exchange for each GFBC Share outstanding at the Effective Time, the Exchange
Ratio, subject to certain adjustments based on changes in the Market Value of
the issued and outstanding Camco Shares.
As of July 25, 1997, the last trading date before the announcement of
the execution of the Agreement, the price paid for the most recent trade of
Camco Shares on Nasdaq equaled $18.75 per share. GFBC Shares are neither listed
on any exchange nor quoted on Nasdaq. Information about GFBC Shares is reported
on the OTC Bulletin Board. As of the date before the announcement of the
execution of the Agreement, the price paid for the most recent trade of GFBC
Shares known to the management of GFBC was $16.75 per share.
If the Merger had closed on October 30, 1997, the date of this
Prospectus and Proxy Statement, the Market Value of Camco Shares would have
equaled $23.02. If $23.02 is the Market Value of a Camco Share on the Closing
Date, the Exchange Ratio will be 1.473 and 1.473 Camco Shares with an aggregate
Market Value of $33.92 will be issued in exchange for each GFBC Share. The
Market Value of Camco Shares to be received in the Merger, however, is subject
to fluctuation. Fluctuations in the Market Value of Camco Shares could result in
an increase or a decrease in the value to be received by GFBC stockholders in
the Merger. See "THE MERGER - Exchange of GFBC Shares."
As of the date of this Prospectus and Proxy Statement, there were
316,082 GFBC Shares issued and outstanding, which would result in the issuance
of approximately 465,588 Camco Shares at the Effective Time, assuming an
Exchange Ratio of 1.473 Camco Shares for each GFBC Share.
PARTIES TO THE AGREEMENT
CAMCO. Camco is a multiple savings and loan holding company organized
under Delaware law in 1970. Its wholly-owned financial institution subsidiaries,
First Federal, Cambridge Savings Bank ("Cambridge Savings"), Marietta Savings
Bank ("Marietta Savings") and First Federal Bank for Savings ("First Savings"),
conduct business in Ohio and Kentucky. East Ohio Land Title Agency, Inc. ("East
Ohio Title"), another wholly-owned subsidiary of Camco, is engaged in the title
insurance agency business. Cambridge Savings and Marietta Savings each own 50%
of the outstanding stock of Camco Mortgage Corporation ("CMC"), a service
corporation engaged in mortgage lending and related activities. Marietta Savings
owns 100% of the outstanding stock of WestMar Mortgage Company ("WestMar"), a
service corporation engaged in mortgage lending activities, primarily in Wood
County, West Virginia. First Savings owns 100% of the stock of First S&L
Corporation, a Kentucky corporation which is currently inactive.
First Federal was acquired by Camco in 1988. First Federal has its main
office in Washington Court House, Ohio, and loan origination offices in
Chillicothe, Circleville and Wilmington, Ohio.
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Cambridge Savings, which was acquired by Camco in 1971, was
incorporated under Ohio law in 1885. The main office of Cambridge Savings is in
Cambridge, Ohio. Cambridge Savings has branch offices in Cambridge, Byesville
and Uhrichsville, Ohio. In July 1994, Cambridge Savings converted from an Ohio
savings and loan association to an Ohio savings bank.
Established in 1923 under Ohio law, Marietta Savings was acquired by
Camco in 1973. Marietta has its main office in Marietta, Ohio, and a branch in
Belpre, Ohio. In July 1994, Marietta Savings converted from an Ohio savings and
loan association to an Ohio savings bank.
First Savings, a federal savings bank, was acquired by Camco in 1996.
First Savings has its main office and a full-service branch office in Ashland,
Kentucky, and a full-service branch office in Russell, Kentucky.
First Federal, Cambridge Savings, Marietta Savings and First Savings
(collectively, the "Banks") are members of the Federal Home Loan Bank (the
"FHLB") of Cincinnati, and the accounts of each are insured up to applicable
limits by the Federal Deposit Insurance Corporation (the "FDIC") in the Savings
Association Insurance Fund (the "SAIF"). First Federal and First Savings are
subject to regulation, examination and supervision by the Office of Thrift
Supervision (the "OTS") and the FDIC. Cambridge Savings and Marietta Savings are
regulated by the Ohio Division of Financial Institutions (the "Division") and
the FDIC. Camco is regulated by the OTS as a savings and loan holding company.
The principal source of revenue for Camco on an unconsolidated basis is
dividends from the Banks. Camco, through the Banks, is principally engaged in
the business of making first mortgage loans to finance the purchase,
construction or improvement of residential or other real property. Camco also
invests in United States Government guaranteed mortgage-backed securities and
securities issued by the United States Government and agencies thereof. Funds
for loans and investments are obtained primarily from savings deposits, loan
principal repayments and borrowings from the FHLB of Cincinnati. At June 30,
1997, Camco had total assets of $489.8 million, total deposits of $371.0 million
and stockholders' equity of $46.9 million, or 9.6% of total assets.
The executive office of Camco is located at 814 Wheeling Avenue,
Cambridge, Ohio 43725, and its telephone number is (614) 432-5641.
GFBC. GFBC is a Delaware corporation organized on June 2, 1993, to
acquire all of the capital stock that Germantown Federal issued upon its
conversion from the mutual form of ownership to the stock form of ownership,
consummated on September 16, 1993 (the "Conversion").
Germantown Federal is a federally chartered savings bank located in
Germantown, Ohio. Germantown Federal was chartered in 1887 as an Ohio building
and loan association under the name Germantown Building and Savings Association.
In 1938, Germantown Federal adopted a federal charter and changed its name to
Germantown Federal Savings and Loan Association. Its present name, Germantown
Federal Savings Bank, was adopted in 1983 when it became a federal savings bank.
Germantown Federal's deposits are insured by the SAIF, and Germantown Federal is
a member of the FHLB of Cincinnati.
Germantown Federal is primarily engaged in the business of accepting
deposits from the general public and using those funds to originate mortgage
loans for the purchase and refinancing of single-family homes located in
Germantown, Ohio, and surrounding communities and for the purchase of
mortgage-backed and investment securities. Germantown Federal also makes deposit
loans, automobile loans, personal installment loans, construction loans, and
second mortgage loans.
Germantown Federal conducts operations through its main office located
at One North Plum Street, Germantown, Ohio, and an additional office located at
675 West Main Street, New Lebanon, Ohio. Germantown Federal's primary market for
savings and lending activities is the villages of Germantown and New Lebanon and
the surrounding Townships of German, Jackson and Perry in southwestern
Montgomery County, Ohio. At June 30, 1997, GFBC had total assets of $48.5
million, total deposits of $40.4 million, and stockholders' equity of $6.6
million, or 13.6% of total assets.
The executive office of GFBC is located at One North Plum Street,
Germantown, Ohio 45327, and its telephone number is (937) 855-4125.
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SPECIAL MEETING OF GFBC STOCKHOLDERS
The GFBC Special Meeting will be held at 8:00 a.m., local time, on
December 16, 1997, at the offices of GFBC, One North Plum Street, Germantown,
Ohio. At the GFBC Special Meeting, GFBC stockholders will be asked to consider
and act upon (i) a proposal to adopt the Agreement, and (ii) such other business
as may properly come before the GFBC Special Meeting and any adjournment
thereof. Only the holders of record of GFBC Shares outstanding at the close of
business on October 24, 1997 (the "GFBC Record Date"), will be entitled to
notice of and to vote at the GFBC Special Meeting and any adjournment thereof.
The affirmative vote of the holders of a majority of the outstanding GFBC Shares
is required to adopt the Agreement. As of the GFBC Record Date, 316,082 GFBC
Shares were outstanding and entitled to vote and were held of record by 170
stockholders. The affirmative vote, therefore, of the holders of 158,042 GFBC
Shares, voting in person or by proxy, will be necessary to adopt the Agreement.
As of the GFBC Record Date, the directors and executive officers of
GFBC owned or had voting power, in the aggregate, with respect to 84,936
outstanding GFBC Shares (excluding GFBC shares held in a fiduciary capacity), or
26.9% of the outstanding GFBC Shares. The directors and executive officers of
GFBC have agreed to vote all such GFBC Shares for the adoption of the Agreement.
Assuming the affirmative vote of all of such GFBC Shares, the affirmative vote
of the holders of an additional 73,106 GFBC Shares, representing an additional
23.1% of the outstanding GFBC Shares, will be necessary to adopt the Agreement.
See "SPECIAL MEETING OF GFBC STOCKHOLDERS - Shares Outstanding and Entitled To
Vote and Record Date; and - Vote Required."
A majority of the GFBC Shares present, in person or by proxy, at the
GFBC Special Meeting will constitute a quorum at the GFBC Special Meeting. Each
GFBC stockholder will be entitled to one vote for each GFBC Share held. Under
applicable law, shares that are held by a nominee for a beneficial owner and
which are represented in person or by proxy at the GFBC Special Meeting, but
which are not voted with respect to the adoption of the Agreement ("Non-votes"),
will be counted as present for purposes of establishing a quorum. The effect of
an abstention or Non-vote will be the same as a vote against the adoption of the
Agreement.
The GFBC Shares represented by each properly executed Proxy received
before the GFBC Special Meeting and not revoked prior to use will be voted at
the GFBC Special Meeting, or any adjournment thereof, as specified on such Proxy
or, in the absence of specific instructions to the contrary, will be voted FOR
the adoption of the Agreement. Any GFBC stockholder who has executed and
returned a Proxy may revoke such Proxy at any time before it is voted by filing
with GFBC, at the address set forth on the Notice of Special Meeting, written
notice of such revocation; by executing a later-dated Proxy that is received by
GFBC prior to the GFBC Special Meeting; or by attending the GFBC Special Meeting
and voting in person. The mere presence at the GFBC Special Meeting of a GFBC
stockholder who has executed and returned a Proxy will not revoke the Proxy. See
"SPECIAL MEETING OF GFBC STOCKHOLDERS - Voting and Solicitation and Revocation
of Proxies."
BACKGROUND AND REASONS FOR THE MERGER
CAMCO. Camco's strategic plan is to deliver a wide array of financial
products and services through a network of community-based financial
institutions which benefit from the centralized support provided by the holding
company structure while operating autonomously in their respective markets under
the direction of management personnel who maintain close ties to the communities
they serve. In pursuing growth, Camco has paid particular attention to
opportunities in geographic areas contiguous to its existing market areas, which
currently consist of portions of central and southern Ohio and northeastern
Kentucky. The acquisition of GFBC provides Camco the opportunity to expand First
Federal's market area into a more densely populated area of Ohio.
For a more detailed discussion of the factors considered by the Camco
Board in reaching its decision to approve the Agreement and the transactions
contemplated thereby, see "BACKGROUND AND REASONS FOR THE MERGER - Camco." Based
upon such factors, the directors of Camco concluded that the terms of the
Merger, as set forth in the Agreement, were fair to, and in the best interests
of, Camco and the Camco stockholders, and, on July 28, 1997, adopted a
resolution approving the Agreement.
GFBC. Since the Conversion in 1993, the Board of Directors of GFBC has
continually evaluated various strategies for increasing the comparatively low
returns on equity and assets of GFBC. In addition, the GFBC Board of Directors
has been concerned about the illiquid nature of the market for GFBC Shares. For
a more detailed discussion of the factors considered by the GFBC Board of
Directors in reaching its decision to adopt the Agreement and approve the
transactions
3
<PAGE> 10
contemplated thereby, see "BACKGROUND AND REASONS FOR THE MERGER - GFBC." Based
upon such factors and the receipt and review of the opinion of McDonald &
Company Securities, Inc. ("McDonald & Company"), the directors of GFBC concluded
that the terms of the Merger, as set forth in the Agreement, were fair to, and
in the best interests of, the GFBC stockholders and, on July 28, 1997, adopted a
resolution approving the Agreement. See "BACKGROUND AND REASONS FOR THE MERGER
Opinion of McDonald & Company." The GFBC Board of Directors therefore recommends
that GFBC stockholders vote FOR approval of the Agreement at the GFBC Special
Meeting.
OPINION OF MCDONALD & COMPANY
McDonald & Company has delivered written opinions to the Board of
Directors of GFBC to the effect that, as of July 28, 1997, and as of October 30,
1997, the Exchange Ratio was fair to GFBC stockholders from a financial point of
view. A copy of the opinion of McDonald & Company, dated as of October 30, 1997,
is attached hereto as Appendix B. The opinion should be read in its entirety for
a description of the procedures followed, assumptions and qualifications made
and matters considered by McDonald & Company and for a description of the
limitations of the opinion. See "BACKGROUND AND REASONS FOR THE MERGER - Opinion
of McDonald & Company."
TERMS OF THE MERGER
EXCHANGE OF GFBC SHARES. At the Effective Time, GFBC will merge with
and into Camco and Camco will be the continuing and surviving corporation. As a
result of the consummation of the Merger, each of the GFBC Shares will be
canceled and extinguished in consideration and exchange for a number of Camco
Shares, in accordance with the Exchange Ratio, which will be determined based on
the Market Value of Camco Shares for a period prior to the Closing Date. See
"THE MERGER - Exchange of GFBC Shares."
As of the date of this Prospectus and Proxy Statement, there were
316,082 GFBC Shares issued and outstanding and 4,623 GFBC Shares subject to
outstanding options, the exercise price of each of which was $10.00 (the "GFBC
Options").
Each of the GFBC Options that is not exercised prior to the Effective
Time will be assumed by Camco and become an option to purchase a number of Camco
Shares equal to the product of the number of shares subject to the GFBC Option
multiplied by the Exchange Ratio, and the exercise price of each such option
shall be an amount equal to the quotient of $10.00 divided by the Exchange
Ratio. See "THE MERGER - Exchange of GFBC Shares."
FRACTIONAL SHARES. No fractional shares of Camco will be issued in the
Merger. In lieu of any such fractional shares, Camco will pay to each holder of
GFBC Shares who otherwise would be entitled to receive a fraction of a Camco
Share an amount in cash based on the Market Value of a Camco Share.
REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of Camco, GFBC, First
Federal and Germantown Federal has made certain representations and warranties
in the Agreement in respect of various matters, including, but not limited to,
the corporate organization and financial condition of each. In addition, GFBC
and Germantown Federal have made certain covenants in respect of various
matters, including, but not limited to, the conduct of their businesses between
the date of the Agreement and the Effective Time. See "THE MERGER -
Representations, Warranties and Covenants."
CONDITIONS AND EFFECTIVE TIME. The consummation of the Merger is
subject to the satisfaction or waiver of a number of conditions, including, but
not limited to, the adoption of the Agreement by the affirmative vote of the
holders of a majority of the issued and outstanding GFBC Shares, the receipt of
all necessary regulatory approvals, the exercise of dissenters' rights by the
holders of no more than 7.5% of the outstanding GFBC Shares, the absence of any
material adverse change in the business, operations, properties, assets or
financial condition of Camco, GFBC, First Federal or Germantown Federal since
July 28, 1997, and GFBC having stockholders' equity immediately prior to the
Effective Time of at least $6.4 million, exclusive of certain expenses of the
Merger and accounting and other adjustments described in the Agreement.
Following the satisfaction or waiver of all such conditions, a Certificate of
Merger will be filed as soon as practicable with the Secretary of State of
Delaware (the "Secretary of State"), after which the Merger will be effective.
See "THE MERGER - Conditions; and - Effective Time of Merger."
Camco has submitted an application to the OTS seeking approval of
Camco's acquisition of Germantown Federal as a result of the Merger. Such
approval is expected to be received prior to the Special Meeting, and it is
currently anticipated that the Merger will be consummated in January 1998.
4
<PAGE> 11
TERMINATION. The Agreement may be terminated and the Merger abandoned
upon the occurrence of certain events, including, but not limited to, the mutual
agreement of the parties, the failure to satisfy or waive all conditions or the
failure to consummate the Merger on or before June 30, 1998. See "THE MERGER -
Termination and Amendment."
TAX AND ACCOUNTING TREATMENT. The following is a summary discussion of
the material federal income tax consequences of the Merger. This summary does
not purport to discuss all aspects of federal income taxation that may be
applicable to particular stockholders, some of whom may be subject to special
rules, nor does it address any aspects of state, local or foreign tax laws. This
summary is based upon current federal law, which is subject to change. GFBC
stockholders are advised to consult their own tax advisors.
The consummation of the Merger is conditioned upon the receipt of an
opinion of Camco's counsel to the effect that the Merger will constitute a
tax-free reorganization under Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"). Camco has received the opinion of Vorys,
Sater, Seymour and Pease that the Merger will constitute a reorganization for
federal income tax purposes and that no gain or loss will be recognized by the
stockholders of GFBC upon the issuance of Camco Shares in exchange for their
GFBC Shares. A gain or loss may be recognized, however, on cash received
pursuant to the exercise of dissenters' rights by GFBC stockholders. Neither the
opinion of counsel nor the discussion of federal income tax consequences in this
Prospectus and Proxy Statement is binding upon either the Internal Revenue
Service (the "IRS") or the courts. See "THE MERGER - Income Tax Consequences"
and "RIGHTS OF GFBC DISSENTING STOCKHOLDERS."
The Merger will be treated as a pooling of interests for accounting
purposes. Accordingly, under generally accepted accounting principles, on a
consolidated basis, the assets and liabilities of GFBC will be combined with
those of Camco and carried forward at historical cost. In addition, the
statements of income of GFBC will be retroactively combined with the statements
of operations of Camco on a consolidated basis. The obligations of Camco under
the Agreement are conditioned upon its receipt of an opinion from its
independent auditors that Camco may treat the Merger as a pooling of interests
for accounting purposes.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF GFBC
The Board of Directors of GFBC believes that the consummation of the
Merger is in the best interests of GFBC and its stockholders. Accordingly, the
Board of Directors of GFBC unanimously recommends that the stockholders of GFBC
vote FOR the adoption of the Agreement.
COMPARISON OF RIGHTS OF HOLDERS OF CAMCO SHARES AND GFBC SHARES
The rights of the holders of GFBC Shares are currently governed by
Delaware law and by GFBC's Certificate of Incorporation and Bylaws. Upon the
consummation of the Merger, GFBC's stockholders, except holders who exercise and
perfect dissenters' rights, will become stockholders of Camco, and their rights
will be governed thereafter by Delaware law and by the Third Restated
Certificate of Incorporation, as amended, of Camco (the "Camco Certificate") and
the By-laws of Camco.
The rights of holders of GFBC Shares and those of holders of Camco
Shares differ in some respects, but are similar in most material respects. The
differences are attributable to variations between the Camco Certificate and
By-laws and GFBC's Certificate of Incorporation and Bylaws. See "DESCRIPTION OF
CAMCO SHARES" and "COMPARISON OF RIGHTS OF HOLDERS OF CAMCO SHARES AND HOLDERS
OF GFBC SHARES."
EXCHANGE OF CERTIFICATES EVIDENCING GFBC SHARES
As soon as practicable after the consummation of the Merger, each GFBC
stockholder will be advised of such consummation by a letter accompanied by
instructions for use in surrendering the certificate or certificates evidencing
GFBC Shares to Registrar and Transfer Company, the exchange agent for the Merger
(the "Exchange Agent"). CERTIFICATES FOR GFBC SHARES SHOULD NOT BE FORWARDED TO
THE EXCHANGE AGENT UNTIL AFTER RECEIPT OF THE LETTER OF TRANSMITTAL AND SHOULD
NOT BE RETURNED TO GFBC WITH THE ENCLOSED PROXY. See "THE MERGER - Exchange of
Certificates Evidencing GFBC Shares."
5
<PAGE> 12
RESALE OF CAMCO SHARES BY AFFILIATES OF CAMCO AND GFBC
the Camco Shares to be issued upon the consummation of the Merger have
been registered with the Commission under the Securities Act and will be freely
transferable, except for Camco Shares received by persons who may be deemed to
be affiliates of GFBC or Camco. The term "affiliate" is defined in Rule 145 of
the Commission under the Securities Act and generally includes executive
officers, directors and controlling stockholders. Persons who are affiliates of
GFBC prior to the Effective Time or who are affiliates of Camco after the
Effective Time may not sell their Camco Shares, except pursuant to an effective
registration statement under the Securities Act covering the Camco Shares or in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. See "THE MERGER Resale of Camco Shares by
Affiliates of Camco and GFBC."
GFBC DISSENTERS' RIGHTS
Any stockholder of GFBC who does not vote in favor of the adoption of
the Agreement and who delivers a written demand for an appraisal by the Delaware
Court of Chancery (the "Chancery Court") of the fair value of such stockholder's
shares prior to the GFBC Special Meeting and in the manner provided by Delaware
General Corporation Law ("DGCL") ss. 262, a copy of which is attached hereto as
Appendix C, shall be entitled, if and when the Merger is consummated, and upon
strict compliance with certain procedures set forth in DGCL ss. 262, to receive
the fair value of the holders' GFBC Shares, if such dissenter is a stockholder
of GFBC at the Effective Time. A GFBC stockholder who wishes to submit a written
demand for an appraisal of the fair cash value of GFBC Shares should deliver
such notice to GF Bancorp, Inc., One North Plum Street, Germantown, Ohio 45327,
Attention: John T. Baker, President. See "RIGHTS OF GFBC DISSENTING
STOCKHOLDERS."
COMPARATIVE STOCK PRICES AND DIVIDENDS
Camco Shares are quoted on Nasdaq under the symbol "CAFI." At October
30, 1997, there were 826 holders of record of Camco Shares.
The following table sets forth the high and low bid prices for Camco
Shares on Nasdaq for the periods indicated and the cash dividends per Camco
Share declared during such periods:
<TABLE>
<CAPTION>
Cash Dividend
Quarter Ended (1) High Low Declared
- ----------------- ---- --- --------
<S> <C> <C> <C>
March 31, 1995 $13.29 $11.58 $0.0814
June 30, 1995 12.86 12.44 0.0858
September 30, 1995 16.70 12.86 0.0903
December 31, 1995 16.70 15.11 0.0948
March 31, 1996 17.15 15.11 0.0993
June 30, 1996 18.28 15.91 0.1038
September 30, 1996 18.41 16.63 0.1093
December 31, 1996 17.81 14.73 0.1140
March 31, 1997 16.53 14.71 0.1188
June 30, 1997 17.53 16.93 0.1235
September 30, 1997 21.86 17.25 0.1300
- ---------------------------
<FN>
(1) Amounts have been restated to give effect to a 5% stock dividend paid in
each of 1995, 1996 and 1997.
</TABLE>
The GFBC Shares are neither listed on any exchange nor quoted on The
Nasdaq Stock Market. Information about GFBC Shares is reported on the OTC
Bulletin Board. The last sale of GFBC Shares known to the management of GFBC as
of October 30, 1997, occurred on July 30, 1997, and the price per share in such
sale was $16.50.
6
<PAGE> 13
GFBC has declared the following cash dividends per GFBC Share for the
periods indicated:
Quarter Ended Cash Dividend Declared
- ------------- ----------------------
June 30, 1995 $0.07
September 30, 1995 0.07
December 31, 1995 0.07
March 31, 1996 0.07
June 30, 1996 0.07
September 30, 1996 0.08
December 31, 1996 0.08
March 31, 1997 0.10
June 30, 1997 0.12
September 30, 1997 0.12
The Agreement permits GFBC to pay a regular quarterly cash dividend of
not more than $0.12 per share in each calendar quarter between July 28, 1997,
and the Effective Time.
The following table sets forth the last reported sales prices of Camco
Shares and GFBC Shares and the equivalent per share price for a GFBC Share
giving effect to the Merger on (i) July 25, 1997, the last trading day preceding
public announcement of the signing of the Agreement; and (ii) October 30, 1997,
the last practicable date prior to the mailing of the Prospectus and Proxy
Statement.
<TABLE>
<CAPTION>
Price per Price per Equivalent price per
Camco Share GFBC Share GFBC Share (1)
----------- ---------- --------------
<S> <C> <C> <C>
July 25, 1997 $18.75 $16.75 $30.30
October 30, 1997 $23.00 $16.50 $33.88
- --------------------
<FN>
(1) The equivalent price per GFBC Share at each specified date represents
the closing market price of a Camco Share on that date multiplied by
the Exchange Ratio, assuming an Exchange Ratio of 1.616 on July 25,
1997, and 1.473 on October 30, 1997. See "THE MERGER - Exchange of GFBC
Shares."
</TABLE>
7
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain information regarding the
financial condition and earnings of Camco and GFBC at the dates and for the
periods indicated. The data for the period ended June 30, 1997, is derived from
unaudited consolidated financial statements. However, in the opinion of the
respective managements of Camco and GFBC, all adjustments necessary for a fair
presentation of consolidated financial condition and results of operations have
been made. The following tables should be read in conjunction with the
consolidated financial statements and other financial information of Camco and
GFBC, respectively, included elsewhere herein.
<TABLE>
<CAPTION>
CAMCO At June 30, At December 31,
--------------------- -------------------------------------------------------
BALANCE SHEET DATA: 1997 1996 1996 1995 1994 1993 1992
------ ------ ------- -------- -------- -------- ---------
(Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets $489,833 $352,576 $469,450 $346,469 $324,627 $277,098 $269,997
Investment securities - at cost 23,800 18,987 21,844 19,283 27,333 29,104 26,158
Investment securities available
for sale - at market 4,689 3,136 5,174 3,131 2,978 - -
Mortgage-backed securities - at
cost 9,870 4,449 10,700 5,002 5,452 9,315 12,121
Mortgage-backed securities
available for sale - at market 504 802 742 985 1,464 - -
Loans receivable - net 409,958 295,544 387,992 291,233 260,991 198,608 184,821
Deposits 371,032 291,288 358,009 286,574 266,861 252,219 249,776
FHLB advances 65,399 27,960 57,354 26,078 26,511 1,500 114
Stockholders' equity, restricted 46,858 29,337 45,013 27,693 24,741 19,826 16,965
Six months ended June 30, Year ended December 31,
------------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- -------- -------- -------- --------
INCOME STATEMENT DATA: (Unaudited) (In thousands)
Total interest income $ 18,047 $ 13,327 $ 29,260 $ 25,440 $ 19,759 $ 18,900 $ 21,937
Total interest expense 10,033 7,187 16,046 14,257 10,233 9,752 12,566
-------- --------- -------- -------- -------- ------- -------
Net interest income 8,014 6,140 13,214 11,183 9,526 9,238 9,371
Provision for loan losses 108 42 111 143 97 310 352
Other income 1,704 1,762 3,596 3,293 2,578 3,106 1,999
General, administrative and other
expense 5,673 4,698 12,910(1) 8,775 8,154 6,963 6,752
Federal income taxes 1,303 1,075 1,496 1,910 1,311 1,747 1,444
-------- -------- -------- -------- -------- ------- -------
Net earnings $ 2,634 $ 2,087 $ 3,013 $ 3,648 $ 2,542 $ 3,324 $ 2,531
======== ======== ======== ======== ======== ======= =======
Earnings per share(2) $ .82 $ .96 $ 1.24(3) $ 1.67 $ 1.33 $ 1.75 $ 1.34
At or for the six
months ended June 30, At or for the year ended December 31,
--------------------- -------------------------------------------------------
SELECTED FINANCIAL RATIOS: 1997 1996 1996 1995 1994 1993 1992
------ ------ ------- -------- -------- -------- ---------
(Unaudited)
Return on average assets(4) 1.10% 1.19% 0.74%(5) 1.09% 0.84% 1.22% 0.93%
Return on average equity(4) 11.47 14.64 8.29(5) 13.91 11.41 18.07 15.96
Average equity to average
assets(4) 9.56 8.16 8.71 7.81 7.41 6.72 5.85
Dividend payout ratio(6) 29.55 21.17 34.52 21.07 22.63 17.53 15.42
<FN>
- --------------------------
(1) Includes a one-time assessment of $1.8 million to recapitalize the SAIF.
(2) Based on 3,214,194 and 2,171,912 weighted average shares outstanding
for the six months ended June 30, 1997 and 1996, respectively and
2,428,902, 2,172,309, 1,904,938, 1,900,864 and 1,895,324 weighted
average shares outstanding for the years ended December 31, 1996, 1995,
1994, 1993 and 1992, respectively. In October 1996, 985,874 Camco
Shares were issued in connection with the acquisition of First Savings.
The acquisition was treated as a purchase for accounting purposes.
(3) Excluding the effect of a one-time assessment to recapitalize the SAIF
and assuming a 34% marginal tax rate, the earnings per share would have
been $1.52.
(4) Ratios are based upon the mathematical average of the balances at the
beginning and the end of the period.
(5) Excluding the effect of a one-time assessment to recapitalize the SAIF,
the return on average assets and the return on average equity would
have been 1.54% and 16.10%, respectively.
(6) Represents dividends per share divided by earnings per share.
</TABLE>
8
<PAGE> 15
<TABLE>
<CAPTION>
GFBC At June 30, At March 31,
------------------- --------------------------------------------------------------
BALANCE SHEET DATA: 1997 1996 1997 1996 1995 1994 1993
------- ------- ------- ------- -------- ------- --------
(Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets $48,502 $48,461 $48,122 $48,982 $ 46,541 $49,209 $ 47,095
Securities held to maturity - at cost - - - - 7,501 7,011 6,021
Securities available for sale - at market 1,500 3,993 2,000 4,493 - - -
Mortgage-backed securities held to
maturity - at cost - - - - 12,030 11,226 9,574
Mortgage-backed securities available
for sale - at market 8,765 9,920 8,848 10,265 -
Loans receivable - net 33,658 30,067 32,524 29,411 22,206 21,641 22,365
Deposits 40,384 40,598 40,369 41,090 39,866 42,850 43,573
FHLB advances 1,000 1,000 1,000 1,000 - - -
Stockholders' equity 6,577 6,352 6,399 6,316 6,223 5,973 3,051
<CAPTION>
Three months
ended June 30, Year ended March 31,
------------------- --------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- ------- ------- -------- ------- --------
INCOME STATEMENT DATA: (Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income $ 906 $ 877 $ 3,560 $ 3,465 $ 3,194 $ 3,146 $ 3,434
Total interest expense 441 440 1,760 1,757 1,764 1,811 2,205
------- ------- ------- ------- -------- ------- --------
Net interest income 465 437 1,800 1,708 1,431 1,335 1,229
Provision for loan losses - - 33 - - 2 (1)
Noninterest income 27 30 122 119 117 107 442
General, administrative and other
expense 314 327 1,598(1) 1,279 1,224 1,080 1,075
Income tax provision 59 48 93 177 99 122 214
Cumulative effect of accounting
change(2) - - - - (72)
------- ------- ------- ------- -------- ------- --------
------- --------
Net earnings $ 119 $ 92 $ 198 $ 371 $ 225 $ 238 $ 311
======= ======= ======= ======= ======== ======= ========
Earnings per share(3) $ .41 $ .32 $ .67(4) $ 1.24 $ .73 $ .39 N/A
<CAPTION>
At or for the three
SELECTED FINANCIAL RATIOS: months ended June 30, At or for the year ended March 31,
------------------- --------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- ------- ------- -------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets(5) 0.99% 0.76% 0.41% 0.78% 0.47% 0.49% 0.65%
Return on average equity(5) 7.28 5.74 3.07 5.85 3.67 5.06 10.21
Average equity to average assets(5) 13.57 13.21 13.30 13.27 12.72 9.71 6.40
Dividend payout ratio(7) 29.27 21.88 49.25 22.58 - - N/A
<FN>
(1) Includes a one-time assessment of $269,558 to recapitalize the SAIF.
(2) The cumulative effect of accounting change reflects the adoption of
Statement of Financial Accounting Standard ("SFAS") No. 109 for fiscal
year 1993.
(3) Based on 292,958 weighted average shares outstanding for each of the
three months ended June 30, 1997 and 1996, respectively, and 292,958,
299,867, 308,376 and 308,376 weighted average shares outstanding for
the years ended March 31, 1997, 1996, 1995 and 1994. 1994 earnings per
share is based on net income subsequent to the Conversion on September
16, 1993.
(4) Excluding the effect of a one-time assessment to recapitalize the SAIF
and assuming a 34% marginal tax rate, the earnings per share would have
been $1.24.
(5) Ratios are based upon the daily average balances for the period.
(6) Excluding the effect of a one-time assessment to recapitalize the SAIF,
the return on average assets and the return on average equity would
have been 0.77% and 5.82%, respectively.
(7) Represents dividends per share divided by earnings per share.
</TABLE>
9
<PAGE> 16
COMPARATIVE PER SHARE DATA
The following table sets forth the book value per common share, cash
dividends paid and earnings per common share of (a) Camco on a historical basis;
(b) GFBC on a historical basis; and (c) Camco on a pro forma basis adjusted to
give effect to the Merger as if the Merger had been consummated as of the dates
and at the beginning of the periods presented. The following information should
be read in conjunction with the historical consolidated audited financial
statements and consolidated unaudited financial information of Camco and GFBC
included herein or incorporated by reference in this Prospectus and Proxy
Statement. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." The information presented below is not necessarily indicative of
the results which actually would have been obtained if the Merger had been
consummated in the past or which may be obtained in the future.
<TABLE>
<CAPTION>
Six months Year ended
ended June 30, 1997 December 31,
------------------- -------------------------------------
1996 1995 1994
--------- -------- -------
<S> <C> <C> <C> <C>
CAMCO HISTORICAL DATA(1)
Earnings per common share $ 0.82 $ 1.24 $ 1.68 $ 1.33
Cash dividends paid per common share 0.25 0.43 0.36 0.30
Book value per common share(2) 14.58 14.00 13.38 11.69
<CAPTION>
Six months
ended June 30, 1997 Year ended March 31,
------------------- -------------------------------------
1997 1996 1995
--------- -------- -------
<S> <C> <C> <C> <C>
GFBC HISTORICAL DATA(3)
Earnings per common share $ 0.80 $ 0.67 $ 1.24 $ 0.73
Cash dividends paid per common share 0.22 0.33 0.28 -
Book value per common share(2) 22.45 21.84 21.56 20.18
<CAPTION>
Six months Twelve months ended
ended June 30, 1997 December 31
------------------- -------------------------------------
1996 1995 1994
--------- -------- -------
<S> <C> <C> <C> <C>
PRO FORMA COMBINED(4)
Earnings per common share $ 0.77 $ 1.11 $ 1.54 $ 1.18
Cash dividends per common share(5) 0.37 0.63 0.53 0.44
Book value per common share(2) 14.64 14.12 13.56 12.14
- ------------------------------
<FN>
(1) Earnings, dividends and book value per common share have been restated
to give effect to a 5% stock dividend paid in each of 1995, 1996 and
1997. Earnings per common share and cash dividends paid per common
share are based on weighted average common shares outstanding totaling
3,214,194 for the six months ended June 30, 1997, and 2,428,902,
2,172,309 and 1,904,938 for each of the years ended December 31, 1996,
1995 and 1994, respectively.
(2) At period end.
(3) Based on 292,958 weighted average shares outstanding for each of the
three months ended June 30, 1997 and 1996, respectively, and 292,958,
299,867 and 308,376 weighted average shares outstanding for the years
ended March 31, 1997, 1996 and 1995.
(4) Pro forma combined earnings, dividends, and book value per common share
is based on Camco's historic earnings, dividends and book value per
common share in addition to GFBC's historical fiscal operating results
and assumes the issuance of 465,588 Camco Shares, based upon an
Exchange Ratio of 1.473 Camco Shares for each GFBC Share.
(5) Camco's historical dividends, adjusted to give effect to stock
dividends, multiplied by an Exchange Ratio of 1.473.
</TABLE>
10
<PAGE> 17
INTRODUCTION
This Prospectus and Proxy Statement constitutes both a Prospectus of
Camco with respect to the issuance of up to 628,967 Camco Shares in connection
with the Merger and the Proxy Statement of GFBC for use in connection with the
solicitation of proxies by the Board of Directors of GFBC to be used at the GFBC
Special Meeting. This Prospectus and Proxy Statement is being mailed to
stockholders of GFBC commencing on or about November 10, 1997.
All information contained in this Prospectus and Proxy Statement
relating to Camco has been furnished by Camco. All information relating to GFBC
and Germantown Federal has been furnished by GFBC. The party furnishing any such
information is responsible for the accuracy thereof.
BACKGROUND AND REASONS FOR THE MERGER
CAMCO
Camco's strategic plan is to deliver a wide array of financial products
and services through a network of community-based financial institutions which
benefit from the centralized support provided by the holding company structure
while operating autonomously in their respective markets under the direction of
management personnel who maintain close ties to the communities they serve.
Since adopting the holding company structure in 1970 with a single thrift
charter, the Camco group has expanded over the years to include four
geographically distinct financial institution charters and several subsidiaries
engaged in mortgage-related activities.
Camco identified GFBC as a desirable acquisition for a variety of
reasons, including the competitive features of the market area and the
opportunities for profitable market expansion. Germantown Federal is based in
Montgomery County, Ohio, in the southwestern part of the Dayton metropolitan
area. From its offices in Germantown and New Lebanon, Germantown Federal is
positioned to serve the population centers in southern Montgomery County,
situated on the Interstate 75 corridor between Dayton and Cincinnati, and the
south Dayton suburban communities, such as Kettering and Beavercreek. These
areas have grown in recent years, linking the Greater Cincinnati and Greater
Dayton areas.
The Germantown Federal offices will become branches of First Federal,
which is headquartered in Washington Court House, the county seat of Fayette
County in south-central Ohio. In 1992, First Federal opened a loan origination
office in Clinton County, Ohio, west of Fayette County. Montgomery County is
adjacent to Clinton County, continuing First Federal's westward expansion into
more densely populated areas.
Camco believes that market conditions in the southern Montgomery County
area are conducive to increased mortgage lending and deposit growth and that
Germantown Federal, as part of First Federal, will be able to compete more
effectively than it could independently. First Federal has an experienced
management team which will provide the support necessary to expand the range of
products and services. As part of First Federal's branch network, the Germantown
Federal offices will benefit from the infrastructure of a larger bank and the
support it derives from Camco's holding company structure, enhancing the
products and services available at the Germantown Federal offices. In addition,
the ability to eliminate duplicative functions, such as data processing systems,
regulatory reporting, compliance and accounting functions, will produce cost
savings.
Germantown Federal has historically been a portfolio lender, whereas
First Federal, in recent years, has been very active in the secondary market.
Camco believes that its consolidated mortgage banking revenue can be enhanced
through the expansion of First Federal's mortgage banking operation into
Montgomery County. Introduction of Camco's "AdvantageBanking" program, which
emphasizes exceptional quality and a broad array of services at a fair price,
offers an additional opportunity to expand lending and deposit relationships
with its existing Germantown Federal customer base and to attract new customers.
Another potential impact of the Merger is increased liquidity of Camco
Shares due to the issuance of additional Camco Shares. As a result of the
Merger, the number of Camco stockholders will increase by approximately 170 and
the number of outstanding Camco Shares will increase by up to 628,967 shares, or
19.6%.
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Based upon all of the foregoing, the directors of Camco concluded that
the terms of the Merger, as set forth in the Agreement, were fair to, and in the
best interests of, the Camco stockholders and, on July 28, 1997, adopted a
resolution approving the Agreement.
GFBC
Since the consummation of the Conversion in 1993, the Board of
Directors of GFBC has continually evaluated various possible strategies for
increasing the comparatively low returns on equity and assets of GFBC. For the
years ended March 31, 1996, 1995 and 1994, for example, the returns on equity of
GFBC equaled 5.85%, 3.67% and 5.06%, respectively. For the same years, the
returns on assets of GFBC equaled .78%, .47% and .49%, respectively. The Board
of Directors was not satisfied with such returns.
Some specific strategies to increase such returns were identified and
pursued. Germantown Federal's mortgage loan operations were reorganized in 1994
in an attempt to increase loan volume. Although some increase was experienced,
it did not reach the Board of Directors' expectations. In fiscal years 1996 and
1997, automated teller machines ("ATMs") were installed at both offices in an
attempt to retain existing customers and attract new customers. The investment
in the ATMs and the expense of operating them has negatively affected operating
results, and account growth has been below expectations. Both of these
strategies have had limited success, and further improvement is uncertain.
GFBC also attempted to increase returns to stockholders by repurchasing
GFBC Shares. GFBC was able to repurchase only 15,418 shares at a price
considered by the Board of Directors of GFBC to be advantageous for the
stockholders of GFBC. The GFBC Shares are currently held by approximately 170
stockholders of record, and there is very little trading in GFBC Shares, which
the directors recognized as another disadvantage for GFBC stockholders.
The Board of Directors considered, therefore, whether a continued
attempt to implement a long-term strategy to improve earnings would be in the
best interests of stockholders in view of the additional expense associated
therewith, the uncertainty of ultimate success and the continued lack of
liquidity for GFBC Shares for an unforeseeable period of time even if earnings
continued to increase. As part of such consideration, the directors noted the
consolidation of the thrift and bank industries and the ways in which the larger
thrifts and banks were able to compete more effectively for deposits and loans
through the offering of additional products and services that small, community
thrifts are unable to provide. The directors also considered legislation being
considered that might permit banks to provide additional services and would
eliminate the federal thrift charter.
As the Board of Directors considered the foregoing matters, it decided
to consult McDonald & Company with respect to alternatives for increasing
stockholder value through a strategic merger with another financial institution
or the sale of GFBC. Upon a comparison of the returns to stockholders over time
that might be achieved if GFBC continued to operate independently, if GFBC
merged with an institution of similar size and, in the current merger and
economic environment, if GFBC entered into a strategic combination with a larger
institution, the Board of Directors determined in March 1997 to engage McDonald
& Company to investigate possible strategic merger alternatives.
With the assistance of McDonald & Company, the directors identified
certain thrift and bank holding companies that might be desirable merger
partners. McDonald & Company contacted 21 thrift and bank holding companies, of
which 16 indicated an interest in receiving preliminary financial and other data
regarding GFBC, after signing confidentiality agreements. After reviewing the
preliminary information, ten of those companies, including Camco, chose to
submit a preliminary nonbinding indication of interest outlining the general
terms and conditions, including a proposed price or range of proposed prices,
for a merger. With the assistance of McDonald & Company, the Board of Directors
thoroughly reviewed such indications of interest. The Board of Directors then
decided to invite the four companies offering the most attractive opportunities
for the GFBC stockholders, based upon the price proposed and the prospects for
stockholders of the combined entity after the merger, to conduct a due diligence
review of GFBC.
After completion of such due diligence, all four companies submitted
final proposals. All four companies proposed a merger of GFBC into the acquiring
holding company and a merger of Germantown Federal into a thrift or bank
subsidiary. Three of the companies offered alternative forms of consideration to
the stockholders of GFBC, permitting the Board of Directors of GFBC to choose,
in two proposals, all cash or a mix of cash and stock, or, in another proposal,
either all stock or a mix of cash and stock. The fourth proposal, Camco's,
permitted only stock of Camco as the consideration, although it offered the
alternative of either a fixed exchange ratio of Camco Shares for GFBC Shares or
a fixed dollar value of Camco Shares for each GFBC Share.
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<PAGE> 19
The Board of Directors determined to continue consideration only of
strategic merger proposals in which the GFBC stockholders would receive stock of
the resulting entity, which would enable the GFBC stockholders to maintain an
ownership interest in the ongoing entity and perhaps obtain a change of control
premium upon a later sale of such entity, and which would enable the GFBC
stockholders to defer the taxable gain on their GFBC Shares.
With extensive information provided by McDonald & Company, the
directors analyzed the value of the consideration to be received under the
various proposals. The Board of Directors reviewed historical and prospective
earnings of the companies, the pro forma financial impact and earnings per share
dilution, if any, of a merger with GFBC, the pro forma impact on the
stockholders of GFBC with respect to earnings, book value and dividends per
share, the ability of the combined entity to realize cost savings through
economies of scale and consolidation of operations, the record of successfully
consolidating institutions in prior acquisitions, the additional products and
services not offered by GFBC which could be offered by the combined entity, the
liquidity of the other companies' stocks, the price at which each of the other
companies' stock was trading compared to that of other financial institutions
using various valuation measures, the possibility that each of such companies
might be acquired in the future at a favorable price and other relevant factors.
The GFBC Board of Directors also carefully considered the advantages and
disadvantages of establishing a fixed exchange ratio at the time the Agreement
was executed, it being understood that once a fixed exchange ratio was agreed
upon, the ultimate value to be received by GFBC stockholders could fluctuate in
the period between signing of the Agreement and the consummation of the Merger.
Under Camco's fixed exchange ratio proposal and based upon the closing
sale price of Camco Shares at the time of the GFBC Board of Directors'
deliberation, each GFBC stockholder would receive Camco Shares worth $29.50 in
exchange for each GFBC Share. Only one other institution offered stock with a
value at that time in excess of Camco's proposal; that proposal would have
provided to GFBC's stockholders $31.00 of the other institution's shares for
each share of GFBC. However, the information regarding Camco and the other
institution indicated that, relative to the other institution, Camco was a
substantially larger and more profitable banking organization, with superior
resources, operating results and business prospects, and Camco Shares were a
more attractive form of consideration than the common stock of the other
institution, based on relative peer group valuation information.
The Board of Directors also reviewed information with respect to other
recently announced mergers and recently completed mergers within the thrift
industry and revisited the prospects for GFBC remaining as an independent
entity. Camco's proposal represented a multiple of 23.0 times GFBC's
fully-diluted earnings per share (adjusted for the one-time SAIF assessment) for
the fiscal year ended March 31, 1997, and 135.1% of GFBC's fully-diluted book
value per share at March 31, 1997. The most recent price known by the Board of
Directors to have been paid for GFBC Shares at the time was $16.75 per share.
After extended discussions of the foregoing considerations, the Board
of Directors concluded that the proposal by Camco of an exchange ratio of 1.616
Camco Shares for each GFBC Share, with certain provisions for fixing the dollar
value of the consideration and for permitting termination of the Agreement upon
specified changes in the Market Value of Camco Shares before closing, would be
in the best interests of GFBC stockholders. Camco agreed to structure the
transaction accordingly.
Once the basic structure of the transaction had been agreed upon,
representatives and management of GFBC and Camco negotiated the terms and
conditions of the Agreement. The Board of Directors then held a special meeting
on July 28, 1997, to review, discuss and approve the Agreement. The Board of
Directors, together with its financial and legal advisors, reviewed in detail
the terms of the Agreement. At that meeting, McDonald & Company delivered its
oral opinion to GFBC's Board of Directors, later confirmed in writing, that, as
of such date, the Exchange Ratio was fair to the holders of GFBC Shares from a
financial point of view. The Board of Directors then unanimously approved the
Agreement and the transactions contemplated thereby. The Agreement was executed
and announced on July 28, 1997.
OPINION OF MCDONALD & COMPANY
GFBC has retained McDonald & Company to render its opinion with respect
to the fairness, from a financial point of view, of the Exchange Ratio to the
holders of GFBC Shares. McDonald & Company rendered its oral opinion to the GFBC
Board of Directors on July 28, 1997, which it subsequently confirmed in writing,
that, as of the date of such opinion, the Exchange Ratio was fair, from a
financial point of view, to the holders of GFBC Shares.
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<PAGE> 20
THE FULL TEXT OF THE OPINION OF MCDONALD & COMPANY, UPDATED AS OF THE
DATE OF THIS PROSPECTUS AND PROXY STATEMENT, WHICH SETS FORTH CERTAIN
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEWS UNDERTAKEN,
IS ATTACHED AS APPENDIX B TO THIS PROSPECTUS AND PROXY STATEMENT, AND SHOULD BE
READ IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF MCDONALD & COMPANY SET FORTH
IN THIS PROSPECTUS AND PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE OPINION. MCDONALD & COMPANY'S OPINION IS DIRECTED TO THE GFBC BOARD OF
DIRECTORS AND ADDRESSES ONLY THE EXCHANGE RATIO.
In arriving at its opinion, McDonald & Company reviewed, among other
things, the Agreement, together with exhibits and schedules thereto, certain
publicly available information relating to the business, financial condition and
operations of GFBC and Camco as well as certain other non-public information,
primarily financial in nature, furnished to it by GFBC and Camco relating to the
respective businesses, earnings, assets and prospects of GFBC and Camco.
McDonald & Company also held discussions with members of senior management of
GFBC and Camco concerning their respective businesses, assets, financial
forecasts and prospects. McDonald & Company also reviewed certain publicly
available information concerning the trading of, and the trading market for,
GFBC Shares and Camco Shares and certain publicly available information
concerning comparable companies and transactions, all as set forth in McDonald &
Company's opinion.
McDonald & Company was not engaged to and did not conduct a physical
inspection of any of the assets, properties, or facilities of either GFBC or
Camco and was not engaged to and has not made, obtained or been furnished with
any independent evaluation or appraisal of any of such assets, properties, or
facilities or any of the liabilities of GFBC or Camco. McDonald & Company has
assumed and relied upon, without independent investigation, the accuracy and
completeness of the financial and other information provided to it or publicly
available, has relied upon the representations and warranties of GFBC and Camco
contained in the Agreement and has not independently attempted to verify such
information. McDonald & Company has also assumed that all of the conditions to
the Merger set forth in the Agreement, including the tax-free nature of the
reorganization for federal income tax purposes, would be satisfied and that the
Merger would be consummated on a timely basis in the manner contemplated by the
Agreement. No limitations were imposed by GFBC upon McDonald & Company with
respect to the scope of McDonald & Company's investigation, nor were any
specific instructions given to McDonald & Company in connection with its
fairness opinion.
In connection with rendering its opinion dated July 28, 1997, and as
updated to the date of this Prospectus and Proxy Statement, McDonald & Company
considered a variety of financial analyses, which are summarized below. McDonald
& Company believes that its analyses must be considered as a whole and that
selecting portions of such analyses and of the factors considered by McDonald &
Company without considering all such analyses and factors may create an
incomplete view of the analytical process underlying McDonald & Company's
opinion. In its analyses, McDonald & Company made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters. Any estimates contained in McDonald & Company's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates.
The following is a summary of selected analyses considered by McDonald
& Company and discussed with the GFBC Board of Directors in connection with
McDonald & Company's opinion dated July 28, 1997:
COMPARISON WITH SELECTED COMPANIES. McDonald & Company compared the
financial performance and stock market valuation of Camco with corresponding
data for the following selected companies: Chester Valley Bancorp, Inc., Emerald
Financial Corporation, First Federal Bancorp, Inc., First Keystone Financial,
Fidelity Bancorp, Inc., Harleysville Savings Bank, TF Financial Corporation and
Winton Financial Corporation. In addition, McDonald & Company compared the same
data of GFBC with corresponding data for the following selected companies:
AmTrust Capital Corporation, First Federal Bancorporation, Classic Bancshares,
Inc., Eagle BancGroup, Inc., First Independence Corporation, Home Building
Bancorp, Hardin Bancorp, Inc., Harvest Home Financial Corporation, Horizon
Financial Services Corporation, Indiana Community Bank SB, Milton Federal
Financial Corporation, North Bancshares, Inc., River Valley Bancorp and Three
Rivers Financial Corporation. At the time, none of the companies listed above
had announced a merger transaction or disclosed an interest in pursuing a
possible merger transaction which would have significantly affected its stock
market valuation.
CONTRIBUTION ANALYSIS. McDonald & Company analyzed the contribution of
each of GFBC and Camco to, among other things, the stockholders' equity and
after-tax net income of the pro forma combined company. The analysis showed
that, among other factors, GFBC would have contributed 12.7% of the
stockholders' equity of the pro forma combined
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<PAGE> 21
company as of March 31, 1997, and 6.1% of the pro forma net income for the
combined company for the 12 months ended March 31, 1997, compared to a proposed
ownership of 13.1% of the combined company to be held by holders of GFBC Shares.
PRO FORMA MERGER ANALYSIS. McDonald & Company analyzed certain pro
forma effects resulting from the Merger on the pro forma combined company over a
five-year period from 1998 through 2002. This analysis, based upon the financial
forecasts of management of GFBC and Camco and including estimates of cost
savings provided by the managements of GFBC and Camco, showed approximately 3.4%
dilution for Camco in pro forma earnings per share in 1998 and approximately
3.7% dilution in pro forma earnings per share in 1999. McDonald & Company also
analyzed the changes in the per share amount of earnings, book value and
indicated dividend represented by one GFBC Share after the Merger. The analysis
was performed on the basis of financial information for both companies as of and
for the years ended December 31, 1994, 1995 and 1996 and the year ended March
31, 1997. The analysis indicated that, among other things, exchanging one GFBC
Share at the 1.616 Exchange Ratio for Camco Shares on a pro forma basis would
have resulted in a 157.4% increase in earnings per share for each GFBC Share for
the 12 months ended March 31, 1997, a 2.7% decrease in fully diluted book value
per share for each GFBC Share as of March 31, 1997, and a dividend increase of
75.1% per GFBC Share based on GFBC's indicated annual dividend rate as of July
28, 1997.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. McDonald & Company reviewed
five groups of selected pending thrift acquisition transactions involving (i)
selling thrifts headquartered in Iowa, Illinois, Indiana, Kansas, Kentucky,
Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio, Pennsylvania, South
Dakota, West Virginia and Wisconsin, (ii) selling thrifts with total assets less
than $100 million, (iii) selling thrifts with an equity to assets ratio of
between 10% and 20%, (iv) selling thrifts with a return on average assets ratio
of between 0.25% and 1.00%, and (v) selling thrifts with a ratio of
nonperforming assets to total assets of less than 0.50%. McDonald & Company
reviewed the ratios of the offer value to stated book value and tangible book
value, the multiple of the last 12 months' earnings of the acquired company
(adjusted for the one-time SAIF assessment), and the ratio of offer value to
assets in each such transaction, and computed the mean and median ratios and
multiples for each group. The calculations yielded ranges of median ratios of
price to stated book value and tangible book value of 138% to 167%. Median
multiples of earnings among the five groups ranged from 18.4 times earnings to
19.7 times earnings, and median ratios of offer value to assets ranged from
16.3% to 18.9%. This analysis showed an imputed reference range of $24.00 to
$29.50 per GFBC Share.
NO COMPANY OR TRANSACTION USED IN THE ABOVE ANALYSIS AS A COMPARISON IS
IDENTICAL TO GFBC, CAMCO OR THE MERGER. ACCORDINGLY, AN ANALYSIS OF THE RESULTS
OF THE FOREGOING NECESSARILY INVOLVES COMPLEX CONSIDERATIONS AND JUDGMENTS
CONCERNING THE DIFFERENCES IN FINANCIAL AND OPERATING CHARACTERISTICS OF THE
COMPANIES TO WHICH THEY ARE BEING COMPARED. MATHEMATICAL ANALYSIS (SUCH AS
DETERMINING THE MEAN OR MEDIAN) IS NOT, IN ITSELF, A MEANINGFUL METHOD OF USING
COMPARABLE COMPANY OR COMPARABLE TRANSACTION DATA.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
McDonald & Company estimated the present value of the future streams of
after-tax cash flows that GFBC could produce over a five-year period from 1998
through 2002, under various assumptions, based upon GFBC's management forecasts.
McDonald & Company then estimated the terminal value of GFBC after the five-year
period by applying an estimated perpetual growth rate to the sixth year's
projected after-tax cash flow and then applied to this value multiples ranging
from 10.1 to 12.1. The five-year cash flow streams and terminal values were then
discounted to present values using different discount rates chosen to reflect
different assumptions regarding the estimated required rates of return of
prospective buyers of GFBC. On the basis of such varying assumptions, this
discounted cash flow analysis indicated a reference range of $25.68 to $31.57
per GFBC Share. This analysis was based upon GFBC's and Camco's management
forecasts, including variations and assumptions made by McDonald & Company,
which included adjustments to reflect the anticipated effects of potential
merger-related cost savings estimated by GFBC and Camco. Management forecasts
are based upon many factors and assumptions, many of which are beyond the
control of GFBC or Camco. As indicated above, this analysis is not necessarily
indicative of actual values or actual future results and does not purport to
reflect the prices at which any securities may trade at the present time or at
any time in the future.
OTHER ANALYSIS. In addition to performing the analyses summarized
above, McDonald & Company also considered its analysis of the general market for
bank and thrift mergers, GFBC's relative share of the deposit market that it
serves and the general economic conditions and prospects of those markets.
In performing its analyses, McDonald & Company made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters. The analyses performed by McDonald &
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Company are not necessarily indicative of actual values, which may be
significantly more or less favorable than the values suggested by such analyses.
Such analyses were prepared solely as part of McDonald & Company's opinion.
The term "fair from a financial point of view" is a standard phrase
contained in investment banking fairness opinions and refers to the fact that
McDonald & Company's opinion as to the fairness of the Exchange Ratio is
addressed solely to the financial attributes of the Exchange Ratio. The analyses
do not purport to be appraisals or to reflect the prices at which a company
might actually be sold. In addition, as described above, McDonald & Company's
opinion and related presentation to the GFBC Board of Directors were one of many
factors taken into consideration by the GFBC Board of Directors in making its
determination to approve the Agreement. Consequently, the McDonald & Company
analyses described above should not be viewed as determinative of the GFBC
Board's conclusions with respect to the value of GFBC or of the decision of the
GFBC Board of Directors to agree to the Merger.
McDonald & Company's opinion is based on economic and market conditions
and other circumstances existing on, and information made available as of, the
date of the opinion. In addition, the opinion does not address the underlying
business decision to effect the Merger or any other terms of the Merger.
McDonald & Company's opinion does not represent its opinion as to what the value
of GFBC Shares or Camco Shares may be at the Closing Date.
In connection with its opinion dated as of the date of this Prospectus
and Proxy Statement, McDonald & Company performed procedures to update certain
of its analyses and reviewed the assumptions on which such analyses were based
and the factors considered herewith.
McDonald & Company, as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. McDonald & Company has
extensive experience with the valuation of financial institutions. GFBC's Board
of Directors selected McDonald & Company as its financial advisor because of
McDonald & Company's industry expertise with respect to financial institutions
and because of its substantial experience in transactions similar to the Merger.
McDonald & Company is not affiliated with either GFBC or Camco. In the
ordinary course of business, McDonald & Company makes a market in Camco Shares
and GFBC Shares and may actively trade Camco Shares or GFBC Shares for its own
account and for the accounts of customers. At any time and from time to time,
McDonald & Company may hold a short or long position in such securities.
For McDonald & Company's services as financial advisor, GFBC has agreed
to pay McDonald & Company two percent of the aggregate fair market value of the
consideration to be paid to the GFBC stockholders in exchange for their GFBC
Shares. Of such amount, GFBC has paid McDonald & Company a retainer of $15,000
and a fee of $25,000 upon rendering of the oral fairness opinion. Assuming the
consummation of the Merger and based upon the value of the Merger assuming a
Market Value of Camco Shares of $23.02, additional fees equal to approximately
$180,000 would be payable to McDonald & Company upon consummation of the Merger.
GFBC has also agreed to reimburse McDonald & Company for its reasonable
out-of-pocket expenses and to indemnify McDonald & Company against certain
liabilities, including certain liabilities under federal securities laws.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF GFBC
The Board of Directors of GFBC unanimously recommends that the
stockholders of GFBC vote FOR the adoption of the Agreement. The Board of
Directors of GFBC believes that the terms of the Merger are fair to, and in the
best interests of, GFBC's stockholders.
THE MERGER
EXCHANGE OF GFBC SHARES
If the Agreement is adopted by the affirmative vote of the holders of a
majority of the issued and outstanding GFBC Shares, if all necessary regulatory
approvals are received and if certain other conditions to the consummation of
the Merger are satisfied or waived, GFBC will merge with and into Camco and
Camco will be the continuing and surviving corporation
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in the Merger. At the Effective Time, each GFBC Share will be canceled and
extinguished in consideration and exchange for the number of Camco Shares
indicated by the Exchange Ratio.
The Exchange Ratio is subject to possible adjustment based on the
Market Value of Camco Shares for a period prior to the Closing Date. The
Exchange Ratio will be determined as follows: (i) if the Market Value is not
less than $15.51 and not greater than $20.99, the Exchange Ratio will be 1.616,
(ii) if the Market Value is less than $15.51 but not less than $12.78, then the
Exchange Ratio shall be the product of multiplying 1.616 by a fraction, the
numerator of which is $15.51 and the denominator of which is the Market Value,
(iii) if the Market Value is more than $20.99, but not more than $23.73, then
the Exchange Ratio shall be the product of multiplying 1.616 by a fraction, the
numerator of which is $20.99 and the denominator of which is the Market Value,
(iv) if the Market Value is less than $12.78, the Agreement shall be terminated,
and (v) if the Market Value is more than $23.73, GFBC may terminate the
Agreement and the Merger.
As used in this Prospectus and Proxy Statement, the term "Exchange
Ratio" shall include the foregoing adjustments, to the extent applicable at the
Effective Time in accordance with the Agreement.
At the time the Agreement was signed the Exchange Ratio was 1.616 and
would have remained 1.616 so long as the Market Value of Camco Shares was not
greater than $20.99 and not less than $15.51. Based on changes in the Market
Value of Camco Shares prior to October 30, 1997, if the closing of the Merger
had occurred on October 30, 1997, the date of this Prospectus and Proxy
Statement, the Market Value of Camco Shares would have equaled $23.02. If $23.02
is the Market Value of a Camco Share during the period prior to the Closing
Date, the Exchange Ratio will be 1.473 Camco Shares for each GFBC Share. No
assurance can be given, however, that the Exchange Ratio will be 1.473 Camco
Shares at the Effective Time.
As of the date of this Prospectus and Proxy Statement, there were
316,082 GFBC Shares issued and outstanding and 4,623 GFBC Shares subject to
outstanding GFBC Options, the exercise price of each of which was $10.00. Each
GFBC Option not exercised prior to the Effective Time will be assumed by Camco
and become an option to purchase a number of Camco Shares equal to the product
of the number of the GFBC Shares subject to the option multiplied by the
Exchange Ratio. The exercise price for such options will equal the quotient of
the $10.00 exercise price of the GFBC Options divided by the Exchange Ratio.
Based on the closing bid and asked prices for Camco Shares on October 29, 1997,
the last trading date prior to the date of this Prospectus and Proxy Statement,
the exercise price would be $6.67.
Assuming that all of the GFBC Options are exercised before the
Effective Time, there will be 320,705 GFBC Shares issued and outstanding at the
Effective Time. Assuming an Exchange Ratio of 1.473 Camco Shares for each GFBC
Share, 472,398 Camco Shares would be issued to GFBC stockholders. Such issuance
would increase total outstanding Camco Shares, assuming no outstanding Camco
options are exercised prior to the Effective Time, to 3,686,766.5, of which
12.8% would be held by former GFBC stockholders.
FRACTIONAL SHARES
No fractional Camco Shares will be issued in the Merger. In lieu of any
such fractional shares, Camco will pay to each holder of GFBC Shares who
otherwise would be entitled to receive a fraction of a Camco Share an amount in
cash based on the Market Value of Camco Shares at the Closing Date. No dividend
or distribution with respect to Camco Shares will be payable on or with respect
to any fractional share, and such fractional share interests will not entitle
the owner thereof to vote or to exercise any other rights of a stockholder of
Camco.
EXCHANGE OF CERTIFICATES EVIDENCING GFBC SHARES
As soon as practicable after the Effective Time, the Exchange Agent
will mail to each holder of record of a certificate or certificates which
immediately before such consummation evidenced outstanding GFBC Shares (the
"Certificates") a form letter of transmittal. The letter of transmittal will
contain instructions for effecting the surrender of the Certificates in exchange
for certificates evidencing Camco Shares. Upon surrender of a Certificate,
together with such letter of transmittal, duly executed, to the Exchange Agent
for exchange and cancellation, the holder of such Certificate will be entitled
to receive a certificate evidencing the number of Camco Shares to which such
Certificate holder will have become entitled pursuant to the provisions of the
Agreement and cash in lieu of any fractional Camco Share and in payment of any
dividend effective with respect to such Camco Shares after the Effective Time.
Unless and until Certificates are surrendered for exchange, no dividend or other
distribution declared or payable to holders of record of Camco Shares as of any
time
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subsequent to the consummation of the Merger will be paid to the holder of any
such unsurrendered Certificate, and such holder's other rights as a stockholder
of Camco will be suspended.
Any stockholder of GFBC who has lost or misplaced a Certificate should
immediately contact John T. Baker, President, GF Bancorp, Inc., in writing at
One North Plum Street, Germantown, Ohio 45327, or by telephone at (937)
855-4125. A written statement detailing the procedures for replacing the lost
Certificate will be mailed to the stockholder following such contact.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Each of Camco, GFBC, First Federal and Germantown Federal has made
certain representations and warranties in the Agreement with respect to various
matters. Such matters include, as to each of Camco, GFBC, First Federal and
Germantown Federal, representations and warranties regarding corporate
organization and authority, capital, financial condition, past conduct of
business, legal proceedings and business condition. In addition, GFBC and
Germantown Federal have each made certain other representations and warranties
regarding investments, properties, taxes, contracts, employee benefit plans and
other matters.
Camco, GFBC, First Federal and Germantown Federal have also each made
certain covenants in the Agreement. GFBC and Germantown Federal have agreed to
conduct their business during the period between July 28, 1997, and the
Effective Time only in the ordinary course consistent with past practice, except
to the extent authorized in writing by Camco. In addition, GFBC and Germantown
Federal must not solicit or initiate any proposals or offers from any person, or
discuss or negotiate with any such person or entity, in respect of any
acquisition or purchase of all or a material amount of the assets of, any equity
security of, or any merger, consolidation or business combination with, GFBC or
Germantown Federal (collectively, an "Acquisition Transaction"), subject to the
good faith exercise of the fiduciary duties of the Board of Directors of GFBC.
In the event that GFBC accepts in any manner an Acquisition Transaction before
the earlier of June 30, 1998, or the termination of the Agreement other than due
to a breach of the Agreement by GFBC or Germantown Federal, GFBC must pay to
Camco $250,000 in immediately available federal funds upon the execution before
July 28, 1998, of any agreement in respect of such Acquisition Transaction.
GFBC and Germantown Federal have also agreed to establish and take, at
the request of Camco and to the extent permitted by law and consistent with
generally accepted accounting principles and the fiduciary duties of the
directors of GFBC, such reserves and accruals to conform Germantown Federal's
loan, accrual and reserve policies to First Federal's policies; to implement
such policies with respect to excess facilities and equipment capacity,
severance costs and litigation matters; and to recognize for financial
accounting purposes such expenses of the Merger and the Bank Merger and
restructuring charges related to or to be incurred in connection with the Merger
and the Bank Merger. GFBC and Germantown Federal do not have to establish and
take such reserves and accruals, however, unless certain conditions to closing
have been satisfied.
In addition, Camco has agreed to indemnify the officers and directors
of GFBC from and against certain liabilities for a three-year period beginning
at the Effective Time upon a determination that the appropriate standard of
conduct under the Camco Certificate, By-laws and applicable law has been met and
that indemnification is permissible under applicable law.
CONDITIONS
The obligation of each of Camco and GFBC to consummate the Merger is
subject to a number of conditions, including, but not limited to, the adoption
of the Agreement by the affirmative vote of the holders of a majority of the
issued and outstanding GFBC Shares and the receipt of all necessary regulatory
approvals.
The obligations of Camco and First Federal to consummate the Merger and
the Bank Merger are also subject to a number of conditions, including, but not
limited to, the truth, in all material respects, of all of GFBC's and Germantown
Federal's representations and warranties in the Agreement; the performance and
compliance by GFBC and Germantown Federal with all agreements, covenants and
conditions in the Agreement; the absence of a material adverse change in the
financial condition, assets, liabilities, obligations, properties or prospects
of GFBC after the date of the Agreement; the exercise of dissenters' rights by
the holders of not more than 7.5% of the GFBC Shares; and the balance of GFBC
stockholders' equity at the Effective Time, as calculated in accordance with
generally accepted accounting principles, being
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an amount not less than $6.4 million, exclusive of expenses related to the
Merger, certain material adverse changes defined in the Agreement and reserves,
accruals and charges taken or established by GFBC at the request of Camco.
The obligations of GFBC and Germantown Federal to consummate the Merger
and the Bank Merger are also subject to a number of conditions, including, but
not limited to, the truth, in all material respects, of all of Camco's and First
Federal's representations and warranties in the Agreement; the material
performance and compliance of Camco and First Federal with all agreements,
covenants and conditions in the Agreement; the absence of a material adverse
change in the financial condition, assets, liabilities, obligations, properties,
business or prospects of Camco after the date of the Agreement; and a Market
Value of Camco Shares prior to the Closing Date between $12.78 and $23.73.
Any of the foregoing conditions may be waived by the party which is
entitled to the benefits thereof.
Camco has submitted an application to the OTS seeking approval of
Camco's acquisition of Germantown Federal as a result of the Merger. Such
approval is expected to be received prior to the Special Meeting.
EFFECTIVE TIME OF MERGER
Following the satisfaction or waiver of all conditions set forth in the
Agreement, and the filing of a Certificate of Merger in respect of the Merger
with the Secretary of State, the Merger will be consummated. It is currently
anticipated that the Merger will be consummated in January 1998.
EFFECTIVE TIME OF BANK MERGER
Following the consummation of the Merger, Articles of Combination
regarding the Bank Merger shall be filed with the OTS. The Bank Merger shall
become effective on the date and at the time the Articles of Combination are
declared effective by the OTS. It is currently anticipated that the Bank Merger
will be consummated in January 1998.
TERMINATION AND AMENDMENT
The Agreement may be terminated and the Merger abandoned by either
Camco or GFBC upon the occurrence of certain events, including the mutual
agreement of Camco and GFBC and the failure to consummate the Merger on or
before June 30, 1998. In addition, either Camco or GFBC may terminate the
Agreement if any event occurs which, in the reasonable opinion of either Camco
or GFBC, precludes compliance with any one of the conditions to the obligation
to consummate the Merger.
If the Agreement is terminated because (1) the Board of Directors of
GFBC is authorized pursuant to the Agreement to recommend an Acquisition
Transaction to the GFBC stockholders and GFBC executes a definitive agreement or
letter of intent in respect of an Acquisition Transaction within one year of the
Agreement; (2) the Board of Directors of GFBC fails to recommend to the
stockholders of GFBC approval of the Agreement and the GFBC stockholders do not
adopt the Agreement; or (3) the GFBC Special Meeting is not held on or before
June 30, 1998, other than for reasons beyond the control of GFBC, then, in any
of such events, GFBC shall pay to Camco, within two business days, $250,000.
The Agreement may be amended by Camco, GFBC, First Federal and
Germantown Federal by action of their respective Boards of Directors and in an
instrument in writing signed by Camco, GFBC, First Federal and Germantown
Federal. The Agreement may be amended at any time before or after the GFBC
Special Meeting. An amendment of the Agreement which materially and adversely
affects the rights of the stockholders of GFBC and which takes place after the
GFBC Special Meeting, however, will not be made without further approval of the
stockholders. If necessary, such approval would be sought at a subsequent
meeting of the stockholders.
INTERESTS OF CERTAIN PERSONS
For a period of three years from the Effective Time, Camco has agreed
to indemnify each officer and director of GFBC against losses, claims and
liabilities arising out of acts or omissions occurring prior to the Effective
Time to the extent Camco is permitted under the Certificate, the By-laws and
Delaware law to indemnify such person.
The security ownership of directors and executive officers of GFBC is
set forth under "SECURITY OWNERSHIP OF GFBC."
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MANAGEMENT AND OPERATIONS OF CAMCO FOLLOWING THE CONSUMMATION OF THE MERGER
After the Effective Time, the Board of Directors and executive officers
of Camco will consist of the same persons who presently serve on the Board of
Directors and as executive officers of Camco.
RESALE OF CAMCO SHARES BY AFFILIATES OF CAMCO AND GFBC
The Camco Shares to be issued upon the consummation of the Merger have
been registered with the Commission under the Securities Act and will be freely
transferable, except for Camco Shares received by persons who may be deemed to
be affiliates of GFBC or Camco. The term "affiliate" is defined in Rule 145
promulgated under the Securities Act and generally includes executive officers
and directors. Persons who are affiliates of GFBC prior to the Effective Time or
who are affiliates of Camco after the Effective Time may not sell their Camco
Shares, except pursuant to an effective registration statement under the
Securities Act covering such Camco Shares or in compliance with Rule 145 or
another applicable exemption from the registration requirements of the
Securities Act.
INCOME TAX CONSEQUENCES
THE FEDERAL INCOME DISCUSSION SET FORTH HEREIN IS INCLUDED FOR GENERAL
INFORMATION ONLY. GFBC STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS. NEITHER
CAMCO NOR GFBC HAS REQUESTED OR OBTAINED A RULING FROM THE IRS.
Camco and GFBC have received an opinion of Vorys, Sater, Seymour and
Pease that the Merger will produce the following material federal income tax
consequences:
1. The Merger will constitute a reorganization under Section
368(a)(1)(A) of the Code. Camco and GFBC will each be a party to the
reorganization.
2. No gain or loss will be recognized to GFBC upon the
transfer of its assets to Camco in exchange for Camco Shares and the
assumption by Camco of liabilities of GFBC.
3. No gain or loss will be recognized to Camco on the receipt
of the assets of GFBC in exchange for Camco Shares.
4. The basis of the assets of GFBC in the hands of Camco will
be the same as the basis of such assets in the hands of GFBC
immediately prior to the Merger.
5. The holding period of the assets of GFBC to be received by
Camco will include the period during which the assets were held by
GFBC.
6. No gain or loss will be recognized by GFBC stockholders who
exchange their GFBC Shares for Camco Shares (including fractional share
interests) pursuant to the Merger.
7. The basis of the Camco Shares (including fractional share
interests) to be received by a GFBC stockholder will be the same as the
basis of the GFBC Shares surrendered in exchange therefor, and the
holding period of Camco Shares (including fractional share interests)
to be received by such GFBC stockholder will be the same as the holding
period of the GFBC Shares surrendered in exchange therefor.
8. Where a cash payment is received by a GFBC stockholder in
lieu of fractional Camco Shares, the cash payment will be treated as
received by such GFBC stockholder as a distribution in redemption of
the fractional share interest, subject to the provisions and
limitations of Section 302 of the Code. These cash payments will be
treated as having been received as distributions in full payment in
exchange for the fractional shares redeemed as provided in Section
302(a) of the Code.
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9. If a GFBC stockholder dissents to the Merger and receives
solely cash in exchange for such stockholder's GFBC Shares, such cash
will be treated as having been received by such stockholder as a
distribution in redemption of such stockholder's GFBC Shares, subject
to the provisions and limitations of Section 302 of the Code. See
"RIGHTS OF GFBC DISSENTING STOCKHOLDERS." Such stockholder will
recognize gain or loss measured by the difference between the amount of
cash received and the proportional tax basis of the GFBC Shares so
redeemed. Any such loss will be treated as a loss from the sale of
stock and will be taxed as a capital loss if the GFBC Shares were held
by such stockholder as a capital asset at the time of the Merger. As
discussed below, depending upon the particular circumstances of each
GFBC stockholder, any such gain from the sale of stock will be taxable
as capital gain or as a dividend taxable as ordinary income. If, after
the receipt of the cash, a GFBC Dissenting Stockholder has completely
terminated such stockholder's actual and constructive ownership
interest in GFBC or Camco within the meaning of Section 302(b)(3) of
the Code, then any gain recognized on the receipt of cash will be
treated as capital gain if GFBC Shares were held by such stockholder as
a capital asset at the Effective Time. If a GFBC Dissenting Stockholder
receiving a cash payment for such stockholder's GFBC Shares does not
thereby completely terminate such stockholder's ownership interest in
GFBC or Camco within the meaning of Section 302(b)(3) of the Code, any
gain recognized on the receipt of cash may be treated as a dividend and
taxed at ordinary income rates unless the cash payment received by such
stockholder qualifies for treatment as capital gain under the
substantially disproportionate redemption exemption of Section
302(b)(2) of the Code, or under one of the other exceptions to dividend
treatment contained in Section 302. In order to determine whether there
has been a complete termination of actual and constructive interests in
Camco, it is necessary to consider Camco Shares owned by persons from
whom ownership is attributed to such GFBC Dissenting Stockholder under
the rules of Section 318 of the Code.
With respect to the Bank Merger, Camco and GFBC have received an
opinion of Vorys, Sater, Seymour and Pease that the Bank Merger will produce the
following material federal income tax consequences:
1. The Bank Merger will constitute a reorganization under
Section 368(a)(1)(A) of the Code. First Federal and Germantown Federal
will each be a party to the reorganization.
2. No gain or loss will be recognized to Germantown Federal
upon the transfer of its assets to First Federal in constructive
exchange for First Federal's shares and the assumption by First Federal
of liabilities of Germantown Federal.
3. No gain or loss will be recognized to First Federal on the
receipt of the assets of Germantown Federal in constructive exchange
for shares of First Federal.
4. The basis of the assets of Germantown Federal in the hands
of First Federal will be the same as the basis of such assets in the
hands of Germantown Federal immediately prior to the Bank Merger.
5. The holding period of the assets of Germantown Federal to
be received by First Federal will include the period during which the
assets were held by Germantown Federal.
6. No gain or loss will be recognized by Camco, the sole
stockholder of Germantown Federal after the Effective Time, which
constructively exchanges its Germantown Federal shares for First
Federal shares pursuant to the Bank Merger.
7. The basis of the First Federal shares held by Camco will be
increased by the same amount as the basis of the Germantown Federal
shares constructively surrendered in exchange for First Federal shares.
ACCOUNTING TREATMENT
The Merger will be treated as a pooling of interests for accounting
purposes. Accordingly, under generally accepted accounting principles, on a
consolidated basis, the assets and liabilities of GFBC will be combined with
those of Camco and carried forward at historical cost. In addition, the
statements of income of GFBC will be retroactively combined with the statements
of operations of Camco on a consolidated basis. The obligations of Camco under
the Agreement are conditioned upon its receipt of an opinion from its
independent auditors that Camco may treat the transactions contemplated thereby
as a pooling of interests for accounting purposes.
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RIGHTS OF GFBC DISSENTING STOCKHOLDERS
Holders of GFBC Shares who so desire may obtain an appraisal by the
Court of Chancery of the fair value of their GFBC Shares under DGCL ss. 262. A
stockholder of GFBC will be entitled to such appraisal, however, only if the
stockholder complies strictly with all of the procedural and other requirements
of DGCL ss. 262. The following summary does not purport to be a complete
statement of the method of compliance with DGCL ss. 262 and is qualified in its
entirety by reference to the copy of DGCL ss. 262 attached hereto as Appendix C.
For a discussion of the tax consequences to a stockholder who exercises
dissenters' rights, see "THE MERGER - Income Tax Consequences."
A GFBC stockholder who wishes to perfect his rights as a dissenting
stockholder in the event the Agreement is adopted:
(a) must have been a record holder of the GFBC Shares as to
which he seeks an appraisal on the GFBC Record Date and at the
Effective Time;
(b) must not have voted his GFBC Shares in favor of adoption
of the Agreement; and
(c) must deliver to GFBC, prior to the GFBC Special Meeting, a
written demand for an appraisal from the Chancery Court of the fair
cash value of his GFBC Shares. Such written demand must state the name
of the stockholder, his address and the number of shares as to which he
seeks relief.
A vote against the adoption of the Agreement will not satisfy the
requirements of a written demand for appraisal. Any written demand for appraisal
by a GFBC Dissenting Stockholder must be mailed or delivered to GF Bancorp,
Inc., One North Plum Street, Germantown Federal, Ohio 45327, Attention: John T.
Baker, President. Because the written demand must be delivered prior to the GFBC
Special Meeting, it is recommended, although not required, that a stockholder
using the mail should use certified or registered mail, return receipt
requested, to confirm that he has made a timely delivery.
Unless the GFBC Dissenting Stockholder and GFBC agree on the fair cash
value per share of the GFBC Shares, either party may, within 120 days after the
service of the written demand by the stockholder, file a petition in the
Chancery Court for an appraisal of the fair cash value of the GFBC Shares. As
part of such proceeding, the Chancery Court shall appraise the dissenting
shares, determining their fair value exclusive of any element of value arising
from expectation of the Merger, with a fair interest rate on such amount, based
on all relevant factors. The costs of the proceeding may be assessed upon the
GFBC Dissenting Stockholders or Camco, as determined equitable by the Chancery
Court.
GFBC Dissenting Stockholders will have no voting rights with respect to
their dissenting GFBC Shares nor will they receive any dividends or
distributions on those shares from GFBC or Camco.
The rights of any GFBC Dissenting Stockholder will terminate if the
dissenting stockholder has not complied with DGCL ss.262. In addition, a
dissenting stockholder may withdraw the demand for appraisal within 60 days of
the Effective Time and receive the same consideration received by other GFBC
stockholders.
Because a Proxy that does not contain voting instructions will be voted
for the adoption of the Agreement, a GFBC stockholder who wishes to exercise
dissenters' rights must either (i) not return a signed Proxy, or (ii) if the
stockholder signs, or submits a Proxy, vote against or abstain from voting on
the adoption of the Agreement.
SPECIAL MEETING OF GFBC STOCKHOLDERS
DATE, TIME AND PLACE
The GFBC Special Meeting will be held on December 16, 1997, commencing
at 8:00 a.m., local time, at the offices of GFBC, One North Plum Street,
Germantown, Ohio 45327.
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PURPOSE OF MEETING
The purpose of the GFBC Special Meeting is to consider and act upon (i)
a proposal to adopt the Agreement and (ii) such other business as may properly
come before the GFBC Special Meeting and any adjournment thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE AND RECORD DATE
The close of business on October 24, 1997, has been fixed by the Board
of Directors of GFBC as the GFBC Record Date for the determination of holders of
GFBC Shares entitled to notice of and to vote at the GFBC Special Meeting and
any adjournment thereof. At the close of business on the GFBC Record Date, there
were 316,082 GFBC Shares outstanding and entitled to vote and held of record by
170 stockholders. Each GFBC Share entitles the holder thereof to one vote on
each matter to be submitted to GFBC stockholders at the GFBC Special Meeting.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
GFBC Shares will be necessary to adopt the Agreement. The affirmative vote,
therefore, of the holders of 158,042 GFBC Shares, voting in person or by proxy,
will be necessary to adopt the Agreement. As of the GFBC Record Date, the
directors and executive officers of GFBC owned or had voting power, in the
aggregate, with respect to 84,936 GFBC Shares then outstanding (excluding GFBC
Shares held in a fiduciary capacity), or 26.9% of the outstanding GFBC Shares.
The directors and executive officers of GFBC have agreed to vote all such GFBC
Shares for the adoption of the Agreement. Assuming the affirmative vote of all
of such GFBC Shares, the affirmative vote of the holders of an additional 73,106
GFBC Shares, representing an additional 23.1% of the outstanding GFBC Shares,
will be necessary to adopt the Agreement.
The Certificate of Incorporation of GFBC provides that in no event
shall any record owner of any outstanding GFBC Shares that are beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the then outstanding GFBC Shares (the "Limit") be entitled or permitted
to any vote with respect to the shares held in excess of the Limit. Beneficial
ownership includes shares beneficially owned by such person or any of his or her
affiliates (as defined in the Certificate of Incorporation), shares which such
person or his or her affiliates have the right to acquire upon the exercise of
conversion rights or options and shares as to which such person and his or her
affiliates have or share investment or voting power, but shall not include
shares beneficially owned by any employee stock ownership or similar plan of the
issuer or any subsidiary.
The presence in person or by proxy of at least a majority of the
outstanding GFBC Shares entitled to vote (after subtracting any shares held in
excess of the Limit) is necessary to constitute a quorum at the GFBC Special
Meeting. In the event there are not sufficient votes for a quorum at the time of
the GFBC Special Meeting, the GFBC Special Meeting may be adjourned in order to
permit the further solicitation of proxies.
Under applicable law, Non-votes will be counted as being present for
purposes of establishing a quorum. The effect of an abstention or Non-vote will
be the same as a vote against the adoption of the Agreement. If a Proxy is
signed and dated by a stockholder, but no vote is specified thereon, the shares
represented by such Proxy will be voted FOR the adoption of the Agreement.
VOTING AND SOLICITATION AND REVOCATION OF PROXIES
A Proxy for use at the GFBC Special Meeting accompanies this Prospectus
and Proxy Statement and is solicited by the Board of Directors of GFBC. Whether
or not a GFBC Stockholder plans to attend the GFBC Special Meeting, the Board of
Directors of GFBC urges each stockholder to use the enclosed Proxy. Without
affecting any vote previously taken, any stockholder of GFBC who has executed a
Proxy may revoke the executed Proxy at any time before the vote by filing with
GFBC, at the address of GFBC set forth on the Notice of Special Meeting, written
notice of such revocation; by executing a later-dated proxy which is received by
GFBC prior to the GFBC Special Meeting; or by attending the GFBC Special Meeting
and voting in person. ATTENDANCE AT THE GFBC SPECIAL MEETING WILL NOT, IN AND OF
ITSELF, REVOKE A PROXY. The GFBC Shares represented by each properly executed
Proxy received prior to the GFBC Special Meeting and not revoked will be voted
at the GFBC Special Meeting, or any adjournment thereof, as specified on such
Proxy or, in the absence of specific instructions to the contrary, will be voted
FOR the Agreement.
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As of the date of this Prospectus and Proxy Statement, the Board of
Directors of GFBC did not know of any business to be brought before the GFBC
Special Meeting, other than as set forth in this Prospectus and Proxy Statement.
If, however, any matters other than those referred to in this Prospectus and
Proxy Statement should properly come before such GFBC Special Meeting, or any
adjournment thereof, the persons named as proxies in the enclosed Proxy intend
to vote the GFBC Shares represented by such Proxy on such matters in accordance
with their best judgment in light of the conditions then prevailing.
GFBC will pay its expenses incurred in connection with preparing and
mailing this Prospectus and Proxy Statement, the accompanying Proxy and any
other related materials to the stockholders of GFBC and all other costs incurred
in connection with the solicitation of Proxies on behalf of the Board of
Directors of GFBC. Camco will pay the costs and expenses incurred by Camco in
connection with preparing and printing this Prospectus and Proxy Statement.
Proxies will be solicited by mail and may be further solicited, for no
additional compensation, by officers, directors or employees of GFBC by further
mailing, by telephone or by personal contact. GFBC will also pay the standard
charges and expenses of brokerage houses, voting trustees, banks, associations
and other custodians, nominees and fiduciaries, who are record holders of GFBC
Shares not beneficially owned by them, for forwarding such materials to and
obtaining Proxies from the beneficial owners of GFBC Shares entitled to vote at
the GFBC Special Meeting.
GFBC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following is management's analysis of the financial condition and
the results of operations of GFBC during recent periods. This discussion is
designed to provide a more comprehensive review of the operating results and
financial position than could be obtained from an examination of the financial
statements alone. This analysis should be read in conjunction with the financial
statements and related footnotes and the selected financial data included
elsewhere in this Prospectus and Proxy Statement. Management is not aware of any
current recommendations by the regulatory authorities which if they were to be
implemented, will have, or are reasonably likely to have, a material effect on
the liquidity, capital resources or operations of GFBC.
GFBC, a Delaware Corporation, is a unitary holding company which holds
all of the capital stock of Germantown Federal. Germantown Federal is a
federally chartered stock savings bank whose main office in Germantown and one
branch office in New Lebanon are located in southwestern Montgomery County,
Ohio. Germantown Federal is primarily engaged in the business of providing loan
and deposit products to consumers in Germantown and New Lebanon, Ohio, as well
as the surrounding communities. Germantown Federal has a wholly owned service
corporation subsidiary, GFS Financial Services, Inc., which was formed to hold
shares of Germantown Federal's data processor.
FINANCIAL CONDITION AT JUNE 30, 1997
GFBC's assets at June 30, 1997, totaled $48.5 million, representing an
increase of $380,000, or 0.8%, from the March 31, 1997, amount.
Net loans receivable at June 30, 1997, totaled $33.7 million,
representing a $1.1 million, or 3.5%, increase from March 31, 1997. The loan
growth was funded primarily by decreases in interest-bearing deposits with other
financial institutions, securities available for sale and mortgage-backed
securities available for sale, which combined to decrease $804,000 for the
three-month period. Virtually all other asset and liability categories remained
stable over the three-month period.
Asset quality, as measured by the level of nonperforming assets to
total assets, has remained relatively constant since March 31, 1997.
Nonperforming assets, which were entirely made up of nonperforming loans,
totaled $197,000 and $167,000 at June 30, 1997, and March 31, 1997,
respectively. Such amounts represent 0.4% and 0.3% of total assets at each of
the respective dates. Germantown Federal maintains an allowance for loan losses
based upon management's periodic evaluation of known and inherent risks in the
loan portfolio, Germantown Federal's past loan loss experience, adverse
situations that may affect the borrowers' ability to repay loans, including
changes in interest rates, real estate values and the economy, the estimated
value of the underlying collateral and current market conditions. At each of
June 30, 1997, and March 31, 1997, Germantown Federal's allowance for loan
losses, totaling $127,000, exceeded 60% of total nonperforming
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loans. Because nonperforming loans consist primarily of residential mortgage
loans and because of the adequacy of the estimated value of their underlying
collateral, management believes Germantown Federal's allowance was adequate at
June 30, 1997. There can be no assurance, however, that losses on loans will not
exceed estimated amounts. Adjustments to the allowance may be necessary due to
changes in any of the factors mentioned above that Germantown Federal's
management considers in evaluating the adequacy of the allowance.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1997,
AND JUNE 30, 1996
NET INTEREST INCOME. Total interest income for the three months ended
June 30, 1997, increased by $29,000 from the comparable 1996 period. The
increase in interest income represents the effects of an increase in loans
receivable. Interest on loans, including fees, increased $85,000 from $604,000
for the quarter ended June 30, 1996, to $688,000 for the 1997 three-month
period. The increase was partially offset by the decrease of $56,000 in interest
income on interest-bearing deposits, securities and mortgage-backed securities.
The decline in interest income on those assets is reflective of the decline in
the balances of those assets.
Interest expense remained relatively constant between the 1996 and 1997
three-month periods, with an increase of $1,000, or 0.2%.
As a result of the foregoing, net interest income increased by $28,000,
or 6.4%, from the three months ended June 30, 1996, to the three months ended
June 30, 1997.
PROVISION FOR LOAN LOSSES. No provision was charged to operations for
either three-month period.
NONINTEREST INCOME. Noninterest income totaled $27,000 for the three
months ended June 30, 1997, reflecting a $3,000 decrease from the comparable
1996 three-month period.
NONINTEREST EXPENSES. Noninterest expenses decreased by $13,000, or
3.9%, from the three months ended June 30, 1996, to the three months ended June
30, 1997. The decrease was due primarily to a $17,000 reduction in FDIC deposit
insurance.
FEDERAL INCOME TAXES. GFBC's provision for federal income taxes
increased by $11,000, or 22.6%, during the three months ended June 30, 1997. The
increase was primarily attributable to a $37,000 increase in earnings before
taxes. The effective tax rate was 32.8% for the three months ended June 30,
1997, and 34.3% for the three months ended June 30, 1996.
FINANCIAL CONDITION AT MARCH 31, 1997
Total assets decreased $860,000 to $48.1 million at March 31, 1997,
from $49.0 million at March 31, 1996. The 1.8% decrease was primarily
attributable to the outflow of funds from deposits.
At March 31, 1997, the market value of securities available for sale
was $2.0 million, which included net unrealized gains of $1,000. Securities
available for sale, which are comprised entirely of U.S. Treasury obligations,
decreased from $4.5 million at March 31, 1996, to $2.0 million at March 31,
1997, a decrease of 55.5%. During fiscal 1997, security maturities of $2.5
million were used to fund mortgage and consumer loan originations. The
securities in the portfolio had varying maturities of one year or less.
Germantown Federal did not purchase or sell any securities during the year ended
March 31, 1997.
At March 31, 1997, the market value of mortgage-backed securities was
$8.8 million, which included net unrealized losses of $84,000. The
mortgage-backed securities portfolio decreased $1.5 million from $10.3 million
at March 31, 1996. The decrease was a result of prepayments and repayments of
principal on existing securities. Germantown Federal did not purchase or sell
any mortgage-backed securities during fiscal 1997.
Net loans receivable increased $3.1 million, to $32.5 million at March
31, 1997, from $29.4 million at March 31, 1996. The 10.6% increase was the
result of new loan originations. Germantown Federal originated $9.7 million in
loans during fiscal 1997. Of the loans originated, 72.7% were mortgage loans
secured by single-family residential real estate and the remaining 27.3% were
consumer loans. All loans originated were retained for Germantown Federal's
portfolio.
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<PAGE> 32
The allowance for loan losses was $127,000 at March 31, 1997, and
$98,000 at March 31, 1996, which represented 0.39% and 0.33% respectively, of
net loans. The allowance for loan losses was increased during 1997 by $33,000,
because of the increase in portfolio balances of both mortgage and consumer
loans over the past two years and the increase in nonperforming loans. The
allowance as a percentage of nonperforming loans was 76.0% at March 31, 1997,
and 90.7% at March 31, 1996.
Nonperforming assets consisted entirely of nonperforming loans at March
31, 1997, and March 31, 1996. Nonperforming loans increased to $167,000 at March
31, 1997, from $108,000 at March 31, 1996. Nonperforming loans were comprised
primarily of delinquent residential mortgage loans, an area of minimal loan loss
experience for Germantown Federal. A significant portion of the allowance has
been established to cover losses from consumer loans. Consumer loan balances
increased approximately $856,000 during fiscal 1997, while nonperforming
consumer loans were $5,000 at both March 31, 1997 and March 31, 1996. Management
is aware that consumer loans tend to carry a higher level of credit risk than
residential mortgage loans. However, the increase in consumer loans was
primarily from second mortgages and equity lines of credit secured by real
estate. Therefore, management believes that the allowance for loan losses was
adequate at March 31, 1997. See "Financial Condition at June 30, 1997."
Loans are reviewed on a regular basis and are generally placed on
non-accrual status when the loan becomes 90 days delinquent and, in the opinion
of management, the collection of additional interest is doubtful. Interest
accrued and unpaid at the time a loan is placed on non-accrual status is charged
against income. Subsequent payments are either applied to the outstanding
principal balance or recorded as interest income, depending on the assessment of
the ultimate collectibility of the loan. There were no loans past-due 90 days or
more and still accruing interest at March 31, 1997, or at March 31, 1996.
Total deposits decreased $721,000 to $40.4 million at March 31, 1997,
compared to $41.1 million at March 31, 1996. The 1.8% decrease was primarily the
result of pricing strategies intended to maintain a lower cost of funds.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31, 1997 AND
MARCH 31, 1996
NET INCOME. Net income for the years ended March 31, 1997 and 1996, was
$198,000 and $371,000, respectively. The decrease in net income for fiscal 1997,
compared to 1996, was primarily due to the one-time charge of $270,000 ($178,000
after tax, or $0.61 per share) to provide for an assessment to recapitalize the
SAIF. The one-time assessment to recapitalize the SAIF was the result of federal
legislation enacted in 1996, and had been anticipated for over a year. The
one-time assessment resulted in a reduction in the deposit insurance premium of
Germantown Federal from 23 basis points to a current rate of 6.4 basis points
for each $100 in deposits. GFBC's return on average assets was 0.41% in fiscal
1997 and 0.78% in fiscal 1996. Excluding the SAIF assessment, the return on
average assets was 0.77% in 1997.
Return on average equity was 3.07% in 1997 and 5.85% in 1996. The
return on average equity decreased in 1997 primarily because of the SAIF
assessment. Excluding the SAIF assessment, the return on average equity was
5.82% for fiscal 1997.
The calculation of earnings per share for fiscal 1997 and 1996 was
based on net income of $198,000 and $371,000, respectively. Based on weighted
average shares outstanding of 292,958 in 1997 and 299,867 in 1996, the earnings
per share were $0.67 and $1.24, respectively. Excluding the SAIF assessment, the
1997 earnings per share were $1.28.
NET INTEREST INCOME. Net interest income, the difference between total
interest income and total interest expense, is GFBC's principal source of
earnings. The amount of net interest income is determined by the volume of
interest-earning assets and the level of interest rates earned on those
interest-earning assets, compared to the volume of interest-bearing liabilities
and the level of interest rates paid on those interest-bearing liabilities.
GFBC's net interest income is affected by a variety of regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows.
Net interest income increased $92,000, or 5.4%, in 1997 compared to
1996. The increase in net interest income is the result of the interest rate
spread increasing to 3.36% for the year ended March 31, 1997, from 3.19% for the
year ended March 31, 1996. The increase due to the interest rate spread was
partially offset by a decrease in the ratio of average interest-earning assets
to average interest-bearing liabilities from 113.2% for the year ended March 31,
1996, to 113.0% for the year ended March 31, 1997.
26
<PAGE> 33
RATE/VOLUME ANALYSIS. The table below sets forth certain information
regarding changes in interest income and interest expense of Germantown Federal
for the periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (changes in average volume multiplied by the previous
year's rate) and (ii) changes in rates (changes in rate multiplied by previous
year's volume). The change in interest due to both volume and rate has been
allocated to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
-------------------------------- ------------------------------------
Increase Increase
(decrease) due to (decrease) due to
------------------ --------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable $ 393 $(70) $ 323 $ 406 $ 48 $ 454
Mortgage-backed securities (112) 8 (104) (17) 18 1
Securities (165) 28 (137) (56) 6 (50)
Other interest-earning assets 33 (20) 13 (216) 81 (135)
----- ---- ----- ----- ---- -----
Total interest-earning assets $ 149 $(54) $ 95 $ 117 $153 $ 270
===== ==== ===== ===== ==== =====
Interest expense:
Deposits $ 8 $(29) $ (21) $ (54) $ 13 $ (41)
Federal Home Loan Bank advances
24 - 24 34 - 34
----- ---- ----- ----- ---- -----
Total interest-bearing $ 32 $(29) $ 3 $ (20) $ 13 $ (7)
===== ==== ===== ===== ==== =====
liabilities
Net change in interest income $ 117 $(25) $ 92 $ 137 $140 $ 277
===== ==== ===== ===== ==== =====
</TABLE>
PROVISION FOR LOAN LOSSES. The provision for loan losses was $33,000
for fiscal 1997. There was no provision for loan losses in fiscal 1996.
Germantown Federal continues to experience a low rate of loan charge-offs. For
1997 and 1996, charge-offs totaled $7,000 and $2,000, respectively. Germantown
Federal continues to record recoveries of loans charged-off in prior periods.
GFBC's decision to increase the allowance for loan losses was based on the
increase in mortgage and consumer loan balances over the past year.
NONINTEREST INCOME. Noninterest income is comprised primarily of
service charges and fees collected by Germantown Federal. Total noninterest
income increased by $3,000 in 1997, compared to 1996. The increase was primarily
from gains on the sale of assets during 1997. Income from service charges and
fees decreased by $3,000 in 1997, compared to 1996, which was primarily the
result of the introduction of a no-fee checking account program designed to
attract new customers. As anticipated, some current customers have switched to
the no-fee checking account, resulting in a decrease in fees collected from NOW
accounts.
NONINTEREST EXPENSE. Noninterest expense increased by $319,000 in 1997,
compared to 1996. The 24.9% increase was primarily due to the $270,000 SAIF
assessment. Salaries and employee benefits increased by $29,000, or 4.4%,
between years as a result of annual adjustments and the addition of a second
mortgage loan originator. Equipment and outside services expense increased in
1997 with the addition of an ATM at the New Lebanon branch.
INCOME TAX PROVISION. The provision for income taxes totaled $93,000 in
fiscal 1997, and $177,000 in fiscal 1996, resulting in an effective tax rate of
31.9% and 32.3%, respectively. The volatility in the provision for income taxes
is primarily attributable to the change in net income before taxes for each
year.
ASSET AND LIABILITY MANAGEMENT
A key component of asset and liability management is the monitoring and
management of interest rate risk. Germantown Federal's exposure to interest rate
risk results from the difference in maturities on interest-bearing liabilities
and interest-earning assets and the volatility of interest rates. In an effort
to reduce interest rate risk and protect it from the
27
<PAGE> 34
negative effect of increases in interest rates, Germantown Federal has
instituted certain asset and liability management measures. The primary elements
of this strategy include: (i) maintaining liquid assets that can be readily
reinvested in higher yielding investments should interest rates rise; (ii)
emphasizing the solicitation and retention of core deposits; (iii) investing in
intermediate-term and adjustable-rate mortgage-backed securities; and (iv)
attempting to maintain an even match between interest sensitive assets and
liabilities. These measures, while significant, may only partially offset
Germantown Federal's interest rate risk.
As a part of its effort to monitor its interest rate risk, Germantown
Federal reviews the reports of the OTS which set forth the application of the
"net portfolio value" ("NPV") methodology adopted by the OTS as part of its
capital regulations to the assets and liabilities of Germantown Federal.
Although Germantown Federal is not currently subject to the NPV regulation
because implementation of the NPV regulation has been delayed and such
regulation does not apply to institutions with less than $300 million in assets
and risk-based capital in excess of 12%, the application of the NPV methodology
may illustrate Germantown Federal's interest rate risk.
Generally, NPV is the discounted present value of the difference
between incoming cash flows on interest-earning and other assets and outgoing
cash flows on interest-bearing liabilities. The application of the methodology
attempts to quantify interest rate risk as the change in the NPV which would
result from a theoretical 200 basis point (1 basis point equals .01%) change in
market interest rates. Both a 200 basis point increase in market interest rates
and a 200 basis point decrease in market interest rates are considered. If the
NPV of an institution subject to NPV regulation would decrease more than 2% of
the present value of the institution's assets with either an increase or a
decrease in market rates, the institution must deduct 50% of the amount of the
decrease in excess of such 2% in the calculation of the institution's risk-based
capital.
At June 30, 1997, the most recent date for which NPV information is
available to Germantown Federal, 2% of the present value of Germantown Federal's
assets was approximately $1,001,000. Because the interest rate risk of a 200
basis point increase in market interest rates (which was greater than the
interest rate risk of a 200 basis point decrease) was $1,766,000 at June 30,
1997, Germantown Federal would have been required to deduct $382,500 (50% of the
approximate $765,000 difference) from its capital in determining whether
Germantown Federal met its risk-based capital requirement. Regardless of such
reduction, however, Germantown Federal's risk-based capital at June 30, 1997,
would still have exceeded the regulatory requirement by approximately $3.5
million.
Presented below, as of June 30, 1997, is an analysis of Germantown
Federal's interest rate risk as measured by changes in NPV for instantaneous and
sustained parallel shifts of 100 basis points in market interest rates.
As illustrated in the table, Germantown Federal's NPV is more sensitive
to rising rates than declining rates. Such difference in sensitivity occurs
principally because, as rates rise, borrowers do not prepay fixed-rate loans as
quickly as they do when interest rates are declining. Thus, in a rising interest
rate environment, the amount of interest Germantown Federal would receive on its
loans could increase relatively slowly as loans are slowly prepaid and new loans
at higher rates are made. Moreover, the interest Germantown Federal would pay on
its deposits would increase rapidly because Germantown Federal's deposits
generally have shorter periods to repricing. Assumptions used in calculating the
amounts in this table are OTS assumptions.
<TABLE>
<CAPTION>
At June 30, 1997
Net Portfolio Value
---------------------
(Dollars in thousands)
Change Board Limit
in rates $ Change % Change % change
-------- -------- -------- --------
<S> <C> <C> <C>
+400 bp $(3,634) (48)% (80)%
+300 bp (2,711) (36) (60)
+200 bp (1,766) (23) (40)
+100 bp (838) (11) (20)
0 bp - - 0
-100 bp 559 7 (20)
-200 bp 675 9 (40)
-300 bp 709 9 (60)
-400 bp 937 12 (80)
</TABLE>
28
<PAGE> 35
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the NPV approach. For example, although certain
assets and liabilities may have similar maturities or periods of repricing, they
may react in different degrees to changes in market interest rates. Also, the
interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types
may lag behind changes in market rates. Further, in the event of a change in
interest rates, expected rates of prepayment on loans and mortgage-backed
securities and early withdrawal levels from certificates of deposit could
deviate significantly from those assumed in making the risk calculations.
29
<PAGE> 36
AVERAGE BALANCE SHEET. The following table sets forth certain
information relating to Germantown Federal's average balance sheet and reflects
the average yield on assets and average cost of liabilities for the periods
indicated and the average yields earned and interests rates paid. Such yields
and costs are derived by dividing income or expense by the average balance of
assets or liabilities, respectively, for the periods presented. Average balances
are derived from daily average balances.
<TABLE>
<CAPTION>
Year ended March 31,
Three months ended -----------------------------------
June 30, 1997 1997
------------------------------ ---------------------------------
Average Average Average Average
balance Interest yield/ cost balance Interest yield/cost
--------- -------- ----------- ---------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1) $33,138 $688 8.31% $30,867 $2,552 8.27%
Mortgage-backed securities 8,776 155 7.07 9,716 678 7.00
Securities 1,742 25 5.74 3,072 163 5.31
Other interest-earning assets 2,823 38 5.38 3,111 167 5.37
-------- ----- -------- -------
Total interest-earning assets 46,479 906 7.80 46,766 3,560 7.61
----- -------
Non-interest-earning assets 1,671 1,686
-------- --------
Total assets $48,150 $48,452
======== ========
Interest-bearing liabilities:
Deposits 40,083 427 4.26 40,398 1,702 4.21
Federal Home Loan Bank advances 1,000 14 5.80 1,000 58 5.80
-------- ----- -------- -------
Total interest-bearing 41,083 441 4.29 41,398 1,760 4.25
-------- ----- -------- -------
liabilities
Non-interest bearing liabilities 532 609
--------- --------
Total liabilities 41,615 42,007
-------- --------
Stockholders' equity 6,535 6,445
-------- --------
Total liabilities and $48,150 $48,452
======== ========
stockholders' equity
Net interest income $465 $1,800
===== =======
Interest rate spread(2) 3.51 3.36
Net yield on interest-earning
assets(3) 3.86 3.85
Ratio of average interest-earning
assets to average interest-
bearing liabilities 113.13 112.97
<CAPTION>
Year ended March 31,
-------------------------------------------------------------------
1996 1995
-------------------------------- ---------------------------------
Average Average Average Average
balance Interest yield/cost balance Interest yield/cost
--------- -------- ---------- --------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1) $26,130 $2,229 8.53% $21,355 $1,775 8.31%
Mortgage-backed securities 11,324 782 6.91 11,580 781 6.74
Securities 6,222 300 4.82 7,387 350 4.74
Other interest-earning assets 2,530 154 6.09 6,465 289 4.47
-------- ------- -------- ------
Total interest-earning assets 46,206 3,465 7.50 46,787 3,195 6.83
------- -------
Non-interest-earning assets 1,605 1,469
-------- ---------
Total assets $47,811 $48,256
======== =========
Interest-bearing liabilities:
Deposits 40,218 1,723 4.28 41,491 1,764 4.25
Federal Home Loan Bank advances 585 34 5.81 -
-------- ------- --------- -------
- -
Total interest-bearing 40,803 1,757 4.31 41,491 1,764 4.25
-------- ------- --------- -------
liabilities
Non-interest bearing liabilities 665 627
-------- ---------
Total liabilities 41,468 42,118
-------- ---------
Stockholders' equity 6,343 6,138
-------- ---------
Total liabilities and $47,811 $48,256
======== =========
stockholders' equity
Net interest income $1,708 $1,431
======= =======
Interest rate spread(2) 3.19 2.58
Net yield on interest-earning
assets(3) 3.70 3.06
Ratio of average interest-earning
assets to average interest-
bearing liabilities 113.24 112.76
- ---------------------------------
(1) Average balances include non-accrual loans, net of allowances for loan
losses.
(2) Interest rate spread represents the difference between the average yield
on interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
</TABLE>
30
<PAGE> 37
LIQUIDITY
Germantown Federal is required to maintain minimum levels of liquid
assets as defined by the regulations of the OTS. This requirement, which may be
varied from time to time depending upon economic conditions and deposit flows,
is based upon a percentage of deposits and short-term borrowings. The required
ratio is currently 5%. Germantown Federal has historically maintained a level of
liquid assets in excess of regulatory requirements. Germantown Federal's
liquidity ratio was 11.1% at June 30, 1997, 11.4% at March 31, 1997, and 17.9%
at March 31, 1996. The decrease in liquidity at June 30, 1997, and March 31,
1997, compared to March 31, 1996, is the result of increased loan demand in the
local market. Loan originations were funded with excess liquidity. Germantown
Federal adjusts liquidity as appropriate to meet its asset/liability objectives.
Germantown Federal's primary sources of funds are deposits,
amortization and prepayment of loans, maturities of securities and funds
provided from operations. While scheduled loan repayments are a relatively
predictable source of funds, deposit flows and loan prepayments are greatly
influenced by general interest rates, economic conditions and competition. In
addition, Germantown Federal invests excess funds in overnight deposits that
provide liquidity to meet lending requirements.
Germantown Federal has other sources of liquidity if a need for
additional funds arises. Additional sources of funds include FHLB of Cincinnati
advances and the ability to borrow against mortgage-backed and other securities.
At June 30, 1997, and March 31, 1997, Germantown Federal had a short-term
fixed-rate advance for $1.0 million from the FHLB of Cincinnati. The advance was
used to help fund Germantown Federal's increased demand for mortgage loan
originations. At maturity, the advance will either be repaid or renewed
depending on Germantown Federal's cash demands at that time.
CAPITAL RESOURCES
At June 30, 1997, and March 31, 1997, GFBC had 15,418 shares of
treasury stock carried at cost in the amount of $213,543. The treasury stock
will be available for general corporate purposes, including the issuance of
shares in connection with the exercise of stock options.
OTS capital regulations require savings institutions to meet three
capital standards: (1) tangible capital equal to 1.5% of total adjusted assets,
(2) a leverage ratio (core capital) equal to 3.0% of total adjusted assets and
(3) a risk-based capital requirement equal to 8.0% of total risk-weighted
assets. Under these capital requirements, at June 30, 1997, Germantown Federal
had:
<TABLE>
<CAPTION>
Tangible Capital Core Capital Risk-based Capital
---------------------- ----------------------- -----------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Actual $5,511 11.4% $5,511 11.4% $5,638 25.5%
Required 727 1.5 1,454 3.0 1,768 8.0
------ ----- ------- ----- ------ -----
Excess $4,784 9.9% $4,057 8.4% $3,870 17.5%
====== ===== ====== ===== ====== ====
</TABLE>
Germantown Federal's tangible capital consists solely of stockholders'
equity. Core capital consists of tangible capital plus certain intangible
assets, of which Germantown Federal has none. Risk-based capital consists of
core capital plus general loan loss allowances.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements of GFBC and notes thereto,
presented elsewhere herein, have been prepared in accordance with generally
accepted accounting principles, which generally require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. The impact of inflation is reflected in the increased cost of
GFBC's operations. Unlike most industrial companies, nearly all the assets and
liabilities of GFBC are monetary. As a result, interest rates have a greater
impact on GFBC's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.
31
<PAGE> 38
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities," was issued by the FASB in 1996. It
revises the accounting for transfers of financial assets, such as loans and
securities, and for distinguishing between sales and secured borrowings. It was
originally effective for some transactions in 1997 and others in 1998. SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125," was issued in December 1996. SFAS 127 defers, for one year, the effective
date of provisions related to securities lending, repurchase agreements and
other similar transactions. The remaining portions of SFAS 125 will continue to
be effective January 1, 1997. SFAS 125 did not have a material impact on GFBC's
financial statements.
In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share,"
which is effective for financial statements for periods ending after December
15, 1997, including interim periods. SFAS 128 simplifies the calculation of
earnings per share by replacing primary EPS with basic EPS. It also requires
dual presentation of basic EPS and diluted EPS for entities with complex capital
structures. Basic EPS includes no dilution and is computed by dividing income
available to common shareholders by the weighted-average common shares
outstanding for the period. Diluted EPS reflects the potential dilution of
securities that could share in earnings, such as stock options, warrants or
other common stock equivalents. All prior period EPS data will be restated to
conform with the new presentation. This statement will not have a material
impact on GFBC's financial statements.
In February 1997, the FASB issued SFAS No. 129, "Disclosures of
Information about Capital Structure." SFAS No. 129 consolidated existing
accounting guidance relating to disclosure about a company's capital structure.
SFAS No. 129 is effective for financial statements for periods ending after
December 15, 1997. SFAS No. 129 is not expected to have a material impact on
GFBC's financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and loses) in
a full set of general-purpose financial statements. SFAS No. 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. It does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. SFAS No. 130 is not expected to
have a material impact on GFBC's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 significantly changes
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about reportable segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 uses a "management approach" to disclose financial and descriptive
information about the way that management organizes the segments within the
enterprise for making operating decisions and assessing performance. For many
enterprises, the management approach will likely result in more segments being
reported. In addition, SFAS No. 131 requires significantly more information to
be disclosed for each reportable segment than is presently being reported in
annual financial statements and also requires that selected information be
reported in interim financial statements. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997. SFAS No. 131 is not expected to have a
material impact on GFBC's financial statements.
BUSINESS OF GFBC
GFBC is a Delaware corporation organized on June 2, 1993, to acquire
all of the capital stock that Germantown Federal issued upon its conversion from
the mutual form of ownership to the stock form of ownership consummated on
September 16, 1993. GFBC has not engaged in any significant business to date
except for the acquisition of Germantown Federal.
32
<PAGE> 39
BUSINESS OF GERMANTOWN FEDERAL
Germantown Federal is a federally chartered savings bank located in
Germantown, Ohio. Germantown Federal was chartered in 1887 as an Ohio building
and loan association under the name Germantown Building and Savings Association.
In 1938, Germantown Federal adopted a federal charter and changed its name to
Germantown Federal Savings and Loan Association. Its present name, Germantown
Federal Savings Bank, was obtained in 1983 at the time it obtained a charter as
a savings bank. Germantown Federal's deposits have been federally insured since
1938 by the SAIF, as administered by the FDIC, and its predecessor, the Federal
Savings and Loan Insurance Corporation. Germantown Federal has been a member of
the FHLB System since 1940. At June 30, 1997, Germantown Federal had no brokered
deposits or goodwill.
Germantown Federal is primarily engaged in the business of accepting
deposits from the general public and using those funds to originate mortgage
loans for the purchase and refinancing of single-family homes located in
Germantown, Ohio, and surrounding communities and for the purchase of
mortgage-backed and investment securities. Germantown Federal also makes deposit
loans, automobile loans, personal installment loans, construction loans and
second mortgage loans.
Germantown Federal conducts operations through its main office located
at One North Plum Street, Germantown, Ohio, and an additional office located at
675 West Main Street, New Lebanon, Ohio. Germantown Federal considers its
primary market for savings and lending activities to be the Villages of
Germantown and New Lebanon and the surrounding Townships of German, Jackson and
Perry in southwestern Montgomery County, Ohio, but such activities also extend
to other parts of Montgomery County and parts of the neighboring counties of
Preble, Butler and Warren. This area has a business environment which primarily
includes the agriculture and service sectors. The population of this primary
market area is approximately 19,000. The service and retail industries are the
largest employers in Germantown Federal's market area. The unemployment rate in
Germantown Federal's market area has been constant since 1987 and is currently
below the State of Ohio and national averages. Because nearly all of the assets
and liabilities of Germantown Federal are monetary in nature, interest rates
have a greater effect on the earnings of Germantown Federal than local economic
conditions.
LENDING ACTIVITIES
GENERAL. Currently the principal lending activity of Germantown Federal
is the origination of mortgage loans for the purpose of financing or refinancing
one- to four-family residential properties and also the origination of consumer
loans.
33
<PAGE> 40
ANALYSIS OF LOAN AND MORTGAGE-BACKED SECURITIES PORTFOLIO. Set forth
below is selected data relating to the composition of Germantown Federal's loan
and mortgage-backed securities portfolio by type of loan on the dates indicated.
<TABLE>
<CAPTION>
At June 30, At March 31,
----------------------- -------------------------------------------------------
1997 1997 1996
----------------------- ----------------------- --------------------------
Amount Percent Amount Percent Amount Percent
------- ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family $ 30,076 89.36% $ 29,367 90.29% $ 27,417 93.22%
Construction 345 1.03 457 1.41 - -
Participations purchased - - - - 5 0.02
-------- ----- -------- ----- -------- -----
30,421 90.39 28,824 91.70 27,422 93.24
Consumer Loans:
Second mortgage 1,445 4.29 1,256 3.86 1,041 3.54
Savings account 197 0.59 114 0.35 159 0.54
Home improvement 178 0.53 187 0.57 167 0.57
Equity line of credit 1,109 3.29 779 2.40 236 0.80
Automobile 712 2.12 619 1.90 516 1.75
Other 240 0.71 238 0.73 218 0.74
-------- ----- -------- ----- -------- -----
3,881 11.53 3,193 9.81 2,337 7.94
-------- ----- -------- ----- -------- -----
Total gross loans 34,302 101.92 33,017 101.51 29,759 101.18
Less:
Loans in process (308) (0.92) (137) (0.42) (7) (0.02)
Deferred loan origination fees
and costs, net (116) (0.34) (113) (0.35) (123) (0.42)
Loan participations sold (93) (0.28) (116) (0.39) (120) (0.41)
Allowance for loan losses (127) (0.38) (127) (0.39) (98) (0.33)
-------- ----- -------- ----- -------- -----
Total loans, net $ 33,658 100.0% $ 32,524 100.0% $ 29,411 100.00%
======== ===== ======== ===== ======== ======
Mortgage-backed securities, net $ 8,765 100.0% $ 8,848 100.0% $ 10,265 100.00%
</TABLE>
Under federal regulations, Germantown Federal's loans and extensions of
credit to a person outstanding at anytime generally may not exceed 15% of
Germantown Federal's total capital under the regulatory capital requirements
plus any additional loan reserve not included in total capital ("Lending Limit
Capital"). A savings association may lend to one borrower an additional amount
not to exceed 10% of Lending Limit Capital if the additional amount is fully
secured by certain forms of "readily marketable collateral." Real estate is not
considered "readily marketable collateral." An exception to these limits permits
loans to one borrower of up to $500,000 "for any purpose."
Based upon such limits, Germantown Federal was able to lend
approximately $832,000 to one borrower at June 30, 1997. The largest amount
Germantown Federal had outstanding to one borrower at June 30, 1997, was
$231,000.
The following table sets forth the dollar amount of loans due after
June 30, 1998, which have fixed rates and which have adjustable rates:
<TABLE>
<CAPTION>
Fixed Adjustable
----- ----------
(In thousands)
<S> <C> <C>
One- to four-family real estate $25,380 $4,726
Consumer 2,551 1,109
-------- -------
Total loans $27,931 $5,835
======== ======
Total mortgage-backed securities $ 7,384 $1,381
======== ======
</TABLE>
RESIDENTIAL REAL ESTATE LOANS. Germantown Federal's primary lending
activity consists of the origination of one- to four-family, owner-occupied,
residential mortgage loans secured by property located in Germantown Federal's
primary
34
<PAGE> 41
market area. The majority of Germantown Federal's residential mortgage
loans consist of loans secured by owner-occupied, single-family residences. At
June 30, 1997, Germantown Federal had $30.1 million, or 87.7% of its gross loan
portfolio, invested in first mortgage loans secured by one-to four-family
residences.
Germantown Federal generally originates 15- nd 30-year fixed-rate
mortgage loans for retention in Germantown Federal's loan portfolio. Germantown
Federal's fixed-rate mortgage loans are amortized on a monthly basis with
principal and interest due each month. Residential real estate loans often
remain outstanding for significantly shorter periods than their contractual
terms because borrowers may refinance or prepay loans at their option.
At June 30, 1996, Germantown Federal had no multi-family residential
real estate loans in its portfolio.
Germantown Federal also originates 30-year adjustable-rate mortgage
loans ("ARMs") for retention in Germantown Federal's loan portfolio. The
interest rate adjustment periods on the ARMs are either one year or three years.
ARMs presently originated by Germantown Federal are tied to changes in the
weekly average yield on the one-year U.S. Treasury constant maturities index.
Rate adjustments are computed by adding a stated margin, typically 2.75%, to the
index. The maximum allowable adjustment at each adjustment date is usually 2%
with a maximum adjustment of 6% over the term of the loan.
Germantown Federal's residential first mortgage loans customarily
include due-on-sale clauses, which are provisions giving Germantown Federal the
right to declare a loan immediately due and payable in the event, among other
things, that the borrower sells or otherwise disposes of the real property
serving as security for the loan. Due-on-sale clauses are an important means of
adjusting the rates on Germantown Federal's fixed-rate mortgage portfolio, and
Germantown Federal has generally exercised its rights under these clauses.
Regulations limit the amount which a savings association may lend in
relationship to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination. Germantown Federal's
lending policies generally limit the maximum loan-to-value ratio to 97% of the
lesser of the appraised value or the purchase price of the property to serve as
security for the residential loan. When Germantown Federal makes a loan in
excess of 80% of the appraised value or purchase price, private mortgage
insurance is required.
Germantown Federal's loan policy requires title insurance on all first
mortgage loans. Flood hazard insurance (if needed) and fire and casualty
insurance are required by Germantown Federal on all properties securing real
estate loans.
Germantown Federal originates loans to finance the construction of
residential property. At June 30, 1997, Germantown Federal had $345,000, or
1.0%, of its gross loan portfolio, in interim construction loans. Germantown
Federal makes construction loans to private individuals and to builders who are
building pursuant to a contract for sale.
Germantown Federal did not sell any loans to investors in the secondary
market during the three months ended June 30, 1997, or during fiscal 1997 or
fiscal 1996.
COMMERCIAL REAL ESTATE LOANS. Although Germantown Federal will consider
offering loans secured by commercial real estate, Germantown Federal did not
have any loans secured by commercial properties at June 30, 1997.
CONSUMER LOANS. Regulations permit federally-chartered savings
associations to make secured and unsecured consumer loans up to 35% of the
association's assets. In addition, Germantown Federal has lending authority
above the 35% limit for certain consumer loans, such as second mortgage loans
and loans secured by deposit accounts.
As of June 30, 1997, consumer loans totaled $3,881,000, or 11.3% of
Germantown Federal's total gross loan portfolio, and consisted of loans secured
with deposits held at Germantown Federal, home improvement loans, equity line of
credit loans, auto loans, second mortgage loans and personal installment loans.
LOAN SOLICITATION AND PROCESSING. Loan originations are derived from a
number of sources, such as realtors, depositors, borrowers, builders and walk-in
customers.
Upon receipt of a loan application, a credit report is obtained and
employers are contacted to verify specific information relating to the loan
applicant's employment, income and credit standing. In the case of a real estate
loan, an appraisal of the real estate intended to secure the proposed loan is
undertaken by an independent appraiser approved by Germantown Federal. Each loan
application file is submitted to the Loan Committee consisting of the President,
the Vice
35
<PAGE> 42
President-Treasurer, the Deposit Operations Manager and the New Lebanon Branch
Manager. Any two of these committee members may approve a one- to four-family
residential real estate loan up to $250,000 and residential real estate loans to
the same borrower secured by more than one property (blanket loans) up to
$300,000. All loans over these limits must be approved by the Board of
Directors.
In the case of a consumer loan, loan officers are required to follow
Germantown Federal's underwriting standards and guidelines and are granted
approval authority up to lending limits ranging from $2,000 to $200,000.
Individual lending limits are established from time to time by the Board of
Directors of Germantown Federal. Consumer loans over $200,000 in amount must be
approved by the Board of Directors.
Loan applicants are promptly notified of the credit decision by
telephone or letter. If the loan is approved in writing, the loan commitment
specifies the terms and conditions of the proposed loan, including the amount of
the loan, interest rate, amortization term, a brief description of the required
collateral and required insurance coverage. The borrower must provide proof of
fire, flood (if applicable) and casualty insurance on the property serving as
collateral, which insurance must be maintained during the full term of the loan.
Generally, a title insurance policy issued to Germantown Federal is required on
all mortgage loans.
ORIGINATIONS AND PURCHASES OF LOANS AND MORTGAGE-BACKED SECURITIES
ORIGINATIONS AND PURCHASES. The following tables set forth Germantown
Federal's gross loan originations, mortgage-backed securities purchases and
principal repayments for the periods indicated.
<TABLE>
<CAPTION>
Three months Year Ended March 31,
ended June 30, -----------------------------
1997 1997 1996
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Total gross loans receivable (net of
participations sold) at beginning of period $32,901 $29,639 $22,653
Loans originated:
1 - 4 family mortgage 1,849 7,051 9,819
Consumer loans 1,292 2,646 1,878
--------- --------- ---------
Total loans originated 3,141 9,697 11,697
Loan principal repayments 1,833 6,435 4,711
--------- --------- ---------
Net loan activity 1,308 3,262 6,986
--------- --------- ---------
Total gross loans receivable (net of
participations sold) at end of period $34,209 $32,901 $29,639
========= ========= =========
<CAPTION>
Three months Year Ended March 31,
ended June 30, -----------------------------
1997 1997 1996
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Total gross mortgage-backed securities at
beginning of period $8,848 $10,265 $12,030
Mortgaged-backed securities purchased - - -
Mortgage-backed securities principal repayments (217) (1,341) 1,763
Unrealized gain (loss) on available-for-sale
securities 134 (76) (2)
--------- --------- ---------
Total gross mortgage-backed securities at end of
period $8,765 $8,848 $10,265
========= ========= =========
</TABLE>
36
<PAGE> 43
LOAN MATURITIES. The following table sets forth certain information at
June 30, 1997, regarding the dollar amount of loans in Germantown Federal's
portfolio based on the contractual maturity dates.
<TABLE>
<CAPTION>
Due during Due one through Due after
the year ending five years after five years after
June 30, 1998 June 30, 1997 June 30, 1997 Total
--------------- ---------------- ---------------- --------
(In thousands)
<S> <C> <C> <C> <C>
One- to four-family (net
of participations) $222 $277 $29,484 $29,983
Construction - - 345 345
---- ---- ------- -------
Total $222 $277 $29,829 $30,328
==== ==== ======= =======
</TABLE>
LOAN COMMITMENTS. Germantown Federal issues standby loan origination
commitments to qualified borrowers, primarily for residential real estate loans.
Such commitments are made on specified terms and conditions and are made for
periods of up to 60 days, during which time the interest rate may be locked in.
At June 30, 1997, Germantown Federal had $444,000 in commitments to originate
loans. At June 30, 1997, Germantown Federal also had commitments of $1,443,000
from unused lines of credit related to its home equity and overdraft line of
credit programs.
LOAN FEES AND SERVICE CHARGES. In addition to interest earned on loans,
Germantown Federal generally recognizes fees and service charges which consist
primarily of loan servicing fees and late charges.
Loan origination and commitment fees are volatile sources of income.
Such fees fluctuate with the volume and type of loans and commitments made and
purchased and with competitive conditions in the mortgage markets, which in turn
respond to the demand and availability of money.
DELINQUENCIES AND ASSET CLASSIFICATION. Germantown Federal's collection
procedures provide that when a loan is 16 days past due, a late charge is
assessed and the borrower is contacted by mail or telephone and payment is
requested. If the delinquency continues, subsequent efforts are made to contact
the delinquent borrower. Loans delinquent 90 days or more are considered problem
loans and are placed on Germantown Federal's loan "watch list." Unless other
repayment arrangements are made, additional late charges may be added and
Germantown Federal generally initiates foreclosure proceedings. Each delinquent
loan is reviewed on a case-by-case basis.
Loans are reviewed on a regular basis and are generally placed on a
non-accrual status when the loan becomes 90 days delinquent and, in the opinion
of management, the collection of additional interest is doubtful. Germantown
Federal will continue to accrue interest on loans more than 90 days past due if
such loans are believed to be well secured and in the process of collection.
Interest accrued and unpaid at the time a loan is placed on non-accrual status
is charged against interest income. Subsequent payments are either applied to
the outstanding principal balance or recorded as interest income, depending on
the assessment of the ultimate collectibility of the loan.
Real estate acquired by Germantown Federal as a result of foreclosure
or by deed in lieu of foreclosure is classified as foreclosed real estate until
such time as it is sold. When foreclosed real estate is acquired, it is recorded
at the lower of the unpaid principal balance of the related loan or its fair
value less its estimated cost of sale. Any additional write-down of foreclosed
real estate is charged to the allowance for real estate losses or written down
if permanent impairment exists.
37
<PAGE> 44
The following table sets forth information regarding Germantown
Federal's nonperforming assets, loans which are 90 days or more delinquent but
on which Germantown Federal is accruing interest and other real estate at the
dates indicated. Germantown Federal, as of and for the three months ended June
30, 1997, and as of and for the years ended March 31, 1997 and 1996, had no
loans which were required to be evaluated for impairment on a loan by loan basis
within the scope of SFAS No. 114. At June 30, 1997, gross interest income that
would have been recorded had non-accruing loans been current in accordance with
their original terms amounted to $19,000.
<TABLE>
<CAPTION>
At March 31,
At June 30, ------------------------
1997 1997 1996
------- --------- -------
(In thousands)
<S> <C> <C> <C>
Loans accounted for on a non-accrual basis:
Permanent loans secured by one- to four-family units $ 192 $ 162 $ 103
Consumer 5 5 5
------- ------- -------
Total 197 167 108
Accruing loans which are contractually past due 90 days
or more - - -
Total nonperforming loans 197 167 108
Real estate owned - - -
------- ------- -------
Total nonperforming assets $ 197 $ 167 $ 108
======= ======= =======
Total nonperforming loans to net loans 0.59% 0.51% 0.37%
Total nonperforming loans to total assets 0.41% 0.35% 0.22%
Total nonperforming assets to total assets 0.41% 0.35% 0.22%
Net loans $33,658 $32,524 $29,411
Total assets $48,502 $48,122 $48,982
</TABLE>
CLASSIFIED ASSETS. OTS regulations provide for a classification system
for problem assets of insured institutions. Under this classification system,
problem assets are classified as "substandard", "doubtful" or "loss." An asset
is considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or by the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard", with the added characteristic that
the weaknesses present make "collection of principal in full," on the basis of
currently existing facts, conditions and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted. Assets classified
"special mention" are assets included on Germantown Federal's internal watch
list.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as "loss", it is required either to establish a specific
allowance for losses equal to 100% of that portion of the asset so classified or
to charge off such amount. An institution's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the OTS, which may order the establishment of additional
general or specific loss allowances.
38
<PAGE> 45
The following table sets forth Germantown Federal's classified assets
and allocation of loan loss allowance at June 30, 1997:
<TABLE>
<CAPTION>
At June 30, 1997
----------------
(In thousands)
<S> <C>
Special mention assets $ -
Substandard assets 203
Doubtful assets -
Loss assets -
----
Total $203
====
General loss allowance $127
----
Specific loss allowance -
Total allowances $127
====
</TABLE>
The following table sets forth the type and dollar amounts of
Germantown Federal's loans more than 60 days delinquent as of June 30, 1997.
<TABLE>
At June 30, 1997
----------------
(In thousands)
<S> <C>
Residential mortgage loans $372
Consumer loans 5
----
Total delinquent loans $379
====
</TABLE>
ALLOWANCE FOR LOAN AND REAL ESTATE LOSSES. It is management's policy to
maintain an allowance for losses on loans in its loan portfolio and other
nonperforming assets. A provision for loan losses is charged to operations based
on management's evaluation of the potential losses that may be incurred in
Germantown Federal's loan portfolio. Such evaluation includes a review and
measurement of all impaired loans based on the present value of expected future
cash flows discounted at the loan's effective interest rate, and considers,
among other matters, the estimated net realizable value of the underlying
collateral.
When other real estate is acquired, it is recorded at the lower of the
unpaid principal balance of the related loan or its fair value less estimated
cost to sell. Valuations are periodically performed by management, and an
allowance for losses on other real estate is established by a charge to
operations if the carrying value of the property exceeds its estimated fair
value.
Management will continue to review the entire loan portfolio to
determine the extent, if any, to which further additional loan loss provisions
may be deemed necessary. There can be no assurance that the allowance for loan
losses will be adequate to cover losses which may in fact be realized in the
future or that additional provisions for loan losses will not be required. See
"GFBC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS Financial Condition at June 30, 1997" for circumstances that could
cause the allowance to be inadequate.
39
<PAGE> 46
The following table sets forth information with respect to Germantown
Federal's allowance for loan losses for the periods indicated:
<TABLE>
<CAPTION>
Three months ended June 30, Year Ended March 31,
--------------------------- --------------------
1997 1997 1996
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Total loans outstanding (at end of period)(1) $33,785 $ 32,651 $ 29,509
Average loans outstanding(1) $33,265 $ 30,979 $ 26,226
Allowance balances (at beginning of period) $ 127 $ 98 $ 95
Provision - 33 -
Charge-offs - (7) (2)
Recoveries - 3 5
------- -------- --------
Allowance balance (at end of period) $ 127 $ 127 $ 98
======= ======== ========
Allowance for loan losses as a percentage of
average loans outstanding 0.38% 0.41 0.37%
Net loans charged-off (recovered) as a
percentage of average loans outstanding - (0.01)% (0.01)%
Allowance for loan losses as a percentage of
nonperforming loans (at end of period) 64.47% 76.05% 90.74%
<FN>
(1) Gross loans net of loans in process, net deferred fees and costs and loan
participations sold.
</TABLE>
The distribution of Germantown Federal's allowance for loan losses at
the dates indicated is summarized as follows:
<TABLE>
<CAPTION>
March 31,
-----------------------------------------------------------
June 30, 1997 1997 1996
--------------------------- -----------------------------------------------------------
Percent of loans Percent of loans Percent of loans
in each category in each category in each category
Amount to total loans Amount to total loans Amount to total loans
------ ---------------- ------ -------------- ------ ---------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate $ 45 88.7% $ 45 90.3% $30 92.2%
Consumer 82 11.3 82 9.7 68 7.8
----- ----- ----- ----- --- -----
Total $ 127 100.0% $127 100.0% $98 100.0%
===== ===== ===== ===== === =====
</TABLE>
MORTGAGE-BACKED SECURITIES AND INVESTMENT ACTIVITIES
GENERAL. Germantown Federal's investment policy, which is established
by senior management and approved by the Board of Directors, is based upon its
asset and liability management goals and is designed primarily to provide a
portfolio of high quality, diversified securities while seeking to optimize net
interest income within acceptable limits of safety and liquidity.
Germantown Federal's current investment goal is to invest available
funds in instruments that generally do not exceed an average life of five to
seven years, or that meet specific requirements of Germantown Federal's asset
and liability management goals. The investment activities of Germantown Federal
consist primarily of investments in mortgage-backed securities and other
securities consisting primarily of securities issued or guaranteed by the United
States Government or agencies thereof. At June 30, 1997, Germantown Federal had
an investment portfolio with a market value of approximately $10.3 million
consisting of mortgage-backed securities and U.S. Government securities.
At June 30, 1997, the carrying value of Germantown Federal's
mortgage-backed securities totaled $8.8 million, or 18.1%, of total assets. Such
securities consisted entirely of Federal Home Loan Mortgage Corporation
("FHLMC") pass-
40
<PAGE> 47
through securities, whose principal and interest are guaranteed by FHLMC. All
mortgage-backed securities are classified as available-for-sale at June 30,
1997, and are carried at market value.
At June 30, 1997, the carrying value of Germantown Federal's investment
securities available for sale totaled $1.5 million, or 3.1% of total assets.
These securities consisted entirely of U.S. Treasury obligations.
VALUES AND MATURITIES. The following table sets forth the carrying
value of Germantown Federal's fixed-rate and adjustable-rate mortgage-backed
securities and securities, all of which are available for sale, at the dates
indicated.
<TABLE>
<CAPTION>
At March 31,
At June 30, -----------------------------
1997 1997 1996
---- ---- ----
(In thousands)
Mortgage-backed securities:
<S> <C> <C> <C>
Fixed $7,384 $7,463 $ 8,772
Adjustable 1,381 1,385 1,493
------ ------ --------
Total mortgage-backed securities $8,765 $8,848 $10,265
====== ====== ========
Securities:
Fixed $1,500 $2,000 $ 4,493
Adjustable - - -
------ ------ --------
Total securities $1,500 $2,000 $ 4,493
====== ====== ========
</TABLE>
The following table sets forth certain information regarding the
carrying values, weighted average yields and maturities of Germantown Federal's
mortgage-backed and investment securities portfolio at June 30, 1997.
<TABLE>
<CAPTION>
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total
------------------ ----------------- ---------------- ----------------- -----------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
------- ------- ------- ------- ------ ------ -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed
securities(1) $ - - $1,165 7.97% $1,452 7.14% $6,148 6.76% $8,765 6.98%
U.S. Treasury
obligations $1,500 5.58% - - - - - - $1,500 5.58%
<FN>
- ---------------------------------
(1) Mortgage-backed securities represent a participation interest in a pool
of mortgages, the principal and interest payments on which are passed
from mortgage originators, through intermediaries (generally
quasi-governmental agencies) that pool and repackage the participation
interests in the form of securities, to investors such as Germantown
Federal. These securities are backed by pools of mortgages that have
loans with interest rates that are within a range and have varying
maturities. As interest rates fluctuate, payments on the underlying
mortgages will vary. As a result, no maturity data has been shown.
</TABLE>
SOURCES OF FUNDS
GENERAL. Deposits are the major source of Germantown Federal's funds
for lending and other investment purposes. In addition to deposits, Germantown
Federal derives funds from amortization and prepayment of loans, maturities of
securities and operations. Scheduled loan principal repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are significantly influenced by general interest rates and market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources or on a longer term basis for general
business purposes.
Germantown Federal had a $1.0 million advance from the FHLB of Cincinnati at
June 30, 1997.
DEPOSITS. Consumer and commercial deposits are attracted principally
from within Germantown Federal's primary market area through the offering of a
broad selection of deposit instruments, including demand checking, NOW, passbook
savings, money market deposit, term certificate and individual retirement
accounts. Deposit account terms vary according to the minimum balance required,
the time periods the funds must remain on deposit and the interest rate, among
other factors. Germantown Federal regularly evaluates the internal cost of
funds, surveys rates offered by competing institutions, reviews
41
<PAGE> 48
Germantown Federal's cash flow requirements for lending and liquidity and
executes rate changes when deemed appropriate. Germantown Federal does not
obtain funds through brokers, nor does it actively solicit funds outside of the
State of Ohio.
Certificates of deposit with principal amounts of $100,000 or more
constituted $1.3 million, or 3.1%, of Germantown Federal's total deposit
portfolio at June 30, 1997. See "Certificates of Deposit."
DEPOSIT PORTFOLIO. Deposits in Germantown Federal were represented by
various types of savings programs described below for the periods indicated.
<TABLE>
<CAPTION>
Three months ended June 30, Year ended March 31,
------------------------- ---------------------------------------------
1997 1997 1996
------------------------- ---------------------------------------------
Weighted Weighted Weighted
Average average Average average Average average
balance rate balance rate balance rate
------- ------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Transaction accounts:
Demand checking $ 396 -% $ 233 -% $ 94 -%
NOW accounts 3,625 1.92 3,441 1.92 3,262 1.91
Money market accounts 2,932 2.96 3,079 2.91 3,297 2.91
Passbook savings 9,852 2.49 9,995 2.47 10,028 2.48
------- ----- -------
Total transaction accounts 16,805 16,749 16,681
Certificates of deposit 23,279 5.61 23,650 5.46 23,537 5.56
------- ----- -------
Total deposits $40,084 4.27% $40,398 4.21% $40,218 4.28%
======= ======= =======
</TABLE>
CERTIFICATES OF DEPOSIT. The following table indicates the amount of
Germantown Federal's certificates of deposit of $100,000 or more by time
remaining until maturity as of June 30, 1997:
<TABLE>
<CAPTION>
Maturity Period Certificates of Deposit
--------------- -----------------------
(In thousands)
<S> <C>
Three through six months $ 774
Six through twelve months 490
-------
Total $ 1,264
=======
</TABLE>
BORROWINGS. Deposits are the primary source of funds for Germantown
Federal's lending and investment activities and for its general business
purposes. Germantown Federal may supplement its supply of lendable funds by
obtaining advances from the FHLB of Cincinnati or by accessing the Federal
Reserve Bank discount window. Advances from the FHLB of Cincinnati would
typically be secured by a pledge of Germantown Federal's stock in the FHLB of
Cincinnati and a portion of Germantown Federal's first mortgage loans and
certain other assets. At June 30, 1997, and March 31, 1997 and 1996, Germantown
Federal had a five-year fixed-rate advance of $1.0 million from the FHLB of
Cincinnati. Germantown Federal pledged $1.5 million of first mortgage loans as
security for the advance. The advance will either be repaid or renewed at
maturity depending on Germantown Federal's cash demands at that time.
The following table sets forth the maximum month-end balance and
average balance of FHLB advances and other borrowings for the periods indicated:
<TABLE>
<CAPTION>
Year ended March 31,
June 30, ---------------------------------------------
1997 1997 1996 1995
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Maximum balance:
FHLB advances $1,000 $1,000 $1,000 $ -
Average balance:
FHLB advances 1,000 1,000 585 -
</TABLE>
42
<PAGE> 49
COMPETITION
Germantown Federal encounters strong competition both in the attraction
of deposits and in the origination of real estate and other loans. Its most
direct competition for deposits has historically come from commercial banks,
other savings associations and credit unions in its market area. Germantown
Federal competes for savings by offering depositors a high level of personal
service and convenient office locations. The competition for real estate and
other loans comes principally from commercial banks, credit unions, mortgage
banking companies and other savings associations.
Germantown Federal competes for loans primarily through the interest
rates and loan fees it charges and the efficiency and quality of services it
provides borrowers, real estate brokers and builders. Factors which affect
competition include the general and local economic conditions, current interest
rate levels and volatility in the mortgage markets.
SUBSIDIARY ACTIVITIES
At June 30, 1997, Germantown Federal had one subsidiary, GFS Financial
Services, Inc. GFS Financial Services, Inc. is a wholly-owned service
corporation of Germantown Federal. The subsidiary was incorporated in 1980. The
only activity of the subsidiary is holding stock of Intrieve, Inc., a data
processing company serving Germantown Federal. At June 30, 1997, Germantown
Federal held an equity investment of $20,000 in its subsidiary.
PERSONNEL
As of June 30, 1997, Germantown Federal had 19 full-time employees and
one part-time employee. None of Germantown Federal's employees are represented
by a collective bargaining group. Germantown Federal believes its relationship
with its employees is good. Germantown Federal offers health, disability and
life insurance benefits.
CHANGE IN ACCOUNTANTS
On September 17, 1996, the Board of Directors of GFBC approved a change
of GFBC's independent public auditors from Arthur Andersen LLP ("Arthur
Andersen") to Crowe, Chizek and Company LLP ("Crowe Chizek"). Arthur Andersen
served as GFBC's independent public auditors from 1984 through the fiscal year
ended March 31, 1996. The decision to dismiss Arthur Andersen was part of an
effort to reduce professional fee expenses.
The reports of Arthur Andersen on the consolidated financial statements
of GFBC for the fiscal years ended March 31, 1996 and 1995, did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to audit scope or accounting principles nor did they include an explanatory
paragraph for material uncertainties. There has not been any disagreement
between GFBC and Arthur Andersen on any matter of accounting principles or
practices, consolidated financial statement disclosure or audit scope or
procedure.
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<PAGE> 50
SECURITY OWNERSHIP OF GFBC
The following table sets forth, as of October 30, 1997, certain
information as to those persons who were believed by management to be the
beneficial owners of more than 5% of the outstanding GFBC Shares.
<TABLE>
<CAPTION>
Percent of shares of
Amount and nature of common stock
Name and address of beneficial owner beneficial ownership outstanding
- ------------------------------------ -------------------- --------------------
<S> <C> <C>
Steven F. Goens and Marilyn J. Goens 21,113 6.68%
10451 Kley Road
Vandalia, Ohio 45377
Jeffrey S. Halis 24,215 7.66%
500 Park Avenue
Fifth Floor
New York, New York 10022
John T. Baker 25,902 8.19%
One North Plum Street
Germantown, Ohio 45327
</TABLE>
The following table sets forth certain information with respect to the
number of GFBC Shares beneficially owned by each director and executive officer
of GFBC and by all directors and executive officers of GFBC as a group as of
October 30, 1997:
<TABLE>
<CAPTION>
Amount and nature of Percent of shares of
Name and address of beneficial owner(1) beneficial ownership(2) common stock outstanding
- ---------------------------------------- ------------------------ ------------------------
<S> <C> <C>
John T. Baker 25,902 (3) 8.19%
Jack L. Cobb 11,847 (4) 3.75
Stephen R. Cox 11,847 (5) 3.75
Bernard W. Falldorf 6,657 (6) 2.10
Thomas L. Fox 14,733 (7) 4.66
Charles E. Hacker 11,157 (8) 3.51
Daniel R. Hill 8,157 (9) 2.58
Bernard R. Kokenge 7,596 (10) 2.39
All directors and executive officers as a group
(8 people) 97,018 (11) 30.25
- -----------------------------
<FN>
(1) Each of the individuals in this table may be contacted at the address of
GFBC, One North Plum Street, Germantown, Ohio 45327.
(2) The beneficial owner has sole voting and dispositive power unless
otherwise indicated.
(3) Includes 3,300 shares held by Mr. Baker's spouse, with respect to which
Mr. Baker shares voting and dispositive power.
(4) Includes 439 shares held by the Germantown Federal Savings Bank Management
Stock Bonus Plan (the "MSBP") Trust, with respect to which Mr. Cobb shares
voting and dispositive power as a Trustee and a member of the MSBP
Committee.
(5) Includes 439 shares held by the MSBP Trust, with respect to which Mr. Cox
shares voting and dispositive power as a Trustee and a member of the MSBP
Committee.
</TABLE>
(Footnotes continued on next page)
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<PAGE> 51
(6) Includes 3,000 shares held jointly with Mr. Falldorf's spouse; 900 shares
held by Mr. Falldorf's spouse, with respect to which Mr. Falldorf shares
voting and dispositive power; and 1,541 shares which may be acquired by
Mr. Falldorf upon the exercise of an option.
(7) Includes 2,500 shares held by Mr. Fox's spouse, with respect to which Mr.
Fox shares voting and dispositive power.
(8) Includes 6,412 shares held jointly with Mr. Hacker's spouse and 1,541
shares which may be acquired by Mr. Hacker upon the exercise of an option.
(9) Includes 5,522 shares held jointly with Mr. Hill's spouse.
(10) Includes 5,000 shares held jointly with Mr. Kokenge's spouse; 1,541 shares
which may be acquired by Mr. Kokenge upon the exercise of an option; and
439 shares held by the MSBP Trust, with respect to which Mr. Kokenge
shares voting and dispositive power as a Trustee and a member of the MSBP
Committee.
(11) Because the same 439 shares held in the MSBP Trust are included in the
numbers held by three directors individually, the total of all shares
beneficially owned by the directors and executive officers is less than
the sum of their individual numbers of shares owned.
REGULATION OF GFBC
GENERAL
As a savings and loan holding company within the meaning of the Home
Owners' Loan Act of 1933, as amended (the "HOLA"), GFBC is subject to
regulation, examination and oversight by the OTS. Germantown Federal is also
subject to regulation, examination and oversight by the OTS and the FDIC. GFBC
and Germantown Federal must file periodic reports with these governmental
agencies concerning their activities and financial condition. Germantown Federal
is also subject to certain regulations promulgated by the Board of Governors of
the Federal Reserve System ("FRB").
OTS REGULATION
SUPERVISION AND EXAMINATION. The OTS is responsible for the regulation
and supervision of all savings associations, including Germantown Federal.
Germantown Federal must undergo a full-scope, on-site examination by the OTS at
least (a) once every twelve months, if it has total assets of $250 million or
more, or (b) once every eighteen months, if it has total assets of less than
$250 million and satisfies other specified criteria.
The OTS issues regulations governing the operations of savings
associations, regularly examines such institutions and imposes assessments on
savings associations based on their asset size to cover the costs of this
supervision and examination. It also promulgates regulations that prescribe
permissible activities for federally chartered associations, including the types
of lending that such associations may engage in and the investments in real
estate, subsidiaries and securities they may make. The OTS also may initiate
enforcement actions against savings associations and certain persons affiliated
with them for violations of laws or regulations or for engaging in unsafe or
unsound practices. If the grounds provided by law exist, the OTS may appoint a
conservator or receiver for a savings association.
Savings associations are subject to regulatory oversight under various
consumer protection and fair lending laws. These laws govern, among other
things, truth-in-lending disclosure, equal credit opportunity, fair credit
reporting and community reinvestment. Failure to abide by federal laws and
regulations governing community reinvestment could limit the ability of an
institution to open a new branch or engage in a merger transaction.
LIQUIDITY. OTS regulations require that Germantown Federal maintain an
average daily balance of liquid assets (cash, certain time deposits, bankers'
acceptances, and specified United States Government, state or federal agency
obligations) equal to a monthly average of not less than 5% of its net
withdrawable savings deposits plus borrowings payable in one year or less.
Federal regulations also require each association to maintain an average daily
balance of short-term liquid assets of not less than 1% of the total of its net
withdrawable savings deposits plus borrowings payable in one year or less.
Monetary penalties may be imposed upon associations failing to meet liquidity
requirements. The average eligible liquidity of Germantown Federal, as
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<PAGE> 52
computed under current regulations, was approximately $4.7 million or 11.1%, for
the month of June 1997, and exceeded the applicable 5% liquidity requirement by
approximately $2.6 million.
QUALIFIED THRIFT LENDER TEST. Savings associations are required to meet
the QTL test. Prior to September 30, 1996, the Qualified Thrift Lender ("QTL")
test required savings associations to maintain a specified level of investments
in assets that are designated as qualifying thrift investments ("QTI"), which
are generally related to domestic residential real estate and manufactured
housing and include credit card, student and small business loans, and stock
issued by any FHLB, the FHLMC or the Federal National Mortgage Association
("FNMA"). Under this test 65% of an institution's "portfolio assets" (total
assets less goodwill and other intangibles, property used to conduct business
and 20% of liquid assets) must consist of QTI on a monthly average basis in 9
out of every 12 months. Congress created a second QTL test, effective September
30, 1996, pursuant to which a savings association will qualify as a QTL thrift
if at least 60% of the institution's assets (on a tax basis) consist of
specified assets (generally loans secured by residential real estate or
deposits, educational loans, cash and certain governmental obligations). The OTS
may grant exceptions to the QTL test under certain circumstances. If a savings
association fails to meet the QTL test, the association and its holding company
become subject to certain operating and regulatory restrictions. A savings
association that fails to meet the QTL test will not be eligible for new FHLB
advances. At June 30, 1997, Germantown Federal met the QTL test.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. The OTS imposes various
restrictions or requirements on the ability of associations, including
Germantown Federal, to make capital distributions, including dividend payments.
OTS regulations also establish a three-tier system limiting capital
distributions according to ratings of associations based on their capital level
and supervisory condition.
Tier 1 consists of associations that, before and after the proposed
distribution, meet their fully phased-in capital requirements. Associations in
this category may make capital distributions during any calendar year equal to
the greater of 100% of net income, current year-to-date, plus 50% of the amount
by which the lesser of the association's tangible, core or risk-based capital
exceeds its fully phased-in capital requirement for such capital component, as
measured at the beginning of the calendar year, or 75% of its net income over
the most recent four-quarter period. A Tier 1 association deemed to be in need
of more than normal supervision by the OTS may be downgraded to a Tier 2 or Tier
3 association. Germantown Federal meets the requirements for a Tier 1
association and has not been notified of any need for more than normal
supervision. Tier 1 associations proposing to make any capital distribution need
only submit written notice to the OTS 30 days prior to such distribution. The
OTS may object to the distribution during that 30-day period based on safety and
soundness concerns.
Tier 2 associations, which before and after the proposed distribution
meet their current minimum, but not fully phased-in, capital requirements, may
make capital distributions of up to 75% of net income over the most recent
four-quarter period. Tier 3 associations do not meet current minimum capital
requirements and must obtain OTS approval of any capital distribution.
LENDING LIMITS. OTS regulations generally limit the aggregate amount
that Germantown Federal can lend to one borrower to an amount equal to 15% of
its Lending Limit Capital. A savings association may lend to one borrower an
additional amount not to exceed 10% of the association's Lending Limit Capital,
if the additional amount is fully secured by certain forms of "readily
marketable collateral." Real estate is not considered "readily marketable
collateral." Certain types of loans are not subject to these limits.
Notwithstanding the specified limits, an association may lend to one borrower up
to $500,000 for any purpose. In applying these limits, the regulations require
that loans to certain related borrowers be aggregated. At June 30, 1997,
Germantown Federal was in compliance with these lending limits, with its largest
extension of credit to one borrower being $231,000.
REGULATORY CAPITAL REQUIREMENTS. Germantown Federal is required by
applicable law and regulations to meet certain minimum capital requirements. The
capital standards include a leverage limit, or core capital requirement, a
tangible capital requirement, and a risk-based capital requirement.
The leverage limit requires "core capital" of at least 3% of total
assets. "Core capital" is comprised of common stockholders' equity (including
retained earnings), noncumulative perpetual preferred stock and related surplus,
minority interests in consolidated subsidiaries, certain nonwithdrawable
accounts and pledged deposits of mutual associations and certain purchased
mortgage servicing rights.
The tangible capital requirement provides that Germantown Federal must
maintain "tangible capital" of not less than 1.5% of its adjusted total assets.
"Tangible capital" is defined as core capital minus any "intangible assets."
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<PAGE> 53
Pursuant to the risk-based capital requirement, Germantown Federal must
maintain total capital, which consists of core or Tier 1 capital and certain
general valuation reserves, of 8% of risk-weighted assets. For purposes of
computing risk-based capital, assets and certain off-balance sheet items are
weighted at percentage levels ranging from 0% to 100%, depending on their
relative risk.
The following tables present certain information regarding compliance by
Germantown Federal with applicable regulatory capital requirements at June 30,
1997:
<TABLE>
<CAPTION>
At June 30, 1997
--------------------------------------------------------------------------------
Actual capital Regulatory requirement Excess capital
--------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
-------- ------- ------- ------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital $5,511 11.4% $ 727 1.5% $4,784 9.9%
Core Capital 5,511 11.4 1,454 3.0 4,057 8.4
Risk-based capital 5,638 25.5 1,768 8.0 3,870 17.5
</TABLE>
The OTS has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings
associations. At each successively lower defined capital category, an
institution is subject to more restrictive and numerous mandatory or
discretionary regulatory actions or limits, and the applicable agency has less
flexibility in determining how to resolve the problems of the institution. In
addition, the OTS generally can downgrade an institution's capital category,
notwithstanding its capital level, if, after notice and opportunity for hearing,
the institution is deemed to be engaging in an unsafe or unsound practice,
because it has not corrected deficiencies that resulted in it receiving a less
than satisfactory examination rating on matters other than capital or it is
deemed to be in an unsafe or unsound condition.
An undercapitalized institution must submit a capital restoration plan
to the OTS within 45 days after it becomes undercapitalized. Such institution
will be subject to increased monitoring and asset growth restrictions and will
be required to obtain prior approval for acquisitions, branching and engaging in
new lines of business. Furthermore, critically undercapitalized institutions
must be placed in conservatorship or receivership within 90 days of reaching
that capitalization level, except under limited circumstances. Germantown
Federal's capital levels at June 30, 1997, met the standards for the highest
category, a "well-capitalized" institution.
DERAL DEPOSIT INSURANCE CORPORATION
The FDIC is an independent federal agency that insures the deposits, up
to prescribed statutory limits, of federally insured banks and thrifts and
safeguards the safety and soundness of the banking and thrift industries. The
FDIC administers two separate insurance funds, the Bank Insurance Fund (the
"BIF") for commercial banks and state savings banks and the SAIF for savings
associations. Germantown Federal is a member of the SAIF, and its deposit
accounts are insured by the FDIC, up to the prescribed limits. The FDIC has
examination authority over all insured depository institutions, including
Germantown Federal, and has authority to initiate enforcement actions against
federally insured savings associations, if the FDIC does not believe the OTS has
taken appropriate action to safeguard safety and soundness and the deposit
insurance fund.
The FDIC is required to maintain designated levels of reserves in each
fund. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such rates if such target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments vary based on the risk the
institution poses to its deposit insurance fund. The risk level is determined
based on the institution's capital level and the FDIC's level of supervisory
concern about the institution.
Because of the differing reserve levels of the funds, deposit insurance
assessments paid by healthy savings associations were reduced significantly
below the level paid by healthy savings associations effective in mid-1995.
Assessments paid by healthy savings associations exceeded those paid by healthy
commercial banks by approximately $.19
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<PAGE> 54
per $100 in deposits in late 1995. Such excess equaled approximately $.23 per
$100 in deposits beginning in 1996. This premium disparity had a negative
competitive impact on Germantown Federal and other institutions in the SAIF.
Federal legislation, which was effective September 30, 1996, provided
for the recapitalization of the SAIF by means of a special assessment of $.657
per $100 of SAIF deposits held at March 31, 1995, in order to increase SAIF
reserves to the level required by law. Certain banks holding SAIF-insured
deposits were required to pay the same special assessment on 80% of deposits at
March 31, 1995. In addition, part of the cost of prior thrift failures, which
had previously been paid only by SAIF members, will be paid by BIF members. As a
result, BIF assessments for healthy banks in 1997 will be $.013 per $100 in
deposits and SAIF assessments for healthy institutions in 1997 will be $.064 per
$100 in deposits.
Germantown Federal had $41.0 million in deposits at March 31, 1995.
Germantown Federal paid a special assessment of $270,000 in November 1996, which
was accounted for and recorded as of September 30, 1996. This assessment was
tax-deductible but reduced earnings for the year ended March 31, 1997.
TRANSACTIONS WITH AFFILIATES AND INSIDERS
Loans to executive officers, directors and principal shareholders and
their related interests must conform to the lending limit on loans to one
borrower, and the total of such loans to executive officers, directors,
principal shareholders and their related interests cannot exceed the
association's Lending Limit Capital (or 200% of Lending Limit Capital for
qualifying institutions with less than $100 million in deposits). Most loans to
directors, executive officers and principal shareholders must be approved in
advance by a majority of the "disinterested" members of the board of directors
of the association with any "interested" director not participating. All loans
to directors, executive officers and principal shareholders must be made on
terms substantially the same as offered in comparable transactions with the
general public or as offered to all employees in a company-wide benefit program,
and loans to executive officers are subject to additional limitations.
Germantown Federal was in compliance with such restrictions at June 30, 1997.
All transactions between savings associations and their affiliates must
comply with Sections 23A and 23B of the Federal Reserve Act (the "FRA"). An
affiliate is any company or entity which controls, is controlled by or is under
common control with the financial institution. In a holding company context, the
parent holding company of a savings association and any companies that are
controlled by such parent holding company are affiliates of the institution.
Generally, Sections 23A and 23B of the FRA (i) limit the extent to which a
financial institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus for any one affiliate and 20% of such capital stock and
surplus for the aggregate of such transactions with all affiliates, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or the subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar types of transactions.
In addition to limits in Sections 23A and 23B, Germantown Federal may not make
any loan or other extension of credit to an affiliate unless the affiliate is
engaged only in activities permissible for a bank holding company and may not
purchase or invest in securities of any affiliate, except shares of a
subsidiary. Exemptions from Sections 23A or 23B of the FRA may be granted only
by the FRB. Germantown Federal was in compliance with these requirements at June
30, 1997.
CHANGE IN CONTROL
The Federal Deposit Insurance Act (the "FDIA") provides that no person,
acting directly or indirectly or in concert with one or more persons, shall
acquire control of any insured depository institution or holding company, unless
60-days prior written notice has been given to the primary federal regulator for
that institution and such regulator has not issued a notice disapproving the
proposed acquisition. Control, for purposes of the FDIA, means the power,
directly or indirectly, alone or acting in concert, to direct the management or
policies of an insured institution or to vote 25% or more of any class of
securities of such institution. Control exists in situations in which the
acquiring party has direct or indirect voting control of at least 25% of the
institution's voting shares, controls in any manner the election of a majority
of the directors of such institution or is determined to exercise a controlling
influence over the management or policies of such institution. In addition,
control is presumed to exist, under certain circumstances, where the acquiring
party (which includes a group "acting in concert") has voting control of at
least 10% of the institution's voting stock. These restrictions do not apply to
holding company acquisitions. See "Holding Company Regulation."
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<PAGE> 55
HOLDING COMPANY REGULATION
GFBC is a unitary savings and loan holding company subject to the
regulatory oversight, examination and enforcement authority of the OTS. GFBC is
required to register and file periodic reports with the OTS. If the OTS
determines that the continuation of a particular activity by a savings and loan
holding company constitutes a serious threat to the financial condition of its
subsidiary institutions, the OTS may impose restrictions on the holding company.
Such restrictions may include limiting the payment of dividends, transactions
with affiliates or any other activities deemed to pose a serious threat to the
subsidiary institutions.
Generally, no savings and loan holding company may (i) acquire or
retain control of a savings association or another savings and loan holding
company or control the assets thereof or (ii) acquire or retain more than 5% of
the voting shares of a savings association or holding company thereof, which is
not a subsidiary, without the prior written approval of the Director of the OTS.
Additionally, under certain circumstances a savings and loan holding company is
permitted to acquire, with the approval of the Director of the OTS, up to 15% of
the previously unissued voting shares of an undercapitalized savings association
for cash, without such savings association being deemed to be controlled by the
holding company. Except with the prior approval of the Director of the OTS, no
director or officer of a savings and loan holding company or person owning or
controlling by proxy or otherwise more than 25% of such company's stock may also
acquire control of any savings institution, other than a subsidiary institution,
or any other savings and loan holding company.
The Director of the OTS may approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
associations in more than one state, if the multiple savings and loan holding
company involved controls a savings association which operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the laws of the state in which the institution to be acquired is located
specifically permit institutions to be acquired by state-chartered institutions
or savings and loan holding companies located in the state where the acquiring
entity is located (or by a holding company that controls such state-chartered
savings institutions). As under prior law, the Director of the OTS may approve
an acquisition resulting in a multiple savings and loan holding company
controlling savings associations in more than one state in the case of certain
emergency thrift acquisitions.
Federal law provides that an insured institution shall be liable for
any loss incurred by the FDIC in connection with the default or potential
default of, or federal assistance provided to, an insured institution which is
controlled by the same holding company. Such loss would be apportioned among all
of the insured institutions controlled by the holding company.
FEDERAL RESERVE REQUIREMENTS
FRB regulations currently require savings associations to maintain
reserves of 3% of net transaction accounts (primarily NOW accounts) up to $49.3
million (subject to an exemption of up to $4.4 million), and of 10% of net
transaction accounts in excess of $49.3 million. At June 30, 1997, Germantown
Federal was in compliance with its reserve requirements.
FEDERAL HOME LOAN BANK SYSTEM
The FHLBs provide credit to their members in the form of advances. As
members of the FHLB of Cincinnati, Germantown Federal is required to maintain an
investment in the capital stock of the FHLB of Cincinnati in an amount equal to
the greater of 1.0% of the aggregate outstanding principal amount of their
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or 5% of their advances from the FHLB of Cincinnati.
GFBC is in compliance with this requirement with an aggregate investment by
Germantown Federal in FHLB of Cincinnati stock of $416,000 at June 30, 1997.
Upon the origination or renewal of a loan or advance, the FHLB of
Cincinnati is required to obtain and to maintain a security interest in
collateral in one or more of the following categories: fully disbursed, whole
first mortgage loans on improved residential property or securities representing
a whole interest in such loans; securities issued, insured or guaranteed by the
United States Government or an agency thereof; deposits in any FHLB; or other
real estate related collateral (up to 30% of the member's capital) acceptable to
the applicable FHLB, if such collateral has a readily ascertainable value and
the FHLB can perfect its security interest in the collateral.
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<PAGE> 56
FEDERAL TAXATION
GFBC and Germantown Federal are each subject to the federal tax laws
and regulations which apply to corporations generally. In addition to the
regular income tax, GFBC and Germantown Federal may be subject to an alternative
minimum tax. An alternative minimum tax is imposed at a minimum tax rate of 20%
on "alternative minimum taxable income" (which is the sum of a corporation's
regular taxable income, with certain adjustments, and tax preference items),
less any available exemption. Such tax preference items include interest on
certain tax-exempt bonds issued after August 7, 1986. In addition, 75% of the
amount by which a corporation's "adjusted current earnings" exceeds its
alternative minimum taxable income computed without regard to this preference
item and prior to reduction by net operating losses, is included in alternative
minimum taxable income. Net operating losses can offset no more than 90% of
alternative minimum taxable income. The alternative minimum tax is imposed to
the extent it exceeds the corporation's regular income tax. Payments of
alternative minimum tax may be used as credits against regular tax liabilities
in future years. However, the Taxpayer Relief Act of 1997 repealed the
alternative minimum tax for certain "small corporations" for tax years beginning
after December 31, 1997. A corporation initially qualifies as a small
corporation if it had average gross receipts of $5,000,000 or less for the three
tax years ending with its first tax year beginning after December 31, 1996. Once
a corporation is recognized as a small corporation, it will continue to be
exempt from the alternative minimum tax for as long as its average gross
receipts for the prior three-year period does not exceed $7,500,000. In
determining if a corporation meets this requirement, the first year that it
achieved small corporation status is not taken into consideration.
Germantown Federal's average gross receipts for the three tax years
ending on March 31, 1997, is $3,562,000, and as a result, Germantown Federal
does qualify as a small corporation exempt from the alternative minimum tax.
Prior to the enactment of the Small Business Jobs Protection Act (the
"Act"), which was signed into law on August 21, 1996, certain thrift
institutions, including Germantown Federal, were allowed deductions for bad
debts under methods more favorable than those granted to other taxpayers.
Qualified thrift institutions could compute deductions for bad debts using
either the specific charge off method of Section 166 of the Code, or one of the
two reserve methods of Section 593 of the Code. The reserve methods under
Section 593 of the Code permitted a thrift institution annually to elect to
deduct bad debts under either (i) the "percentage of taxable income" method
applicable only to thrift institutions, or (ii) the "experience" method that
also was available to small banks. Under the "percentage of taxable income"
method, a thrift institution generally was allowed a deduction for an addition
to its bad debt reserve equal to 8% of its taxable income (determined without
regard to this deduction and with additional adjustments). Under the experience
method, a thrift institution was generally allowed a deduction for an addition
to its bad debt reserve equal to the greater of (i) an amount based on its
actual average experience for losses in the current and five preceding taxable
years, or (ii) an amount necessary to restore the reserve to its balance as of
the close of the base year. A thrift institution could elect annually to compute
its allowable addition to bad debt reserves for qualifying loans either under
the experience method or the percentage of taxable income method. For tax years
1995, 1994 and 1993, GFBC used the percentage of taxable income method because
such method provided a higher bad debt deduction than the experience method.
The Act eliminated the percentage of taxable income reserve method of
accounting for bad debts by thrift institutions, effective for taxable years
beginning after 1995. Thrift institutions that would be treated as small banks
are allowed to utilize the experience method applicable to such institutions,
while thrift institutions that are treated as large banks are required to use
only the specific charge off method.
A thrift institution required to change its method of computing
reserves for bad debt will treat such change as a change in the method of
accounting, initiated by the taxpayer, and having been made with the consent of
the Secretary of the Treasury. Section 481(a) of the Code requires certain
amounts to be recaptured with respect to such change. Generally, the amounts to
be recaptured will be determined solely with respect to the "applicable excess
reserves" of the taxpayer. The amount of the applicable excess reserves will be
taken into account ratably over a six-taxable year period, beginning with the
first taxable year beginning after 1995, subject to the residential loan
requirement described below. In the case of a thrift institution that becomes a
large bank, the amount of the institution's applicable excess reserves generally
is the excess of (i) the balances of its reserve for losses on qualifying real
property loans (generally loans secured by improved real estate) and its reserve
for losses on nonqualifying loans (all other types of loans) as of the close of
its last taxable year beginning before January 1, 1996, over (ii) the balances
of such reserves as of the close of its last taxable year beginning before
January 1, 1988 (i.e., the "pre-1988 reserves"). In the case of a thrift
institution that becomes a small bank, the amount of the institution's
applicable excess reserves generally is the excess of (i) the balances of its
reserve for losses on qualifying real property loans and its reserve for losses
on nonqualifying loans as of the close of its last taxable year beginning before
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<PAGE> 57
January 1, 1996, over (ii) the greater of the balance of (a) its pre-1988
reserves or (b) what the thrift's reserves would have been at the close of its
last year beginning before January 1, 1996, had the thrift always used the
experience method.
For taxable years that begin after December 31, 1995, and before
January 1, 1998, if a thrift meets the residential loan requirement for a tax
year, the recapture of the applicable excess reserves otherwise required to be
taken into account as a Code Section 481(a) adjustment for the year will be
suspended. A thrift meets the residential loan requirement if, for the tax year,
the principal amount of residential loans made by the thrift during the year is
not less then its base amount. The "base amount" generally is the average of the
principal amounts of the residential loans made by the thrift during the six
most recent tax years beginning before January 1, 1996. A residential loan is a
loan as described in Section 7701(a)(19)(C)(v) (generally a loan secured by
residential real and church property and certain mobile homes), but only to the
extent that the loan is made to the owner of the property.
The balance of the pre-1988 reserves is subject to the provisions of
Section 593(e) as modified by the Act which require recapture in the case of
certain excessive distributions to shareholders. The pre-1988 reserves may not
be utilized for payment of cash dividends or other distributions to a
shareholder (including distributions in dissolution or liquidation) or for any
other purpose (excess to absorb bad debt losses). Distribution of a cash
dividend by a thrift institution to a shareholder is treated as made: first, out
of the institution's post-1951 accumulated earnings and profits; second, out of
the pre-1988 reserves; and third, out of such other accounts as may be proper.
To the extent a distribution by Germantown Federal to GFBC is deemed paid out of
its pre-1988 reserves under these rules, the pre-1988 reserves would be reduced
and Germantown Federal's gross income for tax purposes would be increased by the
amount which, when reduced by the income tax, if any, attributable to the
inclusion of such amount in its gross income, equals the amount deemed paid out
of the pre-1988 reserves. As of June 30, 1997, Germantown Federal's pre-1988
reserves for tax purposes totaled approximately $538,000. GFBC believes
Germantown Federal had approximately $3.5 million of accumulated earnings and
profits for tax purposes as of June 30, 1997, which would be available for
dividend distributions, provided regulatory restrictions applicable to the
payment of dividends are met. See "REGULATION - OTS Regulations -- Limitations
on Capital Distributions."
The tax returns of GFBC have been audited or closed without audit
through fiscal year 1992. In the opinion of management, any examination of open
returns would not result in a deficiency which could have a material adverse
effect on the financial condition of GFBC.
OHIO TAXATION
GFBC is subject to the Ohio corporation franchise tax, which, as
applied to GFBC, is a tax measured by both net earnings and net worth. The rate
of tax is the greater of (i) 5.1% on the first $50,000 of computed Ohio taxable
income and 8.9% of computed Ohio taxable income in excess of $50,000 or (ii)
0.582% times taxable net worth. For tax years beginning after December 31, 1998,
the rate of tax is the greater of (i) 5.1% on the first $50,000 of computed Ohio
taxable income and 8.5% of computed Ohio taxable income in excess of $50,000 or
(ii) .400% times taxable net worth.
In computing its tax under the net worth method, GFBC may exclude 100%
of its investment in the capital stock of Germantown Federal, as reflected on
the balance sheet of GFBC, in computing its taxable net worth as long as it owns
at least 25% of the issued and outstanding capital stock of Germantown Federal.
The calculation of the exclusion from net worth is based on the ratio of the
excludable investment (net of any appreciation or goodwill included in such
investment) to total assets multiplied by the net value of the stock. As a
holding company, GFBC may be entitled to various other deductions in computing
taxable net worth that are not generally available to operating companies.
A special litter tax is also applicable to all corporations, including
GFBC, subject to the Ohio corporation franchise tax other than "financial
institutions." If the franchise tax is paid on the net income basis, the litter
tax is equal to .11% of the first $50,000 of computed Ohio taxable income and
.22% of computed Ohio taxable income in excess of $50,000. If the franchise tax
is paid on the net worth basis, the litter tax is equal to .014% times taxable
net worth.
Germantown Federal is a "financial institution" for State of Ohio tax
purposes. As such, it is subject to the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.5% of the
book net worth of Germantown Federal determined in accordance with generally
accepted accounting principles. For tax year 1999, however, the franchise tax on
financial institutions will be 1.4% of the book net worth and for tax year 2000
and years thereafter the tax will be 1.3% of the book net worth. As a "financial
institution," Germantown Federal is not subject to any tax based upon net income
or net profits imposed by the State of Ohio.
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<PAGE> 58
DELAWARE TAXATION
As a Delaware corporation, GFBC is subject to an annual franchise tax
based on the quantity and par value of its authorized capital stock and its
gross assets. As a savings and loan holding company, GFBC is exempt from
Delaware corporate income tax.
DESCRIPTION OF CAMCO SHARES
The following summary of the material attributes of Camco Shares is
qualified in its entirety by reference to applicable provisions of Delaware law
and to the provisions of the Camco Certificate and By-Laws.
AUTHORIZED STOCK
The Camco Certificate authorizes the issuance of up to 4,900,000 shares
of common stock, par value $1.00 per share, and 100,000 shares of preferred
stock, par value $1.00 per share.
The Board of Directors is authorized to issue, without shareholder
approval, the preferred shares and to fix the designations, preferences or other
special rights of such shares and the qualifications, limitations and
restrictions thereof. The issuance of preferred shares and any conversion rights
which may be specified by the Board of Directors for the preferred shares could
adversely affect the voting power of holders of the common shares. In addition,
if the purchase price of the preferred shares is less than the book value of the
common shares, the book value of the common shares could be adversely affected.
No preferred shares will be issued in connection with this offering, and the
Board of Directors has no present intention to issue any of the preferred
shares.
SPECIAL MEETINGS
Special meetings of stockholders of Camco may be called only by the
president or by a majority of the Board of Directors of Camco.
PREEMPTIVE RIGHTS
The Camco Certificate does not grant preemptive rights to the holders
of Camco Shares. Under Delaware law, preemptive rights do not exist unless they
are specifically granted by the corporation's certificate of incorporation.
VOTING RIGHTS
The holders of Camco Shares are entitled to cast one vote per share on
all matters submitted to stockholders for their approval. Cumulative voting is
not provided for in the election of directors.
BOARD OF DIRECTORS
Camco's By-laws provided for a classified Board of Directors consisting
of nine directors, or such other number as determined by the Board, divided into
three classes and elected for three-year terms. Pursuant to the By-laws, the
number of directors is currently fixed at nine. Therefore, it would take two
annual elections to replace a majority of the Board. The By-laws require that
any stockholder nomination for the election of directors must be submitted in
writing, containing specific information regarding the nominee, by the later of
the March 31st immediately preceding the annual meeting of stockholders or the
sixtieth day before the first anniversary of the most recent annual meeting.
Vacancies on Camco's Board may be filled by a majority of the directors
then in office. If a majority of the directors then in office constitutes less
than a majority of the Board, any stockholders holding at least 10% of Camco's
Shares may ask the Chancery Court to order an election to fill the vacancy and
replace directors selected by those directors in office.
The Camco Certificate authorizes the removal of a director for cause by
a vote of not less than 80% of Camco's Shares.
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<PAGE> 59
ANTITAKEOVER PROVISIONS IN THE CAMCO CERTIFICATE AND BY-LAWS
The Camco Certificate and the Camco By-laws contain certain provisions
that could deter or prohibit non-negotiated changes in the control of Camco. The
Camco Certificate requires the approval of the holders of (i) at least 80% of
Camco's outstanding shares of voting stock, and (ii) at least a majority of
Camco's outstanding shares of voting stock, not including shares held by a
"Substantial Stockholder," to approve certain "Business Combinations" as defined
therein, and related transactions. Under Delaware law, absent this provision,
Business Combinations, including mergers, consolidations and sales of
substantially all of the assets of Camco must, subject to certain exceptions, be
approved by the vote of the holders of a majority of Camco's outstanding voting
shares. The increased voting requirements in the Camco Certificate apply in
connection with Business Combinations involving a "Substantial Stockholder,"
except in cases where the proposed transaction has been approved in advance by
three-fourths of the members of Camco's Board of Directors provided that a
majority of the members of the Board are continuing Directors (a continuing
Director being defined as a person who was (i) a member of the Board as of May
26, 1987, (ii) elected by the stockholders or appointed by the Board after May
26, 1987, and prior to the date as of which the Substantial Stockholder in
question became a Substantial Stockholder, or (iii) appointed as a Director by
three-fourths of the Board if and only if a majority of the Board at the time of
appointment consisted of continuing Directors).
The term "Substantial Stockholder" is defined to include any
individual, corporation, partnership or other entity, except for Camco or a
subsidiary of Camco, which owns beneficially or controls, directly or
indirectly, 15% or more of the outstanding voting shares of Camco. A "Business
Combination" is defined to include (i) any merger or consolidation of Camco or a
subsidiary of Camco with or into any Substantial Stockholder or with or into any
or other corporation which, after such merger or consolidation, would be an
Affiliate of a Substantial Stockholder as defined in the Camco Certificate; (ii)
any sale, lease, exchange, mortgage, transfer, pledge or other disposition of
all or a substantial part of the assets of Camco or of a subsidiary of Camco to
any Substantial Stockholder (the terms "substantial part" is defined to include
more than 10% of Camco's total assets); (iii) the adoption of any plan or
proposal for the liquidation or dissolution of Camco if, as of the record date
for the determination of stockholders entitled to notice thereof and to vote
thereon, any person shall be a Substantial Stockholder; (iv) the issuance or
transfer of Camco Equity Securities, as defined in the Camco Certificate, having
an aggregate value equaling or exceeding 60% of Camco's stockholders' equity to
a Substantial Stockholder in exchange for cash, securities or other property; or
(v) any reclassification of the securities of Camco, any recapitalization
involving the securities of Camco or any reorganization, merger, or
consolidation of Camco that has the effect of increasing, directly or
indirectly, a Substantial Stockholder's proportionate share of outstanding
shares of any class of equity securities of Camco or a subsidiary of Camco.
In view of the various provisions of the Camco Certificate, the
aggregate stock ownership by the directors and officers of Camco may have the
effect of facilitating the perpetuation of current management and discouraging
proxy contests and takeover attempts. Officers and directors will have a
significant influence over the vote on such a transaction and may be able to
defeat such a proposal. The Board of Directors of Camco believe that such
provisions are in the best interests of stockholders by encouraging prospective
acquirers to negotiate a proposed acquisition with the directors. Such
provisions could, however, adversely affect the market value of Camco's common
shares or deprive stockholders of the opportunity to sell their shares for
premium prices.
COMPARISON OF RIGHTS OF HOLDERS OF CAMCO SHARES
AND HOLDERS OF GFBC SHARES
As a result of the Merger, all of the holders of GFBC Shares at the
Effective Time will become stockholders of Camco, except holders of GFBC Shares
who exercise dissenters' rights. There are certain differences between the
rights of holders of Camco Shares and the rights of holders of GFBC Shares
arising from the distinctions between the Camco Certificate and By-laws and
GFBC's Certificate of Incorporation and Bylaws. However, the rights of holders
of Camco Shares and those of holders of GFBC Shares are similar in most material
respects. The differences are addressed below.
AUTHORIZED STOCK
The Camco Certificate authorizes 4,900,000 common shares and 100,000
preferred shares. GFBC's Certificate of Incorporation authorizes 1,250,000
common shares and 250,000 preferred shares.
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DIRECTOR NOMINATIONS
Camco stockholders generally must submit director nominations by the
March 31st preceding the annual meeting, which is scheduled for the fourth
Tuesday in May. GFBC stockholders generally must submit director nominations 30
days prior to the meeting or, if less than 31 days' notice of the meeting is
provided, then within 10 days after the mailing of such notice.
ANTITAKEOVER PROVISIONS
Certain provisions of the Camco Certificate and Camco By-laws could
deter or prohibit changes in majority control of the Board of Directors or
non-negotiated acquisitions of control of Camco. See "DESCRIPTION OF CAMCO
SHARES - Antitakeover Provisions in the Camco Certificate and Camco By-laws."
GFBC's Certificate of Incorporation and By-laws contain provisions that could
have a similar impact.
The Certificate of Incorporation of GFBC provides that in no event
shall any record owner of any outstanding GFBC Shares which are beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the then outstanding shares of common stock (the "Beneficial Limit") be
entitled or permitted to any vote in respect of the shares held in excess of the
Beneficial Limit. This limitation would not inhibit any person from soliciting
(or voting) proxies from other beneficial owners for more than 10% of GFBC's
common shares or from voting such proxies. Beneficial ownership is to be
determined pursuant to Rule 13d-3 of the General Rules and Regulations of the
Exchange Act, and includes shares beneficially owned by any affiliate of such
person, shares which such person or his affiliates (as defined in the
Certificate of Incorporation) have the right to acquire upon the exercise of
conversion rights or options and shares as to which such person and his
affiliates have or share investment or voting power. No director or officer of
GFBC or Germantown will, however, be deemed to beneficially own shares
beneficially owned by any other director or officer of GFBC or Germantown
Federal solely due to any of the directors or officers acting in their capacity
as such. This provision may be enforced by the Board of Directors of GFBC to
limit the voting rights of persons beneficially owning more than 10% of the
stock and thus could be utilized in a proxy contest or other solicitation to
defeat a proposal that is desired by a majority of the stockholders.
GFBC's Certificate of Incorporation requires that certain business
combinations (including transactions initiated by management) between it (or any
majority-owned subsidiary thereof) and a 10% or more stockholder either (i) be
approved by at least 80% of the total number of outstanding voting shares,
voting as a single class, of GFBC, or (ii) be approved by two-thirds of the
continuing Board of Directors (i.e., persons serving prior to the 10%
stockholder becoming such).
Amendments to GFBC's Certificate of Incorporation must be approved by
GFBC's Board of Directors and also by a majority of the outstanding GFBC Shares;
provided, however, that approval by at least 80% of the outstanding voting stock
is generally required for certain provisions (i.e., provisions relating to
number, classification, election and removal of directors; amendment of by-laws;
call of special stockholder meetings; offers to acquire and acquisitions of
control; director liability; certain business combinations; power of
indemnification; and amendments to provisions relating to the foregoing in the
certificate of incorporation). The Bylaws may be amended by a majority vote of
the Board of Directors or the affirmative vote of at least 80% of the total
votes eligible to be voted at a duly constituted meeting of stockholders.
ANTITAKEOVER STATUTES APPLICABLE TO CAMCO AND GFBC
Certain federal and state laws can make a change in control more
difficult, even if desired by the holders of the majority of the Camco or GFBC
Shares. The statutes described below apply to both Camco and GFBC.
DELAWARE ANTI-TAKEOVER STATUTE. The DGCL imposes limits on the ability
of persons who acquire more than 15% of the outstanding stock of a Delaware
corporation, such as Camco or GFBC, to effect a merger with or acquisition of
such corporation for three years after the person's acquisition of stock of the
corporation. Such a transaction may be effected, generally, if (i) the buyer,
while acquiring the 15% interest, acquires at least 85% of the corporation's
outstanding stock (the 85% requirement excludes shares held by directors who are
also officers and certain shares held under employee stock plans); (ii) the
board of directors of the corporation pre-approves the transaction; or (iii) the
transaction is subsequently approved by the target corporation's board of
directors and two-thirds of the shares of outstanding stock of the corporation
(excluding shares held by the bidder).
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However, these provisions of the DGCL do not apply to Delaware
corporations with less than 2,000 stockholders or which do not have voting stock
listed on a national exchange or listed for quotation with a registered national
securities association. Neither Camco nor GFBC have 2,000 stockholders. GFBC
Shares are not listed for quotation with a national securities association.
Camco Shares are traded on a registered national securities association. Both
entities could otherwise exempt themselves from the requirements of the statute
by adopting an amendment to their respective Certificate of Incorporation or
Bylaws electing not to be governed by this provision. At the present time,
neither Camco nor GFBC has adopted any such amendment.
FEDERAL REGULATION. OTS regulations prohibit any person, without the
prior approval of the OTS, from acquiring or making an offer to acquire more
than 10% of the stock of any converted savings institution if such person is, or
after consummation of such acquisition would be, the beneficial owner of more
than 10% of such stock. In the event that any person, directly or indirectly,
violates this regulation, the securities beneficially owned by such person in
excess of 10% may not be counted as shares entitled to vote and may not be voted
by any person or counted as voting shares in connection with any matter
submitted to a vote of stockholders. Like the charter provisions outlined above,
these federal regulations can make a change in control more difficult, even if
desired by the holders of a majority of the shares of the stock. The Board of
Directors reserves the right to ask the OTS or other federal regulators to
enforce these restrictions against persons seeking to obtain control of GFBC,
whether in a proxy solicitation or otherwise. Camco and GFBC have requested that
the OTS not enforce these provisions in the Merger.
Federal law provides that no company, "directly or indirectly or acting
in concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. In addition,
federal regulations require that, prior to obtaining control of a savings
association, a person, other than a company, must give 60 days' prior notice to
the OTS and have received no OTS objection to such acquisition of control. Any
company that acquires such control becomes a "savings and loan holding company"
subject to registration, examination and regulation as a savings and loan
holding company. Under federal law (as well as the regulations referred to
below) the term "savings bank" includes state and federally chartered
SAIF-insured institutions and federally chartered savings banks whose accounts
are insured by the FDIC's SAIF and holding companies thereof.
Control, as defined under federal law, in general means ownership,
control of or holding irrevocable proxies representing more than 25% of any
class of voting stock, control in any manner of the election of a majority of
the savings association's directors, or a determination by the OTS that the
acquirer has the power to direct, or directly or indirectly to exercise a
controlling influence over, the management or policies of the institution.
Acquisition of more than 10% of any class of a savings association's voting
stock, if the acquirer also is subject to any one of eight "control factors,"
constitutes a rebuttable determination of control under the regulations. The
determination of control may be rebutted by submission to the OTS, prior to the
acquisition of stock or the occurrence of any other circumstances giving rise to
such determination, of a statement setting forth facts and circumstances which
would support a finding that no control relationship will exist and containing
certain undertakings. The regulations provide that persons or companies which
acquire beneficial ownership exceeding 10% or more of any class of a savings
bank's stock must file with the OTS a certification that the holder is not in
control of such institution, is not subject to a rebuttable determination of
control and will take no action which would result in a determination or
rebuttable determination of control without prior notice to or approval of the
OTS, as applicable.
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
The By-laws of Camco provide that Camco shall indemnify its directors
or officers against expenses (including, without limitation, attorneys' fees,
filing fees, court reporters' fees and transcript costs), judgments, fines, and
amounts paid in settlement by reason of the fact that they are or were
directors, officers, employees or agents of Camco or, at the request of Camco,
were serving another organization in a similar capacity, if the directors or
officers acted in good faith and in a manner they reasonably believed to be in
the best interest of Camco. With regard to criminal matters, directors and
officers must be indemnified by Camco if the directors or officers had no
reasonable cause to believe their conduct was unlawful. Directors or officers
claiming indemnification shall be presumed to have acted in good faith and in a
manner they reasonably believed to be not opposed to the best interests of Camco
and, with respect to any criminal matter, to have had no reasonable cause to
believe their conduct was unlawful.
Camco shall not indemnify any officer or director of Camco who was a
party to any completed action or suit instituted by (or in the right of) Camco
for any matter asserted in such action as to which the officer or director shall
have
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been adjudged to be liable for acting with reckless disregard for the best
interests of Camco or misconduct (other than negligence) in the performance of
his duty to Camco. However, should the court in which such action was brought
determine that the officer or director is fairly and reasonably entitled to such
indemnity, Camco shall indemnify such officer or director to the extent
permitted by the court.
Any indemnification not precluded by judgment shall be made by Camco
only upon a determination that the director has met the applicable standard of
conduct. Such determination may be made only (a) by a majority vote of a quorum
of disinterested directors, (b) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written opinion
by independent legal counsel, (c) by the stockholders or (d) by the court, if
any, in which such action was brought. Expenses incurred in defending any
action, suit or proceeding shall be paid by Camco in advance upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
the director or officer is not entitled to be indemnified by Camco.
In addition, Camco has agreed to indemnify each of its directors and
officers against expenses (including, without limitation, attorneys' fees,
filing fees, court reporters' fees and transcript costs), judgments, fines, and
amounts paid in settlement by reason of the fact that he is or was a director,
officer, employee or agent of Camco or, at the request of Camco, was serving
another organization in a similar capacity, if the director or officer acted in
good faith and in a manner he reasonably believed to be in the best interest of
Camco and if, with respect to any criminal action or proceeding, such director
or officer had no reason to believe that his conduct was unlawful. Such
indemnification shall be made, however, only upon a determination by the
directors or stockholders of Camco, the Court of Common Pleas of Franklin County
or written opinion of legal counsel appointed by Camco that the director or
officer has adhered to the appropriate standard of conduct.
GFBC's Certificate of Incorporation provides that GFBC shall indemnify
or agree to indemnify any current or former director, officer, employee or agent
against whom an action is threatened, pending, or completed because of that
person's position with GFBC or because of that person's performance of his or
her duty, for expenses reasonably incurred in such actions, to the fullest
extent permitted by the DGCL.
LEGAL MATTERS
The federal income tax consequences of the Merger, and certain other
legal matters in connection with the Merger, were passed upon for Camco by
Vorys, Sater, Seymour and Pease, Suite 2100, Atrium Two, 221 East Fourth Street,
P.O. Box 0236, Cincinnati, Ohio 45201-0236. Such counsel has not received nor
will receive a substantial interest, direct or indirect, in Camco, nor was such
counsel compensated on a contingency fee basis for the rendering of its
services.
EXPERTS
The consolidated financial statements of Camco at December 31, 1996 and
1995, and for each of the three years ended December 31, 1996, 1995 and 1994,
incorporated by reference to Camco's 1996 Annual Report accompanying this
Prospectus and Proxy Statement, have been audited by Grant Thornton LLP,
independent certified public accountants, as stated in their report appearing
therein, and have been included in reliance upon such report and given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of GFBC at March 31, 1997, and
for the year ended March 31, 1997, included in this Prospectus and Proxy
Statement, have been audited by Crowe, Chizek and Company LLP, independent
certified public accountants, to the extent and for the periods indicated in
their report appearing herein; the consolidated financial statements of GFBC at
March 31, 1996, and for the year ended March 31, 1996, included in the
Registration Statement have been audited by Arthur Andersen LLP, independent
certified public accountants, to the extent and for the periods indicated in
their report; and such financial statements have been included herein in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
OTHER MATTERS
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The Board of Directors of GFBC is not aware of any business that will
be presented at the GFBC Special Meeting other than as set forth herein and in
the accompanying Notice of Special Meeting. However, if any other matters are
properly presented at the GFBC Special Meeting, the persons designated on the
proxies will have discretion to vote thereon. It is anticipated that such
persons will vote on any such matters in accordance with the recommendation of
the GFBC Board of Directors.
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GF BANCORP, INC.
Germantown, Ohio
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT AUDITORS.........................................................F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1997 (unaudited) and
March 31, 1997 and 1996.....................................................F-3
Consolidated Statements of Income for the three months ended June 30,
1997 and 1996 (unaudited) and for the years
ended March 31, 1997 and 1996...............................................F-4
Consolidated Statements of Changes in Stockholders Equity for the three
months ended June 30, 1997 (unaudited) and for the years
ended March 31, 1997 and 1996 ..............................................F-5
Consolidated Statements of Cash Flows for the three months ended June
30, 1997 and 1996 (unaudited) and for the years
ended March 31, 1997 and 1996...............................................F-6
Notes to Consolidated Financial Statements....................................F-7
All schedules are omitted because the required information is not applicable or
is included in the consolidated financial statements and related notes.
</TABLE>
F-1
<PAGE> 65
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
GF Bancorp, Inc.
Germantown, Ohio
We have audited the accompanying consolidated balance sheet of GF Bancorp, Inc.
as of March 31, 1997 and the related consolidated statements of income, changes
in stockholders' equity and cash flows for the year then ended. 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. The 1996 consolidated financial statements of GF Bancorp, Inc. were
audited by other auditors whose report dated May 3, 1996 expressed an
unqualified opinion on those statements.
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 1997 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of GF Bancorp,
Inc. as of March 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
Crowe, Chizek and Company LLP
Columbus, Ohio,
May 2, 1997
F-2
<PAGE> 66
GF BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1997 (unaudited) and March 31, 1997 and 1996
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31,
------------- -----------------------------
ASSETS (Unaudited) 1997 1996
---------- ----------
<S> <C> <C> <C>
Cash and due from banks $ 574,255 $ 503,851 $ 506,220
Interest-bearing deposits 2,427,868 2,649,811 2,724,202
------------ ----------- ----------
Total cash and cash equivalents 3,002,123 3,153,662 3,230,422
Securities available for sale 1,500,390 1,999,760 4,492,895
Mortgage-backed securities available for sale 8,764,847 8,847,794 10,264,500
Loans receivable 33,785,573 32,651,155 29,508,296
Allowance for loan losses (127,296) (126,920) (97,635)
----------- ----------- -----------
Net loans 33,658,277 32,524,235 29,410,661
Premises and equipment, net 833,040 856,406 830,075
Accrued interest receivable 247,958 244,180 271,135
Federal Home Loan Bank stock, at cost 416,300 409,000 381,800
Other assets 79,519 86,717 100,685
----------- ----------- -----------
Total assets $48,502,454 $48,121,754 $48,982,173
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $40,384,226 $40,369,047 $41,089,834
Federal Home Loan Bank advances 1,000,000 1,000,000 1,000,000
Advances from borrowers for taxes and insurance 158,483 80,298 86,430
Accrued and deferred federal income taxes 293,746 189,796 376,680
Accrued interest payable 9,489 9,778 10,129
Other liabilities 79,074 73,571 103,402
----------- ----------- -----------
Total liabilities 41,925,018 41,722,490 42,666,475
Stockholders' equity
Preferred stock, $0.01 par value; authorized
250,000 shares; none issued
Common stock, $0.01 par value; authorized
1,250,000 shares; issued 308,376 shares 3,084 3,084 3,084
Additional paid-in capital 2,799,640 2,799,640 2,792,445
Retained earnings - substantially restricted 3,985,743 3,901,964 3,801,077
Treasury stock, 15,418 shares at cost (213,543) (213,543) (213,543)
Net unrealized gain/(loss) on available-for-sale
securities 33,350 (54,876) (5,690)
Unearned compensation related to management
stock bonus plan (30,838) (37,005) (61,675)
----------- ----------- -----------
Total stockholders' equity 6,577,436 6,399,264 6,315,698
----------- ----------- -----------
Total liabilities and stockholders' equity $48,502,454 $48,121,754 $48,982,173
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 67
GF BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended June 30, 1997 and 1996 (unaudited) and the years ended
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED MARCH 31,
--------------------------- ----------------------
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited)
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans, including fees $688,462 $603,912 $2,552,241 $2,228,853
Mortgage-backed securities 154,883 177,407 678,451 781,677
Securities 25,155 53,241 162,458 300,244
Deposits with banks 30,327 36,275 139,735 128,898
Dividends on FHLB stock 7,393 6,645 27,373 25,327
-------- -------- ---------- ----------
Total interest income 906,220 877,480 3,560,258 3,464,999
INTEREST EXPENSE
Deposits 426,604 425,903 1,702,429 1,723,345
Borrowings 14,460 14,421 57,880 33,590
-------- -------- ---------- ----------
Total interest expense 441,064 440,324 1,760,309 1,756,935
NET INTEREST INCOME 465,156 437,156 1,799,949 1,708,064
Provision for loan losses - - 33,000 -
-------- -------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 465,156 437,156 1,766,949 1,708,064
-------- -------- ---------- ----------
NONINTEREST INCOME
Service charges and fees 26,602 30,065 110,889 114,035
Other - 10,800 5,214
-------- -------- ---------- ----------
-
Total noninterest income 26,602 30,065 121,689 119,249
NONINTEREST EXPENSES
Salaries and employee benefits 155,037 164,385 683,293 654,770
Occupancy and equipment expense 37,628 35,977 157,190 142,585
Outside services 44,503 44,545 159,606 153,164
FDIC deposit insurance 6,666 23,793 342,847 95,181
State franchise taxes 26,732 21,064 89,695 87,129
Other 43,758 37,380 165,694 146,652
-------- -------- ---------- ----------
Total noninterest expenses 314,324 327,144 1,598,325 1,279,481
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 177,434 140,077 290,313 547,832
Income tax provision 58,500 47,715 92,750 176,750
-------- -------- ---------- ----------
NET INCOME $118,934 $ 92,362 $ 197,563 $ 371,082
======== ========= =========== ==========
Earnings per share $ 0.41 $ 0.32 $ 0.67 $ 1.24
======== ========= =========== ==========
Dividends per share $ 0.12 $ 0.07 $ 0.33 $ 0.28
======== ========= =========== ==========
0.28
Weighted average shares outstanding 292,958 292,958 292,958 299,867
======== ========= =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 68
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
Three months ended June 30, 1997 (unaudited) and years ended
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury '
Stock Capital Earnings Stock
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance, April 1, 1995 $ 3,084 $ 2,792,445 $ 3,514,181 --
Amortization of unearned compensation
related to management stock bonus plan -- -- -- --
Cash dividends declared on common stock -- -- (84,186) --
Purchase of 15,418 shares of treasury stock -- -- -- $ (213,543)
Change in net unrealized gain/(loss)
on available-for-sale securities -- -- -- --
Net income -- -- 371,082 --
----------- ----------- ----------- -----------
Balance, March 31, 1996 3,084 2,792,445 3,801,077 (213,543)
Amortization of unearned compensation
related to management stock bonus plan -- -- -- --
Tax benefit of management stock bonus plan -- 7,195 -- --
Cash dividends declared on common stock -- -- (96,676) --
Change in net gain/(loss)
on available-for-sale securities -- -- -- --
Net income -- -- 197,563 --
----------- ----------- ----------- -----------
Balance, March 31, 1997 3,084 2,799,640 3,901,964 (213,543)
Amortization of unearned compensation
related to management stock bonus plan -- -- -- --
Cash dividends declared on common stock -- -- (35,155) --
Change in net unrealized gain/(loss)
on available-for-sale securities -- -- -- --
Net income -- -- 118,934 --
----------- ------------ ------------ ------------
Balance, June 30, 1997 $ 3,084 $ 2,799,640 $ 3,985,743 $ (213,543)
========== =========== =========== ===========
<CAPTION>
Net Unrealized
Gain/(Loss) on Unearned
Available- Compensation Total
for-Sale Related to Stockholders'
Securities MSBP Equity
---------- ---- ------
<S> <C> <C> <C>
Balance, April 1, 1995 -- $ (86,345) $ 6,223,365
Amortization of unearned compensation
related to management stock bonus plan -- 24,670 24,670
Cash dividends declared on common stock -- -- (84,186)
Purchase of 15,418 shares of treasury stock -- -- (213,543)
Change in net unrealized gain/(loss)
on available-for-sale securities $ (5,690) -- (5,690)
Net income -- -- 371,082
----------- ----------- -----------
Balance, March 31, 1996 (5,690) (61,675) 6,315,698
Amortization of unearned compensation
related to management stock bonus plan -- 24,670 24,670
Tax benefit of management stock bonus plan -- -- 7,195
Cash dividends declared on common stock -- -- (96,676)
Change in net gain/(loss)
on available-for-sale securities (49,186) -- (49,186)
Net income -- -- 197,563
----------- ----------- -----------
Balance, March 31, 1997 (54,876) (37,005) 6,399,264
Amortization of unearned compensation
related to management stock bonus plan -- 6,167 6,167
Cash dividends declared on common stock -- -- (35,155)
Change in net unrealized gain/(loss)
on available-for-sale securities 88,226 -- 88,226
Net income -- 118,934
----------- ----------- -----------
Balance, June 30, 1997 $ 33,350 $ (30,838) $ 6,577,436
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 69
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended June 30, 1997 and 1996 (unaudited) and years ended
March 31, 1997 and 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED MARCH 31,
-------------------------- --------------------
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income $ 118,934 $ 92,362 $197,563 $371,082
Adjustments to reconcile net income to
net cash flows from operating activities
Depreciation and amortization 23,366 20,502 89,452 81,042
Net accretion of securities
premiums/(discounts) (1,643) (874) (5,620) (3,258)
Provision for loan losses - - 33,000 -
FHLB stock dividends (7,300) (6,600) (27,200) (25,100)
Amortization of unearned compensation
related to MSBP 6,167 6,168 24,670 24,670
(Gain)/loss on sale of equipment - 229 (10,571) -
Deferred taxes (12,636) - (14,295) (8,615)
Change in
Accrued interest receivable (3,778) 14,783 26,955 16,657
Other assets 7,198 11,953 13,968 16,326
Federal income taxes payable 71,136 (72,284) (140,056) 140,365
Accrued interest payable (289) (718) (351) (851)
Other liabilities 5,503 (43,643) (29,831) 11,078
------------ ---------- ------------ ------------
Net cash flows from operating activities 206,658 21,878 157,684 623,396
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of available-for-sale securities 500,000 500,000 2,500,000 1,000,000
Maturities of held-to-maturity securities - - - 2,000,000
Maturities and principal repayments on
available-for-sale mortgage-backed securities 217,636 282,703 1,340,937 529,975
Maturities and principal repayments on
held-to-maturity mortgage-backed securities - - - 1,237,461
Net change in loans (1,134,042) (656,207) (3,146,574) (7,204,240)
Proceeds from sale of premises and equipment - 4,172 14,972 -
Purchase of premises and equipment - (12,113) (120,184) (62,328)
------------ ---------- ------------ ------------
Net cash flows from investing activities (416,406) 118,555 589,151 (2,499,132)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 15,179 (492,245) (720,787) 1,223,500
Net change in Federal Home Loan Bank advances - - - 1,000,000
Net change in advances from
borrowers for taxes and insurance 78,185 72,837 (6,132) (13,325)
Purchase of treasury stock - - - (213,543)
Dividends paid (35,155) (20,508) (96,676) (84,186)
----------- ----------- ------------ ----------
Net cash flows from financing activities 58,209 (439,916) (823,595) 1,912,446
------------ ---------- ----------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (151,539) (299,483) (76,760) 36,710
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,153,662 3,230,422 3,230,422 3,193,712
---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $3,002,123 $2,930,939 $3,153,662 $3,230,422
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 70
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of GF Bancorp, Inc. (the Corporation), Germantown Federal Savings Bank
(the Savings Bank), and its wholly owned service corporation subsidiary, GFS
Financial Services, Inc. All material intercompany balances and income and
expenses have been eliminated in the consolidated statements.
NATURE OF OPERATIONS: The Corporation, a Delaware Corporation, is a unitary
holding company which holds all of the capital stock of the Savings Bank. The
Savings Bank is a federally chartered stock savings bank whose main office in
Germantown and one branch office in New Lebanon are located in southwestern
Montgomery County, Ohio. The Savings Bank is primarily engaged in the business
of providing loan and deposit products to consumers in Germantown and New
Lebanon, Ohio, as well as the surrounding communities. GFS Financial Services,
Inc. was formed to hold shares of Intrieve, Inc. common stock. Intrieve, Inc. is
a data processing center used by the Savings Bank.
ESTIMATES: To prepare financial statements in conformity with generally accepted
accounting principles, management must make estimates and assumptions. These
estimates and assumptions affect the amounts reported in the financial
statements, as well as the disclosures provided. Future results could differ
from current estimates. The collectibility of loans, fair values of financial
instruments and the status of contingencies are particularly subject to change.
STATEMENT OF CASH FLOWS: Cash and cash equivalents are defined as cash and due
from banks and overnight deposits, as well as interest-bearing deposits with
original maturities under 90 days. Net cash flows are reported for customer loan
and deposit transactions, as well as short-term borrowings.
Supplemental disclosure of cash flow information is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED MARCH 31,
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Cash paid during the period for:
Interest $441,353 $441,042 $1,760,660 $1,757,786
Income taxes - 120,000 245,100 45,000
</TABLE>
SECURITIES: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported separately in shareholders'
equity, net of tax.
F-7
<PAGE> 71
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Gains and losses on sales of securities are determined using amortized cost of
the specific security sold. Interest income includes amortization of purchase
premiums and discounts.
LOANS: Loans are reported at the principal balance outstanding, net of deferred
loan fees and costs. Interest income is reported on the interest method and
includes amortization of net deferred loan fees and costs over the loan term.
Interest income is not reported when full loan repayment is in doubt, typically
when payments are past due over 90 days. Generally, payments received on such
loans are reported as principal reductions.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss experience, known and inherent risks in the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions and other factors. Allocations of the allowance may be made
for specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged off.
Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage, consumer and credit card loans and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate. Loans are
evaluated for impairment when payments are delayed, typically 90 days or more,
or when the internal grading system indicates a doubtful classification.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using both the straight-line
and accelerated methods for income tax and financial reporting purposes. The
depreciation methods are designed to amortize the cost of the assets over their
estimated useful lives, as follows:
Buildings and improvements 10-40 years
Furniture and equipment 3-15 years
These assets are reviewed for impairment under Statement of Financial Accounting
Standards (SFAS) No. 121 when events indicate the carrying amount may not be
recoverable. Maintenance and repairs are charged to expense as incurred. When
facilities are retired or otherwise disposed of, the cost is removed from the
asset accounts and the related accumulated depreciation is adjusted. Any gain or
loss on disposition is reflected in operations in the year of disposal.
F-8
<PAGE> 72
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES: Income tax expense is the sum of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
STOCK-BASED COMPENSATION: Expense for employee compensation under stock option
plans is reported only if options are granted below market price at grant date.
During 1997, the Corporation adopted the disclosure provisions of SFAS No. 123,
a new Statement regarding stock-based compensation. As required by the
Statement, pro forma disclosures of net income and earnings per share will be
provided as if the fair value method were used for stock-based compensation for
options granted subsequent to April 1, 1996. The Corporation has not granted any
options subsequent to April 1, 1996.
EARNINGS PER SHARE: Earnings per share of common stock was computed by dividing
net income by the weighted average number of shares outstanding. Stock options
outstanding do not presently have a dilutive effect greater than or equal to 3%
on earnings per share.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified in the
accompanying consolidated financial statements to correspond with the current
year presentation.
NOTE 2 - SECURITIES
The amortized cost and estimated fair values of securities are as follows:
<TABLE>
<CAPTION>
June 30, 1997
----------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
U.S. Treasury obligations:
Due within one year $1,499,224 $ 1,289 $ (123) $1,500,390
========== ========== ========== ==========
Mortgage-backed securities $8,715,483 $142,267 $(92,903) $8,764,847
========== ======== ======== ==========
<CAPTION>
March 31, 1997
----------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury obligations:
Due within one year $1,999,083 $ 1,638 $ (961) $1,999,760
========== ========== ============ ==========
Mortgage-backed securities $8,931,617 $108,602 $(192,425) $8,847,794
========== ======== ========= ==========
</TABLE>
F-9
<PAGE> 73
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 2 - SECURITIES (Continued)
<TABLE>
<CAPTION>
March 31, 1996
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury obligations:
Due within one year $ 2,499,936 $ - $ (10,241) $ 2,489,695
One through five years 1,999,180 7,865 (3,845) 2,003,200
------------ ---------- ---------- ------------
Total $ 4,499,116 $ 7,865 $ (14,086) $ 4,492,895
============ ========== ========== ============
Mortgage-backed securities $ 10,266,901 $149,510 $(151,911) $10,264,500
============ ======== ========= ===========
</TABLE>
No securities were sold during the three months ended June 30, 1997 and 1996
(unaudited) and for the years ended March 31, 1997 and 1996.
In December 1995, all of the Corporation's securities totaling $16,294,754 were
reclassified from held to maturity to available for sale, based upon new
interpretations issued for SFAS No. 115. The unrealized gain at the time the
securities were transferred was approximately $177,000.
As of June 30, 1997 (unaudited), March 31, 1997 and 1996, the Corporation had no
pledged securities.
NOTE 3 - LOANS RECEIVABLE
Loans receivable consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------ -----------------------------
1997 1997 1996
------ ------ ------
(Unaudited)
<S> <C> <C> <C>
First mortgage loans, one- to
four-family residences $30,076,052 $29,366,917 $27,416,996
Consumer loans 3,505,908 2,892,522 2,010,376
Construction loans 345,000 456,800 -
Loans secured by deposits 196,770 114,216 158,828
Home improvement loans 177,843 186,760 167,004
Participations purchased - - 4,625
----------- ----------- -----------
Total 34,301,573 33,017,215 29,757,829
Less:
Loans in process 307,700 136,736 6,627
Deferred loan fees 115,838 113,459 122,852
Loan participation sold 92,462 115,865 120,054
----------- ----------- -----------
$33,785,573 $32,651,155 $29,508,296
=========== =========== ===========
</TABLE>
Certain officers, directors and the companies with which they are affiliated
have borrowed funds from the Savings Bank. These loans totaled $192,448 at June
30, 1997 (unaudited) and $194,065 and $199,992 at March 31, 1997 and 1996,
respectively.
F-10
<PAGE> 74
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
A summary of activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED MARCH 31,
-------------------------- -----------------------
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Balance, beginning of period $126,920 $97,635 $ 97,635 $94,682
Charge-offs - (2,175) (7,331) (1,724)
Recoveries of loans previously charged off 376 1,869 3,616 4,677
Provision for loan losses - - 33,000 -
-------- ------- --------- -------
Balance, end of period $127,296 $97,329 $126,920 $97,635
======== ======= ======== =======
</TABLE>
As of and for the three months ended June 30, 1997 and 1996 (unaudited) and as
of and for the years ended March 31, 1997 and 1996, no loans were required to be
evaluated for impairment on a loan by loan basis within the scope of SFAS No.
114.
Nonaccrual loans amounted to approximately $197,000 at June 30, 1997 (unaudited)
and $167,000 and $108,000 at March 31, 1997 and 1996, respectively.
The Savings Bank evaluates the credit risk of each customer on an individual
basis, and when determined to be necessary, obtains collateral to secure the
loan. Collateral varies by individual customer and may include real estate,
vehicles, deposits, personal and governmental guaranties and general security
agreements. Access to collateral is dependent on the type of collateral
obtained, and the Savings Bank monitors its collateral and the collateral value
related to the loan balance on an ongoing basis.
NOTE 4 - PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
---------- -----------------------------
1997 1997 1996
------ ------ ------
(Unaudited)
<S> <C> <C> <C>
Land $ 134,674 $ 134,674 $ 134,674
Buildings and improvements 953,946 953,946 940,311
Furniture and equipment 622,788 622,788 546,626
------------ ----------- -----------
1,711,408 1,711,408 1,621,611
Less accumulated depreciation (878,368) (855,002) (791,536)
----------- ----------- -----------
Premises and equipment, net $ 833,040 $ 856,406 $ 830,075
========== ========== ==========
</TABLE>
F-11
<PAGE> 75
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 5 - DEPOSITS
A summary of deposits is as follows:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------ ------------------------------
1997 1997 1996
------- -------- --------
(Unaudited)
<S> <C> <C> <C>
Noninterest-bearing
demand deposits $ 403,970 $ 393,721 $ 266,666
NOW accounts 3,638,015 3,512,269 3,399,420
Money market accounts 2,932,387 2,972,402 3,234,194
Passbook savings accounts 9,928,200 9,933,636 10,349,094
Certificate accounts 175,883 179,580 195,946
Certificates of deposit 13,840,423 13,538,284 13,462,381
IRA certificates 9,465,348 9,839,155 10,182,133
----------- ----------- -----------
$40,384,226 $40,369,047 $41,089,834
=========== =========== ===========
</TABLE>
The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was $1,264,000 at June 30, 1997 (unaudited), and $1,521,000 and
$1,030,000 at March 31, 1997 and 1996, respectively.
The scheduled maturities of certificate accounts, certificates of deposit and
IRA certificates as of June 30, 1997 (unaudited) are as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
(Unaudited)
<S> <C>
1998 $17,881,841
1999 2,740,703
2000 2,272,248
2001 385,739
2002 201,123
-----------
$23,481,654
===========
</TABLE>
The scheduled maturities of certificate accounts, certificates of deposit and
IRA certificates as of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
Years Ended March 31,
---------------------
<S> <C>
1998 $18,251,847
1999 3,013,255
2000 1,569,043
2001 232,208
2002 446,948
Thereafter 43,718
-----------
$23,557,019
===========
</TABLE>
F-12
<PAGE> 76
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES
Advances from the Federal Home Loan Bank at June 30, 1997 (unaudited), March 31,
1997 and 1996 consisted of a $1,000,000 borrowing due in December, 2000, bearing
interest at 5.8%. First mortgage loans with an unpaid principal balance of
$1,500,000 were pledged as collateral on this borrowing.
NOTE 7 - SAVINGS ASSOCIATION INSURANCE FUND RECAPITALIZATION
Included in FDIC deposit insurance expense in the statement of income for the
year ended March 31, 1997 is $269,558 for a special assessment resulting from
legislation passed and enacted into law on September 30, 1996 to recapitalize
the Savings Association Insurance Fund of the Federal Deposit Insurance
Corporation. Thrifts such as the Savings Bank paid a one-time assessment in
November, 1996 of $0.657 for each $100 in deposits as of March 31, 1995. As a
result of the recapitalization, the Savings Bank began paying lower deposit
insurance premiums in January, 1997.
NOTE 8 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES
There are various contingent liabilities that are not reflected in the financial
statements including claims and legal actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of these matters is not expected to have a material
effect on financial condition or results of operations.
The Federal Reserve requires financial institutions to maintain certain average
reserve balances. A cash reserve of 3%, which is unavailable for investment, is
required for financial institutions with reservable liabilities in excess of
$3.8 million (the exception amount) and total deposits in excess of $44.8
million (the deposit cutoff). At June 30, 1997 (unaudited), March 31, 1997 and
1996, the Savings Bank was exempt from such requirements.
Some financial instruments are used in the normal course of business to meet the
financing needs of customers and to reduce exposure to interest rate changes.
These financial instruments include commitments to extend credit. Commitments to
extend credit involve, to varying degrees, credit and interest-rate risk in
excess of the amount reported in the financial statements.
Exposure to credit loss if the other party does not perform is represented by
the contractual amount for commitments to extend credit. The same credit
policies are used for commitments and conditional obligations as are used for
loans.
F-13
<PAGE> 77
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 8 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES (Continued)
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being used, the total commitments does not necessarily represent
future cash requirements.
A summary of unfunded loan commitments follows:
<TABLE>
<CAPTION>
June 30, March 31,
-------- -----------------------
1997 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
30 year fixed rate mortgages $ 310,100 $75,000 232,000
20 year fixed rate mortgages - - 139,800
20 year variable rate mortgages - 114,000 -
15 year fixed rate mortgages 70,000 110,000 201,000
10 year fixed rate mortgages - - 97,500
Unused overdraft and home equity lines 1,443,093 1,172,793 563,000
</TABLE>
The interest rates on fixed rate commitments ranged from 7.88% to 8.38% at June
30, 1997 (unaudited), 7.50% to 7.88% at March 31, 1997 and 6.88% to 7.75% at
March 31, 1996.
NOTE 9 - REGULATORY AND CAPITAL MATTERS
The Savings Bank is subject to various regulatory capital requirements
administered by the federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory actions that, if undertaken, could
have a direct material affect on the Savings Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Savings Bank must meet specific capital guidelines that involve
quantitative measures of the Savings Bank assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Savings Bank's capital amounts and classifications are also subject to
qualitative judgments by the regulators about the Savings Bank's components,
risk weightings and other factors. At March 31, 1997 and March 31, 1996,
management believes the Savings Bank is in compliance with all regulatory
capital requirements. Based on the Savings Bank's computed regulatory capital
ratios, the Savings Bank is considered well capitalized under Section 38 of the
Federal Deposit Insurance Act at June 30, 1997 (unaudited), March 31, 1997 and
March 31, 1996. The minimum requirements are:
<TABLE>
<CAPTION>
Capital to risk-
Weighted Assets Tier 1 (core)
----------------------------- capital to adjusted
Total Tier 1 (core) total assets
----- ------------- ------------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8% 4% 3%
Undercapitalized 6% 3% 3%
</TABLE>
F-14
<PAGE> 78
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 9 - REGULATORY AND CAPITAL MATTERS (Continued)
At June 30, 1997 (unaudited), March 31, 1997 and March 31, 1996, the Savings
Bank's actual capital levels (in thousands) and minimum required levels were:
<TABLE>
<CAPTION>
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
------------------ ------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
JUNE 30, 1997 (UNAUDITED)
Total capital (to risk-weighted $5,638 25.5% $1,768 8.0% $2,210 10.0%
assets)
Tier 1 (core) capital (to 5,511 24.9 884 4.0 1,326 6.0%
risk-weighted assets)
Tier 1 (core) capital (to adjusted 5,511 11.4 1,454 3.0 2,425 5.0
total assets)
Tangible capital (to adjusted total 5,511 11.4 727 1.5 N/A
assets)
MARCH 31, 1997
Total capital (to risk-weighted 5,506 25.8 1,707 8.0 2,133 10.0
assets)
Tier 1 (core) capital (to 5,379 25.2 854 4.0 1,280 6.0
risk-weighted assets)
Tier 1 (core) capital (to adjusted 5,379 11.1 1,448 3.0 2,413 5.0
total assets)
Tangible capital (to adjusted total 5,379 11.1 724 1.5 N/A
assets)
MARCH 31, 1996
Total capital (to risk-weighted 5,259 26.9 1,565 8.0 1,955 10.0
assets)
Tier 1 (core) capital (to 5,161 26.4 782 4.0 1,173 6.0
risk-weighted assets)
Tier 1 (core) capital (to adjusted 5,161 10.5 1,470 3.0 2,457 5.0
total assets)
Tangible capital (to adjusted total 5,161 10.5 735 1.5 N/A
assets)
</TABLE>
In addition to certain federal income tax considerations, the Office of Thrift
Supervision (OTS) regulations impose limitations on the payment of dividends and
other capital distributions by savings associations. Under OTS regulations
applicable to converted savings associations, the Savings Bank is not permitted
to pay a cash dividend on its common shares if its regulatory capital would, as
a result of payment of such dividends, be reduced below the amount required for
the Liquidation Account (the account established for the purpose of granting a
limited priority claim on the assets of the Savings Bank in the event of
complete liquidation to those members of the Savings Bank before the Conversion
who maintain a savings account at the Savings Bank after the Conversion), or
below applicable regulatory capital requirements prescribed by the OTS.
OTS regulations applicable to all savings and loan associations provide that a
savings association which immediately prior to, and on a pro forma basis after
giving effect to, a proposed capital distribution (including a dividend) has
total capital (as defined by OTS regulations) that is equal to or greater than
the amount of its capital requirements is generally permitted without OTS
approval (but subsequent to 30 days' prior notice to the OTS) to make capital
distributions, including dividends, during a calendar year in an amount not to
exceed
F-15
<PAGE> 79
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 9 - REGULATORY AND CAPITAL MATTERS (Continued)
the greater of (1) 100% of its net earnings to date during the calendar year,
plus an amount equal to one-half that which its total capital to assets ratio
exceeded its required capital to assets ratio at the beginning of the calendar
year, or (2) 75% of its net earnings for the most recent four-quarter period.
Savings associations with total capital in excess of the capital requirements
that have been notified by the OTS that they are in need of more than normal
supervision will be subject to restrictions on dividends. A savings association
that fails to meet current minimum capital requirements is prohibited from
making any capital distributions without the prior approval of the OTS.
The Savings Bank currently meets all of its capital requirements and, unless the
OTS determines that the Savings Bank is an institution requiring more than
normal supervision, the Savings Bank may pay dividends in accordance with the
foregoing provisions of OTS regulations.
NOTE 10 - FEDERAL INCOME TAXES
The income tax provision for the periods indicated consisted of the following:
<TABLE>
<CAPTION>
Three Months ended June 30, Year ended March 31,
--------------------------- --------------------
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Current $71,136 $47,715 $107,045 $185,365
Deferred (12,636) - (14,295) (8,615)
------- ------- -------- --------
Total income tax provision $58,500 $47,715 $ 92,750 $176,750
======= ======= ======== ========
</TABLE>
The effective income tax rate was different than the statutory federal income
tax rate for the following reasons:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED MARCH 31,
--------------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0% 34.0%
Nondeductible expense 0.1 0.1 0.4 0.1
Surtax and other (0.9) - (2.3) (1.8)
----- ------ ----- -----
Effective tax rate 33.0% 34.1% 31.9% 32.3%
==== ==== ==== ====
</TABLE>
F-16
<PAGE> 80
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 10 - FEDERAL INCOME TAXES (Continued)
The sources of gross deferred tax assets and deferred tax liabilities were
comprised of the following:
<TABLE>
<CAPTION>
June 30, March 31,
------- ---------------------------
1997 1997 1996
------ ------ ------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Deferred loan fees and costs $ 26,988 $ 26,179 $ 20,534
Allowance for loan losses 43,153 43,153 33,196
Unrealized loss on securities available for sale - 28,270 2,931
Other 2,869 774 774
---------- ---------- ----------
73,010 98,376 57,435
---------- ---------- ----------
Deferred tax liabilities:
Accrued income and expense (45,378) (59,818) (70,859)
Accumulated depreciation (92,114) (91,151) (86,788)
Special bad debt deduction (74,016) (72,753) (74,016)
FHLB stock dividends (67,468) (64,986) (55,738)
Unrealized gain on securities available for sale (17,180) - -
---------- ---------- ----------
(296,156) (288,708) (287,401)
---------- ---------- ----------
Net deferred tax liabilities $(223,146) $(190,332) $(229,966)
========= ========= =========
</TABLE>
No valuation allowance was recorded against deferred tax assets at June 30, 1997
(unaudited), March 31, 1997 or March 31, 1996.
The Corporation, in accordance with SFAS No. 109, has not recorded a deferred
tax liability of approximately $183,000 in retained earnings related to
approximately $538,000 of cumulative special bad debt deductions arising prior
to December 31, 1987, which is the end of the Savings Bank's base year for
purposes of calculating the bad debt deduction for tax purposes. If this portion
of retained earnings is used in the future for any purpose other than to absorb
bad debts, it will be added to future taxable income.
NOTE 11 - 401(K) PROFIT SHARING PLAN
The Corporation sponsors a tax-qualified defined contribution 401(k) profit
sharing plan (the "Plan"), for the benefit of its employees. Employees become
eligible to participate under the Plan after age 21 and completing one year of
service. Under the Plan, employees may voluntarily elect to defer up to 10% of
compensation, not to exceed applicable limits under the Internal Revenue Code.
F-17
<PAGE> 81
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 11 - 401(K) PROFIT SHARING PLAN (Continued)
Additionally, the Savings Bank may contribute an annual discretionary
contribution to the Plan, not to exceed 10% of compensation. The annual
discretionary contribution includes a 50% match up to a certain percentage of
employee 401(k) contributions. The percentage of employee 401(k) contributions
that is eligible for the match is set annually by the board of directors and was
6% for 1997 and 1996. Employer contributions shall be 100% vested following
completion of six years of service. Employee contributions are always 100%
vested. Compensation expense related to the Plan for the three months ended June
30, 1997 and 1996 (unaudited) was $6,900 and $6,000, respectively. Compensation
expense related to the Plan for the years ended March 31, 1997 and 1996 was
approximately $30,000 and $24,000, respectively.
NOTE 12 - MANAGEMENT STOCK BONUS PLANS
The Savings Bank has two Management Stock Bonus Plans (collectively, the "MSBP")
The objective of the MSBP is to enable the Savings Bank to retain personnel of
experience and ability in key positions of responsibility. All employees and
directors of the Savings Bank are eligible to receive benefits under the MSBP.
Benefits to employees may be granted at the sole discretion of a committee
appointed by the Board of Directors of the Corporation and the MSBP provides for
automatic grants to nonemployee directors. The MSBP is managed by trustees who
are nonemployee directors of the Corporation and who have the responsibility to
invest all funds contributed by the Savings Bank to the trusts created for the
MSBP.
At the time of the stock conversion, the MSBP purchased 12,335 shares of the
Corporation's stock for $123,350. Of these shares, 11,896 shares were granted in
the form of restricted stock payable over a five-year period at the rate of
one-fifth of such shares per year following the date of grant of the award.
Compensation expense in the amount of the fair market value of the common stock
at the date of the grant to the employee or director will be recognized pro rata
over the five years during which the shares are payable. Compensation expense
related to the plan was $6,167 and $6,168 for the three months ended June 30,
1997 (unaudited) and 1996 (unaudited), respectively, and $24,670 for the years
ending March 31, 1997 and 1996, respectively. A recipient of such restricted
stock will be entitled to all voting and other stockholder rights, except that
the shares, while restricted, may not be sold, pledged or otherwise disposed of
and are required to be held in escrow. If a holder of such restricted stock
terminates employment or directorship for reasons other than death, disability,
a change in control or imminent change in control or, in the case of nonemployee
directors, retirement after at least 10 years of service as a director, the
recipient forfeits all rights to the allocated shares under restriction. If the
participant's service terminates as a result of death, disability, or a change
in control or imminent change in control of the Savings Bank or, in the case of
nonemployee directors, retirement after at least 10 years of service as a
director, all restrictions expire and all shares allocated become unrestricted.
The Board of Directors can terminate the MSBP at any time, and if it does so,
any shares not allocated will revert to the Corporation.
F-18
<PAGE> 82
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 13 - STOCK OPTION PLAN
In connection with the stock conversion, the Corporation's Board of Directors
adopted the 1993 Stock Option Plan (the "Option Plan"). Pursuant to the Option
Plan, 30,837 shares of common stock are reserved for issuance by the Corporation
upon exercise of stock options granted to officers, directors and employees of
the Corporation from time to time under the Option Plan. The purpose of the
Option Plan is to provide additional incentive to certain officers, directors
and key employees by facilitating their purchase of a stock interest in the
Corporation. The Option Plan provides for a term of ten years, after which no
awards may be made, unless earlier terminated by the Board of Directors pursuant
to the Option Plan.
The Option Plan is administered by a committee of at least three nonemployee
directors designated by the Board of Directors (the "Option Committee"). The
Option Committee selects the employees to whom options are to be granted and the
number of shares to be granted. The Option Plan provides for automatic grants to
nonemployee directors. The option price may not be less than 100% of the fair
market value of the shares on the date of the grant, and no option shall be
exercisable after the expiration of ten years from the grant date. In the case
of any employee who owns more than 10% of the outstanding common stock at the
time the option is granted, the option price may not be less than 110% of the
fair market value of the shares on the date of the grant, and the option shall
not be exercisable after the expiration of five years from the grant date. The
exercise price may be paid in cash, shares of the common stock, or a combination
of both.
As of the date of conversion, the Option Committee granted options on 27,747
shares of common stock, at an exercise price of $10 per share. One-third of the
granted options became exercisable on January 19, 1995; two-thirds of the
granted options became exercisable on September 17, 1995 and each option was
exercisable in full on September 17, 1996. The options expire on September 16,
2003. No options have been exercised through June 30, 1997 (unaudited).
NOTE 14 - EMPLOYMENT AGREEMENTS
The Savings Bank has entered into employment agreements with certain officers of
the Savings Bank. In general, the agreements provide that if the Savings Bank
terminates the employee for reasons other than "just cause" as defined in the
agreement, the employee will be entitled to a continuation of his current salary
from the date of termination for a period of eighteen months thereafter. The
employment agreements also contain provisions stating that in the event of
termination of employment in connection with, or within one year after, any
change in control of the Savings Bank, the employee will be paid in a lump sum
an amount equal to 2.99 times the employee's average compensation received
during the prior five calendar years. The aggregate amount if payments were to
be made in accordance with such provisions at June 30, 1997 (unaudited) and
March 31, 1997, would have been approximately $424,000.
F-19
<PAGE> 83
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 15 - PARENT COMPANY FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
---------- ----------------------------
1997 1997 1996
---------- ---------- ----------
(Unaudited)
ASSETS
<S> <C> <C> <C>
Investment in subsidiary $5,544,581 $5,330,854 $5,155,217
Cash and cash equivalents 1,023,383 1,076,419 1,170,361
Accrued interest receivable 1,674 1,848 1,823
Other assets 12,500 -
---------- ---------- ----------
-
Total assets $6,582,138 $6,409,121 $6,327,401
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued liabilities $ 4,702 $ 9,857 $ 11,703
Common stock 3,084 3,084 3,084
Additional paid-in capital 2,799,640 2,799,640 2,792,445
Retained earnings 3,988,255 3,810,083 3,733,712
Treasury stock (213,543) (213,543) (213,543)
---------- ---------- ----------
Total liabilities and stockholders' equity $6,582,138 $6,409,121 $6,327,401
========== ========== ==========
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months ended June 30, For the Year ended March 31,
----------------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
INCOME (Unaudited)
<S> <C> <C> <C> <C>
Equity in earnings of subsidiary $119,334 $ 92,683 $192,958 $367,713
Interest income 7,792 8,827 33,666 38,490
--------- -------- --------- ---------
Total income 127,126 101,510 226,624 406,203
--------- -------- --------- ---------
EXPENSES
Outside services 6,475 5,100 18,095 22,000
State franchise taxes 1,551 1,233 4,932 4,932
Other 666 2,990 3,684 6,439
--------- -------- --------- ---------
Total expenses 8,692 9,323 26,711 33,371
--------- -------- --------- ---------
NET INCOME BEFORE INCOME TAXES 118,434 92,187 199,913 372,832
Income tax benefit/(provision) 500 175 (2,350) (1,750)
--------- -------- --------- ---------
NET INCOME $118,934 $ 92,362 $197,563 $371,082
======== ======== ======== ========
</TABLE>
F-20
<PAGE> 84
GF BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996 (unaudited) and March 31, 1997 and 1996
NOTE 15 - PARENT COMPANY FINANCIAL INFORMATION (Continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended June 30, For the year ended March 31,
---------------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
<S> <C> <C> <C> <C>
Net income $ 118,934 $ 92,362 $ 197,563 $ 371,082
Adjustments to reconcile net income to net cash
provided by operating activities
Equity in undistributed earnings of subsidiary (119,334) (92,683) (192,958) (367,713)
Net change in accrued interest receivable 174 (54) (25) (520)
Net change in other assets (12,500) -- -- --
Net change in accrued liabilities (5,155) (4,449) (1,846) 4,532
----------- ----------- ----------- -----------
Net cash flows provided from operating
activities (17,881) (4,824) 2,734 7,381
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock -- -- -- (213,543)
Dividends paid (35,155) (20,507) (96,676) (84,187)
----------- ----------- ----------- -----------
Net cash flows from financing activities (35,155) (20,507) (96,676) (297,730)
----------- ----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (53,036) (25,331) (93,942) (290,349)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,076,419 1,170,361 1,170,361 1,460,710
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,023,383 $ 1,145,030 $ 1,076,419 $ 1,170,361
=========== =========== =========== ===========
</TABLE>
F-21
<PAGE> 85
APPENDIX A
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
(hereinafter referred to as the "AGREEMENT") is made and entered into this 28
day of July, 1997, by and among Camco Financial Corporation, a Delaware
corporation (hereinafter referred to as "CAMCO"); First Federal Savings Bank of
Washington Court House, a savings bank organized under the laws of the United
States (hereinafter referred to as "FIRST FEDERAL"); GF Bancorp, Inc., a
Delaware corporation (hereinafter referred to as "GFBC"); and Germantown Federal
Savings Bank, a savings bank organized under the laws of the United States
(hereinafter referred to as "GERMANTOWN");
WITNESSETH:
WHEREAS, the authorized capital of CAMCO consists of 4,900,000
shares of common stock, par value One Dollar ($1.00) per share (hereinafter
referred to as the "CAMCO SHARES"), 3,214,193 of which are issued and
outstanding and 235,828 of which are reserved for issuance upon the exercise of
outstanding stock options, and 100,000 preferred shares, par value One Dollar
($1.00) per share, none of which is issued or outstanding;
WHEREAS, the authorized capital of FIRST FEDERAL consists of
500,000 common shares, par value One Dollar ($1.00) per share, 180,000 of which
are issued and outstanding and are owned of record by CAMCO and 500,000
preferred shares, par value One Dollar ($1.00) per share, none of which is
issued or outstanding;
WHEREAS, the authorized capital of GFBC consists of 1,250,000
common shares, par value One Cent ($0.01) per share, 292,958 of which are issued
and outstanding and held of record by approximately 170 shareholders
(hereinafter referred to as the "GFBC SHARES"), and 27,747 of which are reserved
for issuance upon the exercise of outstanding stock options (hereinafter
referred to as the "GFBC OPTIONS"), and 250,000 preferred shares, par value One
Cent ($0.01) per share, none of which is issued or outstanding;
WHEREAS, the authorized capital of GERMANTOWN consists of
1,250,000 common shares, par value One Cent ($0.01) per share, 100,000 of which
are issued and outstanding and are owned of record by GFBC and 250,000 preferred
shares, par value One Cent ($0.01) per share, none of which is issued or
outstanding; and
WHEREAS, the Boards of Directors of CAMCO, FIRST FEDERAL, GFBC
and GERMANTOWN believe that the merger of GFBC with and into CAMCO, followed by
the merger of GERMANTOWN with and into FIRST FEDERAL is in the best interest of
each party and its respective shareholders;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, CAMCO, FIRST FEDERAL, GFBC and
GERMANTOWN, each intending to be legally bound, hereby agree as follows:
ARTICLE ONE
THE MERGERS
SECTION 1.01. MERGER OF CAMCO AND GFBC. Subject to the terms
and conditions of this AGREEMENT, and pursuant to the provisions of the Delaware
General Corporation Law (hereinafter referred to as the "DGCL"), the Home Owners
Loan Act ("HOLA") and the rules and regulations promulgated thereunder (the
"THRIFT REGULATIONS"), GFBC shall merge with and into CAMCO (hereinafter
referred to as the "COMPANY MERGER") at the COMPANY EFFECTIVE TIME (hereinafter
defined). CAMCO shall be the
A-1
<PAGE> 86
continuing, surviving and resulting corporation in the COMPANY MERGER and shall
continue to exist as a Delaware corporation. CAMCO shall be the only one of
CAMCO and GFBC to continue its separate corporate existence after the COMPANY
EFFECTIVE TIME. The name of the continuing, surviving and resulting corporation
shall remain "Camco Financial Corporation". From and after the COMPANY MERGER,
CAMCO, as the surviving corporation, shall possess all assets and property of
every description, and every interest in the assets and property, wherever
located, and the rights, privileges, immunities, powers, franchises and
authority, of a public as well as a private nature, of CAMCO and GFBC and all
obligations belonging or due to each of them.
SECTION 1.02. MERGER OF FIRST FEDERAL AND GERMANTOWN. Subject
to the terms and conditions of this AGREEMENT, and pursuant to the provisions of
the HOLA and the THRIFT REGULATIONS, GERMANTOWN shall merge with and into FIRST
FEDERAL (hereinafter referred to as the "BANK MERGER") at the BANK EFFECTIVE
TIME (hereinafter defined). FIRST FEDERAL shall be the continuing, surviving and
resulting corporation in the BANK MERGER and shall continue to exist as a
savings and loan association incorporated under the HOLA. FIRST FEDERAL shall be
the only one of FIRST FEDERAL and GERMANTOWN to continue its separate corporate
existence after the BANK EFFECTIVE TIME.
SECTION 1.03. EXECUTION OF AGREEMENT OF MERGER. FIRST FEDERAL
and GERMANTOWN shall duly execute and deliver a merger agreement in the form of
the Merger Agreement attached hereto as Exhibit A (hereinafter referred to as
the "BANK MERGER AGREEMENT").
SECTION 1.04. CLOSINGS. (a) The closing of the COMPANY MERGER
pursuant to this AGREEMENT (hereinafter referred to as the "COMPANY CLOSING")
shall take place at a date and time selected by CAMCO as soon as practicable
after the satisfaction or waiver of the last of the conditions to the COMPANY
MERGER set forth in Article Seven of this AGREEMENT to be satisfied, which date
shall not be later than 30 days after such satisfaction or waiver.
(b) On the day of the COMPANY CLOSING, CAMCO and GFBC shall
cause a Certificate of Merger in respect of the COMPANY MERGER to be filed in
the Office of the Delaware Secretary of State in accordance with Title 8,
Chapter 1, Subchapter IX, Section 251 of the Delaware Code. The COMPANY MERGER
shall become effective at the date and time indicated on such filing made with
the Delaware Secretary of State (hereinafter referred to as the "COMPANY
EFFECTIVE TIME").
(c) The closing of the BANK MERGER pursuant to this AGREEMENT
and the BANK MERGER AGREEMENT (hereinafter referred to as the "BANK CLOSING")
shall take place at a date and time selected by CAMCO after the COMPANY
EFFECTIVE TIME.
(d) FIRST FEDERAL and GERMANTOWN shall cause Articles of
Combination in respect of the BANK MERGER to be filed with the Office of Thrift
Supervision (hereinafter referred to as the "OTS") in accordance with the THRIFT
REGULATIONS. The BANK MERGER shall become effective at the date specified in the
BANK MERGER AGREEMENT and the endorsement of the Articles of Combination (herein
referred to as the "BANK EFFECTIVE TIME"), which date and time shall be after
the COMPANY EFFECTIVE TIME.
SECTION 1.05. ADOPTION BY SHAREHOLDERS. (a) This AGREEMENT
shall be submitted for consideration and adoption by the shareholders of GFBC
entitled to vote at an annual meeting of shareholders or a special meeting of
shareholders called for such purpose to be held at a time, date and place to be
determined by the Board of Directors of GFBC, subject to applicable laws and
regulations.
(b) This AGREEMENT and the BANK MERGER AGREEMENT shall be
considered and adopted by CAMCO, as the sole shareholder of FIRST FEDERAL, and
by GFBC, as the sole shareholder of GERMANTOWN.
SECTION 1.06. REGULATORY FILINGS. (a) CAMCO shall prepare and
cause to be filed with the OTS, such applications, notices or other instruments
as may be required for approval of the COMPANY MERGER and the BANK MERGER
(hereinafter referred to collectively as the "REGULATORY APPLICATIONS").
A-2
<PAGE> 87
(b) CAMCO shall prepare and cause to be filed with the
Securities and Exchange Commission (hereinafter referred to as the "SEC") a
registration statement on Form S-4, or such other form as may be required by the
SEC (hereinafter referred to as the "REGISTRATION STATEMENT"), to register under
the Securities Act of 1933 the CAMCO SHARES to be issued to shareholders of GFBC
in the COMPANY MERGER as provided in Section 2.01 of this AGREEMENT.
SECTION 1.07. CERTIFICATE OF INCORPORATION AND BYLAWS OF CAMCO
AS THE SURVIVING CORPORATION. The Certificate of Incorporation and Bylaws of
Camco Financial Corporation, as in effect immediately prior to the COMPANY
EFFECTIVE TIME, shall be the Certificate of Incorporation and Bylaws of the
surviving corporation of the COMPANY MERGER, until either is thereafter amended
in accordance with applicable law.
ARTICLE TWO
CONVERSION AND CANCELLATION OF GFBC SHARES
SECTION 2.01. CONVERSION AND CANCELLATION OF GFBC SHARES. At
the COMPANY EFFECTIVE TIME and as a result of the COMPANY MERGER, automatically
and without further act of CAMCO, FIRST FEDERAL, GFBC, GERMANTOWN or the holders
of CAMCO SHARES or GFBC SHARES, the following shall occur:
(a) Each GFBC SHARE shall be cancelled and extinguished and,
in substitution and exchange therefor, the holders thereof shall be entitled,
subject to and upon compliance with Section 2.03 of this AGREEMENT, to receive
from CAMCO 1.616 CAMCO SHARES, subject to possible adjustment as set forth below
(the "EXCHANGE RATIO").
(i) If the AVERAGE CLOSING PRICE (as hereinafter
defined) of CAMCO SHARES is greater than $20.99 or
is less than $15.51, the EXCHANGE RATIO shall be
adjusted to become the product of multiplying
1.616 by a fraction, the numerator of which is
$20.99 if the AVERAGE CLOSING PRICE is greater
than $20.99, and $15.51 if the AVERAGE CLOSING
PRICE is less than $15.51 and the denominator of
which is the AVERAGE CLOSING PRICE. The AVERAGE
CLOSING PRICE shall be the mean of the average of
the daily closing bid and asked prices of CAMCO
SHARES as reported on The Nasdaq National Market
System (as reported by a mutually agreed upon
authoritative source) for the twenty most recent
trading days ending at the close of trading on the
date three days prior to the COMPANY CLOSING.
(ii) The EXCHANGE RATIO shall be adjusted to reflect
any stock split, stock dividend or distributions
in, or combinations or subdivisions of, CAMCO
SHARES, between the date hereof and the COMPANY
EFFECTIVE TIME.
(iii) No fractional shares will be issued, and cash will
be paid in lieu of fractional shares based on the
AVERAGE CLOSING PRICE. No interest shall be
payable with respect to such cash payment.
(b) CAMCO SHARES issued and outstanding before the COMPANY
EFFECTIVE TIME shall remain issued and outstanding after the COMPANY EFFECTIVE
TIME.
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(c) Any treasury shares held by GFBC and any GFBC SHARES owned
by CAMCO for its own account shall be cancelled and retired at the COMPANY
EFFECTIVE TIME and no consideration shall be issued in exchange therefor.
SECTION 2.02. GFBC OPTIONS.
(a) At the COMPANY EFFECTIVE TIME, the GF Bancorp, Inc. Stock
Option Plan (the "OPTION PLAN") and GFBC OPTIONS not yet exercised at such time,
representing a right to purchase not more than 27,747 GFBC SHARES, shall be
assumed by CAMCO. No option to purchase GFBC SHARES granted on or after July 9,
1997 shall be valid in any respect.
The number of CAMCO SHARES to be issued upon the exercise of a
GFBC OPTION which is exercised after the COMPANY EFFECTIVE TIME shall be equal
to the number of GFBC SHARES subject to such GFBC OPTIONS immediately prior to
the date of the COMPANY CLOSING multiplied by the EXCHANGE RATIO (with the
product rounded down to the next whole share), and the per share exercise price
shall be adjusted by dividing the per share exercise price under each such GFBC
OPTION by the EXCHANGE RATIO (with the quotient rounded up to the next whole
cent). CAMCO and its Compensation Committee shall be substituted for GFBC and
the Committee of the GFBC Board of Directors administering the OPTION PLAN. Each
GFBC OPTION shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, dividends payable in
stock, recapitalization or other similar transaction subsequent to the COMPANY
EFFECTIVE TIME.
(b) The CAMCO SHARES covered by the GFBC OPTIONS to be issued
pursuant to Section 2.02(a) shall be covered by a registration statement filed
with the SEC and effective at the COMPANY EFFECTIVE TIME, and CAMCO shall take
all actions necessary to maintain the effectiveness of such registration
statement until all GFBC OPTIONS have been exercised or terminated. When CAMCO
SHARES are issued upon the exercise of GFBC OPTIONS, such CAMCO SHARES shall be
duly authorized, validly issued, fully paid and non-assessable and not subject
to or in violation of any preemptive rights. CAMCO shall reserve sufficient
CAMCO SHARES for issuance with respect to such options. CAMCO shall also take
any reasonable action required to be taken under any applicable state blue sky
or securities laws in connection with the issuance of such shares.
(c) Except as provided in this Section 2.02, all other terms
and conditions of the OPTION PLAN and award grants thereunder shall remain as
now existing.
(d) In respect of any stock option which is an "Incentive
Stock Option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (hereinafter referred to as the "CODE"), the conversion hereby
provided for shall comply with the requirements of Section 424(a) of the CODE,
including the requirement that such converted options shall not give to the
holder thereof any benefits additional to those which such holder had prior to
such conversion under the option as originally granted. It is intended that the
foregoing assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 424(h) of the CODE as to any stock option
which is an "Incentive Stock Option".
(e) Any holder of any GFBC OPTION may exercise such options at
any time, prior to the date of the COMPANY CLOSING as provided in the OPTION
PLAN.
SECTION 2.03. SHARE CERTIFICATES IN THE COMPANY MERGER. (a) As
soon as practicable after the COMPANY EFFECTIVE TIME, CAMCO shall mail to each
holder of record of GFBC SHARES a form letter of transmittal and instructions
for use in effecting the surrender for exchange of the certificates formerly
evidencing the GFBC SHARES cancelled and extinguished as a result of the COMPANY
MERGER (hereinafter referred to collectively as the "CERTIFICATES" and
individually as the "CERTIFICATE"). Such letter of transmittal shall specify
that the risk of loss and title to CERTIFICATES shall pass only upon delivery of
such certificates as specified in the Letter of Transmittal. Upon surrender of a
CERTIFICATE for cancellation, together with such letter of transmittal, duly
executed, the holder of such CERTIFICATE shall be entitled to receive in
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exchange therefor the consideration to which the holder is entitled in
accordance with the provisions of this AGREEMENT, and the CERTIFICATE so
surrendered shall thereafter be cancelled forthwith. CAMCO may, at its election,
designate an exchange agent to discharge its duties pursuant to this Section
2.03.
(b) In the event that any holder of GFBC SHARES cancelled and
extinguished in accordance with this AGREEMENT is unable to deliver the
CERTIFICATE which evidences such GFBC SHARES, CAMCO, in the absence of actual
notice that any GFBC SHARES theretofore evidenced by any such CERTIFICATE have
been acquired by a bona fide purchaser, shall deliver to such holder the
consideration to which such holder is entitled in accordance with the provisions
of this AGREEMENT upon the presentation of all of the following:
(i) Evidence to the reasonable satisfaction of CAMCO
that any such CERTIFICATE has been lost,
wrongfully taken or destroyed;
(ii) Such security or indemnity as may be reasonably
requested by CAMCO to indemnify and hold CAMCO
harmless; and
(iii) Evidence to the reasonable satisfaction of CAMCO
that such person is the owner of the GFBC SHARES
theretofore represented by each CERTIFICATE
claimed by him to be lost, wrongfully taken or
destroyed and that he is the person who would be
entitled to present each such CERTIFICATE for
exchange pursuant to this AGREEMENT.
(c) In the event that delivery of the consideration provided
for herein is to be made to a person other than the person in whose name the
CERTIFICATE surrendered is registered, the CERTIFICATE so surrendered shall be
properly endorsed or otherwise in proper form for transfer and the person
requesting such issuance or payment shall pay any transfer or other taxes
required by reason of the issuance or payment to a person other than the
registered holder of the CERTIFICATE surrendered or establish to the
satisfaction of CAMCO that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.03, each
CERTIFICATE shall represent for all purposes only the right to receive the
number of CAMCO SHARES determined pursuant to this AGREEMENT.
(d) No dividends or other distributions declared after the
COMPANY EFFECTIVE TIME with respect to CAMCO SHARES and payable to the holders
of record thereof after the COMPANY EFFECTIVE TIME shall be paid to the holder
of any unsurrendered CERTIFICATE until the holder thereof shall surrender such
CERTIFICATE. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of a CERTIFICATE, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to the
CAMCO SHARES represented by such CERTIFICATE.
(e) No CAMCO SHARES or payment in lieu of fractional shares
shall be delivered by CAMCO to any former holder of GFBC SHARES in accordance
with this AGREEMENT until such holder shall have complied with this Section
2.03.
SECTION 2.04. PAYMENT IN SATISFACTION OF RIGHTS. All payments
made upon the surrender of CERTIFICATES pursuant to this Article Two shall be
deemed to have been made in full satisfaction of all rights pertaining to the
shares evidenced by such CERTIFICATES.
SECTION 2.05. NO FURTHER REGISTRATION OR TRANSFER. After the
COMPANY EFFECTIVE TIME, there shall be no further registration or transfer of
GFBC SHARES on the stock transfer books of GFBC. In the event that, after the
COMPANY EFFECTIVE TIME, CERTIFICATES evidencing such GFBC SHARES are presented
for transfer, they shall be cancelled and exchanged as provided in this Article
Two.
SECTION 2.06. DISSENTING SHARES. Any GFBC SHARES held by a
holder who dissents from the COMPANY MERGER in accordance with Section 262 of
the DGCL (hereinafter referred to as "DISSENTING
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SHARES"), notwithstanding any other provisions of this AGREEMENT, shall not,
after the COMPANY EFFECTIVE TIME, be entitled to vote for any purpose or to
receive any dividends or other distribution and shall be entitled only to such
rights as are afforded in respect of DISSENTING SHARES pursuant to the DGCL.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF GFBC AND GERMANTOWN
GFBC and GERMANTOWN represent and warrant to CAMCO and FIRST
FEDERAL that each of the following statements is true and accurate in all
material respects, except as otherwise disclosed in a schedule provided by GFBC
and GERMANTOWN to CAMCO prior to the execution of this AGREEMENT (hereinafter
referred to as the "GFBC DISCLOSURE SCHEDULE"):
SECTION 3.01. ORGANIZATION AND STANDING. (a) GFBC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own or
hold under lease all of its properties and assets and to conduct its business
and operations as presently conducted. GFBC is registered as a savings and loan
holding company under the HOLA. GFBC is in compliance in all material respects
with all applicable local, state or federal laws and regulations, including
without limitation, the THRIFT REGULATIONS.
(b) GERMANTOWN is a savings association duly organized and
validly existing under the laws of the United States and has the corporate power
and authority to own or hold under lease all of its properties and assets and to
conduct its business and operations as presently conducted. GERMANTOWN is a
member of the Federal Home Loan Bank of Cincinnati (hereinafter referred to as
the "FHLB"). The deposit accounts of GERMANTOWN are insured up to applicable
limits by the Savings Association Insurance Fund administered by the Federal
Deposit Insurance Corporation (the "FDIC") (hereinafter referred to as the
"SAIF"). GERMANTOWN is in compliance in all material respects with all
applicable local, state or federal laws and regulations, including, without
limitation, the regulations of the FDIC and THRIFT REGULATIONS, except to the
extent that failure to be in compliance would not have a material adverse effect
on GFBC and GERMANTOWN taken as a whole. GERMANTOWN is a "domestic building and
loan association" as defined in Section 7701a(19) of the CODE and a "qualified
thrift lender" as defined in 12 U.S.C. 1467(a)(m) and the THRIFT REGULATIONS.
SECTION 3.02. QUALIFICATION. GFBC and GERMANTOWN are each
either duly qualified to do business and in good standing in each jurisdiction
in which such qualification is required or the failure to so qualify would not
have a material adverse effect on the business of GFBC or GERMANTOWN.
SECTION 3.03. AUTHORITY OF GFBC AND GERMANTOWN. This AGREEMENT
has been duly executed and delivered by GFBC and GERMANTOWN. The BANK MERGER
AGREEMENT has been duly executed and delivered by GERMANTOWN. Subject to the
adoption of this AGREEMENT by the GFBC shareholders, to the adoption of this
AGREEMENT and the BANK MERGER AGREEMENT by GFBC as the sole shareholder of
GERMANTOWN, and to the filing of all requisite regulatory notices and the
receipt of all requisite regulatory approvals, (a) GFBC has all requisite
corporate power and authority to enter into this AGREEMENT and to perform all of
its obligations hereunder; (b) GERMANTOWN has all requisite corporate power and
authority to enter into this AGREEMENT and the BANK MERGER AGREEMENT and to
perform all of its obligations hereunder and thereunder; (c) the execution and
delivery of this AGREEMENT and the BANK MERGER AGREEMENT and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action by GFBC and GERMANTOWN; and (d) subject to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws of general applicability affecting the enforcement of creditors' rights
generally, and the effect of rules of law governing specific performance,
injunctive relief and other equitable remedies on the enforceability of such
documents, and except to the extent such enforceability may be limited by laws
relating to safety and soundness of insured depository institutions as set forth
in 12 U.S.C. ss.1818(b) or by the appointment of a conservator by the FDIC, (i)
this AGREEMENT is the valid and binding agreement of GFBC, enforceable against
GFBC in accordance with its terms, and (ii) this AGREEMENT
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and the BANK MERGER AGREEMENT are the valid and binding agreements of
GERMANTOWN, enforceable against GERMANTOWN in accordance with their terms.
SECTION 3.04. GOVERNING DOCUMENTS. GFBC has made available, or
will promptly make available, to CAMCO true and accurate copies of its
Certificate of Incorporation and Bylaws and has granted CAMCO access to all
records of all meetings and other corporate actions occurring before the COMPANY
EFFECTIVE TIME by the shareholders, Board of Directors and Committees of the
Board of Directors of GFBC. GERMANTOWN has made available, or will promptly make
available, to CAMCO true and accurate copies of its Charter and Bylaws and has
granted or will grant to CAMCO access to all records of all meetings and other
corporate actions occurring before the COMPANY EFFECTIVE TIME by the
shareholders, Board of Directors and Committees of the Board of Directors of
GERMANTOWN. The minute books of GFBC and GERMANTOWN contain, in all material
respects, complete and accurate records of all meetings and other corporate
actions of their shareholders, Boards of Directors and Committees of the Boards
of Directors, except for minutes of meetings held after July 1, 1997 which are
not yet in the minute books.
SECTION 3.05. NO CONFLICTS. The execution and delivery of this
AGREEMENT and, subject to the adoption of this AGREEMENT by the shareholders of
GFBC and to the regulatory filings and approvals referenced in Section 1.06 of
this AGREEMENT, the consummation of the transactions contemplated hereby will
not (a) conflict with or violate any provision of or result in the breach of any
provision of the Certificate of Incorporation or Bylaws of GFBC or the Charter
or Bylaws of GERMANTOWN; (b) conflict with or violate any provision of or result
in the breach or the acceleration of or entitle any party to accelerate (whether
upon or after the giving of notice or lapse of time or both) any obligation
under, or otherwise materially affect the terms of, any mortgage, lien, lease,
agreement, license, instrument, order, arbitration award, judgment or decree to
which GFBC or GERMANTOWN is a party or by which GFBC or GERMANTOWN or their
property or assets is bound; (c) require the consent of any party to any
agreement or commitment to which GFBC or GERMANTOWN is a party or by which GFBC
or GERMANTOWN or their property or assets is bound, the failure to obtain which
could, individually or in the aggregate with all the other failures to obtain
required consents, have a material adverse effect on the business, operations,
condition (financial or otherwise) or prospects of GFBC or GERMANTOWN; (d)
result in the creation or imposition of any lien, charge, pledge, security
interest or other encumbrance upon any property or assets of GFBC or GERMANTOWN;
or (e) violate or conflict with any applicable law, ordinance, rule or
regulation, including, without limitation, the rules and regulations of the OTS
or the FDIC.
SECTION 3.06. CONSENTS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
AGREEMENT by GFBC or GERMANTOWN or the consummation by GFBC or GERMANTOWN of the
transactions contemplated hereby, except for the filings, authorizations
consents or approvals referenced in Sections 1.04, 1.05 and 1.06 of this
AGREEMENT.
SECTION 3.07. CAPITALIZATION. (a) The authorized capital of
GFBC consists solely of (i) 1,250,000 common shares, One Cent ($0.01) par value
per share, 292,958 of which are issued and outstanding and held of record by
approximately 170 shareholders and 27,747 of which are reserved for issuance
upon the exercise of GFBC OPTIONS (all at the option exercise price of $10.00
per share) and (ii) 250,000 preferred shares, One Cent ($0.01) par value, none
of which is issued or outstanding. All of the outstanding GFBC SHARES are duly
authorized, validly issued, fully paid and nonassessable, were issued in full
compliance with all applicable laws and regulations, and were not issued in
violation of the preemptive right of any shareholder of GFBC. Upon the exercise
of the GFBC OPTIONS prior to the date of the COMPANY CLOSING, the GFBC SHARES to
be issued in connection with the exercise of such GFBC OPTIONS will be duly
authorized, validly issued, fully paid and nonassessable, will be issued in full
compliance with all applicable laws and regulations, and will not be issued in
violation of the preemptive right of any shareholder of GFBC. Except for the
GFBC OPTIONS, each of which is identified by type (e.g. incentive stock options
or non-qualified stock options), name of recipient, award date, expiration date,
number of shares and exercise price per share in Section 3.07 of the GFBC
DISCLOSURE SCHEDULE, there are no outstanding subscription rights, options,
conversion rights, warrants or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating GFBC to issue, deliver or
sell,
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cause to be issued, delivered or sold, or restricting GFBC from selling
any additional GFBC SHARES, or obligating GFBC to grant, extend or enter into
any such agreement or commitment.
(b) The authorized capital of GERMANTOWN consists of 1,250,000
common shares, par value One Cent ($0.01) per share, 100,000 of which are issued
and outstanding and held of record by GFBC and 250,000 preferred shares, par
value One Cent ($0.01) per share, none of which is issued or outstanding. All of
the outstanding common shares of GERMANTOWN are duly authorized, validly issued,
fully paid and nonassessable, were issued in full compliance with all applicable
laws and regulations, and were not issued in violation of the preemptive right
of any shareholder of GERMANTOWN. There are no outstanding subscription rights,
options, conversion rights, warrants or other agreements or commitments of any
nature whatsoever (either firm or conditional) obligating GERMANTOWN to issue,
deliver or sell, or to cause to be issued, delivered or sold, any additional
GERMANTOWN SHARES.
SECTION 3.08. SEC REPORTS. GFBC has delivered or made
available to CAMCO copies of the following documents, each of which has been
filed with the SEC (hereinafter referred to as the "GFBC SEC FILINGS"):
(a) The Annual Report on Form 10-KSB filed by GFBC with
the SEC for each of the fiscal years ended March 31,
1996, 1995 and 1994;
(b) The Annual Report to Shareholders for each of the
fiscal years ended March 31, 1996, 1995 and 1994; and
(c) The Proxy Statement for use in connection with each
of the 1996, 1995 and 1994 Annual Meetings of
Shareholders.
The GFBC SEC FILINGS did not, as of the dates on which such reports were filed
with the SEC, contain any untrue statement of a material fact or omit any
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
GFBC has also delivered to CAMCO copies of the 1997 Annual Report to
Stockholders and Proxy Statement for use in connection with the 1997 annual
meeting of shareholders (not filed with the SEC) which did not, as of the date
on which said documents were delivered to CAMCO, contain any untrue statement of
a material fact or omit any material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
GFBC has filed a Form 15, effective September 18, 1996, with the SEC
deregistering the GFBC SHARES under Section 12(g) of the Securities Exchange Act
of 1934 (hereinafter referred to as the "1934 ACT"). Since September 18, 1996,
GFBC has not been required to make any filings with the SEC pursuant to Section
13 or 15(d) of the 1934 ACT, except a Post-Effective Amendment to Form S-8.
SECTION 3.09. FINANCIAL STATEMENTS. (a) The consolidated
statement of financial condition of GFBC as of March 31, 1997, and the related
statements of income, stockholders' equity and cash flows for the year ended
March 31, 1997, audited and reported upon by Crowe Chizek and Company, certified
public accountants (hereinafter referred to as "CROWE") and the consolidated
statement of financial condition of GFBC as of March 31, 1996 and the related
statements of income, stockholders' equity and cash flows for each of the two
years ended March 31, 1996 and 1995, audited and reported upon by Arthur
Andersen, L.L.P., complete copies of which have previously been delivered to
CAMCO (hereinafter referred to as the "GFBC AUDITED FINANCIALS"), have been
prepared in conformity with generally accepted accounting principles
(hereinafter referred to as "GAAP") applied on a consistent basis and fairly
present the financial position of GFBC at such dates and the results of its
operations and cash flows for such periods.
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(b) Except as disclosed in the GFBC AUDITED FINANCIALS, as of
March 31, 1997, GFBC had no liabilities or obligations material to the business
condition (financial or otherwise) of GFBC and its consolidated subsidiaries
taken as a whole, whether accrued, absolute, contingent or otherwise, and
whether due or to become due.
(c) The GFBC AUDITED FINANCIALS did not, as of the dates
thereof, contain any untrue statement of a material fact or omit to state any
material fact necessary to make the information contained therein, in light of
the circumstances under which they were made, not misleading.
SECTION 3.10. ABSENCE OF MATERIAL ADVERSE CHANGE: CONDUCT OF
BUSINESS. Since March 31, 1997, there have been no material adverse changes in
the financial condition, assets, liabilities, obligations, properties, business
or prospects of GFBC or GERMANTOWN, taken as a whole; GFBC and GERMANTOWN have
conducted business only in the ordinary and usual course; and GFBC and
GERMANTOWN have not:
(a) Authorized the creation or issuance of, issued, sold
or disposed of, or created any obligation to issue,
sell or dispose of, any stock, notes, bonds or other
securities, or any obligation convertible into or
exchangeable for, any shares of their capital stock;
(b) Declared, set aside, paid or made any dividend or
other distributions on their capital stock or
directly or indirectly redeemed, purchased or
acquired any shares thereof or entered into any
agreement in respect of the foregoing; except a cash
dividend paid by GFBC on May 15, 1997 in the amount
of $0.12 per share;
(c) Effected any stock split, recapitalization,
combination, exchange of shares, readjustment or
other reclassification;
(d) Amended their Certificate of Incorporation, Charter
or Bylaws;
(e) Purchased, sold, assigned or transferred any material
tangible asset or any material patent, trademark,
trade name, copyright, license, franchise, design or
other intangible asset or property;
(f) Mortgaged, pledged or granted or suffered to exist
any lien or other encumbrance or charge on any assets
or properties, tangible or intangible, except for
liens for taxes not yet due and payable and such
other liens, encumbrances or charges which do not
materially adversely affect their financial position;
(g) Cancelled any material debts or waived any material
claims other than for adequate consideration;
(h) Incurred any material obligation or liability
(absolute or contingent), including, without
limitation, any tax liability or any liability for
borrowings from the FHLB, or paid any material
liability or obligation (absolute or contingent)
other than liabilities and obligations incurred or
paid in the ordinary course of business and
consistent with past practice;
(i) Experienced any material change in the amount or
general composition of their deposit liabilities;
(j) Entered into or amended any employment contract with
any of their employees, increased the compensation
payable to any officer or director or any relative of
any such employee or director, or become obligated to
increase any such compensation, except as set forth
in the DISCLOSURE SCHEDULE;
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(k) Adopted or amended in any material respect any
employee benefit plan, severance plan or collective
bargaining agreement or made any awards or
distributions under any employee benefit plan not
consistent with past practice or custom;
(l) Incurred any damage, destruction or similar loss,
whether or not covered by insurance, materially
affecting their businesses or properties, except as
set forth in the DISCLOSURE SCHEDULE;
(m) Acquired any stock or other equity interest in any
corporation, partnership, trust, joint venture or
other entity;
(n) Made any (i) material investment (except investments
made in the ordinary course of business and
consistent with past practice) or (ii) material
capital expenditure or commitment for any material
addition to property, plant or equipment; or
(o) Agreed, whether in writing or otherwise, to take any
action described in this Section 3.10.
SECTION 3.11. PROPERTIES. (a) A list and brief description of
all material fixed assets owned by GFBC or GERMANTOWN (hereinafter referred to
as the "PERSONAL PROPERTY") carried on the books of GFBC or GERMANTOWN as of the
date hereof, is set forth in Section 3.11(a) of the GFBC DISCLOSURE SCHEDULE.
All PERSONAL PROPERTY has been maintained in good working order, ordinary wear
and tear excepted. GFBC or GERMANTOWN owns and has good title to all of the
PERSONAL PROPERTY, free and clear of any mortgage, lien, pledge, charge, claim,
conditional sales or other agreement, lease, right or encumbrance, except (i) to
the extent stated or reserved against in the GFBC AUDITED FINANCIALS and (ii)
such other exceptions which are not material in character, amount or extent and
do not materially detract from the value of or interfere with the use of the
properties or assets subject thereto or affected thereby.
(b) The documentation governing or relating to the loan and
credit-related assets (hereinafter referred to as the "LOAN ASSETS")
representing the loan portfolio of GERMANTOWN (hereinafter referred to as "LOAN
DOCUMENTATION") is legally sufficient in all material respects for the purposes
intended thereby and creates enforceable rights of GERMANTOWN in accordance with
the terms of such LOAN DOCUMENTATION, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
applicability affecting the enforcement of creditors' rights generally, and the
effect of rules of law governing specific performance, injunctive relief and
other equitable remedies on the enforceability of such documents. To the
knowledge of GERMANTOWN, no debtor under any of the LOAN DOCUMENTATION has
asserted any claim or defense with respect to the subject matter thereof.
(c) A description of each parcel of real property owned by
GFBC or GERMANTOWN (hereinafter referred to as the "REAL PROPERTIES") is set
forth in Section 3.11(c) of the GFBC DISCLOSURE SCHEDULE. GFBC or GERMANTOWN is
the owner of the REAL PROPERTIES in fee simple and has good and marketable title
to the REAL PROPERTIES free of any liens, claims, charges, encumbrances or
security interests of any kind, except (i) liens for real estate taxes and
assessments not yet delinquent and (ii) utility, access and other easements,
rights of way, restrictions and exceptions which do not impair the REAL
PROPERTIES for the use and business being conducted thereon. No party leases any
of the REAL PROPERTIES from GFBC or GERMANTOWN.
(d) Except as set forth in the DISCLOSURE SCHEDULE, neither
GFBC nor GERMANTOWN has received notification from any governmental entity
within the two-year period immediately preceding the date hereof of contemplated
improvements to the REAL PROPERTIES or surrounding area or community by a public
authority, the costs of which are to be assessed as special taxes against the
REAL PROPERTIES in the future.
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(e) A description of all real property leased by GFBC or
GERMANTOWN from a third party (hereinafter referred to as the "LEASED REAL
PROPERTY") is set forth in Section 3.11(e) of the GFBC DISCLOSURE SCHEDULE. True
and correct copies of all leases in respect of the LEASED REAL PROPERTY
(hereinafter referred to as the "REAL PROPERTY LEASES") and all attachments,
amendments and addenda thereto have been delivered by GFBC and GERMANTOWN to
CAMCO. The REAL PROPERTY LEASES create, in accordance with their terms, valid,
binding and assignable leasehold interests of GFBC or GERMANTOWN in all of the
LEASED REAL PROPERTY, free and clear of all liens, claims, charges, encumbrances
or security interests of any kind. GFBC and GERMANTOWN have complied in all
material respects with all of the provisions of the REAL PROPERTY LEASES
required on their part to be complied with and are not in default with respect
to any of their obligations (including payment obligations) under any of the
REAL PROPERTY LEASES.
(f) A description of all personal property leased by GFBC or
GERMANTOWN from a third party (hereinafter referred to as the "LEASED PERSONAL
PROPERTY") is set forth in Section 3.11(f) of the GFBC DISCLOSURE SCHEDULE. The
PERSONAL PROPERTY LEASES create, in accordance with their terms, valid, binding
and assignable leasehold interests of GFBC or GERMANTOWN in all of the LEASED
PERSONAL PROPERTY, free and clear of all liens, claims, charges, encumbrances or
security interests of any kind. GFBC and GERMANTOWN have complied in all
material respects with all of the provisions under the PERSONAL PROPERTY LEASES
required on their part to be complied with and are not in default with respect
to any of their obligations (including payment obligations) under any of the
PERSONAL PROPERTY LEASES.
SECTION 3.12. ALLOWANCE FOR LOAN LOSSES. The allowance for
loan losses reflected on the GFBC AUDITED FINANCIALS is adequate as of the date
hereof in all material respects under the requirements of GAAP to provide for
reasonably anticipated losses on outstanding loans.
SECTION 3.13. INVESTMENTS. Section 3.13 of the GFBC DISCLOSURE
SCHEDULE sets forth (a) a true, accurate and complete list of all investments,
other than investments in the PERSONAL PROPERTY, LOAN ASSETS and REAL
PROPERTIES, owned by GFBC or GERMANTOWN (hereafter referred to as the
"INVESTMENTS") as of the date hereof, the name of the registered holder thereof,
the location of the certificates therefor or other evidence thereof and any
stock powers or other authority for transfer granted with respect thereto and
(b) a true, accurate and complete list of the names of each bank or other
depository in which either GFBC or GERMANTOWN has an account or safe deposit
box, including, without limitation, accounts with the FHLB, and the names of all
persons authorized to draw thereon or to have access thereto. The INVESTMENTS
are owned by GFBC or GERMANTOWN free and clear of all liens, pledges, claims,
security interests, encumbrances, charges or restrictions of any kind and may be
freely disposed of by GFBC or GERMANTOWN at any time. Neither GFBC nor
GERMANTOWN is a party to or has any interest in any repurchase agreements or
reverse repurchase agreements. There are no outstanding letters of credit issued
by GERMANTOWN.
SECTION 3.14. REPORTS AND RECORDS. GFBC and GERMANTOWN have
filed all reports and maintained all records required to be filed or maintained
by them under various rules and regulations of the SEC, the OTS or the FDIC,
except where the failure to file or maintain such reports or records would not
have a material adverse effect on GFBC or GERMANTOWN. All such documents and
reports complied in all material respects with applicable requirements of laws
and regulations in effect at the time of filing such documents and contained in
all material respects the information required to be stated therein. None of
such documents which have been filed since January 1, 1993, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent that such statements or omissions would not
have a material adverse effect on GFBC and GERMANTOWN taken as a whole.
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SECTION 3.15. TAXES. (a) GFBC and GERMANTOWN have duly and
timely filed all federal, state, county and local income, profits, franchise,
excise, sales, customs, property, use, occupation, withholding, social security
and other tax and information returns and reports required to have been filed by
them through the date hereof, and have paid or accrued all taxes and duties (and
all interest and penalties with respect thereto) due or claimed to be due by
GFBC or GERMANTOWN. Neither GFBC nor GERMANTOWN has, to their knowledge, any
liability for any taxes or duties (or interest or penalties with respect
thereto) of any nature whatsoever, and there is no basis for any additional
material claims or assessments. True copies of the federal, state and local
income tax returns of GFBC or GERMANTOWN for each of the three tax years ended
March 31, 1994, 1995 and 1996, have been delivered to CAMCO.
(b) There are no federal, state or local tax returns or reports not
filed which would be due but for an extension of time for filing having been
granted, except as disclosed in Section 3.15(b) of the DISCLOSURE SCHEDULE.
Neither GFBC nor GERMANTOWN has executed or filed with the Internal Revenue
Service (hereinafter referred to as the "IRS") or any state or local tax
authority any agreement extending the period for assessment and collection of
any tax, nor is GFBC or GERMANTOWN a party to any action or proceeding of any
governmental authority for assessment or collection of taxes, except tax liens
or levies against customers of GERMANTOWN. There is no outstanding assessment or
claim for collection of taxes against GFBC or GERMANTOWN. Neither GFBC nor
GERMANTOWN has received any notice of deficiency, proposed deficiency or
assessment from the IRS or any other governmental agency with respect to any
federal, state or local taxes. No tax return of GFBC or GERMANTOWN is currently
the subject of any audit by the IRS or any other governmental agency. No
material deficiencies have been asserted in connection with the tax returns of
GFBC or GERMANTOWN, and GFBC and GERMANTOWN have no reason to believe that any
deficiency would be asserted relating thereto. Except as disclosed in Section
3.15(b) of the DISCLOSURE SCHEDULE: (i) neither GFBC nor GERMANTOWN has ever
been a member of an "affiliated group of corporations" (within the meaning of
Section 1504(a) of the CODE) filing consolidated returns, other than the
affiliated group of which GFBC is the parent; and (ii) neither GFBC nor
GERMANTOWN is a party to any tax sharing agreement.
SECTION 3.16. MATERIAL CONTRACTS. (a) Except as set forth in
Section 3.16(a) of the GFBC DISCLOSURE SCHEDULE, neither GFBC nor GERMANTOWN is
a party to or bound by any written or oral (i) contract or commitment for
capital expenditures in excess of $10,000 for any one project or $20,000 in the
aggregate; (ii) contract or commitment made in the ordinary course of business
for the purchase of materials or supplies or for the performance of services
involving payments to or by GFBC or GERMANTOWN of an amount exceeding $10,000 in
the aggregate or extending for more than six months from the date hereof; (iii)
contract or option for the purchase of any property, real or personal, for an
amount exceeding $10,000; (iv) letter of credit or indemnity calling for payment
of more than $10,000; (v) guarantee agreement; (vi) instrument granting any
person authority to transact business on behalf of GFBC or GERMANTOWN; (vii)
contracts or commitments to make loans (including unfunded commitments and lines
of credit) to any one person (together with "affiliates" of that person) in
excess of $100,000 in the aggregate, except for contracts or commitments entered
into in the ordinary course of business; (viii) employment, management,
consulting, deferred compensation, severance or other similar contract with any
director, officer or employee of GFBC or GERMANTOWN; (ix) note, debenture or
loan agreement pursuant to which GFBC or GERMANTOWN has incurred indebtedness
other than deposit liabilities and advances from the FHLB; (x) loan
participation agreement; (xi) loan servicing agreement; (xii) contract or
commitment relating to a real estate development project consisting of the
development of more than one single family dwelling; (xiii) commitment to make
any acquisition, development and construction loan; (xiv) commitment or
agreement to do any of the foregoing; or (xv) other contract, agreement or
commitment made outside the ordinary course of business. (The contracts,
agreements, commitments and other arrangements described in clauses (i) through
(xv) of this Section 3.16(a) are hereinafter collectively referred to as the
"CONTRACTS").
(b) Except as set forth in the DISCLOSURE SCHEDULE, GFBC or
GERMANTOWN has previously delivered to CAMCO (i) copies of all of the CONTRACTS
and (ii) all form lending agreements and deposit forms used by GERMANTOWN in the
ordinary course of business.
(c) Neither GFBC nor GERMANTOWN is in material default under
any CONTRACT and no claim of such default by any party has been made or is now,
to the knowledge of GFBC or GERMANTOWN,
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threatened, except to the extent such a default would not have a material
adverse effect on GFBC and GERMANTOWN taken as a whole. There does not exist any
event which, with notice or lapse of time or both, would constitute a material
default by GFBC or GERMANTOWN under, or would excuse performance by any party
thereto from, any CONTRACT, except to the extent such a default would not have a
material adverse effect on GFBC and GERMANTOWN taken as a whole.
SECTION 3.17. INSURANCE. All material properties and
operations of GFBC and GERMANTOWN are insured in amounts and types as are
customary for savings associations similarly situated. The performance by the
officers and employees of GFBC and GERMANTOWN of their duties is bonded in such
amounts and against such risks as are usually insured against or bonded by
entities similarly situated, under valid and enforceable policies of insurance
or bonds issued by insurers or bonding companies of recognized responsibility,
financial or otherwise.
SECTION 3.18. LITIGATION. Except as set forth in Section 3.18
of the GFBC DISCLOSURE SCHEDULE, (a) there are no material actions, suits,
proceedings or investigations pending or threatened against or affecting the
business, operations or financial condition of GFBC or GERMANTOWN in any court
or before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, (b) neither the management
of GFBC nor GERMANTOWN has any knowledge of any basis for any such action, suit,
proceeding or investigation, and (c) neither GFBC nor GERMANTOWN is in default
in respect of any judgment, order, writ, injunction or decree of any court or
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality.
SECTION 3.19. PERMITS AND LICENSES. GFBC and GERMANTOWN each
has all material permits, licenses, orders and approvals of all federal, state
or local governmental or regulatory bodies required for it to conduct its
business as presently conducted, and all such material permits, licenses, orders
and approvals are in full force and effect, without the threat of suspension or
cancellation. None of such permits, licenses, orders or approvals will be
adversely affected by the consummation of the transactions contemplated by this
AGREEMENT.
SECTION 3.20. EMPLOYEE BENEFIT PLANS; ERISA. (a) Section
3.20(a) of the GFBC DISCLOSURE SCHEDULE sets forth a true and complete list of
all qualified pension or profit-sharing plans, deferred compensation,
consulting, bonus, group insurance plans or agreements and all other incentive,
welfare or employee benefit plans or agreements maintained for the benefit of
employees or former employees of GFBC or GERMANTOWN. Copies of such plans and
agreements, together with (i) , when applicable, the most recent actuarial and
financial reports prepared with respect to any such plan, (ii) the most recent
annual reports filed with any government agency and (iii) all rulings and
determination letters received from governmental agencies and any open requests
for rulings or letters that pertain to any such plan, have been delivered or
will be delivered to CAMCO.
(b) Except as may be disclosed in Section 3.20(d) of the GFBC
DISCLOSURE SCHEDULE, GFBC and GERMANTOWN do not currently maintain any "employee
pension benefit plan," as defined in Section 3(2) of ERISA, (each such plan,
together with any related trust or other funding mechanism, as maintained by
GFBC or GERMANTOWN, hereinafter referred to as a "PENSION BENEFIT PLAN"), which
is intended to be qualified under Section 401(a) of the CODE.
(c) Neither GFBC nor GERMANTOWN currently maintains, nor have
they ever maintained, any PENSION BENEFIT PLAN subject to the provisions of
Title IV of The Employee Retirement Income Security Act of 1974, as amended
(hereinafter referred to as "ERISA").
(d) GFBC and GERMANTOWN do not currently participate in, nor
have they ever participated in, any multiemployer plan, as such term is defined
in Section 3(37) of ERISA.
(e) Since January 1, 1993, all of the PENSION BENEFIT PLANS
have complied and comply currently in all material respects, both as to form and
operation, with the provisions of ERISA and the CODE, where required in order to
be tax-qualified under Section 401(a) of the CODE, and all other applicable
laws,
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rules and regulations. Neither GFBC nor GERMANTOWN is aware of any event
which might jeopardize the tax qualified status of any PENSION BENEFIT PLAN.
Each PENSION BENEFIT PLAN which is intended to be qualified under Section 401(a)
of the CODE has received a determination letter from the IRS which considers
amendments made to the CODE by the Tax Reform Act of 1986. All reports required
by any governmental agency with respect to each PENSION BENEFIT PLAN have been
timely filed with such agency and, where required, distributed to participants
and beneficiaries of such PENSION BENEFIT PLAN within the time required by law.
(f) Each "employee welfare benefit plan," as defined in
Section 3(1) of ERISA, (each such plan together with any related trust or other
funding mechanism, as maintained by GFBC or GERMANTOWN, hereinafter referred to
as a "WELFARE BENEFIT PLAN") has been administered to date in all material
respects in compliance with the requirements of the CODE and ERISA, and all
reports required by any governmental agency with respect to each WELFARE BENEFIT
PLAN has been timely filed with such agency and, where required, distributed to
participants and beneficiaries of such WELFARE BENEFIT PLAN within the time
required by law.
(g) Neither GFBC nor GERMANTOWN nor, to the knowledge of GFBC
or GERMANTOWN, any plan fiduciary of any WELFARE BENEFIT PLAN or PENSION BENEFIT
PLAN has engaged in any transaction in violation of Section 406(a) or (b) of
ERISA (for which no exemption exists under Section 408 of ERISA) or any
"prohibited transaction" (as defined in Section 4975(c)(1) of the CODE) for
which no exemption exists under Section 4975(c)(1) of the CODE.
SECTION 3.21. ENVIRONMENTAL MATTERS. (a) GFBC and GERMANTOWN,
to the knowledge of GFBC or GERMANTOWN, are in material compliance with all
applicable ENVIRONMENTAL LAWS (hereinafter defined). GFBC and GERMANTOWN have
not received any written or oral communication from any organization, person or
otherwise, which alleges that either (i) GFBC or GERMANTOWN is not in compliance
with all applicable ENVIRONMENTAL LAWS or (ii) any properties or assets of GFBC
or GERMANTOWN may have been affected by any MATERIALS OF ENVIRONMENTAL CONCERN
(hereinafter defined). All permits and other governmental authorizations
currently held or being applied for by GFBC or GERMANTOWN pursuant to the
ENVIRONMENTAL LAWS are set forth in Section 3.21(a) of the GFBC DISCLOSURE
SCHEDULE.
(b) There is no ENVIRONMENTAL CLAIM (hereinafter defined)
pending or, to the knowledge of GFBC or GERMANTOWN, threatened (i) against GFBC
or GERMANTOWN, (ii) against any person or entity whose liability for any
ENVIRONMENTAL CLAIM has or may have been retained or assumed by GFBC or
GERMANTOWN either contractually or by operation of law, or (iii) against any
real or personal property which GFBC or GERMANTOWN owns, leases, manages,
supervises or participates in the management of, or, to the knowledge of GFBC or
GERMANTOWN, in which GFBC or GERMANTOWN holds a security interest in connection
with a loan or loan participation, other than such as would not, either
individually or in the aggregate, have a material adverse effect on GFBC or
GERMANTOWN.
(c) There are no present or, to the knowledge of GFBC and
GERMANTOWN, past activities, conditions, or incidents, including, without
limitation, the release or disposal of any MATERIAL OF ENVIRONMENTAL CONCERN,
that could reasonably form the basis of any ENVIRONMENTAL CLAIM against GFBC or
GERMANTOWN or against any person or entity whose liability for any ENVIRONMENTAL
CLAIM has or may have been retained or assumed by GFBC or GERMANTOWN, either
contractually or by operation of law, other than such as would not, either
individually or in the aggregate, have a material adverse effect on GFBC or
GERMANTOWN.
(d) Section 3.21(d) of the GFBC DISCLOSURE SCHEDULE sets forth
an accurate and complete list of outstanding loans of GERMANTOWN as to which the
borrower has submitted (or is required to submit) to GERMANTOWN any
environmental audits or reports regarding any real property securing such loan
and a brief description of the environmental audit or report, to the extent
applicable. GFBC and GERMANTOWN will make available to CAMCO all such
environmental audits and reports.
(e) As used in this AGREEMENT:
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(i) "ENVIRONMENTAL CLAIM" means any claim, cause of
action or notice (written or oral) by any person or entity alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (I) the presence, or release into the environment, of any
MATERIAL OF ENVIRONMENTAL CONCERN at any location, whether or not owned by GFBC
or GERMANTOWN or (II) circumstances forming the basis of any violation, or
alleged violation, of any ENVIRONMENTAL LAW;
(ii) "ENVIRONMENTAL LAWS" means all laws and
regulations relating to pollution or protection of human health or the
environment including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of MATERIALS OF
ENVIRONMENTAL CONCERN, or otherwise relating to the use, treatment, storage,
disposal, transport or handling of MATERIALS OF ENVIRONMENTAL CONCERN; and
(iii) "MATERIALS OF ENVIRONMENTAL CONCERN" shall mean
(I) any "hazardous waste" as defined in 42 U.S.C. Section 6903, as amended from
time to time, and regulations promulgated thereunder from time to time; (II) any
"hazardous substance" as defined in 42 U.S.C. Section 9601, as amended from time
to time, and regulations promulgated thereunder from time to time; (III)
asbestos; (IV) PCB's; (V) any substance the presence of which on GFBC's or
GERMANTOWN's property is prohibited by any applicable law, ordinance, or
regulation; (VI) petroleum products; and (VII) underground storage tanks and
above ground storage tanks.
SECTION 3.22. EMPLOYMENT MATTERS. GFBC and GERMANTOWN are in
compliance with all federal, state or other applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and have not and are not engaged in any unfair labor practice,
except where such failure to comply or such practice would not have a material
adverse effect on the financial condition, results of operations, business or
prospects of GFBC and GERMANTOWN taken as a whole. No unfair labor practice
complaint against GFBC or GERMANTOWN is pending before any governmental agency
or court and there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving GFBC or GERMANTOWN. No representation
question exists in respect of the employees of GFBC or GERMANTOWN and no labor
grievance which might have a material adverse effect upon GFBC or GERMANTOWN or
the conduct of their businesses is pending or, to the knowledge of GFBC or
GERMANTOWN, threatened. Neither GFBC nor GERMANTOWN has entered into any
collective bargaining agreement with any labor organization with respect to any
group of employees of GFBC or GERMANTOWN, and, to the knowledge of GFBC and
GERMANTOWN, there is no present effort nor existing proposal to attempt to
unionize any group of employees of GFBC or GERMANTOWN.
SECTION 3.23. UNTRUE STATEMENTS AND OMISSIONS. The
certificates, statements and other information furnished to CAMCO in writing by
or on behalf of GFBC and GERMANTOWN in connection with the transactions
contemplated hereby, including, but not limited to, disclosures and information
set forth in the GFBC DISCLOSURE SCHEDULE, but excluding statements or
information pertaining to parties unrelated to GFBC or GERMANTOWN, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 3.24. PROXY MATERIALS. None of the information
relating to GFBC or GERMANTOWN included in any proxy statement which is to be
mailed to the shareholders of GFBC in connection with any meeting of
shareholders convened in accordance with Sections 1.05(a) and 6.06 of this
AGREEMENT (hereinafter referred to as the "PROXY STATEMENT") will, at the time
the PROXY STATEMENT is mailed or at the time of the meeting to which the PROXY
STATEMENT relates, contain any untrue statement of a material fact, or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not false or misleading,
except to the extent it contains information about CAMCO or FIRST FEDERAL
provided in writing to GFBC or GERMANTOWN by CAMCO or FIRST FEDERAL.
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SECTION 3.25. BROKERS. Except for amounts payable to McDonald
& Company Securities, Inc., as disclosed in Section 3.25 of the GFBC DISCLOSURE
SCHEDULE, there are no claims or agreements for brokerage commission, finder's
fees, or similar compensation in connection with the transactions contemplated
by this AGREEMENT payable by GFBC or GERMANTOWN.
SECTION 3.26. REGULATORY ENFORCEMENT. Neither GFBC nor
GERMANTOWN is subject to, or has received any notice or advice that it is or may
become subject to, any order, agreement or memorandum of understanding of any
federal or state agency charged with the supervision or regulation of savings
banks or savings associations or engaged in the insurance of deposits or any
other governmental agency having supervisory or regulatory authority with
respect to GFBC or GERMANTOWN; neither GFBC nor GERMANTOWN has received any
notice or advice that it is not in substantial compliance with any statute or
regulation, except where failure to comply would not have a material adverse
effect upon GFBC and GERMANTOWN taken as a whole; and GFBC and GERMANTOWN have
received no notice from any governmental authority threatening to revoke any
license, franchise, permit or governmental authorization.
SECTION 3.27. TAX TREATMENT OF COMPANY MERGER. Neither GFBC
nor GERMANTOWN has, to their knowledge, taken any action that is reasonably
likely to prevent the transactions contemplated hereby, including the COMPANY
MERGER, from qualifying as a reorganization within the meaning of Section 368(a)
of the CODE.
SECTION 3.28. SUBSIDIARIES: EQUITY INTEREST. The term
"subsidiary" means an organization or entity which is consolidated or is
eligible to be consolidated with a party to this AGREEMENT for financial
reporting purposes. Except for GERMANTOWN and GFS Financial Services, Inc.,
which is a subsidiary of GERMANTOWN, GFBC has no subsidiaries. Except for shares
of GERMANTOWN owned by GFBC and shares of stock of GFS Financial Services, Inc.,
and the Federal Home Loan Bank of Cincinnati owned by GERMANTOWN and stock of
Intrieve, Inc., owned by GFS Financial Services, Inc., or as set forth in
Section 3.29 of the GFBC DISCLOSURE SCHEDULE, neither GFBC nor GERMANTOWN owns,
beneficially or otherwise, any shares of EQUITY SECURITIES (as defined below) or
similar interest of any corporation, bank, business trust, association or
similar organization. "EQUITY SECURITIES" of an issuer means capital stock or
other equity securities of such issuer, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any capital stock or other
equity securities of any issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to issue additional
shares of its capital stock or other equity securities of such issuer, or
options, warrants, scrip or rights to purchase, acquire, subscribe to, calls on
or commitments for any shares of its capital stock or other equity securities.
Neither GFBC nor GERMANTOWN is a party to any partnership or joint venture.
SECTION 3.29. MANAGEMENT STOCK BONUS PLAN. The GFBC DISCLOSURE
SCHEDULE lists the names of the recipients, award dates, expiration dates and
number of shares relating to and arising out of the Management Stock Bonus Plan
of GFBC.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF CAMCO AND FIRST FEDERAL
CAMCO and FIRST FEDERAL represent and warrant to GFBC and
GERMANTOWN that each of the following statements is true and accurate in all
material respects:
SECTION 4.01. ORGANIZATION AND STANDING. (a) CAMCO is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own or
hold under lease all of its properties and assets and to conduct its business
and operations as presently conducted. CAMCO is registered as a savings and loan
holding company under the HOLA. CAMCO is in compliance in all material respects
with all applicable local, state and federal laws and regulations, including
without limitation, the THRIFT REGULATIONS.
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(b) FIRST FEDERAL is a savings and loan association duly
organized, validly existing and in good standing under the laws of the United
States and has the corporate power and authority to own or hold under lease all
of its properties and assets and to conduct its business and operations as
presently conducted. FIRST FEDERAL is a member of the FHLB. The deposit accounts
of FIRST FEDERAL are insured up to applicable limits by the SAIF. FIRST FEDERAL
is in compliance in all material respects with all applicable local, state and
federal laws and regulations, including, without limitation, the regulations of
the FDIC and the OTS. FIRST FEDERAL is a "domestic building and loan
association" as defined in Section 7701a(19) of the Internal Revenue Code and a
"qualified thrift lender" as defined in 12 U.S.C. 1467(a)(m) and the THRIFT
REGULATIONS.
SECTION 4.02. QUALIFICATION. CAMCO and FIRST FEDERAL are
either duly qualified to do business and in good standing in each jurisdiction
in which such qualification is required or the failure to so qualify would not
have a material adverse effect on the business of CAMCO or FIRST FEDERAL.
SECTION 4.03. AUTHORITY OF CAMCO AND FIRST FEDERAL. This
AGREEMENT has been duly executed and delivered by CAMCO and FIRST FEDERAL. The
BANK MERGER AGREEMENT has been duly executed and delivered by FIRST FEDERAL.
Subject to the adoption of this AGREEMENT and the BANK MERGER AGREEMENT by CAMCO
as the sole shareholder of FIRST FEDERAL, and to the filing of all requisite
regulatory notices and the receipt of all requisite regulatory approvals,(a)
CAMCO has all requisite corporate power and authority to enter into this
AGREEMENT and to perform its obligations hereunder; (b) FIRST FEDERAL has all
requisite corporate power and authority to enter into this AGREEMENT and the
BANK MERGER AGREEMENT and to perform all of its obligations hereunder and
thereunder; (c) the execution and delivery of this AGREEMENT and the BANK MERGER
AGREEMENT and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action by CAMCO and
FIRST FEDERAL; and (d) subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general applicability
affecting the enforcement of creditors' rights generally, and the effect of
rules of law governing specific performance, injunctive relief and other
equitable remedies on the enforceability of such documents, and except to the
extent such enforceability may be limited by laws relating to safety and
soundness of insured depository institutions as set forth in 12 U.S.C ss.1818(b)
or by the appointment of a conservator by the FDIC, (i) this AGREEMENT is the
valid and binding agreement of CAMCO, enforceable against CAMCO in accordance
with its terms, and (ii) this AGREEMENT and the BANK MERGER AGREEMENT are valid
and binding agreements of FIRST FEDERAL, enforceable against FIRST FEDERAL in
accordance with their terms.
SECTION 4.04. GOVERNING DOCUMENTS. CAMCO has made available,
or will promptly make available, to GFBC true and accurate copies of the CAMCO
Certificate of Incorporation and Bylaws and has granted GFBC access to all
records of all meetings and other corporate actions occurring before the COMPANY
EFFECTIVE TIME by the stockholders, Board of Directors and Committees of the
Board of Directors of CAMCO. FIRST FEDERAL has made available, or will promptly
make available, to GFBC true and accurate copies of its Charter and Bylaws and
has granted GFBC access to all records of all meetings and other corporate
actions occurring before the COMPANY EFFECTIVE TIME by the shareholders, Board
of Directors and Committees of the Board of Directors of FIRST FEDERAL. The
minute books of CAMCO and FIRST FEDERAL contain, in all material respects,
complete and accurate records of all meetings and other corporate actions of
their shareholders, Boards of Directors and Committees of the Boards of
Directors.
SECTION 4.05. NO CONFLICTS. The execution and delivery of this
AGREEMENT and, subject to the regulatory filings and approvals referenced in
Section 1.06 of this AGREEMENT, the consummation of the transactions
contemplated hereby will not (a) conflict with or violate any provision of or
result in the breach of any provision of the Certificate of Incorporation or
Bylaws of CAMCO or the Charter or Bylaws of FIRST FEDERAL; (b) conflict with or
violate any provision of or result in the breach or the acceleration of or
entitle any party to accelerate (whether upon or after the giving of notice or
lapse of time or both) any obligation under, or otherwise materially affect the
terms of, any mortgage, lien, lease, agreement, license, instrument, order,
arbitration award, judgment or decree to which CAMCO or FIRST FEDERAL is a party
or by which CAMCO or FIRST FEDERAL or their property or assets is bound; (c)
require the consent of any party to any agreement or commitment to which CAMCO
or FIRST FEDERAL is a party or by which CAMCO or FIRST FEDERAL or their property
or assets is
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bound, the failure to obtain which could, individually or in the aggregate with
all the other failures to obtain required consents, have a material adverse
effect on the business, operations, condition (financial or otherwise) or
prospects of CAMCO or FIRST FEDERAL; (d) result in the creation or imposition of
any lien, charge, pledge, security interest or other encumbrance upon any
property or assets of CAMCO or FIRST FEDERAL or give rise to any meritorious
cause of action against CAMCO or FIRST FEDERAL; or (e) violate or conflict with
any applicable law, ordinance, rule or regulation, including, without
limitation, the rules and regulations of the OTS or the FDIC.
SECTION 4.06. CONSENTS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
AGREEMENT by CAMCO or FIRST FEDERAL or the consummation by CAMCO or FIRST
FEDERAL of the transactions contemplated hereby, except for filings,
authorizations, consents or approvals referenced in Section 1.05 and Section
1.06 of this AGREEMENT.
SECTION 4.07. CAPITALIZATION. (a) The authorized capital of
CAMCO consists solely of (i) 4,900,000 shares of common stock, par value One
Dollar ($1.00) per share, 3,214,193 of which are issued and outstanding and
235,828 of which are reserved for issuance upon the exercise of outstanding
stock options, and (ii) 100,000 preferred shares, One Dollar ($1.00) par value
per share, none of which is issued or outstanding. All of the outstanding CAMCO
SHARES are, and, when issued in accordance with this AGREEMENT, the CAMCO SHARES
to be issued upon exchange for the GFBC SHARES shall be, duly authorized,
validly issued, fully paid and nonassessable, issued in full compliance with all
applicable laws, and not issued in violation of the preemptive right of any
person. Except for the CAMCO OPTIONS, there are no outstanding subscription
rights, options, conversion rights, warrants or other agreements or commitments
of any nature whatsoever (either firm or conditional) obligating CAMCO to issue,
deliver or sell, cause to be issued, delivered or sold, or restricting CAMCO
from selling any additional CAMCO SHARES, or obligating CAMCO to grant, extend
or enter into any such agreement or commitment.
(b) The authorized capital of FIRST FEDERAL consists solely of
(i) 500,000 common shares, One Dollar ($1.00) par value per share, 180,000 of
which are issued and outstanding and held of record by CAMCO, and (ii) 500,000
preferred shares, par value One Dollar ($1.00) per share, none of which is
issued or outstanding. All of the outstanding common shares of FIRST FEDERAL are
duly authorized, validly issued, fully paid and nonassessable, were issued in
full compliance with all applicable laws and regulations, and were not issued in
violation of the preemptive right of any shareholder of FIRST FEDERAL. There are
no outstanding subscription rights, options, conversion rights, warrants or
other agreements or commitments of any nature whatsoever (either firm or
conditional) obligating FIRST FEDERAL to issue, deliver or sell, or cause to be
issued, delivered or sold any additional FIRST FEDERAL SHARES.
SECTION 4.08. SEC REPORTS. CAMCO has delivered to GFBC copies
of the following documents, each of which has been filed with the SEC
(hereinafter referred to as the "CAMCO SEC FILINGS"):
(a) The Annual Reports on Form 10-KSB for each of the
fiscal years ended December 31, 1996, 1995 and 1994;
(b) The Annual Report to Stockholders for each of the
fiscal years ended December 31, 1996, 1995 and 1994;
(c) The Proxy Statement for use in connection with each
of the 1997, 1996 and 1995 Annual Meetings of
Stockholders; and
(d) The Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997.
CAMCO has not filed any Forms 8-K since December 31, 1996. The CAMCO SEC FILINGS
did not, as of the dates on which such reports were filed with the SEC, contain
any untrue statement of a material fact or omit any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
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SECTION 4.09. FINANCIAL STATEMENTS. (a) The consolidated
statements of financial condition of CAMCO as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the three years ended December 31, 1996, 1995 and 1994,
examined and reported upon by Grant Thornton, L.L.P., (hereinafter referred to
as "GRANT") complete copies of which have previously been delivered to GFBC
(hereinafter referred to as the "CAMCO AUDITED FINANCIALS"), have been prepared
in conformity with GAAP applied on a consistent basis and fairly present the
financial position of CAMCO at such dates and the results of its operations and
cash flows for such periods.
(b) The unaudited consolidated statements of financial
condition of CAMCO as of March 31, 1997, and the related unaudited consolidated
statements of earnings, stockholders' equity and cash flows for each of the
three months ended March 31, 1997 and 1996, complete copies of which have
previously been delivered to GFBC (hereinafter referred to as the "CAMCO INTERIM
FINANCIALS"), have been prepared in conformity with GAAP as applicable to
condensed interim financial statements and as applied on a consistent basis with
the CAMCO AUDITED FINANCIALS and fairly present the financial position of CAMCO
at such dates and the results of its operations and cash flows for such periods.
(c) Except as disclosed in the CAMCO INTERIM FINANCIALS, as of
March 31, 1997, CAMCO had no liabilities or obligations material to the business
condition (financial or otherwise) of CAMCO taken as a whole, whether accrued,
absolute, contingent or otherwise, and whether due or to become due.
(d) The CAMCO AUDITED FINANCIALS and the CAMCO INTERIM
FINANCIALS did not, as of the dates thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
information contained therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4.10. ABSENCE OF MATERIAL ADVERSE CHANGE. Since March
31, 1997, there have been no material adverse changes in the financial
condition, assets, liabilities, obligations, properties, business or prospects
of CAMCO and its consolidated subsidiaries, taken as a whole.
SECTION 4.11. ALLOWANCE FOR LOAN LOSSES. The allowance for
loan losses reflected on the CAMCO INTERIM FINANCIALS is adequate as of the date
hereof in all material respects under the requirements of GAAP to provide for
reasonably anticipated losses on outstanding loans.
SECTION 4.12. REPORTS AND RECORDS. CAMCO and FIRST FEDERAL
have filed all reports and maintained all records required to be filed or
maintained by them under various rules and regulations of the SEC, the OTS or
the FDIC. All such documents and reports complied in all material respects with
applicable requirements of laws and regulations in effect at the time of the
filing of such documents and contained in all material respects the information
required to be stated therein. None of such documents, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.13. TAXES. CAMCO and FIRST FEDERAL have duly and
timely filed all federal, state, county and local income, profits, franchise,
excise, sales, customs, property, use, occupation, withholding, social security
and other tax and information returns and reports required to have been filed by
them through the date hereof, and have paid or accrued all taxes and duties (and
all interest and penalties with respect thereto) due or claimed to be due by
CAMCO or FIRST FEDERAL. Neither CAMCO nor FIRST FEDERAL has any liability for
any taxes or duties (or interest or penalties with respect thereto) of any
nature whatsoever, and there is no basis for any additional material claims or
assessments, other than with respect to liabilities for taxes and duties which
may have accrued since December 31, 1996, in the ordinary course of business. No
proposed additional taxes, interest or penalties have been asserted by
applicable taxing authorities.
SECTION 4.14. PERMITS AND LICENSES. CAMCO and FIRST FEDERAL
each has all material permits, licenses, orders and approvals of all federal,
state or local governmental or regulatory bodies required for it
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to conduct its business as presently conducted and all such material permits,
licenses, orders and approvals are in full force and effect, without the threat
of suspension or cancellation. None of such permits, licenses, orders or
approvals will be adversely affected by the consummation of the transactions
contemplated by this AGREEMENT.
SECTION 4.15. UNTRUE STATEMENTS AND OMISSIONS. The
certificates, statements and other information furnished to GFBC in writing by
or on behalf of CAMCO and FIRST FEDERAL in connection with the transactions
contemplated hereby do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 4.16. PROXY MATERIALS. None of the information
relating to CAMCO or FIRST FEDERAL included in the PROXY STATEMENT will, at the
time the PROXY STATEMENT is mailed or at the time of the meeting to which the
PROXY STATEMENT relates, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not false or misleading.
SECTION 4.17. BROKERS. Except for amounts payable to National
Capital Companies, L.L.C., there are no claims or agreements for brokerage
commissions, finder's fees, or similar compensation in connection with the
transactions contemplated by this AGREEMENT payable by CAMCO.
SECTION 4.18. REGULATORY ENFORCEMENT. CAMCO and FIRST FEDERAL
are not subject to, nor have they received any notice or advice that either of
them is not in substantial compliance with any statute or regulation, or that
either of them is or may become subject to, any order, agreement or memorandum
of understanding of any federal or state agency charged with the supervision or
regulation of savings banks, savings associations or holding companies of
savings banks or savings associations or engaged in the insurance of deposits or
any other governmental agency having supervisory or regulatory authority with
respect to CAMCO or FIRST FEDERAL, and CAMCO and FIRST FEDERAL have received no
notice from any governmental agency threatening to revoke any license,
franchise, permit or governmental authority.
SECTION 4.19. TAX TREATMENT OF COMPANY MERGER. Neither CAMCO
nor FIRST FEDERAL has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to prevent the transactions contemplated
hereby, including the COMPANY MERGER, from qualifying as a "reorganization"
within the meaning of Section 368(a) of the CODE.
SECTION 4.20. GFBC SHARES OWNED BY CAMCO. Neither CAMCO nor
any of its subsidiaries beneficially owns any GFBC SHARES.
SECTION 4.21. LOAN DOCUMENTATION. The documentation governing
or relating to the loan and credit-related assets (hereinafter referred to as
the "FIRST FEDERAL LOAN ASSETS") representing the loan portfolio of FIRST
FEDERAL (hereinafter referred to as "FIRST FEDERAL LOAN DOCUMENTATION") is
legally sufficient in all material respects for the purposes intended thereby
and creates enforceable rights of FIRST FEDERAL in accordance with the terms of
such FIRST FEDERAL LOAN DOCUMENTATION, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
applicability affecting the enforcement of creditors' rights generally, and the
effect of rules of law governing specific performance, injunctive relief and
other equitable remedies on the enforceability of such documents. To the
knowledge of FIRST FEDERAL, no debtor under any of the FIRST FEDERAL LOAN
DOCUMENTATION has asserted any claim or defense with respect to the subject
matter thereof which would be materially adverse to the financial condition or
operating results of FIRST FEDERAL.
SECTION 4.22. MATERIAL CONTRACTS. Neither CAMCO nor FIRST
FEDERAL is in material default under any CONTRACT and no claim of such default
by any party has been made or is now, to the knowledge of CAMCO or FIRST
FEDERAL, threatened. There does not exist any event which, with notice or lapse
of time or both, would constitute a material default by CAMCO or FIRST FEDERAL
under, or would excuse performance by any party thereto from, any CONTRACT.
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SECTION 4.23. INSURANCE. All material properties and
operations of CAMCO or FIRST FEDERAL are adequately insured for their benefit.
The performance by the officers and employees of CAMCO and FIRST FEDERAL of
their duties is bonded in such amounts and against such risks as are usually
insured against or bonded by entities similarly situated, under valid and
enforceable policies of insurance or bonds issued by insurers or bonding
companies of recognized responsibility, financial or otherwise.
SECTION 4.24. LITIGATION. Except as disclosed in the CAMCO SEC
FILINGS, (a) there are no material actions, suits, proceedings or investigations
pending or threatened against or affecting the business, operations or financial
condition of CAMCO or FIRST FEDERAL in any court or before any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, (b) neither the management of CAMCO or FIRST FEDERAL has any
knowledge of any basis for any such action, suit, proceeding or investigation,
and (c) neither CAMCO nor FIRST FEDERAL is in default in respect of any
judgment, order, writ, injunction or decree of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.
SECTION 4.25. ENVIRONMENTAL MATTERS. (a) CAMCO and FIRST
FEDERAL, to the knowledge of CAMCO or FIRST FEDERAL, are in material compliance
with all applicable ENVIRONMENTAL LAWS. CAMCO and FIRST FEDERAL have not
received any written or oral communication from any organization, person or
otherwise, which alleges that either (i) CAMCO or FIRST FEDERAL is not in
compliance with all applicable ENVIRONMENTAL LAWS or (ii) any properties or
assets of CAMCO or FIRST FEDERAL may have been affected by any MATERIALS OF
ENVIRONMENTAL CONCERN.
(b) There is no ENVIRONMENTAL CLAIM pending or, to the
knowledge of CAMCO or FIRST FEDERAL, threatened (i) against CAMCO or FIRST
FEDERAL, (ii) against any person or entity whose liability for any ENVIRONMENTAL
CLAIM has or may have been retained or assumed by CAMCO or FIRST FEDERAL either
contractually or by operation of law, or (iii) against any real or personal
property which CAMCO or FIRST FEDERAL owns, leases, manages, supervises or
participates in the management of, or, to the knowledge of CAMCO or FIRST
FEDERAL, in which CAMCO or FIRST FEDERAL holds a security interest in connection
with a loan or loan participation, other than such as would not, either
individually or in the aggregate, have a material adverse effect on CAMCO or
FIRST FEDERAL.
(c) There are no present or, to the knowledge of CAMCO and
FIRST FEDERAL, past activities, conditions, or incidents, including, without
limitation, the release or disposal of any MATERIAL OF ENVIRONMENTAL CONCERN,
that could reasonably form the basis of any ENVIRONMENTAL CLAIM against CAMCO or
FIRST FEDERAL or against any person or entity whose liability for any
ENVIRONMENTAL CLAIM has or may have been retained or assumed by CAMCO or FIRST
FEDERAL, either contractually or by operation of law, other than such as would
not, either individually or in the aggregate, have a material adverse effect on
CAMCO or FIRST FEDERAL.
SECTION 4.26. EMPLOYMENT MATTERS. CAMCO and FIRST FEDERAL are
in compliance with all federal, state or other applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and have not and are not engaged in any unfair labor practice,
except where such failure to comply or such practice would not have a material
adverse effect on the financial condition, results of operations, business or
prospects of CAMCO and FIRST FEDERAL taken as a whole. No unfair labor practice
complaint against CAMCO or FIRST FEDERAL is pending before any governmental
agency or court and there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or involving CAMCO or FIRST FEDERAL. No
representation question exists in respect of the employees of CAMCO or FIRST
FEDERAL and no labor grievance which might have a material adverse effect upon
CAMCO or FIRST FEDERAL or the conduct of their businesses is pending or, to the
knowledge of CAMCO or FIRST FEDERAL, threatened. Neither CAMCO nor FIRST FEDERAL
has entered into any collective bargaining agreement with any labor organization
with respect to any group of employees of CAMCO or FIRST FEDERAL, and, to the
knowledge of CAMCO and FIRST FEDERAL, there is no present effort nor existing
proposal to attempt to unionize any group of employees of CAMCO or FIRST
FEDERAL.
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ARTICLE FIVE
COVENANTS
SECTION 5.01. CONDUCT OF GFBC'S AND GERMANTOWN'S BUSINESS.
From the date of this AGREEMENT until the COMPANY EFFECTIVE TIME, GFBC and
GERMANTOWN, except with the prior written consent of CAMCO, which shall not be
unreasonably withheld, will each conduct its business only in the ordinary
course, in accordance with past practices and policies and in compliance with
all applicable statutes, rules and regulations. Notwithstanding the foregoing,
without the prior written consent of CAMCO, which shall not be unreasonably
withheld, neither GFBC nor GERMANTOWN will:
(a) Authorize or agree to authorize the creation or
issuance of, or issue, sell or dispose of, or create
any obligation to issue, sell or dispose of, any
stock, notes, bonds or other securities of which GFBC
or GERMANTOWN is the issuer, or any obligations
convertible into or exchangeable for any shares of
its capital stock, other than GFBC SHARES issued in
connection with the exercise of GFBC OPTIONS;
(b) Declare, set aside, pay or make any dividend or other
distribution on its capital stock, or directly or
indirectly redeem, purchase or otherwise acquire any
shares thereof or enter into any agreement with
respect to the foregoing, except that GFBC may (i)
declare and pay a regular quarterly cash dividend of
$0.12 per share in each calendar quarter between the
date of this AGREEMENT and the COMPANY EFFECTIVE
TIME. CAMCO and GFBC will coordinate dividends so
that only one dividend will be paid in each calendar
quarter.
(c) Effect any stock split, recapitalization,
combination, exchange of shares, readjustment or
other reclassification;
(d) Amend their Certificate of Incorporation, Charter or
Bylaws;
(e) Purchase, sell, assign or transfer any material
tangible asset or any material patent, trademark,
trade name, copyright, license, franchise, design or
other intangible assets or property;
(f) Mortgage, pledge, grant or suffer to exist any lien
or other encumbrance or charge on any assets or
properties, tangible or intangible, except for liens
for taxes not yet delinquent, assets pledged as
collateral to secure borrowings from the FHLB or to
secure public deposits and such other liens,
encumbrances or charges which do not materially or
adversely affect its financial position;
(g) Waive any rights of material value or cancel any
material debts or claims;
(h) Incur any material obligation or liability (absolute
or contingent), including, without limitation, any
tax liability, or pay any material liability or
obligation (absolute or contingent), other than
liabilities and obligations incurred in the ordinary
course of business and borrowings from the FHLB;
(i) Cause any material adverse change in the amount or
general composition of deposit liabilities or other
liabilities;
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(j) Enter into or amend any employment contract with any
of its employees, increase the compensation payable
to any employee or director or any relative of any
such employee or director or become obligated to
increase any such compensation;
(k) Adopt or amend in any material respect any employee
benefit plan, severance plan or collective bargaining
agreement or make awards or distributions under any
employee benefit plan not consistent with past
practice or custom;
(l) Acquire any stock or other equity interest in any
corporation, partnership, trust, joint venture or
other entity;
(m) Make any material capital expenditure or commitment
for any material addition to property, plant, or
equipment;
(n) Originate or issue a commitment to originate any loan
secured by one- to four-family residential real
estate in a principal amount of $250,000 or more or
any loan secured by nonresidential real estate in a
principal amount of $100,000 or more;
(o) Except for FHLB advances, the aggregate amount of
which at any time shall not exceed Three Million
Dollars ($3,000,000), plus such additional amount as
may be obtained with the right of prepayment at any
time without penalty or premium, and deposit taking
in the ordinary course of its business, borrow or
agree to borrow any funds, including but not limited
to repurchase transactions, or indirectly guarantee
or agree to guarantee any obligations of others;
(p) Establish any new lending programs or make any
changes in its policies concerning which persons may
approve loans;
(q) Enter into any securities transactions for its own
account or purchase or otherwise acquire any
investment security for its own account other than
U.S. government and U.S. agency obligations and
deposits in an overnight account at the FHLB;
(r) Increase or decrease the rate of interest paid on
time deposits or certificates of deposits, except in
a manner and pursuant to policies consistent with
past practices in relation to rates prevailing in
GERMANTOWN's market;
(s) Foreclose upon or otherwise take title to or
possession or control of any real property without
first obtaining a Phase I Environmental Report
thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste
materials including petroleum products; provided,
however, that GERMANTOWN shall not be required to
obtain such a report with respect to single-family,
non-agriculture residential property of one acre or
less to be foreclosed upon unless it has reason to
believe such property may contain any such
pollutants, contaminants, waste materials or
petroleum products; or
(t) Agree, whether in writing or otherwise, to take any
action described in this Section 5.01.
SECTION 5.02. ACQUISITION TRANSACTIONS. GFBC and GERMANTOWN
shall (i) not, directly or indirectly, solicit or initiate any proposals or
offers from any person or entity, or discuss or negotiate with any such person
or entity, regarding any acquisition or purchase of all or a material amount of
the assets of, any equity securities of, or any merger, consolidation or
business combination with, GFBC or GERMANTOWN (hereinafter collectively referred
to as "ACQUISITION TRANSACTIONS"), (ii) not disclose to any person any
information not customarily disclosed publicly or provide access to its
properties, books or records or otherwise assist or encourage any person in
connection with any of the foregoing, and (iii) give CAMCO prompt notice of any
such inquiries,
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offers or proposals. The foregoing shall not apply however to
the consideration of an inquiry, offer or proposal not solicited by GFBC or
GERMANTOWN or any of their respective officers, directors, agents or affiliates
which relates to the possible sale or other disposition of GFBC SHARES or
GERMANTOWN SHARES by shareholders or the possible sale or other disposition of
all or substantially all of GFBC's or GERMANTOWN's assets to, or merger or
consolidation with, another corporation or association if and to the extent that
the board of directors of GFBC reasonably determines in good faith after
consultation with McDonald & Company Securities, Inc. and counsel to GFBC that
failure to consider such ACQUISITION TRANSACTION could reasonably be expected to
constitute a breach of its fiduciary duties to the shareholders of GFBC;
provided, however, that GFBC shall give CAMCO prompt notice of any such proposal
of an ACQUISITION TRANSACTION and keep CAMCO promptly informed regarding the
substance thereof and the response of the board of directors of GFBC thereto.
SECTION 5.03. ACCOUNTING POLICIES. Before the COMPANY
EFFECTIVE TIME and at the request of CAMCO, GFBC or GERMANTOWN shall promptly
(a) establish and take such reserves and accruals to conform GERMANTOWN's loan,
accrual and reserve policies to FIRST FEDERAL's policies; (b) establish and take
such accruals, reserves and charges in order to implement such policies in
respect of excess facilities and equipment capacity, severance costs, litigation
matters, write-off or write-down of various assets and other appropriate
accounting adjustments; and (c) recognize for financial accounting purposes such
expenses of the COMPANY MERGER and the BANK MERGER and restructuring charges
related to or to be incurred in connection with the COMPANY MERGER and BANK
MERGER, to the extent permitted by law and consistent with GAAP and with the
fiduciary duties of the officers and directors of GFBC or GERMANTOWN; provided,
however, that neither GFBC nor GERMANTOWN shall be obligated to make any such
changes or adjustments until the satisfaction of all conditions set forth in
Sections 7.01(a) through (g), and further provided that no basis for termination
of this AGREEMENT by any party pursuant to Article Eight is then extant.
. SECTION 5.04 TAX REPRESENTATION. GFBC and GERMANTOWN will use their
reasonable efforts to cause the COMPANY MERGER, and will take no action which
would cause the COMPANY MERGER not, to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of the CODE for federal
income tax purposes.
SECTION 5.05 POOLING. GFBC and GERMANTOWN shall not
intentionally take or cause to be taken any action whether before or after the
COMPANY EFFECTIVE TIME which would disqualify the COMPANY MERGER or BANK MERGER
as a "pooling of interests" for accounting purposes.
ARTICLE SIX
FURTHER AGREEMENTS
SECTION 6.01. REGULATORY APPROVALS; COOPERATION. (a) CAMCO and
FIRST FEDERAL shall use their best efforts to file within 60 days of the date
hereof all REGULATORY APPLICATIONS required in order to consummate the COMPANY
MERGER and the BANK MERGER. CAMCO shall keep GFBC reasonably informed as to the
status of such applications and make available to GFBC copies of such
applications as filed and any supplementary filed materials and all responses
from the regulatory authorities.
(b) GFBC and GERMANTOWN will cooperate and will cause their
respective directors, officers, employees, agents and advisors to cooperate, to
the extent reasonable or necessary, with CAMCO and FIRST FEDERAL in connection
with the preparation of the REGULATORY APPLICATIONS and the REGISTRATION
STATEMENT described in Section 6.03 hereof.
(c) CAMCO and FIRST FEDERAL will cooperate and will cause
their respective directors, officers, employees, agents and advisors to
cooperate, to the extent reasonable or necessary, with GFBC in connection with
the preparation of the REGISTRATION STATEMENT described in Section 6.03 hereof
and the PROXY STATEMENT.
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SECTION 6.02. SPECIAL MEETING OF SHAREHOLDERS OF GFBC. GFBC
shall take all steps necessary to duly call, give notice of, convene and hold a
meeting of its shareholders for the purpose of voting upon this AGREEMENT as
required by applicable law. GFBC shall use its reasonable efforts to hold such
meeting as soon as practicable following the date of this AGREEMENT. GFBC shall
prepare the PROXY STATEMENT (in cooperation with CAMCO) for use in connection
with the GFBC Shareholders Meeting. The Board of Directors of GFBC shall (i) to
the extent consistent with their fiduciary duties, recommend to their respective
shareholders the adoption of this AGREEMENT and the approval of the transactions
contemplated hereby and thereby and any other matters to be submitted to the
shareholders in connection therewith and (ii) use their reasonable efforts to
obtain the necessary adoptions by the shareholders of this AGREEMENT, any
amendments hereto, and the transactions contemplated hereby. Notwithstanding the
foregoing, if the Board of Directors of GFBC shall have reasonably determined in
good faith in accordance with the provisions of Section 5.02 of this AGREEMENT
that such recommendation is reasonably likely to constitute a breach of its
fiduciary duties to the shareholders of GFBC, then the Board of Directors of
GFBC shall not be obligated to recommend to its shareholders adoption of this
AGREEMENT or to present this AGREEMENT to the shareholders of GFBC for their
adoption at the GFBC Shareholders Meeting or to hold the GFBC Shareholders
Meeting for such purpose.
SECTION 6.03. REGISTRATION STATEMENT. (a) CAMCO shall, as soon
as reasonably practicable, prepare in accordance with the Securities Act of
1933, as amended (hereinafter referred to as the "1933 ACT"), and file with the
SEC a REGISTRATION STATEMENT in respect of the CAMCO SHARES to be issued to the
holders of GFBC SHARES in accordance with Article Two of this AGREEMENT
(hereinafter referred to as the "REGISTRATION STATEMENT"), and shall use all
reasonable efforts to have the REGISTRATION STATEMENT, as amended, declared
effective by the SEC as promptly as practicable.
(b) CAMCO shall provide copies of the REGISTRATION STATEMENT
and all amendments to GFBC immediately upon filing, keep GFBC reasonably
informed as to the status of the REGISTRATION STATEMENT and provide GFBC with
copies of all responses from the SEC. All costs related to the REGISTRATION
STATEMENT and the Prospectus and its printing and delivery shall be borne by
CAMCO.
SECTION 6.04. EMPLOYEES. Upon satisfactory review of
employment files, all employees of GERMANTOWN immediately prior to the BANK
EFFECTIVE TIME except those employees covered by a written employment contract,
shall become at will employees of FIRST FEDERAL at the same base compensation
they are receiving from GERMANTOWN and subject to the employment practices and
procedures of FIRST FEDERAL, with prior service credit for purposes of FIRST
FEDERAL's vacation policy. Any employee who is currently covered by a written
employment agreement will continue his employment in accordance with the terms
of such written agreement.
With respect to employees of GERMANTOWN not covered by written
employment contracts, CAMCO, in accordance with its severance policy applicable
to employees of companies that are merged with a subsidiary of CAMCO, shall
provide severance benefits as follows: each former employee of GERMANTOWN
terminated other than for cause within one year of the BANK EFFECTIVE TIME shall
receive one week of base pay (bonus and benefits excluded) for each full year of
service to GERMANTOWN prior to the BANK EFFECTIVE TIME, with a minimum payment
of four weeks' base pay; provided, that an employee employed by GERMANTOWN less
than six months at the BANK EFFECTIVE TIME shall not be eligible for severance
benefits.
Upon request of CAMCO, GFBC shall take all steps necessary to commence
termination of GFBC's 401(k) Plan prior to the COMPANY EFFECTIVE TIME. Notice of
termination shall be made prior to the COMPANY EFFECTIVE TIME. At the COMPANY
EFFECTIVE TIME all employees of GERMANTOWN shall be eligible to participate in
the CAMCO 401(k) Plan, effective immediately, subject to the terms of the Plan,
and shall receive prior service credit for eligibility and vesting purposes
under the CAMCO 401(k) Plan.
CAMCO shall, in its discretion, (i) provide coverage for the GERMANTOWN
employees who become employees of FIRST FEDERAL under the health insurance plan
maintained by CAMCO for the benefit of the employees of CAMCO and its
subsidiaries, including FIRST FEDERAL; provided, however, that any employee of
GFBC or GERMANTOWN who has been insured under the health insurance plan
maintained by GFBC or
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GERMANTOWN for at least 12 months prior to the COMPANY EFFECTIVE TIME shall be
covered by CAMCO's health insurance plan without regard to any waiting periods
and limitations on pre-existing conditions; or (ii) maintain in place the health
insurance plan currently maintained by GERMANTOWN for the benefit of its
employees.
SECTION 6.05. AFFILIATES COMPLIANCE WITH THE 1933 ACT. (a)
Within 45 days after the date of this AGREEMENT, GFBC shall identify to CAMCO
all persons who GFBC reasonably believes to be "affiliates," as defined in
paragraphs (c) and (d) of Rule 145 under the 1933 ACT (hereinafter referred to
as the "AFFILIATES"). Thereafter and until the COMPANY EFFECTIVE TIME, GFBC
shall identify to CAMCO each additional person whom it reasonably believes to
have thereafter become its AFFILIATE.
(b) GFBC shall use its best efforts to obtain from each person
who is identified as an AFFILIATE for delivery to CAMCO before the COMPANY
EFFECTIVE DATE a written agreement in which such AFFILIATE confirms that the
CAMCO SHARES received by such AFFILIATE in the COMPANY MERGER shall be
transferable only in accordance with Rule 145 of the 1933 ACT, and are subject
to rules relating to the transfer of shares received in a transaction deemed a
"pooling of interests" for accounting purposes.
SECTION 6.06. ADVISORY BOARD AND BOARD OF DIRECTORS OF FIRST
FEDERAL.
(a) Subject to THRIFT REGULATIONS and OTS directives and
conditions of approval, the members of the present Board of Directors of
GERMANTOWN will continue for one year as an advisory board to FIRST FEDERAL. The
Advisory Board shall meet one time in each calendar quarter, and the members of
the Advisory Board shall receive $500 for each such meeting attended by them. No
director or executive officer of FIRST FEDERAL shall be paid for attending a
meeting of the Advisory Board.
(b) CAMCO and FIRST FEDERAL will add one current member of the
Board of Directors of GFBC to the Board of Directors of FIRST FEDERAL.
SECTION 6.07. MANAGEMENT STOCK BONUS PLAN. The existing
Management Stock Bonus Plans (A and B) and grants of awards made on or prior to
July 9, 1997 as listed in Section 3.30 of the GFBC DISCLOSURE SCHEDULE in an
amount not to exceed 12,335 GFBC shares shall be honored by CAMCO in accordance
with the terms of said plans and grants of awards and THRIFT REGULATIONS. No
award granted subsequent to July 9, 1997 will be valid in any respect.
SECTION 6.08. ACCESS. Until the COMPANY EFFECTIVE TIME, GFBC
shall afford to CAMCO, and CAMCO shall afford to GFBC and to their respective
officers and representatives (including, without limitation, counsel, financial
advisers and independent accountants), reasonable access to their properties,
personnel, books, records and affairs. Such access shall include, but shall not
be limited to, (i) permitting verification, by audit or otherwise, of any
representation or warranty made hereunder; (ii) authorizing release of any
information (including the work papers of such independent auditors) and
financial consultants; (iii) consistent with applicable regulations or
procedures, furnishing regular and special examination reports since the date of
this AGREEMENT; and (iv) delivering copies of all documents or reports or
correspondence filed and any correspondence with any federal regulatory or
supervisory agency from the date of this AGREEMENT. Each party shall furnish the
other party with such additional financial and operating data and other
information as to its businesses and properties as may be reasonably requested.
SECTION 6.09. CONFIDENTIALITY. The parties acknowledge the
confidential and proprietary nature of the information as hereinafter described
which has heretofore been exchanged and which will be received from each other
hereunder (hereinafter referred to as the "INFORMATION") and agree to hold and
keep the same confidential. Such INFORMATION will include any and all financial,
technical, commercial, marketing, customer or other information concerning the
business, operations and affairs of a party that may be provided to the other,
irrespective of the form of the communications, by such party's employees or
agents. Such INFORMATION shall not include information that is or becomes
generally available to the public other than as a result of a disclosure by a
party or its representatives in violation of this AGREEMENT, or INFORMATION
which is required to be furnished
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or used in connection with legal proceedings. The parties agree that the
INFORMATION will be used solely for the purposes contemplated by this AGREEMENT
and that such INFORMATION will not be disclosed to any person other than
employees and agents of a party who are directly involved in evaluating the
transaction. The INFORMATION shall not be used in any way detrimental to a
party, including use directly or indirectly in the conduct of the other party's
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party. Upon the
written request of the disclosing party, upon termination of this AGREEMENT, the
other parties will promptly return or destroy INFORMATION in their possession
and certify to the disclosing party that the party has done so.
SECTION 6.10. PRESS RELEASES. CAMCO and GFBC shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the COMPANY MERGER or the BANK MERGER and shall not
issue any such press release or make any such public statement without obtaining
the prior consent of the other party, except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
association.
SECTION 6.11. COSTS AND EXPENSES; TERMINATION FEE. Whether or
not the COMPANY MERGER is consummated, all costs and expenses incurred in
connection with this AGREEMENT, the PROXY STATEMENT, the REGISTRATION STATEMENT
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses. Notwithstanding the foregoing, (i) in the event the
Board of Directors of GFBC or GERMANTOWN accepts in any manner an ACQUISITION
TRANSACTION prior to the earlier of termination of this AGREEMENT other than due
to a breach of this AGREEMENT by GFBC or GERMANTOWN, or June 30, 1998, or (ii)
in the event the Board of Directors of GFBC fails to recommend to the
shareholders of GFBC approval of the AGREEMENT and the AGREEMENT is rejected by
the shareholders of GFBC; or (iii) in the event no meeting of shareholders is
held on or before June 30, 1998, other than for reasons beyond the control of
GFBC, then, in any of such events, GFBC shall pay to CAMCO $250,000 in
immediately available federal funds (i) in the case of the execution of any
definitive agreement or letter of intent in respect of an ACQUISITION
TRANSACTION within one year of the date of this AGREEMENT, such payment to be
made within two days of the execution of such agreement or letter of intent,
(ii) in the case of the disapproval by the shareholders of GFBC of this
AGREEMENT where the Board of Directors of GFBC has failed to recommend approval,
such payment to be made within two days after the date of the shareholder
meeting, and (iii) if no meeting of shareholders is held by June 30, 1998, other
than for reasons beyond the control of GFBC, such payment to be made within two
days after June 30, 1998.
SECTION 6.12. REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do or cause
to be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this AGREEMENT.
SECTION 6.13. NOTIFICATION OF EVENTS. At all times from the
date of this AGREEMENT until the COMPANY EFFECTIVE TIME, each party shall
promptly notify the other in writing of any materially adverse business
conditions threatening its normal business operations or of the occurrence of
any event or the failure of any event to occur which might reasonably be
expected to result in a breach of or a failure to comply with any
representation, warranty, covenant, condition or agreement contained in this
AGREEMENT or of the commencement of any action, suit, proceeding or
investigation against it.
SECTION 6.14. VOTING AGREEMENT. Concurrently with the
execution and delivery of this AGREEMENT, or not later than ten days thereafter,
and as a condition and material inducement to CAMCO's willingness to enter into
this AGREEMENT, each of the directors and executive officers of GFBC and
GERMANTOWN shall enter into a shareholder agreement in the form attached hereto
as Exhibit B.
SECTION 6.15. POOLING. GRANT has reviewed the proposed terms
and conditions of the COMPANY MERGER and has issued their opinion on the
proposed accounting that the COMPANY MERGER qualifies as a "pooling of
interests" for accounting purposes. Neither CAMCO nor FIRST FEDERAL shall
intentionally take or cause to be taken any action, whether before or after the
COMPANY EFFECTIVE TIME or
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BANK EFFECTIVE TIME which would disqualify the COMPANY MERGER or BANK MERGER as
a "pooling of interests" for accounting purposes or as a "reorganization" within
the meaning of Section 368(a) of the CODE.
SECTION 6.16. INDEMNIFICATION. Nothing in this AGREEMENT is
intended to affect any rights to indemnification to which any officer or
director of GFBC or GERMANTOWN may be entitled pursuant to the Certificate of
Incorporation, Charter or Bylaws of GFBC or GERMANTOWN in effect prior to the
COMPANY EFFECTIVE TIME.
From the COMPANY EFFECTIVE TIME and continuing for a period of
three years thereafter, the current and former officers and directors of GFBC
shall be indemnified by CAMCO from their acts and omissions occurring prior to
the COMPANY EFFECTIVE TIME to the maximum extent permitted by the Certificate of
Incorporation and Bylaws of CAMCO but subject to any applicable limitations of
Delaware law. From the BANK EFFECTIVE TIME and continuing for a period of three
years thereafter, the current and former officers and directors of GERMANTOWN
shall be indemnified by FIRST FEDERAL for their acts and omissions occurring
prior to the BANK EFFECTIVE TIME to the extent permitted by the THRIFT
REGULATIONS. As a condition to receiving such indemnification, the party
claiming indemnification shall assign to CAMCO, by separate writing, all right,
title and interest in and to the proceeds of the claiming party's applicable
insurance coverage, if any, including insurance maintained or provided by CAMCO
or GFBC or GERMANTOWN to the extent of such indemnity. No person shall be
entitled to such indemnification with respect to a claim (i) if such person
fails to cooperate in the defense and investigation of such claim as to which
indemnification may be made, (ii) made by such person against CAMCO, its
subsidiaries, GFBC or GERMANTOWN arising out of or in connection with this
AGREEMENT, the transactions contemplated hereby or the conduct of the business
of CAMCO, its subsidiaries, GFBC or GERMANTOWN, or (iii) if such person fails to
deliver such notices as may be required under any applicable directors and
officers liability insurance policy to preserve any possible claims of which the
claiming party is aware, to the extent such failure results in the denial of
payment under such policy.
Subject to GFBC and GERMANTOWN providing all requested
information and representations to CAMCO's directors' and officers' liability
insurance carrier, CAMCO shall add a rider, to be effective at the COMPANY
EFFECTIVE TIME, to CAMCO's existing directors' and officers' liability insurance
policy covering the acts and omissions of the officers and directors of GFBC and
GERMANTOWN occurring prior to the COMPANY EFFECTIVE TIME and to continue such
rider for a period of three years.
SECTION 6.17. AMENDMENT OF CHARTER. Prior to the COMPANY
EFFECTIVE TIME, GERMANTOWN shall take all steps necessary to amend its Charter
to remove Section 8(A).
SECTION 6.18. CONDUCT OF CAMCO BUSINESS. From the date of this
AGREEMENT until the COMPANY EFFECTIVE TIME, CAMCO shall:
(a) Use all reasonable efforts to preserve intact its business
organization and assets and maintain its rights, franchises and existing
relationships with customer, suppliers, employees and business associates;
(b) Notify GFBC in writing within five business days of (i)
the existence of any adverse business conditions threatening the normal business
operations of CAMCO, (ii) the occurrence of any event or the failure of any
event to occur which might result in a breach of or a failure to comply with any
representations, warranty, covenant, condition or agreement by or pertaining to
CAMCO contained in this AGREEMENT, (iii) the commencement of any material
action, suit, proceeding, or investigation against CAMCO and (iv) the tender of
any offer to acquire CAMCO by merger or otherwise;
(c) Take no action that would adversely affect the ability of
CAMCO to obtain any necessary approvals of governmental authorities required for
the transactions contemplated hereby without the imposition of a burdensome
restriction or condition, or adversely affect the ability of CAMCO to perform
its covenants and agreements under this AGREEMENT; and
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(d) Take all action necessary to cause to be listed on The
Nasdaq Stock Market the CAMCO SHARES to be issued pursuant to this AGREEMENT.
ARTICLE SEVEN
CLOSING MATTERS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF CAMCO, FIRST
FEDERAL GFBC AND GERMANTOWN. Notwithstanding any other provision of this
AGREEMENT, the obligations of CAMCO, FIRST FEDERAL, GFBC and GERMANTOWN to
effect the COMPANY MERGER and the BANK MERGER shall be subject to the
fulfillment of each of the following conditions:
(a) This AGREEMENT shall have been validly adopted by the
affirmative vote of the holders of at least the
number of outstanding GFBC SHARES required under
Delaware law and GFBC's Certificate of Incorporation
and Bylaws and the BANK MERGER AGREEMENT shall have
been duly authorized and approved by the shareholder
of FIRST FEDERAL and the shareholder of GERMANTOWN;
(b) All permits, approvals, consents, authorizations,
exemptions or waivers of any federal or state
governmental body or agency necessary or appropriate
for consummation of the COMPANY MERGER and the BANK
MERGER shall have been obtained and all notices
required to be filed shall have been filed and any
objection or waiting period with respect to such
notice shall have expired;
(c) All waivers, consents and approval of every person,
in addition to those required under subsections (a)
and (b) of this Section 7.01, necessary or
appropriate for the consummation of the COMPANY
MERGER and the BANK MERGER shall have been obtained;
(d) GFBC shall have received a written fairness opinion
of McDonald & Company Securities, Inc., dated the
date of this AGREEMENT and as of a date reasonably
proximate to the date of the PROXY STATEMENT, to the
effect that the EXCHANGE RATIO is fair to the holders
of the GFBC SHARES from a financial point of view,
and CAMCO shall have received a written fairness
opinion from National Capital Companies, L.L.C. dated
as of the date of the AGREEMENT, to the effect that
the EXCHANGE RATIO is fair to the holders of the
CAMCO SHARES from a financial point of view;
(e) There shall not be in effect any federal or state
law, rule or regulation or any order or decision of a
court of competent jurisdiction which prevents or
materially delays the consummation of the COMPANY
MERGER or the BANK MERGER;
(f) CAMCO and GFBC shall have received an opinion of
Vorys, Sater, Seymour and Pease to the effect that
the COMPANY MERGER and the BANK MERGER, when
consummated in accordance with the terms hereof and
the BANK MERGER AGREEMENT, will each constitute a
reorganization within the meaning of Section
368(a)(1)(A) of the CODE and that no gain or loss
will be recognized by GFBC shareholders to the extent
they receive CAMCO SHARES in exchange for GFBC
SHARES;
(g) The REGISTRATION STATEMENT (including any
post-effective amendment thereto) shall have been
declared effective by the SEC, and no proceeding
shall be pending or, to the knowledge of CAMCO or
GFBC, threatened by the SEC to suspend the
effectiveness of the REGISTRATION STATEMENT; and
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(h) With respect to the BANK MERGER only, the COMPANY
MERGER shall have been effected.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF CAMCO AND FIRST
FEDERAL. In addition to the conditions contained in Section 7.01 of this
AGREEMENT, the obligations of CAMCO and FIRST FEDERAL to effect the COMPANY
MERGER and the BANK MERGER shall also be subject to the fulfillment of each of
the following conditions unless fulfillment is waived by CAMCO and FIRST FEDERAL
in writing:
(a) The representations and warranties of GFBC and
GERMANTOWN contained in Article Three of this
AGREEMENT shall be true in all material respects at
and as of the date hereof and at and as of the day of
the COMPANY CLOSING as if made at and as of such
time, except where such representation or warranty is
expressly made as of a specific date;
(b) GFBC and GERMANTOWN shall have duly performed and
complied in all material respects with all
agreements, covenants and conditions required by this
AGREEMENT to be performed or complied with by GFBC
and GERMANTOWN before or on the day of the COMPANY
CLOSING;
(c) There shall not have been a material adverse change
in the financial condition, assets, liabilities,
obligations, properties, business or prospects of
GFBC or GERMANTOWN after the date of this AGREEMENT,
except changes resulting from action taken by GFBC or
GERMANTOWN pursuant to Section 5.03 of this AGREEMENT
and changes resulting from or attributable to
expenses incurred in connection with the transactions
contemplated by this AGREEMENT;
(d) GFBC and GERMANTOWN shall each have delivered to
CAMCO a certificate dated the day of the COMPANY
CLOSING and signed by the President and the chief
financial officer of each of GFBC and GERMANTOWN to
the effect set forth in subsections (a), (b) and (c)
of this Section 7.02;
(e) CAMCO shall have received an opinion of GFBC's
counsel dated the date of the COMPANY CLOSING in form
reasonably acceptable to CAMCO's counsel opining with
respect to matters listed on Exhibit C hereto;
(f) There shall not be any action or proceeding commenced
by or before any court or governmental agency or
authority in the United States, or threatened by any
governmental agency or authority in the United
States, that challenges or seeks to prevent or delay
the consummation of the COMPANY MERGER or the BANK
MERGER or seeks to impose material limitations on the
ability of CAMCO or FIRST FEDERAL to exercise full
rights of ownership of the assets or business of GFBC
and GERMANTOWN;
(g) There shall not have been proposed, nor shall there
be in effect, any federal or state law, rule,
regulation, order or statement of policy that, in the
reasonable judgment of CAMCO, would: (i) prevent or
delay the consummation of the COMPANY MERGER or the
BANK MERGER or interfere with the reasonable
operation of the business of GFBC or GERMANTOWN (ii)
materially adversely affect the ability of CAMCO to
enjoy the economic or other benefits of the COMPANY
MERGER or the BANK MERGER or (iii) impose any
material adverse condition, limitation or requirement
on CAMCO in connection with the COMPANY MERGER or the
BANK MERGER;
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(h) GFBC and GERMANTOWN shall not have incurred any
damage, destruction or similar loss, not covered by
insurance, materially affecting its businesses or
properties;
(i) Immediately prior to the COMPANY EFFECTIVE TIME no
more than Seven and One Half Percent (7.5%) of the
outstanding GFBC SHARES shall qualify as DISSENTERS
SHARES;
(j) The shareholders' equity of GFBC on the day of the
COMPANY CLOSING and as calculated in accordance with
GAAP shall not be less than $6,399,264, without
giving effect to (i) reserves, accruals and charges
taken or established by GFBC or GERMANTOWN at the
request of CAMCO in accordance with Section 5.03 of
this AGREEMENT, (ii) expenses incurred in connection
with the transactions contemplated by this AGREEMENT;
and (iii) realized or unrealized losses on securities
classified as available for sale in the GFBC AUDITED
STATEMENTS;
(k) CAMCO shall have received from GRANT a written
opinion dated the date of COMPANY CLOSING that CAMCO
will be entitled to account for the COMPANY MERGER
under the "pooling of interests" method;
(l) GFBC and GERMANTOWN shall have complied with Section
5.03 hereof to the reasonable satisfaction of CAMCO;
(m) CAMCO shall have received the affiliate letters
required by Section 6.05 of this AGREEMENT;
(n) The Amendment to the Charter of GERMANTOWN described
in Section 6.17 of this AGREEMENT, shall be
effective; and
(o) CAMCO shall have received documentation from GFBC
with respect to the GERMANTOWN liquidation account,
which documentation shall be reasonably acceptable to
CAMCO.
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF GFBC AND
GERMANTOWN. In addition to the conditions contained in Section 7.01 of this
AGREEMENT, the obligations of GFBC and GERMANTOWN to effect the COMPANY MERGER
and the BANK MERGER shall also be subject to the fulfillment of each of the
following conditions:
(a) The representations and warranties of CAMCO and FIRST
FEDERAL contained in Article Four of this AGREEMENT
shall be true in all material respects at and as of
the date hereof and at and as of the date of the
COMPANY CLOSING as if made at and as of such time;
(b) CAMCO and FIRST FEDERAL shall have duly performed and
complied in all material respects with all
agreements, covenants and conditions required by this
AGREEMENT to be performed or complied with by them
before or at the COMPANY CLOSING;
(c) There shall not have been a material adverse change
in the financial condition, assets, liabilities,
obligations, properties, business or prospects of
CAMCO or FIRST FEDERAL after the date of this
AGREEMENT;
(d) CAMCO and FIRST FEDERAL shall have delivered to GFBC
a certificate dated the day of the COMPANY CLOSING
and signed by the President and the Chief Financial
Officer of each of CAMCO and FIRST FEDERAL to the
effect set forth in subsections (a), (b) and (c) of
this Section 7.03; and
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(e) GFBC shall have received an opinion of CAMCO's
counsel dated the date of the COMPANY CLOSING in form
reasonably acceptable to GFBC's counsel opining with
respect to matters listed on Exhibit D hereto.
ARTICLE EIGHT
TERMINATION
SECTION 8.01. TERMINATION. This AGREEMENT shall be terminated
if the AVERAGE CLOSING PRICE, as adjusted for any stock split, stock dividend,
recapitalization, combination, readjustment or other reclassification, is less
than $12.78. This AGREEMENT may be terminated at any time prior to the date of
the COMPANY CLOSING, whether before or after approval by the shareholders of
GFBC:
(a) By mutual consent of the Boards of Directors of GFBC
and CAMCO; or
(b) By the Board of Directors of GFBC or CAMCO if:
(i) The COMPANY MERGER shall not have been
consummated on or before June 30, 1998;
provided, however, that a party who is then
in breach of any of its representations,
warranties, covenants or agreements under
this AGREEMENT in any material respect may
not exercise such right of termination if it
has received notice from the non-breaching
party that the non-breaching party is
seeking specific performance of the
breaching party's obligations under this
AGREEMENT; provided further, however, that
no such termination shall relieve the
breaching party from liability for a breach
that occurs prior to such termination; or
(ii) Any event occurs which, in the reasonable
opinion of either Board, would preclude
satisfaction of any of the conditions set
forth in Section 7.01 of this AGREEMENT; or
(c) By the Board of Directors of CAMCO if any event
occurs which, in the reasonable opinion of such
Board, would preclude compliance with any of the
conditions set forth in Section 7.02 of this
AGREEMENT; or
(d) By the Board of Directors of GFBC if any event occurs
which, in the reasonable opinion of such Board, would
preclude compliance with any of the conditions set
forth in Section 7.03 of this AGREEMENT, or if the
AVERAGE CLOSING PRICE is more than $23.73, as
adjusted for any stock split, stock dividend,
recapitalization, combination, readjustment or other
reclassification.
SECTION 8.02. WRITTEN NOTICE OF TERMINATION. In order to
terminate this AGREEMENT pursuant to Section 8.01(a), (b), (c) and (d), the
party so acting shall give written notice of such termination to the other
party. This AGREEMENT shall terminate on the date such notice is given.
SECTION 8.03. EFFECT OF TERMINATION. In the event of the
termination of this AGREEMENT, the provisions of this AGREEMENT shall become
void and have no effect; provided, however, that (a) the provisions set forth in
Sections 6.09, 6.10 and 6.11 of this AGREEMENT shall survive such termination
and shall remain in full force and effect and (b) a termination of this
AGREEMENT shall not affect the liability of any party for an uncured breach of
any term or condition of this AGREEMENT.
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SECTION 8.04. AMENDMENT. This AGREEMENT may be amended at any
time before or after approval of this AGREEMENT by the shareholders of GFBC, but
after such approval no amendment shall be made which materially and adversely
affects the rights of such shareholders without the further approval of such
shareholders. This AGREEMENT may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 8.05. WAIVER. Any term or provision of this AGREEMENT
(other than the requirement for shareholder approval) may be waived in writing
at any time by the party which is, or whose shareholders are, entitled to the
benefits thereof.
ARTICLE NINE
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If addressed to CAMCO or FIRST FEDERAL:
Larry A. Caldwell
President, Chief Executive Officer and Chairman of the Board
Camco Financial Corporation
814 Wheeling Avenue
Cambridge, Ohio 43725
with a copy to:
Roger A. Yurchuck
or
Terri Reyering Abare
Vorys, Sater, Seymour and Pease
221 East Fourth Street
Atrium Two, Suite 2100
Cincinnati, Ohio 45202
If addressed to GFBC or GERMANTOWN:
John T. Baker
President and Chief Executive Officer
GF Bancorp, Inc.
One North Plum Street
Germantown, Ohio 45327
with a copy to:
Cynthia A. Shafer
Vorys, Sater, Seymour and Pease
221 East Fourth Street
Atrium Two, Suite 2100
Cincinnati, Ohio 45202
SECTION 9.02. ENTIRE AGREEMENT. This AGREEMENT (including the
exhibits, documents and instruments referred to herein or therein) (a)
constitutes the entire agreement of the parties and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof; (b) is not intended to and
shall not confer any rights or remedies hereunder upon any person other than
CAMCO, FIRST FEDERAL, GFBC and GERMANTOWN; (c) shall not be assigned by
operation
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of law or otherwise; and (d) shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, except to the extent that federal law may be applicable.
SECTION 9.03. EXECUTION IN COUNTERPARTS. This AGREEMENT may be
executed in two or more counterparts which together shall constitute a single
AGREEMENT.
SECTION 9.04. HEADINGS. The headings of articles and sections
herein are for convenience of reference only, do not constitute a part of this
AGREEMENT and shall not be deemed to limit or affect any of the provisions
hereof.
SECTION 9.05. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
No representation or warranty shall survive the COMPANY EFFECTIVE TIME.
SECTION 9.06. LIABILITIES AND SPECIFIC PERFORMANCE. The
termination fee provided for in Section 6.11 shall be the exclusive fee and
remedy for a termination of this AGREEMENT with respect to the matters described
in Section 6.11. Other than with respect to such specific remedy, each party to
this AGREEMENT recognizes that, if it fails to perform, observe or discharge any
of its obligations under this AGREEMENT, remedies at law may not provide
adequate relief to the other party or parties. Therefore, each party is hereby
authorized to demand specific performance of this AGREEMENT, and is entitled to
temporary and permanent injunctive relief, in a court of competent jurisdiction
at any time when any other party fails to comply with any of the provisions of
this AGREEMENT applicable to it, in addition to any other remedy that may be
available in law or equity. To the extent permitted by applicable law, each
party hereby irrevocably waives any defense that it might have based on the
adequacy of a remedy at law that might be asserted as a bar to such remedy of
specific performance or injunctive relief.
IN WITNESS WHEREOF, CAMCO, FIRST FEDERAL, GFBC and GERMANTOWN
have caused this AGREEMENT to be signed by their respective duly authorized
officers on the date first above written.
ATTEST: CAMCO FINANCIAL CORPORATION
/s/ Anthony J. Popp By: /s/ Larry A. Caldwell
- ------------------------ -------------------------------------------
Anthony J. Popp Larry A. Caldwell
Secretary President, Chief Executive Officer and
Chairman of the Board
ATTEST: FIRST FEDERAL SAVINGS BANK
OF WASHINGTON COURT HOUSE
/s/ Harold H. Thompson By: /s/ William W. Whipple
- ------------------------ -------------------------------------------
Harold H. Thompson William W. Whipple
Secretary President and Chief Executive Officer
ATTEST: GF BANCORP, INC.
/s/ Barbara L. Mullis By: /s/ John T. Baker
- ------------------------ -------------------------------------------
Barbara L. Mullis John T. Baker
Secretary President and Chief Executive Officer
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ATTEST: GERMANTOWN FEDERAL SAVINGS BANK
/s/ Barbara L. Mullis By: /s/ John T. Baker
- ------------------------ -------------------------------------------
Barbara L. Mullis John T. Baker
Secretary President and Chief Executive Officer
ACKNOWLEDGMENT
STATE OF OHIO )
) SS:
COUNTY OF GUERNSEY )
BE IT REMEMBERED that on this 24th day of July, 1997,
personally came before me, a Notary Public in and for the State and County
aforesaid, Larry A. Caldwell, President of Camco Financial Corporation, and duly
executed the Agreement and Plan of Reorganization before me and acknowledged the
same to be his act and deed and the act and deed of said corporation and that
the facts therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
24th day of July, 1997.
/s/ Sandra S. Flood
------------------------------
Notary Public
SANDRA S. FLOOD
Notary Public, State of Ohio
My Commission Expires 4-20-98
STATE OF OHIO )
) SS:
COUNTY OF FAYETTE )
BE IT REMEMBERED that on this 24th day of July, 1997,
personally came before me, a Notary Public in and for the State and County
aforesaid, William W. Whipple, President of First Federal Savings Bank of
Washington Court House, and duly executed the Agreement and Plan of
Reorganization before me and acknowledged the same to be his act and deed and
the act and deed of said corporation and that the facts therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
24th day of July, 1997.
/s/ Vicki Pendleton
------------------------------
Notary Public
VICKI PENDLETON
Notary Public, State of Ohio
My Commission Expires August 18, 1999
STATE OF OHIO )
) SS:
COUNTY OF MONTGOMERY )
BE IT REMEMBERED that on this 28th day of July, 1997,
personally came before me, a Notary Public in and for the State and County
aforesaid, John T. Baker, President of GF Bancorp, Inc., and duly executed the
Agreement and Plan of Reorganization before me and acknowledged the same to be
his act and deed and the act and deed of said corporation and that the facts
therein are true.
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<PAGE> 120
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
28th day of July, 1997.
/s/ CYNTHIA ANNE SHAFER
-------------------------------------
Notary Public
CYNTHIA ANNE SHAFER, Attorney at Law
Notary Public, State of Ohio
My Commission has no Expiration Date.
Section 147.03 Rev. Code.
STATE OF OHIO )
) SS:
COUNTY OF MONTGOMERY )
BE IT REMEMBERED that on this 28th day of July, 1997,
personally came before me, a Notary Public in and for the State and County
aforesaid, John T. Baker, President of Germantown Federal Savings Bank, and duly
executed the Agreement and Plan of Reorganization before me and acknowledged the
same to be his act and deed and the act and deed of said corporation and that
the facts therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
28th day of July, 1997.
/s/ CYNTHIA ANNE SHAFER
-------------------------------------
Notary Public
CYNTHIA ANNE SHAFER, Attorney at Law
Notary Public, State of Ohio
My Commission has no Expiration Date.
Section 147.03 Rev. Code.
A-36
<PAGE> 121
Exhibit A
MERGER AGREEMENT
THIS MERGER AGREEMENT (hereinafter referred to as this
"AGREEMENT"), made and entered into on July ___, 1997, by and between First
Federal Savings Bank of Washington Court House (hereinafter referred to as
"FIRST FEDERAL"), a savings bank incorporated under the laws of the United
States and a wholly-owned subsidiary of Camco Financial Corporation, a Delaware
corporation (hereinafter referred to as "CAMCO"), and Germantown Federal Savings
Bank (hereinafter referred to as "GERMANTOWN"), a savings bank incorporated
under the laws of the United States and a wholly-owned subsidiary of GF Bancorp,
Inc., a Delaware corporation (hereinafter referred to as "GFBC");
WITNESSETH:
WHEREAS, CAMCO, FIRST FEDERAL, GFBC and GERMANTOWN are parties
to an Agreement of Merger and Plan of Reorganization dated July ___, 1997
(hereinafter referred to as the "PLAN OF REORGANIZATION"), pursuant to which
GFBC would be merged with and into CAMCO and thereafter GERMANTOWN would be
merged with and into FIRST FEDERAL;
WHEREAS, the authorized capital of FIRST FEDERAL consists of
500,000 common shares, One Dollar ($1.00) par value per share, 180,000 of which
are issued and outstanding and are owned of record by CAMCO and 500,000
preferred shares, One Dollar ($1.00) par value per share, none of which is
issued or outstanding;
WHEREAS, the authorized capital of GERMANTOWN consists of
1,250,000 common shares, One Cent ($0.01) par value per share, 100,000 of which
are issued and outstanding and owned of record by GFBC and 250,000 preferred
shares, One Cent ($0.01) par value per share, none of which is issued or
outstanding; and
WHEREAS, the Boards of Directors of FIRST FEDERAL and
GERMANTOWN believe that the merger of GERMANTOWN with and into FIRST FEDERAL is
in the best interest of GERMANTOWN and FIRST FEDERAL;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, FIRST FEDERAL and
GERMANTOWN, each intending to be legally bound, hereby agree that the terms of
the merger shall be as follows:
ARTICLE ONE
SECTION 1.01. At the EFFECTIVE TIME (hereinafter defined),
which shall occur after both the closing and effective time of the merger of
GFBC into CAMCO, GERMANTOWN shall merge with and into FIRST FEDERAL (the
"MERGER") and FIRST FEDERAL shall be the continuing, surviving and resulting
institution in the MERGER, shall continue to exist as a federal savings bank
organized under the laws of the United States and shall be the only one of
GERMANTOWN and FIRST FEDERAL to continue its separate corporate existence at and
after the EFFECTIVE TIME. As used in this AGREEMENT, the term "RESULTING
INSTITUTION" refers to FIRST FEDERAL at and after the EFFECTIVE TIME. The name
of the RESULTING INSTITUTION shall be "First Federal Savings Bank of Washington
Court House".
SECTION 1.02. At the EFFECTIVE TIME, each common share of
GERMANTOWN issued and outstanding prior to the MERGER shall, by virtue of the
MERGER and without any action on the part of the parties hereto, be cancelled
and extinguished and, at and after the EFFECTIVE TIME, the capital of the
RESULTING INSTITUTION shall consist of 500,000 common shares of FIRST FEDERAL,
One Dollar ($1.00) par value per share, 180,000 of which are issued and
outstanding and owned of record by CAMCO and 500,000 preferred shares of FIRST
FEDERAL, One Dollar ($1.00) par value per share, none of which is issued or
outstanding.
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<PAGE> 122
Any common shares of GERMANTOWN held in the Treasury of
GERMANTOWN immediately prior to the EFFECTIVE TIME shall be retired, cancelled
and extinguished. Each common share of FIRST FEDERAL issued and outstanding
immediately prior to the EFFECTIVE TIME shall be unchanged and shall remain
issued and outstanding.
SECTION 1.03. The Amended Charter of FIRST FEDERAL shall be
the Amended Charter of the RESULTING INSTITUTION until amended in accordance
with law.
SECTION 1.04. The Bylaws of FIRST FEDERAL shall be the Bylaws
of the RESULTING INSTITUTION until amended in accordance with law.
SECTION 1.05. At and after the EFFECTIVE TIME and until
changed in accordance with law, the home office of FIRST FEDERAL at 134 E. Court
Street, Washington Court House, Ohio 43160, shall be the home office of the
RESULTING INSTITUTION and the existing branch office of FIRST FEDERAL at 1050
Washington Avenue, Washington Court House, Ohio 43160 shall be a branch office
of the RESULTING INSTITUTION.
At and after the EFFECTIVE TIME and until changed in accordance with law, the
former offices of GERMANTOWN at the following locations shall be branch offices
of the RESULTING INSTITUTION:
One North Plum Street 675 West Main Street
Germantown, Ohio 45323 New Lebanon, Ohio 45345
SECTION 1.06. At and after the EFFECTIVE TIME and until
changed in accordance with law, the number of directors of the RESULTING
INSTITUTION shall be eight, the names, residence addresses and office terms of
whom are as follows:
<TABLE>
<CAPTION>
NAMES RESIDENCE TERM
- ----- --------- ----
ADDRESS EXPIRES
------- -------
<S> <C> <C>
James R. Hanawalt 10 Royal Court January 2000
Washington Court House, Ohio 43160
Larry A. Caldwell 10491 Rock Hill Road January 2000
Cambridge, Ohio 43725
Anthony J. Popp 507 Tupper Street January 1998
Marietta, Ohio 45750
Philip L. French P.O. Box 82 January 1998
Washington Court House, Ohio 43160
Jeffrey D. Teeters 540 Highland Avenue January 1999
Washington Court House, Ohio 43160
Terry A. Feick 321 N. North Street January 1999
Washington Court House, Ohio 43160
William W. Whipple 1521 Mark Road January 1998
Washington Court House, Ohio 43160
</TABLE>
A-38
<PAGE> 123
ARTICLE TWO
SECTION 2.01. At and after the EFFECTIVE TIME, the separate
existence of GERMANTOWN shall cease; provided, however, that whenever a
conveyance, assignment, transfer, deed or other instrument or act is necessary
to vest property or rights in the RESULTING INSTITUTION, the officers of FIRST
FEDERAL and GERMANTOWN shall execute, acknowledge and deliver such instruments
and do such acts.
SECTION 2.02. At and after the EFFECTIVE TIME, all of the
assets and property of every kind and character, real, personal and mixed,
tangible and intangible, choses in action, rights and credits owned by FIRST
FEDERAL and GERMANTOWN at the EFFECTIVE TIME, or which would inure to any of
them, shall immediately, by operation of law and without any conveyance or
transfer and without any further act or deed, be vested in and become the
property of the RESULTING INSTITUTION, which shall have, hold and enjoy the same
in its own right as fully and to the same extent as the same were possessed,
held and enjoyed by FIRST FEDERAL and GERMANTOWN before the MERGER. The
RESULTING INSTITUTION shall be deemed to be and shall be a continuation of the
entity and identity of FIRST FEDERAL. All of the rights and obligations of FIRST
FEDERAL and GERMANTOWN shall remain unimpaired and the RESULTING INSTITUTION
shall succeed to all of such rights and obligations and the duties and
liabilities connected therewith. Title to any real estate or any interest
therein vested in any of either FIRST FEDERAL or GERMANTOWN shall not revert or
in any way be impaired by reason of the MERGER. Any claim existing, or action or
proceeding pending, by or against either FIRST FEDERAL or GERMANTOWN, may be
prosecuted to judgment with right of appeal as if the MERGER had not taken place
or the RESULTING INSTITUTION may be substituted in its place.
SECTION 2.03. At and after the EFFECTIVE TIME, all the rights
of creditors of each of FIRST FEDERAL and GERMANTOWN shall be preserved
unimpaired, and all liens upon the property of FIRST FEDERAL and GERMANTOWN
shall be preserved unimpaired on only the property affected by any such lien
immediately before the EFFECTIVE TIME.
SECTION 2.04. At the EFFECTIVE TIME and as a result of the
MERGER, each GERMANTOWN savings deposit or other account then existing shall,
automatically and without further act of FIRST FEDERAL or GERMANTOWN or the
holder thereof, be cancelled and extinguished. In substitution and exchange for
each GERMANTOWN passbook savings deposit so cancelled and extinguished, the
holder thereof shall automatically receive from the RESULTING INSTITUTION a
FIRST FEDERAL passbook savings account with a beginning balance equal in dollar
amount to the dollar amount of the GERMANTOWN passbook savings deposit account
so cancelled and extinguished and otherwise on the same terms as other FIRST
FEDERAL passbook savings accounts accepted by FIRST FEDERAL at the EFFECTIVE
TIME. In substitution for each GERMANTOWN savings deposit other than a passbook
savings deposit so cancelled and extinguished, the holder thereof shall
automatically receive from the RESULTING INSTITUTION a FIRST FEDERAL savings
account with a beginning balance equal in dollar amount to the dollar amount of
the GERMANTOWN savings deposit account so cancelled and extinguished and
otherwise having the same terms as the GERMANTOWN savings deposit so cancelled
and extinguished.
SECTION 2.05. The holder of each GERMANTOWN savings deposit or
other account cancelled and extinguished in accordance with Section 2.04 of this
Merger Agreement shall forthwith be entered on the records of the RESULTING
INSTITUTION as the holder of an appropriate FIRST FEDERAL savings deposit or
other account in an amount determined as provided in Section 2.04 and, until
Section 2.06 of this AGREEMENT shall have been complied with, each passbook,
certificate of deposit or other account issued by GERMANTOWN shall be deemed,
for all purposes, to evidence a savings deposit or other account of the
RESULTING INSTITUTION.
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<PAGE> 124
SECTION 2.06. Each person who, as a result of the MERGER,
holds a passbook, certificate of deposit or other document issued by GERMANTOWN
which theretofore evidenced a GERMANTOWN savings deposit or other account shall
surrender each such passbook, certificate or other document to the RESULTING
INSTITUTION. Upon such surrender, the RESULTING INSTITUTION shall deliver in
substitution therefor an account book or other document evidencing the FIRST
FEDERAL savings deposit or other account received by such person in accordance
with Section 2.04 of this AGREEMENT.
ARTICLE THREE
Notwithstanding any other provision of this AGREEMENT, the
obligation of FIRST FEDERAL and GERMANTOWN to effect the MERGER shall be subject
to: (i) the satisfaction at or before the EFFECTIVE TIME of each of the
conditions set forth in Article Seven of the PLAN OF REORGANIZATION; (ii) the
approval of this AGREEMENT by GFBC as the sole shareholder of GERMANTOWN and by
CAMCO as the sole shareholder of FIRST FEDERAL at meetings of shareholders duly
called and held (or by consent or consents in lieu thereof); (iii) receipt of
approval of the MERGER from all governmental authorities whose approval is
required; (iv) receipt of any necessary regulatory approval to operate the
offices of GERMANTOWN as offices of FIRST FEDERAL; and (v) the close and the
effective time of the merger of GFBC and CAMCO before the EFFECTIVE TIME.
ARTICLE FOUR
SECTION 4.01. The closing of the transactions contemplated by
this AGREEMENT shall take place on a date selected by FIRST FEDERAL which date
shall be after the effective time of the merger of GFBC into CAMCO. FIRST
FEDERAL and GERMANTOWN shall cause Articles of Combination to be filed with the
Office of Thrift Supervision. The MERGER shall become effective on the date and
at the time that Articles of Combination are declared effective by the Office of
Thrift Supervision unless a later date and time is specified as the effective
time on the endorsement of said Articles of Combination (the "EFFECTIVE TIME").
SECTION 4.02. In the event of the termination of the PLAN OF
REORGANIZATION in accordance with Article Eight thereof, this AGREEMENT shall
terminate and shall thereafter be of no further force or effect.
ARTICLE FIVE
SECTION 5.01. The MERGER shall have no effect upon the
GERMANTOWN Liquidation Account which is assumed by FIRST FEDERAL at the
EFFECTIVE TIME in accordance with 12 C.F.R. 563b3(f).
SECTION 5.02. The MERGER shall not be effective unless and
until said MERGER receives any necessary approval from the Office of Thrift
Supervision.
ARTICLE SIX
SECTION 6.01. This AGREEMENT may be executed in two or more
counterparts which shall be deemed to constitute a single AGREEMENT.
SECTION 6.02. This AGREEMENT shall be governed by and
construed in accordance with the laws of the United States.
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<PAGE> 125
IN WITNESS WHEREOF, FIRST FEDERAL and GERMANTOWN caused this
AGREEMENT to be signed by their respective duly authorized officers on the date
first above written.
ATTEST: FIRST FEDERAL SAVINGS BANK
OF WASHINGTON COURT HOUSE
By:_______________________________
Harold H. Thompson William W. Whipple
Secretary President
ATTEST: GERMANTOWN FEDERAL SAVINGS BANK
By:_______________________________
Barbara L. Mullis John T. Baker
Secretary President
A-41
<PAGE> 126
ACKNOWLEDGMENTS
STATE OF OHIO )
) SS:
COUNTY OF ____________ )
BE IT REMEMBERED that on this ____ day of July, 1997,
personally came before me, a Notary Public in and for the State and County
aforesaid, William W. Whipple, President of First Federal Savings Bank of
Washington Court House, and duly executed the Merger Agreement before me and
acknowledged the same to be his act and deed and the act and deed of said
corporation and that the facts therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
___ day of July, 1997.
-------------------------------
Notary Public
STATE OF OHIO )
) SS:
COUNTY OF _____________ )
BE IT REMEMBERED that on this ___ day of July, 1997,
personally came before me, a Notary Public in and for the State and County
aforesaid, John T. Baker, President of Germantown Federal Savings Bank, and duly
executed the Merger Agreement before me and acknowledged the same to be his act
and deed and the act and deed of said corporation and that the facts therein are
true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
___ day of July, 1997.
-------------------------------
Notary Public
A-42
<PAGE> 127
EXHIBITS B, C AND D HAVE BEEN OMITTED
A-43
<PAGE> 128
APPENDIX B
(Name & Address for McDonald & Company Securities, Inc.)
October 30, 1997
Board of Directors
GF Bancorp, Inc.
1 North Plum Street
Germantown, OH 45327
Gentlemen:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of common stock,
par value $0.01 per share ("GFBC Shares"), of GF Bancorp, Inc. ("GFBC") of the
exchange ratio as set forth in Section 2.01 (a) of the Agreement of Merger and
Plan of Reorganization dated July 28, 1997, by and among Camco Financial
Corporation ("Camco"), First Federal Savings Bank of Washington Court House
("First Federal"), GFBC and Germantown Federal Savings Bank.
The Agreement of Merger and Plan of Reorganization dated July 28, 1997
(the "Agreement") provides for the merger (the "Merger") of GFBC with and into
Camco, pursuant to which, among other things, at the Company Effective Time (as
defined in the Agreement), outstanding shares of GFBC Shares will be exchanged
for 1.616 shares of common stock, par value $1.00 per share ("Camco Shares"), of
Camco, subject to adjustment, as set forth in Section 2.01 (a) of the Agreement
(the "Exchange Ratio"). The terms and conditions of the Merger are more fully
set forth in the Agreement.
McDonald & Company Securities, Inc., as part of its investment banking
business, is customarily engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
We have acted as GFBC's financial advisor in connection with, and have
participated in certain negotiations leading to, the execution of the Agreement.
In connection with rendering our opinion set forth herein, we have among other
things:
<PAGE> 129
Board of Directors
October 30, 1997
Page Two
(i) Reviewed GFBC's Annual Reports to Shareholders and Annual
Reports on Form 10-KSB for each of the years ended March 31,
1996, March 31, 1995, and March 31, 1994, including the
audited financial statements contained therein; GFBC's audited
financial statements for the year ended March 31, 1997; GFBC's
unaudited financial statements for the three month period
ended June 30, 1997; and GFBC's Thrift Financial Report for
the three month period ended June 30, 1997;
(ii) Reviewed Camco's Annual Reports to Shareholders and Annual
Reports on Form 10-KSB for each of the years ended December
31, 1996, December 31, 1995 and December 31, 1994, including
the audited financial statements contained therein; and
Camco's Quarterly Report on Form 10-Q for each of the three
month periods ended March 31, 1997 and June 30, 1997;
(iii) Reviewed certain other public and non-public information,
primarily financial in nature, relating to the respective
businesses, earnings, assets and prospects of GFBC and Camco
provided to us or publicly available;
(iv) Participated in meetings and telephone conferences with
members of senior management of GFBC and Camco concerning the
financial condition, business, assets, financial forecasts and
prospects of the respective companies, as well as other
matters we believed relevant to our inquiry;
(v) Reviewed certain stock market information for GFBC Shares and
Camco Shares, and compared it with similar information for
certain companies, the securities of which are publicly
traded;
(vi) Compared the results of operations and financial condition of
GFBC and Camco with that of certain companies which we deemed
to be relevant for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions which we deemed
to be relevant for purposes of this opinion;
(viii) Reviewed the Agreement and its schedules and exhibits and
certain related documents; and
(ix) Performed such other reviews and analyses as we have deemed
appropriate.
<PAGE> 130
Board of Directors
October 30, 1997
Page Three
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have relied upon the accuracy and
completeness of the representations, warranties and covenants of GFBC and Camco
contained in the Agreement. We have not been engaged to undertake, and have not
assumed any responsibility for, nor have we conducted, an independent
investigation or verification of such matters. We have not been engaged to and
we have not conducted a physical inspection of any of the assets, properties or
facilities of either GFBC or Camco nor have we made or obtained or been
furnished with any independent valuation or appraisal of any of such assets,
properties or facilities or any of the liabilities of either GFBC or Camco. With
respect to financial forecasts used in our analysis, we have assumed that such
forecasts have been reasonably prepared by management of GFBC and Camco, as the
case may be, on a basis reflecting the best currently available estimates and
judgments of the management of GFBC and Camco, as to the future performance of
GFBC, Camco and GFBC and Camco combined, as the case may be. We have not been
engaged to assess the reasonableness or achievability of such financial
forecasts or the assumptions on which they are based, and we express no view as
to such financial forecasts or assumptions. We have also assumed that all of the
conditions to the consummation of the Merger, as set forth in the Agreement,
including the tax-free nature of the reorganization for federal income tax
purposes, would be satisfied and that the Merger would be consummated on a
timely basis in the manner contemplated by the Agreement.
We will receive a fee for our services as financial advisor to GFBC, a
substantial portion of which is contingent upon closing of the Merger. We will
also receive a fee for our services in rendering this opinion.
In the ordinary course of business, we may actively trade securities of
GFBC or Camco for our own account and for the accounts of customers and,
accordingly, we may at any time hold a long or short position in such
securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the financial
consideration to the holders of GFBC Shares, and does not address the underlying
business decision by GFBC's Board of Directors to effect the Merger, does not
compare or discuss the relative merits of any competing proposal or any other
terms of the Merger, and does not constitute a recommendation to any GFBC
shareholder as to how such shareholder should vote with respect to the Merger.
This opinion does not represent an opinion as to what the value of GFBC Shares
or Camco Shares may be at the Effective Time of the Merger or as to the
prospects of GFBC's business or Camco's business.
<PAGE> 131
Board of Directors
October 30, 1997
Page Four
This opinion is directed to and has been prepared solely for the
confidential use of the Board of Directors of GFBC. We do not believe that we
are acting as agents of the GFBC Board of Directors nor the holders of the GFBC
Shares, and we do not believe that any person other than the GFBC Board of
Directors has any legal right under state law to rely on this opinion. This
opinion shall not be reproduced, summarized, described or referred to or given
to any other person without our prior written consent. Notwithstanding the
foregoing, this opinion may be he Merger, provided that this opinion will be
reproduced in such proxy statement in full, and any description of or reference
to us or our actions, or any summary of the opinion in such proxy statement,
will be in a form acceptable to us and our counsel.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Exchange Ratio is fair to the holders of GFBC Shares
from a financial point of view.
Very truly yours,
MCDONALD & COMPANY SECURITIES, INC.
<PAGE> 132
APPENDIX C
Section. 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a non-stock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a non-stock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares
of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger
or consolidation pursuant to Sections 251, 252, 254, 257, 258, 263
and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of
stock (or depository receipts in respect thereof) at the
effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a., b. and c. of this paragraph.
C-1
<PAGE> 133
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall include
in such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to take
such action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the surviving
or resulting corporation shall notify each stockholder of each constituent
corporation who has complied with the provisions of this subsection and has not
voted in favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice may,
and, if given on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within twenty
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identify of the stockholder and that the stockholder intends thereby to demand
the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either (i)
each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice to
all such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded appraisal
of such holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the corporation
that is required to give either notice that such notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
For purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the
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record date shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date shall be the close
of business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated
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stock forthwith, and the case of holders of shares represented by certificates
upon the surrender to the corporation of the certificates representing such
stock. The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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