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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
Mitchell Bancorp, Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
606503100
(CUSIP Number)
Jerome H. Davis
c/o David M. Perlmutter, Esq.
200 Park Ave., Suite 4515, New York, NY 10166
(212) 986-4900
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 18, 1996
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
Check the following box if a fee is being paid with this statement / /.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class). (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing of this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
Page 1 of 10 Pages
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CUSIP No. 606503100
1. Name of Reporting Person Jerome H. Davis
S.S. or I.R.S. Identification ###-##-####
No. of Above Person
2. Check the Appropriate Box (a)
if a Member of a Group (b) X
(See Instructions)
3. SEC Use Only
4. Source of Funds (See Instructions)
PF
5. Check Box if Disclosure of Legal
Proceedings is Required / /
Pursuant to Items 2(d) or 2(e)
6. Citizenship or Place of
Organization United States
Number of 7. Sole Voting Power 12,190
Shares 8. Shared Voting
Beneficially Power 85,690*<F1>
Owned by 9. Sole Dispositive
Each Report- Power 12,190
ing Person 10. Shared Dispositive
with Power 85,690*<F1>
11. Aggregate Amount Beneficially
Owned by Each Reporting Person 97,880*<F1>
12. Check Box if the Aggregate Amount
in Row (11) Excludes Certain / /
Shares (See Instructions)
13. Percent of Class Represented
by amount in Row (11) 9.98%
14. Type of Reporting Person IN
(See Instructions)
<F1>
* See Items 5(a) and 5(b) of this Statement.
Page 2 of 10 Pages
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CUSIP No. 606503100
1. Name of Reporting Person Susan B. Davis
S.S. or I.R.S. Identification ###-##-####
No. of Above Person
2. Check the Appropriate Box (a)
if a Member of a Group (b) X
(See Instructions)
3. SEC Use Only
4. Source of Funds (See Instructions)
PF
5. Check Box if Disclosure of Legal
Proceedings is Required / /
Pursuant to Items 2(d) or 2(e)
6. Citizenship or Place of
Organization United States
Number of 7. Sole Voting Power -0-
Shares 8. Shared Voting
Beneficially Power 97,880*<F2>
Owned by 9. Sole Dispositive
Each Report- Power -0-
ing Person 10. Shared Dispositive
with Power 97,880*<F2>
11. Aggregate Amount Beneficially
Owned by Each Reporting Person 97,880*<F2>
12. Check Box if the Aggregate Amount
in Row (11) Excludes Certain / /
Shares (See Instructions)
13. Percent of Class Represented
by amount in Row (11) 9.98%
14. Type of Reporting Person IN
(See Instructions)
<F2>
* See Items 5(a) and 5(b) of this Statement. For purposes of this
Statement, Susan B. Davis may be deemed, pursuant to Rules 13d-3(a)(1) and
13d-3(a)(2) under the Securities Exchange Act of 1934, as amended, to be the
beneficial owner of 12,190 shares of the Company's Common Stock, par value
$.01 per share, held in the name of her husband, Jerome H. Davis.
Page 3 of 10 Pages
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The Statement on Schedule 13D (the "Statement") of Jerome H. Davis,
with respect to the Common Stock, par value $.01 per share (the
"Common Stock"), of Mitchell Bancorp, Inc., a North Carolina
corporation ("Mitchell") is hereby amended as set forth below.
Item 4. Purpose of Transaction.
Item 4 of the Statement is hereby supplemented by the
addition of the following:
"Mr. and Mrs. Davis originally acquired the shares of
Common Stock for investment and without any purpose of changing or
influencing the control of Mitchell. However, based on Mr. Davis'
review of Mitchell's financial results for the quarter ending
September, 1996, Mr. and Mrs. Davis now believe that Mitchell must
consider several options which will enhance shareholder value,
including a merger transaction. This view along with Mr. Davis'
several concerns regarding Mitchell's poor financial performance
are discussed in his November 18, 1996 letter to Mitchell's Board
of Directors, a copy of which is attached hereto as Exhibit No. 2.
In his letter, Mr. Davis sets forth the following
specific concerns and suggestions regarding Mitchell's poor
financial results:
1) Inferior Rate of Earnings. Excluding the SAIF
charge, Mitchell's earnings for the September quarter reflect an
earnings rate of only $.13 per share, and an annualized rate of
only $.52 per share. Such earnings do not support Mitchell's
current stock price of $12.25 per share, which is very rich at 23.6
times earnings. The value of the Common Stock must be enhanced in
other ways.
2) Full Valuation of Common Stock. The Common Stock
trades at 82% of its book value of $14.93 per share. Other steps
must be taken to improve the price of the Common Stock, since it
already reflects its "full" value.
3) Substandard return on equity. Mitchell's current
book value per share of $14.93 along with its expected earnings of
$.52 produce a ROE of just 3.5%. This amount similarly does not
support an increase in the price of the Common Stock. Mr. Davis
cautions that when a ROE does not exceed an institution's passbook
rate, shareholders will suffer.
4) Excessive Capital Ratio. Mitchell maintains an
enormous capital ratio of 39.8%. Such a ratio supports an
immediate increase in Mitchell's regular yearly dividend rate of
$.40 per share (which reflects a current yield of only 3.27%).
More significantly, it justifies a special dividend of $7.00 to
$10.00 per share. Numerous thrifts have already issued special
Page 4 of 10 Pages
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dividends between $3.00 and $10.00. For example, Hillsborough
Savings in North Carolina recently announced a special dividend of
$7.00 per share, based on its capital ratio of 28.2% - just 70% of
Mitchell's capital ratio. Mr. Davis questions whether Mitchell has
entered into an agreement with regulators to not issue a special
dividend for at least a year.
5) Lack of share repurchase. The price (discount to
book) of the Common Stock and Mitchell's capital ratio warrant a
substantial share repurchase. Mr. Davis notes that Mitchell will
have been public for 6 months in January, 1997 and requests that
its Board of Directors state its position on a share repurchase.
6) Excessive NPA. Although Mitchell's NPAs are down 86
basis points from March, 1996, they are still extremely elevated at
2.54%. Mr. Davis asks Mitchell's Board of Directors to identify
the steps it is taking to reduce this figure below 1.00%.
Mr. Davis concludes his letter by strongly advising
Mitchell to explore opportunities to merge with a larger financial
institution upon its one year anniversary, if it can not triple its
substandard 3.5% return on equity. Mr. Davis states that such a
transaction would produce a substantial premium over the current
price of the Common Stock of $12.25 per share. However, Mitchell's
first step should be to substantially reduce its capital, such as
through a special dividend of $9.25 per share, which still leaves
a capital ratio of 15.1%.
Other than as described above, Mr. and Mrs. Davis do not
have any plan or proposal which relates to or would result in any
of the actions enumerated in Item 4 of Schedule 13D, except that
Mr. and Mrs. Davis may dispose of some or all of the Common Stock
or may acquire additional shares of Common Stock, from time to
time, depending upon price and market conditions, evaluation of
alternative investments, and other factors."
Item 7. Materials to be filed as Exhibits.
Item 7 of the Statement is hereby supplemented by the
addition of the following:
"2. Letter dated November 18, 1996 from Jerome H. Davis
to the Board of Directors of Mitchell Bancorp., Inc."
Page 5 of 10 Pages
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Signature.
After reasonable inquiry and to the best knowledge and
belief of the undersigned, the undersigned certify that the
information set forth in this amendment is true, complete and
correct.
11/19/96 Jerome H. Davis
Date (Signature)
11/19/96 Susan B. Davis
Date (Signature)
Page 6 of 10 Pages
Exhibit No. 2
November 18, 1996
VIA FEDERAL EXPRESS
Board of Directors
Mitchell Bancorp, Inc.
210 Oak Avenue
Spruce Pine, North Carolina 28777
Gentlemen:
I have reviewed your financial results for the September
quarter and I have a number of concerns. All numbers and ratios
which follow reflect the back-out of the September quarter SAIF
charge.
I. Rate of Earnings.
Ex the SAIF charge, our company earned about $.13 per
share for the quarter. This rate is only $.52 per share per year,
which does not warrant the current $12.25 stock price. It's 23.6
times earnings - too rich. You need to support and enhance stock
price in other ways, while building earnings.
II. Fully Priced to Book.
Present book value is $14.93 per share. Our stock
presently trades at a "full" value of 82% of book. There is no
room for price improvement by this measure either. Other steps
must be taken.
III. Return on Equity.
With book of $14.93 and expected earnings of $.52 (6/97),
the ROE is a paltry 3.5%. Our stock price can not go higher by
this measure either. Rule of thumb: if your ROE is no higher than
your passbook rate, shareholders are in big trouble!
Page 7 of 10 Pages
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Mitchell Bancorp, Inc.
November 18, 1996
Page 2
IV. Excessive Capital Ratio.
Your capital ratio is a whopping 39.8%. What do you
intend to do about it? Your regular dividend rate is only $.40 per
share per year for a current yield of only 3.27%. You could
increase that now. More importantly, you need to pay a special
dividend of $7.00 to $10.00 per share. You have seen numerous
examples of $3.00-$10.00 special dividends paid by thrifts
recently. Hillsborough Savings in North Carolina just announced a
$7.00 special dividend - they had only a 28.2% capital ratio, only
70% of yours. Have you made any agreement with regulators which
would preclude you from moving forward on a special dividend
(return of capital) for a minimum of one year?
V. Share Repurchase.
Our stocks price (discount to book) and company capital
ratio call for substantial share repurchase. Your first six months
are over in January. What is your philosophy on the subject?
See the enclosed Trident article regarding IV and V
above.
VI. Excessive NPA's.
Although down 86 basis points from March, current NPA's
at 2.54% of assets remain way too high. What measures, aggressive
I trust, are you taking to reduce these below 1.00%?
If you cannot triple, at least, the paltry 3.5% ROE in
the near future, I urge you to explore the strategic alternative of
aligning Mitchell with a larger financial institution upon your one
year anniversary. A substantial premium over the current stock
price could be obtained for all shareholders by such sale of the
company. You should first reduce capital considerably. A $9.25
special dividend would get you to a 15.1 capital ratio.
Page 8 of 10 Pages
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Mitchell Bancorp, Inc.
November 18, 1996
Page 3
I hope to hear from you soon regarding my concerns.
Additionally, please advise me how much of your $20.3 million in
deposits were in CD's?
Sincerely,
Jerome H. Davis
(Signature)
cc: Calvin F. Hall,
President/Director
Edward Ballew, Jr.
Executive VP/CEO/Director
Emma Lee M. Wilson,
Assistant Managing Officer
Baxter D. Johnson,
Director
Lloyd Hise, Jr.
Director
Page 9 of 10 Pages
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This page contains a copy of an article published by
Trident Securities, Inc. on October 29, 1996 and contained in its
investment bankers trade circular (Vol. 1, No. 3).
Page 10 of 10 Pages
