As filed with the Securities and Exchange Commission on January 20, 1999.
Registration No. 333-________
======================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM S-3
Registration Statement
Under
The Securities Act of 1933
_______________________
CASTLE BANCGROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 36-3238190
(State or Other Jurisdiction (I.R.S. Employer
ofIncorporation or Organization) Identification No.)
CASTLE BANCGROUP, INC. MR. JOHN W. CASTLE
121 WEST LINCOLN HIGHWAY 121 WEST LINCOLN HIGHWAY
DEKALB, ILLINOIS 60115 DEKALB, ILLINOIS 60115
(815) 758-7007 (815) 758-7007
(Address, Including Zip Code, (Name, Address, Including
and Telephone Number, Including Zip Code, and Telephone Number,
Area Code, of Registrant's Including Area Code, of Agent
Principal Executive Offices) for Service)
WITH A COPY TO:
GARY L. MOWDER, ESQ.
SCHIFF HARDIN & WAITE
6600 SEARS TOWER
CHICAGO, ILLINOIS 60606
(312) 258-5514
_______________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. /X/
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. / /
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. / / ________________<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _____________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount To Be Aggregate Price Aggregate Offering Registration
Securities To Be Registered Registered Per Unit (1) Price (1) Fee
--------------------------- ------------ ---------------- ----------------- ------------
<S> <C> <C> <C> <C>
Common Stock,
$.33 par value . . . . . . . 150,000 $19.18 $2,877,000 $849
</TABLE>
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(h) under the Securities Act of 1933.
<PAGE>
PROSPECTUS
CASTLE BANCGROUP, INC.
121 West Lincoln Highway, DeKalb, Illinois 60115
300,000 Shares
Common Stock, Par Value $.33 Per Share
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan (the "Plan")
described herein offers existing holders of common stock, par value
$.33 per share, (the "Common Stock") of Castle BancGroup, Inc. (the
"Company") an opportunity to reinvest automatically the dividends paid
on the Common Stock in shares of Common Stock. In addition, eligible
employees and eligible directors participating in the Plan may
purchase additional shares of the Common Stock within the limitations
provided in the Plan.
Shares of Common Stock purchased under the Plan will be newly
issued shares, treasury shares or shares purchased in the open market
or in privately negotiated transactions. Until such time as an active
market in the Common Stock develops, all purchases under the Plan will
be satisfied with newly issued shares or treasury shares. The
purchase price of Common Stock under the Plan will equal 100% of the
Fair Market Value, as that term is defined in the Plan. The Company
will pay the cost of administering the Plan and will pay the brokerage
commissions or service charges applicable to the purchase of shares
under the Plan.
Current pricing information on the Common Stock is available in
the "pink sheets" published in National Quotation Bureau, Inc. under
the designation "Castle BancGroup, Inc." or the symbol "CTBG". The
Common Stock is not listed on a national stock exchange or by NASDAQ.
As of November 30, 1998, there was one market maker for the Common
Stock. An interested investor may request information about the
market maker from the Agent (see page 6). THE INVESTMENT
CONSIDERATIONS ON DECIDING WHETHER TO PURCHASE THE COMMON STOCK
OFFERED HEREBY ARE DISCUSSED IN THE "RISK FACTORS" SECTION OF THIS
PROSPECTUS BEGINNING ON PAGE 3.
This Prospectus should be retained for future reference.
_______________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR
ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES
OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC")
OR ANY OTHER GOVERNMENTAL AGENCY.
_______________________
This document constitues part of a Section 10(a) Propsectus covering
securities that have been registered under the Securities Act of 1933.
The date of this Prospectus is January 21, 1999.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND
IN DOCUMENTS SUBSEQUENTLY INCORPORATED BY REFERENCE AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH THIS PROSPECTUS RELATES
OR AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR OF THE PLAN OR THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . 1
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . 2
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk of Operations . . . . . . . . . . . . . . . . . . . . . . 4
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Governmental Monetary Policies . . . . . . . . . . . . . . . . 5
Competition . . . . . . . . . . . . . . . . . . . . . . . . . 5
Effect of Interest Rates . . . . . . . . . . . . . . . . . . . 5
Risks of Mortgage Banking Operation . . . . . . . . . . . . . 6
No Assurance of Public Trading Market . . . . . . . . . . . . 6
Risks Related to the Year 2000 Problem . . . . . . . . . . . . 7
IF YOU HAVE QUESTIONS CONCERNING THE PLAN . . . . . . . . . . . . . 8
DESCRIPTION OF THE DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN . 8
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Advantages to Participants . . . . . . . . . . . . . . . . . . 8
Administration . . . . . . . . . . . . . . . . . . . . . . . . 9
Participation . . . . . . . . . . . . . . . . . . . . . . . . 9
Enrollment Procedures . . . . . . . . . . . . . . . . . . . . 10
Dividend Reinvestment Feature . . . . . . . . . . . . . . . . 11
Stock Purchase Feature . . . . . . . . . . . . . . . . . . . . 12
Purchases of Common Stock . . . . . . . . . . . . . . . . . . 13
Certificate Issuance . . . . . . . . . . . . . . . . . . . . . 15
Safekeeping . . . . . . . . . . . . . . . . . . . . . . . . . 16
Sales of Shares . . . . . . . . . . . . . . . . . . . . . . . 17
Termination of Participation in the Plan by the Participant . 17
Pledging Account Balances . . . . . . . . . . . . . . . . . . 17
Names on Plan Accounts . . . . . . . . . . . . . . . . . . . . 17
Reports to Participants . . . . . . . . . . . . . . . . . . . 18
Termination of Participation in the Plan by the Company . . . 18
Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Federal Income Tax Consequences . . . . . . . . . . . . . . . 19
Other Information . . . . . . . . . . . . . . . . . . . . . . 20
LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . 21
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 22
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . 22
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
i
<PAGE>
AVAILABLE INFORMATION
The Company files reports, proxy statements and other information
with the SEC under the Securities Exchange Act of 1934, as amended
(the "1934 Act"). Such reports, proxy statements and other
information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's Regional Offices located at
Northwest Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and at the 13th Floor, Seven World Trade Center, New
York, New York 10048. Copies of such material can be obtained from
the Public Reference Room of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The public may obtain
information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC maintains an internet site that
contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
SEC. The address of such site is http://www.sec.gov. In addition,
such reports, information statements and other information concerning
the Company can be inspected at the principal offices of the Company,
121 West Lincoln Highway, DeKalb, Illinois 60115.
The Company has filed with the SEC a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "1933 Act")
with respect to the Common Stock being offered pursuant to the
dividend reinvestment feature of the Plan. The Company has filed with
the SEC a Registration Statement on Form S-8 under the 1933 Act with
respect to the Common Stock being offered pursuant to the stock
purchase feature of the Plan. This Prospectus omits certain
information contained in the Registration Statements pursuant to the
rules and regulations of the SEC, and reference is made to the
Registration Statements, including the exhibits thereto, for further
information with respect to the Company and the Common Stock offered
hereby. Statements contained in this Prospectus concerning the
provisions of such documents are necessarily summaries of such
documents and each such statement is qualified in its entirety by
reference to the copy of the applicable document filed with the SEC.
Copies of the Registration Statements and the exhibits thereto may be
inspected without charge at offices of the SEC, and copies of all or
any portion thereof may be obtained from the SEC upon payment of the
prescribed fees or from the internet site referenced above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company with the
SEC under the 1934 Act, are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
(2) the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998, June 30, 1998 and September
30, 1998;
(3) the Company's Current Report on Form 8-K dated June 24,
1998; and
<PAGE>
(4) the description of the Common Stock contained in the
Corporation's Registration Statement on Form 8A dated April
24, 1995.
All documents filed by the Company with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Prospectus and prior to the termination of the offering of the
Common Stock under the Plan, shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date
of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference shall
be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained in this Prospectus or in any
other subsequently filed document, which is also or is deemed to be
incorporated by reference, modifies or replaces such statement.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM
THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROSPECTUS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THE DOCUMENTS THAT THIS PROSPECTUS INCORPORATES). REQUESTS FOR SUCH
COPIES SHOULD BE DIRECTED TO: OFFICE OF THE CONTROLLER, CASTLE
BANCGROUP, INC., 121 WEST LINCOLN HIGHWAY, DEKALB, ILLINOIS, 60115;
TELEPHONE (815) 758-7007.
THE COMPANY
The Company is a Delaware corporation and registered bank holding
company located in DeKalb, Illinois. The Company is a multi-bank
holding company with four subsidiary community banks: First National
Bank In DeKalb/Sycamore, The Sandwich State Bank, Castle Bank Harvard,
N.A. and The Bank of Yorkville. The Company's non-bank subsidiaries
include Castle Finance Company, with seven locations in north central
Illinois, and CasBanc Mortgage, Inc., with six locations in Chicago,
the Chicago suburbs and Merrillville, Indiana. The Company's
registered office is located at 121 West Lincoln Highway, DeKalb,
Illinois 60115; telephone number: (815) 758-7007.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
Prospectus. It is not a complete summary of all the information
contained in this Prospectus. You should therefore read this
Prospectus in its entirety.
PURPOSE OF THE PLAN......... The purpose of the Plan is to provide
the shareholders of the Company with a
convenient way to reinvest all or a
portion of the cash dividends paid on
Common Stock in additional shares of
Common Stock, and to provide Eligible
2
<PAGE>
Employees and Eligible Directors a
method of purchasing Common Stock,
without brokerage fees or commissions.
Effective February 1, 1999, the Plan
will replace the Castle BancGroup, Inc.
Employee Stock Purchase Plan (the
"ESPP") currently offered by the
Company. All accounts and all elections
and authorizations under the ESPP
automatically will continue under the
Plan, and participants in the ESPP will
continue as Participants in the Plan.
No action by current participants in the
ESPP is required to continue
participation in the Plan. If, after
reviewing this Prospectus, participants
in the ESPP do not wish to continue
participation in the Plan, a written
withdrawal notice should be submitted to
the Agent at the address noted on page 6
of this Prospectus.
ELIGIBILITY FOR DIVIDEND
REINVESTMENT................ Any person or entity who is a record
holder of Common Stock is eligible to
participate in the dividend reinvestment
feature of the Plan, provided that (i)
such person or entity fulfills the
prerequisites for participation
described below under "Enrollment
Procedures" and (ii) in the case a
citizen or resident of a country other
than the United States, its territories
or possessions, such person's
participation would not violate local
laws applicable to the Company, the Plan
or the Participant.
ELIGIBILITY FOR
STOCK PURCHASE.............. Each person employed by the Company or a
subsidiary of the Company ("Eligible
Employee") may participate as of the
first day after completing 90 calendar
days of employment with the Company.
Each person who is not employed by the
Company or a subsidiary and who serves
on the Board of Directors of the Company
or on the Board of Directors of a
subsidiary of the Company ("Eligible
Director") may participate as of the
3
<PAGE>
first day after completing 90 calendar
days of service with the Company.
SECURITIES OFFERED UNDER
THE PLAN..................... 150,000 shares of Common Stock under the
dividend reinvestment feature of the
Plan and 150,000 shares of Common Stock
under the stock purchase feature of the
Plan.
PURCHASE PRICE............... The Fair Market Value of a share of
Common Stock on the applicable purchase
date. See Question 13 for a definition
of "Fair Market Value".
PURCHASE DATE................ The purchase date for shares purchased
under the dividend reinvestment feature
of the Plan will be the dividend payment
date.
The purchase date for shares purchased
under the stock purchase feature of the
Plan will be the last business day of
each month.
TRANSFER AGENT AND
REGISTRAR.................... American Stock Transfer and Trust Co. of
New York, New York (the "Agent") acts as
the transfer agent and registrar for the
Common Stock.
ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES............ 121 West Lincoln Highway, DeKalb,
Illinois 60115. Telephone (815) 758-
7007.
RISK FACTORS
You should consider carefully the following risk factors and the
other information in this Prospectus before deciding to invest in the
Common Stock.
RISK OF OPERATIONS
The Company is subject to the risks generally associated with the
operation of banking and financial services businesses, including
uncertainty of revenue to meet fixed obligations, changes in local
market conditions, changes in the habits of the public, increases in
tax rates and other operating expenses and changes in governmental
rules and fiscal policies, which may result in uninsured losses, and
other factors which may be beyond the control of the Company.
4
<PAGE>
REGULATION
The Company's businesses are subject to various state and federal
laws and regulations which govern the various aspects of its
businesses. An adverse change in these laws or regulations could have
a material adverse effect on the Company's profitability.
GOVERNMENTAL MONETARY POLICIES
In addition to the effect of general economic conditions, the
earnings of the Company are affected by the fiscal and monetary
policies of the Federal Reserve System which regulates the national
money supply. The techniques used by the Federal Reserve System
include setting the reserve requirements of banks and establishing the
discount rate on bank borrowings. The Federal Reserve System also
conducts open market operations in United States Government
securities. The policies of the Federal Reserve System have a direct
effect on the amount of bank loans and deposits, and the interest
rates charged and paid thereon. While the impact of the current
economic climate and the policies of the Federal Reserve System and
other regulatory authorities upon the future business and earnings of
the Company cannot be accurately predicted, such factors can
materially affect the revenues and income of banking institutions.
COMPETITION
The Company faces intense and increasing competition both in
making loans and in attracting deposits and in engaging in its other
lines of business. The Company's market area has a large number of
financial institutions, some of which have greater financial
resources, name recognition and market presence than the Company, and
all of which are competitors of the Company to varying degrees.
Particularly intense competition exists for deposits and the
origination of all of the loan products offered by the Company. The
Company's competition for loans comes principally from commercial
banks, savings and loan associations, savings banks, mortgage banking
companies, finance companies and credit unions. The Company's most
direct competition for deposits historically has come from commercial
banks, savings and loan associations, savings banks and credit unions.
In addition, the Company faces increasing competition for deposits
from non-bank institutions such as brokerage firms, insurance
companies, money market mutual funds, other mutual funds (such as
corporate and government securities funds) and annuities. Trends
toward the consolidation of the banking industry and the lifting of
interstate banking and branching restrictions may make it more
difficult for institutions such as the Company, to compete effectively
with large national and super-regional banking institutions.
EFFECT OF INTEREST RATES
The Company's profitability is substantially dependent on its net
interest income, which is the difference between the interest income
5
<PAGE>
received from its interest-earning assets and the interest expense
incurred in connection with its interest-bearing liabilities. The
mismatch between maturities and interest rate sensitivities of balance
sheet items (i.e. interest-earning assets and interest-bearing
liabilities) results in interest rate risk, which risk will change as
the level of interest rates changes. Changes in interest rates also
can affect the amount of loans originated by a banking institution, as
well as the value of its loans and other interest-earning assets and
the resultant ability to realize gains on the sale of such assets.
Changes in interest rates also can result in the flow of funds away
from banking institutions into investments in U.S. Government and
corporate securities, and other investment vehicles which, because of
the absence of federal insurance premiums and reserve requirements
among other reasons, generally can pay higher rates of return than
banking institutions.
RISKS OF MORTGAGE BANKING OPERATION
Mortgage-banking activities impact the Company's results of
operations. The Company's mortgage-banking operations conducted
through CasBanc Mortgage, Inc. (a wholly owned-subsidiary of the
Company) involve the origination, purchase and sale of mortgage loans
for the purpose of generating income from the sale of mortgage loans
into the secondary market. The profitability of CasBanc's mortgage-
banking operations depends in a large part on managing volume of loan
originations, purchases and sales and the expenses associated with
such activity so that gains on the sale of loans together with fee
income exceeds the costs of this activity. Changes in the level of
interest rates and the condition of the local and national economies
affect the amount of loans originated or purchased by CasBanc and
demanded by the investors to whom the loans are sold. Generally,
CasBanc's loan origination, purchase and sale activity and, therefore,
its results of operations, may be adversely affected by an increasing
interest rate environment to the extent such environment results in
decreased loan demand by borrowers and/or investors. Accordingly, the
volume of loan originations, purchases, and sales and the
profitability of this activity can vary significantly from period to
period. In addition, CasBanc's (and therefore the Company's) results
of operations are affected by the amount of non-interest expenses
associated with mortgage-banking activities, such as compensation and
benefits, occupancy and equipment expenses and other variable
operating costs. During periods of reduced loan demand, CasBanc's
(and therefore the Company's) results of operations may be adversely
affected to the extent that it is unable to reduce fixed expenses
commensurate with the decline in loan originations.
NO ASSURANCE OF PUBLIC TRADING MARKET
Current pricing information on the Common Stock is available in
the "pink sheets" published by National Quotation Bureau Inc. The
"pink sheets" is an unorganized over-the-counter market which provides
significantly less liquidity than established stock exchanges or the
6
<PAGE>
NASDAQ National Market, and quotes for stocks included in the "pink
sheets" are not listed in the financial sections of newspapers as are
those for established stock exchanges and the NASDAQ National Market.
Therefore, prices for securities traded solely in the "pink sheets"
may be difficult to obtain. Purchasers of the Common Stock offered
hereby may be unable to resell such Common Stock at any price.
In the absence of any active market for the Common Stock, the
purchase price for newly issued or treasury shares of Common Stock
hereunder will be established from time to time by the Board of
Directors. See "Description of the Dividend Reinvestment and Stock
Purchase Plan -- Purchases of Common Stock -- What is the price of
shares purchased under the Plan?" The price established by the Board
may not be representative of a price established by a willing buyer
and a willing seller. Purchasers of Common Stock under the Plan may
not be able to sell their shares at the price they paid for such
shares.
RISKS RELATED TO THE YEAR 2000 PROBLEM
Many existing computer programs use only two digits to identify a
year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century.
If not corrected, many computer applications could fail or create
erroneous results by or at the Year 2000. This is commonly called the
"Year 2000 Problem". The Year 2000 Problem affects virtually all
companies to varying degrees. Like other financial institutions and
business organizations and individuals, the Company could be adversely
affected if the computer systems used by the Company and Company's
service providers fail to properly process and calculate date-related
information and data from and after January 1, 2000. The Company is
taking steps to address the Year 2000 Problem with respect to its
computer systems and is seeking assurances from the Company's major
service providers that they are taking comparable steps. No assurance
can be given that these steps will be sufficient to avoid any adverse
impact on the Company.
7
<PAGE>
IF YOU HAVE QUESTIONS CONCERNING THE PLAN
Please address all correspondence concerning the Plan to the
Agent:
By Regular Mail: By Hand, Courier or Registered Mail:
--------------- -----------------------------------
American Stock Transfer and American Stock Transfer and
Trust Co. Trust Co.
Dividend Reinvestment Department Dividend Reinvestment Department
40 Wall Street, 46th Floor 6201 15th Avenue
New York, New York 10005 Brooklyn, New York 11219
Please mention Castle BancGroup, Inc. in all your correspondence
and, if you are a participant in the Plan, give the number of your
account. If you prefer, you may call American Stock Transfer and
Trust Co. for general questions on shareholders services at 1-800-937-
5449 and for dividend reinvestment plan matters at 1-800-278-4353, or
send correspondence via facsimile to (718) 921-8367.
DESCRIPTION OF THE DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The following is a description, in question and answer form, of
the provisions of the Plan offered to holders of the Common Stock and
to Eligible Employees and Eligible Directors. A holder of the
Company's Common Stock who does not elect to participate in the Plan
will continue to receive cash dividends by check.
PURPOSE
1. What is the purpose of the Plan?
--------------------------------
The purpose of the Plan is to provide: (i) shareholders of the
Company with a simple and convenient method to invest cash dividends
in the Company's Common Stock without payment of any brokerage
commissions or service charges; and (ii) Eligible Employees and
Eligible Directors a simple and convenient method to purchase Common
Stock without payment of any brokerage commissions or service charges.
ADVANTAGES TO PARTICIPANTS
2. What are the advantages of enrollment in the Plan?
--------------------------------------------------
Participants may reinvest all or a portion of cash dividends paid
on Common Stock registered in their names in additional shares of
Common Stock without the payment of any brokerage commissions or other
charges.
8
<PAGE>
Participants who are Eligible Employees or Eligible Directors may
purchase Common Stock without the payment of any brokerage commissions
or other charges.
Participants may receive, upon written request to the Agent,
certificates for whole shares of Common Stock credited to their Plan
accounts.
Participants may deposit certificates representing shares of
Common Stock into the Plan for safekeeping.
Participants are provided with regular statements to update and
record each transaction under the Plan.
ADMINISTRATION
3. Who administers the Plan?
-------------------------
Administration of the Plan is conducted by the individual (who
may be an employee of the Company), bank, trust company, or other
entity (including the Company) appointed from time to time by the
Company to act as administrator of the Plan. The Company has
appointed the Agent to administer the Plan, and, as such, keep
records, send statements of accounts to Participants and perform other
duties relating to the Plan. Shares of Common Stock purchased under
the Plan are registered in the names of the Participants.
Participants may contact the Agent as indicated on page 6 of this
Prospectus.
The Agent receives dividend payments on behalf of Participants
and cash payments made by Participants, invests such amounts in shares
of Common Stock, maintains account records for Participants and
notifies Participants of transactions in, and the status of, their
accounts. The Agent shall have no duties, obligations or liabilities
with respect to the Plan except as are set forth in this Prospectus.
All notices from the Agent to a Participant will be mailed to the
Participant's address of record, and the mailing of a notice to a
Participant's most recent address of record will satisfy the Company's
obligation to provide notice to that Participant. Accordingly, a
Participant should promptly advise the Agent of any change in his or
her address.
PARTICIPATION
4. Who is eligible to participate in the dividend reinvestment
feature?
-----------------------------------------------------------
All record holders of the Common Stock (the "Record Holders") are
eligible to participate in the dividend reinvestment feature of the
9
<PAGE>
Plan. There is no requirement to hold a minimum number of shares of
the Common Stock. Beneficial owners of the Common Stock whose shares
are held for them in registered names other than their own, such as
the names of brokers, bank nominees or trustees, must, if they desire
to participate in the Plan, either instruct the holder of record to
join the Plan or have the shares transferred to their names.
5. Who is eligible to participate in the stock purchase
feature?
----------------------------------------------------
Each person employed by the Company or a subsidiary of the
Company ("Eligible Employee") may participate in the stock purchase
feature of the Plan as of the first day after completing 90 calendar
days of employment with the Company.
Each person who is not employed by the Company or a subsidiary
and who serves on the Board of Directors of the Company, or on the
Board of Directors of a subsidiary of the Company ("Eligible
Director"), may participate in the stock purchase feature of the Plan
as of the first day after completing 90 calendar days of service with
the Company.
An Eligible Employee or Eligible Director may participate in the
stock purchase feature of the Plan even if he or she is not an
existing holder of Common Stock. There is no requirement to hold a
minimum number of shares of Common Stock for participation in the
Plan.
ENROLLMENT PROCEDURES
6. If eligible, how do I enroll and become a Participant?
------------------------------------------------------
Eligible applicants may join the Plan at any time after being
furnished with a copy of this Prospectus and by completing and signing
an authorization card ("Authorization Card") in the manner set forth
below. Request for copies of Authorization Cards, as well as copies
of other Plan forms and this Prospectus, should be made in writing or
by telephone to the Company's address and telephone number noted
above.
In order to become a Participant in the Plan, an eligible
applicant must complete and sign the Authorization Card and return it
to the Company and (i) elect to have cash dividends paid on Common
Stock of which such applicant is the record holder invested in Common
Stock, (ii) elect to make cash purchases of Common Stock (if an
Eligible Employee or Eligible Director) and/or (iii) deposit
certificates representing shares of Common Stock in the Plan for
safekeeping.
10
<PAGE>
Authorization Cards will be processed as promptly as practicable.
A person will become a Participant after a properly completed
Authorization Card has been received and accepted by the Company and
the Agent.
7. What details are included on the Plan Authorization Card?
---------------------------------------------------------
If a participant elects "Full Dividend Reinvestment," the
Authorization Card directs the Agent to apply toward the purchase of
additional shares of Common Stock all cash dividends paid on all
shares then or subsequently registered in the participant's name.
If a participant elects "Partial Dividend Reinvestment", the
Authorization Card directs the Agent to apply cash dividends paid on
the number of shares specified on the Authorization Card toward the
purchase of additional shares of Common Stock.
If an eligible participant elects the "Stock Purchase" feature,
the Authorization Card directs the Agent to apply optional cash
payments made by the participant toward the purchase of additional
shares of Common Stock.
DIVIDEND REINVESTMENT FEATURE
8. When will participation in the Dividend Reinvestment feature
begin?
------------------------------------------------------------
Participation in the dividend reinvestment feature of the Plan
will begin with the first dividend payment after the shareholder joins
the Plan, provided that his or her Authorization Card was received on
or before the record date for such dividend.
Dividends declared on the Common Stock are usually paid on the
first day of July and January. The record date for such dividend will
occur no earlier than the fifteenth (15th) day prior to the dividend
payment date.
Shareholders are cautioned that the Plan does not represent a
change in the Company's dividend policy or a guarantee of future
dividends, which will continue to depend upon the Company's earnings,
financial condition and other factors.
9. How are Plan options on dividend reinvestment changed?
------------------------------------------------------
A Participant may change the reinvestment level (i.e., full,
partial or none) of cash dividend payments on Common Stock held in his
name by delivering written instructions or a new Authorization Card to
the Agent. To be effective with respect to a particular cash dividend
payment, the instructions or Authorization Card must be received by
11
<PAGE>
the Agent on or before the record date relating to such cash dividend
payment. If such instructions are not received by the Agent on or
before the record date, the instructions will not become effective
until after such dividend is paid. The shares of Common Stock
purchased with such funds will be credited to the Participant's Plan
account.
STOCK PURCHASE FEATURE
10. Who may make cash purchases of Common Stock under the stock
purchase feature?
-----------------------------------------------------------
Only Eligible Employees and Eligible Directors (as defined above)
who elect to participate in the Plan may elect to make cash purchases
of Common Stock. Each such cash purchase must be at least a minimum
amount of $5 and a maximum annual limitation of $15,000. (As noted
below, the $15,000 limit is an initial limitation that may be changed
from time to time by the Company's Board of Directors.) The Company
reserves the right to return to Participants amounts which exceed the
maximum annual amount.
11. How are cash purchases of Common Stock made?
--------------------------------------------
A cash purchase may be made by an Eligible Employee or an
Eligible Director as follows:
a. When enrolling in the Plan, by enclosing a check or money
order payable in United States dollars (payable to "ASTC/Castle
BancGroup, Inc.") with the Authorization Card that is returned to the
Company. Thereafter, optional cash purchases may be made through the
use of a Cash Payment Form which will be attached to each statement of
account. All cash payments are subject to collection by the Agent of
full face value in U.S. funds. The method of delivery of any cash
payment is at the election and risk of the Participant and will be
deemed received when actually received by the Agent. If the delivery
is by mail, it is recommended that the Participant use properly
insured, registered mail with return receipt requested.
b. An Eligible Employee who becomes a Participant may purchase
shares of the Company's Common Stock through regular payroll
deductions. After a Participant's Authorization Card has been
received by the Company and the authority for the payroll deduction
has been noted on the Company's payroll records, the Company will
begin withholding the amount authorized by the Participant on his
Authorization Card from the Participant's next paycheck. The
withholding will continue to be made from each paycheck that the
Participant receives. The Participant may authorize deductions in
even multiples of $5 from a minimum of $5 per pay period. The amount
withheld will be forwarded to the Agent to pay for the purchase of
Common Stock for the Participant's account under the Plan.
12
<PAGE>
PURCHASES OF COMMON STOCK
12. When and how are purchases of Common Stock made?
------------------------------------------------
Purchases under the dividend reinvestment feature will be made on
the applicable dividend payment date at the price in effect on that
dividend payment date. Purchases under the stock purchase feature
will be made on the last business day of each month at the price in
effect on that purchase date, provided that cash payments must be
received by the Agent no later than the purchase date. No interest
will be paid on funds held by the Agent pending investment.
Upon a Participant's written request received by the Agent no
later than the business day prior to the applicable purchase date,
cash payments not yet invested in Common Stock will be returned to the
Participant. However, no refund of a check or money order will be
made until the funds from such instruments have been actually
collected by the Agent.
For both dividend reinvestment and stock purchase features, the
shares of Common Stock purchased for Participants under the Plan will
be either newly issued shares or shares held in the treasury of the
Company or, at the option of the Company, shares of Common Stock
purchased in the open market or in privately negotiated transactions
by the Agent. Until such time as an active market in the Common Stock
develops, all purchases under the Plan will be satisfied with newly
issued shares or treasury shares.
With regard to open market purchases of Common Stock, neither the
Company, the Agent, nor any Participant will have any authority or
power to direct the time or price at which shares may be purchased,
the markets on which the shares are to be purchased, or the selection
of the broker or dealer (other than the Agent) through or from whom
purchases may be made. The Agent may commingle each Participant's
funds with those of other Participants for the purpose of executing
purchase transactions. Dividend and voting rights will commence upon
settlement, whether shares are purchased from the Company or any other
source.
13. What is the price of shares purchased under the Plan?
-----------------------------------------------------
Until such time as an active market in the Common Stock develops,
all purchases under the Plan will be satisfied with newly issued
shares or treasury shares. The purchase price per share of newly
issued or treasury shares of Common Stock for each purchase
transaction will be 100% of the "Fair Market Value" on the dividend
payment date for dividend reinvestment share purchases and the last
business day of the month for shares purchased under the stock
purchase feature.
13
<PAGE>
With respect to newly issued or treasury shares, "Fair Market
Value" as of any date means:
a. Until the Company's Board of Directors determines an active
market has been established for the Company's Common Stock, the Fair
Market Value will be the fair market value of the Common Stock on the
applicable date as determined, from time to time, in good faith by the
Board of Directors utilizing the "Valuation Methodology", as such term
is defined below. Stockholders may contact the Controller of the
Company (telephone: (815) 754-8043) during regular business hours for
the current Board - established Fair Market Value.
Valuation Methodology means a method of valuation utilizing
analysis of two types of information. First, the Company's Board of
Directors analyzes recent trade information to the extent there have
been recent trades in the Company's Common Stock and such information
is available to the Company. The Board focuses not just on the actual
price of these trades but, to the extent it can obtain such
information, also on the other circumstances surrounding the trade.
Such circumstances could include, for example, the number of shares
involved, the relationship, if any, between the seller and the buyer
and whether there may be specific reasons for the sale which would not
be applicable to the market for the Common Stock in general. Second,
the Company's Board of Directors analyzes publicly available
information on prices at which shares of common stock of its peers
have traded in recent trades. The Board identifies this group of
peers from time to time by looking for bank holding companies that
have similar financial, geographic and trading market characteristics
as the Company. From this peer group information, the Board
determines the appropriate multiple to be applied to the Company's (i)
last-twelve months earnings per share, (ii) book value per share and
(iii) tangible book value per share in order to derive a fair market
value per share. In assigning a fair market value to the Common
Stock, the Company's Board of Directors may give greater weighting to
certain of the above described criteria than to others. This
weighting may change from time to time depending upon both internal
and external economic and financial conditions existing at the time
the analysis is conducted. THE PRICE ESTABLISHED BY THE BOARD MAY NOT
BE REPRESENTATIVE OF A PRICE ESTABLISHED BY A WILLING BUYER AND A
WILLING SELLER. PURCHASERS OF COMMON STOCK UNDER THE PLAN MAY NOT BE
ABLE TO SELL THEIR SHARES AT THE PRICE THEY PAID FOR SUCH SHARES.
b. If the Company's Board of Directors determines that an
active over-the-counter market has been established but sales prices
are not regularly reported for the shares, the "Fair Market Value"
price will be determined by using the average of the mean between the
bid and asked price for the shares at the close of trading in the
over-the-counter market for the ten (10) consecutive trading days
immediately preceding such date.
c. If the shares of Common Stock are listed on a national
securities exchange or traded in the over-the-counter market and the
14
<PAGE>
Company's Board of Directors determines that sales prices are
regularly reported for the shares, the Fair Market Value will be
determined by using the average of the closing or last prices of the
shares on the Composite Tape or other comparable reporting system for
the ten (10) consecutive trading days immediately preceding such date.
With respect to shares purchased on the open market or in
privately negotiated transactions, the "Fair Market Value" means the
weighted average price per share of the aggregate number of shares
purchased with respect to the relevant investment date.
14. How many shares may a Participant purchase using the
dividend reinvestment feature, and if eligible, the stock
purchase feature?
---------------------------------------------------------
The maximum number of shares of Common Stock with respect to
which dividends may be reinvested through the Plan by an individual
Participant will be established from time to time by the Company's
Board of Directors. Initially, the Company's Board of Directors has
chosen not to limit share purchases through dividend reinvestment.
The maximum annual dollar limitation for cash purchases under the
stock purchase feature will be established from time to time by the
Company's Board of Directors. The initial annual maximum for cash
purchases under the Plan will be $15,000.
The amount of a Participant's dividend dedicated to the Plan
cannot exceed the net dividend payable after the Company has deducted
any applicable taxes. Each Participant's account will be credited
with the number of shares, calculated to three decimal points, equal
to the total amount invested by him divided by the applicable purchase
price per share. For example, if a shareholder invests his $100
dividend to purchase shares at a price of $17 per share, his account
will be credited with 5.882 shares (i.e., $100 divided by $17).
CERTIFICATE ISSUANCE
15. Are stock certificates issued for shares of Common Stock
purchased under the Plan?
--------------------------------------------------------
Unless a Participant makes a specific request, certificates will
not be issued for Common Stock purchased pursuant to the Plan. The
number of shares held under the Plan will be shown on the
Participant's statement of account. However, except as indicated
below, a Participant may receive certificates for shares accumulated
in his account under the Plan at any time by sending a written request
to the Agent.
Requests for issuance of certificates of shares of Common Stock
which are received by the Agent less than 48 hours prior to a record
15
<PAGE>
date will not be processed until all the dividends have been paid for
the related dividend payment date and any additional cash purchases
have been made.
If a request for stock certificates on which cash dividends are
being reinvested is received by the Agent on or after the record date
but before the related dividend payment date, the dividends paid on
the dividend payment date will be invested in Common Stock through the
Plan, and (i) if the Participant's request covers less than all of the
shares of Common Stock credited to his account, the withdrawal of such
shares will be processed after the dividend payment date and the
shares purchased with the reinvested dividends will be credited to the
Participant's account or (ii) if the Participant's request covers all
of the shares of Common Stock credited to his account, the request
will not be processed until after the dividends have been invested in
Common Stock through the Plan, at which time certificates representing
all of the shares credited to his account, including the shares
purchased with the reinvested dividends, will be sent to the
Participant or other designated recipient.
Certificates representing whole shares of Common Stock withdrawn
from the Plan will be sent to the Participant or designated recipient
by First Class Mail as soon as practicable following the Agent's
receipt of the required documentation, subject to the provisions of
the preceding paragraph. Certificates for fractions of shares will
not be issued. Withdrawal of shares of Common Stock does not affect
reinvestment of dividends on such withdrawn shares unless (i) the
Participant is no longer the record holder of such shares; (ii) the
reinvestment is changed by the Participant by delivering a new
Authorization Card to the Agent; or (iii) the Participant terminates
participation in the Plan.
SAFEKEEPING
16. Are safekeeping services available?
-----------------------------------
At the time of enrollment, or at any later time, a Participant
may take advantage of the Plan's safekeeping services. Common Stock
held in certificate form by a Participant may be deposited into the
Plan, to be held by the Agent, by delivering a complete Authorization
Card and the Common Stock certificates to the Agent. Such
certificates should not be endorsed. The shares of the Common Stock
so deposited will be transferred into the name of the Agent, as
custodian, and credited to the Participant's account. Thereafter,
such shares of Common Stock will be treated in the same manner as
shares of Common Stock purchased under the Plan and credited to the
Participant's account.
16
<PAGE>
SALES OF SHARES
17. How are shares of Common Stock sold?
------------------------------------
Sales of Common Stock held in the Plan are the responsibility of
the Participant. To sell Common Stock held in the Plan, the
Participant must request stock certificates. (See Question 15 above.)
TERMINATION OF PARTICIPATION IN THE PLAN BY THE PARTICIPANT
18. When and how may a Participant terminate his participation
in the Plan?
----------------------------------------------------------
A Participant may terminate his participation in the Plan at any
time, by giving written instructions to the Agent. Upon receipt of
such instructions, the Participant will receive (i) a certificate for
all of the whole shares of Common Stock credited to his account; (ii)
a check for any cash payments credited to his account; and (iii) a
check for the cash value of any fraction of a share of Common Stock
based on the Fair Market Value as of the date of termination.
PLEDGING ACCOUNT BALANCES
19. Can a Participant's Plan Account be Pledged?
--------------------------------------------
No. The shares of Common Stock credited to the account of a
Participant may not be pledged. A Participant who wishes to pledge
his or her shares must request that certificates for such shares be
withdrawn from the Plan and issued in his or her name.
NAMES ON PLAN ACCOUNTS
20. Under whose name are the Plan accounts maintained?
--------------------------------------------------
Plan accounts will be maintained under the same name(s) that
appears on the shareholder's certificates as of the time the
Participant enters the Plan. Consequently, certificates for shares
held by the Agent under the Plan will be registered in the same name
when issued.
Upon written request, certificates will be registered and issued
in names other than the account name, subject to compliance with any
applicable laws and the payments by the Participant of any applicable
taxes, provided that the request meets with the usual requirements of
the Company for the recognition of a transfer of Common Stock of the
Company.
17
<PAGE>
If a Participant wishes to transfer, whether by gift, sale or
otherwise, ownership of all or a portion of the shares of Common Stock
credited to his account to the account of another Participant or to
establish an account for a person not already a Participant, the
Participant may do so by delivering written instructions and a stock
assignment form to the Administrator. No fraction of a share of
Common Stock may be transferred unless the Participant's entire
account is transferred.
REPORTS TO PARTICIPANTS
21. What reports will be sent to Participants in the Plan?
------------------------------------------------------
Each Participant in the Plan will receive a statement of account
describing cash dividends received, the cash payments received (if
any), the number of shares purchased, the price per share and total
shares accumulated under the Plan as promptly as practicable after
each purchase. These statements will provide a continuing record of
the dates and cost of purchases and should be retained for income tax
purposes. In addition, each Participant will also receive copies of
all communications sent to the holders of the Common Stock. This may
include the Company's quarterly reports to shareholders, annual report
to shareholders, notices of shareholder meetings, proxy material and
Internal Revenue Service information for reporting dividends paid.
All notices, Statements of Account, and other communications from
the Agent to the Participant will be addressed to the latest address
of record. Therefore, it is important that a Participant promptly
notify the Agent of any change of address.
TERMINATION OF PARTICIPATION IN THE PLAN BY THE COMPANY
22. Can the Company terminate a shareholder's participation in
the Plan?
----------------------------------------------------------
Yes. If a participant does not have at least one whole share of
Common Stock credited to his account, participation in the Plan may be
terminated by the Company upon written notice to the Participant. In
addition, the Company reserves the right, in its sole discretion, to
terminate a shareholder's participation in the Plan for any reason,
after written notice is mailed in advance to the Participant.
In either case, a Participant whose participation is terminated
will receive (i) a certificate for all of the whole shares of Common
Stock credited to his account; (ii) a check for any cash payments
credited to his account; and (iii) a check for the value of any
fractional shares credited to his account, based on the Fair Market
Value on such date of such termination.
18
<PAGE>
COSTS
23. What costs will the Company pay?
--------------------------------
The Company will pay all administrative costs and expenses
associated with the Plan. In addition, the Company will pay any
brokerage commissions and any applicable transfer taxes and service
charges relating to shares purchased in the open market under the
Plan.
FEDERAL INCOME TAX CONSEQUENCES
24. What are the federal income tax consequences of
participation in the Plan?
-----------------------------------------------
The value of the shares acquired under the Plan through the
reinvestment of dividends will be included in a Participant's gross
income as a dividend even though no such amount is actually received
by the Participant in cash. If shares are acquired in the open market
a Participant will also be required to include in income for federal
income tax purposes an allocable share of any brokerage commissions
incurred to purchase such shares.
A Participant's tax basis for shares of Common Stock purchased
under the Plan will be equal to the price at which the shares are
credited by the Agent to a Participant's account. If shares are
purchased in the open market, the allocable shares of any brokerage
commissions incurred are added to a Participant's tax basis. Shares
of Common Stock purchased under the Plan will have a holding period
beginning on the day after the shares are allocated to the
Participant's account.
A Participant will not realize any taxable income when he
receives certificates for whole shares credited to his account under
the Plan. Gain or loss will be recognized by the Participant when he
sells such whole shares or when a fractional share credited to his
account is sold pursuant to the terms of the Plan.
THE ABOVE DISCUSSION IS ONLY A SUMMARY OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN. PARTICIPANTS
ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE TAX
CONSEQUENCES OF A PARTICULAR TRANSACTION.
19
<PAGE>
OTHER INFORMATION
25. May the Plan be changed or discontinued?
----------------------------------------
The Company may suspend, modify, discontinue or terminate the
Plan at any time, in whole or in part, in respect of Participants in
one or more jurisdictions, without the approval of the Participants.
Notice of such suspension, modification, discontinuation, or
termination will be sent to the affected Participants, who will in all
events have the right to withdraw from the Plan. No such action will
prejudice retroactively any interests of any Participants. Upon any
whole or partial termination of the Plan by the Company, each affected
Participant will receive (i) a certificate for all of the whole shares
of Common Stock credited to his account and (ii) a check for the cash
value of any fraction of a share of Common Stock credited to his
account. Any fraction of a share will be valued in accordance with
Question 13 above as of such termination.
26. How is the Plan to be interpreted?
----------------------------------
The officers of the Company are authorized to take such action to
carry out the Plan as may be consistent with the Plan's terms and
conditions. The Company reserves the right to interpret and regulate
the Plan as the Company deems desirable or necessary in connection
with the Plan's operations and any such determinations will be final.
27. Who bears the risk of market price fluctuations in the
Common Stock?
------------------------------------------------------
A Participant's investment in Common Stock pursuant to the Plan
will be no different from investment in directly held shares. The
Participant will bear the risk of loss and will realize the benefits
of any gain from market price changes with respect to all such shares
held by him in the Plan or otherwise. THE SHARES ARE NOT DEPOSITS AND
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
PARTICIPATION IN THE PLAN INVOLVES INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
28. What happens if the Company issues a stock dividend or
declares a stock split?
------------------------------------------------------
Any shares representing stock dividends or stock splits with
respect to shares of Common Stock held in the Participant's Plan
account will be automatically enrolled in the Plan.
20
<PAGE>
29. If the Company issues rights to purchase securities to the
shareholders of the Company, how will the rights applicable
to Plan shares be handled?
-----------------------------------------------------------
If the Company makes rights available to the holders of the
Common Stock to purchase additional shares of Common Stock or any
other securities of the Company, the Company will grant the rights
accruing to shares of Common Stock held in each Participant's account.
The Participant will then have the opportunity to exercise his rights
with respect to shares held under the Plan until the expiration of the
rights offering.
30. How will shares held in the Participant's Plan account be
voted at meetings of shareholders?
---------------------------------------------------------
A Participant will be entitled to vote the shares of Common Stock
held in his account. If a Participant holds shares under the Plan on
a record date for a meeting of shareholders, the Participant will be
sent proxy material with respect to that meeting. A Participant may
vote in person or by proxy at any such meeting.
31. Do any limitations apply to sales of Common Stock?
Generally a shareholder may freely sell shares of Common Stock
acquired under the Plan. If, however, a shareholder is an "affiliate"
of the Company, he may not reoffer or resell shares of Common Stock
acquired under the Plan pursuant to this Prospectus by use or delivery
of this Prospectus. An affiliate of the Company may resell Common
Stock only pursuant to a registration statement or in accordance with
Rule 144 or another available exemption under the 1933 Act. The
Company has neither an obligation nor any present intention to prepare
and file a separate prospectus to facilitate reoffers and resales by
affiliates. An "affiliate" generally includes any control person or
person who, directly or indirectly, has the power to direct or cause
the direction of the management and policies of the Company. Whether
a person is an "affiliate" depends on all the facts and circumstances.
In general, any director or 10% shareholder of the Company or any
officer who performs a policy-making function for the Company is
presumptively an affiliate.
LIMITATION OF LIABILITY
Neither the Company, the Agent (including the Company if it is
acting as such) in administering the Plan, nor the Agent shall be
liable for any act done in good faith or for the good faith omission
to act in connection with the Plan. However, nothing contained herein
shall affect a Participant's right to bring a cause of action based on
alleged violations of federal securities laws.
21
<PAGE>
USE OF PROCEEDS
If newly issued shares or treasury shares of Common Stock are
purchased under the Plan directly from the Company, the Company
intends to use substantially all of the net proceeds from such sale
for general corporate purposes, including advances to or investments
in subsidiaries. Management, however, has discretion in determining
the actual manner in which such net proceeds will be applied. The
precise use, amounts and timing of the application of the proceeds
will depend upon, among other things, the funding requirements of its
subsidiaries, the availability of other funds and the existence of
business opportunities.
PLAN OF DISTRIBUTION
The Common Stock being offered hereby is offered pursuant to the
Plan, the terms of which provide for the purchase of shares of Common
Stock, either newly issued shares or shares held in the treasury of
the Company, directly from the Company or, at the Company's option, by
the Agent in the open market or in privately negotiated transactions.
The Company will pay all administrative costs and expenses
associated with the Plan. In addition, the Company will pay any
brokerage commissions and any applicable transfer taxes and service
charges related to shares purchased under the Plan in the open market.
DESCRIPTION OF CAPITAL STOCK
The Company's certificate of incorporation authorizes the
issuance of 5,000,000 shares of Common Stock, par value $.33 per
share, of which 2,169,427 were issued and outstanding on September 30,
1998. The description of the Common Stock is incorporated by
reference into this Prospectus. See "Incorporation of Certain
Documents by Reference" for information on how to obtain a copy of
this description.
EXPERTS
The consolidated financial statements of Castle BancGroup, Inc.
as of December 31, 1997 and 1996, and for each of the three-year
periods ended December 31, 1997, have been incorporated by reference
herein in reliance upon the report of KPMG LLP, independent certified
public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered
hereby have been passed upon for the Company by Schiff Hardin & Waite,
Chicago, Illinois.
22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses in connection with
the distribution of the shares of Common Stock being registered. All
amounts shown below are estimates, except the registration fee:
Registration fee of Securities and Exchange Commission . . . $849
Accountants' fees and expenses . . . . . . . . . . . . . . $5,000
Legal fees and expenses . . . . . . . . . . . . . . . . $20,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . $5,000
TOTAL . . . . . . . . . . . . . . . . . . . . . . $30,849
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of
Delaware permits indemnification of directors, officers, employees and
agents of corporations under certain conditions and subject to certain
limitations. Article 6 of the By-Laws of the Registrant and Article
Eleventh of the Restated Articles of Incorporation of the Registrant
provide for the indemnification of directors and officers of the
Registrant to the fullest extent permitted by Section 145.
ITEM 16. EXHIBITS
The Exhibits filed herewith are set forth on the Index to
Exhibits filed as a part of this Registration Statement.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
<PAGE>
PROVIDED, HOWEVER, that paragraphs 1(a) and 1(b) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration
statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial BONA FIDE offering
thereof.
3. To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
4. That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act, that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 15
above, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of DeKalb, and
State of Illinois, on this 17th day of December, 1998.
CASTLE BANCGROUP, INC.
(Registrant)
By: /s/ John W. Castle
-----------------------------
John W. Castle
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints John W.
Castle, as such person's true and lawful attorney to execute in the
name of each such person, and to file, any amendments to this
Registration Statement that such attorney will deem necessary or
desirable to enable the Registrant to comply with the Securities Act,
as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission with respect thereto, in connection
with the registration of the shares of Common Stock of the Registrant
that are subject to this Registration Statement, which amendments may
make such changes in such Registration Statement as the above-named
attorney deems appropriate, and to comply with the undertakings of the
Registrant made in connection with this Registration Statement; and
each of the undersigned hereby ratifies all that said attorney will do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ John W. Castle Chairman of the Board, December 17, 1998
------------------------ Chief Executive Officer
John W. Castle and Director
(Principal Executive
Officer)
<PAGE>
/s/ Micah R. Bartlett Vice President and December 17, 1998
------------------------ Controller
Micah R. Bartlett (Principal Financial
Officer and Controller)
/s/ Bruce P. Bickner Director December 17, 1998
------------------------
Bruce P. Bickner
/s/ Robert T. Boey Director December 17, 1998
------------------------
Robert T. Boey
/s/ Kathleen L. Halloran Director December 17, 1998
------------------------
Kathleen L. Halloran
/s/ Peter H. Henning Director December 17, 1998
------------------------
Peter H. Henning
/s/ Donald E. Kieso Director December 17, 1998
------------------------
Donald E. Kieso
/s/ Richard C. McGinity Director December 17, 1998
------------------------
Richard C. McGinity
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
INDEX Exhibit
------- -------------------------------------------------
3.1* Articles of Incorporation of the Company, as
amended. Filed as Exhibit 3.1 to the Quarterly
Report on Form 10-Q under the Securities Exchange
Act of 1934 for the quarter ended March 31, 1997
(File No. 0-25914).
3.2* By-Laws of the Company. Filed as Exhibit 3.2 to the
Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended December 31,
1997 (File No. 0-25914).
4 Form of Castle BancGroup, Inc. Dividend
Reinvestment and Stock Purchase Plan (included as
the Prospectus set forth herein).
5 Opinion of Schiff Hardin & Waite.
23.1 Consent of KPMG LLP.
23.2 Consent of Schiff Hardin & Waite
(included in its opinion filed as
Exhibit 5).
24 Powers of Attorney (as set forth in the
signature pages hereto).
------------------------
* Incorporated herein by reference as indicated.
EXHIBIT 5
Gary L. Mowder
(312) 258-5514
January 20, 1999
Securities and Exchange Commission
Filing Desk -- Stop 1-4
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
RE: CASTLE BANCGROUP, INC. -- REGISTRATION OF 150,000
SHARES OF COMMON STOCK ON FORM S-3
-------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Castle BancGroup, Inc., a Delaware
corporation (the "Company"), in connection with the Company's filing
of a Registration Statement on Form S-3 (the "Registration Statement")
covering 150,000 shares of common stock, $.33 par value (the "Common
Stock"), to be issued pursuant to the Castle BancGroup, Inc. Dividend
Reinvestment and Stock Purchase Plan (the "Plan").
In this connection, we have made such investigation and have
examined such documents as we have deemed necessary in order to enable
us to render the opinion contained herein.
Based upon the foregoing, it is our opinion that those shares of
Common Stock covered by the Registration Statement that are issued in
accordance with the terms of the Plan and as contemplated in the
Registration Statement, will, when so issued, be legally issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
SCHIFF HARDIN & WAITE
By: /s/ Gary L. Mowder
-------------------------------
Gary L. Mowder
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Castle BancGroup, Inc.:
We consent to incorporation by reference in the subject Registration
Statement on Form S-3 of Castle BancGroup, Inc. of our report dated
February 3, 1998, relating to the consolidated balance sheets of
Castle BancGroup, Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of earnings, changes in
stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, which report appears in the
December 31, 1997 annual report on Form 10-K of Castle BancGroup, Inc.
/s/ KPMG LLP
----------------------------
KPMG LLP
Chicago, Illinois
January 19, 1999
