As filed with the Securities and Exchange Commission on ^ October 21, 1998
Registration No. 333-63987
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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Village Financial Corporation
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(Exact name of Small Business Issuer as specified in charter)
New Jersey 6035 22-3562091
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(State or other jurisdiction (Primary SIC No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
590 Lawrence Square Boulevard, Lawrenceville, New Jersey 08648
(609) 730-0183
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(Address, including zip code, and telephone number, including area code, of
principal executive offices and principal place of business)
Kenneth J. Stephon, President
Village Financial Corporation
P.O. Box 6554, 590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
(609) 730-0183
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(Name, address and telephone number of agent for service)
Please send copies of all communications to:
John J. Spidi, Esq.
Andrew S. White, Esq.
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W., Suite 700 East, Washington, D.C. 20005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier 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. [ ]
^^^
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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^
PROSPECTUS
410,000 to 610,000 Shares of Common Stock
Village Financial Corporation
A Proposed Holding Company for Village Bank (In Organization)
590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
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Village Financial Corporation is a New Jersey corporation formed in
January 1998 to become the holding company for Village Bank, a proposed
FDIC-insured federal savings bank to be located in Lawrenceville, New Jersey.
Village Financial Corporation will own all of the shares of Village Bank. The
common stock of Village Financial Corporation will be sold only if Village
Financial Corporation and Village Bank receive all required regulatory approvals
and Village Financial Corporation receives orders for at least 410,000 shares of
common stock.
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TERMS OF OFFERING
We are offering for sale a minimum of 410,000 shares and a maximum of
610,000 shares of our common stock to the general public on a "best efforts"
basis. All subscription funds tendered will be deposited in an interest bearing
escrow account with Summit Bank, Princeton, New Jersey (the "Escrow Agent")
pending completion, termination or cancellation of the offering. The offering
will expire on _______ __, 1998. However, we may extend the offering without
further notice to subscribers. See pages ___ to ___, "The Offering and Plan of
Distribution." Our offering of common stock is based on the following terms:
o Price Per Share: $10.00
o Number of Shares
Minimum/Maximum: 410,000 to 610,000
o Underwriting Commissions
and Other Expenses: $70,000*
o Net Proceeds to Village Financial Corporation
Minimum/Maximum: $4,030,000 to $6,030,000
o Net Proceeds Per Share
Minimum/Maximum: $9.83 to $9.89
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* We previously sold 94,850 shares of our common stock for $10.00 per share in a
private placement to pay for our preopening expenses. Pending regulatory
approval or non-objection, the investors in the private placement may receive
warrants, stock options or a split of their shares, the amount of which has not
yet been determined, in recognition of the additional risk undertaken by these
individuals. We currently anticipate our preopening organizational expenses to
be $383,000, of which an estimated $70,000 is for the initial public offering
relating to legal, accounting, printing and postage costs. ^ See "The Offering
and Plan of Distribution."
Please refer to Risk Factors beginning on page 1 of this Prospectus.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation ("FDIC") or any other government
agency.
Neither the Securities and Exchange Commission ("SEC"), the Office of Thrift
Supervision ("OTS"), nor any state securities regulator has approved or
disapproved these securities or determined if this Prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
For information on how to subscribe, call ____________ at (609) ___-____.
The date of this Prospectus is ______, 1998
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^ TABLE OF CONTENTS
Page
----
Questions and Answers About the Stock Offering...............................
Highlights of the Offering...................................................
Summary......................................................................
Risk Factors.................................................................
Use of Proceeds..............................................................
Dividends....................................................................
Market for Common Stock......................................................
Dilution.....................................................................
Capitalization...............................................................
The Offering and Plan of Distribution.......................................
Office Facilities............................................................
Unaudited Pro Forma Financial Information....................................
Management's Discussion and Analysis or Plan of Operation....................
Proposed Business of the Company.............................................
Proposed Business of the Bank................................................
Regulation...................................................................
Management of the Company....................................................
Management of the Bank.......................................................
Security Ownership of Certain Beneficial Owners..............................
Description of Capital Stock.................................................
Legal Matters................................................................
Experts......................................................................
Index to Financial Statements................................................
Subscription Agreement....................................................A-1
This document contains forward-looking statements which involve risks
and uncertainties. Village Financial Corporation's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors" beginning on page 1 of this document.
You should rely only on the information contained in this document or
that we have referred you to. We have not authorized anyone to provide you with
information that is different. The affairs of Village Financial Corporation may
have changed since the dates referred to in this document.
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[MAP PAGE]
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QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: How do I purchase the stock?
A: You must complete and return the stock order form to us together with your
payment no later than 5:00 p.m., New Jersey Time, _________, 1998.
Q: How much stock may I purchase?
A: The minimum purchase is 100 shares (or $1,000). The maximum purchase is
50,000 shares (or $500,000).
Q. Will the stock be traded on a market?
A. It is anticipated that the stock will be traded in the over-the-counter
market and reported on the OTC Bulletin Board. However it is not assured or
guaranteed that the stock will be traded on the OTC Bulletin Board or on
any market.
Q: What particular factors should I consider when deciding whether to buy the
stock?
A: Before you decide to purchase shares, you should read the Risk Factors
section on pages 1-5 of this document.
Q: Who can help answer any other questions I may have about the stock
offering?
A: In order to make an informed investment decision, you should read this
entire document. In addition, you may contact:
Kenneth J. Stephon, President
Village Financial Corporation
P.O. Box 6554
Lawrenceville, New Jersey 08648
(609) 730-0183
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HIGHLIGHTS OF THE OFFERING
This Summary highlights selected information from this document and may not
contain all the information that is important to you as a prospective investor.
To understand the stock offering fully, please read the entire document. An
investment in the ^ common stock involves significant risks and should be
undertaken as a long-term investment only after careful evaluation of the Risk
Factors beginning on page 1.
Strategy
Our primary market area is currently serviced almost entirely by large,
regional financial institutions headquartered outside of the area. Village Bank
is being formed to provide the area with a locally managed and operated
financial institution with the policies and decisions of the bank being made by
people known to the customers.
In a market dominated by large, regional and statewide banks and their
branches, we intend to offer the community an alternative. Village Bank will be
a highly personalized, community-oriented financial institution delivering
service that we believe only comes from responsive local decision-making. The
elements of this strategy include:
o Accessibility to the bank's President, officers and directors, whether
during or after business hours.
o Flexibility in loan and business decisions to account for local
community and customer needs.
o Investment of depositors funds back into the community.
o Involvement in the community affairs of our primary market area.
o Competitive products and pricing on a wide array of financial
services.
o Responsiveness to customer needs supported by an experienced and
service-oriented staff.
Community Ownership
Our organizers believe that our primary market area, Lawrence Township
and Pennington Borough, New Jersey, is in need of a locally-headquartered
financial institution dedicated to the needs of its community. As a locally
operated financial institution, we will be able to more quickly recognize the
needs of the local residents and businesses, versus out-of-state and out-of-area
financial institutions. We anticipate implementing services, deposit and credit
programs intended to fulfill the financial needs of our primary market area. See
pages ____ to ____, "Proposed Business of the Bank."
New Operation
We are a new entity without any operating history. However, as a newly
established financial institution, we intend to structure loans and savings
accounts with flexibility to react to changes in the interest rate environment
of today's economy. See page ___, "Risk Factors - Lack of Operating History" and
see pages ___ to ___, "Proposed Business of the Bank."
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Management
Kenneth J. Stephon will serve as our President, Chief Executive Officer, Chief
Financial Officer and a director. Mr. Stephon is the former President, Chief
Executive Officer, Chief Financial Officer and a director of CloverBank,
Pennsauken, New Jersey. The board of directors includes local business persons
and professionals with diverse backgrounds, familiar with the communities of
central Mercer County. Members of the board of directors are involved in local
civic and non-profit organizations. See pages ___ to ___, "Management of the
Company" and pages ___ to ___, "Management of the Bank."
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SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
stock offering fully, you should read carefully this entire document, including
the financial statements and the notes to the financial statements of Village
Financial Corporation. References in this document to "we," "us" and "our" refer
to Village Financial Corporation. In certain instances where appropriate, "we,"
"us" or "our" refers collectively to Village Financial Corporation and Village
Bank. References in this document to "Village" or the "Company" refer to Village
Financial Corporation. References in this documents to the "Bank" refer to
Village Bank.
The Company and the Bank
Village Financial Corporation
590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
(609) 730-0183
Village Financial Corporation is not an operating company and we have
not engaged in any significant business to date. Our company was formed in
January 1998 as a New Jersey-chartered corporation to be the holding company for
Village Bank, a federal savings bank in the process of organizing. The holding
company structure will provide greater flexibility in terms of operations,
expansion and diversification. Our office is currently located at 23 Route 31
North, Suite A22, Pennington, New Jersey 08534. Our mailing address is P.O. Box
6554, Lawrenceville, New Jersey 08648. Our telephone number is (609) 730-0183.
After the opening of the bank, our main office is expected to be located at 590
Lawrence Square Boulevard, Lawrenceville, New Jersey 08648.
See pages ___ to ____, "Proposed Business of the Company."
Village Bank
590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
(609) 730-0183
The principal business of Village Bank will be to accept various types
of transaction and savings deposits from the general public and to make
mortgage, consumer, small business and other loans. Our main office is expected
to be located at 590 Lawrence Square Boulevard, Lawrenceville, New Jersey,
presently a vacant branch office of a regional commercial bank. We intend to
operate a limited service facility within the Pennington Point complex, which
includes the Pennington Point adult community, in Pennington, New Jersey. See
pages ____ to ____, "Proposed Business of the Bank."
Organizers
The organizers consist of the initial board of directors of the
Company, Kenneth J. Stephon, William C. Hart, William V. R. Fogler, Paul J.
Russo, Jonathan R. Sachs and George M. Taber. See pages ____ to ____,
"Management of the Bank". The organizers purchased 18,600 shares and certain
other initial investors previously purchased 76,250 shares, for a total of
94,850 shares of common stock at $10.00 per share for long-term investment in a
private placement to fund preopening expenses. The initial board of directors
plans to subscribe for an additional 21,000 shares in the offering. The
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organizers reserve the right to purchase additional shares in the offering. The
remaining shares are being offered to the public on a first come, first served
basis. However, we may refuse to accept any subscription in whole or in part for
any reason. All potential investors in the common stock in the offering will
have the opportunity to purchase the stock at the same price and on the same
terms. The initial investors in our common stock, including our organizers, may
receive warrants, stock options or a split of the shares of stock they purchased
in the private placement. However, no investor will receive any warrants or
stock options with the shares purchased in this offering. Although you may, in
the future, receive a split of the shares of our common stock purchased in this
offering, we have no plans to declare a stock split other than for those shares
purchased in the private placement. See pages ____ to ____, "Management's
Discussion and Analysis or Plan of Operation"; pages ____ to ____, "Management
of the Company"; and pages ____ to ____, "The Offering and Plan of
Distribution."
Office Facilities
We entered into a Lease Agreement in ^ October, 1998 with the owner of
590 Lawrence Square Boulevard, Lawrenceville, New Jersey. We also entered into a
lease agreement for space in the Pennington Point complex in order to operate a
limited service facility. See pages ___ to ___, "Proposed Business of the Bank"
and see pages ___ to___, "Office Facilities."
Conditions of the Offering
We will terminate the offering, no shares of common stock will be
issued, and no subscription proceeds will be released from escrow to us, unless
the following conditions are met on or before _______ __, 1998 (or such later
date if we extend the offering):
o We have accepted subscriptions and payment in full for the
minimum number of shares and
o Our organizers have made provisions for satisfying any regulatory
or other conditions that must be satisfied before Village Bank
may commence banking operations. See page ____, "The Offering and
Plan of Distribution Conditions of the Offering and Release of
Funds."
^
Subscription proceeds for shares subscribed for will be promptly
deposited in an interest-earning escrow account with Summit Bank as escrow agent
under the terms of an escrow agreement pending the satisfaction of the
conditions set forth above or the termination of the offering. Upon satisfaction
of the conditions set forth above, all subscription funds held in escrow,
including any interest earned, shall be released to us for our immediate use.
See pages ___ to ___, "The Offering and Plan of Distribution."
The Offering
The offering consists of a minimum of 410,000 shares and a maximum of
610,000 shares of Common Stock at $10.00 per share. In the offering, there is a
minimum purchase requirement of 100 shares and a maximum purchase limitation of
50,000 shares per subscriber including all affiliates of the subscriber. The
offering will terminate on _______ __, 1998. However, we may extend the offering
without notifying you. If the offering is not completed or regulatory conditions
are not met by _______ __, 199_, all subscription funds will be promptly
refunded. See pages ___ to ___, "The Offering and Plan of Distribution."
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Private Placement for Preopening Expenses
Our organizers and certain other initial investors previously purchased
in a private placement an aggregate of 94,850 shares of the Company's Common
Stock at a price of $10.00 per share for a total of $948,500. The amount
received, and accrued interest thereon, from the private placement has been, and
will continue to be, used to pay our offering, organizational and preopening
expenses. ^ We have and will continue to expend the proceeds received in the
private placement prior to the receipt of all regulatory approvals and
completion of the offering.
Use of Proceeds
We expect to contribute all of the net proceeds remaining from the
private placement and all of the net proceeds of the offering to Village Bank as
capital. We intend to use the proceeds as the initial capital of the bank. See
pages ___ to ___, "Use of Proceeds."
Dividends
Our board of directors currently intends to initially ^ grow the bank's
capital and not issue cash dividends. We may declare dividends on the common
stock at some time in the future depending upon our profitability, regulatory
and financial condition and other factors. However, no assurance can be given
that any dividends will be declared or, if declared, what the amount of
dividends will be, or whether such dividends, once declared, will continue. See
pages ___ to ___, "Risk Factors" and see pages ___ to ___, "Dividends."
Market for Common Stock
We do not anticipate that there will be an active trading market for
our common stock upon completion of the offering ^. You should have a long-term
investment intent. You may not be able to sell your shares when you desire or
sell them at a price equal to or above the offering price. Following completion
of the offering, we anticipate that our common stock will be traded in the
over-the-counter market and reported on the OTC Bulletin Board. See page ___,
"Risk Factors - Lack of Trading Market."
Payment for Subscription
Payments for subscriptions must be for the full amount subscribed and
must be made by check, bank draft or money order made payable to "Summit Bank,
Escrow Agent for Village Financial Corporation," and sent to or delivered to us.
If we do not accept your subscription, we will mail you notice of the rejection
within ten business days after we have received your subscription. See page ___,
"The Offering and Plan of Distribution - How To Subscribe."
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RISK FACTORS
In addition to the other information in this Prospectus, you should
consider carefully the following risk factors in evaluating an investment in our
common stock.
Certain statements in this Prospectus are forward-looking and are
identified by the use of forward-looking words or phrases such as "intended,"
"will be positioned," "believes," "expects," is or are "expected,"
"anticipates," and "anticipated." These forward-looking statements are based on
our current expectations.
The risk factors set forth below are cautionary statements identifying
important factors that could cause actual results to differ materially from
those in the forward-looking statements.
Potential Total Loss of Investment
Investment in our common stock involves significant risk. Each
subscriber should be financially able to sustain a total loss of his investment.
OUR COMMON STOCK CANNOT AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
Lack of Operating History
Our Company is recently formed. Village Bank will be formed following
regulatory approval. Neither entity has any operating history. Accordingly,
prospective investors do not have access to all of the information that is
available to the purchasers of securities of a financial institution with a
history of operations. Because our primary asset will be the capital stock of
the bank, our operating results and financial position will be dependent upon
the operating results and financial condition of the bank. The business of the
bank is subject to the risks inherent in the establishment of any new business
and, specifically, of a new Federal stock savings bank. As a result of the
substantial start-up expenditures that must be incurred by a new bank, we may
not be profitable for several years after commencing business, if ever. See
^"Unaudited Pro Forma Financial Information."
No Assurance of Ability to Raise Additional Capital
Although the organizers believe the proceeds from the offering will be
sufficient to support our initial operations and commitments, there can be no
assurance that the proceeds of the offering will be sufficient to meet our
future capital requirements without additional financing. The amount of capital
required will depend, among other things, upon operating results, the growth of
assets and regulatory requirements. The organizers have made no commitments to
provide additional funds for the operation of our company. Therefore, you should
not expect the organizers personally to provide additional funds for our
operations or capital requirements if the proceeds of this offering are
insufficient.
Lack of Trading Market
Due to the small size of the offering, it is highly unlikely that an
active trading market will develop and be maintained. If an active market does
not develop, you may not be able to sell your shares promptly or perhaps at all.
You may not be able to sell your shares at a price equal to or above the
Offering price. It is anticipated that our common stock will be traded in the
over-the-counter market and reported on the OTC Bulletin Board. However, we do
not yet have a market maker for our common stock. A market maker is a
requirement for reporting on the OTC Bulletin Board. Our common stock may not be
appropriate as a short-term investment. See ^"Market for Common Stock."
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Arbitrary Determination of Offering Price
The offering price of our common stock has been arbitrarily determined
by our organizers. Our company is a new enterprise. We previously sold shares of
our common stock in a private placement at $10.00 per share, the offering price
per share in this offering. There can be no assurance that the shares of our
common stock can be resold at the offering price or any other amount. See ^"The
Offering and Plan of Distribution;" ^ "Capitalization;" and ^"Dilutive."
Dividends
Village Financial Corporation is a legal entity separate and distinct
from Village Bank. Because we initially will engage in no business other than
owning all of the outstanding shares of capital stock of Village Bank, our
payment of dividends to you will generally be funded only from dividends we
receive from the bank. Any dividends to be paid to you will be dependent on,
among other things, the bank's profitability. In addition, the payment of
dividends may be made only if we are in compliance with certain applicable
regulatory requirements governing the payment of dividends. No assurance can be
given that dividends on our common stock will ever be paid. We expect that
earnings, if any, will be used initially for operating capital. We do not
foresee payment of any dividends in the near future. OUR COMMON STOCK SHOULD NOT
BE PURCHASED BY PERSONS WHO NEED OR DESIRE DIVIDEND INCOME FROM THIS INVESTMENT.
See ^"Dividends."
Government Regulation
We will operate in a highly regulated environment and will be subject
to examination, supervision and comprehensive regulation by the OTS and the
FDIC. Banking regulations, designed primarily for the safety of depositors, may
limit Village Bank's growth, and thus the return to you. The activities that may
be restricted include the payment of dividends, mergers with or acquisitions by
other institutions, investments, loans and interest rates, interest rates paid
on deposits and the creation of branch offices. We also will be subject to
capitalization guidelines set forth in federal legislation, and could be subject
to enforcement action to the extent Village Bank is found by regulatory
examiners to be undercapitalized. Laws and regulations applicable to us could
change at any time, and there can be no assurance that such changes would not
adversely affect our business. In addition, the cost of compliance with
regulatory requirements could adversely affect our ability to operate
profitably. See ^ "Regulation."
Competition
Our primary market area will be Lawrence Township and Pennington
Borough, New Jersey. See ^"Proposed Business of the Bank - Market Area." The
Bank's primary emphasis will be on residential real estate lending, and
secondarily on commercial real estate financing, consumer and small business
lending. ^ Within our market area there are numerous financial institutions
including banks, thrifts and credit unions. We will be competing for deposits
with these larger established institutions as well as with money market mutual
funds, brokerage services, private banking and other non-traditional financial
intermediaries. We will have to attract our customer base from existing
financial institutions and new residents. Many of the competitors will be much
larger than Village Bank in terms of assets. Our competitors have more extensive
facilities and greater depth of organizational and marketing capabilities, and
may initially be able to offer a greater range of services. There can be no
assurance that we will be able to compete successfully. See ^ "Proposed Business
of the Bank - Competition."
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Possible Lack of Market Growth
Our organizers' assumptions about the viability of Village Financial
Corporation and Village Bank are based on their projections of growth trends in
population, deposits and housing starts in our primary market area, as well as
on their projections of interest rates, earning asset origination capability,
deposit account growth and operating expense trends. These projections are
merely forecasts and may prove to be inaccurate. Our primary market area has
experienced some growth in population, deposits and housing starts in recent
years, but there can be no assurance that growth will continue in the future or
that the Company will benefit from any such growth if it does continue. See
^"Proposed Business of the Bank - Market Area."
Interest Rate Risk
Our operating results will depend to a great extent upon Village Bank's
net interest income. Net interest income which is the difference between the
interest earned on assets (primarily loans and investment securities) and the
interest paid for liabilities (primarily savings and time deposits). Market
interest rates for loans, investments and deposits are highly sensitive to many
factors beyond our control. These factors include general economic conditions
and the policies of various governmental and regulatory authorities. In
addition, due to current low prevailing market interest rates, it may be
difficult for us to utilize the bank's capital to originate loans and purchase
investments at a sufficient yield. See ^"Proposed Business of the Bank - Lending
Activities" and see ^"- Source of Funds."
Proposed Legislation
A bill, H.R. 10, has been passed by the U.S. House of Representatives,
that would curtail the powers of unitary thrift holding companies. We are a
proposed unitary thrift holding company. Furthermore, other proposed legislation
has been considered that might eliminate the federal thrift charter under, the
proposed charter of Village Bank. If this legislation becomes law, we will be
forced to convert Village Bank to a state chartered bank or national commercial
bank. If the bank becomes a commercial bank, the investment authority of the
bank and our ability to engage in diversified activities would be more limited.
This could affect our profitability. See ^ "Regulation."
Possible Delay in the Opening of Village Bank
We anticipate that we will have completed all of the regulatory
conditions precedent to commencing business and will have Village Bank ready for
opening ^ prior to the spring of 1999. This date is only a projection, however,
and the actual opening date may be later.
Anti-Takeover Provisions
Certain provisions included in our Certificate of Incorporation and
Bylaws are designed to encourage potential acquirors to negotiate directly with
our board of directors and to discourage takeover attempts. These provisions may
discourage non-negotiated takeover attempts. These provisions also tend to
perpetuate management. You may determine that these provisions are not in your
best interest. See ^"Description of Common Stock - Certain Anti-Takeover
Provisions."
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Dilution
After the offering, and subject to stockholder approval, we expect to
adopt a stock option plan and restricted stock plan that will permit us to grant
options and restricted stock to our officers, directors, and key employees. The
option price will be no less than the greater of the fair market value of our
common stock on the date the option is granted or $10.00 per share. The stock
option plan will not include more than 10% of the outstanding common stock. The
exercise of options and the granting of restricted stock could have a dilutive
effect on earnings and book ^ value calculated on a per share basis. ^
Furthermore, our preopening expenses will have a dilutive effect on earnings and
book value. We may issue additional shares of common stock or preferred stock in
the future. ^ In addition, we anticipate issuing warrants, stock options or a
split of shares to the investors in the private placement. These actions would
also have a dilutive effect. See "Dilution" and "Management of the Bank -
Remuneration of Directors and Officers."
Possible Year 2000 Computer Program Problems
A great deal of information has been disseminated about the global
computer crash that may occur in the Year 2000. Many computer programs that can
only distinguish the final two digits of the year entered (a common programming
practice in earlier years) are expected to read entries for the Year 2000 as the
Year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency. Rapid
and accurate data processing is essential to our operations. Data processing is
also essential to most other financial institutions and many other companies.
Most of the bank's material data processing that could be affected by
this problem ^ will be provided by NCR, a nationally recognized third party
service bureau. Village Bank's prospective service bureau provider has advised
us that it expects to resolve this potential problem before the Year 2000.
However, if this potential problem is not resolved before the Year 2000, we
would likely experience significant data processing delays, mistakes or
failures. These delays, mistakes or failures could have a significant adverse
impact on the our financial condition and results of operations. See ^"Office
Facilities."
Direct Public Offering (No Underwriter)
No commitment exists for an underwriter to purchase any shares in this
offering. Instead, we are offering shares of our common stock directly to the
public on a "best efforts" basis. No assurance can be given that any shares will
be sold. If necessary, we may enter into a marketing or consulting agreement
with a registered broker/dealer to assist in the sale of our common stock
without further notice to subscribers. We estimate that such an agreement would
include compensation to the broker/dealer in the amount of 3% to 7% of the gross
proceeds it receives from the sale of our common stock. See "The Offering and
Plan of Distribution."
USE OF PROCEEDS
Although the amounts set forth below provide an indication of the
proposed use of funds based on the plans and estimates of our organizers, actual
expenses may vary from the estimates. The organizers believe that the net
minimum proceeds of ^ $4,030,000 from the offering, as well as the remaining
proceeds from the private placement, will satisfy the cash requirements of
Village Financial Corporation (hereafter the "Company") and the capital
requirements of Village Bank (hereafter the "Bank") for their respective first
year of operations but there can be no assurance that this will be the
4
<PAGE>
case. Because the Company and the Bank constitute a new enterprise, the
organizers cannot predict with any certainty to what extent the Bank will
generate revenues from investments and loan originations. As a result, the
organizers cannot predict precisely what the actual application of proceeds will
be. However, there is no assurance that the proceeds of the offering will be
sufficient to meet the future capital requirements of the Company without
additional financing.
The net proceeds to the Company from the sale of 410,000 and 610,000
shares of common stock in the offering are estimated at $4,030,000 and
$6,030,000, respectively. The preopening expenses and offering ^ costs are
estimated at approximately $383,000. The ^ preopening expenses, estimated to be
$313,000, are to be paid from the proceeds of the private placement. The
estimated $70,000 in offering ^ costs may be paid from the proceeds of the
offering. Estimated preopening expenses and offering ^ costs are the total of
the following estimated expenses: preopening salaries and benefits - $183,000;
marketing, travel and promotions - $8,000; legal - $100,000; accounting and
consulting - $30,000; printing and office supplies - $10,000; filing fees -
$20,000; and other miscellaneous operating expenses - $32,000. As a result of
delays in the offering, regulatory comments and other factors, expenses may be
significantly greater. In the event there are insufficient revenues from
operations and investments, the salaries and benefits of the officers and
employees hired may be paid from the proceeds of the offering. ^ On the basis of
the foregoing assumptions, gross proceeds, expenses and net proceeds at the
minimum and maximum offering amount would be as follows:
<TABLE>
<CAPTION>
Minimum Maximum
410,000 Shares 610,000 Shares
(504,850 Total (704,850 Total
Outstanding Shares) Outstanding Shares)
at $10.00 Per Share at $10.00 Per Share
------------------- -------------------
(In thousands)
<S> <C> <C>
Gross Proceeds from Private Placement
Gross Proceeds from offering............ $ 949 $ 949
Less Estimated Preopening and 4,100 6,100
offering Expenses.....................
Estimated Net Proceeds.................. (383) (383)
----- -----
$4,666 $6,666
===== =====
</TABLE>
All of the proceeds of the offering are expected to be invested by the
Company in the common stock of the Bank. ^ Until utilized by the Bank for
operations, investments or lending purposes, proceeds of this offering will be
invested by the Company in short-term interest-bearing investments and
securities. The Bank will use the proceeds from the sale of its Stock to the
Company for:
o investment in residential and commercial real estate loans,
consumer loans, small business loans, and other loans
o payment of operating expenses
o working capital purposes
o the purchase of investment securities as needed for liquidity
purposes.
5
<PAGE>
DIVIDENDS
The board of directors of the Company initially expects to follow a
policy of retaining any earnings to provide funds to operate and expand the
Company. Consequently, there are no plans for any cash dividends to be paid in
the near future. However, the Company may issue warrants or grant stock options
to the purchasers in the private placement. The Company may, instead, notify
stockholders of a stock split of the shares of the Company's stock purchased in
the private placement. The Company's ability to pay any cash dividends to its
stockholders in the future will depend primarily on the Bank's ability to pay
cash dividends to the Company. The payment of dividends may be made only if the
Bank is in compliance with certain applicable regulatory requirements governing
the payment of dividends. In addition, the payment of cash dividends by the
Company is subject to the discretion of the Company's board of directors, which
will consider a number of factors, including business condition. See "Regulation
- - Saving Institution Regulation -- Dividend and Other Capital Distribution
Limitations."
MARKET FOR COMMON STOCK
The Company issued a total of 94,850 shares of its common stock in a
private placement. There are 24 shareholders of the Company's common stock.
However, as a newly organized company, the Company has never publicly issued
capital stock. There is no established market for the common stock. Following
the completion of the offering, it is anticipated that the common stock will be
traded on the over-the-counter market with quotations available through the OTC
^ Bulletin Board. However, the Company may not make use of the OTC Bulletin
Board without a market maker. No market maker has agreed to make a market in the
Company's Common Stock at this time. If the common stock cannot be quoted on the
OTC Bulletin Board it is expected that the transactions in the common stock will
be reported in the pink sheets of the National Quotations Bureau, Inc.
The development of an active trading market depends on the existence of
willing buyers and sellers. Due to the small size of the offering, it is highly
unlikely that an active trading market will develop and be maintained. Investors
should have a long-term investment intent. Investors may not be able to sell
their shares when they desire or sell them at a price equal to or above the
offering price.
6
<PAGE>
DILUTION
The following table illustrates, assuming the minimum or maximum shares to be
issued in the offering, the estimated dilution per share to new investors from
the offering:
410,000 610,000
Shares Shares
Minimum Maximum
Offering price per share............................. $10.00 $10.00
----- -----
Pro forma net
tangible book value per ^ $ 8.81 ^ $ 8.81
share at ^ September 30, 1998 (1)..................
Increase per share attributable to new investors from ^
offering............................................. ^ 0.43 0.65
------- -----
Pro forma net tangible book value per
share after ^ offering............................. $ 9.24 $ 9.46
===== =====
Dilution per share to new investors from
^ offering......................................... ^ $ 0.76 ^ $ 0.54
===== =====
- -----------------------
(1) ^ Does not include potential effect of shares of common stock that may be
issued under a stock option plan and restricted stock plan under
consideration and stock options which may be granted under the employment
agreement of the President of the Corporation. See the notes to the
financial statements regarding the employment agreement of the President.
CAPITALIZATION
The table set forth below shows the pro forma capitalization of the
Company immediately following completion of the private placement and the
offering as though the private placement and the offering had been completed on
^ September 30, 1998, assuming that 410,000 and 610,000 shares of common stock
had been sold pursuant to the offering, after deduction of projected
organizational and initial public offering expenses of $383,000.
7
<PAGE>
PRO FORMA CAPITALIZATION
410,000 610,000
Shares Sold Shares Sold
----------- -----------
(In thousands)
^ Preferred Stock ($0.10 par value)
^ Authorized - 1,000,000; Assumed
none outstanding......................... $ -- $ --
Common Stock ($0.10 par value)
Authorized - 5,000,000 shares;
Assumed 505,000 and 705,000 shares
issued and outstanding (1)...............
50 ^ 70
Additional Paid-In Capital................. 4,928 6,908
----- -----
Pro Forma Retained (313) (313)
----- -----
Deficit....................................
Total Stockholders' Equity............. $4,665 $6,665
===== =====
- -----------------
(1) In addition to the 410,000 to 610,000 shares to be issued pursuant to
the offering, 94,850 shares have been issued to organizers and certain
other investors pursuant to the private placement.
THE OFFERING AND PLAN OF DISTRIBUTION
General
The Company is offering for sale in the offering a minimum of 410,000
shares and a maximum of 610,000 shares of its common stock at a purchase price
of $10.00 per share to raise proceeds between $4,100,000 and $6,100,000 for the
Company. The Company has established a minimum subscription of 100 shares
($1,000) and a maximum subscription of 50,000 shares ($500,000). The maximum
subscription is 9.9% of the minimum number of shares to be outstanding. Because
the Company is a new organization with no operating history and the Bank is in
organization, the offering price of the common stock was arbitrarily determined
by the organizers without reference to traditional criteria for determining
value such as book value or historical or projected earnings.
Subscribers should be aware that beneficial ownership of as little as
5% of the outstanding shares of common stock could obligate the beneficial owner
to comply with certain reporting and disclosure requirements of federal
securities and banking laws. ^ Additionally, no person may purchase more than
9.9% of our outstanding stock without prior approval of the OTS. See
"Description of Capital Stock -Provisions of the Company's Certificate of
Incorporation and Bylaws -- and Regulatory Restrictions."
The Company's directors are expected to purchase additional shares in
the offering, resulting in total aggregate purchases of at least 39,600 shares.
The organizers reserve the right to increase the amount of common stock they
purchase in the offering. See "Management of the Bank."
8
<PAGE>
The shares are being offered to the public through the directors and
officers of the Company. No director or officer, other than Director Fogler, is
affiliated with a securities broker or dealer. Director Fogler will not act as a
broker or dealer in this transaction. No commission or other sales compensation
will be paid to any organizer in connection with the offering. The Company has
not entered into any marketing or consulting agreement with a registered
broker/dealer. If necessary, the Company may enter into an agreement with a
registered broker/dealer to assist in the sale of common stock in this public
offering, without notice to subscribers.
Except for one director of the Company, none of the Company's directors
and officers participating in the offering are registered or licensed as a
broker or dealer or an agent of a broker or dealer. The unlicensed officers and
directors of the Company will assist in sales activities in connection with the
offering pursuant to an exemption from registration as a broker or dealer
provided by Rule 3a4-1 promulgated under the Securities Exchange Act of 1934
("Rule 3a4-1"). Rule 3a4-1 generally provides that an "associated person of an
issuer" of securities shall not be deemed a broker solely by reason of
participation in the sale of securities of such issuer if the associated person
meets certain conditions. Such conditions include, but are not limited to, that
the associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participating, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities. For purposes
of this exemption, "associated person of an issuer" is defined to include any
person who is a director, officer or employee of the issuer or a company that
controls, is controlled by, or is under common control with, the issuer.
Subscriptions to purchase shares of the common stock will be received
until 5:00 p.m. New Jersey Time, on _______ __, 1998, unless all of the common
stock is earlier sold or the offering is earlier terminated or extended by the
Company. See "Conditions of the Offering and Release of Funds" below. The
Company reserves the right to extend the offering without further notice to
subscribers. However, if the offering is not completed by _______ __, 199_ all
subscription funds will be promptly refunded. The date the offering expires (as
possibly extended) is referred to herein as the "Expiration Date." No written
notice of an extension of the offering until _______ __, 199_ need be given
prior to any extension and any such extension will not alter the binding nature
of subscriptions already accepted by the Company. If the offering is extended
beyond _______ __, 199_, subscribers will be resolicited and all subscription
funds previously submitted will be promptly refunded. If the above conditions
are not satisfied by _______ __, 199_, or if the offering is terminated at an
earlier date, the funds including any interest earned thereon, will be promptly
repaid to investors. Investors may not receive any interest on their
subscription funds, if the offering expenses are in excess of amounts to be
covered by the proceeds of the private placement. However, if such funds are
held in excess of 90 days, such funds will be promptly returned to the
subscribers with any interest earned thereon. See "Termination or Extension of
the Offering."
Following acceptance by the Company, subscriptions are binding on
subscribers and may not be revoked by subscribers. The Company reserves the
right to cancel accepted subscriptions at any time and for any reason until the
proceeds of the offering are released from escrow (as discussed in greater
detail in "Conditions of the Offering and Release of Funds" below), and the
Company reserves the right to reject, in whole or in part and in its sole
discretion, any subscription.
Promptly after receipt of final regulatory approval and authorization
to do business, the Company will cause to be mailed or delivered to each
subscriber stock certificates representing the shares of common stock purchased
by such subscriber.
9
<PAGE>
Conditions of the Offering and Release of Funds
Subscription proceeds for shares subscribed for will be promptly
deposited in an interest-earning escrow account with the Summit Bank, Princeton,
New Jersey, as escrow agent (the "Escrow Agent"), under the terms of an escrow
agreement (the "Escrow Agreement"), pending the satisfaction of the conditions
of the offering or the termination of the offering. Neither the Company nor any
of its officers or directors is affiliated with the Escrow Agent. The offering
will be terminated, no shares of common stock will be issued, and no
subscription proceeds will be released from escrow to the Company unless on or
before the Expiration Date (i) the Company has accepted subscriptions and
payment in full for the minimum number of shares and (ii) the organizers have
made provisions for satisfying any regulatory or other conditions that must be
satisfied before the Bank may commence banking operations.
The Escrow Agent is expected to place the funds held in the Escrow
Account solely in accounts that are FDIC-insured. Until the regulatory
authorities authorize the organizers to use the proceeds of this offering to
capitalize the Company, the $948,500 obtained from the organizers of the Company
and certain other initial investors in the private placement will be used to pay
for expenses incurred. Upon disbursement of funds from the Escrow Account to the
Company, ^ any investment earnings ^ on the Escrow Account will be the property
of the Company. The Escrow Agent has not investigated the desirability or
advisability of an investment in the common stock by prospective investors and
has not approved, endorsed or passed upon the merits of an investment in the
common stock.
If the above conditions are not satisfied by _______ __, 199_, or if
the offering is terminated at an earlier date, the funds available from the
Escrow Account, including any interest earned thereon, will be promptly repaid
to investors. Investors may not receive any interest on their subscription
funds, if the offering expenses are in excess of amounts to be covered by the
proceeds of the private placement. However, if such funds are held in excess of
90 days, such funds will be promptly returned to the subscribers with any
interest earned thereon.
How To Subscribe
All subscriptions must be made by completing a Subscription Agreement.
Additional copies of the Prospectus and the Subscription Agreement may be
obtained by contacting the Company at the address set forth below. Subscriptions
will not be binding on subscribers until accepted by the Company. SUBSCRIPTIONS
WILL NOT BE ACCEPTED UNLESS ACCOMPANIED BY PAYMENT IN FULL AT THE SUBSCRIPTION
PRICE. The Company reserves the right to reject any subscription, in whole or in
part, with or without cause, but will inform the subscriber of the reason for
such rejection. The Company will refuse any subscription by sending written
notice to the subscriber by personal delivery or first-class mail within ten
calendar days after receipt of the subscription, and the subscriber's
Subscription Agreement and refund of payment will accompany such notice,
together with a statement as to the reason for such rejection. Any Subscription
Agreement which is completely and correctly filled out, which is accompanied by
proper and full payment and which is physically received at the offices of the
Company by any employee or agent of the Company, shall be deemed to have been
accepted if it is not refused as hereinbefore provided within ten business days
after such receipt.
A completed Subscription Agreement and payment in full (made in the
manner specified below) of the total subscription price for the number of shares
subscribed should be mailed to the Company at the following address:
10
<PAGE>
Village Financial Corporation
P.O. Box 6554
Lawrenceville, New Jersey 08648
Subscriptions and payment in full also may be delivered in person to
the office of the Company at 23 Route 31 North, Suite A22, Pennington, New
Jersey between 10:00 a.m. and 5:00 p.m., Monday through Friday. If the offering
is canceled, all subscriptions will be promptly refunded.
IMPORTANT: PAYMENTS MUST BE MADE IN UNITED STATES FUNDS BY CHECK, BANK
DRAFT OR MONEY ORDER PAYABLE TO "SUMMIT BANK, ESCROW AGENT FOR VILLAGE FINANCIAL
CORPORATION." FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE WITH THE
SUBSCRIPTION AGREEMENT WILL RESULT IN THE SUBSCRIPTION BEING RETURNED BY THE
COMPANY.
Escrow Account
The offering is being made subject to the requirement that at least
410,000 shares are sold. Pending receipt of insurance of accounts, payments
received from subscribers will be held in an interest-bearing escrow account
maintained with the Escrow Agent. Funds in the Escrow Account may not be reached
by creditors of the organizers. The terms of the Escrow Agreement include the
following provisions:
(a) Payments of subscribers will be identified to each subscriber and
will be deposited by the Escrow Agent in the Escrow Account, which shall be
known as "Village Financial Corporation - Stock Purchase Account," and shall be
held in escrow and disbursed, including the interest earned thereon, only in
accordance with the provisions of the Escrow Agreement.
(b) The Escrow Agent will maintain its records of the Escrow Account so
that each subscriber will be entitled to FDIC insurance with respect to all
funds up to $100,000 paid by such subscriber.
(c) Funds deposited in the Escrow Account shall earn interest at the
Escrow Agent's current money market rate.
(d) Upon receipt of written confirmation that the Company has obtained
FDIC insurance of its accounts, the Escrow Agent will pay any and all funds in
the Escrow Account to the order of the Company. In the event that the offering
is not completed by _______ __, 199_, all funds in the Escrow Account, including
any interest earned thereon, will be promptly returned to subscribers.
Subscribers may not receive any interest on their money if offering expenses are
in excess of the amounts to be covered by the proceeds of the private placement.
However, if such funds are held in excess of 90 days, such funds will be
promptly returned to the subscriber with any interest earned thereon. The Escrow
Agent may conclusively rely on a certificate of the president of the Company
stating the amount of organizational expenses.
(e) The Escrow Agent will be liable only for monies received by it and
not disbursed by it pursuant to the provisions of the Escrow Agreement.
(f) The Company has agreed to indemnify the Escrow Agent for, and to
hold it harmless against, any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Escrow Agent.
11
<PAGE>
(g) All interest earned and accrued on the deposited subscription funds
shall accrue for the benefit of the subscribers and the Company and the Escrow
Agent shall report such interest as having been earned by the Company. All funds
will be repaid in accordance with paragraph (d) above.
(h) The Escrow Agent's fees will be paid by the Company and the Escrow
Agent may be authorized to deduct such fees from the interest earned on the
Escrow Account.
Termination or Extension of the Offering
The offering will terminate at 5:00 p.m., Lawrenceville, New Jersey
Time, on _______ __, 1998, unless extended by the Company without further notice
to the subscriber. The Company reserves the right to terminate the offering at
any time. However, if the offering is not completed by _______ __, 199_, all
subscription funds will be promptly refunded. If the above conditions are not
satisfied by _______ __, 199_, or if the offering is terminated at an earlier
date, the funds including any interest earned thereon, will be promptly repaid
to investors. Investors may not receive any interest on their subscription
funds, if the offering expenses are in excess of amounts to be covered by the
proceeds of the private placement. However, if such funds are held in excess of
90 days, such funds will be promptly returned to the subscribers with any
interest earned thereon.
If an extension to the offering is obtained, subscribers will be
resolicited and would be provided a supplemental offering Prospectus, declared
effective by the Securities and Exchange Commission ("SEC"). Upon
resolicitation, subscribers would have an opportunity to increase or decrease
their subscriptions, subject to applicable minimum and maximum purchase
limitations.
The Company will deliver an effective Prospectus to all persons to whom
the securities offered hereby are to be sold at least 48 hours prior to the
acceptance or confirmation of sale to such persons or to send such a Prospectus
to such persons under circumstances that it would normally be received by them
48 hours prior to acceptance or confirmation of the sale. The Company will mail
to all subscribers and other persons who have received a Prospectus written
notice of any such determination to terminate the offering at least seven days
prior to such terminations. During this seven day period, the Company may
continue to accept subscriptions for up to 610,000 shares. The Company expects
only one closing.
OFFICE FACILITIES
The Company agreed to the terms of the lease in ^ October 1998 with
Lawrenceville Associates, a New Jersey Partnership, to lease the premises
located at 590 Lawrence Square Boulevard, Lawrenceville, New Jersey to be the
main office of the Bank. The Company has also entered into a lease of space
within the Pennington Point complex. The Pennington Point adult community is
within the same complex in Pennington, New Jersey.
The Bank will purchase the furniture, fixtures and equipment ^
currently on the premises of the proposed main office ^ from the local
commercial bank that previously occupied the premises. The local commercial bank
has valued the furniture, fixtures, and equipment at approximately $35,000. The
main office is currently a vacant branch office previously leased by the local
commercial bank. The building is a 3,952 square feet one story facility located
in a two-building office complex. The main office will include a vault, six
teller stations, a two lane drive-up area, walk-up ATM, night depository and
space designed for safe deposit boxes. The terms of the lease provide for 20
designated parking spaces. The Bank does not intend to make any renovations to
the main office prior to opening other than adding signage and other incidental
changes in order to prepare the facility for operation. The lease will expire on
May 31, 2005. The lease will be assignable and is renewable for one additional
five-year term. The
12
<PAGE>
annual base rental amount will increase from approximately $50,000 to $70,000
over the course of the first five years and will increase at an annual amount of
four percent for any and all subsequent years. In accordance with the terms of
the lease, the Company intends to prepay its rent in the approximate amount of
$90,000 for the proposed main office from November 1, 1998, the commencement of
the lease, through December 31, 1999. The average monthly amount of the rent for
this fourteen month period is approximately $6,430. These funds would be
non-refundable should the Bank fail to receive all required regulatory approval.
The Company intends to prepay the lease from the funds received in the private
placement.
The Bank's limited service facility will be located in the Pennington
Point complex, 23 Route 31 North, Suite A22, Pennington, New Jersey, where the
Company has leased an office within a suite of offices for one year. The Company
anticipates signing a new lease at the expiration of the current lease at the
discretion of the board of directors. The office is expected to include two
teller desks and to operate during limited hours, three days per week. The
current annual rental amount of the lease is $9,600. There is no limit on the
number of terms or years the lease may be renewed.
The bank ^ has contracted for data processing services with NCR in
Framingham, Massachusetts. The Bank will incur a monthly data processing fee of
approximately $5,000 to $6,000 and will also incur a one-time software licensing
fee of approximately $40,000 to $50,000. NCR will perform substantially all of
the data services needed by the Bank.
^ It is expected that upon the opening of the Bank, the Company will
move its headquarters to 590 Lawrence Square Boulevard.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information and explanatory
notes have been derived from the historical financial statements of the Company,
adjusted to give effect to the sale of the minimum number of shares and the
maximum number of shares in the offering. The Unaudited Pro Forma ^ Combined
Balance Sheet assumes ^ such transactions occurred on ^ September 30, 1998, and
that the Company's application for the formation of the Bank has been approved.
No ^ pro forma ^ consolidated statement of operations is presented because as of
^ September 30, 1998, the Company has ^ been in existence for approximately ^
nine months, and all activity through this date has been dedicated to the
formation of the Bank. The unaudited pro forma financial information ^ does not
show the effect of: (a) results of operations, (b) changing market prices of the
shares after the initial offering is complete, or (c) potential effects of newly
issued shares to be granted to the President of the Company under the terms of
the President's employment agreement (see notes to the financial statements
regarding the employment agreement of the President).
13
<PAGE>
VILLAGE FINANCIAL CORPORATION
PRO FORMA COMBINED BALANCE SHEET
AS OF ^ SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Company Company
As Adjusted As Adjusted
Minimum No. Maximum No. Minimum No. Maximum No.
^ Corporation of Shares of Shares of Shares of Shares
------------------ ---------------- ------------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash ^$ ^ 30,863 $3,838,482 (a) $ ^ 5,838,482 (a) $ ^ 3,869,345 $ ^ 5,869,345
Short-term investments 760,184 -- -- 760,184 760,184
Furniture and equipment 32,959 -- -- 32,959 32,959
Deferred organization costs ^ 70,000 (70,000) (b) (70,000) (b) 0 0
Other assets 3,012 - - 3,012 3,012
--------------- --------- ------------ ------------ -----------
Total assets $ ^ 897,018 $3,768,482 $ ^ 5,768,482 $ ^ 4,665,500 $ ^ 6,665,500
=============== ========= ============ ============= =============
LIABILITIES
Accounts payable and accrued ^ 61,527 (61,527)(c) ^(61,527)(c) -- ^--
--------------- --------- ------------- ------------- ------------
expenses
^ Total liabilities 61,527 (61,527) (61,527) -- --
--------------- --------- ------------- -------------- ------------
STOCKHOLDERS' EQUITY
Preferred stock ^-- -- -- -- --
Common stock 9,485 41,000 (d) 61,000 (d) 50,485 70,485
Additional paid-in ^ capital 939,015 3,989,000 (d) 5,969,000 (d) 4,928,015 6,908,015
Retained deficit ^(113,009) (199,991)(b) (199,991)(b) (313,000) (313,000)
-------------- --------- ------------- ------------- -------------
Total stockholders' equity 835,491 3,830,009 5,830,009 4,665,500 6,665,500
--------------- --------- ------------- ----------- -------------
Total liabilities and stoc
stockholders' equity $ ^ 897,018 $^3,768,482 $ ^ 5,768,482 $ ^ 4,665,500 $ ^ 6,665,500
=============== ========== ============= ============= =============
</TABLE>
14
<PAGE>
VILLAGE FINANCIAL CORPORATION
NOTES TO PRO FORMA BALANCE SHEET AT ^ SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
(a) The net cash to be received, and after payments are made for certain
organizational costs incurred.
Number of Shares Sold
-----------------------------------
Minimum Maximum
------- -------
Proceeds from offering.............. $4,100,000 $6,100,000
Less:
Payment of accrued and additional
organization costs.................. ^(261,518) (261,518)
--------- ---------
$3,838,482 $5,838,482
========= =========
(b) Reflects the reclass of the deferred organization and offering costs
against the offering proceeds and available cash at ^ September 30, 1998.
Organizational costs to be incurred are estimated to be $313,000, and will
be charged to operating expenses when paid. Such items are construed to be
start up activity expenditures, relating primarily to the regulatory
application processes for the proposed bank formation.
These costs are for consulting, legal, accounting and audit services, as
well as for regulatory filing fees and outside marketing assistance. These
costs also include in-formation period expenses to be incurred for normal
operations and salary and benefits of staff through the successful
completion of the stock offering and regulatory approval processes.
(c) Reflects the payments of payables outstanding at ^ September 30, 1998 for
offering and organizational costs.
(d) Reflects stockholders' equity, after payments are made for certain
estimated costs incurred in the offering:
Number of Shares Sold
------------------------------------
Minimum Maximum
---------- -------------
Proceeds from offering................ $4,100,000 $6,100,000
Less: Offering costs................. (70,000) (70,000)
--------- ----------
Net proceeds from offering............ 4,030,000 6,030,000
Less: Par value of common stock...... 41,000 61,000
--------- --------
Additional Paid In Capital............ $3,989,000 $5,969,000
========= =========
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
The Company was incorporated under the laws of the State of New Jersey
on January 16, 1998, for the purpose of becoming a unitary savings and loan
holding company, which will own all of the outstanding shares of capital stock
of a proposed federal stock savings bank, Village Bank. It is anticipated,
though there is no assurance, that the Company will receive regulatory approval
to open the Bank in January or February, 1999.
Prior to the offering, the only material source of funds for the
Company has been private sales of the Company's common stock to the organizers
of the Company and certain other initial investors at a price of $10.00 per
share. In connection with such sales, these individuals purchased 94,850 shares
of Common Stock. The Company received aggregate gross proceeds of $948,500. The
Company may issue warrants, grant stock options or declare a split of the shares
of common stock to the organizers and other individuals who purchased shares in
the private placement, provided the Company is not prohibited from taking these
actions by applicable regulations or by regulatory authority. The warrants,
stock options, or split of shares is contemplated in recognition of the risk
undertaken by those individuals.
The Company is recently formed and the Bank will be newly formed, both
without any prior operating history. The operating results of the Company will
be dependent upon the operating results of the Bank. The Bank will to a large
extent be a first mortgage lender on residential real estate and its
profitability will depend in large part on the real estate market of its primary
market area. The Bank will incur operating expenses and there can be no
assurances as to when, if ever, the Bank will generate sufficient revenues to
operate profitably. Assuming that the minimum net proceeds from the offering are
raised, the Company presently believes that it will have sufficient capital
resources to meets its commitments over the next twelve months. See "Use of
Proceeds;" "Unaudited Pro Forma Financial Information;" and "Office Facilities."
PROPOSED BUSINESS OF THE COMPANY
General
The Company, a New Jersey corporation, was incorporated primarily to be
the holding company of the Bank. The Company has not conducted any business
activities to date other than entering into the Lease Agreement and those
activities deemed necessary by the Company to obtain regulatory approval for the
Bank and to proceed with the offering. The Company will initially engage
exclusively in the business of owning all of the outstanding shares of capital
stock of the Bank. However, the Company may pursue other business interests in
the future, subject to regulatory approval. There can be no assurances as to
when, if ever, the Company will pursue such interests. Accordingly, the
Company's initial earnings will be dependent upon dividends received by the
Company from the Bank, which dividends are dependent on the Bank's profitability
and the Bank's compliance with certain regulatory requirements. See "Regulation
- - Savings Institution Regulation -- Dividend and Other Capital Distribution
Limitations."
The Company may not acquire the capital stock of the Bank without the
approval of the Office of Thrift Supervision (the "OTS"). On August 3, 1998, the
Company filed with the OTS an Application for Permission to Organize the Bank,
and an Application H-(e)1 to become the holding company for the Bank. These
Applications were filed to obtain the necessary approvals and these approvals
were conditionally granted by the OTS on __________ ___, 1998. An FDIC
Application for Federal Deposit Insurance was filed on August 7, 1998 and
approval was conditionally granted on __________ ___, 1998.
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Upon satisfaction of the conditions of the offering and of the regulators and
the release of escrowed funds to the Company, the Company will proceed to
acquire all of the shares of capital stock of the Bank and the Company will
become, subject to the Bank's compliance with certain regulatory requirements
discussed below, a unitary savings and loan holding company. As such, the
company will be subject to examination and comprehensive regulation by the OTS.
Because the Company will own only one savings association, it generally will not
be restricted in the types of business activities in which it may engage,
provided that the Bank retains a specified amount of its assets in
housing-related investments. See "Regulation - Holding Company Regulation."
The Company is currently located at 23 Route 31 North, Suite A22,
Pennington, New Jersey 08534. The telephone number is (609) 730-0183. The
Company expects, upon the opening of the Bank, to relocate to the main office of
the Bank at 590 Lawrence Square Boulevard, Lawrenceville, New Jersey. At the
present time, upon the approval and opening of the Bank, the Company does not
intend to have any employees other than its officers. The Company may utilize
the support staff of the Bank from time to time. The Company initially will
engage in no business other than owning all of the outstanding shares of capital
stock of the Bank; therefore, the competitive conditions to be faced by the
Company will be the same as those faced by the Bank.
Additional Information
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement under the Securities Act of 1933, as amended,
with respect to the common stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the common stock, reference
is hereby made to the Registration Statement and the exhibits thereto. The
Registration Statement may be examined at, and copies of the Registration
Statement may be obtained at prescribed rates from, the Public Reference Section
of the SEC, Room 1024, 450 Fifth Street, N.W., Washington, DC 20549. Such
material may also be accessed electronically by means of the SEC's home page on
the Internet at "http://www.sec.gov".
The Company and the Bank have filed various applications with the OTS
and the FDIC, as required by the applicable regulatory authorities. Prospective
investors should rely only on information contained in this Prospectus and in
the Company's related Registration Statement in making an investment decision.
To the extent that information available from the Company and information in
public files and records maintained by the OTS and the FDIC is inconsistent with
information presented in this Prospectus, such other information is superseded
by the information presented in this Prospectus.
Reports to Stockholders
Upon the effective date of the Registration Statement, the Company will
be subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which includes requirements to file annual
reports on Form 10-KSB and quarterly reports on Form 10-QSB with the SEC. This
reporting obligation will exist for at least one year and may continue for
fiscal years thereafter, except that such reporting obligations may be suspended
for any subsequent fiscal year if at the beginning of such year the common stock
of the Company is held of record by fewer than three hundred persons or if the
common stock of the Company is held of record by fewer than five hundred persons
and the total assets of the Company have not exceeded $10 million on the last
day of each of the Company's three most recent fiscal years.
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Regardless of whether the Company is subject to the reporting
requirements of the Exchange Act, the Company intends to furnish its
stockholders with annual reports containing audited financial information for
each fiscal year. The Company's fiscal year ends on December 31.
PROPOSED BUSINESS OF THE BANK
General
The proposed business of the Bank will primarily consist of accepting
deposits and originating mortgage, consumer, small business and other loans. The
Bank intends to supplement its portfolio of loans with investment securities
deemed prudent by the board of directors. Upon regulatory approval, the Bank
will seek to attract deposits. The Bank intends to pay money market deposit
account rates above the average market rates. The Bank also intends to offer a
checking account, a savings account and a NOW account and various certificates
of deposit products at competitive interest rates. The Bank or Company may also
offer through affiliations with other companies, alternative non-deposit
investments, such as mutual funds and securities, although no determination has
been made as to when, if ever, the Bank or Company will enter into such
affiliations. The Bank anticipates originating primarily residential mortgage
loans and home equity loans. To a lesser extent, the Bank intends to originate
consumer installment, commercial real estate and small business loans.
The organizers' assumptions as to the viability of the Bank, as
represented in their business plan, are based on projections of population
growth, deposit growth and housing development in the market area and adjacent
communities, as well as on assumed levels of earning assets, interest rates and
operating expenses. These projections and assumptions are thus subject to the
hazards of forecast and may prove to be inaccurate. Furthermore, although the
Company anticipates some growth in its primary market area, there can be no
assurance of any growth or that the Bank will benefit from any growth.
The Bank has prepared a strategic business plan to provide direction
for the Bank over the next three years. Although the Bank anticipates numerous
revisions as to tactics and possibly even to strategy, the basic objectives of
the Bank, though there is no assurance that such objectives will be attained,
are as follows:
o The Company will pursue aggressive, but controlled, balance
sheet growth with the Bank originating a broad array of
lending products, including residential mortgage, commercial
mortgage, consumer installment and commercial loans.
o The Bank anticipates attracting deposits with an emphasis on
core deposits and transaction accounts with competitive rates
and products, supported by individuals with strong customer
service attitudes and skills.
o The Bank intends to outsource non-banking services, such as
data processing, in order to employ a core group of banking
professionals focused on customer needs.
Prospects
Although investment in its common stock involves significant risk, the
organizers believe that the Company will be able to compete effectively.
Furthermore, as a ^ stockholder-owned institution, the Bank will not be subject
to the limitations on raising capital that have constrained mutual institutions,
and will have the opportunity to raise capital from institutional and other
private investors.
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The Company, through the Bank, intends to fill what it perceives to be
a significant market niche that exists in central Mercer County, and
particularly in Lawrence Township and Pennington Borough. These areas are
currently served almost entirely by large financial institutions based outside
of the area. The Bank will have local owners, directors and senior management
and therefore anticipates being more responsive to the banking needs of the
local community. However, there can be no assurance that the Bank will achieve
this goal.
In the current environment of bank mergers, acquisitions, and
consolidations, there is a perceived need for banks focused on the needs of the
local community. The organizers believe this void of community focused banks is
particularly evident in the Lawrence Township and Pennington Borough areas. The
organizers of the proposed Bank intend to provide a community bank oriented
toward the local residents and small businesses in the primary market area.
The Bank believes that the following attributes will make the Bank
attractive to the local business people and residents:
o Direct and easy access to the Bank's President, officers and directors by
members of the community, whether during or after business hours.
o Local conditions and needs will be taken into account by the Bank when
deciding loan applications and making other business decisions affecting
members of the community.
o A personalized relationship banking approach that is supported by decision
making that is local and responsive to customer needs.
o Offering competitive interest rates and fees on savings and checking
accounts.
o Prompt review and processing of loan applications.
o Depositors' funds will be invested back into the community.
o Positive involvement of the Bank in the community affairs within its
primary market area.
o A staff of individuals with strong customer service attitudes and skills
dedicated to meeting customer needs.
In ^ October 1998, Village Financial Corporation agreed to the terms of
a lease for 590 Lawrence Square Boulevard, a facility previously operated as a
bank branch and equipped with much of the necessary banking equipment. As such,
the Bank has leased a facility which can open immediately upon receipt of
regulatory approval. The Bank has also signed a lease to operate a limited
service facility near the Pennington Point adult community. Leasing these
facilities will provide the Bank with a convenient location in Lawrenceville,
with an ATM facility, a drive-in facility, teller stations and the potential to
add safe deposit boxes, as well as the potential to attract deposits from the
retirement community.
Market Area
The Bank's main office ^ will be located at 590 Lawrence Square
Boulevard, Lawrenceville, New Jersey. The Bank's primary market area will
consist of Lawrence Township and Pennington Borough in Mercer County. A final
determination as to the boundaries of the primary market area is subject to
regulatory approval or non-objection.
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Lawrence Township is mainly a residential and small business community
consisting of approximately 50 square miles. The population within a four-mile
radius of the proposed main office has been estimated to be approximately 68,000
and the population of Mercer County has been estimated to be approximately
330,000. There are over 2,500 businesses located within four miles of the
proposed main office consisting mainly of small service and retail businesses
with less than 10 employees.
Competition
Competition for deposits and loans is strong among savings
institutions, commercial banks, mortgage banks, mortgage brokers, credit unions
and money market funds. There is also increasing competition from securities
firms and other financial service corporations not traditionally engaged in the
banking or savings business. The primary factors with which institutions compete
for deposits and loans are interest rates, loan origination fees and range of
services offered.
Mercer County, which includes the Bank's primary market area is served
almost entirely by large, regional financial institutions, almost all of which
are headquartered out of the area. As of June 30, 1998, these financial
institutions include Carnegie Bank (merged with Sovereign Bank), College Savings
Bank, CoreStates Bank, N.A. (merging with First Union National Bank), Dime
Savings Bank of New York, First Union National Bank, First Washington State
Bank, Fleet Bank, N.A., Mellon Bank, N.A., Mercer County New Jersey Teachers
Federal Credit Union, PNC Bank, N.A., Public Service Ed Trenton FCU, Pulse
Savings Bank (merging with First Source Bancorp, Inc.), Roma FSB, Sovereign
Bank, Summit Bank, Sun National Bank, Third Federal Savings Bank, Trenton
Savings Bank (merging with Sovereign Bank), U.S. Trust Company of New Jersey and
Yardville National Bank.
All of these institutions have been in existence for a longer period of
time than the Bank, are better established than the Bank and have financial
resources substantially greater than those of the Bank. The Bank will not have
an existing deposit base when it commences operations, and will be competing for
deposits with these larger established institutions as well as with investment
bankers, money market mutual funds and other non-traditional financial
intermediaries. The Bank will have to attract its loan customer base from
existing financial institutions and from growth in the community.
Market Strategy
The Bank's objective will be to create a customer-driven financial
institution focused on providing value to residents and businesses within the
local community by delivering products and services matched to the clients'
needs. It is believed that customers will be drawn to a locally managed
institution that demonstrates an active interest in its customers and their
business and personal financial needs.
The banking industry in general has experienced substantial
consolidation in recent years. From the organizers' point of view, this
consolidation has resulted in increasing fees for bank services, the dissolution
of local boards of directors, management and personnel changes and a decline in
the level of customer service and attention to the needs of local communities.
With the permissibility of interstate banking and the announcements of several
mergers by large financial institutions, the organizers anticipate this type of
consolidation to continue. The organizers believe that the present competitive
and economic environment is right for a new, independent, locally managed bank
to service the financial needs of residents and businesses of Lawrence Township
and Pennington Borough.
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Lending Activities
General. The Bank anticipates that its lending activities will be
primarily composed of the origination of residential mortgage loans and home
equity loans for the purpose of financing and refinancing one-to-four family
residential properties. To a lesser extent, the Bank anticipates that it will
originate commercial real estate loans, commercial business loans and consumer
installment loans. The types of loans the Bank will originate generally will be
subject to federal and state law and regulation. All loan requests will be
subject to appropriate underwriting guidelines, a loan review process,
management supervision and monitoring by the board of directors on an ongoing
basis. The Bank will implement various lending limits for the Bank's loan
officers and will maintain a loan committee composed of the President, Chief
Lending Officer and at least one outside director to be determined prior to the
opening of the Bank.
The Bank's ability to originate loans will be dependent upon the
relative customer demand, which will be affected by the current and expected
future level of interest rates. Interest rates will be affected by the demand
for loans and the supply of money available for lending purposes and the rates
offered by competitors. Among other things, these factors are, in turn, affected
by economic conditions, monetary policies of the federal government and
legislative tax policies.
The Bank intends to originate the following loans:
One- to Four-Family Mortgage Loans. The Bank intends to offer
fixed-rate and adjustable-rate mortgage loans primarily secured by one- to
four-family residences, with maturities up to 30 years. It is anticipated that
such loans will be secured by properties located in the Bank's market areas. All
one-to four-family loans will be underwritten using generally accepted lending
standards such as Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), or the Federal Home Loan Mortgage
Corporation ("FHLMC"). The Bank will originate loans for both owner occupied and
non-owner occupied (investor) residential properties. Non-owner occupied
residential mortgage loans generally carry a higher degree of credit risk than
owner occupied residential mortgage loans. The Bank intends to limit non-owner
occupied residential lending for a given year to approximately 5% of the total
residential loan volume for the year. The maximum loan-to-value ratio for such
loans will be 70% to 80%. The Bank plans on maintaining all residential mortgage
loans originated during the first three years of existence but intends to sell a
portion of such loans if the Bank deems it necessary. If the Bank sells any of
its loans, the Bank intends to retain the servicing rights to such loans. The
Bank expects its one- to four-family mortgage loans to be composed primarily of
one-year adjustable rate loans, 15-year fixed rate loans and 30-year fixed rate
loans.
Home Equity Loans. The Bank intends to offer home equity term loans and
home equity revolving lines of credit, primarily secured by one- to four-family,
owner occupied residences. It is anticipated that the Bank will employ similar
underwriting standards in making home equity loans as those utilized in making
residential mortgage loans. The Bank expects to originate term loans for periods
up to 15 years and to originate adjustable rate revolving lines of credit.
Commercial Real Estate Loans. The Bank intends to offer commercial and
multi-family real estate loans (five units or more) generally secured by
property located in the Bank's market areas. The Bank intends to originate
commercial mortgage loans for the acquisition, construction and refinancing of
commercial real estate. At times such loans may exceed the Bank's internal
lending limits and will require the Bank to obtain the participation of other
financial institutions to assist in funding excess loan amounts. In such cases,
the Bank expects to maintain servicing responsibility for the loans.
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Commercial real estate and multi-family loans are generally larger and
present a greater degree of credit risk than loans secured by one- to
four-family residences. Because payments on loans secured by commercial real
estate and multi-family properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject to a greater extent to adverse conditions in the real estate market or
in the economy. It is anticipated that the Bank will seek to minimize these
risks through its underwriting standards. The Bank currently does not anticipate
originating more than one multi-family loan per year. The maximum loan amount
for multi-family loans will be up to 75% of the appraised value of the property.
Small Business Commercial Loans. The Bank intends to pursue
opportunities to offer small business loans, primarily to businesses located in
the Bank's market areas. Federally chartered savings institutions such as the
Bank are authorized to make secured or unsecured loans and letters of credit for
commercial, corporate, business and agricultural purposes and to engage in
commercial leasing activities. However, federally chartered savings institutions
generally are limited in the amount of commercial business loans they may hold
in their portfolio to a maximum of 20% of total assets.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income, and which are secured by real estate property whose value tends to
be more easily ascertainable, commercial business loans are of higher credit
risk and typically are made on the basis of the borrower's ability to make
repayment from cash flow of the borrower's business. As a result, the
availability of funds for the repayment of commercial business loans may be
substantially dependent on the success of the business itself. Further, the
collateral securing the loans may depreciate over time, may be difficult to
appraise and may fluctuate in value on the success of the business.
Consumer Loans. The Bank intends to make a variety of consumer loans
which are anticipated to consist primarily of fixed-rate installment loans
secured by automobiles or by deposits at the Bank. The Bank may originate home
improvement loans not secured by real estate and other personal loans, both
secured and unsecured.
Consumer loans may entail greater credit risk than do residential
mortgage loans, particularly in the case of consumer loans that are unsecured or
that are secured by rapidly depreciable assets, such as automobiles. In such
cases, any repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. In addition, consumer
loan collections are dependent on the borrower's continuing financial stability,
and therefore are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loan.
Participation Interests. The Bank will consider participating in loans
originated in New Jersey outside its primary market area, provided such loans
meet approval criteria as will be stipulated in the Bank's lending policies. The
Bank anticipates participation in the origination of loans through Thrift
Institutions' Community Investment Corporation, a subsidiary of the New Jersey
League - Savings and Community Bankers.
Loan Approval. The Bank's lending activity will be conducted primarily
through advertising, customer calls and contacts by the Bank's employees,
officers and directors and solicitations to local real estate brokers, builders
and real estate developers. The Bank's lending will be subject to written
underwriting standards (including, as applicable, a Year 2000 compliance clause)
and loan origination procedures. Decisions on loan applications will be made on
the basis of detailed applications and
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<PAGE>
property valuations. The loan applications will be designed primarily to
determine the borrower's ability to repay and the more significant items on the
applications will be verified through the use of credit reports, financial
statements, tax returns and/or confirmations.
The Bank generally will require title insurance on its real estate
secured loans as well as fire and extended coverage casualty insurance in
amounts at least equal to the principal amount of the loan or the value of
improvements on the property, depending on the type of loan. The Bank also will
require flood insurance to protect the property securing its interest when the
property is located in a flood plain.
Loan Fees and Service Charges. In addition to interest earned on loans,
the Bank will generally recognize fees and service charges which consist
primarily of loan origination fees and late charges.
Loans to One Borrower. Under applicable regulations, the maximum amount
of loans that may be made to one borrower initially will not exceed the greater
of $500,000 or 15% of the unimpaired capital and surplus of the Bank. The Bank
may lend an additional 10% of unimpaired capital and surplus if a loan is fully
secured by readily marketable collateral.
Delinquencies. The Bank's collection procedures are expected to provide
that when a loan is 30 days past due, a late charge is added and the borrower is
contacted by mail and/or telephone and payment 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 90 days or more, the Bank will likely initiate foreclosure
proceedings unless other repayment arrangements are made. Non-Performing Assets
and Asset Classification. Loans will be reviewed on a regular basis and
classified in accordance with the requirements of the OTS and internal policies
of the Bank. The Bank's internal classifications will be reviewed annually
through a loan review process. Such a loan review will likely be outsourced to
an independent qualified third party.
Investment Activities
The Bank will be required under federal regulations to maintain a
minimum amount of liquid assets which may be invested in specified short-term
securities and certain other investments.
The Bank expects to maintain a liquidity portfolio in excess of regulatory
requirements. Until the Bank is able to originate sufficient loans, it expects
to leverage its capital by investing deposits and borrowed money in securities
and other investments at a positive interest rate spread exceeding the cost of
deposits received and borrowings. Liquidity levels may be increased or decreased
depending upon the yields on investment alternatives and upon management's
judgment as to the attractiveness of the yields then available in relation to
other opportunities and its expectation of the level of yield that will be
available in the future, as well as management's projections as to the short
term demand for funds to be used in the Bank's loan origination and other
activities. The Bank intends to invest primarily in U.S. Government and agency
obligations, federal funds sold and U.S. government agency issued
mortgage-backed securities.
Sources of Funds
General. The management of the Bank will endeavor to build a deposit
base with the expectation that deposits will be the major source of the Bank's
funds for lending and other investment purposes. In addition to deposits, the
Bank anticipates deriving funds from payment streams of loans and securities,
sale or maturities of investment securities, operations and, as needed, advances
from the Federal Home Loan Bank ("FHLB") of New York. Scheduled loan principal
repayments are generally a stable source of funds for banking institutions,
while deposit inflows and outflows and loan prepayments are
23
<PAGE>
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 will be attracted
principally from within the 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 and Keogh accounts. Deposit account terms will vary acc ording to the
minimum balance required, the time periods the funds must remain on deposit and
the interest rate, among other factors. The Bank will regularly evaluate the
internal cost of funds, survey rates offered by competing institutions, review
the Bank's cash flow requirements for lending and liquidity and execute rate
changes when deemed appropriate. The Bank does not anticipate obtaining funds
through brokers. The Bank may seek to acquire deposits from another financial
institution in the Bank's primary market area, but presently has no agreements
nor intentions to do so.
Employees
The Bank anticipates having 10 full-time equivalent employees,
including two executive officers, when it commences operations. The executive
officers of the Bank are expected to initially include (i) the President and
Chief Executive Officer (who will also serve initially as the Chief Financial
Officer) and (ii) a Chief Lending Officer. The Bank also expects to employ a
Senior Operations Officer. In addition, the Bank intends to employ a Branch
Manager, Administrative Assistant and a Customer Service Representative. The
Bank may employ a Loan Processor and an Operations Supervisor subsequent to the
opening of the Bank, but will not likely employ such individuals until the year
2000. The remaining employees will provide staff support in the teller, new
accounts and loan processing functions. The employees of the Bank will
concentrate on providing a high level of service to the customers of the Bank.
Non-banking services, such as data processing, will likely be outsourced to
companies specializing in those areas. The Company anticipates having the same
executive officers of the Bank act as executive officers of the Company. No
other employees of the Company are anticipated at this time. See "Management of
the Company" and "Management of the Bank."
Total compensation for the Bank's employees for the first full year of
operations is projected to be $387,000. In addition, the Bank intends to provide
its employees with certain benefits programs, including medical insurance, paid
vacation time and sick leave. Directors will receive fees in the amount of $300
per month. A stock option plan and restricted stock plan are expected to be
adopted by the Board, subject to stockholder approval. Other benefit programs
such as a profit sharing plan may also be adopted following commencement of
operations of the Bank. The board of directors will consider the implementation
of a pension plan, but no such plan will be in place at the commencement of
operations of the Bank.
REGULATION
Set forth below is a brief description of certain laws which relate to
the Company and the Bank. The description is not complete and is qualified in
its entirety by references to applicable laws and regulations.
Holding Company Regulation
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General. The Company will be required to register and file reports
reports with the OTS and will be subject to regulation and examination by the
OTS. In addition, the OTS will have enforcement authority over the Company and
any non-savings institution subsidiaries. This will permit the OTS to restrict
or prohibit activities that it determines to be a serious risk to the Company
and the Bank. This regulation is intended primarily for the protection of the
Bank's depositors and not for the benefit of the stockholders of the Company.
Qualified Thrift Lender ("QTL") Test. Since the Company will only own
one savings institution, it will be able to diversify its operations into
activities not related to banking, if the Bank satisfies the QTL test. If the
Company controls more than one savings institution, it would lose the ability to
diversify its operations into non-banking related activities, unless such other
savings institutions each also qualify as a QTL or were acquired in a supervised
acquisition. See "- Savings Institution Regulation -- Qualified Thrift Lender
Test."
Restrictions on Acquisitions. The Company must obtain approval from the
OTS before acquiring control of any other SAIF-insured savings institution. No
person may acquire control of a federally insured savings institution without
providing at least 60 days written notice to the OTS and giving the OTS an
opportunity to disapprove the proposed acquisition.
Savings Institution Regulation
General. As a federally chartered, SAIF-insured savings institution,
the Bank is subject to extensive regulation by the OTS and the FDIC. The Bank's
lending activities and other investments must comply with various federal and
state statutory and regulatory requirements.
The OTS, in conjunction with the FDIC, will regularly examine the Bank
and prepare reports for the consideration of the board of directors on any
deficiencies that the OTS finds in the Bank's operations. The Bank's
relationship with the depositors and borrowers also will be regulated to a great
extent by federal and state law, especially in such matters as the ownership of
savings accounts and the form and content of its mortgage documents.
The 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 financial 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 regulations, whether by the OTS, the FDIC or any other
government agency, could have a material adverse impact on the Bank's
operations.
Insurance of Deposit Accounts. The FDIC is authorized to establish
separate annual assessment rates for deposit insurance for members of the BIF
and the SAIF. The FDIC may increase assessment rates for either fund if
necessary to restore the fund's ratio of reserves to insured deposits to its
target level within a reasonable time and may decrease such assessment rates if
such target level has been met. The FDIC has established a risk-based assessment
system for both SAIF and BIF members. Under this system, assessments are set
within a range, based on the risk the institution poses to its deposit insurance
fund. This risk level is determined based on the institution's capital level and
the FDIC's level of supervisory concern about the institution.
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Because a significant portion of the assessments paid into the SAIF by
savings institutions were used to pay the cost of prior savings institution
failures, the reserves of the SAIF were below the level required by law. The BIF
had, however, met its required reserve level during the third calendar quarter
of 1995. As a result, deposit insurance premiums for deposits insured by the BIF
were substantially less than premiums for deposits which are insured by the
SAIF. Legislation to capitalize the SAIF and to eliminate the significant
premium disparity between the BIF and the SAIF became effective September 30,
1996. The recapitalization plan provided for a special assessment equal to $.657
per $100 of SAIF deposits held at March 31, 1995, in order to increase SAIF
reserves to the level required by law. Certain BIF institutions holding
SAIF-insured deposits were required to pay a lower special assessment.
The recapitalization plan also provides that the cost of prior failures
which were funded through the issuance of Fico Bonds (bonds issued to fund the
cost of savings institution failures in prior years) will be shared by members
of both the SAIF and the BIF. This increased BIF assessments for healthy banks
to approximately $.0125 per $100 of deposits in 1998. SAIF assessments for
healthy savings institutions in 1998 were approximately $.0628 per $100 in
deposits and may be reduced, but not below the level set for healthy BIF
institutions.
The FDIC has lowered the rates on assessments paid to the SAIF and
widened the spread of those rates. The FDIC's action established a base
assessment schedule for the SAIF with rates ranging from 4 to 31 basis points,
and an adjusted assessment schedule that reduces these rates by 4 basis points.
As a result, the effective SAIF rates range from 0 to 27 basis points as of
October 1, 1996. In addition, the FDIC's final rule prescribed a special interim
schedule of rates ranging from 18 to 27 basis points for SAIF-member savings
institutions for the last quarter of calendar 1996, to reflect the assessments
paid to the Financing Corporation (Fico Bonds). Finally, the FDIC's action
established a procedure for making limited adjustments to the base assessment
rates by rulemaking without notice and comment, for both the SAIF and the BIF.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming there are no savings institutions under
federal law. Under separate proposed legislation, Congress is considering the
elimination of the federal thrift charter and elimination of the separate
federal regulation of thrifts. As a result, the Bank may have to convert to a
different financial institution charter and be regulated under federal law as a
bank, including being subject to the more restrictive activity limitations
imposed on national banks. The Bank cannot predict the impact of the proposed
legislation unless and until the legislation requiring such change is enacted.
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) core capital equal to at least 3% of total
adjusted assets, and (3) risk-based capital equal to 8% of total risk-weighted
assets. The Bank's capital ratios, which are set forth under "Historical and Pro
Forma Capital Compliance," are expected to be well in excess of these
requirements.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders' equity
(including retained earnings), noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits of mutual savings associations and
qualifying supervisory goodwill, less nonqualifying intangible assets, certain
mortgage servicing rights and certain investments.
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<PAGE>
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% 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 portion of the allowance for loan
losses not designated for specific loan losses. The portion of the 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.
The risk-based capital standards of the OTS generally require savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. An institution's interest rate risk will be measured
in terms of the sensitivity of its "net portfolio value" to changes in interest
rates. Net portfolio value is defined, generally, as the present value of
expected cash inflows from existing assets and off-balance sheet contracts less
the present value of expected cash outflows from existing liabilities. A savings
institution will be considered to have a "normal" level of interest rate risk
exposure if the decline in its net portfolio value after an immediate 200 basis
point increase or decrease in market interest rates (whichever results in the
greater decline) is less than two percent of the current estimated economic
value of its assets. An institution with a greater than normal interest rate
risk will be required to deduct from total capital, for purposes of calculating
its risk-based capital requirement, an amount (the "interest rate risk
component") equal to one-half the difference between the institution's measured
interest rate risk and the normal level of interest rate risk, multiplied by the
economic value of its total assets.
The OTS calculates the sensitivity of an institution's net portfolio
value based on data submitted by the institution in a schedule to its quarterly
Thrift Financial Report and using the interest rate risk measurement model
adopted by the OTS. The amount of the interest rate risk component, if any, to
be deducted from an institution's total capital will be based on the
institution's Thrift Financial Report filed two quarters earlier.
Savings institutions with less than $300 million in assets and a risk-based
capital ratio above 12% are generally exempt from filing the interest rate risk
schedule with their Thrift Financial Reports. However, the OTS may require any
exempt institution that it determines may have a high level of interest rate
risk exposure to file such schedule on a quarterly basis and may be subject to
an additional capital requirement based upon its level of interest rate risk as
compared to its peers. However, due to the Bank's net size and risk-based
capital level, it is expected to be exempt from the interest rate risk
component.
In accordance with the requirements of the Federal Deposit Insurance
Corporation with respect to the Application for Insurance of Deposits of Village
Bank, the organizers agreed to maintain a Tier 1 Capital ratio to total
estimated assets of at least 8% and an adequate allowance for loan and lease
losses for the first three years of operation of the Bank from the date the FDIC
deposit insurance is effective.
Dividend and Other Capital Distribution Limitations. OTS regulations
require the Bank to give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends by the Bank to the
Company.
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 stockholders 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
27
<PAGE>
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 notice. The Bank expects to qualify as a
Tier 1 institution, but there can be no assurance that it will achieve this
goal.
In the event the Bank's capital falls below the fully phased-in
requirement or the OTS notifies the Bank that it needs more than normal
supervision, the Bank would become a Tier 2 or Tier 3 institution and as a
result, its ability to make capital distributions could be restricted. Tier 2
institutions, which are institutions that before and after the proposed
distribution meet their current minimum capital requirements, may only make
capital distributions of up to 75% of net income over the most recent four
quarter period. Tier 3 institutions, which are institutions that do not meet
current minimum capital requirements and propose to make any capital
distribution, and Tier 2 institutions that propose to make a capital
distribution in excess of the noted safe harbor level, must obtain OTS approval
prior to making such distribution. 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. The OTS has proposed rules relaxing
certain approval and notice requirements for well-capitalized institutions.
In January 1998, the OTS proposed amendments to its current regulations
with respect to capital distributions by savings associations. Under the
proposed regulation, savings associations that would remain at least adequately
capitalized following the capital distribution, and that meet other specified
requirements, would not be required to file a notice or application for capital
distributions (such as cash dividends) declared below specified amounts. Under
the proposed regulation, savings associations which are eligible for expedited
treatment under current OTS regulations are not required to file a notice or an
application with the OTS if (i) the savings association would remain at least
adequately capitalized following the capital distribution and (ii) the amount of
capital distribution does not exceed an amount equal to the savings
association's net income for that year to date, plus the savings association's
retained net income for the previous two years. Thus, under the proposed
regulation, only undistributed net income for the prior two years may be
distributed in addition to the current year's undistributed net income without
the filing of an application with the OTS. Savings associations which do not
qualify for expedited treatment or which desire to make a capital distribution
in excess of the specified amount, must file an application with, and obtain the
approval of, the OTS prior to making the capital distribution. Under certain
other circumstances, savings associations will be required to file a notice with
OTS prior to making the capital distribution. The OTS proposed limitations on
capital distributions are similar to the limitations imposed upon national
banks. The Company is unable to predict whether or when the proposed regulation
will become effective.
A savings institution is prohibited from making a capital distribution
if, after making the distribution, the savings institution would be
undercapitalized (i.e., not meet any one of its minimum regulatory capital
requirements). Further, a savings institution cannot distribute regulatory
capital that is needed for its liquidation account.
Qualified Thrift Lender Test. Savings institutions must meet a
qualified thrift lender ("QTL") test. If the Bank maintains an appropriate level
of qualified thrift investments ("QTIs") (primarily residential mortgages and
related investments, including certain mortgage-related securities) and
otherwise qualifies as a QTL, the Bank will continue to enjoy full borrowing
privileges from the FHLB of New
28
<PAGE>
York. The required percentage of QTIs is 65% of 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). Certain assets are
subject to a percentage limitation of 20% of portfolio assets. In addition,
savings institutions may include shares of stock of the FHLBs, FNMA, and FHLMC
as QTIs. Compliance with the QTL test is determined on a monthly basis in nine
out of every 12 months.
Transactions With Affiliates. Generally, restrictions on transactions
with affiliates require that transactions between a savings institution or its
subsidiaries and its affiliates be on terms as favorable to the savings
institution as comparable transactions with non-affiliates. In addition, certain
of these transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. The Bank's
affiliates include the Company and any company which would be under common
control with the Bank. In addition, a savings institution may not extend credit
to any affiliate engaged in activities not permissible for a bank holding
company or acquire the securities of any affiliate that is not a subsidiary. The
OTS has the discretion to treat subsidiaries of savings institutions as
affiliates on a case-by-case basis.
Liquidity Requirements. All savings institutions are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. Monetary penalties may be imposed upon
institutions for violations of liquidity requirements.
Federal Home Loan Bank System. The Bank will be a member of the FHLB of
New York, which is one of 12 regional FHLBs. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from funds deposited by savings institutions and 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 Bank will be required to purchase and maintain stock
in the FHLB of New York in an amount equal to at least 1% of our aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year. The FHLB imposes various limitations
on advances such as limiting the amount of certain types of real estate related
collateral to 30% of a member's capital and limiting total advances to a member.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions 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.
Federal Reserve System. The Federal Reserve System 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 System may be used
to satisfy the liquidity requirements that are imposed by the OTS. Savings
institutions have authority to borrow from the Federal Reserve System "discount
window," but Federal Reserve System policy generally requires savings
institutions to exhaust all other sources before borrowing from the Federal
Reserve System.
29
<PAGE>
MANAGEMENT OF THE COMPANY
The board of directors of the Company currently consists of the same
individuals who will serve as directors of the Bank. The Company's certificate
of incorporation and bylaws require that directors be divided into three
classes, as nearly equal in number as possible. Each class of directors serves
for a three-year period, with approximately one-third of the directors elected
each year. The Bank's officers will be elected by the Board and serve at the
Board's discretion.
MANAGEMENT OF THE BANK
Directors
The proposed board of directors of the Bank ^ will be composed of six
members. The proposed stock charter and bylaws for the Bank require that
directors be divided into three classes, as nearly equal in number as possible.
The officers are elected annually by the Board and serve at the Board's
discretion.
The following table sets forth information with respect to the
directors, executive officers, and significant employees, all of whom will
continue to serve in the same capacities after the offering. The Bank is
currently negotiating with one individual to become Vice President and Chief
Lending Officer and another individual to become Vice President and Senior
Operations Officer.
<TABLE>
<CAPTION>
Proposed % of
Stock Proposed
Organization Subscription Total Ownership
Directors Age (1) Position Shares Shares Shares (2)(3)
- --------- ------- -------- ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
William C. Hart 65 Chairman of the Board 2,500 2,500 5,000 1.0
Kenneth J. Stephon 39 President, CEO and 5,100 10,000 15,100 3.0
Director
William V. R. Fogler ^ 54 Director 3,000 3,000 6,000 1.2
Paul J. Russo 47 Director 5,000 1,000 6,000 1.2
Jonathan R. Sachs 41 Director 1,500 2,000 3,500 *
George M. Taber 56 Director 1,500 2,500 4,000 *
------ ------ ----- ---
18,600 21,000 39,600 7.9
====== ====== ====== ===
</TABLE>
- ------------------
(1) At ^ September 30, 1998.
(2) Includes shares purchased in the private placement.
(3) Based upon 505,000 shares (outstanding after the issuance of common stock
in the private placement and the offering).
* Less than 1%
Messrs. Hart and Stephon have over forty years combined experience in
the banking industry. Each has served as Chief Executive Officer and a director
of a thrift institution in New Jersey.
There is no family relationship between any director or executive
officer. No director or executive officer has filed a petition in bankruptcy in
the past five years, nor been convicted in a criminal proceeding. The business
experience for the past five years of each of the directors and executive
officers is as follows:
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<PAGE>
Kenneth J. Stephon was President, Chief Executive Officer and a
Director of CloverBank, Pennsauken, New Jersey from 1993 until July 1998, having
previously served CloverBank as Executive Vice President and Chief Financial
Officer. Mr. Stephon has over twenty years of experience in the banking and
thrift industries, with experience in all facets of financial institution
operations, with particular emphasis on administration, strategic planning and
implementation, investment portfolio management, asset and liability management,
budgeting and accounting. While at CloverBank, he was responsible for the daily
management of the $30 million, three office, community-oriented federal savings
bank. Mr. Stephon presently serves as Chairman of the MBA Advisory Board of
Rowan University, Glassboro, New Jersey. He is a member of the School of
Business Advisory Committee of The College of New Jersey and the Business
Advisory Commission of Mercer County Community College, West Windsor Township,
New Jersey. He has also served as a member of the Board of Governors of the New
Jersey League - Community and Savings Bankers for two terms and is a Past
President of the Burlington/Camden Counties Savings League. He has a Master's
Degree in Business Administration from Rider University, Lawrenceville, New
Jersey and a Bachelor of Science Degree in Accounting from The College of New
Jersey (formerly Trenton State College), Ewing Township, New Jersey.
William C. Hart has been the President and Chief Executive Officer of
Mercer Mutual Insurance Company, Pennington, New Jersey since 1987. Mr. Hart has
been a Director of Mercer Mutual Insurance Company since 1970 and was Chairman
of the Board from 1979 to 1985. He has also been the Chairman of the Investment
Committee at the insurance company since 1979. His experience in the thrift
industry includes Executive Vice President of Colonial Savings and Loan
Association, Roselle Park, New Jersey and President of Colonial Service
Corporation from 1984 to 1985 and Chief Executive Officer of Centennial Savings
and Loan Association, Pennington, New Jersey from 1962 to 1984. He has a
Bachelor of Science Degree in Accounting from Rider University, Lawrenceville,
New Jersey.
William V. R. Fogler is the founder and President of Van Rensselaer,
Ltd., Princeton, New Jersey, a registered investment advisory and arbitration
consulting firm, founded in 1989. The registered investment advisory division of
Van Rensselaer, Ltd. specializes in the management of individual, corporate and
ERISA portfolios. Mr. Fogler's exchange affiliations include, NYSE and NASD
General Securities Representative and the American Stock Exchange Puts and
Calls. He is a member of the NYSE, NASD and American Arbitration Association
arbitration panels. He is a Licensed Life Insurance Agent with the State of New
Jersey. He is a three term board member of the Rider University Business
Advisory Board and is the Chairman of the Development Committee. He has a
Bachelor of Science Degree in Business Administration from Rider University
School of Business Administration.
Paul J. Russo is the Vice President and part-owner of the Lawrenceville
Home Improvement Center, Inc., Lawrenceville, New Jersey, where he has worked
since 1973. Mr. Russo's responsibilities include sales, marketing and
management. He has been a volunteer manager and coach for the Lawrence Township
Little League and Babe Ruth League for ten years. He has a Bachelor's Degree of
Science in Commerce, magna cum laude, from Rider University, Lawrenceville, New
Jersey.
Jonathan R. Sachs, M.D. has been a physician with the Princeton
Gastroenterology Associates, Princeton, New Jersey since 1993, and in private
practice since 1989. Dr. Sachs is a licensed Medical Doctor in the State of New
Jersey and the Commonwealth of Pennsylvania. He became board certified in
Internal Medicine in 1987 and in Gastroenterology in 1989. He is a Fellow in
both the American College of Physicians and the American College of
Gastroenterology. He is the co-author of numerous articles in professional
publications and abstracts. He is the past Chairman of the Section of
Gastroenterology, Department of Internal Medicine at the Medical Center at
Princeton. He has been active with the Unitarian Church of Princeton, the
Citizens for Quality Schools in Hopewell Township, New Jersey, and as a hockey
coach in the Nassau Hockey League. He is a summa cum laude graduate
31
<PAGE>
of Amherst College, where he received his Bachelor of Arts Degree and graduated
medical school from the Medical College of Pennsylvania, Philadelphia,
Pennsylvania.
George M. Taber is the founder and President of BUSINESS NEWS New
Jersey. BUSINESS NEWS New Jersey, founded in its original form in 1988, is a
weekly newspaper with a readership of approximately 50,000. Mr. Taber is also
the daily business commentator for the radio station New Jersey 101.5, and
moderated "Business New Jersey This Week," a weekly cable television show. He
was a reporter and editor with Time magazine for 21 years. He has a Master of
Arts Degree from the College of Europe in Bruges, Belgium and a Bachelor of Arts
Degree from Georgetown University in Washington, D.C.
Remuneration of Directors and Officers
Director Compensation. The directors of the Bank will each receive fees
in the amount of $300 per month, except Mr. Stephon, who will not receive
directors' fees. The organizers do not intend for the Company to pay directors'
fees apart from those paid by the Bank. The Company may consider the payment of
separate board fees in the future based upon several factors, including, but not
limited to, the contribution of board members to the operations of the Company
rather than the Bank and the financial condition of the Company.
Employment Agreement. The Company entered into an employment agreement
with Mr. Stephon to serve as President and Chief Executive Officer of the
Company and the Bank for a three-year term. Mr. Stephon ^ receives a base salary
of $9,167 per month. The terms of the employment agreement also provide that Mr.
Stephon will be awarded between 10,000 and 30,000 stock options prior to the
effective date of this Prospectus, exercisable at a price equal to the offering
price in this offering, and exercisable for a period of ten years from the
effective date of the Prospectus.
Pension Plan. The Bank will not initially sponsor a tax-qualified
pension plan. Initially, the Bank may implement a 401(k) plan, which initially
will have contributions only by the employee. In the future, the Bank will
consider the implementation of a retirement plan that will involve contributions
made by the Bank.
Stock Option Plan. The board of directors expects to consider a stock
option plan or plans (the Option Plan) following the offering. The exercise
price is expected to be the fair market value of the common stock on the date of
grant, but not less than $10.00 per share. Options are expected to vest over
three years. The Board considers the adoption of the Option Plan to be in the
best interests of the Company and its shareholders by assisting the Company and
the Bank in attracting and retaining highly qualified individuals to serve as
members of management and the Board. The Option Plan shares may be issued from
shares purchased from the market or they may be issued from authorized but
unissued shares.
Restricted Stock Plan. The board of directors expects to consider a
restricted stock plan (the RSP) following the offering, the objective of which
is to enable the Company and the Bank to retain personnel and directors of
experience and ability in key positions of responsibility. The RSP will be
implemented in accordance with applicable OTS regulations. The RSP would be
managed by a committee of non-employee directors. The RSP shares may be issued
from shares purchased from the market or from authorized but unissued shares.
Other Benefits. The Bank expects to pay benefit costs for its
employees, including its officers. These costs may include such items as health
care, disability insurance and group term life insurance.
32
<PAGE>
Transactions with Related Parties
After the Company commences operations, it may engage in transactions
with its organizers, officers, employees, directors or other affiliated persons
only to the extent that such activities are permitted by, and consistent with,
all applicable state and federal regulations. OTS and FDIC regulations impose a
number of restrictions on transactions and dealings between the Company and
affiliated persons. The definition of "affiliated person" includes the Company's
directors and officers and their spouses and certain members of their immediate
families. Also included as affiliated persons are certain persons, corporations
and other organizations that have a close relationship with the Company as set
out in the regulations. All dealings between the Company and its affiliated
persons will have to comply with those regulations. The Company plans to adopt
policies designed to assure compliance with those regulations. Such
transactions, should they occur, are expected to be primarily in the nature of
loans made in the ordinary course of business such as home loans, educational
loans or consumer loans. In addition, future material transactions made or
entered into will be no less favorable to the Company than those that can be
obtained from unaffiliated third parties. All future loans to directors,
officers and affiliates, if any, will be made for bona fide business purposes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of ^ September 30, 1998, the shares
of common stock owned by each person who is a beneficial owner of more than five
percent of the outstanding common stock of the Company and is not an officer or
director of the Company.
Name and Address of Amount of Percent of Class
Beneficial Owner Beneficial Ownership Before Offering(1)
- ---------------- -------------------- ------------------
Fred D. Price
Cranbury, NJ 20,000 21.09%
Peter and Mary Russo Trust
Lawrenceville, NJ 10,000 10.54%
Felix Buccellata
Belle Mead, NJ 7,500 7.91%
Raman R. Patel
Lawrenceville, NJ 5,000 5.27%
John P. Russo, Jr.
Lawrenceville, NJ 5,000 5.27%
- ---------------
(1) Prior to this public offering of the common stock of the Company, there
were 94,850 shares of Company common stock outstanding.
33
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 5,000,000 shares of the common
stock, $0.10 par value, of which 94,850 shares were issued on May 20, 1998 in
the private placement. The Company is authorized to issue 1,000,000 shares of
serial preferred stock, $0.10 par value, with none issued to date. The Company
does not intend to issue any shares of serial preferred stock in the offering,
nor are there any present plans to issue such preferred stock following the
offering. The following is a summary of certain terms of the common stock and is
subject to and qualified in its entirety by reference to the certificate of
incorporation and bylaws of the Company which are filed with the SEC as exhibits
to the registration statement of which this Prospectus forms a part.
Common Stock
Voting Rights. Each share of the common stock will have the same
relative rights and will be identical in all respects to every other share of
the common stock. The holders of the common stock will possess exclusive voting
rights in the Company, except to the extent that shares of serial preferred
stock issued in the future may have voting rights, if so designated by the board
of directors of the Company. Each holder of the common stock will be entitled to
only one vote for each share held of record on all matters submitted to a vote
of holders of the common stock and will not be permitted to cumulate their votes
in the election of the Company's directors.
Liquidation. In the unlikely event of the complete liquidation or
dissolution of the Company, the holders of the common stock will be entitled to
receive all assets of the Company available for distribution in cash or in kind,
after payment or provision for payment of (i) all debts and liabilities of the
Company (including all savings accounts and accrued interest thereon); (ii) any
accrued dividend claims; and (iii) liquidation preferences of any serial
preferred stock which may be issued in the future.
Restrictions on Acquisition of the Common Stock. See "Certain
Anti-Takeover Provisions" for a discussion of the limitations on acquisition of
shares of the common stock.
Other Characteristics. Holders of the common stock will not have
preemptive rights with respect to any additional shares of the common stock
which may be issued. Therefore, the board of directors may sell shares of
capital stock of the Company without first offering such shares to existing
stockholders of the Company. The common stock is not subject to call for
redemption, and the outstanding shares of common stock when issued and upon
receipt by the Company of the full purchase price therefor will be fully paid
and non-assessable.
Issuance of Additional Shares. Other than shares to be issued pursuant
to the benefit plans, the Company has no present plans, proposals, arrangements
or understandings to issue additional authorized shares of the common stock. In
the future, the authorized but unissued and unreserved shares of the common
stock will be available for general corporate purposes, including, but not
limited to, possible issuance as stock dividends, in connection with mergers or
acquisitions, under a cash dividend reinvestment or stock purchase plan, in a
public or private offering, or under employee benefit plans. Normally no
stockholder approval would be required for the issuance of these shares, except
as described herein or as otherwise required to approve a transaction in which
additional authorized shares of the common stock are to be issued.
34
<PAGE>
Serial Preferred Stock
None of the 1,000,000 authorized shares of serial preferred stock of
the Company will be issued in the offering. After the offering is completed, the
board of directors of the Company will be authorized to issue serial preferred
stock and to fix and state voting powers, designations, preferences or other
special rights of such shares and the qualifications, limitations and res
trictions thereof, subject to regulatory approval but without stockholder
approval. If and when issued, the serial preferred stock is likely to rank prior
to the common stock as to dividend rights, liquidation preferences, or both, and
may have full or limited voting rights. The board of directors, without stockh
older approval, can issue serial preferred stock with voting and conversion
rights which could adversely affect the voting power of the holders of the
common stock. The board of directors has no present intention to issue any of
the serial preferred stock. If such stock is issued without shareholder
approval, such issuance will be approved by a majority of independent directors
who do not have an interest in the transaction and who have access to counsel.
Certain Anti-Takeover Provisions
The following discussion is a general summary of the material
provisions of the certificate of incorporation, bylaws, and certain other
regulatory provisions of the Company, which may be deemed to have such an
anti-takeover effect.
Provisions of the Company's Certificate of Incorporation and
Bylaws
Election of Directors. Certain provisions of the Company's certificate
of incorporation and bylaws will impede changes in majority control of the board
of directors. The Company's certificate of incorporation provides that the board
of directors of the Company will be divided into three staggered classes, with
directors in each class elected for three-year terms. Thus, it would take two
annual elections to replace a majority of the Company's board. The Company's
certificate of incorporation provides that the size of the board of directors
may be increased or decreased only if two-thirds of the directors then in office
concur in such action. 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, shall be filled for the remainder of the
unexpired term by a majority vote of the directors then in office. Finally, the
certificate of incorporation and 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
stockholders of business to be acted upon at an annual meeting of stockholders.
The certificate of incorporation provides that a director may only be
removed for cause by the affirmative vote of at least 80% of the outstanding
shares of the Company entitled to vote generally in an election of directors
cast at a meeting of stockholders called for that purpose.
Restrictions on Call of Special Meetings. The certificate of
incorporation of the Company provides that a special meeting of stockholders may
be called only by the President of the Company, by a majority of the board of
directors of the Company, or by a committee of the board of directors pursuant
to a resolution adopted by a majority of the board of directors or pursuant to
the bylaws of the Company.
Absence of Cumulative Voting. The Company's certificate of
incorporation provides that stockholders may not cumulate their votes in the
election of directors.
Authorized Shares. The certificate of incorporation authorizes the
issuance of 5,000,000 shares of common stock and 1,000,000 shares of preferred
stock. The shares of common stock and preferred
35
<PAGE>
stock were authorized in an amount greater than that to be issued in the
offering to provide the Company's board of directors with as much flexibility as
possible to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and the exercise of stock options. However, these
additional authorized shares may also be used by the board of directors
consistent with its fiduciary duty to deter future attempts to gain control of
the Company. The board of directors also has sole authority to determine the
terms of any one or more series of Preferred Stock, including voting rights,
conversion rates, and liquidation preferences. As a result of the ability to fix
voting rights for a series of Preferred Stock, the board has the power, to the
extent consistent with its fiduciary duty, to issue a series of Preferred Stock
to persons friendly to management in order to attempt to block a post-tender
offer merger or other transaction by which a third party seeks control, and
thereby assist management to retain its position.
Procedures for Business Combinations. The certificate of incorporation
requires the affirmative vote of at least 80% of the outstanding shares of the
Company for any merger, consolidation, liquidation, or dissolution of the
Company or any action that would result in the sale or other disposition of at
least 50% of the tangible assets of the Company, unless the transaction has been
approved by the board of directors. Any amendment to this provision requires the
affirmative vote of at least 80% of the outstanding shares of capital stock of
the Company entitled to vote generally in the election of directors.
Amendment to Certificate of Incorporation and Bylaws. Amendments to the
Company's certificate of incorporation must be approved by the Company's board
of directors and also by a majority of the outstanding shares of the Company's
voting stock, provided, however, that approval by at least 80% of the
outstanding voting stock entitled to vote generally in the election of directors
is generally required for certain provisions (i.e., number, classification,
election and removal of directors; amendment of bylaws; call of special
stockholder meetings; preemptive rights; nomination of directors and stockholder
proposals; voting rights; director liability; 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 two-thirds vote of the board of
directors or the affirmative vote of the holders of at least 80% of the
outstanding shares of the Company entitled to vote in the election of directors
cast at a meeting called for that purpose.
Regulatory Restrictions. 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 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 acquiror 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 acquiror 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 to or approval of the OTS, as applicable.
36
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have a minimum of
504,850 and a maximum of 704,850 shares of common stock issued and outstanding.
All shares of common stock issued in the offering will be available for resale
in the public market without restriction or further registration under the
Securities Act, except for shares purchased by affiliates of the Company (in
general, any person who has a control relationship with the Company) which
shares will be subject to the resale limitations of Rule 144 under the
Securities Act. After the offering, shares of common stock held by affiliates
will be considered "control shares", and are eligible for sale in the public
market in compliance with Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three month period, a number of restricted shares
as to which at least one year has elapsed from the later of the acquisition of
such shares from the Company or an affiliate of the Company in an amount that
does not exceed the greater of (i) one percent of the then outstanding shares of
common stock, or (ii) if the Common Shares are quoted on the Nasdaq National
Market or a stock exchange, the average weekly trading volume of the Common
Shares during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice, and
the availability of current public information about the Company. However, a
person who is not deemed to have been an affiliate of the Company during the 90
days preceding a sale by such person and who has beneficially owned shares as to
which at least two years have elapsed from the later of the acquisition of such
shares from the Company or an affiliate of the Company is entitled to sell them
without regard to the volume, manner of sale, or notice requirements of Rule
144.
LEGAL MATTERS
The validity of the common stock offered hereby and certain other
matters will be passed upon for the Company by Malizia, Spidi, Sloane & Fisch,
P.C., Washington D.C., counsel to the Company.
EXPERTS
The financial statements of the Company included herein and elsewhere
in this Prospectus from inception to September 30, 1998, have been included in
reliance upon the report of S.R. Snodgrass A.C., Wexford, Pennsylvania,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm and experts in accounting and auditing. There have
been no changes in or disagreements with the accountants.
37
<PAGE>
VILLAGE FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
----
^ Report of Independent Auditors............................................F-1
^ Balance Sheet........................................................... F-2
Income Statement............................................................F-3
Statement of Changes in Stockholders' Equity.............................. F-4
Statement of Cash Flows.................................................. ^ F-5
Notes to Financial Statements............................................ F-6-8
38
<PAGE>
[S.R. Snodgrass, A.C. letterhead]
REPORT OF INDEPENDENT AUDITORS
------------------------------
Organizers and Stockholders
Village Financial Corporation
We have audited the accompanying balance sheet of Village Financial Corporation
as of September 30, 1998, and the related statements of income, and cash flows
for the period from January 16, 1998 (inception) to September 30, 1998. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Village Financial Corporation
as of September 30, 1998 and the results of its operations and its cash flows
for the period from January 16, 1998 (inception) to September 30, 1998, in
conformity with generally accepted accounting principles.
/s/S.R. Snodgrass, A.C.
- -----------------------
Wexford, PA
October 9, 1998
F-1
<PAGE>
VILLAGE FINANCIAL CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
1998
--------------
ASSETS
<S> <C>
Cash $ 30,863
Short-term investments 760,184
Furniture and equipment 32,959
Deferred organization costs 70,000
Other assets 3,012
-------------
Total assets $ 897,018
=============
LIABILITIES
Accounts payable and accrued expenses $ 61,527
-------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10; 1,000,000 shares authorized;
none outstanding -
Common stock, par value $.10; 5,000,000 shares authorized;
94,850 issued and outstanding 9,485
Additional paid-in capital 939,015
Retained deficit (113,009)
-------------
Total stockholders' equity 835,491
Total liabilities and stockholders' equity $ 897,018
=============
</TABLE>
See accompanying notes to the financial statements.
F-2
<PAGE>
VILLAGE FINANCIAL CORPORATION
INCOME STATEMENT
Period From
January 16, 1998
(Inception) to
September 30, 1998
------------------
INTEREST INCOME $ 10,453
-------------
EXPENSES
Salaries and employee benefits 16,899
Occupancy and equipment 5,053
Professional services 82,858
Other 18,652
-------------
Total expenses 123,462
-------------
Loss before income taxes (113,009)
Income taxes -
-------------
NET LOSS $ (113,009)
=============
LOSS PER SHARE ($1.19)
AVERAGE SHARES OUTSTANDING (From May 20, 1998) 94,850
See accompanying notes to the financial statements.
F-3
<PAGE>
VILLAGE FINANCIAL CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Deficit Total
----- ------- ------- -----
<S> <C> <C> <C> <C>
Balance, January 16, 1998 (Inception) $ - $ - $ - $ -
Sale of common stock for
cash ($10.00 per share) 9,485 939,015 948,500
Net loss for the period
ended September 30 (113,009) (113,009)
------------ ------------ ------------- ------------
Balance, September 30, 1998 $ 9,485 $ 939,015 $ (113,009) $ 835,491
============ ============ ============= ============
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
VILLAGE FINANCIAL CORPORATION
STATEMENT OF CASH FLOWS
Period From
January 16, 1998
(Inception) to
September 30, 1998
------------------
OPERATING ACTIVITIES
Net loss $ (113,009)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 1,010
Decrease in accrued organization expenses, net (11,485)
------------
Net cash used for operating activities (123,484)
------------
INVESTING ACTIVITIES
Purchase of equipment and vehicle (33,969)
------------
FINANCING ACTIVITIES
Proceeds from sale of common stock 948,500
-----------
Increase in cash and cash equivalents 791,047
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
-----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 791,047
===========
See accompanying notes to the financial statements.
F-5
<PAGE>
VILLAGE FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
- --------------------------------------
Village Financial Corporation ("the Corporation") was incorporated under the
laws of the State of New Jersey on January 16, 1998, for the purpose of becoming
a holding company, which will own all of the outstanding shares of capital stock
of a proposed federal stock savings bank with the name Village Bank ("the
Bank"). The Corporation will be a unitary savings and loan holding company and
will own only the Bank. As of September 30, 1998, the Corporation is capitalized
to the extent currently considered necessary to provide adequate funding of the
ongoing organization efforts of management in the formation of the Bank.
Additional funds necessary to adequately capitalize the Bank will be raised
through a contemplated initial public offering ("IPO"), which is discussed in
greater detail in these notes. Upon satisfaction of the conditions of the IPO
and receipt of appropriate regulatory approval, the Bank will operate two branch
offices as a community oriented bank concentrating on consumer residential and
installment loan products and deposit services, and will be headquartered in
Lawrenceville, New Jersey. Qualifying customer bank deposit accounts will be
insured by the Federal Deposit Insurance Corporation. The anticipated opening of
the Bank is scheduled for the first quarter of 1999, pending receipt of
necessary regulatory approvals and raising adequate capital funds.
To date, the Corporation's operations have been limited to in-formation
procedures; raising capital, recruiting officers and staff, obtaining a banking
facility and working towards obtainment of regulatory approval. Since the
Corporation's planned principal operations have not yet commenced no significant
revenue has been derived therefrom. There is no assurance that the Corporation
will be able to raise sufficient capital to satisfy minimum regulatory capital
requirements. Further, if such capital requirements are not met, the formation
of the Bank will be delayed or not materialize.
The accounting and reporting policies of the Corporation conform with generally
accepted accounting principles ("GAAP"). The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the balance
sheet date and income and expenses during the reported period. Actual results
could differ from those estimates. In the opinion of management, the
accompanying financial statements of the Corporation contain all adjustments
necessary for the fair presentation of the Corporation's balance sheet, results
of operations and cash flows for the period from inception through September 30,
1998. The results of operations for this period are not indicative of the
results that may actually occur once operations commence and could be materially
different.
Short-term Investments
- ----------------------
The Corporation's short term investments are comprised of a money market deposit
account maintained with a correspondent bank and shares purchased in a national
dealer/broker interest-bearing money fund account.
F-6
<PAGE>
VILLAGE FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Furniture and Equipment
- -----------------------
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets. Expenditures for maintenance and repairs are charged
against income as incurred. Costs of major additions are capitalized.
On July 17, 1998 the Corporation entered into an operating lease arrangement for
office space located in Pennington, New Jersey. Monthly office rental payments
of $700 and furniture rental payments of $62 a month will be payable over the
lease term, which is for one year. This site will serve as the Corporation's
temporary headquarters until a full service banking and administrative site has
been negotiated.
Deferred Organization Costs and Start-up Activities Expenses
- ------------------------------------------------------------
Such costs are for organization work being completed as well as the registration
process for the IPO. Offering expenses will be charged to stockholders' equity
upon completion of the IPO and are presently recorded as deferred organization
costs. Organizational services relating to the preparation of regulatory
applications, feasibility studies, and financial projections are considered
costs of start-up activities and will be charged to expense once paid.
All other ongoing organizational and start-up costs incurred primarily before
the commencement of operations as a bank will also be expensed in accordance
with the AICPA accounting statement of Position 98-5, "Reporting on the Costs of
Start-up Activities." The Statement requires entities to expense costs of
start-up activities as they are incurred.
Cash Flow Information
- ---------------------
Cash equivalents include the interest-bearing deposit held with a correspondent
bank and funds held in a money fund with a dealer/broker.
Income Taxes
- ------------
The Corporation has not provided for a federal or state income tax
provision for the period ending September 30, 1998, as the Corporation
represents an entity in-formation and has incurred a cumulative operating loss
since the date of incorporation. As such, a 100% valuation allowance for the
deferred tax assets, comprised solely of the tax benefit generated from the
operating loss, has been recorded.
F-7
<PAGE>
VILLAGE FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Organization Period Stock Option Plan - President
- -------------------------------------------------
Effective August 1, 1998 the Corporation entered into an Employment Agreement
with the President of the Corporation. As a part of the Agreement, the
Corporation has granted stock options for a minimum of 10,000 shares, and a
maximum of 30,000 shares of common stock. The President vests in 833 shares for
every full month that transpires through the effective date of the Corporation's
IPO and is guaranteed the minimum of 10,000 shares. The per share exercise price
of an option granted is $10, which is the anticipated IPO offering price. The
stock options have an expiration term of ten years from the effective date of
the IPO. The Corporation accounts for stock option grants in accordance with APB
Opinion 25, "Accounting for Stock Issued to Employees," and, accordingly,
recognizes no compensation expense for the stock option grants. Had the
Corporation accounted for compensation cost on the basis of fair value pursuant
to Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation," there would have been no effect on the net loss and
loss per share information as disclosed on the Income Statement.
Stockholders' Equity and Initial Public Offering
- ------------------------------------------------
Initial capitalization of the Corporation has occurred through the subscription
and issuance of common stock, in a private placement during the second quarter
of 1998. As of September 30, 1998, a total of 94,850 shares, at an offering
price of $10.00 per share, have been subscribed to and issued.
The Corporation intends to issue between 410,000 and 610,000 shares of common
stock at $10.00 per share in the IPO. Current shares of common stock owned by
investors, from a private placement, and any other additional shares issued
prior to the IPO, will remain issued and outstanding. The Corporation
anticipates purchasing all of the common stock to be issued by the Bank with the
net proceeds received from the private placement and the IPO.
Earnings Per Share
- ------------------
For the period ending September 30, 1998, earnings per share is calculated using
the weighted average number of shares outstanding from May 20, 1998 (issue date)
through September 30, 1998, including common stock equivalents, if such items
have a dilutive effect. For 1998, the Corporation has maintained a simple
capital structure; therefore, there are no dilutive effects on loss per share
computations.
F-8
<PAGE>
APPENDIX A
VILLAGE FINANCIAL CORPORATION
A proposed
Holding Company for Village Bank
(In Organization)
Lawrenceville, New Jersey
SUBSCRIPTION AGREEMENT
THE OFFER OF THE SECURITIES IS MADE ONLY
BY THE ACCOMPANYING PROSPECTUS
Subject to the terms and conditions of sale contained in the Prospectus
dated ______, 1998, (the "Prospectus"), the undersigned hereby subscribes for
the purchase of the number of shares shown below of the common stock ($0.10 par
value), of Village Financial Corporation (the "Company"), a proposed holding
company for Village Bank (In Organization) (the "Bank"). The purchase price is
$10.00 per share and full payment is enclosed with this Subscription Agreement.
Enclosed as payment for the shares subscribed to herein is a check, bank draft
or money order payable to "Summit Bank, Escrow Agent for Village Financial
Corporation," in the amount shown below.
Terms not otherwise defined herein shall have the same meaning as in
the Prospectus.
All subscriptions for the offering are subject to a 100 share purchase
minimum and a 50,000 share maximum purchase limitation per subscriber. For
purposes of determining the maximum purchase limitation, the term subscriber
includes all persons who are affiliates of the person submitting this
Subscription Agreement (an affiliate is a person that directly, or indirectly,
controls, is controlled by or is under common control with, the subscriber).
Method of Subscription
All subscriptions must be made on this Subscription Agreement.
Subscriptions are not binding until accepted by the Company. The Company
reserves the right to reject any subscription, with or without cause. The
Company will refuse any subscription by sending written notice to the subscriber
by first-class mail within ten calendar days after receipt of the subscription,
and the subscriber's Subscription Agreement and refund of payment will accompany
such notice. Any Subscription Agreement which is completely and correctly filled
out, which is accompanied by proper and full payment and which is physically
received at the office of the Company by an employee or agent of the Company by
the date set forth in the Prospectus, shall be deemed to have been accepted if
it is not refused as hereinbefore provided within ten calendar days after such
receipt.
A-1
<PAGE>
A completed Subscription Agreement and payment in full (made in the
manner specified below) of the total subscription price for the number of shares
subscribed should be mailed to the Company at the following address:
Village Financial Corporation
P.O. Box 6554
Lawrenceville, New Jersey 08648
Subscriptions also may be delivered in person to the office of the Company at 23
Route 31 North, Suite A22, Pennington, New Jersey between 10:00 a.m. and 5:00
p.m. Monday through Friday.
IMPORTANT: PAYMENTS MUST BE MADE IN UNITED STATES FUNDS BY CHECK, BANK DRAFT OR
MONEY ORDER PAYABLE TO "SUMMIT BANK, ESCROW AGENT FOR VILLAGE FINANCIAL
CORPORATION," CHECKS MAY NOT BE MADE PAYABLE TO THE ORGANIZERS OF THE COMPANY.
FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE WITH THE SUBSCRIPTION AGREEMENT
WILL RESULT IN THE SUBSCRIPTION BEING RETURNED BY THE ESCROW AGENT.
Terms of the offering
The Company is offering a minimum of 410,000 shares and a maximum of
610,000 shares at $10.00 per share pursuant to the Prospectus. The offering will
terminate at 5:00 p.m., New Jersey Time, on _______ __, 1998, unless extended by
the Company without further notice to subscribers. If the offering is not
completed by _______ __, 199_, subscribers will be refunded their subscription
funds.
If an extension to the offering is obtained, subscribers would be
resolicited and all subscription funds would be promptly refunded. Subscribers
would also be provided with a supplemental offering prospectus declared
effective by the SEC. Upon resolicitation, subscribers would have an opportunity
to increase or decrease their subscriptions.
The Company will deliver an effective prospectus to all persons to whom
the securities offered hereby are to be sold at least 48 hours prior to the
acceptance or confirmation of sale to such persons or to send such a prospectus
to such persons under circumstances that it would normally be received by them
48 hours prior to acceptance or confirmation of the sale. The Company will mail
to all subscribers who have theretofore received a Prospectus written notice of
any such determination to terminate the offering at least seven days prior to
such termination. During this seven day period, the Company will continue to
accept subscriptions for up to 610,000 shares. The Company expects only one
closing.
Subscription Escrow Agreement
The Escrow Agent will maintain the records of the Escrow Account so
that each subscriber's funds will be insured up to $100,000 by the FDIC so long
as such funds are held in the escrow account.
Subscribers may not receive interest on their subscription funds, if
the offering expenses are in excess of the amounts to be covered by the proceeds
of the private placement. However, if such funds are held by the Company in
excess of 90 days, such funds will be promptly returned to the subscriber with
any interest earned thereon. Subscribers will not be entitled to any return of
funds during the offering period.
A-2
<PAGE>
Receipts
Not sooner than forty-eight hours after receipt of the subscriber's
Subscription Agreement and payment in full for the shares subscribed the Company
will deliver a receipt to the subscriber by first-class mail or by personal
delivery.
Stock Certificates
Within approximately seven business days after receipt of final
regulatory approval and authorization to do business, the Company will cause to
be mailed by first-class mail or deliver to each subscriber a certificate
representing the shares of common stock purchased by such subscriber.
Acknowledgements
The undersigned hereby acknowledges receipt of a copy of the
Prospectus, and represents that this Subscription Agreement is made solely on
the basis of the information contained in the Prospectus and is not made in
reliance on any inducement, representation or statement not contained in the
Prospectus. The undersigned understands that no person (including any Organizer)
has authority to give any information or to make any representation not
contained in the Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized. The
undersigned represents that this subscription is made for the benefit of the
undersigned and not for the benefit of any other person who is not identified on
this Subscription Agreement. The undersigned also acknowledges that there is in
the offering a minimum purchase requirement of 100 shares and a maximum purchase
limitation of 50,000 shares. The undersigned is aware that ownership of 5% or
more of the outstanding common stock could obligate the undersigned to comply
with certain reporting and other requirements of federal and state banking and
securities laws. The undersigned understands that the shares of the common stock
offered by the Company are not savings accounts or deposits and are not insured
by the Federal Deposit Insurance Corporation, the Savings Association Insurance
Fund or any other governmental or private agency.
A-3
<PAGE>
This Subscription Agreement is made in consideration of the premises
set forth in the Prospectus and the subscriptions of others, and the undersigned
acknowledges that this Subscription Agreement creates a legally binding
obligation unless refused by the Company.
<TABLE>
<CAPTION>
<S> <C>
Number of shares __________ at $10.00 per share (100 share minimum) equals $_____________________
(Total Purchase Price)
-----------------------------------------------------------------------
(Name(s) in which stock certificates should be registered*)
-----------------------------------------------------------------------
(Street Address)
-----------------------------------------------------------------------
(City/State/Zip Code)
( )
---------------------------------- ---------------------------
(Social Security or Tax I.D. No.) (Telephone No.)
- ------------------------------------------- ---------------------------------
(Date) (Signature)
- ------------------------------------------- ---------------------------------
(Date) (Signature)
</TABLE>
*Stock certificates for shares to be issued in the names of two or more
persons will be registered in the names of such persons as joint tenants with
right of survivorship, and not as tenants in common.
If shares are to be held in joint ownership, all joint owners should
sign this Agreement. Information on the Agreement will be treated confidentially
by the Company, to the extent legally permissible.
If purchaser is a corporation or partnership, list the names of the
principals of the corporation or partnership as well as the name of the
corporation or partnership.
A-4
<PAGE>
VILLAGE FINANCIAL CORPORATION
410,000 to 610,000 Shares
Common Stock
-----------------------
PROSPECTUS
-----------------------
Dated , 1998
------- --
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors.
Section 14A:3-5 of the New Jersey Business Corporation Act sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their
capacities as such.
Provisions regarding indemnification of directors, officers, employees
or agents of the Company are contained in Article 17 of the Company's Articles
of Incorporation.
Under a directors' and officers' liability insurance policy, directors
and officers of the Company are insured against certain liabilities, including
certain liabilities under the Securities Act, as amended.
Item 25. Other Expenses of Issuance and Distribution
* Legal services.................................................$100,000
* Accounting and consulting fees................................. 30,000
* Registration and application fees.............................. 20,000
* Printing, stationery and supplies.............................. 10,000
* Pre-opening salaries/benefits/health insurance................. 183,000
* Occupancy costs................................................ 20,000
* Marketing, travel and promotions............................... 8,000
* Postage and telephone.......................................... 2,000
* Miscellaneous.................................................. 10,000
-------
TOTAL .........................................................$383,000
=======
* Estimated. Includes all expenses in connection with all regulatory
applications (i.e., SEC, OTS, and FDIC).
Item 26. Recent Sales of Unregistered Securities.
Set forth below is certain information concerning all sales of
securities by the Company since inception that were not registered under the
Securities Act of 1933 (the "Securities Act").
During the second quarter of 1998, the Company offered and sold to
investors 94,850 shares of its common stock at $10.00 per share. The total
offering price was $948,500. The Company received all of the proceeds of the
offering. There were no underwriting fees or commissions.
The above sales were exempt from the registration requirements of the
Securities Act pursuant to Section 3(b) and the provisions of Rule 504 of
Regulation D.
<PAGE>
Item 27. Exhibits:
The exhibits filed as part of this Registration Statement are
as follows:
3(i) Certificate of Incorporation of Village
Financial Corporation*
(ii) Bylaws of Village Financial Corporation*
4.1 Specimen Stock Certificate of Village Financial
Corporation*
4.2 Form of Subscription Agreement (included as
Appendix A to the Prospectus)
5 Opinion of Malizia, Spidi, Sloane & Fisch, P.C.*
10.1 Employment Agreement with Kenneth J. Stephon*
10.2 Lease Agreement (Lawrenceville)**
10.3 Lease Agreement (Pennington)**
10.4 Escrow Agreement**
23.1 ^ Consent of Malizia, Spidi, Sloane & Fisch, P.C.
(included in Exhibit 5)*
23.2 Consent of S.R. Snodgrass, A.C.
24.1 ^ Power of Attorney (reference is made to the
Signature page)*
24.2 Certified Board Resolutions authorizing Power of
Attorney
27 Financial Data Schedule***
99 Marketing Materials**
------------------------
* Previously filed
** To be filed by amendment
*** Electronic filing only
Item 28. Undertakings
The undersigned registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
<PAGE>
^ SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Lawrenceville, New
Jersey, on ^ October 21, 1998.
VILLAGE FINANCIAL CORPORATION
By: ^/s/ Kenneth J. Stephon
-----------------------------------------------
Kenneth J. Stephon
President, Director and Chief Executive Officer
(Duly Authorized Representative)
^
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated as of ^ October 21, 1998.
By:^/s/ Kenneth J. Stephon By: /s/ Paul J. Russo *
-------------------------------- ----------------------------------
Kenneth J. Stephon Paul J. Russo
President, Director, Chief Executive Director
Officer and Chief Financial/
Accounting ^ Officer
By:^/s/ William C. Hart * By: ^/s/ Jonathan R. Sachs *
-------------------------------- ----------------------------------
William C. Hart Jonathan R. Sachs
Director Director
(Chairman of the Board)
By:^/s/ William V.R. Fogler * By: ^/s/ George M. Taber *
-------------------------------- ----------------------------------
William V.R. Fogler George M. Taber
Director Director
^* By:/s/ Kenneth J. Stephon
------------------------------
Kenneth J. Stephon,
under Power of Attorney dated August 27, 1998
EXHIBIT 23.2
<PAGE>
SNODGRASS
Certified Public Accountants and Consultants
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Pre-Effective Amendment No. 1 to the
Registration Statement of Village Financial Corporation on Form SB-2 of our
report dated October 9, 1998 appearing in the Prospectus, which is part of such
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/s/ S.R. Snodgrass, A.C.
Wexford, PA
October 16, 1998
S.R. Snodgrass, A.C.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
101 Bradford Road, Suite 100 Wexford, PA 15090-6909 Phone: 724-934-0344 Facsimile: 724-934-0345
</TABLE>
EXHIBIT 24.2
<PAGE>
CERTIFIED RESOLUTIONS
BOARD OF DIRECTORS
VILLAGE FINANCIAL CORPORATION
Meeting held January 23, 1998
================================================================================
I, Kenneth J. Stephon, do hereby certify that I am the duly elected
Secretary of Village Financial Corporation, a New Jersey corporation; that the
following is a true and correct copy of the resolutions duly adopted by at least
a majority of the Board of Directors of said corporation at a meeting held on
the date above-stated, a quorum being present throughout; and that such
resolutions are in full force and effect and have not been amended or rescinded:
WHEREAS, at a duly called meeting of the initial Board of Directors of
Village Financial Corporation, a New Jersey corporation (the "Company"), held on
January 23, 1998, the Board of Directors considered the matter of its initial
organization and the organization of Village Bank (the "Bank"), a
federally-chartered capital stock savings bank in the process of organization by
the Company (the "Organization"), the formation of the Company by the Bank for
the purpose of becoming the parent holding company of the Bank and the
acquisition of all of the common stock of the Bank by the Company, as part of
the Organization;
WHEREAS, the Board has determined that it would be in the best interest
of the Company to effect said Organization;
NOW, THEREFORE, BE IT:
RESOLVED, that the Certificate of Incorporation for the Company, as
previously adopted by the sole incorporator of the Company and as presented to
the Board at this meeting, a copy of which is attached hereto as Exhibit A, be
and it hereby is ratified, approved, and adopted, and the Secretary is
instructed to insert a specimen copy thereof in the Minute Book;
FURTHER RESOLVED, that the Bylaws of the Company as presented to the
Board at this meeting, a copy of which is attached hereto as Exhibit B, be, and
they hereby are, approved and adopted as the Bylaws of the Company and the
Secretary is instructed to insert a specimen copy thereof in the Minute Book;
<PAGE>
FURTHER RESOLVED, that the following persons are elected to the offices
set forth opposite their respective names, to serve at the pleasure of the Board
of Directors or until their successors are elected and qualified:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C> <C>
Kenneth J. Stephon President, Chief Executive Officer
and Corporate Secretary
William C. Hart Vice President
William V.R. Fogler Treasurer
</TABLE>
FURTHER RESOLVED, that all acts of William C. Hart, the sole
incorporator of the Company, taken on behalf of the Company for the period since
the inception of the Company to date, including the filing of the Certificate of
Incorporation in the form attached hereto as Exhibit A with the Secretary of
State of New Jersey, be, and they hereby are, approved, ratified, and confirmed;
FURTHER RESOLVED, that the President and the Secretary of the Company,
presently or hereafter elected, be, and both of them hereby are, authorized and
directed for and on behalf of the Company to sign and countersign, or to cause
to be signed or countersigned by facsimile, stock certificates representing the
shares of the Company's common stock, par value of $0.10 per share ("Common
Stock");
FURTHER RESOLVED, that the President, the Secretary, and the Treasurer
shall have and may exercise all the powers and duties incident to such office as
set forth in the Company's Bylaws, and that the remaining officers, if any,
shall have all the powers and duties incident to such offices and as are
delegated to them from time to time or as are set forth in a description of such
offices approved by the Board and inserted in the Minute book; and
FURTHER RESOLVED, that the form of stock certificate presented to this
meeting to be, and it hereby is, approved and adopted, and the Secretary is
instructed to insert a specimen thereof in the Minute Book as Exhibit C;
FURTHER RESOLVED, that the officers of the Company be, and they hereby
are, authorized to cause the Company to pay all costs and expenses in connection
with the organization and commencement of business of the Company and the
issuance of its capital stock;
FURTHER RESOLVED, that the office of the Company be, and it hereby is,
established and maintained at 455 Federal City Road, Pennington, New Jersey
08534, and that meetings of the Board of Directors from time to time may be held
either at such office or at such other office in the State of New Jersey or
elsewhere, as the Board of Directors shall from time to time order;
2
<PAGE>
FURTHER RESOLVED, that the fiscal year of the Company shall begin on
the first day of January of each year;
FURTHER RESOLVED, that for the purpose of authorizing the Company to do
business in any state, territory, or dependency of the United States or any
foreign country in which it is necessary or expedient for the Company to
transact business, the proper officers of the Company be, and they hereby are,
authorized to appoint or substitute all necessary agents or attorneys for
service of process, to designate and change the location of all necessary
statutory offices, and, under the corporate seal if necessary or appropriate, to
make and file all necessary certificates, reports, powers of attorney, and other
instruments as may be required by the laws of any such state, territory,
dependency, or country to authorize the Company to transact business therein;
FURTHER RESOLVED, that the Bank, upon completion of its Organization
and the receipt of all necessary regulatory approvals appurtenant thereto, be,
and it hereby is, designated as a depository of the funds of this Company and
that an account be opened with said Bank to be designated Village Financial
Corporation;
FURTHER RESOLVED, that the banking resolutions required by said Bank in
order to open an ordinary checking account and such other accounts as the
President of this Company shall deem appropriate be, and they hereby are,
adopted as the resolutions of this Board of Directors as if fully set forth
herein; and that the President of this Company be, and he hereby is, authorized
to designate signatories to execute checks and other documents on behalf of this
Company with respect to such accounts; and that the officers of this Company be,
and they hereby are, authorized and directed to execute and deliver, in the name
and on behalf of this Company and under its corporate seal or otherwise, any and
all certificates, agreements, undertakings, authorizations, and other
instruments or documents as said Bank may require and as shall be necessary or
appropriate to carry out the intent and accomplish the purposes of this
resolution; and that copies of any banking resolutions so executed shall be
inserted in the Minute Book;
FURTHER RESOLVED, that the President and the Treasurer, and each other
person designated by such officers, such designation to be evidenced in writing
and placed on file with the Secretary of the Company be, and each of them hereby
is, authorized to initiate wire transfers on behalf of the Company;
FURTHER RESOLVED, that the Secretary is authorized and directed to
procure the proper corporate books, including stock certificate books, and the
Treasurer is authorized to pay all expenses incident to or necessary for the
organization of the Company and the transaction of its business;
FURTHER RESOLVED, that the authority conferred by the foregoing
resolutions shall continue until revoked by the Board of Directors of this
Company, but said Company shall be fully protected in acting on such authority
and may conclusively assume that the person(s) from
3
<PAGE>
time to time certified to it, under the seal of this Company, are the person(s)
actually occupying the aforesaid office(s) and shall not be charged with any
notice of the revocation of any such authority or the removal of any such
person(s) unless and until it shall have actually received a certificate, under
the seal of this Company, setting forth such revocation or removal;
FURTHER RESOLVED, that the proper officers of the Company be, and each
of them hereby is, authorized and directed, for and on behalf of the Company, to
take all actions and to execute all agreements, instruments, and other documents
as each of such officers considers necessary or advisable to effectuate each of
the foregoing resolutions and to carry out the purposes thereof, the taking of
any such action and the execution of any agreement, instrument, or document
conclusively to evidence the due authorization thereof by the Company;
FURTHER RESOLVED, that the Company be, and it hereby is, authorized to
offer, issue, and sell to the public up to the number of shares of its Common
Stock as determined by the Board which shares, when issued, shall be fully paid
and nonassessable shares of Common Stock, all to be upon such specific terms and
conditions and pursuant to such agreements as may be approved by the Board of
Directors of the Company;
FURTHER RESOLVED, that the Company hereby ratifies and approves the
filing by the Company of a registration statement (the "Registration Statement")
with the Securities Exchange Commission including the exhibits thereto and
authorizes the filing by the Company of any amendments and supplements thereto
or to the Prospectus contained therein, on the appropriate form authorized by
the Securities and Exchange Commission, providing for the registration of the
issuance of the Common Stock under the Securities Act of 1933, as amended;
FURTHER RESOLVED, that the proper officers of the Company are hereby
authorized and directed to register the Common Stock under Section 12(g) of the
Securities Exchange Act of 1934, as amended, if required by law;
FURTHER RESOLVED, that the proper officers of the Company be, and each
of them hereby is, authorized, in the name and on behalf of the Company, to
execute and deliver a power of attorney appointing the directors and officers of
the Company, or any one of them to act as attorneys-in-fact for the Company for
the purpose of executing and filing with the Securities and Exchange Commission
any such registration statement, or any amendment or supplement thereto, or any
document deemed necessary, convenient, or appropriate by any such officer in
connection therewith;
FURTHER RESOLVED, that William C. Hart be, and he hereby is, designated
and appointed as the agent for service of the Company in all matters relating to
any such registration statement;
4
<PAGE>
FURTHER RESOLVED, that the Company shall use its best efforts to
maintain a market for its Common Stock to list those shares on a national or
regional securities exchange or on the Nasdaq Stock Market;
FURTHER RESOLVED, that it is desirable and in the best interest of this
Company that its securities be qualified or registered for sale in various
states; that the President or any Vice President and the Secretary or an
Assistant Secretary hereby are authorized to determine the states in which
appropriate action shall be taken to qualify or register for sale all or such
part of the securities of this Company as said officers may deem advisable; that
said officers are hereby authorized to perform on behalf of this Company any and
all such acts as they may deem necessary or advisable in order to comply with
the applicable laws of any such states, and in connection therewith to execute
and file all requisite papers and documents, including, but not limited to,
applications, reports, surety bonds, irrevocable consents, and appointments of
attorneys for service of process; and the execution by such officers of any such
paper or document or the doing by them of any act in connection with the
foregoing matters shall conclusively establish their authority therefor from
this Company and the approval and ratification by this Company of the papers and
documents so executed and the action so taken;
FURTHER RESOLVED, that the Company hereby ratifies and approves the
filing by the Bank with the Office of Thrift Supervision of a Permission to
Organize and an Application for Insurance of Accounts with the Federal Deposit
Insurance Corporation and any exhibits thereto and any amendment and supplements
thereto with such agencies;
FURTHER RESOLVED, that the Company hereby ratifies and approves the
filing with the Office of Thrift Supervision of an application for approval to
become a savings and loan holding company, including the filing of an
Application H-(e)1 and any exhibits thereto and any amendments and supplements
thereto;
FURTHER RESOLVED, that the proper officers of the Company be, and each
of them hereby is, authorized and directed to make, execute, and deliver, or
cause to be made, executed, and delivered, all such agreements, documents,
instruments, and papers, and to do, or cause to be done, all such further acts
or things in the name of and on behalf of the Company and under its corporate
seal or otherwise as they may deem necessary or appropriate to effect or carry
out the purposes and intent of the foregoing resolutions; and all such acts and
actions taken in furtherance of the Plan by the Officers of the Company and the
Bank taken to date are hereby authorized, ratified, and confirmed.
5
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary and have
caused the corporate seal of Village Financial Corporation to be affixed hereto,
this 23rd day of January, 1998.
/s/ Kenneth J. Stephon
-----------------------------------------
Kenneth J. Stephon
Secretary
[Corporate Seal]
6
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
REGISTRATION STATEMENT ON FORM SB-2/A AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 31
<INT-BEARING-DEPOSITS> 760
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 897
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 62
<LONG-TERM> 0
0
0
<COMMON> 9
<OTHER-SE> 826
<TOTAL-LIABILITIES-AND-EQUITY> 897
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 10
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 10
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 123
<INCOME-PRETAX> (113)
<INCOME-PRE-EXTRAORDINARY> (113)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (113)
<EPS-PRIMARY> (1.19)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.64
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
