POINT BANCORP, INC.
610-12 VIAND STREET
POINT PLEASANT, WEST VIRGINIA 25550
January 27, 1995
To the Shareholders of
Point Bancorp, Inc.:
You are cordially invited to attend the 1995 Annual Meeting of
Shareholders of Point Bancorp, Inc. ("Point Bancorp"), which will be
held at Lowe's Motor Inn, Fourth and Main Streets, Point Pleasant, West
Virginia, on February 24, 1995, at 2:00 p.m., local time.
At the Annual Meeting, you will be asked to consider and vote upon an
Agreement and Plan of Merger pursuant to which Point Bancorp will be merged (the
"Merger") with and into One Valley Thrift, Inc. ("Thrift"), a wholly-owned
subsidiary of One Valley Bancorp of West Virginia, Inc. ("One Valley"). The
Merger will require One Valley to issue up to 422,370 shares of its common
stock plus cash in the amount of $7.10 per share in exchange for Point Bancorp
Common Stock. As a result of the Merger, Shareholders of Point Bancorp, in
addition to cash of $7.10 per share, will receive six tenths (.6) of a share of
Common Stock of One Valley in exchange for each share of Point Bancorp Common
Stock held by them.
Additionally, Shareholders will be asked to elect two directors and to
approve the appointment by the Board of Directors of Trainer, Wright & Paterno
as independent Certified Public Accountants for the fiscal year ending September
30, 1995.
Enclosed with this letter are a Notice of Annual Meeting of Point Bancorp
Shareholders and a Proxy Statement of Point Bancorp, which describes in detail
the proposed Merger, the background of the Merger, and other related
information. Also enclosed is a proxy solicited by the Board of Directors of
Point Bancorp in connection with the Annual Meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED MERGER AND
RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES "FOR" THE MERGER. THE BOARD OF
DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTEREST OF POINT
BANCORP AND ITS SHAREHOLDERS. THE AFFIRMATIVE VOTE OF A MAJORITY OF POINT
BANCORP'S OUTSTANDING SHARES IS NECESSARY TO APPROVE THE MERGER. ACCORDINGLY,
FAILURE TO RETURN YOUR PROXY CARD OR TO VOTE IN PERSON AT THE
ANNUAL MEETING WILL HAVE THE EFFECT OF A VOTE AGAINST THE MERGER.
THE BOARD OF DIRECTORS ALSO RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES
"FOR" THE ELECTION OF THE TWO NOMINEES LISTED IN THE ENCLOSED PROXY STATEMENT
AND "FOR" APPROVAL OF TRAINER, WRIGHT & PATERNO AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1995.
We urge you to consider carefully all of the materials in the Proxy
Statement and to execute and return the enclosed proxy as soon as possible. If
you attend the Annual Meeting, you may vote in person if you wish, even though
you have previously returned your proxy.
Sincerely,
Maye R. Smith
President, Chief Executive Officer
and Chief Financial Officer
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POINT BANCORP, INC.
POINT PLEASANT, WEST VIRGINIA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 24, 1995
The Annual Meeting of Shareholders of Point Bancorp, Inc. ("Point
Bancorp"), will be held on February 24, 1995, at Lowe's Motor Inn,
Fourth and Main Streets, Point Pleasant, West Virginia, at 2:00 p.m.,
local time, for the purpose of considering and voting upon the
following:
1. To consider and vote upon a proposal to approve the Agreement
and Plan of Merger (the "Merger Agreement") dated as of September 2,
1994, between Point Bancorp and One Valley Bancorp of West Virginia,
Inc. ("One Valley"), which agreement provides for the merger (the
"Merger") of Point Bancorp with and into One Valley Thrift, Inc.
("Thrift"), a wholly-owned subsidiary of One Valley. The Merger will
require One Valley to issue up to 422,370 shares of common stock, par
value $10.00 per share, plus cash in the amount of $7.10 per share, of
One Valley in exchange for Point Bancorp Common Stock pursuant to the
terms of the Merger Agreement. The Merger Agreement provides for the
conversion of each share of common stock of Point Bancorp into
six-tenths (.6) of a share of common stock of One Valley. The Merger
Agreement is attached as Appendix I to and is described in the
accompanying Proxy Statement.
2. To elect two directors to serve for a term of three years and until
their successors are chosen and qualify.
3. To ratify the appointment by the Board of Directors of Trainer, Wright
& Paterno as independent Certified Public Accountants for the 1995
fiscal year.
4. To act upon such other matters as may properly come before the meeting
or any adjournment or adjournments thereof, including a motion to adjourn the
Annual Meeting for the purpose of soliciting additional proxies necessary for
the approval of the Merger Agreement.
Only Shareholders of record at the close of business on the record date
January 26, 1995, are entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof. The affirmative vote of not less than a
majority of Point Bancorp's outstanding Common Stock entitled to vote is
necessary to approve the Merger. Accordingly, failure to return your proxy card
or to vote in person at the Annual Meeting will have the effect of a vote
against the Merger. In the event there are not sufficient shares represented
for a quorum or votes to approve the Merger Agreement at the Annual Meeting the
Annual Meeting may be adjourned to permit further solicitation. We urge you to
execute and return the enclosed proxy as soon as possible to insure that your
shares will be represented at the meeting. Your proxy may be revoked in the
manner described in the accompanying Proxy Statement at any time before it has
been voted at the Annual Meeting.
By Order of the Board of Directors
Maye R. Smith
President, Chief Executive Officer
and Chief Financial Officer
Point Pleasant, West Virginia
January 27, 1995
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE PROPOSAL TO ADOPT AND APPROVE THE MERGER AGREEMENT. PLEASE
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE YOUR
PROXY AT ANY TIME BEFORE IT IS VOTED AT THE SPECIAL MEETING.
<PAGE>
PROSPECTUS
PROXY STATEMENT
OF
POINT BANCORP, INC.
ONE VALLEY BANCORP OF WEST VIRGINIA
PROSPECTUS
422,370 SHARES OF COMMON STOCK
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 24, 1995
This Proxy Statement/Prospectus is being furnished to the Shareholders of
Point Bancorp, Inc. ("Point Bancorp"), in connection with the solicitation of
proxies by the Board of Directors of Point Bancorp for use at the Annual Meeting
of Shareholders of Point Bancorp to be held on February 24, 1995. At the
meeting, the Shareholders will consider and vote upon a proposal to approve the
Agreement and Plan of Merger (the "Merger Agreement") dated as of September 2,
1994, between Point Bancorp and One Valley, which agreement provides for the
merger (the "Merger") of Point Bancorp with and into One Valley Thrift, Inc.
("Thrift"), a wholly-owned subsidiary of One Valley. The Merger Agreement is
attached to this Proxy Statement/Prospectus as Appendix I and is incorporated by
reference herein. As a result of the Merger, Shareholders of Point Bancorp will
be entitled to receive, in exchange for each share of common stock of Point
Bancorp six-tenths (.6) of a share of common stock of One Valley and cash in the
amount of $7.10 per share. This Proxy Statement also constitutes a prospectus
of One Valley relating to a maximum of 422,370 shares of common stock, par value
$10.00 per share ("One Valley Common Stock"), to be issued in connection with
the Merger.
This Proxy Statement is also being furnished in connection with the
solicitation of proxies for the election of directors and for the appointment of
Trainer, Wright & Paterno as independent Certified Public Accountants for the
1995 fiscal year.
THE SHARES OF ONE VALLEY COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER
AGREEMENT AND THE PLAN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THE SHARES OF ONE VALLEY COMMON STOCK TO BE ISSUED UNDER THE MERGER
AGREEMENT ARE NOT INSURED BY AN AGENCY OF THE GOVERNMENT.
THE SHARES OF ONE VALLEY COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FDIC, BIF OR ANY OTHER GOVERNMENTAL AGENCY.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to Shareholders of Point Bancorp on or about January 27,
1995.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JANUARY 27, 1995.
<PAGE>
No persons have been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus or
incorporated by reference herein in connection with the solicitation of proxies
or the offering of securities made hereby and, if given or made, such
information or representations must not be relied upon as having been authorized
by One Valley or Point Bancorp. This Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction to or from any
person to whom it is not lawful to make any such offer or solicitation in such
jurisdiction. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of securities made hereunder shall, under any circumstances, create
an implication that there has been no change in the affairs of One Valley or
Point Bancorp since the date of this Proxy Statement/Prospectus or that the
information herein or the documents or reports incorporated by reference herein
is correct as of any time subsequent to such date. All information contained in
this Proxy Statement/Prospectus relating to Point Bancorp and its subsidiaries
has been supplied by Point Bancorp and all information contained in this Proxy
Statement/Prospectus relating to One Valley and its subsidiaries has been
supplied by One Valley.
AVAILABLE INFORMATION
One Valley and Point Bancorp are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith file reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, information statements
and other information, when filed, can 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 the Commission's Regional offices in
New York (7 World Trade Center, New York, New York 10048) and Chicago (500 W.
Madison, Suite 1400, John C. Kluczynski Federal Building, Room 3190, Chicago,
Illinois 60661). Copies of such material can also be obtained from the Public
Reference Section of the Commission, at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. One Valley and Point Bancorp each
furnishes its Shareholders with annual reports containing audited financial
statements with an opinion expressed by independent certified public accountants
for each fiscal year and quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by One Valley are hereby incorporated by
reference into this Prospectus:
1. Portions of (Part I and Part III) One Valley's Annual Report on Form
10-K for the fiscal year ended December
31, 1993, filed with the Commission.
2. One Valley's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994, and
September 30, 1994, filed with the Commission.
3. One Valley's reports on Form 8-K dated February 17, 1994, April 20,
1994, April 22, 1994, October 15, 1994,
and January 10, 1995 filed with the Commission.
4. One Valley's Proxy Statement filed on March 24, 1994.
5. The description of One Valley's Common Stock, $10.00 par value per
share, contained under the caption, "Description of One Valley's Securities" in
One Valley's Registration Statement on Form S-4, filed with the Commission on
October 22, 1993 (Commission File No. 33-305729).
6. All documents filed by One Valley after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, prior to the termination of the offering covered by this Prospectus.
One Valley has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereof, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of One Valley Common Stock to be issued pursuant to the Merger
Agreement. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
Such additional information
<PAGE>
may be inspected and copied as set forth above. Statements contained in this
Proxy Statement/Prospectus or in any document incorporated by reference in this
Proxy Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document each such
statement being qualified in all respects by such reference. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST
(WITHOUT CHARGE) TO BRIEN CHASE, ONE VALLEY BANCORP OF WEST VIRGINIA, INC., ONE
VALLEY SQUARE, P.O. BOX 1793, CHARLESTON, WV 25326. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY 10, 1995.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION....................................................1
SUMMARY INFORMATION ............................................2
General................................................2
One Valley ............................................2
Point Bancorp..........................................2
The Annual Meeting Of
Shareholders........................................3
Opinion of Point Bancorp Financial
Advisor.............................................3
Rights Of Dissenting Shareholders......................3
Federal Income Tax Consequences.....................4
Accounting Treatment...................................4
Conditions; Regulatory Approvals;
Termination.........................................4
Effect of the Merger on Shareholders'
Rights .............................................4
Interests of Certain Persons in the
Merger..............................................4
Election of Directors .................................4
Ratification of Appointment of
Auditors............................................4
COMPARATIVE PER SHARE
INFORMATION..................................................5
SELECTED FINANCIAL DATA ......................................7
THE MERGER....................................................10
General...............................................10
Operations After the Merger...........................10
Management After The
Merger.............................................10
Background of the Merger..............................11
Reasons for the Merger................................11
Opinion Of Point Bancorp's Financial
Advisor............................................12
Comparable Companies and Compar-
able Acquisition Transaction
Analyses...........................................13
Discounted Dividend Analyses..........................13
Conditions To Consummation Of The
Merger.............................................14
Termination...........................................14
Certain Federal Income Tax
Consequences......................................14
Exchange Of Certificates.............................16
Accounting Treatment.................................16
Resales by Affiliates ...............................16
Regulatory Approvals ................................17
APPRAISAL RIGHTS..............................................17
EFFECT OF THE MERGER ON
SHAREHOLDERS' RIGHTS ......................................19
Antitakeover Provisions in One Valley's
Articles and Bylaws .............................20
Antitakeover Provisions in Point Bancorp's
Certificate of Incorporation and
Bylaws...........................................22
Other Restrictions on Acquisitions of
Point Bancorp Common Stock.......................23
HISTORICAL COMPARATIVE STOCK
PRICES AND DIVIDENDS....................................25
One Valley ..........................................25
Point Bancorp .......................................25
POINT BANCORP, INC. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ...........................................26
SELECTED FINANCIAL AND OTHER
DATA......................................................32
BUSINESS AND PROPERTIES OF ONE
VALLEY....................................................38
BUSINESS AND PROPERTIES OF POINT
BANCORP ..................................................39
ELECTION OF DIRECTORS.........................................57
Directors And Executive Officers....................57
Reports ........................................58
Executive Compensation..............................59
Long Term Incentive Plans...........................60
Compensation Committee Interlocks
and Insider Participation .....................60
Other Benefits .....................................61
Compensation Committee Report On
Executive Compensation .......................62
Certain Transactions With the
Company.......................................62
Meetings of the Board of Directors
and Committees ...............................63
Directors' Compensation ..........................63
RATIFICATION OF APPOINTMENT OF
AUDITORS..................................................64
DESCRIPTION OF ONE VALLEY'S
SECURITIES ................................................65
Authorized Common Stock.............................65
Preferred Stock.....................................65
Dividends and Dividend Rights.......................65
Voting Rights.......................................66
Preemptive Rights...................................66
Liquidation Rights..................................66
Assessment of Shares................................66
Shareholder Approval of Mergers.....................66
Rights of Dissenting Shareholders...................67
Directors...........................................67
Indemnification ....................................67
Other Considerations................................67
SUPERVISION AND REGULATION OF
POINT BANCORP .............................................67
EXPERTS.......................................................74
LEGAL MATTERS ................................................74
OTHER MATTERS.................................................75
INDEX TO FINANCIAL STATEMENTS ............................F-1
APPENDIX I...................................................A-I-1
APPENDIX II .................................................A-II-1
APPENDIX III ................................................A-III-1
<PAGE>
POINT BANCORP, INC.
PROXY STATEMENT
INTRODUCTION
This Proxy Statement and the accompanying proxy (the "Proxy") are
being furnished to the Shareholders of Point Bancorp in connection with
the solicitation of proxies by the Board of Directors of Point Bancorp
for the Annual Meeting of Shareholders (the "Annual Meeting") to be held
at 2:00 p.m., local time, on February 24, 1995, at Lowe's Motor Inn,
Fourth and Main Streets, Point Pleasant, West Virginia, and any
adjournments thereof, to consider and vote upon a proposal to approve
the Agreement and Plan of Merger (the "Merger Agreement") dated as of
September 2, 1994, between Point Bancorp and One Valley Bancorp of
West Virginia, Inc. ("One Valley").
This Proxy Statement is also being furnished in connection with proxies to
be solicited for the election of directors and for the approval of the
appointment of Trainer, Wright & Paterno as independent Certified Public
Accountants for the 1995 fiscal year.
This Proxy Statement and the Proxy will be first sent or given to Point
Bancorp Shareholders on or about January 27, 1995.
The shares of Common Stock of Point Bancorp (the "Shares") represented by a
Proxy will be voted as directed if the Proxy is properly signed and received by
Point Bancorp prior to the Annual Meeting. The Proxy will be voted "FOR" the
approval of the Merger Agreement, "FOR" the election of directors and "FOR" the
approval of the auditors if no direction is made to the contrary on a duly
executed and returned Proxy. The Proxy may also be used to grant discretionary
authority to vote on other matters which may arise at the Point Bancorp Annual
Meeting. While management is presently unaware of any such matters, the person
or persons designated to vote the Shares will cast votes at the direction of
the Board of Directors of Point Bancorp if any such matters properly come
before the Point Bancorp Annual Meeting. A person giving a Proxy has the power
to revoke it at any time before it is voted by notifying Point Bancorp in
person, by giving written notice to Point Bancorp of the revocation of the
proxy, by submitting to Point Bancorp a subsequently dated Proxy, or by
attending the meeting and withdrawing the Proxy before it is voted at the
Annual Meeting.
One Valley will bear the cost of the solicitation of the Proxies, including
the charges and expenses of brokerage firms and others, if any, for forwarding
solicitation material to beneficial owners of stock. Representatives of Point
Bancorp may solicit proxies by mail, telegram, telephone or personal interview.
Shareholders of record of Point Bancorp at the close of business on
January 26, 1995 (the "Record Date"), will be entitled to vote at the Annual
Meeting.
1
<PAGE>
SUMMARY INFORMATION
The following is a brief summary of certain information with respect to the
matters to be considered at the Annual Meeting. This summary is not intended to
be complete and is qualified in its entirety by reference to, and should be read
in conjunction with, the detailed information contained or incorporated by
reference herein.
GENERAL
The Merger Agreement provides for the Merger of Point Bancorp with and into
One Valley Thrift, Inc. ("Thrift"), a wholly-owned subsidiary of One Valley.
Upon consummation of the Merger, Point Bancorp's thrift, Point Pleasant Federal
Savings Bank (the "Savings Bank") will become a wholly-owned subsidiary of
Thrift and its name will be changed to One Valley Bank, F.S.B.
The Merger will become effective upon the date the Secretary of State of
the State of West Virginia issues a certificate of merger. At that time, each
of the outstanding shares of Point Bancorp Common Stock will be converted into
six-tenths (.6) of a share of One Valley Common Stock, except that no fractional
shares will be issued, and each Point Bancorp Shareholder will receive $7.10 in
cash for each share of Point Bancorp Common Stock. One Valley will pay cash to
the holders of fractional interests in an amount equal to that fraction
multiplied by the average of the closing bid and ask price for One Valley Common
Stock as of the Effective Date. The affirmative vote of not less than a
majority of the outstanding shares of Point Bancorp Common Stock is required to
approve the Merger. See "The Merger - Conditions to Consummation of the Merger"
and "The Merger - Accounting Treatment".
ONE VALLEY
One Valley is a multi-bank holding company organized under the laws of the
State of West Virginia and registered with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") pursuant to the Bank Holding
Company Act of 1956, as amended, with headquarters in Charleston, West
Virginia. It is comprised of eleven banking subsidiaries located in 50 cities
and towns in West Virginia, providing services to customers through 79
offices. Other subsidiaries include (i) a real estate management company that
owns and operates One Valley's headquarters building and (ii) a data processing
company which had, until recently, provided data processing services for One
Valley's subsidiary banks and for third parties. See "Business and Properties
of One Valley". At September 30, 1994, One Valley reported total assets of
approximately $3.60 billion, loans of $2.32 billion, deposits of $2.92 billion,
and equity of $318 million. In addition to providing commercial and retail
banking services, One Valley provides trust services to its customers. At
September 30, 1994, One Valley reported over $2.7 billion in trust assets.
For more information about One Valley, reference is made to Parts I and III
of One Valley's Form 10-K for the fiscal year ended 1993 and to One Valley's
Form 10-Q for the quarter ended September 30, 1994, which are hereby
incorporated by reference. See "Available Information" and "Incorporation by
Reference."
One Valley's executive offices are located at One Valley Square, P.O. Box
1793, Charleston, West Virginia 25326. Its telephone number is (304) 348-7000.
POINT BANCORP
Point Bancorp serves as a holding company headquartered in Point Pleasant,
West Virginia. Its wholly-owned subsidiary, Point Pleasant Federal Savings Bank
(the "Savings Bank"), has been and continues to be in the business of
attracting deposits from the general public and investing these deposits,
together with funds generated from operations, primarily in one-to-four family
residential mortgage loans and, to a lesser extent, mortgage-backed
securities, U.S. Government and agency securities and other marketable
securities.
Point Bancorp operates out of the Savings Bank's main office located at
610-12 Viand Street, Point Pleasant, West Virginia. The Savings Bank also
conducts business out of its branch office located at 415 Main Street, Point
Pleasant, West Virginia. The Bank's deposit-gathering base is concentrated in
the communities surrounding its offices while its lending base extends
throughout Mason and contiguous counties in West Virginia. See "Business and
Properties of Point Bancorp". As of
2
<PAGE>
September 30, 1994, Point Bancorp reported total assets of approximately $57
million, loans of $12 million, deposits of $42 million and equity of $14
million.
Point Bancorp's executive offices are located at 610-12 Viand Street, Point
Pleasant, West Virginia. Its telephone number is (304) 675-2500.
THE ANNUAL MEETING OF SHAREHOLDERS
One purpose of the Annual Meeting is to approve the Merger Agreement which
provides for the merger of Point Bancorp with and into Thrift. If consummated,
each share of Point Bancorp Common Stock, except for shares held by dissenting
shareholders, will be converted into six-tenths (.6) of a share of One Valley
Common Stock, and each Point Bancorp Shareholder will receive $7.10 per share in
cash. No fractional shares of One Valley Common Stock will be issued in
connection with the Merger and, in lieu thereof, One Valley will pay cash for
fractional shares. Point Bancorp's Board of Directors has unanimously approved
the proposed Merger and recommends that the Shareholders of Point Bancorp vote
"FOR" the Merger. See "The Merger - Background of the Merger" and "The Merger -
Reasons for the Merger".
Shareholders of record of Point Bancorp at the close of business on the
Record Date will be entitled to vote at the Annual Meeting. Point Bancorp
Shareholders are entitled to cast one vote for each share of Point Bancorp
Common Stock they hold on the Record Date. To approve the Merger, a vote of a
majority of the issued and outstanding shares of Point Bancorp Common Stock is
required. As of the Record Date, the directors, executive officers and
affiliates of Point Bancorp had beneficial ownership of, directly or indirectly,
approximately 23% of the issued and outstanding shares of Point Bancorp.
Management of Point Bancorp expects that such shares will be voted "FOR" the
approval of the Merger.
At the Annual Meeting, Point Bancorp Shareholders are also being asked to
elect two directors to Point Bancorp's Board of Directors and to approve the
appointment of Trainer, Wright & Paterno as Point Bancorp's auditors for 1995.
A proxy for use by Point Bancorp's Shareholders in connection with the
Annual Meeting is enclosed with this Proxy Statement which was mailed to
Shareholders on or about January 27, 1995. The proxy will be voted as
specified thereon by the Shareholder. Where no specification is made on the
proxy, a properly executed proxy will be voted "FOR" approval of the Merger,
"FOR" the election of the two nominees for director and "FOR" the approval of
the auditors.
As of the date of the mailing of this Proxy Statement, Point Bancorp is not
aware of any business to be acted on at the Annual Meeting other than
consideration of the Merger, the election of directors and the appointment of
Point Bancorp's auditors. It is not anticipated that other matters will be
brought before the Annual Meeting.
A person giving a Proxy may revoke it at any time before it is voted by
notifying Point Bancorp in person, by giving written notice to Point Bancorp of
the revocation of the Proxy, by submitting to Point Bancorp a subsequently dated
proxy, or by attending the meeting and withdrawing the proxy before it is voted
at the meeting.
OPINION OF POINT BANCORP FINANCIAL ADVISOR
Berwind Financial Group, Inc. ("Berwind"), Point Bancorp's financial
advisor, has rendered its opinion to the Point Bancorp Board of Directors that
the consideration to be paid is fair to Point Bancorp's shareholders from a
financial point of view. As discussed in "The Merger- Reasons for the Merger,"
Berwind's opinion and presentations were among the factors considered by the
Point Bancorp Board in reaching the determination to approve the Merger. A copy
of Berwind's opinion is attached hereto as Appendix II and should be read in its
entirety with respect to the assumptions made, other matters considered and
limitations on the review undertaken by Berwind in rendering its opinion. See
"The Merger - Opinion of Point Bancorp's Financial Advisor".
RIGHTS OF DISSENTING SHAREHOLDERS
Under Delaware law, holders of Point Bancorp Common Stock have the right to
dissent from the Merger and, if the Merger is consummated and such holders have
complied with all applicable notice requirements and other procedures, to
receive payment of the fair value of their shares. See "The Merger - Appraisal
Rights".
3
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FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the Merger will be a tax-free reorganization for
federal income tax purposes. Point Bancorp Shareholders will receive both cash
and One Valley Common Stock in exchange for their Point Bancorp Common Stock
under the terms of the Merger. Upon the exchange of stock, Point Bancorp
Shareholders will recognize no gain or loss upon their exchange of Point Bancorp
Common Stock solely for shares of One Valley Common Stock. Upon the exchange of
cash for Point Bancorp Common Stock, including cash for fractional shares, Point
Bancorp Shareholders will recognize gain, but not in an amount in excess of cash
received. See "The Merger - Federal Income Tax Consequences."
ACCOUNTING TREATMENT
One Valley expects that the Merger will be accounted for under the purchase
method of accounting. See "The Merger -Accounting Treatment".
CONDITIONS; REGULATORY APPROVALS; TERMINATION
Consummation of the Merger is subject to various conditions, including
among others, receipt of approval by a majority of Point Bancorp's shareholders,
receipt of certain legal opinions and the satisfaction of other closing
conditions. In addition, the Merger is subject to receipt of required approvals
from the Federal Reserve Board, the Office of Thrift Supervision and the West
Virginia Board of Banking and Financial Institutions ("West Virginia Board").
An application seeking approval of the Merger was filed with the Office of
Thrift Supervision on October 20, 1994. Applications seeking approval of the
Merger were filed with the Federal Reserve Board and the West Virginia Board on
October 31, 1994. The Federal Reserve Board approved the application on
December 20, 1994, and the West Virginia Board approved the application on
December 12, 1994. See "The Merger -Regulatory Approvals". The Merger may be
terminated under certain circumstances. See "The Merger-Termination."
EFFECT OF THE MERGER ON SHAREHOLDERS' RIGHTS
If the Merger Agreement is approved, Point Bancorp Shareholders will receive
shares of One Valley Common Stock, which have different rights with respect to
certain important matters including certain provisions which are intended to
ensure that a party seeking control of One Valley will discuss its proposal with
One Valley's Board of Directors. Point Bancorp is a Delaware corporation, and
upon consummation of the Merger, Point Bancorp Shareholders will become
shareholders of a West Virginia corporation. See "Effect of the Merger on
Shareholders' Rights".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Point Bancorp's management and Point Bancorp's Board of
Directors have interests in the Merger in addition to their interests as
stockholders of Point Bancorp generally. These include provisions in the Merger
Agreement relating to indemnification, severance payments and benefit plan
payments. Point Bancorp's Board of Directors were aware of these interests and
considered them in approving the Merger Agreement. See "Employment Agreements"
and "Management After the Merger."
ELECTION OF DIRECTORS
At the Annual Meeting, Point Bancorp Shareholders are being asked to elect
C. Edwin Cotton and Maye R. Smith to Point Bancorp's Board of Directors for a
term of three years.
RATIFICATION OF APPOINTMENT OF AUDITORS
Trainer, Wright & Paterno were Point Bancorp's independent Certified Public
Accountants for 1994. The Board of Directors has approved Trainer, Wright &
Paterno as its auditors for the 1995 fiscal year, subject to ratification by
Point Bancorp's Shareholders.
4
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following tables present the historical per share data, pro forma
combined and pro forma equivalent per share data of One Valley and Point
Bancorp. The information is based on the historical financial statements and
does not purport to be indicative of the results of future operations or the
actual results that would have occurred had the Merger been consummated at the
beginning of each period presented. The pro forma data gives effect to the
Merger as if the entities had been consummated at the beginning of each period
presented using the purchase method of accounting. For pro forma purposes, it
is assumed that the historical dividend rate of One Valley will be the same.
The information presented below should be read in conjunction with other
unaudited pro forma financial information included elsewhere in this Proxy
Statement, and with the separate financial statements of both One Valley and
Point Bancorp, including applicable notes, included elsewhere in or incorporated
herein by reference this Proxy Statement.
ONE VALLEY
PRO FORMA(1)
HISTORICAL COMBINED
Book Value at Period End:
September 30, 1994 $ 18.66 $ 18.91
September 30, 1993 17.46 17.72
December 31, 1993 17.70 17.95
December 31, 1992 16.29 16.22
December 31, 1991 14.83 14.74
Cash Dividends Declared:
For the Nine Months Ended
September 30, 1994 $ .69 $ .69
September 30, 1993 .62 .62
For the Year Ended
December 31, 1993 .84 .84
December 31, 1992 .70 .70
December 31, 1991 .62 .62
Earnings Per Share:
For the Nine Months Ended
September 30, 1994 $ 2.02 $ 1.99
September 30, 1993 1.76 1.74
For the Year Ended
December 31, 1993 2.20 2.18
December 31, 1992 2.13 2.10
December 31, 1991 1.72 1.70
(1) Based on the issuance of 422,370 shares of One Valley Common Stock to
acquire all of the outstanding Point Bancorp Common Stock.
5
<PAGE>
POINT BANCORP
PRO FORMA
HISTORICAL (1) EQUIVALENT
Book Value at Period End:
September 30, 1994 $ 21.65 (2) $18.45
September 30, 1993 21.43 (2) 17.73
Cash Dividends Declared:
For the Year Ended
September 30, 1994 $ 0.40 $ 0.55
September 30, 1993 -- 0.37
Earnings Per Share:
For the Year Ended
September 30, 1994 $ 0.77 $ 1.46
September 30, 1993 (3) 0.58 1.04
(1) Based on the assumed exchange ratio of one (1) share of Point Bancorp
Common Stock for six-tenths (.6) of a
share of One Valley Common Stock.
(2) Includes the cash to be paid by One Valley of $7.10 per share.
(3) Historical earnings per share represent the earnings per share since
the conversion date of Point Bancorp from a
mutual to a stock company, which occured on December 31, 1992. The pro
forma equivalent represents the pro forma
combined earnings per share for the nine month period ending September 30,
1993.
6
<PAGE>
SELECTED FINANCIAL DATA
The following pages present selected financial information for the years
ended December 31, 1989, through December 31, 1993, and for the nine months
ended September 30, 1994 and 1993, for One Valley and financial information for
the years, ended September 30, 1990, through September 30, 1994 for Point
Bancorp, which will be merged with and into One Valley pursuant to the Merger
Agreement.
<TABLE>
<CAPTION>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
(Dollars in thousands Except Per Share Data)
At or for the
Nine Months
Ended September 30, At or for the Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income............ 116,838 109,927 247,699 $ 263,484 $ 242,792 $ 234,025 $ 226,249
Interest expense........... 68,921 75,368 99,786 120,039 130,913 134,462 131,335
Net interest income........ 185,759 185,295 147,913 143,445 111,879 99,563 94,914
Provision for losses....... 3,577 4,521 5,788 11,389 6,671 7,884 12,404
Non-interest income........ 28242 30,065 40,149 37,403 25,086 19,670 17,199
Securities transactions.... (717) 177 113 (35) (730) (37) 265
Non-interest expense....... 89,990 90,186 126,107 116,140 92,429 79,201 75,676
Net income................. 34,679 30,264 37,954 36,638 26,392 23,709 19,101
PER SHARE DATA
Net income................. $ 2.02 $ 1.76 $ 2.20 $ 2,13 $ 1.72 $ 1.55 $ 1.25
Cash dividends............. $ 0.69 $ 0.62 $ 0.84 0.70 0.62 0.59 0.56
AVERAGE BALANCE SHEET
SUMMARY
Loans, net................. 2,169,631 1,999,362 2,026,748 $1,926,773 $1,557,230 $1,384,035 $1,346,884
Investment securities...... 1,065,881 1,069,653 1,074,467 1,049,459 834,820 745,063 657,578
Total assets............... 3,529,612 3,444,601 3,467,261 3,373,245 2,771,901 2,483,158 2,377,899
Deposits................... 2,515,463 2,489,246 2,895,131 2,829,263 2,343,404 2,101,377 2,018,646
Long-term debt............. 22,526 37,244 36,088 25,703 15,653 21,342 22,489
Shareholders' equity....... 314,644 291,762 294,733 269,007 215,273 196,500 184,558
SELECTED RATIOS
Equity to average assets... 8.91% 8.47% 8.50% 7.97% 7.77% 7.91% 7.76%
Return on average assets. 0.98% 0.88 1.09% 1.09 % 0.95% .95% 0.80
Return on average equity 11.02% 10.37 12.88% 13.62 % 12.26 % 12.07% 10.35%
Dividends declared as
a % of net income....... 34.16% 35.23% 38.18% 32.86% 36.05% 38.06% 44.80%
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
POINT BANCORP, INC.
(Dollars in thousands Except Per Share Data)
At or for the Year Ended September 30,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income............ $ 3,419 $ 3,682 $ 4,007 $ 4,358 $ 4,410
Interest expense........... 1,679 1,842 2,412 2,412 3,131
Net interest income........ 1,740 1,840 1,595 1,595 1,279
Provision for losses....... 1,716 1,802 1,520 1,520 1,231
Non-interest income........ 36 40 45 45 31
Securities transactions.... 0 0 0 0 0
Non-interest expense....... 960 977 791 791 731
Net income................. 495 505 454 454 343
PER SHARE DATA
Net income................. $ 0.77 $ 0.58 $ 0.00 $ 0.00 $ 0.00
Cash dividends............. 0.40 0.00 0.00 0.00 0.00
AVERAGE BALANCE SHEET
SUMMARY
Loans, net................. 11,692 11,692 12,137 12,436 12,650
Investment securities...... 16,588 15,542 16,588 4,198 3,724
Total assets............... 57,256 57,171 51,509 49,562 47,831
Deposits................... 43,602 44,080 44,156 42,615 41,327
Long-term debt............. 0 0 0 0 0
Shareholders' equity....... 13,501 12,303 6,846 6,468 6,046
SELECTED RATIOS
Equity to average assets... 23.58% 21.52% 13.29% 13.05% 12.64%
Return on average assets. 0.86% 0.88% 0.88% 0.75% 0.71%
Return on average equity 3.65% 4.10% 6.63% 5.72% 5.64%
Dividends declared as
a % of net income....... 51.95% 0.00% 0.00% 0.00% 0.00%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. and
POINT BANCORP, INC.
Pro Forma Selected Financial Information
(Dollars in thousands Except Per Share Data)
At or for the
Nine Months
Ended September 30, At or for the Year Ended December 31,
1994 1993 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income............ 188,297 188,065 $ 251,381 $ 267,491 $ 247,150 $ 238,435
Interest expense........... 70,181 76,771 101,628 122,451 133,852 137,593
Net interest income........ 118,116 111,294 149,753 145,040 113,298 100,842
Provision for losses....... 3,595 4,544 5,826 11,464 6,719 7,932
Non-interest income........ 29,001 29,934 40,189 37,448 25,122 19,701
Securities transactions.... (717) 177 113 (35) (730) (37)
Non-interest expense....... 90,710 90,898 127,084 116,931 93,207 79,932
Net income................. 35,059 30,666 38,459 37,092 26,762 24,052
PER SHARE DATA
Net income................. $ 1.99 $ 1.74 $ 2.18 $ 2.10 $ 1.70 $ 1.53
Cash dividends............. $ 0.69 $ 0.62 0.84 0.70 0.62 0.59
AVERAGE BALANCE SHEET
SUMMARY
Loans, net................. 2,181,371 2,010,910 2,038,011 1,938,788 1,569,770 1,396,685
Investment securities...... 1,109,843 1,111,125 1,118,331 1,087,269 870,235 778,764
Total assets............... 3,586,882 3,499,473 3,524,432 3,424,754 2,821,463 2,531,227
Deposits................... 2,975,881 2,924,931 2,938,878 2,873,419 2,386,019 2,142,704
Long-term debt............. 23,026 37,521 36,421 25,703 15,653 21,342
Shareholders' equity....... 328,099 302,022 307,036 275,853 221,741 202,577
SELECTED RATIOS
Equity to average assets... 9.15% 8.63% 8.71% 8.05% 7.86% 8.00%
Return on average assets. 1.30% 1.17% 1.09% 1.08% 0.95% 0.95%
Return on average equity 14.25% 13.54% 12.53% 13.45% 12.07% 11.87%
Dividends declared as
a % of net income....... 34.67% 35.63% 38.53% 33.33% 36.47% 38.56%
</TABLE>
9
<PAGE>
THE MERGER
THE FOLLOWING INFORMATION CONCERNING THE MERGER, INSOFAR AS IT RELATES TO
MATTERS CONTAINED IN THE MERGER AGREEMENT, IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT WHICH IS ATTACHED HERETO AND INCORPORATED
HEREIN AS APPENDIX I.
GENERAL
On September 2, 1994, One Valley and Point Bancorp entered into the Merger
Agreement which provides for the merger of Point Bancorp with and into Thrift
which is a wholly-owned subsidiary of One Valley. On the effective date of the
Merger, the shareholders of Point Bancorp will become shareholders of One
Valley, and the separate existence and corporate organization of Point Bancorp
will cease. As a result of the Merger, Point Bancorp and its Savings Bank will
become subsidiaries of One Valley, and each of the outstanding shares of Point
Bancorp Common Stock will be converted into shares of One Valley at the exchange
rate of six-tenths (.6) of a share of One Valley Common Stock for each share of
Point Bancorp Common Stock. In lieu of fractional shares, each shareholder of
Point Bancorp, who would otherwise be entitled to receive a fraction of a share,
will receive an amount in cash equal to such fraction multiplied by the average
of the closing bid and ask price of One Valley on the business day immediately
prior to the effective date of the Merger. Additionally, each shareholder of
Point Bancorp will receive $7.10 in cash for each share of Point Bancorp
exchanged.
The affirmative vote of not less than a majority of the outstanding shares
of Point Bancorp is required to approve the Merger.
Subject to shareholder approval, the satisfaction of certain conditions and
the receipt of all requisite regulatory approvals, the Merger shall become
effective on the date the certificate of merger approving the Merger is issued
by the Secretary of State of West Virginia, but in any event, no later than the
60th day after receipt of all requisite approvals of regulatory authorities and
shareholders.
OPERATIONS AFTER THE MERGER
It is anticipated that after the Merger is complete and in conjunction with
an orderly transition, One Valley will continue to conduct operations in Point
Pleasant as a federally chartered savings bank with the title "One Valley Bank,
F.S.B." Using the unlimited interstate branching powers of such federal savings
bank, One Valley anticipates that it may also expand its operations by opening
branches in Ohio. Currently, One Valley has not entered into any negotiations,
agreements, understandings or arrangements with regard to any such expansion.
In addition, One Valley will, over time, expand the products and services
currently offered by Point Bancorp through the introduction of the common
products currently offered statewide by One Valley's affiliate banks.
MANAGEMENT AFTER THE MERGER
It is anticipated that following consummation of the Merger, One Valley
will continue the existence of its newly organized savings & loan holding
company. The Board of Directors of Thrift as well as One Valley Bank, F.S.B.
will be comprised of five officers of One Valley Bancorp of West Virginia, Inc.,
and its affiliates. Pursuant to the Merger Agreement, Maye Smith and Faye R.
Hudson will have their employment agreements amended to provide One Valley will
make a lump sum payment in cash to these individuals in the amount equal to one
year of their respective salaries as in effect on the effective date of the
Merger and will reimburse each of them for the remainder of each of their lives
in an amount equal to the highest Medicare Supplement offered to retirees of One
Valley provided that such persons terminate their respective employment
agreements effective as of the effective date of the Merger and release in full
One Valley from any and all obligations thereunder. It is also anticipated that
following a brief transition period, Maye R. Smith and Faye R. Hudson will
retire, although they may be retained as consultants by One Valley. See
"Management of Point Bancorp -Employment Agreements." An officer of One Valley
will thereafter manage these operations. The Board of Directors of Point
Bancorp will serve on an advisory board of the thrift for 12 months after the
effective date and will be paid $650 per month for such service.
10
<PAGE>
BACKGROUND OF THE MERGER
In recognition of the trend towards consolidation and increasing
competition in the financial institution industry, the Board of Directors of
Point Bancorp hired an investment advisor in mid-1994. After a lengthy
interview process with several investment advisors, Berwind Financial Group,
Inc. ("Berwind") was hired by Point Bancorp to evaluate strategic alternatives
available to Point Bancorp under the existing circumstances and to provide
guidance as to possible courses of action. Subsequently, Point Bancorp
instructed Berwind to assist in the preparation of a confidential offering
memorandum regarding Point Bancorp and to solicit preliminary indications of
interest to acquire Point Bancorp.
Berwind contacted a number of financial institutions and holding companies
that it and management believed would have a strategic interest in Point
Bancorp. After execution of a confidentiality agreement, interested parties
were provided with a confidential offering memorandum.
After the receipt of preliminary indications of interest, the Board of
Directors of Point Bancorp met to assess and consider, among other things, the
terms and conditions of the preliminary indications of interest. At this
meeting, Berwind made a detailed presentation regarding the preliminary
indications of interest and the financial institutions and holding companies
which submitted them as well as background information relating to recent merger
and acquisition pricing. Based on this presentation and certain criteria of
Point Bancorp's Board, the Point Bancorp Board requested that Berwind obtain
additional information from certain parties who had submitted preliminary
indications of interest.
After the receipt of additional information from these parties, the Point
Bancorp Board of Directors met to assess and consider the indications of
interest. At this meeting, Berwind provided an analysis of the additional
information. Following extensive discussion, the Board voted to authorize
management to negotiate the terms of a definitive merger agreement with One
Valley, which had submitted the highest offer.
During the next several weeks, management of Point Bancorp and One Valley
and their respective financial and legal advisors engaged in negotiations
concerning the terms of a transaction and a definitive agreement. During this
time, the Point Bancorp Board of Directors met to review and discuss the ongoing
negotiations, including the terms of a transaction and a definitive agreement.
On September, 2, 1994, the Point Bancorp Board met again to consider the
proposed definitive agreement with One Valley. After extensive discussion, the
Point Bancorp Board voted to authorize the execution of the definitive
agreement.
REASONS FOR THE MERGER
The Boards of Directors of One Valley and Point Bancorp consider the Merger
to be advisable and to the advantage of each company and its respective
shareholders, employees and customers. After the Merger, One Valley will have
over 6,000 Shareholders, which will result in increased trading volumes and
shareholder liquidity for former Point Bancorp Shareholders. In addition, in
some areas, the Merger may result in economies of scale which would permit more
efficient operations and cost savings. Customers of both companies throughout
the state will benefit from additional offices to serve them. After the
Merger, the resulting company will operate at 80 offices located in 51 towns
throughout West Virginia. The Board of Directors of Point Bancorp recommends
Shareholder approval of the Merger Agreement. The exchange ratio of $7.10 in
cash and six-tenths (.6) of a share of One Valley represents an exchange
premium of approximately 12.6% to Point Bancorp Shareholders based on a
comparison of the market value of One Valley Common Stock as of January 9,
1995, with the market value of Point Bancorp Common Stock as of January 9,
1995. Point Bancorp, as a part of a larger multi-bank holding company, will be
able to compete more effectively, due in part to economies of scale, and will
also be able to offer a wider range of products and services in various areas.
Pursuant to the Merger Agreement, former shareholders of Point Bancorp will
have equity ownership in a large bank holding company. When the Merger is
consummated, assuming that there are no dissenting shareholders, shareholders of
Point Bancorp will receive, in the aggregate, 422,370 shares of One Valley
Common Stock, or approximately 2.42% of the 17,436,648 shares of One Valley
Common Stock which are expected to be issued and outstanding at that time.
Based upon financial data as of September 30, 1994, the proportion of the pro
forma consolidated bank holding company assets contributed by Point Bancorp will
be approximately 1.56% of assets, 1.44% of deposits, 1.19% of revenues, 1.15% of
net income and 4.13% of shareholder equity.
11
<PAGE>
One Valley has determined that the banking markets served by Point Bancorp
are attractive, that One Valley's presence in those markets will be advantageous
to its expanding, state-wide operations and that the Merger will complement its
present service areas. The Merger with Point Bancorp will enable One Valley to
expand its banking and related activities in western West Virginia. If the
Merger had been completed on September 30, 1994, One Valley would have had
approximately $3.66 billion in total assets, approximately $2.96 billion in
total deposits and approximately $2.33 billion in total loans. As of December
31, 1994, One Valley is the largest bank holding company in West Virginia.
OPINION OF POINT BANCORP'S FINANCIAL ADVISOR
Point Bancorp has retained Berwind to act as its financial advisor and to
render a fairness opinion in connection with the Merger. Berwind has rendered
opinions that, based upon and subject to various considerations set forth
therein, as of the date of this Proxy Statement/Prospectus, the Merger is fair,
from a financial point of view, to the holders of Point Bancorp Common Stock.
The full text of Berwind's opinion dated January 24, 1994, which
sets forth the assumptions made, matters considered and limitations of
the review undertaken, is attached as Appendix II to this Proxy
Statement/Prospectus and is incorporated herein by reference, and should
be read in its entirety in connection with this Proxy
Statement/Prospectus. The summary of the opinion of Berwind set forth
herein is qualified in its entirety by reference to the full text of
such opinion attached as Appendix II of this Proxy Statement/Prospectus.
Point Bancorp retained Berwind to act as Point Bancorp's financial advisor
in connection with the Merger based upon its qualifications, expertise and
reputation. No limitations were imposed by Point Bancorp's Board of Directors
upon Berwind with respect to the investigations made or procedures followed by
Berwind in rendering its opinion.
In rendering its Opinion, Berwind (a) reviewed the Merger Agreement; (b)
reviewed this Proxy Statement/Prospectus; (c) reviewed the consolidated
financial statements of Point Bancorp for the three years ended September 30,
1994 and of One Valley for the three years ended December 31, 1993, and certain
other publicly filed information concerning Point Bancorp and One Valley,
including but not limited to (i) Point Bancorp's Annual Reports to Shareholders
and Annual Reports on Form 10-K for the fiscal years ended September 30, 1993
and 1994; (ii) One Valley's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended December 31, 1991, 1992, and 1993; (iii)
Point Bancorp's Subscription and Community Offering Prospectus, dated November
12, 1993; (iv) One Valley's Quarterly Reports to Shareholders and Quarterly
Reports on Form 10-Q for the Quarter ended September 30, 1994; and (v) the most
recent proxy statements of each of Point Bancorp and One Valley; (d) analyzed
certain internal financial statements and other financial operating data
including asset quality trends concerning Point Bancorp and prepared by Point
Bancorp's management; (e) reviewed with senior management of Point Bancorp
certain internal forecasted results of operations for Point Bancorp as prepared
by its management; (f) held discussions with members of the senior managements
of Point Bancorp and One Valley regarding past and current business operations
and financial conditions; (g) analyzed the future prospects of the respective
companies; (h) reviewed the reported trading prices and trading activity for
One Valley Common Stock and Point Bancorp Common Stock; (i) analyzed certain
financial and stock market information for One Valley and compared that data
with similar information for certain other companies, the securities of which
are publicly traded; (j) reviewed the financial terms of certain recent
business combinations in the commercial banking and thrift industries; and (k)
performed such other studies and analyses as Berwind considered appropriate.
Berwind relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by and
discussed with it for purposes of its opinion. With respect to Point Bancorp's
financial forecasts reviewed by Berwind in rendering its opinion, Berwind
assumed that such financial forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of Point Bancorp as to the future financial performance of Point
Bancorp. Berwind did not make an independent valuation or appraisal of the
assets (including loans) or liabilities of Point Bancorp or One Valley nor was
it furnished with any appraisal. Berwind also did not independently verify and
has relied on and assumed that all allowances for loan and lease losses set
forth in the balance sheets of Point Bancorp and One Valley were adequate and
complied fully with applicable law, regulatory policy and sound banking practice
as of the date of such financial statements.
The following is a summary of selected analyses prepared by Berwind,
presented to Point Bancorp's Board at several meetings and analyzed by Berwind
in connection with its opinion.
12
<PAGE>
COMPARABLE COMPANIES AND COMPARABLE ACQUISITION TRANSACTION ANALYSES.
Berwind compared selected financial and operating data for Point Bancorp with
those of a peer group of selected thrifts with assets of less than $125 million,
as of June 30, 1994, located in West Virginia. Financial data and operating
ratios compared in the analysis of the Point Bancorp peer group included: return
on average assets, return on average equity, shareholders' equity to assets
ratios and certain asset quality ratios. Berwind also compared selected
financial, operating and stock market data for One Valley with those of a peer
group of selected commercial banks and bank holding companies with assets
between $1.5 billion and $5 million, as of September 30, 1994, located in
Pennsylvania, Ohio, Virginia, West Virginia and Kentucky. Financial, operating
and stock market data included: return on average assets, return on average
equity, shareholders' equity to asset ratios, certain asset quality ratios,
price to book value, price to tangible book value, price to earnings (latest
twelve months) and dividend yield.
Berwind also compared the multiples of book value, tangible book value and
latest twelve months' earnings inherent to the Merger with the multiples paid in
recent acquisitions of thrifts and thrift holding companies that Berwind deemed
comparable. The transactions deemed comparable by Berwind included both
interstate and intrastate acquisitions announced since January 1, 1994, in which
selling institution's (i) assets were less than $125 million or (ii) equity to
assets was greater than 12%. Berwind compared selected transactions located
throughout the country. However, no company or transaction used in this
analysis is identical to Point Bancorp, One Valley or the Merger. Accordingly,
an analysis of the result of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
would affect the public trading values of the companies or company to which they
are being compared.
DISCOUNTED DIVIDEND ANALYSES. Using discounted dividend analyses, Berwind
estimated the present value of the future dividend streams that Point Bancorp
could produce over a five-year period under different assumptions as to dividend
pay-out levels, if Point Bancorp performed in accordance with various earnings
growth forecasts. Berwind also estimated the terminal value for Point
Bancorp's Common Stock after the five-year period by applying a range of
earnings multiples from 8 to 12 times Point Bancorp's terminal year earnings.
The range of multiples used reflected a variety of scenarios regarding the
growth and profitability prospects of Point Bancorp. The dividend streams and
terminal values were then discounted to present value using discount rates
ranging from 8% to 18%, reflecting different assumptions regarding the rates of
return required by holders or prospective buyers of Point Bancorp's Common
Stock.
In connection with rendering its opinion, Berwind performed a variety of
financial analyses. Although the evaluation of the fairness, from a financial
point of view, of the consideration to be paid in the Merger was to some extent
a subjective one based on experience and judgment of Berwind and not merely the
result of mathematical analysis of financial data, Berwind principally relied on
the previously discussed financial valuation methodologies in its
determinations. Berwind believes its analyses must be considered as a whole and
that selecting portions of such analyses and factors considered by Berwind
without considering all such analyses and factors could create an incomplete
view of the process underlying Berwind's opinion. In its analysis, Berwind made
numerous assumptions with respect to business, market, monetary and economic
conditions, industry performance and other matters, many of which are beyond
Point Bancorp's and One Valley's control. Any estimates contained in Berwind's
analyses are not necessarily indicate of future results or values, which may be
significantly more or less favorable than such estimates. None of the analyses
performed by Berwind was assigned a greater significance by Berwind than any
other.
In connection with delivering its opinion, Berwind reviewed the assumptions
which it utilized in connection with performing the analyses described above
with the management of Point Bancorp and updated certain analyses described
above to reflect current market conditions and events occurring since the date
of the Merger Agreement.
Berwind, as part of its investment banking business, is regularly engaged
in the valuation of assets, securities and companies in connection with various
types of asset and security transactions, including mergers, acquisitions,
private placements, and valuations for various other purposes and in the
determination of adequate consideration in such transactions.
Berwind's opinion was based solely upon the information available to it and
the economic, market and other circumstances as they existed as of the date its
opinion was delivered. Events occurring after the date of its opinion could
materially affect the assumptions used in preparing its opinion. Berwind has
not undertaken to reaffirm and revise its opinion or otherwise comment upon any
events occurring after the date thereof.
In delivering its opinion, Berwind assumed that in the course of obtaining
the necessary regulatory and governmental approvals for the Merger, no
restriction will be imposed on One Valley that would have a material adverse
effect on the
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contemplated benefits of the Merger. Berwind also assumed that there would not
occur any change in applicable law or regulation that would cause a material
adverse change in the prospects or operations of One Valley after the Merger
.
Pursuant to the terms of the engagement letter executed on May 16, 1994,
Point Bancorp paid Berwind $7,500 upon its engagement and $35,000 for acting as
financial advisor in connection with the Merger including delivering its
opinion. In addition, Point Bancorp has also agreed to pay Berwind $154,098.70
upon the consummation of the Merger and to reimburse Berwind for its reasonable
out-of-pocket expenses. Point Bancorp has agreed to indemnify Berwind, and
certain related persons, against certain liabilities relating to or arising out
of Berwind's engagement.
Point Bancorp's stockholders are urged to read the opinion in its entirety.
Berwind's opinion is directed only to the consideration to be received by
Point Bancorp stockholders in the Merger and does not constitute a
recommendation to any holder of Point Bancorp Common Stock as to how such
holder should vote at the Point Bancorp Annual Meeting.
THE FOREGOING PROVIDES ONLY A SUMMARY OF THE OPINION OF BERWIND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THAT OPINION, WHICH
IS SET FORTH IN APPENDIX II TO THIS PROXY STATEMENT/PROSPECTUS.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger will occur only if the Merger Agreement is approved by the
affirmative vote of the holders of a majority of the issued and outstanding
shares of Point Bancorp Common Stock. Consummation of the Merger is subject to
the satisfaction of certain other conditions, including: (i) receipt of
approvals of the Merger from Shareholders of Point Bancorp and the Federal
Reserve Board, the Office of Thrift Supervision, the West Virginia Board and any
other governmental authority having jurisdiction, and the expiration of any
applicable waiting periods; (ii) representations and warranties of One Valley
and Point Bancorp contained in the Merger Agreement being true and correct in
all material respects on the effective date of the Merger; (iii) receipt of
certain legal opinions from counsel, including an opinion regarding certain
federal tax aspects of the Merger; (iv) Point Bancorp having delivered to One
Valley a schedule of all persons deemed to be "affiliates" of Point Bancorp;
and (v) the effectiveness of the registration statement filed with the
Securities and Exchange Commission and the absence of any pending or threatened
stop order proceedings with respect thereto.
One Valley and Point Bancorp may waive (i) any inaccuracies in the
representations and warranties of the other party contained in the Merger
Agreement or in any document delivered pursuant thereto, and (ii) compliance by
the other party with any of the conditions, covenants and agreements contained
in the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated (i) by mutual consent of Point
Bancorp and One Valley, (ii) by One Valley if there has been a material
misrepresentation or breach of warranty in the representations and warranties of
Point Bancorp in the Merger Agreement, (iii) by Point Bancorp if there has been
a material misrepresentation or breach of warranty in the representations and
warranties of One Valley in the Merger Agreement, (iv) by either Point Bancorp
or One Valley upon written notice to the other if the effective date of the
Merger does not occur on or before midnight on May 31, 1995, and (v) by either
One Valley or Point Bancorp if the Merger will violate any nonappealable final
order, decree or judgment of any court or governmental body having competent
jurisdiction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The summary of certain federal income tax consequences set forth below, is
based on the Internal Revenue Code of 1986, as amended (the "Code"), and is for
general information only. The tax treatment of particular Shareholders may
vary depending on their specific circumstances. Special tax considerations not
discussed herein may be applicable to particular categories of taxpayers, such
as broker-dealers, or to any Shareholders who acquired their Point Bancorp
Common Stock through the exercise of an employee stock option or otherwise as
compensation. This discussion does not address the effect of any applicable
foreign, state, local or other tax laws. SHAREHOLDERS OF POINT BANCORP ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
THEM OF THE MERGER, INCLUDING THE APPLICABILITY OF AND EFFECT OF FOREIGN, STATE,
LOCAL AND OTHER TAX LAWS.
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In the opinion of Jackson & Kelly, counsel to One Valley, the Merger will
have the following tax consequences:
1. The Merger will constitute a tax-free reorganization under Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Code and Point Bancorp, Thrift, and
One Valley will each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code.
2. No gain or loss will be recognized by Point Bancorp, One Valley, or
Thrift as a result of the Merger.
3. The basis of the assets of Point Bancorp acquired by Thrift in the
Merger will be the same as the basis of such assets in the hands of Point
Bancorp immediately prior to the Merger, and the holding period of the assets of
Point Bancorp in the hands of Thrift will include, in each instance, the holding
period during which such assets were held by Point Bancorp.
4. Point Bancorp Shareholders will receive both cash and One Valley Common
Stock in exchange for their Point Bancorp Common Stock under the terms of the
Merger. Upon the exchange of stock, Point Bancorp Shareholders will recognize
no gain or loss upon their exchange of Point Bancorp Common Stock solely for
shares of One Valley Common Stock. Upon the exchange of cash for Point Bancorp
Common Stock, INCLUDING CASH FOR FRACTIONAL SHARES, Point Bancorp Shareholders
will recognize gain, but not in an amount in excess of the amount of cash
received. With respect to the receipt of cash, Point Bancorp Shareholders will
have their cash treated as if it were received as a distribution in redemption
of that Shareholder's One Valley Common Stock, and the receipt of the cash will
be taxable subject to the provisions and limitations of section 302 of the Code.
Under section 302(b)(2) of the Code, the deemed redemption of the One Valley
Common Stock should be treated as a "substantially disproportionate redemption"
with respect to each Point Bancorp Shareholder, and accordingly, should be
treated as a sale or exchange of property. If a Point Bancorp Shareholder has
held his or her Point Bancorp Common Stock for more than one year, the gain
should be treated as long-term capital gain, provided that the Point Bancorp
Common Stock was a capital asset in the hands of the Point Bancorp Shareholder
on the date of the exchange.
5. The basis of the One Valley Common Stock to be received by Point
Bancorp Shareholders will be, in each instance, the same as the basis of the
Point Bancorp Common Stock surrendered in exchange therefor decreased by the
amount of cash received by the Shareholder and increased by the amount of gain
recognized by such Shareholder with respect to the cash received pursuant to the
Merger.
6. The holding period of the One Valley Common Stock received by Point
Bancorp Shareholders will include the period during which the Point Bancorp
Common Stock surrendered in exchange therefor was held by Point Bancorp
Shareholders, provided that the Point Bancorp Common Stock was a capital asset
in the hands of the Point Bancorp Shareholder on the date of the exchange.
7. No loss will be recognized by a Point Bancorp Shareholder on the
receipt of the One Valley Common Stock and cash in exchange for Point Bancorp
Common Stock.
8. Where solely cash is received by a Shareholder of Point Bancorp in
exchange for his or her Point Bancorp Common Stock pursuant to the exercise of
dissenters' rights, the cash will be treated as having been received by such
Shareholders as a distribution in redemption of their Point Bancorp Common
Stock, subject to the provisions and limitations of Section 302 of the Code.
Where as a result of such distribution a Shareholder owns no One Valley Common
Stock either directly or through the application of section 318(a) of the Code,
the redemption will be a complete termination of interest within the meaning of
section 302(b)(3) of the Code and such cash will be treated as a distribution in
full payment in exchange for his or her Point Bancorp Common Stock, as provided
in section 302 (a) of the Code. Under Section 1001 of the Code, gain or
(subject to the limitations of section 267 of the Code) loss will be realized
and recognized to such Shareholders in an amount equal to the difference between
the amount of such cash and the adjusted basis of the Point Bancorp Common Stock
surrendered, as determined under section 1011 of the Code. If a Point Bancorp
Shareholder has held his or her Point Bancorp Common Stock for more than one
year the gain should be treated as long term capital gain, provided that the
Point Bancorp Common Stock was a capital asset in the hands of the Point
Bancorp Shareholder on the date of the exchange.
9. Thrift will succeed to and take into account those attributes of Point
Bancorp described in Section 381(c) of the Code and Thrift will be the
"acquiring corporation" within the meaning of Section 1.381(a)-1(b)(2) of the
Treasury Regulations. These items will be taken into account by Thrift subject
to the conditions and limitations specified in Sections 381, 382, 383 and 384
of the Code and regulations thereunder.
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In rendering the above opinions, Jackson & Kelly has relied upon written
representations and covenants of One Valley and Point Bancorp. No ruling has
been sought from the Internal Revenue Service as to the federal income tax
consequences of the Merger, and the opinions of Jackson & Kelly set forth above
are not binding on the Internal Revenue Service or any Court.
EXCHANGE OF CERTIFICATES
As soon as practicable after the effective date of the Merger, the
certificates representing the outstanding shares of Point Bancorp Common Stock
will be surrendered to Harris Trust and Savings Bank (the "Exchange Agent") and,
upon such surrender, the Exchange Agent will issue certificates representing
the number of shares of One Valley Common Stock into which surrendered shares
have been converted and will issue cash in lieu of fractional shares (without
interest).
Certificates representing shares of Point Bancorp Common Stock (other than
shares of Point Bancorp Common Stock subject to perfected appraisal rights)
which are not surrendered will be deemed for all purposes to evidence the
ownership of the number of shares of One Valley Common Stock into which the
shares of Point Bancorp Common Stock will have been converted. No dividends or
distributions payable to holders of record of One Valley Common Stock will be
paid to former Point Bancorp Shareholders who have not surrendered their
certificates formerly representing shares of Point Bancorp Common Stock, until
they have exchanged their certificates representing their Point Bancorp Common
Stock for certificates representing One Valley Common Stock, at which time the
holder will be paid the amount of dividends previously declared on such shares
without interest. All unclaimed dividends at the end of two years from the
effective date of the Merger will be repaid by the Exchange Agent to One Valley,
and thereafter, the holders of certificates of Point Bancorp Common Stock will
be paid directly by One Valley.
ACCOUNTING TREATMENT
Under generally accepted accounting principles, it is anticipated that the
Merger will be accounted for under the purchase method of accounting. The
assets and liabilities of Point Bancorp will be reflected in the consolidated
financial statements of One Valley based upon their fair values as of the
effective date of the Merger. Results of operations will be reflected in the
consolidated financial statements of One Valley for all periods subsequent to
the effective date of the Merger.
RESALES BY AFFILIATES
The shares of One Valley Common Stock issued to Point Bancorp Shareholders
upon consummation of the Merger have been registered under the Securities Act,
but such registration does not cover resales by affiliates of Point Bancorp
("Affiliates"). One Valley Common Stock received and beneficially owned by
those Point Bancorp Shareholders who are deemed to be Affiliates may be resold
without registration as provided for by Rule 145 under the Securities Act, or
as otherwise permitted. The term "Affiliate" is defined to include any person
who, directly or indirectly, controls, or is controlled by, or is under common
control with Point Bancorp at the time the Merger Agreement is submitted for
approval by a vote of the holders of Point Bancorp Common Stock. Generally,
this definition includes officers, directors and 10% shareholders of Point
Bancorp. Each Affiliate who desires to resell One Valley Common Stock received
in the Merger must sell such One Valley Common Stock either (i) pursuant to an
effective registration statement under the Securities Act, (ii) in accordance
with the applicable provisions of Rule 145 under the Securities Act or (iii) in
a transaction which, in the opinion of counsel for such Affiliate or as
described in a "no-action" or interpretive letter from the staff of the
Securities and Exchange Commission, in each case reasonably satisfactory in
form and substance to One Valley, to the effect that such resale is exempt from
the registration requirements of the Securities Act.
Rule 145(d) requires that persons deemed to be Affiliates resell their One
Valley Common Stock pursuant to certain of the requirements of Rule 144 under
the Securities Act if such One Valley Common Stock is sold within the first two
years after the receipt thereof. After two years, if such person is not an
affiliate of One Valley and One Valley is current in the filing of its periodic
securities law reports, a former Affiliate of Point Bancorp may freely resell
the One Valley Common Stock received in the Merger without limitation. After
three years from the issuance of the One Valley Common Stock, if such person is
not an affiliate of One Valley at the time of sale or for at least three months
prior to such sale, such person may freely resell such One Valley Common Stock,
without limitation, regardless of the status of One Valley's periodic securities
law reports.
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Point Bancorp has agreed to provide One Valley with a list of those persons
who may be deemed Affiliates at the time of the Point Bancorp Special Meeting.
The certificates of One Valley Common Stock issued to affiliates of Point
Bancorp in the Merger may contain an appropriate restrictive legend, and
appropriate stop transfer orders may be given to the transfer agent for such
certificates.
REGULATORY APPROVALS
The Merger is subject to approval by the Federal Reserve Board, the Office
of Thrift Supervision ("OTS") and the West Virginia Board. The Bank Holding
Company Act of 1956, as amended (the "BHC Act"), governs the Federal Reserve
Board's approval process. The BHC Act provides that the Federal Reserve Board
may not approve any transaction (i) which would result in a monopoly or which
would be in furtherance of any combination or conspiracy to monopolize or to
attempt to monopolize the business of banking in any part of the United States,
or (ii) the effect of which in any section of the country may be to
substantially lessen competition, or tend to create a monopoly, or which in
any other manner might restrain trade, unless the Federal Reserve Board finds
that the anti-competitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served.
In conducting its review of any application for approval under the BHC Act,
the Federal Reserve Board must consider the financial and managerial resources
and future prospects of the institutions involved, and the convenience and needs
of the communities that the institutions will serve. The Federal Reserve Board
may deny an application if it determines that the financial or managerial
resources of the acquiring bank holding company are inadequate. The BHC Act
also provides that a transaction approved by the Federal Reserve Board may not
be consummated for 30 days after approval to allow for review by the Department
of Justice under the federal antitrust laws. If, however, the Department of
Justice does not commence a legal action during this 30-day period, it may not
thereafter challenge the transaction except in an action commenced under Section
2 of the Sherman Antitrust Act.
Consummation of the Merger is also subject to approval by the West Virginia
Board under the West Virginia banking statutes regulating interstate
combinations. The West Virginia Board must consider whether (i) the Merger
would result in a monopoly, or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any section of West Virginia, (ii) the Merger would have the effect in any
section of West Virginia of substantially lessening competition, or would tend
to create a monopoly or in any other manner would be in restraint of trade,
unless the anti-competitive effects of the proposed Merger are clearly
outweighed in the public interest by the probable effect of the Merger in
meeting the convenience and needs of the communities to be served or (iii) the
Merger would be contrary to the best interests of the Shareholders or customers
of Point Bancorp and its subsidiary banks.
The BHC Act and West Virginia law provide for the publication of notice of,
and the opportunity of administrative hearings relating to, the respective
applications for approval noted and described above. Interested parties may
intervene in the approval proceedings. If an interested party intervenes, such
intervention could substantially delay the regulatory approvals required for
consummation of the Merger.
An application seeking approval of the Merger was filed with the Office of
Thrift Supervision on October 20, 1994. Applications seeking approval of the
Merger were filed with the Federal Reserve Board and the West Virginia Board on
October 31, 1994. The Federal Reserve Board approved the application on
December 20, 1994, and the West Virginia Board approved the application on
December 12, 1994.
APPRAISAL RIGHTS
If the Merger is consummated, holders of shares of Point Bancorp Common
Stock are entitled to appraisal rights under Section 262 of the Delaware General
Corporation Law ("Section 262"), provided that they comply with the conditions
established by Section 262.
SECTION 262 IS REPRINTED IN ITS ENTIRETY AS APPENDIX III TO THIS PROXY
STATEMENT/PROSPECTUS. THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF
THE LAW RELATING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO APPENDIX III. THIS DISCUSSION AND APPENDIX III SHOULD BE REVIEWED
CAREFULLY BY ANY
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HOLDER WHO WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO
PRESERVE THE RIGHT TO DO SO. FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH
HEREIN OR THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
A record holder of shares of Point Bancorp Common Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Effective Date, who otherwise complies with
the statutory requirements of Section 262 and who neither votes in favor of the
Merger nor consents thereto in writing will be entitled to an appraisal by the
Delaware Court of Chancery (the "Delaware Court") of the fair value of his or
her shares of Point Bancorp Common Stock. All references in this summary of
appraisal rights to a "stockholder" or "holders of shares of
Point Bancorp Common Stock" are to the record holder or holders of shares of
Point Bancorp Common Stock. Stockholders of One Valley will have no appraisal
rights in connection with the Merger.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the Annual Meeting, not less than 20 days prior
to the meeting, a constituent corporation must notify each of the holders of its
stock for which appraisal rights are available that such appraisal rights are
available and include in each such notice a copy of Section 262. This Proxy
Statement/Prospectus shall constitute such notice to the record holders of Point
Bancorp Common Stock.
Holders of shares of Point Bancorp Common Stock who desire to exercise
their appraisal rights must not vote in favor of the Merger and must deliver a
separate written demand for appraisal to Point Bancorp prior to the vote by the
stockholders of Point Bancorp on the Merger. A stockholder who signs and
returns a proxy without expressly directing by checking the applicable boxes on
the proxy card enclosed herewith that his or her shares of Point Bancorp Common
Stock be voted against the proposal or that an abstention be registered with
respect to his or her shares of Point Bancorp Common Stock in connection with
the proposal will effectively have thereby waived his or her appraisal rights as
to those shares of Point Bancorp Common Stock because, in the absence of
express contrary instructions, such shares of Point Bancorp Common Stock will
be voted in favor of the proposal. A person having a beneficial interest in
shares of Point Bancorp Common Stock that are held of record in the name of
another person, such as a broker, fiduciary or other nominee, must act promptly
to cause the record holder to follow the steps summarized herein properly and
in a timely manner to perfect whatever appraisal rights are available. If the
shares of Point Bancorp Common Stock are owned of record by a person other than
the beneficial owner, including a broker, fiduciary (such as a trustee,
guardian or custodian) or other nominee, such demand must be executed by or for
the record owner. If the shares of Point Bancorp Common Stock are owned of
record by more than one person, as in a joint tenancy or tenancy in common,
such demand must be executed by or for all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
shares of Point Bancorp Common Stock as a nominee for others, may exercise
appraisal rights with respect to the shares held for all or less than all
beneficial owners of shares as to which such person is the record owner. In
such case, the written demand must set forth the number of shares covered by
such demand. Where the number of shares is not expressly stated, the demand
will be presumed to cover all shares of Point Bancorp Common Stock outstanding
in the name of such record owner.
A stockholder who elects to exercise appraisal rights should mail or
deliver his or her written demand to: Point Bancorp, 610-12 Viand Street, Point
Pleasant, West Virginia 25550, Attention: Faye R. Hudson, Secretary.
The written demand for appraisal should specify the stockholder's name and
mailing address, the number of shares of Point Bancorp Common Stock owned, and
that the stockholder is thereby demanding appraisal of his or her shares. A
proxy or vote against the Merger will not by itself constitute such a demand.
Within ten days after the Effective Date, One Valley must provide notice of the
Effective Date to all stockholders who have complied with Section 262.
Within 120 days after the Effective Date, either One Valley or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Court, with a copy served on One Valley in the
case of a petition filed by a stockholder, demanding a determination of the fair
value of the shares of all dissenting stockholders. There is no present intent
on the part of One Valley to file an appraisal petition and stockholders seeking
to exercise appraisal rights should not assume that One Valley will file such a
petition or that One Valley will initiate any negotiations with respect to the
fair value of such shares. Accordingly, Point Bancorp stockholders who desire
to have their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. Within 120 days after the Effective Date, any
stockholder who has theretofore complied with the applicable
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provisions of Section 262 will be entitled, upon written request, to receive
from One Valley a statement setting forth the aggregate number of shares of
Point Bancorp Common Stock not voting in favor of the Merger and with respect
to which demands for appraisal were received by Point Bancorp and the number of
holders of such shares. Such statement must be mailed within 10 days after the
written request therefor has been received by One Valley.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware 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 Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed,
the Delaware Court will appraise the shares of Point Bancorp Common Stock owned
by such stockholders, determining the fair value of such shares exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining fair value, the Delaware Court
is to take into account all relevant factors.
Holders of shares of Point Bancorp Common Stock considering seeking
appraisal should recognize that the fair value of their shares determined under
Section 262 could be more than, the same as or less than the consideration they
are entitled to receive pursuant to the Merger if they do not seek appraisal of
their shares. The cost of the appraisal proceeding may be determined by the
Delaware Court and taxed against the parties as the Delaware Court deems
equitable in the circumstances. Upon application of a dissenting stockholder of
Point Bancorp, the Delaware Court may order that all or a portion of expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including without limitation, reasonable attorney's fees and the
fees and expenses of experts, be charged pro rata against the value of all
shares of stock entitled to appraisal.
Any holder of shares of Point Bancorp Common Stock who has duly demanded
appraisal in compliance with Section 262 will not, after the Effective Date, be
entitled to vote for any purpose any shares subject to such demand or to receive
payment of dividends or other distributions on such shares, except for dividends
or distributions payable to stockholders of record at a date prior to the
Effective Date.
At any time within 60 days after the Effective Date, any stockholder will
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger; after this period, the stockholder may withdraw such
demand for appraisal only with the consent of One Valley. If no petition for
appraisal is filed with the Delaware Court within 120 days after the Effective
Date, stockholders' rights to appraisal shall cease, and all holders of shares
of Point Bancorp Common Stock will be entitled to receive the consideration
offered pursuant to the Merger. Any stockholder may withdraw such stockholder's
demand for appraisal by delivering to One Valley a written withdrawal of his or
her demand for appraisal and acceptance of the Merger, except (i) that any such
attempt to withdraw made more than 60 days after the Effective Date will require
written approval of One Valley and (ii) that 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.
EFFECT OF THE MERGER ON SHAREHOLDERS' RIGHTS
Although One Valley is a West Virginia corporation and Point Bancorp is a
Delaware corporation, the respective rights of their shareholders with regard to
such rights as voting rights, dividend rights, liquidation rights, preemptive
rights and dissenters rights are similar. However, under West Virginia law, One
Valley Shareholders have cumulative voting rights with regard to the election of
directors whereas Point Bancorp Shareholders do not have cumulative voting
rights. One Valley Shareholders do not have conversion rights.
One Valley currently looks to the ability of its subsidiaries to pay
dividends to One Valley in order for it, in turn, to pay dividends to One Valley
Shareholders. The dividends payable by One Valley's banking subsidiaries are
dependent upon their earnings and profitability and must be in compliance with
certain federal and state banking law requirements. See "Supervision and
Regulation - Introduction". Following consummation of the proposed Merger,
dividends received by One Valley's Shareholders will continue to be dependent
upon the payment of dividends by its banking subsidiaries.
In the case of One Valley and Point Bancorp, preemptive rights do not
exist, and the Board of Directors of each has the authority to issue additional
shares without first obtaining the approval of existing Shareholders and without
first offering
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newly issued shares to existing Shareholders for purchase. Following the
proposed Merger, One Valley Common Stock will continue to be available for
issuance by the Board of Directors when and as it determines advisable for the
purpose of raising capital, in acquiring other businesses and for other
appropriate purposes.
Under West Virginia Code Sections 31-1-122 and 31-1-123, Shareholders of One
Valley possess dissenters' rights in connection with certain transactions, which
are substantially similar to Point Bancorp's appraisal rights under Delaware
law. See "Rights of Dissenting Shareholders".
ANTITAKEOVER PROVISIONS IN ONE VALLEY'S ARTICLES AND BYLAWS
In 1986, One Valley's Shareholders adopted certain amendments to One
Valley's Articles of Incorporation (the "Articles") and Bylaws which are
intended to ensure that a party seeking control of One Valley will discuss its
proposal with One Valley's Board of Directors. These amendments are discussed
below.
CLASSIFICATION OF THE BOARD OF DIRECTORS. Article V.1(a) of the Articles
permits the Board to fix the number of Directors from time to time pursuant to
the Bylaws and provides that the Board will be divided into three classes of
directors, each class to be as nearly equal in number of directors as possible.
This provision has the effect of making it more difficult and time-consuming for
a shareholder who has acquired or controls a majority of One Valley's
outstanding common stock to gain immediate control of the Board of Directors or
otherwise disrupt the management of One Valley. Unless that shareholder can
gain the 80% vote required to amend the provisions regarding classifications or
number of directors or to remove directors, it would not be possible for that
shareholder to elect a majority of the directors at a single meeting of
shareholders. Accordingly, it takes at least two annual meetings to change the
composition of a majority of the Board of Directors.
This provision has the effect of making it more difficult for a shareholder
to elect a director pursuant to the exercise of his cumulative voting rights.
However, the Board believes that the benefits to One Valley and its shareholders
of encouraging prior consultation and negotiation outweigh the disadvantages of
discouraging any such proposals.
NOMINATIONS OF DIRECTORS. Article V.1(b) of the Articles provides that
nominations for the election of directors must be made as provided in the
Bylaws. Article III of the Bylaws provides the manner in which nominations for
the election of directors may be made by a shareholder. Article V.1(b) requires
the affirmative vote of over 80% of the voting power of One Valley to repeal or
amend this provision regarding shareholder nominations.
The advance notice requirement, by regulating shareholder nominations of
Directors, affords the Board of Directors the opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform shareholders about these qualifications.
Although this provision does not give the Board of Directors any power to
approve or disapprove shareholder nominations for election of directors, it may
have the effect of precluding a contest for the election of directors if the
procedures established are not followed and may discourage a third party from
conducting a solicitation of proxies to elect its own slate of directors.
NEWLY-CREATED DIRECTORSHIPS AND VACANCIES. Article V.1(c) of the Articles
and Section 9, Article III, of the Bylaws provide that a vacancy on the Board
occurring during the course of the year, including a vacancy created by an
increase in the number of directors, will be filled by the remaining directors.
They further provide that any new director elected to fill a vacancy on the
Board resulting from death, resignation, disqualification, removal or other
cause will serve for the remainder of the full term of the class (each class
having staggered 3-year terms) in which the vacancy occurred rather than until
the next annual meeting of shareholders. However, in accordance with West
Virginia law, the amendments provide that those directors elected to fill a
vacancy resulting from an increase in the number of directors will hold office
only until the next election of directors. It also provides that no decrease in
the number of directors will shorten the term of any incumbent.
The provision that newly-created directorships are to be filled by the
Board could prevent a third party seeking majority representation on the Board
of Directors from obtaining such representation simply by enlarging the Board
and immediately filling the new directorships created with its own nominees.
However, these new directors elected by the Board would only serve until the
next meeting of shareholders under West Virginia law.
REMOVAL OF DIRECTORS. Article V.1(d) and Section 13, Article III of the
Bylaws provide that a director may be removed, with or without cause, by the
affirmative vote of the holders of at least 80% of the voting power of the
shares
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entitled to vote generally in the election of directors. These provisions
preclude a third party from removing incumbent directors and simultaneously
gaining control of the Board by filling the vacancies created by removal with
its own nominees unless the third party controls 80% of the voting power of the
voting stock and can amend provisions of the Bylaws and the Articles.
INCREASE SHAREHOLDER AND DIRECTOR VOTE FOR ALTERATION, AMENDMENT OR REPEAL
OF PROPOSED AMENDMENTS. Article V.1(e) of the Articles requires the concurrence
of the holders of at least 80% of the voting power of One Valley entitled to
vote generally in the election of directors for the alteration, amendment or
repeal of, or the adoption of any provision inconsistent with, all of the
foregoing provisions to the Articles and Bylaws. Under West Virginia
corporation law, amendments to the Articles of One Valley require the approval
of the holders of more than one-half of the outstanding stock entitled to vote
thereon and of more than one-half of the outstanding stock of each class
entitled to vote thereon voting as a class. However, West Virginia corporation
law also permits provisions in the Articles which require a greater vote than
the minimum vote otherwise required by law for any corporate action. In
addition, under Article V.2 of the Articles, none of the Bylaw provisions
discussed above relating to the Articles may be altered, amended or repealed,
nor may any provision inconsistent with those provisions be adopted, without the
concurrence of the holders at least 80% of the voting power of One Valley.
The requirement of an increased shareholder vote is designed to prevent a
shareholder with a majority of the voting power of One Valley from avoiding the
requirements of the foregoing provisions by simply repealing them.
NOTIFICATION OF SHAREHOLDER BUSINESS AND NOTICE OF PURPOSE OF ANNUAL
MEETING. Article II, Section 1 of One Valley's Bylaws provides that a
Shareholder who wishes to bring business before an annual meeting of
Shareholders must give advance notification in a manner similar to that required
for shareholder nominations for election of directors. Shareholders intending to
bring business before an annual meeting are required to deliver or mail notice
not less than 40 days prior to the meeting, unless less than 50 days' notice or
prior disclosure of the date of the meeting is made in which case the notice
must be received not later than the close of business on the 8th day following
the day on which notice of the date of the annual meeting was mailed or public
disclosure was made. The notice must be sent to the secretary and must set
forth a brief description of the business to be brought before the annual
meeting, the reasons for conducting the business at the annual meeting, the
name, address, number and class of shares held by the shareholder, and any
material interest of the shareholder in the proposal.
The advance notice requirement affords the Board of Directors the
opportunity to consider the shareholder's proposal and, to the extent deemed
necessary or desirable by the Board, inform other shareholders about the
proposal and the Board's position with respect to the proposal. Although the
Bylaw provision does not give the Board the power to approve or disapprove the
consideration of a matter which a shareholder wishes to bring before the Annual
Meeting, the Bylaw provision may discourage a shareholder from bringing a matter
before an Annual Meeting.
In addition, Section 4, Article II of the Bylaws requires that written
notice of all meetings and the purpose or purposes for which a meeting is to be
called must be delivered not less than ten nor more than 50 days before the date
of the meeting by those persons calling the meeting to each shareholder of
record entitled to vote the meeting.
LIMITATIONS ON AMENDMENTS TO BYLAWS. Article XI of the Bylaws provides
that subject to the laws of the State of West Virginia, the Articles and other
provisions of the Bylaws, the Bylaws may be altered, amended or repealed at (1)
any regular or special meeting for the shareholders by a majority vote of the
shares represented and entitled to vote at the meeting provided notice of the
proposed amendment is given; or by (2) a majority of the Board at any meeting
at which a quorum of the Directors are present except that a two-thirds
affirmative vote of all members of the Board is required to amend the Bylaws to
change the principal office, change the number of directors, change the number
of directors on the Executive Committee or make a substantial change in the
duties of the Chairman of the Board and the President.
The purpose of Article XI of the Bylaws is to prohibit directors who only
control a simple majority of the Board from amending or repealing those Bylaws
which could have significant effects on the operation of One Valley.
In 1986, the Shareholders of One Valley also approved a "Fair Price
Amendment" concerning business combinations, such as mergers or consolidations.
The Fair Price Amendment requires the approval of the holders of 80%, or a
"super majority," of the shares of One Valley then entitled to vote ("Voting
Stock") as a condition to specified transactions with an Interested
Shareholder, except in cases in which either (i) certain price criteria and
procedural requirements are satisfied or (ii) the transaction is recommended to
the Shareholders by a majority of the Disinterested Directors. In the event the
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minimum price criteria and procedural requirements have been met or the
requisite approval of the Board of Directors of One Valley has been given with
respect to a particular business combination, the normal requirements of West
Virginia law would apply.
An "Interested Shareholder" is defined in the Fair Price Amendment as any
person, other than One Valley or any of its subsidiaries, who is, or who was
within the two-year period immediately before the announcement of the proposed
business combination, the Beneficial Owner of more than 10% of the voting power
of One Valley's Voting Stock. It also includes any person who is an assignee
of, or has succeeded to, any shares of Voting Stock in a transaction not
involving a public offering which were at any time within the prior two-year
period beneficially owned by Interested Shareholders. The term "Beneficial
Owner" includes persons directly or indirectly owning or having the right to
acquire or vote the stock. At present, One Valley is not aware of the
existence of any Shareholder or group of Shareholders who would be "Interested
Shareholders" except for those persons listed under "Principal Holders of
Voting Securities."
A "Disinterested Director" is any member of the Board of Directors of One
Valley who is not affiliated with an Interested Shareholder and who was a
director of One Valley prior to the time the Interested Shareholder became an
Interested Shareholder, and any successor to such Disinterested Director who is
not affiliated with an Interested Shareholder who was recommended by a majority
of the Disinterested Directors then on the Board. The Merger is not subject to
the Fair Price Amendment.
ANTITAKEOVER PROVISIONS IN POINT BANCORP'S CERTIFICATE OF INCORPORATION
AND BYLAWS.
Point Bancorp's Articles of Incorporation and Bylaws also contain certain
provisions designed to ensure that a party seeking control of Point Bancorp will
discuss any proposal with Point Bancorp's Board of Directors. These provisions
are discussed below.
LIMITATIONS ON VOTING RIGHTS. The Certificate of Incorporation of Point
Bancorp provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit") be entitled or permitted to any vote in respect of the
shares held in excess of the Limit. Beneficial ownership is determined
pursuant to Rule 13d-3 of the general rules and regulations promulgated
pursuant to the Securities Exchange Act of 1934, and 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 their
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 do not include shares beneficially owned
by directors, officers and employees of the Savings Bank or Point Bancorp or
shares that are subject to a revocable proxy and that are not otherwise
beneficially owned, or deemed by Point Bancorp to be beneficially owned, by
such person and his or her affiliates. The Certificate of Incorporation of
Point Bancorp further provides that this provision limiting voting rights may
only be amended upon the vote of 80% of the outstanding shares of voting stock.
DIRECTORS. Certain provisions of Point Bancorp's Certificate of
Incorporation and Bylaws impede changes in majority control of the Board of
Directors. Point Bancorp's Certificate of Incorporation provides that the Board
of Directors of Point Bancorp be divided into three classes, with directors
(except for initial directors) in each class elected for three-year staggered
terms. Thus, it takes two annual elections to replace a majority of Point
Bancorp's Board. Point Bancorp's Certificate of Incorporation provides that
the size of the Board of Directors may be increased or decreased only by a two-
thirds vote of the directors then in office. The Certificate of Incorporation
also provides that any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of directors, must be filled for
the remainder of the unexpired term by a majority vote of the directors then in
office. The Certificate of Incorporation further provides that to be eligible
to serve as a director, persons must meet certain eligibility criteria.
Finally, the Bylaws impose certain notice and information requirements in
connection with the nomination by stockholders of candidates for election to
the Board of Directors or the proposal by Shareholders of business to be acted
upon at an annual meeting of Shareholders.
The Certificate of Incorporation provides that directors may only be
removed for cause by the affirmative vote of 80% of the shares eligible to vote.
RESTRICTIONS ON CALL OF SPECIAL MEETINGS. The Certificate of Incorporation
of Point Bancorp provides that a special meeting of shareholders may be called
only pursuant to a resolution adopted by a majority of the Board of Directors.
Shareholders are not authorized to call a special meeting.
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ABSENCE OF CUMULATIVE VOTING. Point Bancorp's Certificate of Incorporation
provides that there shall be no cumulative voting rights in the election of
directors.
AUTHORIZATION OF PREFERRED STOCK. The Certificate of Incorporation of
Point Bancorp authorizes 500,000 shares of serial preferred stock, $.01 par
value per share. Point Bancorp is authorized to issue preferred stock from time
to time in one or more series subject to applicable provisions of law, and the
Board of Directors is authorized to fix the designations, powers, preferences
and relative participating, optional and other special rights of such shares,
including voting rights (which could be multiple or as a separate class) and
conversion rights. In the event of a proposed merger, tender offer or other
attempt to gain control of Point Bancorp that the Board of Directors does not
approve, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede the completion of such a transaction. An effect of the possible issuance
of preferred stock, therefore, may be to deter a future takeover attempt. No
shares of preferred stock have been issued, and the Board of Directors has no
present plans or understanding for the issuance of any preferred stock and does
not intend to issue any preferred stock except on terms which the Board deems to
be in the best interests of Point Bancorp and its shareholders.
PROCEDURES FOR CERTAIN BUSINESS COMBINATIONS. Point Bancorp's Certificate
of Incorporation requires that certain business combinations, as defined
therein, between Point Bancorp (or any majority-owned subsidiary thereof) and a
10% or more stockholder either (i) be approved by a least 80% of the total
number of outstanding voting shares, voting as a single class, of Point Bancorp,
(ii) be approved by two-thirds of the continuing Board of Directors (i.e.,
persons serving prior to the 10% stockholder becoming such) or (iii) involve
consideration per share generally equal to that paid by such 10% stockholder
when it acquired its block of stock.
EVALUATION OF OFFERS. The Certificate of Incorporation of Point Bancorp
further provides that the Board of Directors of Point Bancorp, when evaluating
any offer of another "Person", (as defined therein), to (i) make a tender or
exchange offer for any equity security of the company, (ii) merge or
consolidate Point Bancorp, with another corporation or entity or (iii) purchase
or otherwise acquire all or substantially all of the properties and assets of
Point Bancorp, may in connection with the exercise of its judgment in
determining what is in the best interest of Point Bancorp, the Savings Bank and
the stockholders of Point Bancorp, give due consideration to all relevant
factors, including, without limitation, the social and economic effects of
acceptance of such offer to Point Bancorp's customers and the Savings Bank's
present and future account holders, borrowers and employees; on the communities
in which Point Bancorp and the Savings Bank operate or are located; on the
ability of Point Bancorp to fulfill its corporate objectives as a savings and
loan holding company; and on the ability of the Savings Bank to fulfill the
objectives of a federally chartered stock savings bank under applicable
statutes and regulations. By having these standards in the Certificate of
Incorporation of Point Bancorp, the Board of Directors may be in a stronger
position to oppose such a transaction if the Board concludes that the
transaction would not be in the best interest of Point Bancorp, even if the
price offered is significantly greater than the current market price of any
equity security of Point Bancorp.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to Point
Bancorp's Certificate of Incorporation must be approved by a two-thirds vote of
Point Bancorp's Board of Directors and also by a majority of the outstanding
shares of Point Bancorp's voting stock, 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 Bylaws; call of special shareholders'
meeting; offers to and acquisition 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
affirmative vote of at least 80% of the total votes eligible to be voted at a
duly constituted meeting of Shareholders.
OTHER RESTRICTIONS ON ACQUISITIONS OF POINT BANCORP COMMON STOCK
DELAWARE ANTI-TAKEOVER STATUTE. The State of Delaware has enacted
legislation which provides that subject to certain exceptions, a publicly-held
Delaware corporation may not engage in any business combination with an
"interested stockholder" for three years after such stockholder became an
interested stockholder, unless, among other things, the interested stockholder
acquires at least 85% of the corporation's voting stock in the transaction that
resulted in the stockholder becoming an interested stockholder. This
legislation generally defines "interested stockholder" as any person or
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entity that owns 15% or more of the corporation's voting stock. The term
"business combination" is defined broadly to cover a wide range of corporate
transactions, including mergers, sale of assets, issuance of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits. Under certain circumstances, either the Board of Directors or both
the Board and two-thirds of the shareholders other than the acquirer may
approve a given business combination and thereby exempt the corporation from
the operation of the statute.
However, these statutory provisions do not apply, among other situations, to
Delaware corporations with fewer 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. Currently Point Bancorp does not
have 2,000 shareholders.
FEDERAL REGULATION. A federal regulation prohibits any person prior to the
completion of a conversion from transferring, or entering into any agreements or
understandings to transfer, the legal or beneficial ownership of the
subscription rights issued under a plan of conversion or the stock to be issued
upon their exercise. This regulation also prohibits any person prior to the
completion of a conversion from offering, or making an announcement of an offer
or intent to make an offer, to purchase such subscription rights or stock. For
three years following conversion, 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 person, directly or indirectly,
violates this regulation, the securities beneficially owned by such person in
excess of 10% shall not be counted as shares entitled to vote and shall not be
voted by any person or counted as voting shares in connection with any matter
submitted to a vote of shareholders.
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, 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. "Control" in this context means ownership, control of, or holding
proxies representing more than 25% of the voting shares of, a savings
association or the power to control in any manner the election of a majority of
the directors of such institution.
Federal law provides that no "person," acting directly or indirectly or
through or in concert with one or more other persons, may acquire "control" of
a savings association unless at least 60 days' prior written notice has been
given to the OTS and the OTS has not objected to the proposed acquisition.
"Control" is defined for this purpose as the power, directly or indirectly, to
direct the management or policies of a savings association or to vote more than
25% of any class of voting securities of a savings association. Under federal
law (as well as the regulations referred to below) the term "savings
association" includes state and federally chartered SAIF-insured institutions,
federally chartered savings and loans and savings banks whose accounts are
insured by the FDIC and holding companies thereof.
Federal regulations require that, prior to obtaining control of an insured
institution, a person, other than a company, must give 60 days' notice to the
OTS and have received no OTS objection to such acquisition of control, and a
company must apply for and receive OTS approval of the acquisition. Control, as
defined under federal law, involves a 25% voting stock test, control in any
manner of the election of a majority of the institution'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 an institution's
voting stock, if the acquirer also is subject to any one of either "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 association's stock after the effective
date of the regulations 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 or
approval of the OTS, as applicable.
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HISTORICAL COMPARATIVE STOCK PRICES AND DIVIDENDS
ONE VALLEY
One Valley Common Stock is traded on the NASDAQ National Market System,
under the symbol "OVWV." At December 30, 1994, there were approximately 5,850
holders of record of One Valley's Common Stock. The following table sets forth
the price range and the cash dividends paid per share for the periods indicated
below.
CASH
PRICE RANGE DIVIDENDS
HIGH LOW PAID PER SHARE
1992
First Quarter.... 20.56 19.58 0.17
Second Quarter... 26.25 19.73 0.17
Third Quarter.... 23.96 21.46 0.18
Fourth Quarter... 30.21 26.25 0.18
1993
First Quarter.... 32.25 28.25 0.20
Second Quarter... 29.75 25.25 0.20
Third Quarter.... 33.25 26.75 0.22
Fourth Quarter 31.25 27.00 0.22
1994
First Quarter.... 28.50 24.75 0.22
Second Quarter... 29.00 24.25 0.22
Third Quarter.... 29.75 27.75 0.25
Fourth Quarter... 30.25 28.00 0.25
On December 30, 1994, the average of the closing bid and ask prices of One
Valley's Common Stock on the NASDAQ National Market System was $28.50 per share.
On September 1, 1994, the day prior to the public announcement of the Merger,
the average of the closing bid and ask prices of One Valley's Common Stock on
the NASDAQ National Market System was $29.20 per share.
One Valley has historically paid dividends on a quarterly basis and
currently intends to continue to pay such dividends in the foreseeable future.
One Valley's ability to pay dividends depends upon dividends One Valley receives
from its banking subsidiaries. Dividends paid by One Valley's banking
subsidiaries are subject to restrictions by banking regulations. See
"Supervision and Regulation - Introduction". The most restrictive provision
requires regulatory approval if dividends in any year exceed the year's retained
net profits, as defined, plus the retained net profits of the two preceding
years.
POINT BANCORP
Point Bancorp's Common Stock is not actively traded or quoted on an exchange
or reporting system. At December 28, 1994, there were approximately 283 holders
of record of Point Bancorp's Common Stock. The average of the bid and ask price
of the Common Stock as reported on the Pink Sheets as of January 9, 1995, was
$21.50 per share.
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POINT BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Point Bancorp, Inc.'s (the Corporation's) total assets at September 30, 1994
and 1993 totaled $56,935,000 and $57,170,000, respectively, a decrease of
$235,000 or .41%. Total deposits at September 30, 1994 were $42,493,000 which
represents a decrease of $469,000 or 1.09% as compared with September 30, 1993.
The primary reason for the decreases were savings withdrawal because of the
Savings Bank control of interest expense on deposit which resulted in a minimal
loss of savings deposits.
Other interest earnings assets totaled $7,878,000 at September 30, 1994
which represents an increase of $1,952,000 or 32.94% as compared with September
30, 1993. The major reason for the increase is due to the reinvestment of the
proceeds of investment securities into other interest earning assets on a short
term basis while long-term investment strategy was being developed.
Investment securities at September 30, 1994, totaled $16,588,000 which
represents a decrease of $1,790,000 or 9.74%, as compared to September 30, 1993.
Mortgaged-backed and other asset-backed securities totaled $18,973,000 at
September 30, 1994 which represents a decrease of $603,000 or 3.08% as compared
with September 30, 1993. The primary reason for the decrease is principal
payments on the underlying loans of the mortgage-backed and other asset-backed
securities.
Loans receivable, net totaled $11,895,000 at September 30, 1994 which
represents a net increase of $407,000 or 3.54% as compared with September 30,
1993. Loans originated during fiscal year 1994 totaled $4,358,000. Principal
reductions during 1994 totaled $3,951,000.
COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
1994 AND 1993
Net income decreased $10,000 or 1.98% to $495,000 for the year ended
September 30, 1994 compared with $505,000 for 1993.
Interest income on loans reflected a decrease of $50,000 in 1994 when
compared with 1993. The decrease during 1994 resulted from a combination of
decreasing loan balances and lower interest rates. Interest income on mortgage-
backed and other asset-backed securities decreased by $281,000 during 1994 when
compared with 1993. The decrease during 1994 resulted from a decrease in the
average balance of mortgage-backed and other asset-backed securities
outstanding, which resulted from principal payments on mortgage-backed
securities, and other assets-backed securities since September 30, 1993.
Interest earned on investment securities increased to $898,000 during 1994,
compared to $816,000 in 1993, as a result of investment of loan and mortgage-
backed securities principal payments.
During the year ended September 30, 1994 and 1993, the Savings Bank
provided $24,000 and $38,000, respectively, as a provision for loan losses,
which was charged to operations. The provision for loan losses is based on
management's evaluation of the risk inherent in its loan portfolio for loan
losses, and gives due consideration to changes in general market conditions and
in the nature and volume of the Savings Bank's loan activity. At September 30,
1994 and 1993, the Savings Bank's non-performing loans totaled $21,000 and
$560,000 respectively. Non-performing loans at September 30, 1994, were
comprised of two single family mortgage loans in the amount of $21,000. The one
multi-family loan in the amount of $530,000 at September 30, 1993 was current
with scheduled payments at September 30, 1994. Management believes the
allowance for loan loss at September 30, 1994 in the amount of $223,000 is
adequate to provide for a loss, if any, in regard to this loan. The level of
non-performing loans is generally due to the slowdown in the West Virginia
economy and surrounding economy, and real estate markets. The allowance for
loan losses amounted to $223,000 at September 30, 1994 and $199,000 at
September 30, 1993.
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The Savings Bank intends to continue to provide for loan losses based on its
periodic review of the loan portfolio and general market conditions. In the
event that the real estate markets and general economies served by the Savings
Bank do not improve or continue to decline, the level of the Savings Bank's non-
performing loans may increase. To the extent any such increase exceeds the
allowance for loan losses, the Savings Bank's results of operations and
financial condition may be adversely affected.
Non-interest expenses decreased $17,000 during the year ended September 30,
1994 when compared with 1993. Salaries and employee benefits increased by
$33,000, and $73,000 respectively, during 1993. Salary and employee benefits
include an amount of $82,000 for twelve months of fiscal year 1994 and $61,750
for nine months of fiscal year 1993 for the pro-rata expense of the Management
Stock Bonus Plan, adopted in connection with the Conversion. Management
continues to limit expense items where it has a degree of control.
Non-interest expense other decreased $54,000 during the year ended
September 30, 1994 when compared with 1993. The primary reason for the decrease
was a reduction in the amount of franchise tax being accrued and adjustment for
a refund of franchise taxes.
Income tax expenses totaled $297,000 and $360,000 for the year ended
September 30, 1994 and 1993 respectively. The decrease is a result of a
decrease in pre-tax income and deferred tax expense.
COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
1993 AND 1992
Net income increased $51,000 or 11.23% to $505,000 for the year ended
September 30, 1993 compared with $454,000 for 1992.
Interest income on loans reflected a decrease of $128,000 in 1993 when
compared with 1992. The decrease during 1993 resulted from a combination of
decreasing loan balances and lower interest rates. Interest on mortgage-backed
and other asset-backed securities decreased by $249,000 during 1993 when
compared with 1992. The decrease during 1993 resulted from a decrease in the
average balance of mortgage-backed securities outstanding, which resulted from
principal payments on mortgage-backed securities, and other assets-backed
securities since September 30, 1992. Interest earned on investment securities
increased $816,000 during 1993, when compared to $730,000 in 1992, as a result
of investment of loan and mortgage-backed securities and other asset-backed
securities principal payments and net proceeds from the Conversion into
investment securities and other interest earning deposits.
During the year ended September 30, 1993 and 1992, the Savings Bank
provided $38,000 and $75,000, respectively, as a provision for loan losses,
which was charged to operations. The provision for loan losses is based on
management's evaluation of the risk inherent in its loan portfolio for loan
losses, and gives due consideration to changes in general market conditions and
in the nature and volume of the Savings Bank's loan activity. At September 30,
1993 and 1992, the Savings Bank's non-performing loans totaled $560,000 and
$104,000 respectively. Non-performing loans at September 30, 1993, were
comprised of two single family mortgage loans in the amount of $30,000 and one
multi-family loan in the amount of $530,000. The multi-family mortgage was
originated on August 23, 1990, and is secured by 28 two-bedroom garden style
apartments in two buildings built on 1.5 acres of land located in St. Albans,
West Virginia. The loan was assumed by the present borrowers on December 28,
1990, however, the original guarantors were not released. As of September 30,
1993, the principal balance of $529,627 was due and owing, plus accrued
interest of $4,965. The level of non-performing loans is generally due to the
slowdown in the West Virginia economy and surrounding economy, and real estate
markets. The allowance for loan losses amounted to $199,000 at September 30,
1993 and $174,000 at September 30, 1992.
In the event that the real estate markets and general economies served by
the Savings Bank do not improve or continue to decline, the level of the Savings
Bank's non-performing loans may increase. To the extent any such increase
exceeds the allowance for loan losses, the Savings Bank's results of operations
and financial condition may be adversely affected.
Non-interest expenses increased $186,000 during the year ended September
30, 1993 when compared with 1992. Salaries and employee benefits, and
professional fees increased by $73,000, and $60,000 respectively, during 1993.
Salary and employee benefits include an amount of $61,750 for the pro-rata
expense of the Management Stock Bonus Plan, adopted in connection with the
Conversion, for 1993. Professional fees increased primarily due the increased
legal and accounting fees associated with the Corporation's filings due to
public registration. Management continues to limit expense items where it has a
degree of control.
27
<PAGE>
Income tax expenses totaled $360,000 and $320,000 for the year ended
September 30, 1993 and 1992, respectively. The increase is primarily a result of
an increase in pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The Savings Bank is required to maintain minimum levels of liquid assets as
defined by the OTS regulations. 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 minimum ratio
currently is 5%. The Savings Bank's liquidity averaged 48.5% during 1994. The
Savings Bank adjusts its liquidity levels in order to meet funding needs for
deposit outflows, payment of real estate taxes from escrow accounts on mortgage
loans, and loan funding commitments. The Savings Bank also adjusts its
liquidity level as appropriate to meet its asset/liability management
objectives.
The Savings Bank's primary source of funds are deposits, amortization and
prepayments of loans and mortgage-backed securities principal, maturities of
investment securities and funds provided from operations. While scheduled loan
amortization and maturing investment securities are a relatively predictable
source of funds, deposit flow and loan prepayments are greatly influenced by
market interest rates, economic conditions and competition. The Savings Bank
manages the pricing of its deposits to maintain a steady deposit balance. In
addition, the Savings Bank invests its excess overnight deposits with the
Federal Home Loan Bank of Pittsburgh, which provides liquidity to meet lending
requirements. Interest-bearing deposits at September 30, 1994 and 1993 amounted
to $7,250,000 and $5,871,000, respectively. The Savings Bank's liquidity,
represented by cash and cash equivalents, is a product of its operating,
investing, and financing activities. These activities are summarized below:
Cash was generated by operating activities during the fiscal years ended
September 30, 1994 and 1993. The primary source of cash from operating
activities during each of the years was net income. The primary source of
investing activity of the Savings Bank during these years was lending and the
purchase of investments and mortgage-backed securities. Net loans amounted to
$11,895,000 and $11,488,000 at September 30, 1994 and 1993, respectively.
Mortgage-backed and other asset-backed securities totaled $18,973,000 and
$19,576,000, investments totaled $16,588,000 and $18,378,000 at September 30,
1994 and 1993, respectively. In addition to funding new loan production and the
purchase of investments and mortgage-backed securities through operations and
financing activities, such activities were funded by principal repayments on
existing loans and mortgage-backed securities which totaled $9,270,000 during
the year ended September 30, 1994.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments,
such as interest-bearing deposits. If the Savings Bank requires funds beyond
its ability to generate them internally, borrowing agreements exist with the
Federal Home Loan Bank of Pittsburgh which provide an additional source of
funds. At September 30, 1994, and 1993 the Savings Bank had $500,000 of
advances from FHLB at an interest rate of 4.96%.
The Savings Bank anticipates that it will have sufficient funds available
to meet its current loan commitments. At September 30, 1994, the Savings Bank
had outstanding commitments of $114,000. Certificates of deposit scheduled to
mature in one year or less at September 30, 1994, totaled $18,967,000.
Management believes that a substantial portion of such deposits will remain with
the Savings Bank based on past experience.
As required by the FIRREA, the OTS prescribed three separate standards of
capital adequacy (the "Capital Rule"). The Capital Rule requires each savings
institution to maintain tangible capital equal to at least 1.5% and core capital
equal to at least 3.0% of its adjusted total assets. The Capital Rule further
requires each savings institution to maintain total capital equal to at least
8.0% of its risk-weighted assets.
28
<PAGE>
The following table sets forth the Savings Bank's capital position at
September 30, 1994, as compared to the minimum regulatory requirements:
PERCENT OF
ADJUSTED
AMOUNT ASSETS
(Dollars in Thousands)
Tangible Capital:
Requirement $ 813 1.50%
Actual 10,816 19.94%
Excess $ 10,003 18.44%
Core Capital:
Requirement $ 1,627 3.00%
Actual 10,816 19.94%
Excess $ 9,189 16.94%
Risk-Based Capital:
Requirement $ 1,251 8.00%
Actual 11,011 70.43%
Excess $ 9,760 62.43%
At September 30, 1994 the Bank's capital exceeded all of the capital
requirements of OTS as mandated by FIRREA.
ASSET/LIABILITY MANAGEMENT
Asset/Liability management is a daily function of the Corporation's
management and is continually changing in response to interest rate
fluctuations. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are interest rate
sensitive, and by monitoring the Savings Bank's interest sensitivity "gap".
The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets anticipated, based on certain assumptions, to
mature or reprice within a specific time period and the amount of interest-
bearing liabilities anticipated to mature or reprice within that time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. Conversely, a gap is
considered negative when the amount of interest rate sensitive liabilities
exceeds the amount of interest rate sensitive assets. During a period of rising
interest rates, a negative gap would tend to adversely affect net interest
income, while a positive gap would tend to result in an increase in net interest
income. During a period of falling interest rates, a negative gap would tend to
result in an increase in net interest income, while a positive gap would tend to
adversely affect net interest income.
Management's overall strategy for controlling interest rate risk exposure
has been to increase the rate of sensitivity of Savings Bank's assets and
liabilities. This largely has been accomplished by management's efforts to
expand the Savings Bank's participation in mortgage-backed and other asset-
backed securities. In addition, the Savings Bank has sought to lengthen the
maturity of its interest-bearing liabilities by emphasizing longer term
certificates of deposit. The Savings Bank also has the ability to obtain long-
term advances from the FHLB-Pittsburgh if such borrowings appear favorable
under a particular interest rate environment.
At September 30, 1994, total interest-earning assets repricing or maturing
within one year exceeded interest-bearing liabilities maturing or repricing in
the same time period by $1,631,000 million, representing a positive cumulative
gap ratio of 2.86% based upon assumptions regarding loan prepayments and deposit
decay rates prepared by the OTS for its quarterly gap report for September 30,
1994. Thus, during periods of rising interest rates, based on the OTS
prepayment assumptions, it is expected that the yield on interest-earning assets
would rise more quickly than the cost of the Saving Bank's interest-bearing
liabilities. In periods of declining interest rates, the opposite effect on net
interest income is expected. The loan prepayment
29
<PAGE>
assumption and deposit decay rates, although standardized, may not be
indicative of actual loan prepayments and deposit withdrawals experienced by
the Savings Bank. The Interest Rate Sensitivity Analysis table sets forth the
amounts of interest-earning assets and interest-bearing liabilities outstanding
at September 30, 1994, which are expected to reprice or mature in each of the
time periods shown.
Certain shortcomings are inherent in the method of analysis presented in the
aforementioned table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while interest rates on other types may lag behind
changes in market rates. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate from those assumed
in calculating the table. Finally, the ability of many borrowers to service
their debt may decrease in the event of an interest rate increase.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with Generally Accepted Accounting Principles
("GAAP") which require the measurement of financial position and operating
results in terms of historical dollars without considering the changes in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of the Corporation's operations.
Unlike most industrial companies, nearly all the assets and liabilities of the
Corporation are monetary in nature. As a result of inflation, interest rates
have a greater impact on the Corporation'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.
IMPACT OF NEW ACCOUNTING STANDARDS
In February, 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 109 relating to the
method of accounting for income taxes. Implementation of SFAS No. 109 is
required for fiscal years beginning after December 15, 1992. SFAS No. 109
requires companies to take into account changes in tax rates when valuing the
deferred income tax amounts recorded on the balance sheet. The statement also
requires that deferred taxes be provided for all temporary differences between
the financial statements and tax bases of assets and liabilities. The
Corporation adopted SFAS No. 109 in the first quarter of the fiscal year ending
September 30, 1994. Implementation of this new statement did not have a material
effect on the Corporation's results of operations.
In December 1990, FASB issued SFAS No. 106, "Employers' Accounting for
Post-Retirement Benefits Other Than Pensions." SFAS No. 106 focuses principally
on post-retirement health care benefits, and will significantly change the
prevalent current practice of accounting for post-retirement benefits on a cash
basis to requiring accrual, during the years that the employee renders the
necessary service, of the expected cost of providing those benefits to an
employee and the employee's beneficiaries and covered dependents. SFAS No. 106
is effective for fiscal years beginning after December 15, 1992, and adoption
is required on a prospective basis. Implementation of this new guidance is not
applicable. The Corporation has no post-retirement benefits.
In December 1991, the FASB issued SFAS No. 107, "Disclosures About Fair
Value of Financial Investments." SFAS No. 107 requires all entities to disclose
in financial statements or the notes thereto, the fair value of financial
instruments, both assets and liabilities recognized and not recognized in the
statement of financial condition, for which it is practicable to estimate fair
value. SFAS No. 107 is effective for financial statements issued for years
ending after December 15, 1995 for institutions with total assets of $150
million or less and December 15, 1992 for all other institutions. Substantially
all of the Corporation's assets and liabilities are financial instruments and,
as a result, SFAS No. 107 requires the fair value of such assets and liabilities
to be disclosed. Because such assets and liabilities are monetary in nature,
their fair values may fluctuate significantly over time. Management currently
is evaluating SFAS No. 107, including acceptable valuation methodologies for
purposes thereof, for adoption in the fiscal year ending September 30, 1996.
In April 1992, the Accounting Standards Division of the American Institute
of Certified Public Accountants issued Statement of Position 92-3 ("SOP 92-3"),
"Accounting for Foreclosed Assets." SOP 92-3 requires all entities to record
foreclosed real estate at fair market value as of the date of foreclosure. This
recorded value becomes the new cost basis. Subsequently, a valuation account is
established to adjust to the lower of the new cost basis or fair market value
less estimated costs to sell. This SOP is effective for fiscal years ending
after December 15, 1992. The Corporation has adopted SOP 92-3 in the September
30, 1993 financial statements.
30
<PAGE>
In November 1992, the FASB issued SFAS No. 112, "Employers-Accounting for
Post Employment Benefits." SFAS No. 112 focuses principally on post employment
benefits currently expensed on a cash basis, to recognition on the accrual basis
of the expected cost of providing those benefits to an employee and employee's
beneficiaries and covered dependents during the years that the employee renders
the necessary services. Such benefits include salary continuation, supplemental
unemployment benefits, severance benefits, job training and counseling, and
continuation of health care benefits. SFAS No. 112 is effective for fiscal
years beginning after December 15, 1993 and adoption is required on a
prospective basis. Management has not determined the impact of this statement at
September 30, 1994.
In June 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment a Loan." The Statement requires that a creditor should evaluate the
collectibility of both contractual interest and contractual principal of all
receivables when assessing the need for a loss accrual. It also requires a
creditor to measure certain impaired loans on a basis that reflects the time
value of money.
The Statement addresses the accounting by creditors for impairment of a
loan by specifying how allowances for credit losses related to certain loans
should be determined. The Statement also addresses the accounting by creditors
for all loans that are restructured in a troubled debt restructuring involving a
modification of terms of a receivable, including those involving a receipt of
assets in partial satisfaction of a receivable. SFAS No. 114 is effective for
fiscal years beginning after December 15, 1993. In management's opinion the
Statement is not expected to have a material effect on the Corporation's
financial statements.
In June, 1993 FASB issued SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities." SFAS No. 115 addresses the accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Those investments are to
be classified in three categories and accounted for as follows:
(Bullet) Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as SECURITIES HELD TO MATURITY and
reported at amortized cost.
(Bullet) Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified as TRADING
SECURITIES and reported at fair value, with unrealized gains and losses
included in earnings.
(Bullet) Debt and equity securities not classified as either securities
held to maturity or trading securities are classified as SECURITIES AVAILABLE
FOR SALE and reported at fair value, with unrealized gains and losses excluded
from earnings and reported as a separate component of stockholders' equity.
The Statement is effective for fiscal years beginning after December 15,
1993. It is to be initially applied as of the beginning of an enterprise's
fiscal year and cannot be applied retroactively to prior years' financial
statements. Management's intent is for all securities to be "securities held to
maturity" and therefore this Statement will not have a material effect on the
Corporation's financial statements.
31
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
Set forth below are summaries of historical financial and other data
regarding the Corporation. This information is derived in part from, and should
be read in conjunction with, the Financial Statements of the Corporation
presented elsewhere in the Corporation's Annual Report to Shareholders.
SELECTED FINANCIAL DATA
The following table sets forth certain information concerning the financial
position of the Corporation at the dates indicated:
<TABLE>
<CAPTION>
At September 30,
1990 1991 1992 1993 1994
(Dollars in the thousands)
Total Amount of:
<S> <C> <C> <C> <C> <C>
Assets $ 48,602 $ 50,190 $ 52,202 $ 57,170 $ 56,935
Loans receivable-net 12,493 12,378 11,896 11,488 11,895
Mortgage-backed securities 16,676 19,531 19,076 19,576 18,973
Investments 3,049 5,347 10,265 18,378 16,588
FHLB Stock 218 278 316 288 268
FHLB Stock 218 278 316 288 268
Cash and interest-earning
deposits 15,312 11,855 9,782 6,605 8,364
Deposits 41,921 43,188 44,732 42,962 42,493
Stockholders' equity
(substantially
restricted)(1) $ 6,251 $ 6,621 $ 7,075 $ 13,363 $ 13,683
Number of:
Real estate loans outstanding 471 469 454 425 410
Deposit accounts 5,904 5,727 5,380 4,943 5,198
Full service offices 1 1 1 1 1
</TABLE>
(1) Composed of appropriated retained income.
32
<PAGE>
SUMMARY OF OPERATIONS
The following table summarizes results of operations for each of the periods
indicated:
<TABLE>
<CAPTION>
Year Ended September 30,
1990 1991 1992 1993 1994
(Dollars in the thousands)
<S> <C> <C> <C> <C> <C>
Interest income $4,410 $4,358 $4,007 $3,682 $3,419
Interest expense 3,131 2,939 2,412 1,842 1,679
Net interest income 1,279 1,419 1,595 1,840 1,740
Provision for loan losses 48 48 75 38 24
Net interest income after
provision for loan losses 1,231 1,371 1,520 1,802 1,716
Non-interest income:
Fees and service charges 20 24 32 28 31
Gain (loss) on sale of investments
Gain (loss) on sale of loans and
mortgage-backed securities
Gain (loss) on sale of
foreclosed real estate 5 2
Other income 11 12 8 10 5
Total non-interest income 31 36 45 40 36
Non-interest expense:
Compensation and employee
benefits 272 341 383 456 489
Occupancy and equipment 99 103 104 93 101
Data processing 53 65 72 76 76
Federal deposit insurance
premium 81 90 97 88 99
Professional fees 57 67 9 69 54
Loss on sale of service
center stock 54
Other general and
administrative 115 112 126 195 141
Total non-interest
expense 731 778 791 977 960
Income before income taxes 531 629 774 865 792
Income tax expense 188 259 320 360 297
Net income $ 343 $ 370 $ 454 $ 505 $ 495
</TABLE>
33
<PAGE>
KEY OPERATING RATIOS
The table below sets forth certain performance ratios for the periods
indicated. The ratios using the September 30, 1994 equity balances are
different from previous years primarily due to the increase in equity as a
result of the Conversion.
<TABLE>
<CAPTION>
At or for the Year Ended September 30,
<S> <C> <C> <C> <C> <C>
1990 1990 1992 1993 1994
Return on average assets
(net income divided by
average total assets) .71% .75% .88% .88% .86%
Return on average equity
(net income divided by
average equity) 5.64 5.72 6.63 4.10 3.65
Average equity to average
assets ratio (average
equity divided by average
total assets) 12.64 13.05 13.29 21.52 23.58
Equity to assets at
period end 12.86 13.19 13.55 23.37 24.03
Net interest rate spread (1) 1.95 2.17 2.56 2.48 2.29
Net yield on average
interest-earning assets 2.75 2.95 3.19 3.32 3.13
Non-performing loans
to total loans (2) 0.69 0.83 0.87 4.87 .18
Non-performing assets
to total assets (3) 0.18 0.27 0.19 0.98 .04
Non-interest expense to
average assets 1.52 1.57 1.54 1.71 1.67
Average interest-earning
assets to average
interest-bearing liabilities 111.97 112.71 113.90 121.01 127.55
Net interest income to
total non-interest
expenses 174.97% 182.39% 201.64% 188.33% 181.25%
</TABLE>
(1) Computed on the basis of average balances.
(2) Non-performing loans include non-accruing loans and accruing loans
delinquent 90 days or more.
(3) Includes non-accruing loans, accruing loans more than 90 days delinquent
and real estate owned.
34
<PAGE>
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to average
balance sheets and reflects the average yield on assets and average cost of
liabilities for the periods indicated and the average yields earned and 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 month-end balances. Management
does not believe that the use of month-end instead of daily average balances has
caused any material difference in the information presented.
<TABLE>
<CAPTION>
Year Ended September 30,
1992 1993 1994
Average Average Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
(Dollars in the thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans receivable(1) $12,152 $1,204 9.90% $ 11,450 $1,076 9.39% $11,884 $1,026 8.63%
Mortgage-backed
securities 19,505 1,775 9.10 19,115 1,526 7.98 18,404 1,245 6.76
Investment securities 8,993 730 8.11 15,542 816 5.25 16,175 898 5.55
Other interest
earning assets(2) 9,312 298 3.20 9,207 264 2.86 9,090 250 2.75
Total interest-earning
assets 49,962 4,007 8.02 55,314 3,682 6.66 55,553 3,419 6.15
Non-interest earning
assets 1,547 1,857 1,703
Total assets $ 51,509 $ 57,171 $57,256
Interest-bearing
liabilities:
Now $ 1,522 64 4.20 1,583 49 3.07 1,963 58 2.95
Money market 2,087 90 4.36 2,010 64 3.15 1,748 52 2.98
Passbook 9,835 449 4.56 13,244 472 3.56 14,260 477 3.35
CD 30,712 1,809 5.89 26,910 1,242 4.62 25,131 1,067 4.24
Deposits $ 44,156 2,412 5.46 $ 43,747 1,827 4.18 43,102 1,654 .86
Borrowed funds -0- -0- .00 333 15 4.96 500 25 4.96
Total interest-bearing
liabilities 44,156 2,412 5.46 44,080 1,842 4.18 43,602 1,679 3.86
Non-interest-bearing
liabilities
Total liabilities
Retained earnings
Total liabilities and
retained earnings
Net interest income $1,595 1,840 $1,740
Interest rate spread(3) 2.56% 2.48% 2.29%
Net yield on interest-
earning assets(4) 3.19% 3.32% 3.13%
Ratio of average interest-
earning assets to average
interest-bearing liabilities 113.15% 125.48% 127.55%
</TABLE>
(1) Average balances include non-accrual loans.
(2) Includes interest-earning deposits in other financial institutions and FHLB
of Pittsburgh stock.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
35
<PAGE>
RATE/VOLUME ANALYSIS
The following table presents the extent to which changes in interest rates
and changes in the volume of interest-earnings assets and interest-bearing
liabilities have affected interest income and interest expense during the
periods indicated. Information is provided in each category with respect to (i)
changes attributable to changes in volume (changes in volume multiplied by prior
rate), (ii) changes attributable to changes in rate (changes in rate multiplied
by prior volume), and (iii) the net change. The changes attributable to the
combined impact of volume and rate have been allocated proportionately to the
changes due to volume and the changes due to rate.
<TABLE>
<CAPTION>
Year Ended September 30, Year Ended September 30,
1993 Compared to Year 1994 Compared to Year
Ended September 30, 1992 Ended September 30, 1993
Increase (Decrease) Increase (Decrease)
Volume Rate Net Volume Rate Net
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING
ASSETS
Mortgage loans purchased
under agreements to
resell $ -0- $ -0- $ -0- $-0- $ -0- $ -0-
Loans receivable, net (69) (59) (128) 37 (87) (50)
Mortgage-backed
securities (36) (213) (249) (48) (233) (281)
Investment securities 333 (247) 86 40 42 82
OTHER INTEREST
EARNING ASSETS
Interest earning
deposits and
federal funds sold (10) (24) (34) (6) (8) (14)
Total 218 (543) (325) 23 (286) (263)
INTEREST-BEARING
LIABILITIES
NOW accounts 2 (17) (15) 11 (2) 9
Money market accounts (3) (24) (27) (2) (3) (5)
Passbook accounts 155 (132) 23 36 (28) 8
Certificate accounts (224) (342) (566) (82) (103) (185)
Borrowed funds 7 8 15 10 -0- 10
Total (63) (507) (570) (27) (136) (163)
Net change in
interest income $ 281 $ (36) $ 245 $ 50 $ (150) $ (100)
</TABLE>
36
<PAGE>
INTEREST RATE SENSITIVITY ANALYSIS
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities at September 30, 1994, which are anticipated by the
Corporation, based upon 1994 mortgage loan prepayment and deposit decay rate
assumptions, to reprice or mature in each of the future time periods shown.
<TABLE>
<CAPTION>
At September 30, 1994
More than More than More than More than
Six Six Months One Year Three Years Five Years
Months to to to to More Than
Or Less One Year Three Years Five Years Ten Years Ten Years TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans (1):
Held for investment $ 1,552 $ 1,651 $ 2,808 $ 1,989 $ 2,757 $ 940 $ 11,697
Purchased under agree-
ments to resell -0- -0- -0- -0- -0- -0- -0-
Consumer and Other
Loans (1) 245 219 -0- -0- -0- -0- 464
Mortgage-backed and
related securities 3,303 1,245 5,618 6,552 1,672 583 18,973
Interest-earning deposits 437 7,441 -0- -0- -0- -0- 7,878
Investment securities 8,187 500 5,401 2,250 250 -0- 16,588
Securities held for sale -0- -0- -0- -0- -0- -0- -0-
Total interest-earning
assets $13,724 $11,056 $13,827 $10,791 $ 4,679 $1,523 $ 55,600
Interest-bearing liabilities
Passbook accounts $ 1,146 $ 1,044 $ 3,326 $ 2,291 $ 3,075 $1,998 $ 12,880
Money market accounts 772 355 287 13 1 -0- 1,428
NOW accounts 406 322 748 297 176 19 1,968
Certificate accounts 10,416 8,552 6,809 440 -0- -0- 26,217
Borrowed funds 45 91 364 -0- -0- -0- 500
Total interest-bearing
liabilities $12,785 $10,364 $11,534 $ 3,041 $ 3,252 $2,017 $ 42,993
Interest sensitivity gap
per period $ 939 $ 692 $ 2,293 $ 7,750 $ 1,427 $ (494) $ 12,607
Cumulative interest
sensitivity gap $ 939 $ 1,631 $ 3,924 $11,674 $13,101 $2,607 $ 12,607
Cumulative interest
sensitivity gap as a
percentage of total assets 1.65% 2.86% 6.89% 20.50% 23.01% 22.14% 22.14%
Cumulative net interest-
earning assets as a
percentage of net interest-
bearing liabilities 2.18% 3.79% 9.12% 27.15% 30.05% 29.32% 29.32%
</TABLE>
(1) For purposes of the gap analysis, gross mortgage and other loans are
reduced for loans delinquent 90 days or more, but are not reduced for the
allowance for loan losses. Loans delinquent 90 days or more (in thousands) at
September 30, 1994, totaled $21,000 for mortgage loans and $-0- for other
loans.
37
<PAGE>
BUSINESS AND PROPERTIES OF ONE VALLEY
The Board of Directors of One Valley Bank, National Association, formerly
Kanawha Valley Bank, National Association ("One Valley Bank"), caused One Valley
to be formed, through a corporate reorganization, as a single bank holding
company holding all of the common stock of One Valley Bank. On September 4,
1981, the effective date of the reorganization, the shareholders of One Valley
Bank exchanged their shares of Kanawha Valley Bank common stock for shares of
One Valley Common Stock, $10 par value, and became shareholders of One Valley,
and One Valley Bank became a wholly-owned subsidiary of One Valley.
As of September 30, 1994, One Valley owned eleven operating banking
subsidiaries ("Banking Subsidiaries") including: One Valley Bank, National
Association; One Valley Bank of Huntington, Inc.; One Valley Bank of Mercer
County, Inc.; One Valley Bank-East, National Association; One Valley Bank of Oak
Hill, Inc.; One Valley Bank of Ronceverte, National Association; One Valley Bank
of Morgantown, Inc.; One Valley Bank of Summersville, Inc.; One Valley Bank of
Clarksburg, National Association; One Valley Bank of Marion County, National
Association; and One Valley Bank-North, Inc. In addition, One Valley owns 100%
of the outstanding stock of One Valley Services, Inc., which until December
1993, provided data processing services to the Banking Subsidiaries and other
nonaffiliated banks, and 100% of the outstanding stock of One Valley Square,
Inc., a Texas corporation, which owns the office building in which One Valley
Bank and One Valley are located. (All of these subsidiaries, including the
Banking Subsidiaries, are collectively referred to as the "Subsidiaries".)
One Valley has, from time to time, engaged in merger or acquisition
discussions with other banks and financial institutions both within and outside
of West Virginia, and it is anticipated that such discussions will continue in
the future.
As of September 30, 1994, One Valley was the largest bank holding company
in total assets in the State of West Virginia, and its principal activities
consist of owning and supervising its eight operating Banking Subsidiaries. At
September 30, 1994, One Valley had consolidated assets of $3.60 billion,
deposits of $2.92 billion, and shareholders' equity of $318 million.
RECENT DEVELOPMENTS
On January 28, 1994, One Valley consummated its merger with Mountaineer
Bankshares of W.Va., Inc., and as a result, acquired ownership of the
outstanding stock of the following seven banking subsidiaries: Old National
Bank, Martinsburg; The Empire National Bank of Clarksburg; City National Bank of
Fairmont; The Bank of Wadestown, Fairview; Mercantile Banking & Trust Company,
Moundsville; The Bank of Cameron, Inc.; and The Sunshine Bank of Wheeling (the
"New Banking Subsidiaries") (the Banking Subsidiaries and the New Banking
Subsidiaries are hereafter collectively referred to as the "Banking
Subsidiaries"). As a result of this acquisition, One Valley is the largest bank
holding company in the State of West Virginia.
38
<PAGE>
BUSINESS AND PROPERTIES OF POINT BANCORP
GENERAL
Point Bancorp, Inc. ("Registrant" or "Company") is a unitary savings and
loan holding company that was incorporated in 1992 under the laws of the State
of Delaware for the sole purpose of acquiring all of the issued and outstanding
common stock of Point Pleasant Federal Savings Bank ("Point Pleasant Federal" or
"Savings Bank"). This acquisition occurred in connection with the simultaneous
conversion of Point Pleasant Federal from a mutual to stock institution, on
December 31, 1992. The only subsidiary of the Company is the Savings Bank. The
Savings Bank has no subsidiaries.
Point Pleasant Federal is a federally chartered capital stock savings bank
located in Point Pleasant, West Virginia. The Savings Bank was founded in 1892
as a West Virginia chartered building and loan association under the name Point
Pleasant Building and Loan Association. In 1975, the Savings Bank adopted a
federal charter and changed its name to Point Pleasant Federal Savings and Loan
Association. In 1992, the Savings Bank converted from a federally chartered
mutual savings and loan association to its current form, a federally chartered
capital stock savings bank subsidiary of a savings and loan holding company.
The Savings Bank's deposits have been federally insured since 1934 by the
Savings Association Insurance Fund ("SAIF"), as administered by the Federal
Deposit Insurance Corporation ("FDIC"), and its predecessor, the Federal Savings
and Loan Insurance Corporation. The Savings Bank has been a member of the
Federal Home Loan Bank System since 1932. As of September 30, 1994, Point
Pleasant Federal had total assets of $54 million, total deposits of $42 million,
and retained earnings of $8 million or 15% of total assets under generally
accepted accounting principles (GAAP).
Point Pleasant Federal is primarily engaged in attracting deposits from the
general public and investing such deposits, together with other sources of
funds, in mortgage-backed and investment securities and loans secured primarily
by residential real estate located in Mason, Cabell, Kanawha, Putnam and Jackson
Counties, West Virginia and the neighboring counties of Gallia and Meigs, Ohio.
To a lesser extent, the Savings Bank also makes multi-family and commercial real
estate loans, deposit loans and second mortgage loans.
The principal sources of funds for the Savings Bank's lending activities
are deposits and the amortization and payment of loans and maturities of
investment securities. Principal sources of income are interest on investment
securities and mortgage loans. The Savings Bank's principal expense is interest
paid on deposits and operating expenses.
Based on total assets, at September 30, 1994, Point Pleasant Federal
believes that it is the 6th largest thrift institution headquartered in West
Virginia. During its over 100-year existence, among its other lending
activities, Point Pleasant Federal has focused on serving its customers located
in Point Pleasant, West Virginia and surrounding communities. The Savings
Bank's immediate market area features a variety of industries such as water
transportation related to public utilities, chemical manufacturers, coal mining
and distribution, and health care.
Conditions in the Savings Bank's primary market area during the past
several years have resulted in low levels of loan demand. As a result, the
Savings Bank's principal method of financing home ownership has been the
purchase of mortgage-backed securities. As of September 30, 1994, mortgage-
backed securities and collateralized mortgage obligations totalled $19 million
and constituted approximately 35% of the Savings Bank's total assets. Such
amount exceeded the amount of the Savings Bank's total loans by approximately $7
million.
LENDING ACTIVITIES
General. Currently, the principal lending activity of Point Pleasant
Federal is the origination of mortgage loans for the purpose of financing or
refinancing one- to four-family residential properties.
39
<PAGE>
ANALYSIS OF LOAN PORTFOLIO. Set forth below is selected data relating to
the composition of the Savings Bank's loan and mortgage-backed securities
portfolio by type of loan on the dates indicated.
<TABLE>
<CAPTION>
At September 30,
1992 1993 1994
$ % $ % $ %
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
Residential $ 10,616 34.04% $ 10,501 33.56% $ 10,958 35.27%
Commercial 148 .47 90 .29 78 .25
Construction 80 .26 64 .20 20 .06
Multi-family 544 1.74 530 1.69 519 1.67
Second mortgage 162 .52 154 .49 122 .39
Consumer loans:
Deposit 576 1.85 436 1.39 464 1.49
Total loans 12,126 38.88 11,775 37.62 12,161 39.13
Mortgage-backed securities 19,059 61.12 19,513 62.38 18,913 60.87
Total loans and mortgage-backed
securities 31,185 100.00% 31,288 100.00% 31,074 100.00%
Less:
Loans in process 33 64 20
Deferred loan origination fees
and costs 23 24 23
Unamortized yield adjustments (17) (63) (60)
Allowance for loan losses 174 199 223
Total loans and mortgage-
backed securities, net $ 30,972 $ 31,064 $ 30,868
</TABLE>
40
<PAGE>
Loan Maturity. The following table sets forth the maturity of the
Savings Bank's loan portfolio at September 30, 1994. The table
does not include prepayments or scheduled principal repayments.
Prepayments and scheduled principal repayments on loans totalled
$3,856,000, $3,786,000 and $3,951,000, for the three years ended
September 30, 1992, 1993 and 1994, respectively. The Savings Bank had
no adjustable-rate loans at September 30, 1994.
<TABLE>
<CAPTION>
1-4 Family
Real Estate Commercial Multi-
Mortgage(1) Real Estate Family Construction Deposit Total
(In thousands)
<S> <C> <C> <C> <C> <C>
Amounts Due:
Within 1 year $ 73 $ -- $ 519 $ 20 $ 464 $ 1,076
After 1 year
1 to 3 years 249 -- -- -- -- 249
3 to 5 years 408 78 -- -- -- 486
5 to 10 years 2,709 -- -- -- -- 2,709
10 to 20 years 7,313 -- -- -- -- 7,313
Over 20 years 328 -- -- -- -- 328
Total due after one year 11,007 78 -- -- -- 11,085
Total amount due $11,080 $ 78 $ 519 $ 20 $ 464 $12,161
Less:
Allowance for loan loss 143 -- 80 -- -- 223
Loans in process -- -- -- 20 -- 20
Deferred loan fees 23 -- -- -- -- 23
Loans receivable, net $10,914 $ 78 $ 439 $ -- $ 464 $11,895
</TABLE>
_____________________
(1) Includes second mortgage loans.
The following table sets forth the dollar amount of all loans due after
September 30, 1995, which have predetermined interest rates and
which have floating or adjustable interest rates.
Floating or
Fixed Adjustable
Rates Rates Total
(In Thousands)
One-to-four family $10,885 $ -- $10,885
Commercial real estate 78 -- 78
Multi-family -- -- --
Second mortgage 122 -- 122
Construction -- -- --
Deposit -- -- --
Total $11,085 $ -- $11,085
Residential and Multi-Family Real Estate Loans. The Savings Bank's
primary lending activity consists of the origination of one- to
four-family, owner-occupied, residential mortgage loans secured by
property located in the Savings Bank's primary market area. The
majority of the Savings Bank's residential mortgage loans consist
of loans secured by owner-occupied, single-family residences. As of
September 30, 1994, the Savings Bank had $10.9 million, or 35.27%,
of its gross loan and mortgage-backed securities portfolio invested in
loans secured by one-to-four family residences. In addition, at
that same date, the Savings Bank had $18.9 million or 60.87% in
mortgage-backed securities that were secured by one-to- four family
residences.
The Savings Bank originates 15- and 20-year fixed-rate mortgage loans
intended primarily for retention in the Savings Bank's loan
portfolio. The Savings Bank'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.
41
<PAGE>
The Savings Bank currently offers one-year and three-year fixed-rate
balloon mortgage loans. Balloon mortgage loans have one- and three-year
maturities at which time the Savings Bank may renew the loan at
prevailing market rates at its option. Balloon loans are made on a 20-
to 25-year amortization basis. Depending upon the credit history
of the borrower, balloon loans may not be re-underwritten by the Savings
Bank upon maturity. The Savings Bank's origination of fixed-rate
mortgage loans versus balloon loans is determined on an on-going basis
and is based on changes in market interest rates. The primary
purpose of offering balloon loans is to make the Savings Bank's loan
portfolio more interest rate sensitive. However, as the interest
income earned on balloon loans varies with prevailing interest
rates, such loans do not offer the Savings Bank predictable cash flows
as would long-term, fixed-rate loans. There is increased credit
risk resulting from potential increased payments to the borrowers as a
result of repricing of balloon loans. It is possible, therefore,
that during periods of rising interest rates, the risk of defaults on
balloon loans may increase due to the upward adjustment of interest
costs to the borrower. As of September 30, 1994, the Savings Bank had
$1.6 million or 5.01% of its gross loan and mortgage-backed
securities portfolio comprised of balloon loans.
The Savings Bank also originates multi-family residential real estate
mortgage loans which are secured by a first lien on such properties
as apartment buildings. As of September 30, 1994, multi-family
residential real estate loans totalled $519,000 or 1.67% of the Savings
Bank's gross loan and mortgage-backed securities portfolio.
Multi-family loans are generally made with a fixed rate of interest that
is at least 100 basis points above the interest rate on the Savings
Bank's fixed- rate residential real estate loans, depending upon market
conditions existing at the time the loan is made. Multi-family
loans are underwritten on the same basis as residential real estate
loans except that the Savings Bank generally will only lend up to
80% of the appraised value of the property, requires certain debt
service coverage ratios to be met and may charge higher origination
fees and points.
Loans secured by multi-family real estate generally involve a greater
degree of credit risk than one- to four-family residential mortgage
loans and carry larger loan balances. This increased credit risk
is a result of several factors, including the concentration of principal
in a limited number of loans and borrowers, the effects of general
economic conditions on income producing properties, and the increased
difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by Multi-family real estate
is typically dependent upon the successful operation of the related
real estate project. If the cash flow from the project is reduced, the
borrower's ability repay the loan may be impaired. The Savings
Bank evaluates all aspects of multi-family lending in order to mitigate
risk to the extent possible. The Savings Bank seeks to ensure that
the property securing the loan will generate sufficient cash flow
to adequately cover operating expenses and debt service payments.
Multi-family loans generally are made at a loan-to-value ratio no
greater than 80%. In underwriting these loans, consideration is given
to the property's operating history, future operating projections,
current and projected occupancy, position in the local and regional
market, location, and physical condition. The underwriting
analysis also includes credit checks and a review of the financial
condition of the borrower.
Point Pleasant Federal's residential first mortgage loans customarily
include due-on-sale clauses, which are provisions giving the
Savings Bank 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 the Savings Bank's fixed-rate mortgage portfolio, and the
Savings Bank 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. Such regulations permit a maximum loan-to-value ratio of
100% for residential property and 90% for all other real estate
loans. The Savings Bank's lending policies, however, generally limit
the maximum loan-to-value ratio to 80% of the lesser of the
appraised value or the purchase price of the property to serve as
security for the loan. When the Savings Bank makes a loan in
excess of 80% of the appraised value or purchase price, private mortgage
insurance is required. Mortgage loans will be made up to 90% of
appraised value only if private mortgage insurance is provided for the
amount of the loan in excess of 80% of the lower of the appraised
value or purchase price.
The loan-to-value ratio, maturity, and other provisions of the
residential real estate loans made by the Savings Bank have
generally reflected the policy of making loans below the maximum limits
permitted under applicable regulations. The Savings Bank requires
title insurance or an attorney's title certificate, flood hazard
insurance (if required), fire, and casualty insurance on all properties
securing real estate loans made by the Savings Bank.
42
<PAGE>
CONSTRUCTION LOANS. The Savings Bank originates loans to finance the
construction of owner-occupied residential property. As of September 30, 1994,
the Savings Bank had none of its total loan and mortgage-backed securities
portfolio invested in interim construction loans. The Savings Bank makes
construction loans to private individuals and to builders who are building
pursuant to a contract for sale. Construction loans are made with fixed
interest rates for terms of up to one year. Loan proceeds are disbursed in
increments as construction progresses and as inspections warrant. Construction
loans are structured to be converted to permanent loans originated by the
Savings Bank at the end of the construction period.
COMMERCIAL REAL ESTATE LOANS. Loans secured by commercial properties
constituted approximately $78,000, or .25%, of Point Pleasant Federal's total
gross loans and mortgage-backed securities at September 30, 1994. The Savings
Bank's permanent commercial real estate loans are secured by improved property
such as churches, offices, small business facilities, and other non-residential
buildings, all of which are located in the Savings Bank's primary market. The
Savings Bank offers commercial real estate loans with balloon maturities up to
three years that amortize on ten-to 25-year repayment schedules. Interest rates
offered on commercial real estate loans are slightly higher than those offered
on residential mortgage loans. The Savings Bank does not consider the
origination of commercial real estate loans as its primary lending activity, nor
has the Savings Bank emphasized the origination of such loans.
It is the Savings Bank's policy to limit commercial real estate loans to
principal balances of up to approximately $1,500,000. Commercial real estate
loans generally range in size up to approximately $250,000 to $500,000. As of
September 30, 1994, the Savings Bank's largest commercial real estate loan had a
principal balance of $78,172 and was made to finance a small business activity
located in Nitro, West Virginia.
Loans secured by commercial real estate generally involve a greater degree
of risk than residential mortgage loans and carry larger loan balances. This
increased credit risk is a result of several factors, including the
concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties, and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by commercial real estate is
typically dependent upon the successful operation of the related real estate
project. If the cash flow from the project is reduced, the borrower's ability
to repay the loan may be impaired.
CONSUMER LOANS. Regulations permit federally-chartered savings associations
to make secured and unsecured consumer loans up to 35% of the Savings Bank's
assets. In addition, the Savings Bank has lending authority above the 35%
category for certain consumer loans, such as second mortgage loans and loans
secured by deposit accounts.
As of September 30, 1994, consumer loans totaled $464,000 or 1.49% of the
Savings Bank's total gross loan and mortgage-backed securities portfolio and
consisted entirely of loans on deposit accounts. While the Savings Bank has the
authority to offer a variety of consumer loans, at September 30, 1994, the
Savings Bank only offered consumer loans secured by savings accounts or
certificates of deposit. Loans secured by deposit accounts are made at a fixed
interest rate 200 basis points above the interest rate paid on the account and
with maturities up to one year, subject to renewal at the Savings Bank's option.
LOAN SOLICITATION AND PROCESSING. Loan originations are derived from a
number of sources such as real estate broker referrals, customers, borrowers,
builders, and walk-in customers.
Upon receipt of a loan application, a credit report is made 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 the Savings Bank. A loan application file is first
reviewed by the President of the Savings Bank and then, depending on the amount
of the loan, is submitted to the Loan Committee or the full Board of Directors
for consideration and approval. The President or the Loan Committee approves
loans in the amount of $100,000 or less. All loans over $100,000 must be first
approved by the President and then ratified by the Loan Committee or the full
Board of Directors.
Loan applicants are promptly notified of the credit decision by a letter.
If the loan is approved, 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, title
insurance endorsed to the Savings Bank or an attorney's certificate is required
on all mortgage loans.
43
<PAGE>
ORIGINATION, PURCHASE AND SALE OF LOANS
Loan Originations, Purchases and Sales. The following table sets forth the
Savings Bank's gross loan originations, loan and mortgage-backed securities
purchases, sales and principal repayments for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
1992 1993 1994
<S> <C> <C> <C>
Total gross loans receivable and mortgage-backed
securities at beginning of period $32,015 $31,185 $31,288
Loans originated:
1 to 4 family residential 3,599 3,575 4,085
Commercial -- -- --
Multi-family real estate -- -- --
Construction loans -- -- --
Deposit loans 314 218 346
Total loans originated 3,913 3,793 4,431
Mortgage-backed securities purchased 4,295 8,395 5,440
Loan principal and mortgage-backed securities
repayments 9,038 12,085 10,085
Net loan activity (830) 103 (214)
Total gross loans receivable and mortgage-
backed securities at end of period $31,185 $31,288 $31,074
</TABLE>
LOAN COMMITMENTS. The Savings Bank issues standby loan origination
commitments to qualified borrowers primarily for the construction and purchase
of residential real estate and non-residential real estate. Such commitments
are made on specified terms and conditions and are made for periods of up to 30
days, during which time the interest rate is locked-in. As of September 30,
1994, the Savings Bank had $114,000 in commitments to originate mortgage loans.
LOAN FEES AND SERVICE CHARGES. In addition to interest earned on loans,
the Savings Bank generally recognizes fees and service charges which consist
primarily of loan servicing fees and late charges. The Savings Bank recognized
other fees and service charges on loans of $32,000, $28,000 and $31,000 for the
years ended September 30, 1992, 1993 and 1994, respectively.
Loan origination and commitment fees are volatile sources of income. Such
fees vary 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.
LOANS TO ONE BORROWER. FIRREA significantly reduced the dollar amount of
loans that a savings association may lend to a single or related group of
borrowers. Under prior federal regulations, a savings association could make
real estate related loans to one borrower in an amount equal to 100% of its
regulatory capital. Under FIRREA, savings associations are subject to the same
limits as those applicable to national banks, which under current regulation,
limits loans to one borrower in an amount equal to 15% of unimpaired capital and
unimpaired surplus on an unsecured basis and an additional amount equal to 10%
of unimpaired capital and unimpaired surplus if the loan is secured by readily
marketable collateral (generally, financial instruments and bullion, but not
real estate) or $500,000, whichever is higher. Prior to FIRREA, the Savings
Bank's maximum loan to one borrower limit equaled 10% of withdrawable accounts
or 100% of its regulatory capital under the then-existing FHLBB regulations.
Under FIRREA and implementing regulations, the Savings Bank's maximum loan to
one borrower limit was $1.5 million at September 30, 1994.
44
<PAGE>
DELINQUENCIES AND ASSET CLASSIFICATION. The Savings Bank's collection
procedures provide that when a loan is 15 days past due, a late charge is added
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. Additional late charges may be added and, if the loan continues in a
delinquent status for 60 days or more, the Savings Bank generally initiates
foreclosure proceedings unless other repayment arrangements are made. Each
delinquent loan is reviewed on a case by case basis.
Loans are reviewed on a regular basis and are 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. 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 the Savings Bank 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.
Any write-down of foreclosed real estate is charged to the allowance for real
estate losses. As of September 30, 1994, the Savings Bank had no property
acquired as the result of foreclosure or by deed in lieu of foreclosure and
classified as foreclosed real estate.
The following table sets forth information regarding loans which are 90
days or more delinquent but on which the Savings Bank is accruing interest and
real estate owned at the dates indicated. Management of the Savings Bank
believes that all loans accruing interest are well secured and in the process of
collection. At such dates, the Savings Bank had no restructured loans within
the meaning of SFAS No. 15 and had no loans on non-accrual status.
<TABLE>
<CAPTION>
At September 30,
1990 1991 1992 1993 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Accruing loans which are contractually past due
90 days or more:
Permanent loans secured by 1-4
dwelling units $ 86 $103 $104 $ 560 $ 21
Total accrual loans more than 90
days delinquent $ 86 $103 $104 $ 560 $ 21
Real estate owned $ -- $ 32 $ -- $ -- $ --
Total non-performing assets $ 86 $135 $104 $ 560 $ 21
Total accrual loans more than 90
days delinquent to net loans .69% .83% .86% 4.79% .17%
Total accrual loans more than 90
days delinquent to total assets .69% .27% .20% .98% .17%
Total non-performing assets to total
assets .18% .27% .20% .98% .17%
</TABLE>
CLASSIFIED ASSETS. OTS regulations provide for a classification system for
problem assets of insured institutions which covers all problem assets,
including assets that previously had been treated as "scheduled items". Under
this classification system, problem assets of insured institutions 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 of the
45
<PAGE>
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 the Savings Bank's
internal watchlist.
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, thereby impacting the institution's
financial conditions and earnings.
As of September 30, 1994, the Savings Bank had $512,000, or .94% of total
assets, classified as substandard assets and no assets classified as special
mention. At such date, the Savings Bank had $223,000 in general loss
allowances. The Savings Bank had no assets classified as doubtful or loss at
September 30, 1994.
At September 30, 1994
(In Thousands)
Special mention.............. $ --
Substandard.................. 512
Doubtful assets.............. --
Loss assets.................. --
Total classified assets... $ 512
General loss allowance....... $ 223
Specific loss allowance...... --
Charge-offs.................. $ --
The Savings Bank had one loan classified as "substandard" at September 30,
1994, which had a principal balance of $512,000 plus accrued interest of $4,800
at that date. Originally, this was a $519,500 permanent loan secured by 28 two-
bedroom garden style apartments located on 1.5 acres of land in St. Albans, West
Virginia. The loan was assumed by the current borrowers in December 1990,
however, the original guarantors were not released from the loan. The loan is
secured by a first mortgage on the apartment buildings and an assignment of the
rents. As of November 30, 1994, the date of last payment on this loan, the loan
was 30 days delinquent.
The following table sets forth the type and dollar amounts of the Savings
Bank's delinquent loans more than 90 days delinquent as of September 30, 1994.
At
September 30,
1994
(In Thousands)
Delinquent residential mortgage loans
(90 days or more delinquent)...... $ 21,000
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<PAGE>
Allowance for Loan and Real Estate Losses. It is management's policy to
provide for losses on unidentified loans in its loan portfolio and foreclosed
real estate. A provision for loan losses is charged to operations based on
management's evaluation of the potential losses that may be incurred in the
Savings Bank's loan portfolio. Such evaluation, which includes a review of all
loans of which full collectibility of interest and principal may not be
reasonably assured, considers, among other matters, the estimated net realizable
value of the underlying collateral. During the years ended September 30, 1992,
1993, and 1994, the Savings Bank provided $75,000, $38,000 and $24,000,
respectively, to the provision for loan losses.
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. Valuations are
periodically performed by management and an allowance for losses is established
by a charge to operations if the carrying value of the property exceeds its
estimated net realizable value. As of September 30, 1994, the Savings Bank had
neither real estate owned nor an allowance for losses on real estate owned.
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 and
that additional provisions for loan losses will not be required.
47
<PAGE>
The following table sets forth information with respect to the Savings
Bank's allowance for loan losses at the dates
indicated:
<TABLE>
<CAPTION>
At September 30,
1992 1993 1994
(Dollars in Thousands)
<S> <C> <C> <C>
Total loans outstanding $12,070 $11,687 $12,118
Average loans outstanding $12,152 $11,450 $11,884
Allowance balances (at beginning of period) 99 174 199
Provision (credit):
Residential real estate 75 38 24
(Charge-offs) recoveries:
Residential real estate -- (13) --
Recoveries -- -- --
Allowance balance (at end of period) $ 174 $ 199 $ 223
Allowance for loan losses as a percentage of
total loans outstanding 1.44% 1.70% 1.84%
Net loans charged off as a percentage of
average loans outstanding --% .11% --%
</TABLE>
The distribution of the Savings Bank's allowance for loan losses at the
dates indicated are summarized as follows:
<TABLE>
<CAPTION>
At September 30,
1992 1993 1994
Percent of Percent of Percent of
Loans in Loans in Loans in
Each Each Each
Category Category Category
To Total To Total To Total
Amount Loans Amount Loans Amount Loans
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real $ 124 71.26% $124 62.31% $143 64.13%
estate
Multi-family real 50 28.74 75 37.69 80 35.87
estate
Commercial real
estate -- -- -- -- -- --
Total $ 174 100.00% $199 100.00% $223 100.00%
</TABLE>
48
<PAGE>
MORTGAGE-BACKED SECURITIES AND INVESTMENT ACTIVITIES
GENERAL. The investment policy of the Savings Bank, 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 investments while seeking to optimize net
interest income within acceptable limits of safety and liquidity. Investments
generally are made with the intent of holding them to maturity, and the Savings
Bank's portfolio of mortgage securities and other investments is accounted for
on an amortized cost basis. The Savings Bank'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 the Savings
Bank's asset and liability management goals. The investment activities of the
Savings Bank consist primarily of investments in mortgage securities consisting
primarily of mortgage-backed securities, and other securities consisting
primarily of securities issued or guaranteed by the United States Government or
agencies thereof and investment grade corporate securities. As of September 30,
1994, the Company had an investment portfolio of approximately $36 million
consisting primarily of mortgage-backed securities and U.S. Government and
agency securities. The market value of such securities at September 30, 1994,
was $35 million. See Notes 3 and 4 of Notes to Financial Statements.
On February 10, 1992, the OTS adopted Thrift Bulletin 52 ("TB 52"). This
bulletin addresses the selection of securities dealers, requires depository
institutions to establish prudent policies and strategies for securities
transactions, describes securities trading and sales practices that are
unsuitable when conducted in an investment portfolio, indicates characteristics
of loans held for sale or trading, and establishes a framework for identifying
when certain mortgage derivative products are high-risk mortgage securities that
must be reported in a "trading" or "held for sale" account. As of September 30,
1994, the Savings Bank believed it was in compliance with TB 52. As of this
same date, the Savings Bank's policies made no allowance for either "trading" or
"held for sale" activity or investment in high-risk mortgage securities.
On June 1, 1989, the OTS issued a new rule to clarify the application of
GAAP to securities held for investment, sale, and/or trading by insured savings
associations. The rule requires an insured savings association's board of
directors to document and monitor its investment policy and strategies,
discusses the appropriate documentation of investment decisions of the insured
savings association's board of directors, summarizes GAAP applicable to
securities held for investment, sale and/or trading, and offers guidance on the
application of GAAP by insured savings associations in determining when
securities should be accounted for as a security held as an investment, as a
security held for sale or as a security held for trading. As of September 30,
1994, the Savings Bank had no securities held for sale or trading.
COMPOSITION OF MORTGAGE SECURITIES PORTFOLIO. The principal business
activity of the Savings Bank is investing in mortgage-backed securities and
Mortgage Obligations ("CMOs") (collectively referred to as "mortgage
securities"), and the Savings Bank makes such investments as its principal
method of financing home ownership. As of September 30, 1994, the carrying
value of mortgage-backed securities totalled $16 million, or 28.07% of total
assets, and CMOs and other asset-backed securities totalled $3 million, or 5.26%
of total assets. The market value of such securities totalled approximately $19
million at September 30, 1994. Included in CMOs at September 30, 1994, were
real estate mortgage investment conduits ("REMICs"). Included in the Savings
Bank's mortgage-backed securities portfolio at September 30, 1994, were $4.1
million of pass-through securities issued by the Government National Mortgage
Association ("GNMA"), $8.6 million of pass-through securities issued by the
Federal Home Loan Mortgage Corporation ("FHLMC"), and $3.7 million of pass-
through securities issued by the Federal National Mortgage Association ("FNMA").
Mortgage-backed securities represent a participation interest in a pool of
single-family or multi-family mortgages, the principal and interest payments on
which are passed from the mortgage originators, through intermediaries
(generally quasi-governmental agencies) that pool and repackage the
participation interests in the form of securities, to investors such as the
Savings Bank. Such quasi-governmental agencies, which guarantee the payment of
principal and interest to investors, primarily include FHLMC, FNMA and GNMA.
Since FHLMC, FNMA and GNMA were established to provide support for low- and
middle-income housing, there are limits to the maximum size of loans that
qualify for these programs. As of September 30, 1994, GNMA limited its maximum
loan size to $184,000 for Veterans Administration ("VA") loans and on average
$184,000 for Federal Housing Authority ("FHA") loans; FNMA and FHLMC limited
their loans to $203,150. To accommodate larger-sized loans, and loans that, for
other reasons, do not conform to the agency programs, a number of private
institutions have established their own home-loan origination and securitization
programs.
49
<PAGE>
Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate mortgages or
adjustable rate mortgage ("ARM") loans. Mortgage-backed securities are
generally referred to as mortgage participation certificates or pass-through
certificates. As a result, the interest rate risk characteristics of the
underlying pool of mortgages, i.e., fixed rate or adjustable rate, as well as
prepayment risk, are passed on to the certificate holder. The life of a
mortgage-backed pass-through security is equal to the life of the underlying
mortgages. Mortgage-backed securities issued by FHLMC, FNMA, and GNMA make up a
majority of the pass-through market and totalled 52%, 23%, and 25%,
respectively, of the Savings Bank's mortgage-backed securities portfolio at
September 30, 1994.
In the current declining interest rate environment, the Savings Bank has
experienced significant prepayments of both fixed and adjustable rate mortgage-
backed securities. The Savings Bank generally has not been able to reinvest the
cash flow from these securities into comparable yielding investments, and
expects that this reinvestment risk will continue so long as interest rates
remain relatively low.
The following table sets forth the contractual maturities, as modified to
reflect estimated maturities based on prepayment assumptions, of the Savings
Bank's mortgage-backed securities portfolio as of September 30, 1994. See Note
4 of the Notes to Financial Statements.
<TABLE>
<CAPTION>
Contractual Maturities Due In Year(s) Ended September 30,
1997 to 1999 to 2004 and
1994 1995 1996 1998 2003 Thereafter Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
$ -- $ -- $1,105 $6,723 $4,639 $6,506 $18,973
</TABLE>
CMOs are typically issued by a special-purpose entity (the "issuer"), which
may be organized in a variety of legal forms, such as a trust, a corporation, or
a partnership. The entity aggregates pools of pass-through securities, which
are used to collateralize the CMO. Once combined, the cash flows can be divided
into "tranches" or "classes" of individual bonds, thereby creating more
predictable average durations for each bond than the underlying pass-through
pools. Accordingly, under the CMO structure all principal pay downs from the
various mortgage pools are allocated to a CMO's first class until it has been
paid off, then to a second class until such class has been paid off, and then to
the next classes. Thus, CMOs are intended to address the reinvestment concerns
associated with mortgage-backed securities pass-throughs, namely that (i) they
tend to pay off when interest rates fall, thereby taking their relatively high
coupon with them, and (ii) their expected average life may vary significantly
among the different tranches.
Some CMO instruments are most like traditional debt instruments because
these CMO instruments have stated principal amounts and traditionally defined
interest-rate terms. Purchasers of certain other CMO instruments are entitled
to the excess, if any, of the issuer's cash inflows, including reinvestment
earnings, over the cash outflows for debt service and administrative expenses.
These CMO instruments may include instruments designated as residual interests,
and are riskier in that they could result in the loss of a portion of the
original investment. Cash flows from residual interests are very sensitive to
prepayments and, thus, contain a high degree of interest-rate risk. Residual
interests represent an ownership interest in the underlying collateral, subject
to the first lien of the CMO investors.
50
<PAGE>
The following table sets forth information relating to the carrying and
market values of the Savings Bank's mortgage securities portfolio at the dates
indicated.
<TABLE>
<CAPTION>
At September 30,
1992 1993 1994
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities:
GNMA $ 8,289 $ 9,001 $ 5,616 $ 6,007 $ 4,136 $ 4,217
FHLMC 5,115 5,298 7,475 7,658 8,577 8,293
FNMA 4,699 4,967 3,784 3,929 3,724 3,641
Total 18,103 19,266 16,875 17,594 16,437 16,131
CMO and REMIC securities:
Government and agency CMO
and 973 997 2,701 2,707 2,536 2,439
REMIC regular interests
Private issuer CMO and REMIC
regular interests -- -- -- -- -- --
Total 973 997 2,701 2,707 2,536 2,439
Total mortgage-backed securities
and CMO and REMIC $19,076 $20,263 $19,576 $20,301 $18,973 $18,570
securities
</TABLE>
The following table sets forth the carrying value of the Savings Bank's
fixed rate and variable rate mortgage securities and investment securities at
the dates indicated.
At September 30,
1993 1994
(In Thousands)
Fixed $15,655 $14,631
Variable 1,220 1,806
Total mortgage-backed securities $16,875 $16,437
CMO and REMIC securities:
Fixed $ 2,701 $ 1,590
Variable -- 946
Total CMO and REMIC $ 2,701 $ 2,536
Investment securities:
Fixed $17,628 $12,938
Variable 750 3,650
Total investment securities $18,378 $16,588
51
<PAGE>
The following table sets forth the carrying value of the Savings Bank's
investment securities portfolio, short-term investments and FHLB stock at the
dates indicated.
<TABLE>
<CAPTION>
At September 30,
1992 1993 1994
(In Thousands)
<S> <C> <C> <C>
Investment securities:
U.S. Government and agency securities $ 5,300 $10,275 $12,123
Other securities(1) 4,965 8,103 4,465
Total investment securities 10,265 18,378 16,588
Interest-bearing deposits 9,098 5,887 7,878
Federal funds sold -- -- --
FHLB of Pittsburgh stock 316 288 268
Mortgage securities 19,076 19,576 18,973
Total investments $38,755 $44,129 $43,707
</TABLE>
(1) Consists of corporate bonds, notes and debentures.
Investment Portfolio Maturities
The following table sets forth certain information regarding the carrying
values, weighted average yields and maturities of the Savings Bank's investment
securities portfolio at September 30, 1994.
<TABLE>
<CAPTION>
As of September 30, 1994
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total Investment Securities
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
(Dollars in the Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
and federal $4,824 4.51% $ 6,547 4.97% $ 250 5.00% $502 7.25% $12,123 4.88% $11,780
agency
obligations
Other securities(1) 2,771 4.55 1,694 5.26 -- -- -- -- 4,465 4.81 4,444
Total $7,595 4.52% $ 8,241 5.03% $ 250 5.00% $502 7.25% $16,588 4.86% $16,224
</TABLE>
(1) Consists of corporate securities.
52
<PAGE>
SUBSIDIARY ACTIVITIES
As a federally chartered savings and loan association, Point Pleasant
Federal is permitted to invest up to 2% of its assets in the stock of, or loans
to, service corporation subsidiaries. Point Pleasant Federal may invest an
additional 1% of its total assets in service corporations where such additional
funds are used for inner-city or community development purposes. As of September
30, 1994, the Savings Bank had no subsidiaries.
SOURCES OF FUNDS
GENERAL. Deposits are the major source of the Savings Bank's funds for
lending and other investment purposes. In addition to deposits, Point Pleasant
Federal derives funds from amortization and prepayment of loans, sale or
maturities of investment 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.
DEPOSITS. Consumer and commercial deposits are attracted principally from
within the Savings Bank's primary market area through the offering of a broad
selection of deposit instruments including NOW, regular savings, money market
deposit, term certificate accounts (including negotiated jumbo certificates in
denominations of $100,000 or more), 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.
The Savings Bank regularly evaluates the internal cost of funds, surveys rates
offered by competing institutions, reviews the Savings Bank's cash flow
requirements for lending and liquidity and executes rate changes when deemed
appropriate. The Savings Bank does not obtain funds through brokers, nor does
it actively solicit funds outside of the State of West Virginia.
Jumbo certificates of deposit with principal amounts of $100,000 or more
constituted $2.5 million or 6% of the Savings Bank's total deposit portfolio at
September 30, 1994. The Savings Bank's jumbo deposits include deposits from
various individuals. Jumbo deposits make the Savings Bank susceptible to large
deposit withdrawals if one or more depositors withdraw deposits from the Savings
Bank. Such withdrawals may adversely impact the Savings Bank's cost of funds,
liquidity, and funds available for lending.
53
<PAGE>
DEPOSIT PORTFOLIO. Deposits in the Savings Bank as of September 30, 1994,
were represented by various types of savings programs described below.
<TABLE>
<CAPTION>
Minimum Balance as of Percentage
Interest Balance September 30, of Total
Category Term Rate Amount 1994(1) Deposits
<S> <C> <C> <C> <C> <C>
NOW Accounts None 2.85% $ 300 $ 1,968 5%
Regular Savings None 3.25 5 12,880 30
Money Market None 2.85 1,000 1,428 3
accounts
Non-interest deposit None -- N/A -- --
Christmas Club None -- N/A -- --
Total $ 16,276 38%
Certificates of
Deposit:
Fixed Term, Fixed 1 - 3 Months 3.93 500 $ 3,640 8%
Rate
Fixed Term, Fixed 4 - 6 Months 4.08 500 5,421 12
Rate
Fixed Term, Fixed 7 - 12 Months 4.52 500 7,406 17
Rate
Fixed Term, Fixed 13 - 24 Months 4.97 500 6,810 16
Rate
Fixed Term, Fixed 25 - 36 Months 4.99 500 146 1
Rate
Fixed Term, Fixed 37 - 48 Months 4.99 500 147 1
Rate
Fixed Term, Fixed 49 - 120 Months 4.99 500 147 1
Rate
Jumbo Certificates 4.95 100,000 2,500 6
Total certificates 4.42 26,217 62
Total deposits 3.96% $ 42,493 100%
</TABLE>
(1) Dollars in thousands.
TIME DEPOSITS BY RATE. The following table sets forth the time deposits in
the Savings Bank classified by rates as of the dates indicated.
As of September 30,
1992 1993 1994
(In thousands)
Weighted Average Rate
4.00% or Less $ 8,989 $ 7,180 $12,467
4.01 - 6.00% 17,002 16,959 12,895
6.01 - 8.00% 2,985 1,325 855
Total $28,976 $25,464 $26,217
54
<PAGE>
TIME DEPOSITS MATURITY SCHEDULE. The following table sets forth the amount
and maturities of time deposits at September 30, 1994.
<TABLE>
<CAPTION>
Amount Due
Less Than 1-2 2-3 After
One Year Years Years 3 Years Total
(In thousands)
<S> <C> <C> <C> <C> <C>
Weighted Average Rate
4.00% or less $ 6,139 $ -- $ -- $ -- $ 6,139
4.01% - 6.00% 12,827 4,338 2,472 441 20,078
6.01% - 8.00% -- -- -- -- --
8.01% - 10.00% -- -- -- -- --
10.01% - 12.00% -- -- -- -- --
Total $18,966 $ 4,338 $ 2,472 $ 441 $26,217
</TABLE>
JUMBO CERTIFICATES OF DEPOSIT. The following table indicates the amount of
the Savings Bank's certificates of deposit of $100,000 or more by time
remaining until maturity as of September 30, 1994:
Certificates
of Deposits
Maturity Period (In thousands)
Three months or less........ $1,600
Three through six months.... 400
Six through twelve months... 200
Over twelve months.......... 300
$2,500
DEPOSIT ACTIVITY. The following table sets forth the deposit activities of
the Savings Bank for the periods indicated:
<TABLE>
<CAPTION>
Year Ended September 30,
1992 1993 1994
(In thousands)
<S> <C> <C> <C>
Beginning Balance $43,188 $ 44,732 $42,962
Deposits 34,565 34,421 32,482
Withdrawals 34,803 37,596 34,384
Net increase (decrease) before interest credited 238 (3,175) (1,902)
Interest credited 1,306 1,405 1,433
Net increase (decrease) in savings deposits $ 1,544 $ (1,770) (469)
Ending Balance $44,732 $ 42,962 $42,493
</TABLE>
In the unlikely event of liquidation of the Savings Bank after the
Conversion, depositors will be entitled to full payment of their deposit
accounts prior to any payment being made to the stockholders of the Savings
Bank. Substantially all of the Savings Bank's depositors are residents of West
Virginia.
PROPERTIES
The Savings Bank currently operates from a main office. The main office is
located in a two story, 7,000 square foot building owned by Point Bancorp. This
facility operates five teller stations and three drive-in stations. In
addition, there exists a station which could be utilized either as an additional
drive in station or an ATM facility.
55
<PAGE>
COMPETITION
Point Bancorp's target market area consists of portions of Mason, Cabell,
Kanawha, Putnam and Jackson Counties (West Virginia) and Gallia and Meigs
Counties (Ohio). Located along Route 35 and near Interstate routes 64, and 77,
Point Bancorp's market area includes the cities of Point Pleasant, Gallipolis,
Ravenswood, New Haven and their neighboring communities.
Point Bancorp's market area is supported by a variety of industries
including healthcare, chemical manufacturing, coal mining and distribution.
Leading employers in Point Pleasant's market area include Pleasant Valley
Hospital, Holzer Medical Center, Reliance Control, Shell Chemical, Federal Mogul
Corp., American Alloys, Ravenswood Aluminum, Appalachian Power (4 power plants
within 20 miles), Akzo, school districts and county governments. In addition, a
proposed paper and pulp manufacturing facility to be located in Apple Grove,
West Virginia (Mason County) would be one of the largest of such facilities
nationwide.
In recent years, the economy of the market area has suffered from the
nationwide recession and as a result, loan demand has not increased at
historical levels. The Savings Bank believes it is the largest thrift in West
Virginia. The Savings Bank credits its stability, people and name recognition,
soundness and reputation for personal service as reasons for its success.
Point Bancorp's primary competitors are Banc One Corp., City Holding
Company, Ohio Valley and Star Banc Corporation. These organizations are all
larger than the Savings Bank, offer a wider array of services, and are capable
of making larger loans than Point Pleasant.
PERSONNEL
As of September 30, 1994, the Savings Bank had 8 full-time employees.
LEGAL PROCEEDINGS
There are various claims and lawsuits in which the Company or the Savings
Bank are periodically involved, such as claims to enforce liens, condemnation
proceedings on properties in which the Savings Bank holds security interests,
claims involving the making and servicing of real property loans, and other
issues incident to the Company's or Savings Bank's business. In the opinion of
management, no material loss is expected from any such pending claims or
lawsuits.
56
<PAGE>
ELECTION OF DIRECTORS
Point Bancorp's Board of Directors is presently composed of five members who
are elected for terms of three years. Cecil Edwin Cotton and Maye R. Smith are
Point Bancorp's nominees for the Board of Directors. Dr. Gary L. Clarke,
Theodore H. Ghiz and Robert C. Doeffinger, Jr. will continue in office.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Director or
Officer of
Point
Bancorp or Common Stock Owned
one of its Beneficially(1)(2)(3)
Name & Position Held Principal Occupation for Subsidiaries
with Point Bancorp Past Five Years Age Since Number Percentage
<C> <S> <C> <C> <C> <C>
Dr. Gary L. Clarke, Practices optometry in Gallipolis, 41 1980 41,626 6.44
Director Ohio
Robert E. Clary, August 1989-January 1991, CPA- 45 1990 2456 (6)
Vice President and Chief Trainer, Wright & Paterno
Accounting Officer
Cecil Edwin Cotton, (4) Served as a director for over a 76 1980 26,174 4.05
Director decade. Mr. Cotton is retired.
Robert C. Doeffinger, Jr., Partner of an architectural 44 1979 28,104 4.34
(7) engineering firm in Charleston,
Director WV. Paid consultant to the
Savings
Bank in the area of
investments and lending. Devotes
10% of
his time to the Savings
Bank.
Theodore H. Ghiz Attorney at law practicing in 70 1990 7,275 1.12
Director Charleston, WV. Director Ghiz is
the sole owner of Theodore H.
Ghiz, L.C., law firm. Provides
legal services to the Savings Bank
from time to time.
Faye R. Hudson, (7) Vice President and Secretary - 71 1992 33,041 4.69
Vice President and Point Bancorp
Secretary
Maye R. Smith, (4) (7) President, Chief Executive Officer 71 1967 43,202 6.14
President, Chief Executive and Chief Financial Officer since
Officer, Chief Financial 1975. Has four decades of service
Officer, Treasurer and with the Savings Bank.
Director
</TABLE>
All directors and executive officers as a group (7 persons) (5)
57
<PAGE>
(1) Pursuant to rules promulgated under the 1934 Act, a person or entity is
considered to beneficially own shares of Common Stock if he or she directly or
indirectly has or shares (1) voting power, which includes the power to vote or
to direct the voting of the shares; or (2) investment power, which includes the
power to dispose or direct the disposition of the shares. Unless otherwise
indicated, includes all shares held directly by the named individuals as well as
by spouses, minor children in trust and other indirect ownership, over which
shares the named individual effectively exercises sole voting and investment
power with respect to the indicated shares.
(2) Includes 24,700 shares of Common Stock awarded pursuant to the
Management Stock Bonus Plan, which vests over four years at the rate of 25% per
year commencing on the first anniversary of the effective date of the Savings
Bank's conversion from mutual to stock form (December 31, 1992) for which each
recipient possesses sole voting power and no investment power until such shares
vest.
(3) Excludes 30,874 shares of Common Stock granted under the 1992 Stock
Option Plan which are not exercisable within 60 days of the Record Date.
(4) Nominee for Point Bancorp's Board of Directors
(5) Includes 19,451 shares of Common Stock granted under the 1992 Stock
Option Plan.
(6)Less than 1%
(7) Maye R. Smith and Faye R. Hudson are sisters. Robert L. Doeffinger is
the son-in-law of Faye R. Hudson.
FILING OF BENEFICIAL OWNERSHIP REPORTS
The Common Stock of Point Bancorp is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934 ("Exchange Act"). The executive officers
and directors of the Company and beneficial owners of greater than 10% of the
Company's Common Stock ("10% beneficial owners") are required to file reports
on Forms 3, 4 and 5 with the Securities and Exchange Commission ("SEC")
disclosing changes in beneficial ownership of the Common Stock. Based on Point
Bancorp's review of Forms 3, 4 and 5 filed by officers, directors and 10%
beneficial owners of Common Stock, no executive officer, director or 10%
beneficial owners of Common Stock failed to file such ownership reports on a
timely basis during the fiscal year ended September 30, 1994 .
58
<PAGE>
EXECUTIVE COMPENSATION
Point Bancorp has no full time employees, relying upon employees of the
Savings Bank for the limited services required by Point Bancorp. All
compensation paid to directors, officers and employees is paid by the Savings
Bank.
The following table sets forth certain salary and compensation information
regarding the chief executive officer of Point Bancorp during the fiscal years
ended September 30, 1994, 1993 and 1992. No executive officer received cash
compensation in excess of $100,000 during the fiscal years ended September 30,
1994, 1993 and 1992.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM ALL OTHER
Name and COMPENSATION (1) COMPENSATION (3) COMPENSATION
Principal
Position Restricted Securities
Stock Awards Underlying
Year Salary Bonus (2) Options
<S> <C> <C> <C> <C> <C> <C>
MAYE R. SMITH 1994 $69,250 $4,250 0 0 $0
President, CEO
and CFO 1993 71,700 4,250 0 0 0
1992 67,013 4,250 86,450 15,437 0
</TABLE>
(1) Does not include the value of certain other perquisites and personal
benefits, which do not in the aggregate exceed 10% of the total salary and
bonus of the named executive officer. Salary includes fees received for
service as a director.
(2) Includes all restricted stock awards granted to the named executive officer
under the Management Stock Bonus Plan effective upon the completion of the
initial stock offering on December 31, 1992. Such awards vest at the rate of
33 1/3% per year after December 31, 1992.
(3) Includes grants of stock options received under the 1992 Stock Option Plan
effective upon the completion of the initial stock offering on December 31,
1992.
59
<PAGE>
EMPLOYMENT AGREEMENTS
Point Bancorp, through the Savings Bank, has entered into an employment
agreement with Maye R. Smith, President and Chief Executive Officer, and with
Faye R. Hudson, Vice President and Secretary. Each employment agreement is for
a three-year term, with an annual base salary of $65,000 for Ms. Smith and
$50,000 for Ms. Hudson. Each agreement provides for a salary review by the
Board of Directors not less often than annually with the Board to consider
increases to be made upon satisfactory performance, as well as participation in
any customary fringe salary benefits and vacation and sick leave. The agreement
terminates upon death, and will be terminable by Point Bancorp for "just cause"
as defined in the agreement. If Point Bancorp terminates the employee without
just cause, the employee will be entitled to a continuation of her salary from
the date of termination through the remaining term of the agreement. The
employee will be able to terminate the agreement by providing not less than 60
days written notice to the Board of Directors. In the event that such
individuals terminate employment as a result of the hiring of new management,
the Board will be furnished with at least 90 days notice of each employee's
intention to retire. Each agreement may be renewed annually by the Board of
Directors upon a determination of satisfactory performance and a determination
to extend such agreement within the Board's sole judgment. Upon retirement,
each employee will be eligible to receive reimbursement for life for payment
of the highest Medicare Supplement available for which they may elect to
enroll. Vacation benefits under each agreement will be accrued at the rate of
six weeks per year, with any unused vacation to be paid in the form of a lump-
sum payment at retirement. In the event of the death of the employee during
the term of such agreement, the estate of such employee shall be paid such
employee's base salary through the end of the calendar year but in no event for
a period of less than six months. Each employee will be eligible to receive
disability payments in the amount of the greater of 100% of base compensation
for 12 months or 65% of base compensation for the remaining term of the
agreement.
Each employment agreement contains a provision stating that in the event of
involuntary termination of employment in connection with, or within one year
after, any change in control of the Savings Bank or Point Bancorp, the employee
will be paid in a lump sum an amount equal to 299% of the employee's average
compensation during the preceding five year period. In no event, however, shall
compensation paid under any severance arrangement under either agreement exceed
three times the employee's annualized salary or result in the imposition of an
excise tax under Section 280G of the Internal Revenue Code. "Control" generally
refers to the ownership, holding or power to vote more than 25% of the Savings
Bank's or Point Bancorp's voting stock, the control of the election of a
majority of directors of the Savings Bank or Point Bancorp, or the exercise of
a controlling influence over the management or policies of the Savings Bank or
Point Bancorp by any person or group. The employee may also be entitled to
receive the foregoing termination payment, following a change in control in
the event she is required to relocate more than 35 miles from Point Bancorp's
main office, her duties are materially diminished, existing employee benefit
plans are not maintained, or in the case of Ms. Smith, is she is not re-elected
to the Board of Directors of the Savings Bank or Point Bancorp. If a change of
control occurred based upon compensation as of September 30, 1994, Ms. Smith
would have been entitled to a lump sum of $207,750, except her employment
contract will be amended to provide for a reduced amount as described below.
Pursuant to the Merger Agreement, these contracts will amended to provide
for (i) a lump sum payment on the Effective Date in amount equal to their
salaries for one year, and (ii) payment of the highest medicare supplement for
life that is offered to One Valley retirees. After a short transition period,
Ms. Smith and Ms. Hudson will cease their active duties and they will make
themselves available for consulting.
LONG TERM INCENTIVE PLANS
The Company does not sponsor any long-term incentive plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company consists of Directors Clarke,
Cotton, Doeffinger and Ghiz. The Committee serves as the Compensation Committee
for the Savings Bank. The Committee meets annually to review the performance of
Point Bancorp's and Savings Bank's officers and employees, and to determine
compensation programs and salary actions for Point Bancorp, the Savings Bank
and their personnel.
Director Doeffinger is a consultant to Point Bancorp and receives a $500
monthly fee. Director Ghiz provides legal services to Point Bancorp from time
to time at rates no less favorable to Point Bancorp than those which could be
obtained from unaffiliated third parties.
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OTHER BENEFITS
INSURANCE. Full-time employees of the Savings Bank are provided with group
plan insurance that covers hospitalization, major medical, dental and long-term
disability and life insurance. This insurance is available generally and on the
same basis to all full-time employees following completion of approximately
ninety days of employment.
STOCK OPTION PLAN. In connection with the Conversion, Point Bancorp's
Board of Directors adopted the 1992 Stock Option Plan (the "Option Plan").
Pursuant to the Option Plan, a number of shares equal to 10% of the Common Stock
issued in the Conversion (i.e., 61,750 shares based upon the sale of 617,500
shares) are reserved for issuance by Point Bancorp upon exercise of stock
options to be granted to officers, directors and employees of Point Bancorp
from time to time under the Option Plan. The purpose of the Option Plan is to
provide additional incentive to certain officers, directors and employees by
facilitating their purchase of a stock interest in Point Bancorp. The Option
Plan has 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.
MANAGEMENT STOCK BONUS PLAN. The Board of Directors of the Savings Bank
has adopted the Management Stock Bonus Plan (the "MSBP") as a method of
providing directors, officers, and employees of the Savings Bank with a
proprietary interest in Point Bancorp in a manner designed to encourage such
persons to remain in the employment or service with the Savings Bank. The
Savings Bank has contributed sufficient funds to the MSBP Trust which enabled
the MSBP Trust to purchase Common Stock representing 4% of the aggregate number
of shares issued in the Conversion (i.e., 24,700 shares of Common Stock).
Awards under the MSBP were made in recognition of prior and expected future
services to the Savings Bank of its directors and executive officers
responsible for implementation of the policies adopted by the Board of
Directors, the profitable operation of the Savings Bank, and as a means of
providing a further retention incentive and direct link between compensation
and the profitability of the Savings Bank.
The options granted under the Option Plan and the MSBP will be exercised
prior to the Merger and exchanged for shares of One Valley Common Stock.
There were no grants of options during fiscal year 1994.
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
Aggregated Option /SAR Exercises in Last Fiscal Year, and FY-End Option/SAR Value
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SAR Options/SARs
at FY-End (#) at FY-End ($)
<C> <S> <C> <C> <C>
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($)(1) Unexercisable Unexercisable
Maye R. Smith -- -- 15,437 $266,288/$0(1)
</TABLE>
(1) The Point Bancorp Common Stock is thinly traded and had a bid price of
$20.00 at September 30, 1994. Sales and purchases of the Point Bancorp Common
Stock occurred at prices ranging between $14.50 and $20.00 during the fiscal
year ended September 30, 1994. The mean trading price of the Point Bancorp
Common Stock was $17.25 for the fiscal year ended September 30, 1994. For
purposes of calculating the value of unexercisable options, a $17.25 per share
price was multiplied by the number of unexercisable options at the end of the
fiscal year.
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<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Point Bancorp's Compensation Committee did not meet during the fiscal year
ended September 30, 1994. However, the committee did meet subsequent to the
fiscal year end to review compensation paid to executive officers and to review
any increases in the salary budget for executive officers that took effect
during the 1994 fiscal year. The committee reviews various published surveys of
compensation paid to executives performing similar duties for depository
institutions and their holding companies, with a particular focus on the level
of compensation paid by comparable institutions in and around Point Bancorp's
market area, including institutions with total assets of between $30 million and
$300 million. Although the committee does not set compensation levels for
executive officers based on whether particular financial goals have been
achieved by Point Bancorp, the committee does consider the overall profitability
of Point Bancorp when making these decisions. With respect to each particular
executive officer, his or her particular contributions to Point Bancorp over the
past year are also evaluated.
For the fiscal year ended September 30, 1994, Maye R. Smith, President and
Chief Executive and Financial Officer, did not receive a salary increase awards
of restricted stock and stock options, as disclosed in the Summary Compensation
Table. The Committee referred to various published compensation surveys. The
committee considered the annual compensation paid to chief executive officers of
financial institutions in the State of West Virginia, Ohio and surrounding
states with assets of between $30 million to $300 million and the individual job
performance of such other chief executive officers in consideration of its
specific salary increase decision with respect to compensation paid to Ms.
Smith.
Compensation Committee
Gary L. Clarke
C. Edwin Cotton
Robert C. Doeffinger
Theodore H. Ghiz
CERTAIN TRANSACTIONS WITH THE COMPANY
The Savings Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors and employees. The loans
have been made in the ordinary course of business and on substantially the same
terms and conditions which apply to the Savings Bank's other customers, and do
not involve more than the normal risk of collectibility, or present other
unfavorable features. All loans by the Savings Bank to its directors and
executive officers are subject to regulations of the Office of Thrift
Supervision ("OTS") restricting loans and other transactions with affiliated
persons of the Savings Bank. Prior to the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act ("FIRREA"), the Savings Bank
provided loans to officers and directors and other affiliates at reduced
interest rates and fees. The preferential rate on mortgage loans could be no
less than the greater of (i) the Savings Bank cost of funds plus 100 basis
points or (ii) the Internal Revenue Service's applicable federal rate. In
addition, the Savings Banks routinely waived its points and application fees
for affiliate loans. Effective August 9, 1989, FIRREA required that all such
loans be made on terms and conditions comparable to those for similar
transactions with non-affiliates. The Savings Bank's affiliates must now
qualify for any loans on the same terms and conditions that apply to other
customers. Furthermore, loans to an affiliate must be approved in advance by a
disinterested majority of the Board of Directors or be within other guidelines
established as a result of OTS regulations.
The following table sets forth the indebtedness of executive officers,
directors, and members of the immediate family of an executive officer or
director who are or were indebted to the Savings Bank at any time during the
fiscal year ended September 30, 1994, in an amount in excess of $60,000. All
mortgage loans shown are secured by the borrower's primary residence.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Highest
Balance
Original Prevailing During Balance at
Name and Position Date Loan Interest Rate at Year Ended September
with Savings Bank Loan Type Originated Amount Rate Origination 9/30/94 30,1994
Robert C. Doeffinger, Mortgage 6-8-94 $190,000(2) 7.25 7.25 $190,000 $188,823
Jr. (1)
Director
</TABLE>
(1) The spouse of Mr. Doeffinger is also obligated for the loan amount.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Point Bancorp's Board of Directors conducts its business through meetings
of the Board. During the fiscal year ended September 30, 1994, the Board of
Directors held 16 meetings. No director of Point Bancorp attended fewer than
75% of the total meetings of the Board of Directors and committee meetings on
which such Board member served during this period.
Point Bancorp has a Loan Committee an Audit Committee and a Nominating
Committee, but does not have an Executive Committee.
Point Bancorp's full Board of Directors acts as the Nominating Committee
for the annual selection of its nominees for election as directors. While the
Nominating Committee will consider nominees recommended by the stockholders, it
has neither actively solicited recommendations from stockholders nor established
any procedures for this purpose. The Board did not meet in its capacity as the
Nominating Committee during fiscal 1994.
The Audit Committee consists of Directors Cotton, Doeffinger and Smith.
The Audit Committee is responsible for recommending the appointment of Point
Bancorp's independent accountants and meeting with such accountants with respect
to the scope and review of the annual audit. The Audit Committee did not meet
during fiscal 1994.
Point Bancorp's Board of Directors has appointed a Compensation Committee.
The Compensation Committee, reviews at least annually, the salaries and other
fringe benefits of its officers and employees. The Compensation Committee is
comprised of Directors Clarke, Cotton, Doeffinger, and Ghiz. During the 1994
fiscal year, the Compensation Committee did not meet.
DIRECTORS' COMPENSATION
During the year ended September 30, 1994, each member of the Savings Bank's
Board of Directors received a fee of $650 per month. Mr. Doeffinger received a
$500 per month consulting fee in addition to his director's fees. Mr. Ghiz
received a legal retainer that averaged approximately $337 per month in addition
to his director's fees during the year ended September 30, 1994. No additional
fees are paid for Board committee meetings. No separate fees are paid for
attendance at Board or Board committee meetings of Point Bancorp.
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<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
Trainer, Wright & Paterno were Point Bancorp's independent public
accountants for the 1994 fiscal year. Point Bancorp' s Board of Directors has
approved Point Bancorp's arrangement with Trainer, Wright & Paterno as auditors
for the fiscal year 1995, subject to ratification by Point Bancorp's
Shareholders. A representative of Trainer, Wright & Paterno is expected to be
present at the Annual Meeting to respond to questions and will have the
opportunity to make a statement.
Approval of the appointment of Trainer, Wright & Paterno requires the
affirmative vote of a majority of the votes cast by Point Bancorp's
Shareholders. The Board of Directors recommends that Shareholders vote "FOR"
the approval of the appointment of Trainer, Wright & Paterno as Point Bancorp's
independent Certified Public Accountants for the 1995 fiscal year.
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DESCRIPTION OF ONE VALLEY'S SECURITIES
AUTHORIZED COMMON STOCK
One Valley has authorized capital of 41,000,000 shares, consisting of
40,000,000 shares of Common Stock, with a par value of $10 per share, and
1,000,000 shares of preferred stock with a par value of $10 per share. As of
September 30, 1994, 17,533,778 shares of One Valley Common Stock were issued and
outstanding. No shares of One Valley's preferred stock are issued and
outstanding. As of September 30, 1994, there were approximately 5,750
Shareholders of One Valley.
PREFERRED STOCK
One Valley is authorized to issue 1,000,000 shares of Preferred Stock, $10
par value per share. One Valley does not have any shares of preferred stock
outstanding as of the date of this Prospectus. The Board of Directors of One
Valley is authorized by the Articles of Incorporation to provide, without
further Shareholder action, for the issuance of one or more series of preferred
stock and to fix various terms with respect to each series, including voting
powers, designations, preferences, dividend rates, conversion and exchange
provisions, redemption provisions, and the amounts which holders are entitled to
receive upon any liquidation, dissolution, or winding up of One Valley.
DIVIDENDS AND DIVIDEND RIGHTS
The Shareholders of One Valley are currently entitled to receive dividends
when and as declared by its Board of Directors. Dividends may be paid out of
funds legally available therefor, and subject to the restrictions set forth in
the West Virginia Corporation Act (West Virginia Code, Sections 31-1-1, ET SEQ.)
(the "Corporation Act"). The Corporation Act provides that a corporation may
declare and pay a dividend to its Shareholders if the corporation is solvent
and if the payment would not render the corporation insolvent. A corporation
under the Corporation Act cannot declare a dividend contrary to any
restrictions contained in its articles of incorporation. One Valley does not
have any such restrictions. Dividends may be declared and paid in cash or
property only from the unreserved and unrestricted earned surplus of the
corporation except that dividends may be declared and paid in treasury shares
or in the corporation's authorized but unissued shares, from unreserved and
unrestricted surplus if an amount of surplus is transferred to stated capital
equal to the aggregate par value of the shares to be issued or the aggregate
stated value fixed by the Board of Directors in the case of shares without par
value.
Historically, One Valley has declared regular quarterly dividends. It is
expected that cash dividends of One Valley after the consummation of the Merger
will be declared and paid on approximately the same schedule of dates as that
now followed with respect to regular cash dividends on the Common Stock of One
Valley, which is quarterly. One Valley's future cash dividends will depend on
its consolidated earnings, general economic conditions, financial condition of
its Banking Subsidiaries and other facts generally affecting dividend policy.
Dividends of One Valley and its Banking Subsidiaries which are state banks
may be paid out of funds legally available therefor, subject to the restrictions
set forth in West Virginia Code, Section 31A-4-25, which provides that before
the declaration of any dividend at least one-tenth of the net profits of the
preceding half year (in the case of quarterly or semiannual dividends) or the
preceding two consecutive half-year periods (in the case of annual dividends)
must be carried to a bank's surplus fund until the surplus fund equals the
amount of its capital stock. The prior approval of the West Virginia
Commissioner of Banking is required if the total of all dividends declared by a
state bank in any calendar year will exceed the bank's net profits for that year
combined with its retained net profits for the preceding two years. "Net
profits" is defined as the remainder of all earnings from current operations
plus actual recoveries on loans and investments and other assets, after
deducting from the total thereof, all current operations expenses, actual
losses and all federal and state taxes.
For those Banking Subsidiaries of One Valley which are national banks,
dividends may be paid out of funds legally available therefor, subject to the
restrictions set forth in the United States Code. The United States Code
generally provides that the board of directors of any national banking
association may, quarterly, semiannually or annually, declare a dividend of so
much of the net profits of the association as they shall judge expedient, except
that until the surplus fund of the association equals its common capital, no
dividends can be declared unless the association has carried to the surplus fund
not less than one-tenth part of the association's net profits of the preceding
half year in the case of quarterly or semiannual dividends, or no less than one-
tenth part of its net profits of the preceding two consecutive half-year periods
in the case of annual dividends. The United States Code also provides that if a
national banking association sustains losses equal to or exceeding its undivided
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<PAGE>
profits it may not pay a dividend and that a national banking association while
engaging in banking operations may never pay a dividend in an amount greater
than its net profits on hand less its losses and bad debts. Furthermore, a
federal banking agency may prohibit a national banking association from paying a
dividend if the agency determines that it would be an unsafe or unsound practice
in conducting the business of the bank. The approval of the OCC is required if
the total of all dividends declared by an association in any calendar year
exceeds the total of its net profits of that year combined with its retained net
profits of the preceding two years, less any required transfers to surplus.
VOTING RIGHTS
All voting rights of One Valley are vested in the holders of One Valley
Common Stock. In the election of Directors, the Shareholders of One Valley have
the right to vote the number of shares owned by them for as many persons as
there are directors to be elected, or to cumulate their votes and give one
candidate as many votes as the number of directors to be elected multiplied by
the number of shares they own, or to distribute them on the same principle among
as many candidates as they may decide. For all other purposes, each share is
entitled to one vote.
PREEMPTIVE RIGHTS
Holders of Common Stock presently have no preemptive rights to subscribe to
a pro rata share of any future offers of shares by One Valley. Therefore,
future shares of Common Stock or other securities may be offered to the
investing public or to Shareholders or to both at the discretion of the Board of
Directors. If One Valley should decide to issue any or all of these shares, the
effect would be to dilute the percentage ownership of the Shareholders who do
not acquire a pro rata portion of shares issued.
LIQUIDATION RIGHTS
The holders of One Valley Common Stock are entitled to share equally in the
net assets of One Valley in the event of liquidation or dissolution, subject to
the preferential rights, if any, of the holders of any outstanding senior
securities. At this time, there are no senior securities of One Valley issued
or outstanding.
ASSESSMENT OF SHARES
The shares of One Valley Common Stock are fully paid and nonassessable.
West Virginia Code Section 31A-4-11 provides that in certain circumstances
Shareholders of a state bank may be liable to the creditors of the bank for
obligations arising while they are Shareholders in an amount equal to the par
value of the shares owned by them unless the bank has its deposits insured by
the FDIC or any other federal institution or agency, or the bank has obtained a
certificate from the Commissioner of Banking stating that the bank has
unimpaired surplus equal to at least 50 percent of the authorized capital of the
state bank. Because the deposits of its Banking Subsidiaries are insured by the
FDIC, neither One Valley nor its Shareholders are presently subject to this
liability. In addition to the foregoing section, West Virginia Code, Section
31A-4-12, provides that the outstanding shares of a bank may be assessed by the
officers and directors of the bank if the bank's common stock becomes impaired
by losses or otherwise.
SHAREHOLDER APPROVAL OF MERGERS
Before One Valley can merge or consolidate with other corporations under
West Virginia law, the affirmative vote of the holders of a majority of the
outstanding shares of each corporation is needed to approve such a merger or
consolidation, unless the other corporation is a bank or bank holding company
with principal offices in another state or is a national bank. Pursuant to
legislation passed by the West Virginia legislature in 1986, if the other
corporation is a bank or bank holding company with principal offices outside the
State of West Virginia, a proposed merger requires the affirmative vote of the
holders of two-thirds of the outstanding shares of One Valley Common Stock,
unless the laws of the other state require a higher percentage vote.
In 1986, the Shareholders of One Valley approved a "Fair Price Amendment"
concerning business combinations, such as mergers or consolidations. For a
discussion of the Fair Price Amendment. See "Effect of the Merger on
Shareholder Rights".
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<PAGE>
RIGHTS OF DISSENTING SHAREHOLDERS
Shareholders of One Valley who do not vote all of the shares which are
entitled to vote for a proposed merger or consolidation or who give notice at or
prior to a shareholder's meeting at which such vote is to be taken that they
dissent from the merger or consolidation, may require One Valley to purchase, in
cash, those shares so held by them when such merger or consolidation is
consummated.
DIRECTORS
The Bylaws of One Valley authorize its Board of Directors to designate the
number of directors of the corporation within a range of 6 to 33. In 1986, the
Shareholders of One Valley approved amendments to the Articles of Incorporation
and Bylaws of One Valley which (i) classified the Board of Directors of One
Valley into three classes, as nearly equal in number as possible, each of which
classes, after a transitional arrangement, would serve for three years, with one
class being elected each year at the Annual Meeting of Shareholders; (ii)
provided that any vacancy in the Board of Directors of One Valley could be
filled by the remaining directors then in office, though less than a quorum;
(iii) provided that directors of One Valley may be removed, with or without
cause, only with the approval of the holders of at least 80% of the voting power
of One Valley entitled to vote generally in the election of directors; and (iv)
increased the Shareholder vote required to alter, amend or repeal those
amendments to the Articles of Incorporation and to the Bylaws of One Valley from
a majority of the voting power to 80% of the voting power of One Valley. See
"Effect of the Merger on Shareholders' Rights".
INDEMNIFICATION
Directors and officers of One Valley or persons serving at the request of
One Valley as directors, offices, employees or agents of another corporation or
organization (including any of One Valley's subsidiaries), their heirs and
personal representatives, are entitled to indemnification as provided in Article
V of the Articles of Incorporation of One Valley.
In general, Article V provides indemnification for reasonable costs,
expenses, fees and payments, except in matters in which the person is adjudged
liable for gross negligence or willful misconduct. If, in the judgment of the
Board of Directors of One Valley, a settlement of any claim, action, suit or
proceeding is in the best interests of One Valley, the director or officer will
be reimbursed for amounts paid in settlement and reasonable expenses in
connection with the settlement.
OTHER CONSIDERATIONS
Generally, One Valley may purchase, hold and dispose of its own shares but
purchases of its own shares may be made only to the extent of unreserved and
unrestricted capital surplus. In addition, approval of the Federal Reserve
Board may be required before One Valley may purchase its shares.
SUPERVISION AND REGULATION OF POINT BANCORP
GENERAL
Set forth below is a brief description of certain laws which relate to the
regulation of Point Bancorp (the "Company") and the Savings Bank. The
description does not purport to be complete and is qualified in its entirety by
reference to applicable laws and regulations.
As a federally-chartered, SAIF-insured, savings association, the Savings
Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. The Savings Bank is also subject to certain reserve
requirements promulgated by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board").
The OTS, in conjunction with the FDIC, regularly examines the Savings Bank
and prepares reports for the consideration of the Savings Bank's Board of
Directors on any deficiencies that they find in the Savings Bank's operations.
The Savings
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Bank's relationship with its depositors and borrowers is also
regulated to a great extent by federal law, especially in such matters as the
ownership of savings accounts and the form and content of the Savings Bank's
mortgage documents.
The Savings Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in such regulations, whether by the OTS, the FDIC or the
Congress could have a material adverse impact on the Savings Bank and its
operations. The Holding Company will also be required to file certain reports
with, and otherwise comply with the rules and regulations of the OTS and the
Securities and Exchange Commission ("SEC").
FDICIA
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was enacted into law. The purpose of FDICIA, among other
things, is to provide funding to the federal deposit insurance funds insuring
the deposits of both banks and savings associations and to impose a number of
mandatory measures on savings associations and banks. Many of the provisions
have already been incorporated into the regulatory structure and some are
discussed herein.
The FDICIA imposes a number of new mandatory supervisory measures on
savings associations, such as the Savings Bank. The FDICIA requires financial
institutions to take certain actions relating to their internal operations,
including: providing annual reports on financial condition and management to the
appropriate federal banking regulators; having an annual independent audit of
financial statements performed by an independent public accountant; and
establishing an independent audit committee comprised solely of outside
directors. The FDICIA also imposes certain operational and managerial standards
on financial institutions relating to internal controls, loan documentation,
credit underwriting, interest rate exposure, asset growth, compensation, fees,
and benefits. The FDICIA also requires the FDIC to assess deposit insurance
premiums based on risk.
INSURANCE OF DEPOSIT ACCOUNTS
The Savings Bank's deposit accounts are insured by the SAIF to a maximum of
$100,000 for each insured member (as defined by law and regulation). The
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
gives the FDIC the authority to suspend the deposit insurance of any savings
association without tangible capital. However, if a savings association has
positive capital when it includes qualifying intangible assets, the FDIC cannot
suspend deposit insurance unless capital declines materially, the institution
fails to enter into and remain in compliance with an approved capital plan, or
the institution is operating in an unsafe or unsound manner.
Regardless of an institution's capital level, insurance of deposits may be
terminated by the FDIC upon a finding that the institution has engaged in unsafe
or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC or the institution's primary regulator. Management
is unaware of any practice, condition or violation that might lead to
termination of its deposit insurance.
The FDIC charges an annual assessment for the insurance of deposits based
on the risk a particular institution poses to its deposit insurance fund. The
risk-related assessment program provides a transition between the prior flat-
rate system and the final risk-related system in place as of January 1, 1994, in
accordance with the FDICIA. Under this interim system (which has been continued
without substantial change as the permanent system), a bank or thrift will pay
within a range of 23 cents to 31 cents per $100 of domestic deposits, depending
upon the institution's risk classification. This risk classification is based
on an institution's capital group and supervisory subgroup assignment. In
addition, the FDIC is authorized to increase such deposit insurance rates, on a
semiannual basis, if it determines that the reserve ratio of the SAIF will be
less than the designated reserve ratio of 1.25% of SAIF-insured deposits. In
setting these increased assessments, the FDIC must seek to restore and preserve
the ratio to that designated reserve level, or such higher reserve ratio as
established by the FDIC. In addition, under the FDICIA, the FDIC may impose
special assessments on SAIF members to repay amounts borrowed from the United
States Treasury or for any other reason deemed necessary by the FDIC. Based on
its review of the interim assessment schedule, management does not expect
amounts paid to materially affect results of operation, however, no
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assurance can be given as to the effect of the new schedule or premiums paid by
the Savings Bank. The Savings Bank's federal deposit insurance premium expense
for the year ended September 30, 1994 amounted to approximately $98,761.
EXAMINATION FEES
In addition to federal deposit insurance premiums, savings institutions
like the Savings Bank are required by OTS regulations to pay assessments to the
OTS to fund the operations of the OTS. The general assessment is paid on a
semi-annual basis and is computed based on total assets of the institution,
including subsidiaries. The Savings Bank's OTS assessments for the fiscal year
ended September 30, 1994 totaled $18,854.
REGULATORY CAPITAL REQUIREMENTS
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% of total adjusted assets and (3) a
risk-based capital requirement equal to 8.0% of total risk-weighted assets.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), plus purchased mortgage servicing rights
valued at the lower of the maximum percentage established by the OTS or the
amount includable in core capital. Core capital is defined as common
stockholders' equity (including retained income), noncumulative perpetual
preferred stock, and minority interests in the equity accounts of consolidated
subsidiaries, plus purchased mortgage servicing rights valued at the lower of
90% of fair market value, 90% of original cost, or 100% of the current amortized
book value as determined under GAAP, and qualifying supervisory goodwill, less
nonqualifying intangible assets.
The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital (which is defined as core capital plus
supplementary capital) of 8.0% of risk-weighted assets. The components of
supplementary capital include, among other items, cumulative perpetual preferred
stock, perpetual subordinated debt, mandatory convertible subordinated debt,
intermediate-term preferred stock and the allowance for loan losses. Allowance
for loan and lease losses includable in supplementary capital is limited to a
maximum of 1.25% of risk-weighted assets. Overall, supplementary capital is
limited to 100% of core capital. A savings association must calculate its risk-
weighted assets by multiplying each asset and off-balance sheet item by various
risk factors as determined by the OTS, which range from 0% for cash to 100% for
delinquent loans, property acquired through foreclosure, commercial loans and
other assets. As of September 30, 1994, the Savings Bank's risk adjusted
assets with 0% risk weighting was $14.4 million, 20% risk weighting was $23.1
million, 50% risk weighting was $11.7 million, and 100% risk weighting was $5.2
million.
As of September 30, 1994, the Savings Bank had tangible, core and risk-
based capital of $10.8 million, $10.8 million, and $11.0 million, respectively,
which amounts exceed all applicable fully phased-in regulatory capital
requirements of the OTS.
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The following table sets forth the Savings Bank's capital position at
September 30, 1994, as compared to the minimum regulatory capital requirements
imposed by the OTS at that date.
<TABLE>
<CAPTION>
Percent
of
Adjusted
Amount Assets
(Dollars in Thousands)
<S> <C> <C>
Tangible Capital:
Regulatory capital $10,816 19.94%
Regulatory requirement 813 1.50
Excess $10,003 18.44%
Core Capital:
Regulatory capital $10,816 19.94%
Regulatory requirement 1,627 3.00
Excess $9,189 16.94%
Risk-Based Capital:
Regulatory capital $11,011 70.43%
Regulatory requirement 1,251 8.00
Excess $9,760 62.43%
</TABLE>
The OTS leverage ratio regulation establishes a core capital ratio of at
least 3% for those savings associations in the strongest financial and
managerial condition based on the "CAMEL" rating system currently in use by the
OTS. Those savings associations receiving a CAMEL rating of "1", the best
possible rating on a scale of 1 to 5, will be required to maintain a ratio of
core capital to adjusted total assets of 3%. All other savings associations
will be required to maintain minimum core capital of at least 4% of total
adjusted assets, with a maximum core capital ratio requirement of 5%. In
determining the required minimum core capital ratio, the OTS would assess the
quality of risk management and the level of risk in each savings association on
a case-by-case basis. The OTS has not indicated the standards it will use in
establishing the appropriate core capital requirement for savings associations
not rated "1" under the CAMEL rating system. At September 30, 1994, the Savings
Bank's ratio of core capital to total adjusted assets was 19.94%.
On January 20, 1993, the OTS issued a statement imposing certain
limitations on the inclusion of net deferred tax assets calculated under FAS 109
in regulatory capital. Deferred tax assets that are dependent on future taxable
income or the institution's tax planning strategies may only be counted as a
component of Tier 1 capital to the lesser of: (i) 10% of Tier 1 capital, or (ii)
the amount of such benefits which may be realized within one year. The Savings
Bank adopted FAS 109 on March 31, 1994, at which time this regulation became
applicable in the determination of its capital ratios. Management anticipates
that, for future periods, this regulation will not affect the Association's
ability to meet regulatory requirements for a well-capitalized institution.
On August 31, 1993, the OTS issued a final rule effective January 1, 1994,
which sets forth the methodology for calculating an interest rate risk ("IRR")
component which is added to the risk-based capital requirements for OTS
regulated thrift institutions. Under the final rule, savings associations with
a greater than "normal" level of interest rate exposure will be subject to a
deduction from total capital for purposes of calculating their risk-based
capital requirement. Specifically, interest rate exposure will be measured as
the decline in net portfolio value due to a 200 basis point change in market
interest rates. The interest rate risk ("IRR") component to be deducted from
total capital is equal to one-half the difference between an institution's
measured exposure and the "normal" level of exposure, which is defined as two
percent of the estimated economic value of its assets.
70
<PAGE>
The final rule establishes a two quarter "lag" between the reporting date
that is used to calculate the IRR component and the effective date of each
quarter's IRR component. Under the final rule, the Director of the OTS may
waive or defer an institution's IRR component, but not decrease it unless it is
as the result of an appeal. The OTS intends to make an appeals process
available to institutions under certain circumstances.
PROMPT CORRECTIVE ACTION
The FDICIA also establishes a system of prompt corrective action to resolve
the problems of undercapitalized institutions. Under this system, which became
effective December 19, 1992, the banking regulators are required to take certain
supervisory actions against undercapitalized institutions, the severity of which
depends upon the institution's degree of capitalization. Under the OTS final
rule implementing the prompt corrective action provisions, an institution shall
be deemed to be: (i) "well capitalized" if it has total risk-based capital of
10.0% or more, has a Tier I risk-based capital ratio (core or leverage capital
to risk-weighted assets) of 6.0% or more, has a leverage capital ratio of 5.0%
or more, and is not subject to any order or final capital directive to meet and
maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier
I risked -based ratio of 4.0% or more, a leverage capital ratio of 4.0% or more
(3.0% under certain circumstances), and does not meet the definition of "well
capitalized"; (iii) "undercapitalized" if it has a total risk-based capital
ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less
than 4.0% or a leverage capital ratio that is less than 4.0% (3.0% in certain
circumstances); (iv) "significantly undercapitalized" if it has a total risk-
based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio
that is less than 3.0% or a leverage capital ratio that is less than 3.0%; and
(v) "critically undercapitalized" if it has a ratio of tangible equity to total
assets that is equal to or less than 2.0% In addition, under certain
circumstances, a federal banking agency may reclassify a well capitalized
institution as adequately capitalized and may require an adequately capitalized
institution or an undercapitalized institution to comply with supervisory
actions as if it were in the next lower category (except that the FDIC may not
reclassify a significantly undercapitalized institution as critically
undercapitalized).
Immediately upon becoming undercapitalized, an institution shall become
subject to the provisions of Section 38 of the FDIA (i) restricting payment of
capital distributions and management fees, (ii) requiring that the appropriate
federal banking agency monitor the condition of the institution and its efforts
to restore its capital, (iii) requiring submission of a capital restoration
plan, (iv) restricting the growth of the institution's assets, and (v) requiring
prior approval of certain expansion proposals. The appropriate federal banking
agency for an undercapitalized institution also may take any number of
discretionary supervisory actions if the agency determines that any of these
actions is necessary to resolve the problems of the institution at the least
possible long term cost to the deposit insurance fund, subject in certain cases
to specified procedures. These discretionary supervisory actions include:
requiring the institution to raise additional capital; restricting transactions
with affiliates; restricting interest rates paid by the institution on deposits;
requiring replacement of senior executive officers and directors; restricting
the activities of the institution and its affiliates; requiring divestiture of
the institution or the sale of the institution to a willing purchaser; and any
other supervisory action that the agency deems appropriate.
Any institution that fails to comply with its capital plan or is
"significantly undercapitalized" must be, in addition to those restrictions
applicable to undercapitalized institutions, subject to one or more of the
discretionary supervisory actions set forth above. An institution that becomes
"critically undercapitalized" is subject to restrictions on its activities in
addition to those applicable to those applicable to significantly
undercapitalized institutions. The FDIC must restrict the activities of a
critically undercapitalized institution and, among other things, prohibit any
material transaction outside the ordinary course of business or engaging in
certain transactions with affiliates, without the approval of the FDIC.
Furthermore, the OTS must be appointed as a receiver (or conservator with the
concurrence of the FDIC) for an institution within 90 days after it becomes
critically undercapitalized unless it determines, with the concurrence of the
FDIC, that other action will better protect the SAIF. A redetermination of this
decision must be made every 90 days. The Savings Bank is currently an
adequately capitalized institution.
DIVIDEND AND OTHER CAPITAL DISTRIBUTION LIMITATIONS
OTS regulations require the Savings Bank to give the OTS 30 days advance
notice of any proposed declaration of dividends and the OTS has the authority
under its supervisory powers to prohibit the payment of dividends. In addition,
the Savings Bank may not declare or pay a cash dividend on its capital stock if
the effect thereof would be to reduce the regulatory capital of the Savings Bank
below the amount required for the liquidation account established pursuant to
the Savings Bank's Plan of Conversion.
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<PAGE>
OTS regulations impose limitations upon all capital distributions by savings
institutions, such as cash dividends, payments to repurchase or otherwise
acquire its shares, payments to shareholders of another institution in a cash-
out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions, based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory approval. As of
September 30, 1994, the Savings Bank was a Tier 1 institution. In the event the
Savings Bank's capital fell below its fully phased-in requirement or the OTS
notified it that it was in need of more than normal supervision, the Savings
Bank's ability to make capital distributions could be restricted. In addition,
the OTS could prohibit a proposed capital distribution by any institution, which
would otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice.
Finally, under the FDICIA, a savings association is prohibited from making
a capital distribution if, after making the distribution, the savings
association would be "undercapitalized" (not meet any one of its minimum
regulatory capital requirements).
QUALIFIED THRIFT LENDER TEST
The Home Owners Loan Act ("HOLA"), as amended, requires savings
institutions to meet a qualified thrift lender ("QTL") test. If the Savings
Bank maintains at least 65% of its portfolio assets (defined as all assets minus
intangible assets, property used by the institution in conducting its business
and liquid assets equal to 10% of total assets) in Qualified Thrift Investments
(primarily residential mortgages and related investments, including certain
mortgage-backed securities) ("QTIs") and otherwise qualifies as a QTL, it will
continue to enjoy full borrowing privileges from the FHLB of Pittsburgh.
Certain assets are subject to a percentage limitation of 20% of portfolio
assets. In addition, savings associations may include shares of stock of the
Federal Home Loan Banks, FNMA, and FHLMC as qualifying QTIs. Compliance with
the QTL test is measured on a monthly basis in nine out of every 12 months. As
of September 30, 1994, the Savings Bank was in compliance with its QTL
requirement with 72.09% of its total assets invested in Qualified Thrift
Investments.
A savings association that does not meet a QTL test must either convert to a
bank charter or comply with the following restrictions on its operations: (i)
the savings association may not engage in any new activity or make any new
investment, directly or indirectly, unless such activity or investment is
permissible for a national bank; (ii) the branching powers of the savings
association shall be restricted to those of a national bank; (iii) the savings
association shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the savings association shall be subject to the rules
regarding payment of dividends by a national bank. Upon the expiration of three
years from the date the savings association ceases to be a QTL, it must cease
any activity and not retain any investment not permissible for a national bank
and immediately repay any outstanding FHLB advances (subject to safety and
soundness considerations).
COMMUNITY REINVESTMENT
Under the Community Reinvestment Act ("CRA"), as implemented by OTS
regulations, a savings association has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of
its entire community, including low and moderate income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the OTS, in connection
with its examination of a savings institution, to assess the institution's
record of meeting the credit needs of its community and to take such record into
account in its evaluation of certain applications by such institution. The
FIRREA amended the CRA to require, effective July 1, 1990, public disclosure of
an institution's CRA rating and require the OTS to provide a written evaluation
of an institution's CRA performance utilizing a four-tiered descriptive rating
system in lieu of the existing five-tiered numerical rating system. The Savings
Bank was graded satisfactory for its overall compliance with the CRA during its
last CRA examination on February 12, 1993.
72
<PAGE>
TRANSACTIONS WITH AFFILIATES
Generally, restrictions on transactions with affiliates require that
transactions between a savings association or its subsidiaries and its
affiliates be on terms as favorable to the Savings Bank as transactions with
non-affiliates. In addition, certain of these transactions are restricted to a
percentage of the Savings Bank's capital. Affiliates of the Savings Bank and
any company which would be under common control with the Savings Bank. In
addition, a savings association may not lend to any affiliate engaged in
activities not permissible for a bank holding company or acquire the securities
of any affiliate which is not a subsidiary. The OTS has the discretion to treat
subsidiaries of savings associations as affiliates on a case-by-case basis.
The Savings Bank's authority to extend credit to executive officers,
directors, and 10% shareholders, as well as such entities such persons control
are currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act
and Regulation O promulgated by the Federal Reserve Board. Among other things,
these regulations require such loans to be made on terms substantially similar
to those offered to unaffiliated individuals, place limits on the amount of
loans the Savings Bank may make to such persons based, in part, on the Savings
Bank's capital position, and require certain approval procedures to be followed.
OTS regulations, with the exception of minor variations, apply Regulation O to
savings associations.
LIQUIDITY REQUIREMENTS
The OTS requires savings institutions to 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 a specified percentage of its net
withdrawable deposits plus short-term borrowings. This
liquidity requirement, which is currently 5%, may be changed from time to
time by the OTS to any amount within the range of 4% to 10% depending upon
economic conditions and the savings flow of member savings associations.
Current regulations also require each member institution to maintain an average
daily balance of short-term liquid assets at a specified percentage (currently
1%) of the total of its net withdrawable savings accounts and borrowings payable
in one year or less. Monetary penalties may be imposed for failure to meet
liquidity requirements. The Savings Bank's average daily liquidity and short-
term liquidity ratios for the month ended September 30, 1994 were 28.72% and
49.02%, respectively, which exceeded the then applicable requirements.
FEDERAL HOME LOAN BANK SYSTEM
The Savings Bank is a member of the FHLB of Pittsburgh, which is one of 12
regional FHLBs that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the Board of Directors of the FHLB.
As a member, the Savings Bank is required to purchase and maintain stock in
the FHLB of Pittsburgh in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. As of September 30, 1994, the Savings Bank had
$268,000 in FHLB stock, which was in compliance with this requirement.
FHLBs are required to provide funds for the resolution of troubled savings
associations and to contribute to affordable housing programs through direct
loans or interest subsidies on advances targeted for community investment and
low- and moderate-income housing projects. These contributions have adversely
affected the level of FHLB dividends paid and could continue to do so in the
future. For the year ended September 30, 1994, dividends paid by the FHLB of
Pittsburgh to the Savings Bank totalled $17,463.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board requires all depository institutions to maintain
non-interest bearing reserves at specified levels against their transaction
accounts (primarily checking, NOW, and Super NOW checking accounts) and non-
personal time deposits. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve Board may be used to satisfy the
liquidity requirements that are imposed by the OTS.
73
<PAGE>
Savings associations have authority to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve policy generally requires savings
associations to exhaust all OTS sources before borrowing from the Federal
Reserve System. The Savings Bank had no discount window borrowings at September
30, 1994.
HOLDING COMPANY REGULATION
The Company is a unitary savings and loan holding company subject to
regulatory oversight by the OTS. As such, the Company is required to file
reports with the OTS and is subject to regulation and examination by the OTS.
In addition, the OTS will have enforcement authority over the Company and its
non-savings association subsidiaries which also permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to the subsidiary
savings association. This regulation and oversight is intended primarily for
the protection of the depositors of the Savings Bank and not for stockholders of
the Company.
As a unitary savings and loan holding company, the Company generally is not
subject to activity restrictions, provided the Savings Bank satisfies the QTL
test. If the Company acquires control of another savings association as a
separate subsidiary, it would become a multiple savings and loan holding
company, and the activities of the Company and any of its subsidiaries (other
than the Savings Bank or any other SAIF-insured savings association) would
become subject to such restrictions unless such other associations each qualify
as a QTL and were acquired in a supervisory acquisition.
The Company must obtain approval from the OTS before acquiring control of
any other SAIF-insured association. Such acquisitions are generally prohibited
if they result in a multiple savings and loan holding company controlling
savings associations in more than one state. However, such interstate
acquisitions are permitted based on specific state authorization or in a
supervisory acquisition of a failing savings association.
EXPERTS
The consolidated financial statements of Point Bancorp at September 30,
1994, and 1993, and for each of the years in the three year period ended
September 30, 1994, appearing in this Proxy Statement, have been audited by
Trainer, Wright & Paterno, independent auditors, whose report thereon appears
elsewhere in this Proxy Statement, which is included in this Proxy Statement in
reliance upon such firm's reports given upon the authority of such firm as an
experts in accounting and auditing.
The consolidated financial statements of One Valley at December 31, 1993
and 1992, and for each of the years in the period ended December 31, 1993,
appearing in One Valley's Current Report on Form 8-K dated January 10, 1995,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon included therein and incorporated herein by reference such
reports are based in part on the report of Crowe, Chizek and Company,
independent auditors which in turn are based in part on the reports of S.A.
Snodgrass, A.C., indepenent auditors. Such consolidated financial statements
are incorporated herein by reference in reliance upon such reports given upon
the authority of such firms as experts in accounting and auditing.
LEGAL MATTERS
The validity of the One Valley Common Stock to be issued to Point Bancorp
Shareholders pursuant to the Merger and certain other legal matters in
connection with the Merger will be passed upon for One Valley by Jackson &
Kelly, Charleston, West Virginia. James K. Brown, a director of One Valley, is a
partner in Jackson & Kelly.
Certain legal matters in connection with the Merger will be passed upon for
Point Bancorp by Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C.
74
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, management of One Valley and Point
Bancorp know of no other business that will come before the Special Meetings.
Should any other matters properly come before the Special Meetings, the proxy
in the enclosed form confers upon the person or persons designated to vote the
shares discretionary authority to vote the same with respect to any other matter
in accordance with the direction of the Board of Directors of Point Bancorp.
75
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
POINT BANCORP INC.:
Report of Independent Auditors.......................... F-2
Consolidated Balance Sheets as of September 30,
1994 and 1993......................................... F-3
Consolidated Statements of Income for the Years
Ended
December 31, 1994, 1993, and 1992.................... F-4
Consolidated Statements of Shareholders' Equity
for the Years Ended
December 31, 1994, 1993, and 1992.................... F-6
Consolidated Statements of Cash Flows for the
Years Ended
December 31, 1994, 1993, and 1992.................... F-7
Notes to Consolidated Financial Statements.............. F-9
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
Point Bancorp, Inc. and Subsidiary
Point Pleasant, West Virginia
We have audited the accompanying consolidated balance sheets of Point
Bancorp, Inc. and Subsidiary as of September 30, 1993 and 1994 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three year period ended September 30, 1994.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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 consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Point
Bancorp, Inc. and Subsidiary as of September 30, 1993 and 1994, and the results
of its operations and cash flows for each of the years in the three year period
ended September 30, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the corporation changed
its method of accounting for income taxes in October, 1993 to conform with
statement of Financial Accounting Standards No. 109.
/s/ Trainer, Wright & Paterno
Huntington, West Virginia
November 18, 1994
F-2
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30,
1993 1994
<S> <C> <C>
ASSETS:
Cash and due from financial institutions $ 679 $ 486
Other interest-earning assets (cash equivalents) 3,162 6,491
Total cash and cash equivalents 3,841 6,977
Other interest-earning assets 2,764 1,387
Investment securities (estimated market value
of $18,543 and $16,224) (Note 3) 18,378 16,588
Mortgage-backed and other asset-backed
securities (market value of $20,301
and $18,570) (Note 4) 19,576 18,973
Loans receivable, net (Note 5) 11,488 11,895
Accrued interest receivable (Note 6) 451 422
Federal Home Loan Bank Stock, at cost 288 268
Office property and equipment, at cost
net of accumulated depreciation and
amortization (Note 7) 312 296
Other assets 72 129
TOTAL ASSETS $ 57,170 $ 56,93
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits (Note 8) $42,962 $42,493
Borrowed funds (Note 9) 500 500
Advances from borrowers for taxes
and insurance 68 74
Current income taxes payable 16 20
Deferred income taxes (Note 10) 72 29
Accrued expenses and other liabilities 189 136
TOTAL LIABILITIES 43,807 43,252
STOCKHOLDERS' EQUITY
Serial preferred stock, $.01 par value,
500,000 shares authorized; none outstanding
Common stock, $.01 par value, 1,250,000 shares
authorized; issued and outstanding:
- 642,200 shares September 30, 1993 and 1994 6 6
Additional paid-in capital 5,962 5,962
Retained earnings - substantially restricted (Note
10) 7,580 7,818
Less common stock acquired by management
stock bonus plan (Note 14) (185) (103)
TOTAL STOCKHOLDERS' EQUITY 13,363 13,683
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 57,170 $ 56,935
</TABLE>
F-3
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended September 30,
1992 1993 1994
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans receivable $1,204 $1,076 $1,026
Mortgage-backed and other
asset-backed securities 1,775 1,526 1,245
Investment securities 730 816 898
Dividends - Federal Home Loan Bank stock 28 23 17
Other interest-earning assets 270 241 233
TOTAL INTEREST AND DIVIDEND INCOME 4,007 3,682 3,419
INTEREST EXPENSE:
Deposits 2,412 1,827 1,654
Borrowed funds 15 25
TOTAL INTEREST EXPENSE 2,412 1,842 1,679
NET INTEREST INCOME 1,595 1,840 1,740
PROVISION FOR LOSSES ON LOANS 75 38 24
NET INTEREST INCOME AFTER PROVISION
FOR LOSSES ON LOANS 1,520 1,802 1,716
NON-INTEREST INCOME:
Fees and service charges 32 28 31
Gain on sale of foreclosed real estate 5 2 -0-
Other (Note 12) 8 10 5
TOTAL NON-INTEREST INCOME 45 40 36
NON-INTEREST EXPENSE:
Compensation and employee benefits 383 456 489
Occupancy and equipment 104 93 101
Data processing 72 76 76
Federal Deposit Insurance premiums 97 88 99
Professional fees 9 69 54
Other (Note 12) 126 195 141
TOTAL NON-INTEREST EXPENSE 791 977 960
INCOME BEFORE INCOME TAX EXPENSE 774 865 792
INCOME TAX EXPENSE (NOTE 10) 320 360 297
NET INCOME $ 454 $ 505 $ 495
</TABLE>
F-4
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended September 30,
1992 1993 1994
(Dollars in the thousands)
<S> <C> <C> <C>
Earnings per common and common equivalent
share, 1993 subsequent to conversion
(Notes 1 and 13):
Net income $ -- $ .58 $ .77
</TABLE>
F-5
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
Common
Stock
Acquired by
Additional Management Total
Common Paid-in Retained Stock Stockholders
Stock Capital Earnings Bonus Plan Equity
<S> <C> <C> <C> <C> <C> <C>
Balance -
September 30, 1991 $ -- $ -- $6,621 $ -- $6,621
Net income for the
year ended
September 30, 1992 454 454
Balance -
September 30, 1992 -- -- 7,075 7,075
Issuance of 642,200
shares of common
stock (Note 13) 6 5,962 -- -- 5,968
Common stock acquired
by Management Stock
Bonus Plan -- -- -- (247) (247)
Amortization of Manage-
ment Stock Bonus Plan -- -- -- 62 62
Net income for the
year ended
September 30, 1993 -- -- 505 -- 505
Balance -
September 30, 1993 6 5,962 7,580 (185) 13,363
Amortization of Manage-
ment Stock Bonus Plan -- -- -- 82 82
Cash dividends, common stock
- - ($40 per share) -- -- (257) -- (257)
Net income for the
year ended
September 30, 1994
495 495
Balance -
September 30, 1994 $ 6 $ 5,962 $ 7,818 $ (103) $ 13,683
</TABLE>
F-6
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended September 30,
1992 1993 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 454 $ 505 $ 495
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of premium and discounts - net 48 173 219
Provision for loan losses on loans
receivable 75 38 24
Gain on sale of foreclosed real estate (5) (2) -0-
Depreciation 23 21 22
Provision for deferred income tax 26 (46) (43)
(Increase) decrease in interest
receivable, and other assets (118) 25 (28)
Increase (decrease) in current income
taxes payable 25 (21) 4
Increase (decrease) in accrued expenses
and other liabilities (33) 26 (53)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 495 719 640
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations and principal payments
on loans - net $ 414 $ 332 $ (431)
Purchase of investment securities (7,742) (15,790) (7,735)
Proceeds from maturity of investment
securities 2,771 7,518 9,344
Purchase of certificates of deposit
for investment (2,684) (2,467) (99)
Proceeds from maturity of certificates
of deposit for investment 5,972 2,276 1,476
Purchase of collateralized mortgage
obligations (229) (2,649) (514)
Principal collected on collateralized
mortgage obligations 1,142 628 686
Purchase of mortgage-backed securities (4,066) (5,746) (4,926)
Principal collected on mortgage-backed
securities 3,596 7,253 5,319
Proceeds from sale of foreclosed real estate 30 40
Purchase of Federal Home Loan Bank stock (38)
Proceeds from sale of Federal Home Loan
Bank stock 28 20
Purchase of office property and equipment (3) (14) (6)
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (837) (8,591) 3,134
</TABLE>
F-7
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended September 30,
1992 1993 1994
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits,
N.O.W. accounts, passbook savings accounts,
and certificates of deposit $ 1,544 $ (1,770) $ (469)
FHLB advances -- 500 --
Net increase (decrease) in advances from
borrowers for taxes and insurance (4) (9) 6
Proceeds from excess stock subscriptions -- 3,348 --
Refund of excess stock subscriptions -- (3,348) --
Proceeds from sale of common stock - net of
conversion cost and MSBP -- 5,721 --
Dividends paid -- -- (257)
Amortization of MSBP
-- 62 82
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,540 4,504 (638)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,198 (3,368) 3,136
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 6,011 7,209 3,841
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR $ 7,209 $ 3,841 $ 6,977
SUPPLEMENTAL DISCLOSURES OF
CASH FLOWS:
Cash paid during the period for:
Interest on deposits $ 2,448 $ 1,840 $ 1,693
Income taxes $ 272 $ 424 $ 335
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES:
Transfer from loans to foreclosed
real estate $ -- $ 39 $ --
</TABLE>
F-8
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Savings Bank provides a full range of banking services to customers
through its home office and branch facility located in Point Pleasant, West
Virginia. The Savings Bank is subject to competition from other financial
institutions and is subject to regulations of certain federal agencies,
including periodic examinations by those regulatory agencies. The Savings Bank
is also subject to minimum regulatory capital requirements as described more
fully in Note 2 to the financial statements.
In preparing the accompanying financial statements, the Corporation is
required to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue, and expenses. Actual results could differ
significantly from those estimates. Those estimates and assumptions are
described in the following significant accounting policies.
Financial Statement Year End
The accompanying financial statements have been prepared on a September 30
year-end basis. The Corporation and Savings Bank report on a December 31
calendar year basis for regulatory and income tax purposes.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Point Bancorp, Inc. ("the Corporation") and its wholly-owned subsidiary, Point
Pleasant Federal Savings Bank ("the Savings Bank"). All significant
intercompany transactions and balances are eliminated in consolidation.
Basis of Accounting
Assets and liabilities, and revenues and expenses, are recognized on the
accrual basis of accounting for financial reporting.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents are defined
to include the Corporation's cash on hand, due from financial institutions and
short-term interest-earning deposits in financial institutions with original
maturities of ninety days or less when purchased. The Corporation reports a net
cash flow from customer loan transactions, deposit transactions and advance
payments by borrowers for taxes and insurance.
F-9
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment Securities
Bonds, notes and debentures are carried at cost, adjusted for premiums and
discounts (amortized cost) that are recognized in interest income using the
straight line method, which does not differ significantly from the interest
method, over the period to maturity. Investment securities are not adjusted to
the lower of cost or market since it is management's intention, and management's
opinion that the Corporation has the ability, not to trade the securities and to
hold them to maturity. Equity securities (nonmarketable FHLB stock) is carried
at cost. The Corporation does not intend to use any such securities as part of
its asset/liability strategy or to sell any such securities in response to
changes in interest rates, changes in prepayment risk or to increase regulatory
capital and, therefore, does not consider any of its securities in its portfolio
to be held for sale (trading account securities). Gains or losses on the sale
of investment securities are determined using the specific-identification
method.
Mortgage-Backed and Other Asset-Backed Securities
Investment in mortgage-backed and other asset-backed securities
(consolidated mortgage obligations - CMO's) are stated at cost, adjusted for
amortization of premiums and accretion of discounts (amortized cost) by the
straight line method. The Corporation has adequate liquidity and capital, and it
is management's intention, and management's opinion that the Corporation has the
ability, not to trade the securities and to hold them to maturity. Mortgage-
backed and other asset-backed securities are, therefore, not adjusted to the
lower of cost or market. The Corporation does not intend to use any such
mortgage-backed or other asset-backed securities as part of its asset/liability
strategy or to sell any such mortgage-backed or other asset-backed securities in
response to changes in interest rates, changes in prepayment risk or to increase
regulatory capital and, therefore, does not consider any of its mortgage-backed
or other asset-backed securities in its portfolio to be held for sale (trading
account mortgage-backed or other asset-backed securities). Should any be sold,
gains and losses are recognized based on the specific identification method.
All sales are made without recourse.
The weighted average interest rate for the CMO's is 5.24% and 5.27% at
September 30, 1993 and 1994, respectively. Management believes given these rates
that prepayment risk is minimal, recoverability is not at risk and the carrying
amounts of the CMO's are reasonable.
Loans Receivable
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses, and net deferred loan-origination fees. The
allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Savings Bank's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, estimated value of any underlying
collateral, and current economic conditions.
F-10
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans Receivable (Continued)
Uncollectible interest on loans that are contractually past due is charged
off or an allowance is established based on management's periodic evaluation.
The allowance is established by a charge to interest income equal to all
interest previously accrued, and income is subsequently recognized only to the
extent cash payments are received until, in management's judgement, the
borrower's ability to make periodic interest and principal payments is back to
normal, in which case the loan is returned to accrual status.
Substantially all of the collateral securing the Savings Bank's loans is
located in the States of West Virginia and Ohio, certain areas of which include
depressed business and real estate markets. Accordingly, the ultimate
collectibility of the Savings Bank's loan portfolio are susceptible to changes
in market conditions in West Virginia and Ohio and the surrounding region.
Various regulatory agencies, as an integral part of their examination
process, periodically review the Savings Bank's allowances for losses on loans
and real estate. Such agencies may require the Savings Bank to record
additional provisions for losses based upon their evaluation of information
available at the time of their examination.
Interest on loans is accrued only if deemed collectible and is credited to
income as earned.
Loan Origination Income and Costs
Fees for originating loans are deferred for amounts in excess of the
Savings Bank's estimated cost of origination. Deferred fees are being amortized
to income over the average lives of the related loans using the level-interest-
yield method. Any unamortized fees on loans sold are credited to income in the
year the transaction occurs.
Foreclosed Real Estate
Real estate properties acquired through, or in lieu of, loan foreclosure
are initially recorded at fair value at the date of foreclosure. Costs relating
to development and improvement of property are capitalized, whereas costs
relating to the holding of property are expensed.
Valuations are periodically performed by management, and an allowance for
losses is established by a charge to operations if the carrying value of a
property exceeds its estimated net realizable value.
F-11
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Premises and Equipment
Land is carried at cost. Building; leasehold improvement; and furniture,
fixtures and equipment are carried at cost, less accumulated depreciation and
amortization. The Savings Bank computes depreciation on its properties and
equipment on the straight-line or declining balance methods over the estimated
useful lives of the various classes of assets, which range from three to fifty
years.
Earnings Per Share
Earnings per common and common equivalent share were computed by dividing
net income subsequent to the conversion by the weighted average number of shares
of common stock and common stock equivalents outstanding subsequent to the
conversion discussed in Note 13. Employee and Director stock options are
considered common stock equivalents. The weighted-average number of shares
outstanding subsequent to the conversion for the calculation of earnings per
common and common equivalent share was 642,200.
Income Taxes - Accounting Change
Effective October 31, 1993, the Corporation changed its method of
accounting for income taxes to conform with new requirements of the Financial
Accounting Standards Board, Statement of Financial Accounting Standards 109,
ACCOUNTING FOR INCOME TAXES. Under SFAS 109, the asset and liability
approach is used to calculate deferred income taxes. Under this method, deferred
tax assets and liabilities are recognized on temporary differences between the
financial statement and tax bases of assets and liabilities using applicable
enacted tax rates. Under the provisions of SFAS 109, the Company elected not to
restate prior years' consolidated financial statements. The cumulative effect
of initial adoption on prior years' retained earnings was not significant.
Additionally, the effect of the adoption of SFAS 109 on net income for fiscal
year ended September 30, 1994 was not significant.
NOTE 2 - FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT
ACT (FIRREA) OF 1989
FIRREA was signed into law in 1989; regulations for savings institutions'
minimum capital requirements went into effect on December 7, 1989. In addition
to its capital requirements, FIRREA includes provisions for changes in the
federal regulatory structure for institutions, including a new deposit insurance
system, increased deposit insurance premiums, and restricted investment
activities with respect to noninvestment grade corporate debt and certain other
investments. FIRREA also increases the required ratio of housing-related assets
in order to qualify as a savings institution.
F-12
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 2 - FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT (FIRREA)
OF 1989 (CONTINUED)
The regulations require institutions to have a minimum regulatory tangible
capital equal to 1.5% of tangible assets, a minimum 3% core capital ratio, and a
7.2% risk-based capital ratio. The ability to include qualifying supervisory
goodwill for purposes of the core capital ratio requirement will be phased out
by January 1, 1995. Additionally, the risk-based capital ratio requirement was
increased to 8% on December 31, 1992.
A reconciliation of shareholders' equity as reported in the accompanying
financial statements in accordance with generally accepted accounting principles
(GAAP) to the three components of regulatory capital required by FIRREA as of
September 30, 1993 and 1994 is as follows (amounts in thousands):
<TABLE>
<CAPTION>
September 30, 1993
Regulatory
GAAP Tangible Core Total
Capital Capital Capital Capital
<S> <C> <C> <C> <C>
GAAP capital, before adjust-
ment $10,290
Audit Adjustments:
Income tax expense --
Accrued expense --
GAAP capital, adjusted $10,290 $10,290 $10,290 $10,290
Nonallowable capital -- -- --
Nonallowable assets -- -- --
Additional capital items-GVA -- -- 144
Regulatory capital-computed 10,290 10,290 10,434
Minimum capital requirement (811) (1,622) (916)
Regulatory capital-excess $ 9,479 $ 8,668 $ 9,518
</TABLE>
The Savings Bank, at September 30, 1993, meets the regulatory-tangible-
capital of 1.5 percent, core-capital requirement of 3 percent and the risk-based
capital requirement of 8 percent of total risk-adjusted assets, as defined by
FIRREA. At September 30, 1993, the Savings Bank's regulatory tangible capital
was $10,290, or 19 percent of total assets; core capital was $10,290, or 19
percent of total assets; and risk-based capital was $10,434, or 91.09 percent of
total risk-adjusted assets, as defined by FIRREA.
F-13
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 2 - FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT (FIRREA)
OF 1989 (CONTINUED)
<TABLE>
<CAPTION>
September 30, 1993
Regulatory
GAAP Tangible Core Total
Capital Capital Capital Capital
<S> <C> <C> <C> <C>
GAAP capital, before adjust-
ment $10,816
Audit Adjustments:
Income tax expense --
Accrued expense --
GAAP capital, adjusted $10,816 $ 10,816 $10,816 $10,816
Nonallowable capital -- -- --
Nonallowable assets -- -- --
Additional capital items-GVA -- -- 195
Regulatory capital-computed 10,816 10,816 11,011
Minimum capital requirement (813) (1,627) (1,251)
Regulatory capital-excess $ 10,003 $ 9,189 $ 9,760
</TABLE>
The Savings Bank, at September 30, 1994, meets the regulatory-tangible-
capital of 1.5 percent, core-capital requirement of 3 percent and the risk-based
capital requirement of 8.0 percent of total risk-adjusted assets, as defined by
FIRREA. At September 30, 1994, the Savings Bank's regulatory tangible capital
was $10,816, or 19.94 percent of total assets; core capital was $10,816, or
19.94 percent of total assets; and risk-based capital was $11,011, or 70.43
percent of total risk-adjusted assets, as defined by FIRREA.
F-14
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 3 - INVESTMENT SECURITIES AND OTHER INTEREST-EARNING ASSETS
As of September 30, 1993, the carrying values, gross unrealized gains and
losses and market values of investment
securities are as follows (amounts in thousands):
<TABLE>
<CAPTION>
September 30, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government and
Federal Agencies $10,275 $119 $ (5) $10,389
Non-government securities
including bonds, notes, and
debentures at amortized cost:
Domestic corporations 8,103 54 (3) 8,154
TOTAL $18,378 $173 $ (8) $18,543
</TABLE>
The amortized cost and estimated market value of securities at September 30,
1993, by contractual maturity, are shown as follows. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
Due in one year or less $ 8,620
$ 8,666
Due after one year
through five years 8,631
7,398
Due after five years
through ten years 625
1,921
Due after ten years 502 558
TOTAL $ 18,378 $ 18,543
Investment securities with a carrying amount of $500 thousand and market
value of $558 thousand at September 30, 1993 were pledged to secure customer
deposits in excess of $100 thousand.
F-15
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 3 - INVESTMENT SECURITIES AND OTHER INTEREST EARNING ASSETS
As of September 30, 1994, the carrying values, gross unrealized gains and
losses and market value of investment securities are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
September 30, 1994
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government and
Federal Agencies $12,123 $ 1 $ (344) $11,780
Non-government securities
including bonds, notes, and
debentures at amortized cost:
Domestic corporations 4,465 3 (24) 4,444
TOTAL $16,588 $ 4 $ (368) $16,224
</TABLE>
Management considers the decline in market value to be temporary and,
accordingly, no adjustment has been made to the carrying value of the securities
nor has any provision for loss been charged to operations.
The amortized cost and estimate market value of securities at September 30,
1994, by contractual maturity, are shown as follows. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value__
Due in one year or less $ 7,114 $ 7,079
Due after one year
through five years 8,722 8,449
Due after five years
through ten years 250 234
Due after ten years 502 462
TOTAL $ 16,588 $ 16,224
Investment securities with a carrying amount of $500,000 thousand and market
value of $462,000 thousand at September 30, 1994, were pledged to secure
customer deposits in excess of $100 thousand.
F-16
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 3 - INVESTMENT SECURITIES AND OTHER INTEREST EARNING ASSETS (CONTINUED)
During 1993 and 1994, the Savings Bank sold 280 shares and 200 shares,
respectively of Federal Home Loan Bank stock back to the Federal Home Loan Bank
at par, $28 thousand and $20 thousand.
Other interest earning assets are summarized as follows:
Amortized Cost
September 30, September 30,
1993 1994
Interest Bearing Checking
Accounts in other institutions $3,162 $6,491
Investment in certificates of
deposits of other institutions 2,764 1,387
$5,926 $7,878
The contractual maturity of investment in certificates of deposits
of other institutions (at amortized cost) are as follows:
<TABLE>
<CAPTION>
September 30, 1993
Weighted
Term to Maturity Average Rate Amount
<S> <C> <C>
One year or less 4.08% $ 692
After one year
through five years 4.85% 2,072
$2,764
September 30, 1994
Weighted
Term to Maturity Average Rate Amount
One Year or less 5.69% $1,091
After one year
through five years 4.18% 296
$1,387
All investments in certificate of deposits of other institutions are $100
thousand or less for each certificate issuer.
F-17
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 3 - INVESTMENT SECURITIES AND OTHER INTEREST EARNING ASSETS (CONTINUED)
Deposits in interest bearing checking accounts of other institutions
representing more than 10% of equity are as follows:
At September 30, At September 30,
1993 1994
Federal Home Loan Bank $3,162 $ 6,491
NOTE 4 - MORTGAGE-BACKED AND OTHER ASSET-BACKED SECURITIES
Mortgage-backed and other asset-backed securities consist of the following
(amounts in thousands):
September 30, September 30,
1993 1994
Federal Home Loan Mortgage
Corporation $ 7,449 $ 8,549
Federal National Mortgage
Association 3,742 3,710
Government National Mortgage
Association 5,619 4,137
Collateralized mortgage
obligations and other
mortgage-backed securities 2,703 2,517
19,513 18,913
Unamortized premiums and
discount, net 63 60
TOTAL $ 19,576 $ 18,973
F-18
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 4 - MORTGAGE-BACKED AND OTHER ASSET-BACKED SECURITIES (CONTINUED)
As of September 30, 1993, the carrying values, gross unrealized gains and
losses and market values of mortgage backed and other asset-backed securities
are as follows (amounts in thousands):
</TABLE>
<TABLE>
<CAPTION>
September 30, 1993
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Federal Home Loan
Mortgage Corporation $ 7,475 $ 184 $ (1) $ 7,658
Federal National Mortgage
Association 3,784 145 3,929
Government National
Mortgage Association 5,616 391 6,007
Collateralized mortgage
obligations and other
mortgage-backed securities 2,701 7 (1) 2,707
TOTAL $ 19,576 $ 727 $ (2) $ 20,301
</TABLE>
As of September 30, 1993, maturities of mortgage-backed and other asset-
backed securities, including estimated maturities based on prepayment
assumptions, were as follows (amounts in thousands):
Due in one year or less $
Due after one year
through five years 7,385
Due after five years
through ten years 4,446
Due after ten years 7,745
TOTAL 19,576
F-19
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 4 - MORTGAGE-BACKED AND OTHER ASSET-BACKED SECURITIES (CONTINUED)
As of September 30, 1994, the carrying values, gross unrealized gains and
losses of mortgage-backed and other asset-backed securities are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
September 30, 1994
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Federal Home Loan
Mortgage Corporation $ 8,577 $ 16 $ (320) $ 8,273
Federal National Mortgage
Association 3,724 44 (127) 3,641
Government National
Mortgage Association 4,136 133 (52) 4,217
Collateralized mortgage
obligations and other
mortgage-backed securities 2,536 1 (98) 2,439
TOTAL $18,973 $194 $ (597) $18,570
</TABLE>
Management considers the decline in market value to be temporary and,
accordingly, no adjustment has been made to the carrying value of the mortgage-
backed and other asset-backed securities nor has any provision for loss been
charged to operations.
As of September 30, 1994, maturities of mortgage-backed and other asset-
backed securities, including estimated maturities based on prepayment
assumptions, were as follows (amounts in thousands):
Due in one year or less $
Due after one year
through five years 7,828
Due after five years
through ten years 4,639
Due after ten years 6,506
TOTAL 18,973
At September 30, 1994, the Savings Bank had no purchase commitments
outstanding.
F-20
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 5 - LOANS RECEIVABLE
Loans receivable consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
September 30, September 30,
1993 1994
<S> <C> <C>
First mortgage loans (principally
conventional):
Principal balances:
Secured by one-to-four family
residences $ 10,552 $ 10,988
Secured by other properties 723 689
Construction 64 20
11,339 11,697
Less:
Deferred loan origination fees (24) (23)
11,315 11,674
Less allowances for loan losses (199) (223)
Total first mortgage loans 11,116 11,451
Less loans in process (64) (20)
11,052 11,431
Other loans:
Principal balances:
Deposit loans 436 464
LOANS RECEIVABLE-NET $ 11,488 $ 11,895
</TABLE>
The following table sets forth the maturity of the loan portfolio at
September 30, 1994. The Savings Bank had no adjustable-rate loans at September
30, 1994.
<TABLE>
<CAPTION>
1-4 Family
Real Estate Commercial Multi-
Mortgage Real Estate Family Construction Deposits Total
<S> <C> <C> <C> <C> <C> <C>
Amounts Due:
Within 1 year $ 73 $ -- $ 519 $ 20 $ 464 $ 1,076
After 1 year
1 to 3 years 249 -- -- -- -- 249
3 to 5 years 408 78 -- -- -- 486
5 to 10 years 2,709 -- -- -- -- 2,709
10 to 20 years 7,313 -- -- -- -- 7,313
Over 20 years 328 -- -- -- -- 328
Total due after
one year 11,007 78 -- -- -- 11,085
Total amount due $ 11,080 $ 78 $ 519 $ 20 $ 464 $ 12,161
</TABLE>
As of September 30, 1994 certain mortgage loans are pledged as collateral
pursuant to an agreement with the Federal HomeLoan Bank of Pittsburgh.
F-21
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 5 - LOANS RECEIVABLE (CONTINUED)
Activity in the allowance for loan losses is summarized as follows (amounts in
thousands):
September 30,
1992 1993 1994
Balance at beginning of year $ 99 $174 $199
Provision charged to income 75 38 24
(Charge-offs) -- (13) --
Recoveries -- -- --
Balance at end of year $174 $199 $223
At September 30, 1993 and 1994, the Savings Bank had $418 thousand and $114
thousand, respectively, in fixed rate loan commitments outstanding.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
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 drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Savings Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
it is deemed necessary by the Savings Bank upon extension of credit, is based on
management's credit evaluation of the counterparty.
Loans serviced by the Savings Bank for the benefit of others at September
30, 1993 and 1994 were $1,302 thousand and $961 thousand, respectively.
NOTE 6 - ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows (amounts in thousands):
September 30,
1993 1994
Loan receivable $ 68 $ 72
Investment securities 229 196
Mortgage-backed and other
asset-backed securities 135 125
Other interest-earning assets 19 29
TOTAL $ 451 $ 422
F-22
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 7 - OFFICE PROPERTY AND EQUIPMENT
Office property and equipment and related accumulated depreciation and
amortization are summarized as follows (amounts in thousands):
September 30,
1993 1994
[S] [C] [C]
Cost:
Land $ 62 $ 62
Building 445 445
Leasehold improvements 37 37
Parking lot improvements 11 11
Furniture and equipment 249 255
Automobile 12 12
Total premises and equipment 816 822
Less: Accumulated depreciation
and amortization (504) (526)
TOTAL - NET $ 312 $ 296
Depreciation and amortization expense for the years ended September 30,
1992, 1993 and 1994 totaled $23 thousand, $21 thousand and $22 thousand,
respectively.
NOTE 8 - DEPOSITS
Deposits at September 30 are summarized by interest rates and certificate
maturities as follows (amounts in thousands):
September 30,
1993 1994
Amount Percent Amount Percent
Savings accounts:
Passbook and club
accounts, 3.50% 1993,
3.25% 1994 $13,952 33% $12,880 30%
Demand (NOW accounts),
3.25% 1993, 2.85% 1994 1,685 4 1,968 5
Money market accounts,
3.00% 1993, 2.85% 1994 1,861 4 1,428 3
TOTAL SAVINGS
ACCOUNTS 17,498 41% 16,276 38%
F-23
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 8 - DEPOSITS (CONTINUED)
September 30,
1993 1994
Amount Percent Amount Percent
Certificate accounts:
Certificates of
deposit:
2.00 - 2.99% $ -- --% $ 186 --%
3.00 - 3.99% $ 7,180 17% 5,563 13
4.00 - 4.99% 12,214 28 14,716 35
5.00 - 5.99% -- -- 1,153 3
6.00 - 6.99% 1,268 3 -- --
7.00 - 7.99% 57 -- 16 --
Jumbo certificates:
4.00 - 4.99% 2,700 6 2,500 6
Individual retirement
Accounts (IRA):
4.00 - 4.99% 1,942 5 2,083 5
5.00 - 5.99% 103 -- -- --
TOTAL CERTIFICATE
ACCOUNTS 25,464 59% 26,217 62%
TOTAL $42,962 100% $42,493 100%
The aggregate amount of short-term jumbo certificates of deposit with a
minimum denomination of over $100 thousand was approximately $2,700 thousand
and $2,500 thousand at September 30, 1993 and 1994, respectively.
At September 30, 1993 and 1994, scheduled maturities of certificates of
deposit are as follows (amounts in thousands):
September 30,
1993 1994
Amount Percent Amount Percent
Certificate maturities:
12 months or less $18,193 71% $18,967 72%
13 months - 36 months 6,379 25 6,810 26
37 months and over 892 4 440 2
TOTAL $25,464 100% $26,217 100%
F-24
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 8 - DEPOSITS (CONTINUED)
Interest expense on deposits is summarized as follows (amounts in thousands):
Years Ended September 30,
1992 1993 1994
Money market $ 91 $ 65 $ 52
Passbook savings 449 470 477
NOW 63 49 59
Certificates of deposit 1,809 1,243 1,066
TOTAL $2,412 $1,827 $1,654
NOTE 9 - BORROWED FUNDS
Borrowed funds is summarized as follows (amounts in thousands):
At September 30,
1993 1994
Advance from the
Federal Home Loan Bank, 4.96% $500 $500
Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB),
the advance is secured by all stock in the FHLB and qualifying first mortgage
loans. Advance at September 30, 1994, has a maturity date of February 22,
1996.
Interest expense on borrowed funds is summarized as follows (amounts in
thousands):
Years Ended September 30,
1992 1993 1994
Advance from the
FHLB $ -- $15 $25
NOTE10 - FEDERAL AND STATE INCOME TAXES
As discussed in Note 1, the Corporation adopted Statement of Financial
Accounting Standards 109 effective October 31, 1993. Statement of Financial
Accounting Standards 109 requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Prior to the adoption of Statement 109, income tax
expense was determined under Accounting Principles Board Opinion No. 11.
F-25
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 10 - FEDERAL AND STATE INCOME TAXES (CONTINUED)
Statement 109 requires savings bank to provide a deferred tax liability for
bad debt reserves for tax purposes that arose in years beginning after December
31, 1987, and to recognize a deferred tax benefit for the allowance for losses
on loans recorded in the financial statements. In accordance with Statement 109,
the Association has not provided a deferred tax liability for its statutory bad
debt reserve arising prior to December 31, 1987. At current rates,
approximately $853 thousand of deferred tax liabilities would have been provided
for such reserves.
Income tax expense is summarized as follows:
Years Ended September 30,
1992 1993 1994
Federal:
Current $242 $343 $285
Deferred 21 (46) (40)
$263 $297 245
State:
Current $ 52 $ 64 54
Deferred (5) (1) (2)
$ 57 $ 63 $ 52
The differences between the actual Federal tax expense and the amount that
would have been recorded using the federal statutory tax rate of 34% are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
Years ended September 30,
1992 1993 1994
% of % of % of
pretax pretax pretax
Amount earnings Amount earnings Amount earnings
<S> <C> <C> <C> <C> <C> <C>
Computed statutory federal
tax expense $289 37.3% $294 34.0% $269 34.0%
Change in tax expense
resulting from:
Management Stock Bonus Plan 21 2.0 28 3.53
Benefit of State Income Tax
deduction (21) (2.7) (22) (2.5) (18) (2.24)
Statutory Bad Debt
deduction (29) (3.65)
Other, net (5) (.6) 4 .5 (5 ) (.74)
Total federal income tax
expense $263 34.0% $297 34.0% $245 30.9%
</TABLE>
F-26
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 10 - FEDERAL AND STATE INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Temporary differences
giving rise to the deferred tax asset/(liability) consist primarily of the
allowance for losses on loans, deferred loan fees, accrued revenue and
expenditures, and amortization of the management stock bonus plan accounted for
differently for financial reporting and tax purposes.
Significant components of the Corporation's deferred tax assets and
liabilities as of September 30, 1994 are as follows:
September 30,
1994
Deferred Tax Assets:
Allowance for losses on loans $ 96
Deferred loan fees 10
Unamortized management stock
bonus plan 62
Accrued expenses 56
TOTAL DEFERRED TAX ASSET 224
Valuation allowance (49)
NET DEFERRED TAX ASSET 175
Deferred Tax Liabilities:
Accrued income (180)
Prepaid expense (24)
TOTAL DEFERRED TAX LIABILITIES (204)
NET DEFERRED TAX LIABILITIES $ (29)
Years Ended September 30,
1992 1993 1994
Allowance for loan losses $-- $ -- $ (47)
Unamortized management stock
bonus plan (26) (42)
Use of the cash method of
accounting for tax purposes 10 (10) 49
Other-net 16 (11) (2)
TOTAL $ 26 $ (47) $ (42)
F-27
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 10 - FEDERAL AND STATE INCOME TAXES (CONTINUED)
Savings and loan associations that meet certain conditions prescribed by the
Internal Revenue Code are allowed a special bad-debt deduction based on a
percentage of taxable income (presently 8 percent) or on specified experience
formulas. The Savings Bank used the specific experience method for all years
presented.
Retained earnings at September 30, 1994 include approximately $2,133,000
for which no deferred income tax liability has been recognized. This amount
represents an allocation of income to bad-debt deductions for tax purposes only.
Reduction of amounts so allocated for purposes other than tax bad-debt losses or
adjustments arising from carryback of net operating losses would create income
for tax purposes only, which would be subject to the then-current corporate
income-tax rate.
NOTE 11 - RELATED PARTY TRANSACTIONS
At September 30, 1993 and 1994, certain directors were indebted to the
Savings Bank in the aggregate amount of $150 thousand and $189 thousand,
respectively. These loans are secured by trust deeds and savings accounts. The
transactions are summarized as follows (amounts in thousands):
Loans to directors
Balance as of September 30, 1993 $ 150
Additional loans 190
Repayments (151)
Balance as of September 30, 1994 $ 189
F-28
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 12 - OTHER NON-INTEREST INCOME AND EXPENSE
Other non-interest income and expense amounts are summarized as follows
(amounts in thousands):
Years Ended September 30,
1992 1993 1994
Other non-interest income:
Early withdrawal penalties $ 3 $ 4 $ 2
Other 5 6 3
TOTAL $ 8 $ 10 $ 5
Other non-interest expense:
Advertising and promotions $ 11 $ 11 $ 10
Audit, accounting and supervisory
exam fees 18 28 20
Printing, postage, stationary and
supplies 24 29 26
Telephone 8 9 9
Surety insurance 18 19 15
Organizational dues and
subscriptions 12 13 10
Taxes, other than income 8 56 18
Other 27 30 33
TOTAL $126 $195 $141
NOTE 13 - CONVERSION TO STOCK FORM OF OWNERSHIP
On August 11, 1992, the Board of Directors of the Association adopted a
Plan of Conversion (the "Plan") pursuant to which the Association would be
converted from a federally chartered mutual savings and loan association to a
federally chartered stock savings bank under the name Point Pleasant Federal
Savings Bank ("Savings Bank") with the concurrent formation of the Corporation
(the "Conversion"). In connection with the Conversion, the Corporation offered
and sold 617,500 shares of its common stock, par value $.01 per share, for a
price of $10.00 per share. The Conversion was accounted for using the
historical cost method of accounting. The members of the Association, entitled
to vote on the matter, approved the Plan at a special meeting called for that
purpose on December 14, 1992. The Plan was also approved by the Office of
Thrift Supervision ("OTS"), subject to the satisfaction of certain conditions
imposed by the OTS in its approval.
F-29
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 13 - CONVERSION TO STOCK FORM OF OWNERSHIP (CONTINUED)
The Corporation filed an application with the OTS to become a savings and
loan holding company and to acquire all of the common stock of the Savings Bank
to be issued in the Conversion. The Corporation retained 50% of the net
proceeds from the sale of the Common Stock of the Corporation and used the
remaining 50% to purchase all of the outstanding capital stock of the Savings
Bank. The Conversion and acquisition of the Savings Bank by the Corporation
were simultaneously consummated on December 31, 1992.
At the time of the conversion the Savings Bank established a "Liquidation
Account" in an amount equal to the retained income as of the date of the then
most recent financial statements ($6,963,000, unaudited at June 30, 1992)
contained in the final conversion Prospectus. The Liquidation Account was
established to provide a limited priority claim to the assets of the Savings
Bank to qualifying depositors ("Eligible Account Holders") at January 31, 1992
who continue to maintain deposits in the Savings Bank after conversion. In the
unlikely event of a complete liquidation of the Savings Bank, and only in such
event, each Eligible Account Holder would receive from the Liquidation Account a
liquidation distribution based on their proportionate share of the then total
remaining qualifying deposits.
Current regulations allow the Savings Bank to pay dividends on its stock
after the conversion if its regulatory capital would not thereby be reduced
below the amount then required for the aforementioned Liquidation Account. Also
capital distribution regulations limit the Saving Bank's ability to make capital
distributions which include dividends, stock redemptions and repurchases, cash-
out mergers, interest payments on certain convertible debt and other
transactions charged to the capital account based on their capital level and
supervisory condition. Federal regulations also preclude any repurchase of the
stock for the Savings Bank or its holding company for three years after
conversion except for purchases of qualifying shares of a director and
repurchases pursuant to an offer made on a pro rata basis to all stockholders
and with prior approval of the Office of Thrift Supervision or pursuant to an
open-market stock repurchase program that complies with certain regulatory
criteria.
F-30
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 14 - EMPLOYEE BENEFITS
Management Stock Bonus Plan (MSBP).
In conjunction with the Conversion, the Corporation has established the
Management Stock Bonus Plan (MSBP) as a method of providing directors, officers
and other key employees of the Savings Bank with a proprietary interest in the
Corporation in a manner designed to encourage such persons to remain with the
Savings Bank. The terms of each MSBP are identical, only the participants and
the number of shares awarded to each participant vary. Eligible directors,
officers and other key employees of the Corporation will earn (i.e., become
vested in) shares of common stock covered by the award at a rate of 33 1/3% per
year commencing immediately upon conversion. The Savings Bank contributed funds
to the MSBP to enable the Plan to acquire in the aggregate up to 4% or 24,700
shares of common stock issued in the conversion. An expense of $62 thousand and
$82 thousand was recorded for the Plan for the years ended September 30, 1993
and 1994.
Stock Option Plan.
The Board of Directors of the Corporation has adopted the Point Bancorp,
Inc. 1992 Stock Option Plan (the "Option Plan"). The number of options
authorized under the Option Plan is 10% or 61,750 shares of common stock issued
in the Conversion. Officers, directors and employees of the Corporation and its
subsidiary are eligible to participate in the Option Plan. The option exercise
price must be at least 100% of the fair market value of the common stock on the
date of the grant, and the option term cannot exceed 10 years. Eligible
officers, directors and employees of the Corporation were able to exercise
options awarded to them upon the ratification of the Option Plan by stockholders
of the Corporation at a special meeting of stockholders held on September 7,
1993. Upon conversion, 61,750 options were granted and remain outstanding at
September 30, 1994, at an exercise price of $10 per share.
F-31
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS
Presented below are the condensed financial statements for the Parent
Company, Point Bancorp, Inc.
CONDENSED BALANCE SHEET
SEPTEMBER 30, 1993 AND 1994
1993 1994
ASSETS:
Cash $ 55 $ -0-
Other interest earning assets
(cash equivalents) -0- 628
Investment securities 3,008 1,999
Investment in subsidiary 3,267 3,711
Other assets 26 83
TOTAL ASSETS $6,356 $6,421
LIABILITIES:
Accrued expenses and taxes $ 16 $ (157)
STOCKHOLDERS' EQUITY 6,340 6,578
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,356 $6,421
CONDENSED STATEMENT OF INCOME
PERIOD FROM SEPTEMBER 24, 1992 TO SEPTEMBER 30, 1993
AND THE YEAR ENDED SEPTEMBER 30, 1994
Year
September 24, Ended
1992 to September
September 30, 1993 30, 1994
INCOME
Interest income $ 78 $113
EXPENSES
Professional fees 68 46
Franchise tax 41 (21)
Other expenses 4 31
TOTAL EXPENSES 113 56
(LOSS) INCOME BEFORE EQUITY IN
INCOME OF SAVINGS BANK (35) 57
Equity in income of Savings Bank 407 444
INCOME BEFORE INCOME TAX EXPENSE 372 501
Income tax expense -- 6
NET INCOME $372 $495
F-32
<PAGE>
POINT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1992, 1993 AND 1994
NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)
CONDENSED STATEMENT OF INCOME
PERIOD FROM SEPTEMBER 24, 1992 TO SEPTEMBER 30, 1993
AND THE YEAR ENDED SEPTEMBER 30, 1994
Year
September 24, Ended
1992 to September
September 30, 1993 30, 1994
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 372 $ 495
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities
Equity in income of Savings Bank (407) (444)
(Increase) in other assets (26) (57)
Increase (decrease) in other
liabilities 16 (173)
NET CASH (USED IN) OPERATING
ACTIVITIES (45) (179)
CASH FLOWS FROM INVESTMENT
ACTIVITIES:
(Increase) decrease in investment
securities (3,008) 1,009
Investment in Savings Bank (3,267) --
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (6,275) 1,009
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends paid -- (257)
Proceeds from stock issue, net of
conversion costs and stock acquired
by MSBP 6,375 --
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 6,375 (257)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 55 573
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF PERIOD -- 55
CASH AND CASH EQUIVALENTS
AT THE END OF PERIOD $ 55 $ 628
F-33
<PAGE>
APPENDIX I
AGREEMENT
AND
PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter sometimes referred to as the
"Agreement"), made and
entered into as of the 2nd day of September, 1994, by and between One Valley
Bancorp of West Virginia, Inc. ("One Valley") and Point Bancorp, Inc. ("Point
Bancorp").
WITNESSETH:
RECITALS
A. One Valley is a West Virginia corporation duly organized and validly
existing under the laws of the State of West Virginia.
B. Point Bancorp is a Delaware corporation duly organized and validly
existing under the laws of the State of Delaware.
C. The Board of Directors of Point Bancorp and the Executive Committee of
One Valley have each approved this Agreement, authorized the execution hereof in
counterparts and the Board of Directors of Point Bancorp has directed that it be
submitted for shareholder approval.
D. One Valley will cause to be formed a wholly-owned West Virginia
subsidiary, One Valley Thrift, Inc. ("Thrift").
E. One Valley and Point Bancorp intend, and it is a condition hereof, that
the Merger (as defined below) constitute a tax-free reorganization.
AGREEMENT
Now, therefore, for and in consideration of the premises and the mutual
agreements hereinafter set forth, and in accordance with the provisions of
applicable law, the parties agree as follows:
SECTION 1
THE PLAN OF MERGER
1.1 The Merger. On the Effective Date, Point Bancorp shall merge with and
into Thrift under the Articles of Incorporation of Thrift (the "Merger").
Thrift shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation").
1.2 Effects of Merger. On the Effective Date, the corporate name and
existence of Point Bancorp shall cease and all of its purposes, powers and
objects, and all of its rights, assets, liabilities and obligations, shall pass
to and vest in Thrift as the Surviving Corporation without any conveyance or
transfer, and Thrift as the Surviving Corporation shall continue to be governed
by the laws of the State of West Virginia and shall also succeed to all rights,
assets, liabilities and obligations of Point Bancorp in accordance with the West
Virginia Corporation Act. Upon the Effective Date of the Merger, the separate
existence and corporate organization of Point Bancorp shall cease.
SECTION 2
ARTICLES OF INCORPORATION; BYLAWS;
BOARD OF DIRECTORS AND OFFICERS
2.1 Articles of Incorporation. The Articles of Incorporation of Thrift
shall continue unchanged as the Articles of Incorporation of Thrift as the
Surviving Corporation. From and after the Effective Date, said Articles of
Incorporation, as the same may be amended from time to time as provided by law,
shall be the Articles of Incorporation of the Surviving Corporation.
A-I-1
<PAGE>
2.2 Bylaws. The Bylaws of Thrift as in effect on the Effective Date shall
continue as the Bylaws of the Surviving Corporation until the same shall
thereafter be altered, amended or repealed in accordance with law, its Articles
of Incorporation, or said Bylaws.
2.3 Directors and Officers. The directors and officers of Thrift on the
Effective Date shall continue as the directors and officers of the Surviving
Corporation and shall hold office as prescribed in the Bylaws of the Surviving
Corporation and applicable law until their successors shall have been elected
and shall qualify.
SECTION 3
CONVERSION OF SHARES AND OPTIONS
3.1 Conversion of Shares. On the Effective Date:
(a) All issued and outstanding shares of common stock of Thrift shall on
the Effective Date of the Merger, be converted into the number of shares of
common stock of Point Bancorp outstanding on the Effective Date.
(b) Each share of common stock of Point Bancorp then issued and outstanding
(excluding (i) any shares held in the treasury of Point Bancorp; and (ii) any
shares as to which dissenters' rights are exercised pursuant to the requirements
of Delaware General Corporation Law all of which shares shall be canceled) shall
be converted by the Merger into: (i) six tenths of one (.6) share of common
stock of One Valley ("Fixed Exchange Ratio"); and (ii) cash in the amount
$7.10. Each person who, but for the provisions of this Section 3.1 (b), would
be entitled to a fractional share interest in the common stock of One Valley as
a result of the conversion, upon surrender of certificates theretofore
representing shares of common stock of Point Bancorp, shall receive in lieu
thereof an amount in cash equal to such fraction multiplied by the average of
the last bid and ask price for the common stock of One Valley reported on the
National Association of Securities Dealers National Market System on the
business day immediately prior to the Effective Date.
(c) Shareholders of Point Bancorp asserting dissenters' rights under the
laws of the State of Delaware shall have their rights determined pursuant to
Delaware General Corporation Law and shall be entitled to cash payment pursuant
to the terms and provisions of said law with funds to be provided by One Valley.
(d) From and after the Effective Date, the holders of the certificates
representing common stock of Point Bancorp shall cease to have any rights with
respect to such shares (except such rights as they may have as dissenting
shareholders) and their sole right shall be to receive cash and common stock of
One Valley as herein provided.
(e) If One Valley shall, at any time prior to the Effective Date, (A) issue
a dividend in shares of One Valley Common Stock, (B) combine the outstanding
shares of One Valley Common Stock into a smaller number of shares, (C) subdivide
the outstanding shares of One Valley Common Stock, or (D) reclassify the shares
of One Valley Common Stock, then, in any such event, the Fixed Exchange Ratio
(as set forth in Section 3.1(b) hereof) shall be adjusted by multiplying the
Fixed Exchange Ratio by a fraction the numerator of which is equal to the number
of shares of One Valley Common Stock outstanding immediately after the
happening of such event and the denominator of which is equal to the number of
shares of One Valley Common Stock outstanding immediately prior to the
happening of such event.
(f) Each holder of an option to acquire Point Bancorp common stock may
elect, in a written notice delivered to One Valley at least five days prior to
the Effective Date, to receive cash in cancellation of his or her option to
acquire Point Bancorp common stock (a "Cash Election"). If an option holder
makes a Cash Election, such option holder
shall receive cash in an amount equal to the product of (A) the difference
between (i) the One Valley Market Value (as defined herein) multiplied by the
Fixed Exchange Ratio and (ii) the exercise price of the option, multiplied by
(B) the number of shares of Point Bancorp common stock covered by the option,
plus (C) the product of $7.10 multiplied by the number of shares of common stock
covered by the option. For purposes of this Section 3.1(f), the phrase "One
Valley Market Value" shall mean the last bid price for the common stock of One
Valley reported on the National Association of Securities Dealers National
Market System on the business day immediately prior to the Effective Date.
3.2 Exchange of Certificates. As soon as practicable after the Effective
Date, the certificates representing the outstanding shares of Point Bancorp
shall be surrendered to Harris Trust and Savings Bank, or to such other entity
as One Valley may direct, as agent ("Exchange Agent") for One Valley and, upon
such surrender, the Exchange Agent shall issue and deliver in substitution
therefore, cash and certificates representing the number of shares of common
stock of One Valley into which such surrendered shares have been converted as
hereinbefore provided, and cash in lieu of fractional shares
A-I-2
<PAGE>
(without interest). Certificates representing shares of Point Bancorp (other
than the shares of common stock of Point Bancorp as to which there are
perfected dissenters' rights) which are not surrendered shall be deemed for all
purposes to evidence the ownership of the number of shares of common stock of
One Valley into which said shares of Point Bancorp shall have been converted as
hereinbefore set forth and the right to receive cash in the amount determined
pursuant to Section 3.1; provided, however, that One Valley will not distribute
to the holder of an unsurrendered certificate for common stock of Point Bancorp
dividends declared with respect to common stock of One Valley until such owner
shall surrender such certificate, at which time the holder thereof shall be
paid the amount of the dividends having a record date on or after the Effective
Date theretofore declared with respect to common stock without interest. All
such dividends unclaimed at the end of two years from the Effective Date shall
be repaid by the Exchange Agent to One Valley, and thereafter the holders of
such outstanding certificates shall look, subject to applicable escheat,
unclaimed funds and other laws, as general creditors only to One Valley for
payment thereof.
3.3 Closing of Stock Transfer Books. At the close of business on the
business day immediately preceding the Effective Date, the stock transfer books
of Point Bancorp shall be deemed closed, and no shares of common stock of Point
Bancorp shall thereafter be transferred.
SECTION 4
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF POINT BANCORP
Except as set forth in the disclosure schedule to be delivered by Point
Bancorp to One Valley on or before 30 days from the date of this Agreement (the
"Disclosure Schedule"), Point Bancorp represents and warrants to and covenants
with One Valley that:
4.1 Organization and Qualification of Point Bancorp and the Subsidiaries.
Point Bancorp is duly organized, validly existing and in good standing as a
corporation under the laws of the State of Delaware and has the corporate power
to own all of its properties and assets and to carry on its business as it is
now being conducted, and neither the ownership of its property nor the conduct
of its business requires it to be qualified to do business in any other
jurisdiction. Point Bancorp owns 100% of the issued and outstanding shares of
stock of Point Pleasant Federal Savings Bank ("Subsidiary"), free and clear of
all liens, claims and encumbrances. The Subsidiary is duly organized, validly
existing and in good standing as a federal savings bank under the laws of the
United States and has the corporate power to own all of its assets and to carry
on its business as it is now being conducted. The issued and outstanding
shares of stock of Subsidiary are all duly authorized, validly issued, fully
paid and nonassessable. Except for Subsidiary, Point Bancorp has no other
direct or indirect subsidiaries, and does not own 5% or more of the shares of
stock of any other corporation.
4.2 Authorization of Agreement. The Board of Directors of Point Bancorp
has authorized the execution of this Agreement as set forth herein, and subject
to the approval of this Agreement by the shareholders of Point Bancorp and all
appropriate regulatory authorities as provided in Delaware General Corporation
Law and the Rules and Regulations or the Office of Thrift Supervision ("OTS"),
Point Bancorp has the corporate power and is duly authorized to merge with
Thrift pursuant to this Agreement, and upon its execution and delivery (and
assuming due execution and delivery by One Valley) this Agreement is a valid
and binding agreement of Point Bancorp enforceable in accordance with its
terms.
4.3 No Violation of Other Instruments. The execution and delivery of this
Agreement do not, and the consummation of the Merger will not, (i) violate any
provisions of Point Bancorp's Certificate of Incorporation or Bylaws, (ii)
violate any provision of, or result in the acceleration of any obligation under
or in the termination, if applicable, of, any mortgage, deed of trust, note,
lien, lease, franchise, license, permit, agreement, instrument, order,
arbitration award, judgment or decree to which either Point Bancorp or
Subsidiary is a party or by which any of them is bound except for such as would
not have a material adverse effect on the financial condition, business,
properties, or results of operations of Point Bancorp and Subsidiary, taken as a
whole, or the transactions contemplated hereby, (iii) violate or conflict with
any other material restriction of any kind or character by which either Point
Bancorp or Subsidiary is bound, or (iv) enable any person to enjoin the
transactions contemplated hereby. After the approval of this Agreement by the
shareholders of Point Bancorp and the OTS, Point Bancorp will have taken all
action required by law, the Certificate of Incorporation of Point Bancorp, its
Bylaws or otherwise to authorize the execution and delivery of this Agreement
and to authorize the Merger of Point Bancorp with Thrift pursuant to this
Agreement and the consummation of the transactions contemplated hereby.
4.4 Financial Statements. The consolidated balance sheets of Point Bancorp
as of the years ended September 30, 1991, 1992 and 1993, and its statements of
income for each of such years, heretofore delivered to One Valley, were prepared
in accordance with generally accepted accounting principles consistently applied
and those financial statements, as
A-I-3
<PAGE>
well as the unaudited balance sheet as of June 30, 1994, and the statement of
income for the nine-month period ended June 30, 1994, both of which will be
delivered to One Valley, fairly present its financial condition and results of
operations as of such date and for such period. The consolidated balance sheet
of Point Bancorp as of September 30, 1994, and statement of income for the
fiscal year ended September 30, 1994, both of which will be delivered to One
Valley, will be prepared in accordance with generally accepted accounting
principles consistently applied and will fairly present its financial condition
and results of operations as of that date and for such period.
4.5 No Material Adverse Change. There has been no material adverse change,
or development involving a reasonably foreseeable prospective material adverse
change, in or affecting the financial condition, businesses, properties, results
of operations or prospects of Point Bancorp and Subsidiary, taken as a whole,
since September 30, 1993.
4.6 Form 10-K Annual Report and Other Reports. Point Bancorp's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended September 30, 1993, heretofore delivered to One Valley, does
not contain, as of the date thereof, an 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 such statements were made, not misleading.
Since January 1, 1992, Point Bancorp has filed with the Securities and Exchange
Commission and the OTS all documents and reports required to be filed and such
reports do not contain, as of their respective dates, an 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 such statements were made,
not misleading. Subsidiary has filed with the OTS and the Federal Deposit
Insurance Corporation all documents and reports required to be filed and such
reports are accurate and complete in all material respects.
4.7 No Actions, Etc. There are no actions, suits, claims, proceedings or
investigations pending or, to the knowledge of the executive officers or
directors of Point Bancorp or Subsidiary, threatened or contemplated against or
relating to Point Bancorp or Subsidiary or any of their properties which,
individually or in the aggregate, could materially and adversely affect the
financial condition, businesses, properties or results of operations of Point
Bancorp and Subsidiary, taken as a whole, or the ability of Point Bancorp to
consummate the transactions contemplated hereby, and such officers and directors
do not know of any basis for any such action or proceeding. Neither Point
Bancorp nor Subsidiary is transacting business in violation of any applicable
law or regulation which could materially adversely affect the financial
condition, businesses, properties or results of operations of Point Bancorp and
Subsidiary, taken as a whole, or the ability of Point Bancorp to consummate the
transactions contemplated hereby.
4.8 Capitalization. The authorized capital stock of Point Bancorp consists
of (i) 1,250,000 shares of common stock, par value of $.01 per share, 642,200 of
which as of the date hereof are issued and outstanding and are validly issued,
fully paid and nonassessable, and (ii) 500,000 shares of preferred stock, par
value of $.01 per share, none of which is issued. Other than stock options
granted under Point Bancorp's Stock Option Plan covering 61,750 shares of common
stock of Point Bancorp, there are no options, warrants, calls, reservations for
issuance or commitments of any kind relating to, or securities convertible into,
Point Bancorp or Subsidiary common stock.
4.9 Copies of All Contracts, Leases, Etc. Point Bancorp has furnished or
will promptly furnish to One Valley true and complete copies of all material
contracts, leases and other agreements to which Point Bancorp or Subsidiary is a
party or by which any of them is bound and all employment, pension, retirement,
stock option, employee stock option, profit sharing, deferred compensation,
consultant, bonus, group insurance or similar plans with respect to any of the
directors, officers or other employees of Point Bancorp or Subsidiary.
4.10 Undisclosed Liabilities. Neither Point Bancorp nor Subsidiary has any
material liabilities other than those liabilities disclosed on or provided for
in the balance sheet as of September 30, 1993, and liabilities incurred since
such date in the ordinary course of business consistent with past practices.
4.11 Title to Properties. Point Bancorp and Subsidiary have good and
marketable title to all their property and assets set forth in their balance
sheets as of September 30, 1993, except property and assets sold or otherwise
disposed of since September 30, 1993, in the ordinary course of business,
subject to no liens, mortgages, pledges, encumbrances or charges of any kind
except liens reflected on said balance sheet and except liens for taxes and
assessments not delinquent, pledges to secure deposits and such other liens and
encumbrances and imperfections of title as do not materially affect the value of
such property as reflected on said balance sheet and which do not interfere with
or impair its present or continued use, and all of their material leases are in
full force and effect and neither Point Bancorp nor Subsidiary is in default in
any material respect thereunder.
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4.12 Proxy Statement. The information pertaining to Point Bancorp which has
been or will be furnished by or on behalf of Point Bancorp or its management for
inclusion in the Proxy Statement referred to in Section 10 and the Registration
Statement referred to in Section 5.12 or any amendment or supplement thereto
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading.
4.13 Good Faith. Point Bancorp shall use its best efforts in good faith to
take or cause to be taken all action required under this Agreement on its part
to be taken as promptly as practicable so as to permit the consummation of this
Agreement at the earliest practicable date and cooperate fully with the other
parties to that end.
4.14 Absence of Regulatory Actions. Neither Point Bancorp nor Subsidiary is
a party to any cease and desist order, written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, federal governmental authorities charged
with the supervision or regulation of the operations of any of them nor has it
been advised by any such governmental authority that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking.
4.15 ERISA. Neither the Corporation nor the Subsidiary has within the past
five calendar years maintained or been required to or has made any contributions
to any plan subject to the requirements of Section 401(a) of the Internal
Revenue Code of 1986, as amended.
4.16 Labor Disputes. Neither Point Bancorp nor Subsidiary is directly or
indirectly involved in or to the knowledge of them threatened with any labor
dispute or trouble or organizational effort, including, without limitation,
matters regarding actual or alleged discrimination by reason of race, creed,
sex, disability or national origin, which might materially and adversely affect
the financial condition, assets, businesses or results of operations of any of
them.
4.17 Reserve for Possible Loan Losses. The reserve for possible loan
losses shown on the consolidated balance sheet of Point Bancorp as of September
30, 1993, and on the unaudited balance sheet of Point Bancorp dated June 30,
1994, is adequate as of the dates thereof. The reserve for possible loan losses
to be shown on the consolidated balance sheet of Point Bancorp as of September
30, 1994, will be adequate as of the date thereof.
4.18 Knowledge as to Conditions. Point Bancorp knows of no reason relating
to Point Bancorp why the approvals, consents and waivers of governmental
authorities referred to in Sections 8.1 (b) and 8.1 (c) should not be obtained.
4.19 Taxes.
(a) Point Bancorp and Subsidiary have filed on a timely basis all Federal
Income Tax Returns and all other federal, state, municipal and other tax returns
which each of them is required to file, and each has paid all taxes shown to be
due on such returns and, in the opinion of its respective Chief Executive and
Financial Officers, has adequately reserved for all current taxes;
(b) Neither the Internal Revenue Service nor any other taxing authority is
now asserting against Point Bancorp or Subsidiary, or, to its knowledge,
threatening to assert against any of them, any deficiency or claim for
additional taxes, interest or penalty;
(c) There is no pending, or to the knowledge of Point Bancorp or
Subsidiary, threatened examination of the Federal Income Tax Returns of Point
Bancorp or Subsidiary and, except for tax years still subject to the assessment
and collection of additional federal income taxes under the three-year period of
limitations prescribed in Section 6501(a) of the Internal Revenue Code, no tax
year of Point Bancorp or Subsidiary remains open to the assessment and
collection of additional Federal Income Taxes; and
(d) There is no pending or, to the knowledge of Point Bancorp or
Subsidiary, threatened examination of the West Virginia Business and Occupation
Tax, Corporate Net Income Tax, Consumer Sales and Use Tax or the Business
Franchise Tax (the "West Virginia Taxes") returns of Point Bancorp or any of the
Subsidiaries and, except for tax years still subject to the assessment and
collection of additional West Virginia Taxes under the applicable statutes of
limitations, no tax year of Point Bancorp or Subsidiary remains open to the
assessment and collection of additional taxes.
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4.20 Absence of Certain Changes. Since September 30, 1993:
(a) There has not been any damage, destruction or loss by reason of fire,
flood, accident or other casualty (whether insured or not insured) materially
and adversely affecting the assets, financial condition or operations of Point
Bancorp or Subsidiary;
(b) Except in the ordinary course of business, neither Point Bancorp nor
Subsidiary has disposed of, or agreed to dispose of, any of its material
properties or assets, nor has any of them leased to others, or agreed to so
lease, any of such material properties or assets;
(c) There has not been any change in the authorized, issued or outstanding
capital stock of Point Bancorp or Subsidiary, except as provided for in this
Agreement, or any material change in the outstanding debt of Point Bancorp or
Subsidiary, other than changes due to payments in accordance with the terms of
such debt;
(d) No change has occurred in the personnel who are key personnel with
respect to the operations of Point Bancorp or Subsidiary, nor has there been any
increase in the compensation or fees payable by either Point Bancorp or
Subsidiary to their directors or officers other than increases in the ordinary
course of business in accordance with the personnel policies of Point Bancorp or
Subsidiary, or any material increase in any bonus, insurance, pension or other
employee benefit plan, payment or arrangement for or with any of such directors
or officers;
(e) Neither Point Bancorp nor Subsidiary has made any material loan or
advance other than in the ordinary course of business;
(f) Neither Point Bancorp nor Subsidiary has made any expenditure or major
commitment for the purchase, acquisition, construction or improvement of any
material asset or assets which in the aggregate would be material;
(g) Neither Point Bancorp nor Subsidiary has entered into any other
material transaction, contract or lease or incurred any other material
obligation or liability;
(h) The Subsidiary has not incurred any unusual or extraordinary loan
losses;
(i) There has not been any other event, condition or development of any
kind which materially and adversely affects the assets, financial condition or
results of operations of Point Bancorp or Subsidiary, and Point Bancorp has no
knowledge of any such event, condition or development which may materially and
adversely affect the assets, financial condition or operations of Point Bancorp
or Subsidiary; and
(j) Point Bancorp and Subsidiary are, and have been, in substantial
compliance with all environmental laws and regulations, and there is no suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending, or, to the knowledge of Point Bancorp or
Subsidiary, threatened, before any court, governmental agency or board or other
forum against Point Bancorp or Subsidiary for alleged noncompliance with, or
liability under, any environmental law or relating to the release into the
environment of any hazardous material or oil.
4.21 Negative Covenants. Except as otherwise contemplated hereby, between
the date hereof and the Effective Date, or the time when this Agreement
terminates as provided herein, neither Point Bancorp nor Subsidiary,
respectively, will, without the prior written consent of One Valley, which
consent shall not be unreasonably withheld:
(a) Make any change in its authorized capital stock or corporate structure;
(b) Issue, redeem or purchase any shares of its capital stock, securities
convertible into its common stock or any long-term debt securities; other than
shares of capital stock issued pursuant to the exercise of outstanding stock
options granted under the Stock Option Plan of Point Bancorp;
(c) Issue or grant any options, warrants or other rights to purchase shares
of its common stock;
(d) Declare or pay any dividends or other distributions on any shares of
common stock, except a cash dividend in an amount not to exceed $.40 per share
to be paid on or before the Effective Date;
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(e) Purchase or otherwise acquire, or agree to acquire, for a consideration
any shares of its capital stock (other than in a fiduciary capacity);
(f) Except as set forth in Section 5.25 enter into or amend any employment
contract or pension, retirement, stock option, employee stock option, profit
sharing, deferred compensation, consultant, bonus, group insurance or similar
plan in respect of any of its directors, officer or other employees or increase
its contribution to any pension or other employee benefit plan;
(g) Take any action materially and adversely affecting the transactions
contemplated hereby or this Agreement or the financial condition, businesses,
properties or results of operations of Point Bancorp and Subsidiary, taken as a
whole;
(h) Acquire any other company or acquire any branch or, other than in the
ordinary course of business, any assets or deposits of any other company;
(i) Mortgage, pledge or subject to a lien or any other encumbrance any of
its assets, dispose of any of its assets, incur or cancel any debts or claims,
or take any other action not in the ordinary course of its business as
heretofore conducted;
(j) Except as may be necessary to comply with this Agreement, amend its
Certificate of Incorporation or Bylaws;
(k) Sell, pledge or otherwise dispose of or encumber any of its stock, or
any of the stock of Subsidiary or change the capital structure of Subsidiary;
(l) Sell any securities from its investment portfolio, except in the
ordinary course of business;
(m) Increase the compensation of any officer or employee during or for the
years 1994 or 1995 in an amount greater than the increase for any such officer
or employee that was awarded in 1993; or
(n) Enter into any agreement to do any of the foregoing.
4.22 Additional Covenants. Point Bancorp covenants and agrees:
(a) That it will promptly advise One Valley in writing of the name and
address of, and number of shares of Point Bancorp held by, each shareholder who
elects to exercise his right to dissent to the Merger pursuant to Delaware
General Corporation Law;
(b) That, subsequent to the date of this Agreement and prior to the
Effective Date, it will operate its business and the businesses of Subsidiary
only in the normal course and in a normal manner consistent with past
practices;
(c) That it will take no action which would adversely affect or delay the
ability of Point Bancorp or Subsidiary to obtain any necessary approvals,
consents or waivers of any governmental authority required for the transaction
contemplated hereby or to perform its covenants and agreements on a timely basis
under this Agreement;
(d) That immediately upon the execution of this Agreement it will direct
its accountants and attorneys to give One Valley access to all relevant and
material information, documents and working papers pertaining to Point Bancorp
and Subsidiary; provided, however, that in the event Point Bancorp determines
that providing One Valley access to such information, documents and working
papers of its attorneys would waive its attorney-client privilege therein and if
Point Bancorp determines in its reasonable discretion to assert such privilege
and to deny access thereto to One Valley, then, notwithstanding any other
provision of this Agreement, One Valley may in its sole discretion immediately
terminate this Agreement at any time before the Effective Date;
(e) That it will use its best efforts in good faith to take or cause to be
taken all action required under this Agreement on its part to be taken as
promptly as practicable so as to permit the consummation of the Merger at the
earliest possible date and cooperate fully with the other parties to that end;
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(f) That neither Point Bancorp nor its directors, officers or
representatives or agents will, directly or indirectly, take any action to
solicit, support or encourage any offer or proposal from any other person to
acquire Point Bancorp or its assets, or shares of its common stock, or of
Subsidiary, or engage in negotiations with or provide information to such person
with respect to such offer or proposal, unless the fiduciary duties such persons
owe to the shareholders of Point Bancorp so require, and Point Bancorp will
immediately notify One Valley if any such offer or proposal is made;
(g) That it will promptly advise One Valley of any material adverse change
in the financial condition, assets, businesses, results of operations or
prospects of Point Bancorp or Subsidiary, and any breach of any representation,
warranty, covenant or agreement made by Point Bancorp in this Agreement known to
Point Bancorp;
(h) That it will maintain in full force and effect adequate fire, casualty,
public liability, employer fidelity and other insurance coverage in accordance
with prudent practices to protect Point Bancorp and Subsidiary against losses
for which insurance can reasonably be obtained; and
(i) That it will consult with One Valley as to the form and substance of
any press release or other public disclosure concerning matters related hereto,
and, except as required by law, shall not issue such release or disclosure
without the reasonable consent of One Valley.
SECTION 5
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ONE VALLEY
One Valley represents and warrants to and covenants with Point Bancorp that:
5.1 Organization and Qualification of One Valley. One Valley is a
corporation duly organized, validly existing and in good standing under the laws
of the State of West Virginia and has the corporate power to own all of its
properties and assets and to carry on its business as it is now being conducted.
Each of the banking subsidiary companies owned by One Valley is duly organized,
validly existing and in good standing as either a state banking corporation
under the laws of West Virginia or a national bank under the laws of the United
States and each has the corporate power to own all of its assets and to carry on
its business as it is now being conducted.
5.2 Authorization of Agreement. The Executive Committee of the Board of
Directors of One Valley has authorized the execution of this Agreement as set
forth herein, and One Valley has the corporate power to execute and deliver this
Agreement, and has taken all action required by law, its Articles of
Incorporation, its Bylaws or otherwise to authorize such execution and delivery,
the Merger and the consummation of the transactions contemplated hereby, and
upon its execution and delivery (and assuming due execution and delivery by
Point Bancorp) this Agreement is a valid and binding agreement of One Valley
enforceable in accordance with its terms.
5.3 No Violation of Other Instruments. The execution and delivery of this
Agreement do not, and the consummation of the Merger will not, (i) violate any
provision of the Articles of Incorporation or Bylaws of One Valley, (ii) violate
any provision of, or result in the acceleration of any obligation under or in
the termination, if applicable, of, any mortgage, deed of trust, note, lien,
lease, franchise, license, permit, agreement, instrument, order, arbitration
award, judgment or decree to which One Valley or any of its subsidiaries is a
party or by which it is bound except for such as would not have a material
adverse effect on the financial condition, business, properties, or results of
operations of One Valley and its subsidiaries, taken as a whole, or the
transactions contemplated hereby, (iii) violate or conflict with any other
material restriction of any kind or character to which One Valley or any of its
Subsidiaries is subject, or (iv) enable any person to enjoin the transactions
contemplated hereby. After approval of this Agreement by the Executive
Committee of the Board of Directors of One Valley and the OTS, One Valley will
have taken all action required by law and its Articles of Incorporation and
Bylaws necessary to authorize the execution and delivery of this Agreement and
to authorize the Merger of Point Bancorp with Thrift and the consummation of the
transactions contemplated hereby.
5.4 Organization and Qualification of Thrift. One Valley shall cause to be
filed with the OTS and the Board of Governors of the Federal Reserve ("Federal
Reserve") an application to approve the transaction contemplated hereby. Upon
the approval of such application and the issuance of a certificate of
incorporation for Thrift by the Secretary of State of the State of West
Virginia, One Valley and Point Bancorp shall execute and One Valley shall
cause Thrift to execute and enter into an adoption agreement in substantially
the form attached as Exhibit A to this Agreement and cause Thrift to take such
action as is provided in this Agreement on Thrift's part to be taken.
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5.5 Regulatory Approvals. Prior to the Effective Date, One Valley,
separately and jointly with Point Bancorp, shall use its best efforts in good
faith to take or cause to be taken as promptly as practicable all such steps as
shall be necessary to obtain (i) the prior approval of the OTS for One Valley to
organize Thrift and to take all action to effectuate the Merger; (ii) the prior
approval of the Board of Governors of the Federal Reserve System under the Bank
Holding Company Act of 1956, as amended, of the Merger; and (iii) all other
consents and approvals of governmental agencies as are required by law or
otherwise, and shall do any and all things deemed by One Valley and Point
Bancorp to be necessary or appropriate in order to cause the Merger to be
consummated on the terms provided herein; and (iv) enable any person to enjoin
the transactions contemplated hereby. After approval of this Agreement by the
Board of Directors of One Valley and the OTS, One Valley will have taken all
action required by law and its Articles of Incorporation and Bylaws necessary to
authorize the execution and delivery of this Agreement and to authorize the
Merger of Point Bancorp with Thrift and the consummation of the transactions
contemplated hereby.
5.6 Financial Statements. One Valley's consolidated balance sheets as of
the years ended December 31, 1991, 1992 and 1993, and its statement of income
for each of such years, heretofore delivered to Point Bancorp, were prepared in
accordance with generally accepted accounting principles consistently applied
and those financial statements, as well as the unaudited balance sheet as of
September 30, 1994 which will be delivered to Point Bancorp, fairly present and
will fairly present its financial condition and results of operations as of such
respective dates and for such respective periods.
5.7 No Material Adverse Change. There has been no material adverse change,
or development involving a reasonably foreseeable prospective material adverse
change, in or affecting the financial condition, businesses, properties or
results of operations of One Valley and its subsidiaries, taken as a whole,
since December 31, 1993.
5.8 Form 10-K Annual Report and Other Reports. One Valley's Annual Report
on Form 10-K filed with the Securities and Exchange Commission for the year
ended December 31, 1993, heretofore delivered to Point Bancorp, does not
contain, as of the date thereof, any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading. Since
January 1, 1992, One Valley has filed with the Securities and Exchange
Commission all documents and reports required to be filed and such reports do
not contain, as of their respective dates, an 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 such statements were made, not
misleading.
5.9 No Actions, Etc. There are no actions, proceedings or investigations
pending or, to the knowledge of the executive officers or directors of One
Valley, threatened or contemplated against or relating to One Valley or any of
its subsidiaries or any of its properties, which, individually or in the
aggregate, could materially and adversely affect the financial condition,
businesses, properties or operations of One Valley and its subsidiaries, taken
as a whole, or the ability of One Valley to consummate the transactions
contemplated hereby, and such officers and directors do not know of any basis
for any action or proceeding. Neither One Valley, nor any of its subsidiaries,
is transacting business in violation of any applicable law or regulation which
could materially adversely affect the financial condition, businesses,
properties or operations of One Valley and its subsidiaries, taken as a whole,
or the ability of One Valley to consummate the transactions contemplated hereby.
5.10 Capitalization. As of the date hereof, the authorized capital stock
of One Valley consists of (i) Forty Million shares of common stock, par value of
$10 per share, of which 17,110,658 are issued and outstanding and are fully paid
and nonassessable, and (ii) One Million shares of preferred stock, par value of
$10 per share, none of which is issued.
5.11 Good Faith. One Valley shall use its best efforts in good faith to
take or cause to be taken all action required under this Agreement on its part
to be taken as promptly as practicable so as to permit the consummation of this
Agreement at the earliest practicable date and cooperate fully with the other
parties to that end.
5.12 Registration. One Valley will cause a Registration Statement (or
other appropriate form) to be filed with and declared effective by the
Securities and Exchange Commission, appropriate agencies regulating securities,
and other governmental agencies having jurisdiction, with respect to the
securities to be issued in conjunction with the Merger. The information
pertaining to One Valley which will appear in the Registration Statement and
Proxy Statement will contain no untrue statement of any material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
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5.13 Copies of Public Information One Valley has made or will make available
for review by Point Bancorp all information publicly available concerning One
Valley and all pension, retirement, thrift, group insurance or similar plans
with respect to any of the directors, officers or other employees of One Valley
or its subsidiaries.
5.14 Undisclosed Liabilities; Taxes. One Valley has no material
liabilities other than those liabilities disclosed on or provided for in its
balance sheet as of December 31, 1993, and liabilities incurred since such date
in the ordinary course of business. One Valley has paid all federal, state and
local taxes now due and payable and there are no material tax items now in
dispute or anticipated to be disputed.
5.15 Title to Properties. One Valley has good and marketable title to all
its property and assets set forth on its balance sheet as of December 31, 1993,
except property and assets sold or otherwise disposed of since December 31,
1993, in the ordinary course of business, subject to no liens, mortgages,
pledges, encumbrances or charges of any kind except liens reflected on said
balance sheet and except liens for taxes and assessments not delinquent, pledges
to secure deposits, and such other liens and encumbrances and imperfections of
title as do not materially affect the value of such property as reflected on
said balance sheet and which do not interfere with or impair its present or
continued use, and all of its leases are in full force and effect and One
Valley is not in default thereunder.
5.16 Absence of Regulatory Actions. Neither One Valley nor any of its
banking subsidiaries is a party to any cease and desist order, written agreement
or memorandum of understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of, federal or state governmental authorities charged
with the supervision or regulation of the operations of any of them nor has it
been advised by any such government authority that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking.
5.17 Labor Disputes. One Valley is not directly or indirectly involved in
or threatened with any labor dispute or trouble or organizational effort,
including, without limitation, matters regarding actual or alleged
discrimination by reason of race, creed, sex, disability or national origin,
which might materially and adversely affect its financial condition, assets,
businesses or results of operations.
5.18 Reserve for Possible Loan Losses. The reserve for possible loan
losses shown on the consolidated balance sheet of One Valley as of December 31,
1993, and on the unaudited balance sheet of One Valley dated June 30, 1994, is
adequate as of the dates thereof.
5.19 Knowledge as to Conditions. One Valley knows of no reason relating to
One Valley why the approvals, consents and waivers of governmental authorities
referred to in Sections 8.1 (b) and 8.1 (c) should not be obtained.
5.20 Other Transactions. One Valley has had, and will continue to have,
negotiations for the acquisition of other banking institutions. Nothing
contained herein shall in any manner limit the ability of One Valley to acquire
additional banking institutions or other corporations, either before or after
the Effective Date, for such consideration (cash, notes, common or preferred
stock) and upon such terms and conditions as One Valley deems appropriate.
Notwithstanding the foregoing, One Valley will not, and will cause its
subsidiaries to not, make or agree to make any acquisition or take any action
that materially adversely affects its ability to consummate the transaction
contemplated hereby in a reasonably timely manner.
5.21 Press Release. One Valley will consult with Point Bancorp as to the
form and substance of any press release or other public disclosure concerning
matters related hereto, and, except as required by law, shall not issue such
release or disclosure without the consent of Point Bancorp.
5.22 Employees of Point Bancorp. One Valley will consider all employees
and officers of Point Bancorp and its subsidiary for employment by One Valley
after consummation of the Merger based on One Valley's staffing needs.
5.23 Indemnification. One Valley shall indemnify, and advance expenses
(including legal fees and expenses) in matters that may be subject to
indemnification to, persons who served as directors and officers of Point
Bancorp and its Subsidiary on or before the Effective Date of the Merger with
respect to liabilities and claims (and related expenses) made against them
resulting from their service as such prior to the Effective Date of the Merger
in accordance with and subject to
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the requirements and other provisions of One Valley's Articles of Incorporation
and Bylaws in effect on the date of this Agreement and applicable provisions of
law to the same extent as One Valley is obliged thereunder to indemnify and
advance expenses to its own directors and officers with respect to liabilities
and claims made against them resulting from their service as such to One
Valley.
5.24 Advisory Board. The existing five members of the Board of Directors
and the one advisory board member of Point Bancorp will become a community
advisory board of Thrift to assist it in developing a business plan for the
Point Pleasant market. The advisory Board's role will end twelve months after
the Effective Date. Each member of the advisory board will be paid $650 per
month for the twelve month period.
5.25 Employment Agreements. On the Effective Date of the Merger, One
Valley will make a lump sum payment in cash to Maye R. Smith and Faye R. Hudson
in the amount equal to one year of their respective salaries as in effect on the
Effective Date and will reimburse each of them for the remainder of each of
their lives in an amount equal to the highest Medicare Supplement offered to
retirees of One Valley; provided that such persons terminate their respective
employment agreements effective as of the Effective Date of the Merger and
release in full One Valley from any and all obligations thereunder.
SECTION 6
INVESTIGATION
Prior to the Closing Date, either party may directly and through its
representatives, make such reasonable investigation of the assets and business
of the other party and its subsidiaries as deemed necessary or advisable. Each
party and its representatives shall have, at reasonable times after the date of
execution hereof, during normal business hours and upon reasonable request, full
access to the premises and to all the relevant and material books and records of
the other party and its subsidiaries.
SECTION 7
NON-SURVIVAL
Other than Sections 5.22, 5.23, 5.24 and 5.25 hereof, the representations
and warranties included or provided herein shall not survive the Effective
Date.
SECTION 8
CONDITIONS PRECEDENT; CLOSING DATE AND EFFECTIVE DATE
8.1 Conditions Precedent. The consummation of this Agreement and the Merger
is conditioned upon the following:
(a) The shareholders of Point Bancorp shall have approved this Agreement by
vote as required by law and final approval of this Agreement shall have taken
place as provided in Section 10 hereof, and the Board of Directors of One Valley
shall have approved this Agreement;
(b) OTS shall have approved the acquisition of control of Point Bancorp and
Subsidiary by One Valley;
(c) The Federal Reserve shall have approved the acquisition of control of
Point Bancorp and Subsidiary by One Valley;
(d) The Registration Statement shall have become effective under the 1933
Act, no stop order suspending the effectiveness of such Registration Statement
shall be in effect and no proceedings for such purpose shall have been initiated
or threatened by or before the Securities and Exchange Commission. All state
securities and "blue sky" permits or approvals required (in the opinion of One
Valley) to carry out the transactions contemplated by this Agreement shall have
been received;
(e) All other consents, approvals and permissions and the satisfaction of
all the requirements prescribed by law which are necessary to the carrying out
of the transactions contemplated hereby shall have been procured;
(f) All delay periods and all periods for review, objection or appeal of or
to any of the consents, approvals or permissions required with respect to the
consummation of the Merger and this Agreement shall have expired;
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(g) Unless waived by One Valley, the approvals referred to in subparagraphs
(b), (c) and (d) hereof shall not have required the divestiture or cessation of
any significant part of the present operations conducted by One Valley, Point
Bancorp, and their respective subsidiaries, taken as a whole, and shall not have
imposed any other condition which One Valley reasonably deems to be materially
disadvantageous or burdensome;
(h) Unless waived by One Valley, the representations and warranties of
Point Bancorp contained in this Agreement shall be correct on and as of the
Effective Date in all material respects with the same effect as though made on
and as of such date, except as affected by the transactions contemplated by this
Agreement and except for changes which are not, in the aggregate, material and
adverse to the financial condition, businesses, properties or operations of
Point Bancorp, and Point Bancorp shall have performed in all material respects
all its obligations and agreements hereunder theretofore to be performed by it;
and One Valley shall have received on the Effective Date an appropriate
certificate to the foregoing effect dated the Effective Date and executed on
behalf of Point Bancorp by one or more appropriate executive officers of Point
Bancorp;
(i) Unless waived by Point Bancorp, the representations and warranties of
One Valley contained in this Agreement shall be correct on and as of the
Effective Date in all material respects with the same effect as though made on
and as of such date, except as affected by the transactions contemplated by this
Agreement and except for changes which are not, in the aggregate, material and
adverse to the financial condition, businesses, properties, results of
operations or prospects of One Valley, and One Valley shall have performed in
all material respects all of its obligations and agreements hereunder
theretofore to be performed by it; and Point Bancorp shall have received on the
Effective Date an appropriate certificate to the foregoing effect dated the
Effective Date and executed on behalf of One Valley by one or more appropriate
executive officers;
(j) One Valley shall have received from legal counsel to Point Bancorp a
written opinion pertaining to the transactions herein provided for, dated the
Effective Date, in form and substance acceptable to counsel for One Valley, and
Point Bancorp shall have received from legal counsel to One Valley a customary
written opinion pertaining to the transactions herein provided for, dated the
Effective Date, in form and substance acceptable to counsel for Point Bancorp;
(k) Unless waived by One Valley, One Valley shall have received an opinion
of counsel to the effect that the transaction will constitute a tax free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code;
(l) Unless waived by Point Bancorp, Point Bancorp shall have obtained an
opinion of counsel to the effect that, as to each holder of Point Bancorp common
stock who receives One Valley common stock in exchange for his or her Point
Bancorp common stock, no gain will be recognized by such shareholder on such
exchange; the basis of the One Valley common stock to be received by such Point
Bancorp shareholders will be the same as the basis of the Point Bancorp common
stock surrendered in exchange therefor; and the holding period of the One Valley
common stock to be received by such Point Bancorp shareholders includes the
holding period of the Point Bancorp common stock surrendered in exchange
therefor, provided their Point Bancorp common stock was held as a capital asset
at the time of the exchange;
(m) Unless waived by One Valley, on or before the Effective Date, all
incentive stock options granted pursuant to the 1992 Stock Option Plan of Point
Bancorp shall have been exercised or tendered for payment in cash in accordance
with the terms of said options;
(n) Point Bancorp shall have delivered to One Valley a list of all persons
known to Point Bancorp who own in excess of 5% of the issued and outstanding
stock of Point Bancorp.
(o) The Employment Agreements referred to in Section 5.25 shall have been
amended as set forth in that section.
(p) The receipt by Point Bancorp of the opinion of its investment banker
that the consideration to be paid to stockholders of Point Bancorp pursuant to
this Agreement is fair from a financial point of view to such stockholders.
8.2 Closing Date. The time and date of closing are herein called the
"Closing Date". The Closing Date shall be selected by One Valley and shall be
within thirty (30) days of approvals of this Agreement by the shareholders of
Point Bancorp or the receipt of all of the approvals referred to in Section
8.1(b), (c), (d), (e) and (f), whichever is later. One Valley shall cause the
Articles of Merger with respect to the Merger to be filed with the Secretary of
State of West Virginia.
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8.3 Effective Date. The Merger shall become effective (the "Effective
Date") on the date on which the certificate of merger approving the Merger is
issued by the Secretary of State of the State of West Virginia, but in any event
no later than the 60th day after receipt of all requisite approvals of
regulatory authorities and shareholders.
SECTION 9
TERMINATION OF AGREEMENT
9.1 Grounds for Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date
either before or after the meeting of the shareholders of Point Bancorp:
(a) By mutual consent of Point Bancorp and One Valley;
(b) By One Valley if there has been a material misrepresentation or breach
of warranty in the representations and warranties of Point Bancorp set forth
herein, or by Point Bancorp if there has been a material misrepresentation or
breach of warranty in the representations and warranties of One Valley set forth
herein, which material misrepresentation or breach of warranty has not been
cured to the satisfaction of the non-breaching party within 30 days thereof;
(c) By either Point Bancorp or One Valley upon written notice to the other,
if the Effective Date does not occur on or before midnight on May 31, 1995;
(d) By either Point Bancorp or One Valley if the Merger shall violate any
nonappealable final order, decree or judgment of any court or governmental body
having competent jurisdiction; or
(e) In the event that the Disclosure Schedule or One Valley's investigation
of Point Bancorp and Subsidiary discloses matters which One Valley in good faith
believes either (i) to be inconsistent in any material and adverse respect with
any of the representations or warranties of Point Bancorp (without giving effect
to the Disclosure Schedule) or (ii) in the reasonable judgment of the Board of
Directors of One Valley either (A) to be of such significance as to materially
and adversely affect the financial condition or results of operations of Point
Bancorp and the Subsidiary, taken as a whole, or (B) to deviate materially and
adversely from the financial statements for the year ended September 30, 1993,
of Point Bancorp, the Board of Directors of One Valley may elect to terminate
this Agreement by giving notice of termination to Point Bancorp within or at the
end of the 30 day period following the date of the delivery by Point Pleasant to
One Valley of the Disclosure Schedule.
(f) In the event that Point Bancorp's investigation of One Valley and its
subsidiaries discloses matters which Point Bancorp in good faith believes either
(i) to be inconsistent in any material and adverse respect with any of the
representations or warranties of One Valley or (ii) in the reasonable judgment
of the Board of Directors of Point Bancorp either (A) to be of such significance
as to materially and adversely affect the financial condition or results of
operations of One Valley and its subsidiaries taken as a whole, or (B) to
deviate materially and adversely from the financial statements for the year
ended December 31, 1993, of One Valley, the Board of Directors of Point Bancorp
may elect to terminate this Agreement by giving notice of termination to One
Valley within or at the end of the 30 day period following the date of this
Agreement.
(g) By One Valley in accordance with the provisions of Section 4.22(d).
9.2 Effect of Termination; Right to Proceed. In the event this Agreement
shall be terminated pursuant to Section 9.1, all further obligations of One
Valley and Point Bancorp under this Agreement shall terminate without further
liability of the parties to one another.
9.3 Return of Documents in Event of Termination. In the event of the
termination of this Agreement for any reason, each party shall forthwith deliver
to the other all documents, work papers and other material obtained from it
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, including information obtained pursuant to Section 6
hereof, and will take reasonable steps to have any information so obtained kept
confidential.
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SECTION 10
MEETING OF SHAREHOLDERS
Point Bancorp shall take all steps necessary to call and hold a special
meeting of shareholders, in accordance with applicable law and its Certificate
of Incorporation and Bylaws, as soon as practicable for the purpose of
submitting this Agreement to its shareholders for their consideration and
approval. Point Bancorp will send to its shareholders for purposes of such
meetings a proxy statement, which will be in the form contained in the
Registration Statement on Form S-4, or any amendments thereto, prepared and
filed by One Valley (the "Proxy Statement"). The Board of Directors of Point
Bancorp will recommend shareholder approval of this Agreement and will not
withdraw such recommendation unless the fiduciary duties such persons owe to
the stockholders of Point Bancorp so require.
SECTION 11
BROKERS, ETC.
Point Bancorp represents and warrants to One Valley, that no broker, or
finder, or financial analyst except Berwind Financial Group, Inc., pursuant to
an agreement previously provided to One Valley, has been employed, or is
entitled to a fee, commission or other compensation, with respect to this
Agreement or the transactions contemplated hereby.
SECTION 12
GOVERNING LAW; SUCCESSORS AND ASSIGNS;
COUNTERPARTS; ENTIRE AGREEMENT
This Agreement (a) shall be governed by and construed under and in
accordance with the laws of the State of West Virginia; (b) shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that this Agreement may not be
assigned by any party without the written consent of the other parties hereto;
(c) may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective and binding
when one or more counterparts shall have been signed and delivered; and (d)
embodies the entire agreements and understandings between Point Bancorp and One
Valley relating to the subject matter hereof.
SECTION 13
EFFECT OF CAPTIONS
The captions in this Agreement are included for convenience only and shall
not in any way affect the interpretation
or construction of any of the provisions hereof.
SECTION 14
NOTICES
Any notices or other communications required or permitted hereunder shall be
sufficiently given if sent by registered
mail, postage prepaid, addressed as follows:
To Point Bancorp:
Point Bancorp, Inc.
610-12 Viand Street
Point Pleasant, West Virginia 25550
Attention: Maye R. Smith, President and CEO
With a copy to:
John J. Spidi, Esquire
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square
1301 K. Street, N.W., Suite 700 East
Washington, DC 20005
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To One Valley:
One Valley Bancorp of West Virginia, Inc.
One Valley Square
P. O. Box 1793
Charleston, West Virginia 25326
Attention: J. Holmes Morrison
With a copy to:
Merrell S. McIlwain, Esquire
One Valley Bancorp of West Virginia, Inc.
One Valley Square
P. O. Box 1793
Charleston, West Virginia 25326
or such other addresses as shall be furnished in writing by either party to
the other party. Any such notice or communication shall be deemed to have been
given as of the date so mailed.
SECTION 15
AMENDMENTS
This Agreement may be amended by the written agreement of One Valley and
Point Bancorp and without the approval of the shareholders before or after the
meeting of shareholders at any time prior to the Closing Date with respect to
any of the terms contained herein; provided, however, that if amended after such
meeting of shareholders, no such amendment shall be materially adverse to the
shareholders of Point Bancorp.
SECTION 16
EXPENSES
Each of the parties hereto agrees to pay, without a right of reimbursement
from the other party and whether or not the transactions contemplated by this
Agreement shall be consummated, the costs incurred by it incident to the
performance of its obligations under this Agreement and to the consummation of
the Merger and the other transactions contemplated herein, including the fees
and disbursements of counsel, accountants and consultants employed by such party
in connection therewith; provided, however, that One Valley shall bear the full
expense of the printing and mailing of the proxy statement to be used in
connection with the shareholder's meeting referenced in Section 10.
SECTION 17
AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS
Point Bancorp and One Valley each agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement. Each Director
who has authorized this Agreement hereby further agrees to cooperate fully with
the parties, their employees, representatives and agents in consummating the
Merger, and that, based upon his or her understanding of the transaction, as
proposed, each Director will vote appropriately upon all corporate resolutions
toward that end and will take no action inconsistent with the purposes of this
Agreement or the consummation of the Merger.
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IN WITNESS WHEREOF, One Valley and Point Bancorp have each caused this
Agreement to be executed on its
behalf by its officers thereunto duly authorized all as of the day and year
first written above.
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
By /s/ J. Holmes Morrison
Its President and Chief Executive Officer
POINT BANCORP, INC.
By /s/ Maye R. Smith
Its President and Chief Executive Officer
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APPENDIX II
FAIRNESS OPINION
Board of Directors
Point Bancorp, Inc.
610 Viand Street
Point Pleasant, WV 25550
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Point Bancorp, Inc. ("Point") of the financial
terms of the proposed merger whereby Point will be merged with and into a newly
formed and wholly-owned subsidiary of One Valley Bancorp of West Virginia, Inc.
(collectively, "One Valley"). The terms of the proposed merger (the "Proposed
Merger") between Point and One Valley are set forth in the Agreement and Plan of
Merger (the "Merger Agreement") and provide that each outstanding share of
Point's Common Stock will be converted into (i) .60 shares of One Valley's
Common Stock and (ii) cash in the amount of $7.10 with cash to be paid in lieu
of any fractional shares.
Berwind Financial Group, Inc., as part of its investment banking business,
regularly is engaged in the valuation of assets, securities and companies in
connection with various types of asset and security transactions, including
mergers, acquisitions, private placements and valuations for various other
purposes, and in the determination of adequate consideration in such
transactions.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performances, current financial positions and general
prospects of Point and One Valley; (ii) reviewed the Merger Agreement; (iii)
reviewed the stock market performances of Point and One Valley; (iv) studied and
analyzed the consolidated financial and operating data of Point and One Valley;
(v) considered the terms and conditions of the Proposed merger between Point and
One Valley as compared with the terms and conditions of comparable bank mergers
and acquisitions; (vi) met and/or communicated with certain members of Point's
and One Valley's senior management to discuss operations, historical financial
statements, and future prospects; and (vii) conducted such other financial
analyses, studies and investigations as we deemed appropriate.
Our opinion is given in reliance on information and representations made or
given by Point and One Valley and their respective officer, directors, auditors,
counsel and other agents, and on filings, releases and other public information
issued by Point and One Valley including financial statements, financial
projections, and stock price data as well as certain information from recognized
independent sources. We have not independently verified the information
concerning Point and One Valley nor other data which we have considered in our
review and, for purposes of the opinion set forth below, we have assumed and
relied upon the accuracy and completeness of all such information and data.
Additionally, we assume that the Proposed Merger is, in all respects, lawful
under applicable law.
With regard to financial and other information relating to the general
prospects of Point and One Valley, we have assumed that such information has
been reasonably prepared and reflects the best currently available estimates and
judgments of the managements of Point and One Valley as to Point's and One
Valley most likely future performance. In rendering our opinion, we have
assumed that in the course of obtaining the necessary regulatory approval for
the Proposed Merger, and in preparation of the final proxy statement, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Proposed Merger to Point. For Point and One
Valley, we have assumed the allowance for loan losses indicated on the balance
sheets of each entity is adequate to cover such losses; we have not reviewed the
credit files of either Point or One Valley.
Our opinion is based upon information provided to us by the managements of
Point and One Valley, as well as market, economic, financial, and other
conditions as they exist and can be evaluated only as of the date hereof and
speaks to no other period. Our opinion pertains only to the financial
considerations of the Proposed Merger and does not constitute a recommendation
to the Board of Point.
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Based on the foregoing, it is our opinion that, as of the date hereof,
the Proposed Merger between Point and One Valley is fair, from a financial point
of view, to the shareholders of Point.
Sincerely,
BERWIND FINANCIAL GROUP, INC.
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APPENDIX III
DELAWARE GENERAL CORPORATION LAW
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 the provisions of subsection (d) of this Section and who
has neither voted in favor of the merger or consolidation nor consented thereto
in writing pursuant to s228 of this Chapter shall be entitled to an appraisal by
the Court of Chancery of the fair value of his 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.
(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 Sections 251, 252, 254, 257, 258, or 263 of this Chapter:
(1) provided, however, that no appraisal rights under this Section shall be
available for the shares of any class or series of stock which, 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 at
consolidation, were either (i) listed on a national securities exchange or (ii)
held of record by more than 2,000 stockholders; 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 Chapter.
(2) Notwithstanding the provisions of subsection (b)(1) of this Section,
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 and 258 of this Chapter to accept for such stock
anything except (i) shares of stock of the corporation surviving or resulting
from such merger or consolidation; (ii) shares of stock of any other
corporation which at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of record by more than
2,000 stockholders; (iii) cash in lieu of fractional shares of the corporations
described in the foregoing clauses (i) and (ii); (iv) any combination of the
shares of stock and cash in lieu of fractional shares described in the foregoing
clauses (i), (ii) and (iii) of this subsection.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this chapter 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), 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
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are available pursuant to subsections (b) and (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 Chapter, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal rights
of the effective date of the merger or consolidation and that appraisal rights
are available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this Section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the 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.
(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 the provisions of 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 one or more publications at
least one 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 the provisions of 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.
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(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
at 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 stock forthwith, and in 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 other 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 attorneys' 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.
A-III-3
