BECKLEY BANCORP, INC.
200 MAIN STREET
BECKLEY, WEST VIRGINIA 25802-1069
(304) 252-6201
______________________, 1997
Dear Stockholder:
On behalf of the Board of Directors, I want to extend to you a cordial
invitation to attend a Special Meeting of Stockholders of Beckley Bancorp, Inc.
(the "Company"). The meeting will be held at ______ _.m., Eastern time, on
________, 1997, in the ____________________ Room of the Raleigh County
Armory-Civic Center, 200 Armory Drive, Beckley, West Virginia.
The primary purpose of the meeting is to vote on a proposal to approve
the Agreement and Plan of Merger, dated as of May 30, 1997 (the "Merger
Agreement"), by and among the Company, Beckley Federal Savings Bank (the
"Savings Bank"), HB Acquisition Company ("HBAC") and Bank of Raleigh
("Raleigh"), pursuant to which the Company would merge with HBAC (the "Corporate
Merger"), and the Savings Bank would merge with Raleigh (the "Bank Merger" and
together with the Corporate Merger, the "Mergers"). HBAC is a newly-formed
subsidiary of Horizon Bancorp, Inc. ("Horizon"). Raleigh is also a subsidiary of
Horizon. Stockholders will also vote at the meeting for adjournment to permit
further solicitation if an insufficient number of shares have voted for approval
of the Merger Agreement.
Upon consummation of the Corporate Merger, each outstanding share of
the Company common stock (excluding certain shares held by the Company or held
by stockholders who have properly exercised dissenter's rights) would be
converted into the right to receive a cash payment of $25.64 from HBAC.
Consummation of the Mergers is subject to certain conditions, including approval
of the Merger Agreement by the Company's stockholders and approval of the
Mergers by various regulatory agencies. Approval of the Merger Agreement
requires the affirmative vote by the holders of a majority of the outstanding
common stock of the Company.
The accompanying Notice of Special Meeting and Proxy Statement contain
information about the Mergers. We urge you to review carefully such information,
and the information in the Company's 1996 Annual Report to Stockholders, and
Quarterly Report on Form 10-QSB for the period ended March 31, 1997, copies of
which are attached to the Proxy Statement.
The Board of Directors of the Company has unanimously approved the
Merger Agreement and unanimously recommends that the stockholders of the Company
approve the Merger Agreement. A failure to vote, either by not returning the
enclosed proxy or by checking the "Abstain" box thereon, will have the same
effect as a vote against approval of the Merger Agreement. Even if you plan to
attend the meeting in person, please complete the enclosed proxy, sign, date and
mail it promptly in the enclosed postage-paid, return addressed envelope. You
may revoke your proxy by attending the Special Meeting and voting in person.
Yours very truly,
Duane K. Sellards
President and Chief Executive Officer
Please do not send your common stock certificates at this time. If the
Corporate Merger is consummated, you will be sent instructions regarding the
surrender of your stock certificates.
<PAGE>
BECKLEY BANCORP, INC.
200 MAIN STREET
BECKLEY, WEST VIRGINIA 25802-1069
(304) 252-6201
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ________, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Beckley Bancorp, Inc. (the "Company") will be held at __________ __.m., Eastern
time, on ________, 1997, or any adjournment or adjournments thereof, in the
____________________ Room of the Raleigh County Armory-Civic Center, 200 Armory
Drive, Beckley, West Virginia, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement
and Plan of Merger, dated as of May 30, 1997 (the "Merger
Agreement"), by and among the Company, Beckley Federal Savings
Bank ("the Savings Bank"), HB Acquisition Company ("HBAC"),
and the Bank of Raleigh ("Raleigh"), pursuant to which (i)
HBAC would merge with the Company (the "Corporate Merger") and
the Savings Bank would merge with Raleigh and (ii) each
outstanding share of the Company common stock (excluding
certain shares held by the Company, or held by stockholders
who have properly exercised dissenter's rights) would be
converted into the right to receive a cash payment of $25.64
from HBAC upon completion of the Corporate Merger (each
outstanding stock option would also be entitled to receive
$25.64, less the option exercise price), all on and subject to
the terms and conditions contained therein.
2. To approve a proposal to adjourn the Special Meeting to permit
further solicitation of proxies in the event that an
insufficient number of shares is present in person or by proxy
to approve the Merger Agreement.
3. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
A copy of the Merger Agreement is set forth in ANNEX A to the
accompanying Proxy Statement. Stockholders are urged to read the Merger
Agreement in its entirety.
The Board of Directors of the Company has fixed _______, 1997, as the
record date for the determination of stockholders entitled to notice of and to
vote at the Special Meeting, and accordingly, only holders of record of the
Company common stock at the close of business on that date will be entitled to
notice of and to vote at the Special Meeting or any adjournment or adjournments
thereof.
Approval of the Merger Agreement requires the affirmative vote of a
majority of the holders of the outstanding common stock of the Company.
Any holder of the Company common stock who wishes to demand appraisal
rights (dissenter's rights) with respect to such holder's shares of Company
common stock must comply with the requirements of Section 262 of the Delaware
General Corporation Law. A copy of Section 262 is attached as ANNEX C to the
accompanying Proxy Statement. See also, "THE MERGER AGREEMENT - Appraisal
Rights" in the accompanying Proxy Statement.
<PAGE>
The Board of Directors of the Company unanimously recommends that
stockholders vote "For" approval of these proposals.
By Order of the Board of
Directors of BECKLEY
BANCORP, INC.
Ned H. Ragland, Jr.
Secretary
Stockholders are urged to complete, date, sign and return promptly the enclosed
proxy in the accompanying envelope, which requires no postage if mailed in the
United States. If a stockholder receives more than one proxy for any reason,
each proxy should be completed and returned. Your cooperation is appreciated.
Your proxy will be voted with respect to the matters identified thereon in
accordance with any specifications on the proxy. A failure to vote, either by
not returning the enclosed proxy or by checking the "Abstain" box thereon, will
have the same effect as a vote against approval of the Merger Agreement.
<PAGE>
BECKLEY BANCORP, INC.
200 MAIN STREET
BECKLEY, WEST VIRGINIA 25802-1069
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ________, 1997
This Proxy Statement is being furnished by Beckley Bancorp, Inc., a
Delaware-chartered corporation (the "Company"), to the holders of the Company
common stock, par value $0.10 per share (the "Company Common Stock"), in
connection with the solicitation of proxies by the Company's Board of Directors
for use at a Special Meeting of Stockholders of the Company to be held at
__________ __.m., Eastern time, on ________, 1997, in the ____________________
Room of the Raleigh County Armory-Civic Center, at 200 Armory Drive, Beckley,
West Virginia (the "Special Meeting"), and at any adjournment or adjournments
thereof.
This Proxy Statement, the accompanying Notice of Special Meeting and
form of proxy are first being mailed to the stockholders of record of the
Company on or about ______________________, 1997.
The primary purpose of the Special Meeting is to consider and vote upon
a proposal to approve the Agreement and Plan of Merger, dated as of May 30, 1997
(the "Merger Agreement"), by and among the Company, Beckley Federal Savings Bank
(the "Savings Bank"), HB Acquisition Company ("HBAC") and Bank of Raleigh
("Raleigh"), pursuant to which the Company would merge with HBAC, (the
"Corporate Merger"), and the Savings Bank would merge with Raleigh (the "Bank
Merger" and together with the Corporate Merger, the "Mergers"), all on and
subject to the terms and conditions contained therein. HBAC is a newly-formed
subsidiary of Horizon Bancorp, Inc. ("Horizon"). Raleigh is also a subsidiary of
Horizon. See "SUMMARY," "THE MERGERS", "THE MERGER AGREEMENT" and a copy of the
Merger Agreement attached as ANNEX A to this Proxy Statement. Stockholders will
also vote at the meeting for adjournment to permit further solicitation if an
insufficient number of shares have voted for approval of the Merger Agreement.
Upon consummation of the Corporate Merger each outstanding share of the
Company Common Stock (excluding certain shares held by the Company or held by
stockholders who have properly exercised dissenter's rights) would be converted
into the right to receive a cash payment of $25.64 from HBAC (each outstanding
stock option would also be entitled to receive $25.64, less the option exercise
price).
The Company Common Stock is traded on the over-the-counter market,
including the OTC Bulletin Board under the symbol "BCKB." On May 16, 1997, the
last business day prior to public announcement of the execution of the letter of
intent concerning the Merger Agreement, the high and low bid quotations per
share of the Company Common Stock were $18.75 and $18.50, respectively. On
__________ ____ 1997, such quotations were $__________ and $__________. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
THE DATE OF THIS PROXY STATEMENT IS ______________________, 1997
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (Company File No. 0-23878) under Section 13(a) or 15(d) of
the Exchange Act are hereby incorporated by reference in this Proxy Statement:
(i) the Company's Annual Report on Form 10-K for the year
ended December 31, 1996;
(ii) the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1997;
(iii) the Company's Current Report on Form 8-K, dated May
20, 1997; and
(iv) the Company's Current Report on Form 8-K, dated May
30, 1997.
Any statement contained herein, in any supplement hereto or in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein, in any supplement hereto which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement or any supplement
hereto.
(ii)
<PAGE>
TABLE OF CONTENTS
PAGE
----
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................
SUMMARY......................................................................
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA...............................
PRICE RANGE OF COMPANY COMMON STOCK; DIVIDENDS...............................
THE SPECIAL MEETING..........................................................
General...................................................................
Record Date: Vote Required................................................
THE MERGERS..................................................................
General...................................................................
Background and Reasons....................................................
Opinion of Financial Advisor..............................................
Certain Federal Income Tax Consequences...................................
THE MERGER AGREEMENT.........................................................
The Mergers...............................................................
Effective Date............................................................
Exchange of the Company Common Stock Certificates.........................
Interests of Certain Persons..............................................
Employee Benefits.........................................................
Appraisal Rights..........................................................
Business Pending Consummation.............................................
Regulatory Approvals......................................................
Conditions to Consummation; Termination...................................
Waiver; Amendment.........................................................
Expenses; Termination Fees................................................
ADJOURNMENT OF THE MEETING...................................................
ADDITIONAL MATTERS...........................................................
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING................................
LEGAL OPINIONS...............................................................
ACCOUNTANTS..................................................................
OTHER MATTERS................................................................
ANNEXES
Annex A - Agreement and Plan of Merger ...................................
Annex B - Opinion of Baxter Fentriss and Company..........................
Annex C - Appraisal Rights................................................
EXHIBITS
Exhibit 1 - 1996 Annual Report to Stockholders............................
Exhibit 2 - Form 10-QSB for the quarter ended March 31, 1997..............
(iii)
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY PROVIDES CERTAIN INFORMATION RELATING TO THE
MERGERS. THIS SUMMARY IS NOT INTENDED TO BE A SUMMARY OF ALL MATERIAL
INFORMATION RELATING TO THE MERGERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROXY
STATEMENT, INCLUDING THE ANNEXES HERETO, AND IN THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT. A COPY OF THE MERGER AGREEMENT IS ATTACHED AS
ANNEX A TO THIS PROXY STATEMENT. STOCKHOLDERS ARE URGED TO READ CAREFULLY THE
ENTIRE PROXY STATEMENT, INCLUDING THE ANNEXES. AS USED IN THIS PROXY STATEMENT,
THE TERMS "HBAC", "HORIZON", "RALEIGH", "THE COMPANY" AND "THE SAVINGS BANK"
REFER TO SUCH ORGANIZATIONS, AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, SUCH
ORGANIZATIONS AND THEIR RESPECTIVE SUBSIDIARIES.
Horizon Bancorp, Inc. and Bank of Raleigh
Horizon was incorporated in 1982 under the laws of the State of West
Virginia as a bank holding company then known as Raleigh Bankshares, Inc. and
changed to its current name in 1985. In 1984, Raleigh became a wholly-owned
subsidiary of Horizon. Raleigh was originally chartered in 1899 as a state
banking corporation with the name "Bank of Raleigh." It has conducted banking
operations in Beckley, West Virginia, continuously since that time. The
principal executive offices of Horizon and Raleigh are located at One Park
Avenue, Beckley, West Virginia 25802-2803 and the telephone number at that
address is (304) 255-7000.
Banking operations are, and are expected to continue to be, Horizon's
primary business and major source of revenue. For the most part, Horizon derives
its revenues from dividends paid by its subsidiary banks. The principal role of
Horizon is to supervise and coordinate the activities of the subsidiary banks.
Horizon has five operating subsidiaries, Raleigh, National Bank of Summers of
Hinton, Greenbrier Valley National Bank, The First National Bank in Marlinton
and The Twentieth Street Bank.
At December 31, 1996, Horizon had consolidated assets of $947,068,000,
deposits of $797,996,000 and shareholders' equity of $109,411,000.
HB Acquisition Company
HBAC is a wholly-owned subsidiary of Horizon. HBAC is a West
Virginia-chartered corporation formed in May 1997 to acquire the shares of the
Company. HBAC owns no assets. However, the obligations of HBAC have been
guaranteed by Horizon. The principal executive office of HBAC is located at One
Park Avenue, Beckley, West Virginia 25802-2803 and the telephone number at that
address is (304) 255-7000.
The Company and the Savings Bank
The Company is a Delaware-chartered corporation organized in March 1994
to acquire the stock of the Savings Bank issued upon the conversion from mutual
to stock form of ownership. The Company is a savings and loan holding company.
The Company's principal asset is the stock of the Savings Bank which is a
community-oriented institution offering a variety of financial services in
Beckley, West
1
<PAGE>
Virginia. As of March 31, 1997, the Company reported assets of $44.6 million,
net loans of $20.4 million, deposits of $33.0 million, and stockholders' equity
of $11.2 million, and as of such date the Company operated through two offices
in Beckley, West Virginia. For the fiscal year ended December 31, 1996, and for
the three months ended March 31, 1997, the Company reported net income of
$276,000 and $93,000, respectively. The principal executive offices of the
Company and the Savings Bank are located at 200 Main Street, Beckley, West
Virginia 25802-1069, and their telephone number is (304) 252-6201.
Special Meeting; Record Date
The Special Meeting will be held on ________, 1997, at __________
__.m., Eastern time, in the ____________________ Room of the Raleigh County
Armory-Civic Center, 200 Armory Drive, Beckley, West Virginia, for the purpose
of considering and voting upon a proposal to approve the Merger Agreement and a
proposal to adjourn the meeting to permit further solicitation.
The Board of Directors of the Company has fixed __________ ____, 1997,
as the record date for determining stockholders entitled to notice of and to
vote at the Special Meeting (the "Record Date"). As of such date, there were
__________ shares of the Company Common Stock outstanding and entitled to be
voted at the Special Meeting. See "THE SPECIAL MEETING."
The Mergers
Under the terms of the Merger Agreement, the Company would merge with
HBAC and the Savings Bank would merge with Raleigh. Upon consummation of the
Corporate Merger, each outstanding share of the Company Common Stock (excluding
any shares of stock held by the Company or held by stockholders who have
properly exercised dissenter's rights) would be converted into the right to
receive a cash payment of $25.64 (the "Cash Consideration") from HBAC. As part
of the Cash Consideration, each outstanding stock option would also be converted
into the right to receive $25.64, less the option exercise price. In addition to
this Cash Consideration of $25.64, in the event the Corporate Merger occurs on
or after October 1, 1997, an additional cash payment of $0.02 per share will be
provided by HBAC for each month, or part of one month, that the Corporate Merger
is not effective, unless the delay in requested by the Company, in which case no
additional cash payment will occur.
The Corporate Merger and the Bank Merger are expected to occur
contemporaneously, although HBAC may waive the requirement that the Bank Merger
occur contemporaneously with the Corporate Merger. A waiver of this requirement
will not affect the timing of the payment of the Cash Consideration.
Vote Required
Approval of the Merger Agreement requires the affirmative vote of a
majority of the holders of the outstanding common stock of the Company. Approval
of the proposal to adjourn the Special Meeting to permit additional solicitation
in the event an insufficient number of votes are cast in favor of the Merger
Agreement requires the affirmative vote of a majority of the votes cast at the
Special Meeting. Each owner of Company Common Stock on the Record Date will be
entitled to one vote for each share held of record upon each matter properly
submitted at the Special Meeting or any adjournment or adjournments thereof.
2
<PAGE>
The directors and executive officers of the Company (including certain
of their related interests) beneficially owned, as of the Record Date, and are
entitled to vote at the Special Meeting, 106,066 shares of the Company Common
Stock, which represents 17.6% of the outstanding shares of the Company Common
Stock entitled to be voted at the Special Meeting. Accordingly, assuming that
the directors and executive officers of the Company vote their shares of the
Company Common Stock in favor of approval of the Merger Agreement, approval of
the Merger Agreement will require the affirmative vote of the holders of an
additional 32.4% of the outstanding shares of the Company Common Stock entitled
to be voted at the Special Meeting in order for the Merger Agreement to be
approved at the Special Meeting.
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
APPROVAL OF THE MERGER AGREEMENT OR ADJOURNMENT.
Effective Date
Subject to the conditions to the obligations of the parties to effect
the Mergers, the Corporate Merger will become effective (the "Effective Date")
at the time specified in the Certificate of Merger for the Corporate Merger,
which shall be executed at the completion of the closing of the Corporate Merger
and in no event be more than 10 days following the completion of the Corporate
Merger. Subject to the foregoing, it is currently anticipated that the Mergers
will be consummated during the fourth calendar quarter of 1997. The date of the
closing will be determined by HBAC, following the expiration of any and all
required waiting periods, following the receipt of required governmental
approvals of the Mergers. The Company may delay the closing of the Mergers to
not later than November 1, 1997. See "THE MERGER AGREEMENT -- Exchange of the
Company Common Stock Certificates" and "-- Conditions to Consummation;
Termination."
Recommendation of the Company's Board of Directors
The Board of Directors of the Company has approved the Merger Agreement
by unanimous vote, believes it is in the best interests of the Company and its
stockholders and unanimously recommends its approval by the Company
stockholders. See "THE MERGERS -- Background and Reasons."
Opinion of Financial Advisor
Baxter Fentriss and Company ("Baxter Fentriss"), an investment banker,
has advised the Company's Board of Directors that, in its opinion, the
consideration for each share of the Company Common Stock set forth in the Merger
Agreement is fair, from a financial point of view, to the holders of the Company
Common Stock. The full text of the Baxter Fentriss opinion, dated as of May 30,
1997, which describes the procedures followed, assumptions made, limitations on
the review undertaken and other matters in connection with rendering such
opinion, is attached as ANNEX B to this Proxy Statement and should be read in
its entirety by the Company stockholders. For further information regarding the
opinion of Baxter Fentriss, see "THE MERGERS -- Opinion of Financial Advisor."
3
<PAGE>
Certain Federal Income Tax Consequences
Stockholders are urged to consult their own tax advisors as to the
specific consequences to them of the Corporate Merger under applicable tax laws.
The receipt of cash by a stockholder of the Company in exchange for
shares of the Company Common Stock pursuant to the Merger Agreement will be a
taxable transaction to such stockholder for federal income tax purposes. In
general, a stockholder will recognize gain or loss upon the surrender of the
stockholder's Company Common Stock equal to the difference, if any, between (i)
the sum of the cash payment of $25.64 per share received (plus any additional
cash payment received) in exchange for the shares of the Company Common Stock
and (ii) the stockholder's tax basis in such Company Common Stock. See "THE
MERGERS -- Certain Federal Income Tax Consequences."
Interests of Certain Persons
Certain directors or executive officers of the Company have interests
in the Mergers in addition to their interests as stockholders of the Company
generally. These interests include, among others, provisions in the Merger
Agreement relating to indemnification and maintenance of director and officer
liability insurance coverage, and the agreement by HBAC to appoint members of
the Company's Board of Directors to an Advisory Board for a six-month term.
These interests also relate to certain benefits available as a result of a
"change in control" of the Company, such as the Corporate Merger, including,
among others, the payment of certain severance benefits under an existing
employment agreement to President Sellards. In addition, the Corporate Merger
will accelerate the vesting of certain shares of Company Common Stock held by
directors and executive officers of the Company under the terms of the Company's
existing executive officer and director compensation plans. The estimated
aggregate amount of payments to directors and executive officers expected to be
made in connection with the Corporate Merger due to acceleration of benefits is
$125,500 from an employee stock ownership plan (the "ESOP"), $73,000 from a
management stock bonus plan (the "MSBP"), $452,200 from stock option plans, and
$283,000 from an employment agreement. See "THE MERGER AGREEMENT -- Interests of
Certain Persons" for further disclosure on payments to be made as a result of
the Corporate Merger.
Appraisal Rights
Holders of record of shares of Company Common Stock who do not vote to
approve the Merger Agreement may dissent from the Merger Agreement and demand to
have the fair value of their shares of Company Common Stock, based on all
relevant factors and excluding any element of value arising from the
accomplishment or expectation of the Mergers, judicially appraised and paid to
them. Such fair value may be more, the same as, or less than the consideration
provided for in the Merger Agreement. Such stockholders must deliver a written
demand for such appraisal to the Company prior to the taking of the vote on the
approval of the Merger Agreement and comply with the other requirements of
Section 262 of the Delaware General Corporation Law ("DGCL"), the full text of
which Section 262 is attached to this Proxy Statement as ANNEX C. Any deviation
from the requirements of Section 262 may result in forfeiture of appraisal
rights granted thereunder. Voting for approval of the Merger Agreement, or
delivering a Proxy in connection with the Special Meeting (unless the Proxy
directs a vote against, or expressly abstains from the vote on, the approval of
the Merger Agreement), will constitute a waiver of a stockholder's right to seek
appraisal as to the shares of Company Common Stock so voted by such Proxy and
will nullify any written demand for appraisal submitted by such stockholder.
Return of a blank executed Proxy will constitute a vote in favor of the Merger
Agreement and will thereby result in waiver
4
<PAGE>
of a dissenter's appraisal rights. Voting against or failing to vote for the
Merger Agreement will not by itself constitute a valid demand for appraisal
rights. See "THE MERGER AGREEMENT -- Appraisal Rights."
Business Pending Consummation
The Company has agreed in the Merger Agreement to carry on its business
in substantially the same manner its business was conducted prior to the date of
the Merger Agreement, and has agreed not to take certain actions relating to the
operation of the Company pending consummation of the Mergers, without the prior
written consent of HBAC, except as otherwise permitted by the Merger Agreement.
See. "THE MERGER AGREEMENT -- Business Pending Consummation."
Regulatory Approvals
The Mergers are subject to the prior approval of the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), the Federal Deposit
Insurance Corporation (the "FDIC"), the West Virginia Board of Banking and
Financial Institutions (the "West Virginia Board"), the Office of Thrift
Supervision (the "OTS") and other regulatory authorities, if any. Applications
or waiver requests are expected to be filed with each of such regulatory
authorities for such approvals in the near future. There can be no assurance
that the necessary regulatory approvals will be obtained or as to the timing or
conditions of such approvals. See "THE MERGER AGREEMENT -- Regulatory
Approvals."
Conditions to Consummation; Termination
Consummation of the Mergers is subject, among other things, to: (i)
approval of the transactions contemplated by the Merger Agreement by the
requisite vote of the stockholders of the Company; (ii) receipt of the
regulatory approvals referred to under "THE MERGER AGREEMENT -- Regulatory
Approvals" without any condition or requirement which, in the reasonable opinion
of HBAC, would so materially adversely impact the economic or business benefits
to HBAC of the transactions contemplated by the Merger Agreement so as to render
inadvisable the consummation of the Mergers; (iii) there being in effect no
order, decree or injunction of any court or agency of competent jurisdiction
that enjoins or prohibits the Mergers; and (iv) all outstanding stock options to
purchase shares of Company Common Stock shall have been canceled on or prior to
the Effective Date.
The Merger Agreement may be terminated by mutual agreement of the
Boards of Directors of HBAC and the Company. The Merger Agreement may also be
terminated by the Board of Directors of the Company if the Corporate Merger does
not occur on or before January 10, 1998, or if certain conditions set forth in
the Merger Agreement are not met. See "THE MERGER AGREEMENT -- Conditions to
Consummation; Termination."
Expenses; Termination Fees
All expenses incurred by or on behalf of the parties in connection with
the Merger Agreement and the transactions contemplated thereby shall be borne by
the party incurring the same.
The Company shall be entitled to pursue its remedies at law or receive
reimbursement of its out-of-pocket expenses from HBAC for up to $150,000 if the
Company terminates the Merger Agreement as the result of a breach by HBAC. HBAC
shall be entitled to a fee of $500,000 following the
5
<PAGE>
occurrence of an Acquisition Event (as defined in the Merger Agreement). See
"THE MERGER AGREEMENT -- Expenses; Termination Fees."
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following selected consolidated financial and other data for the
last five fiscal years are derived in part from the audited consolidated
financial statements of the Company and, for the periods prior to the Savings
Bank's conversion in July 1994, the Savings Bank. The consolidated financial and
other data for the three-month period ended March 31, 1996 and 1997, are derived
from unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
financial position and the results of operations of these periods. Operating
results for the three- months ended March 31, 1996 and 1997, are not necessarily
indicative of the results that may be expected for the entire fiscal year ending
December 31, 1997. The data for the three months ended March 31, 1996 and 1997,
are annualized where applicable. The data should be read in conjunction with the
audited consolidated financial statements, related notes and other financial
information incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
Selected Five-Year Financial and Other Data
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
---------------------------- -----------------------
1997 1996 1996(1) 1995 1994(2) 1993 1992
---- ---- ---- ---- ---- ---- ----
SELECTED FINANCIAL CONDITION DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets $44,623 $44,003 $45,964 $45,213 $42,372 $37,883 $36,680
Loans receivable, net 20,403 17,603 16,484 15,966 13,792 12,086 10,917
Investment Securities (3) 4,961 5,024 6,995 9,014 11,412 1,061 5,545
Collateralized mortgage obligations and other
mortgage-backed securities (3) 16,289 17,651 16,484 17,954 14,546 17,189 12,489
Deposit accounts 32,975 32,421 32,246 33,427 32,191 32,790 31,727
Shareholders' equity 11,214 11,208 11,282 11,268 9,843 4,868 4,653
SELECTED OPERATIONS DATA
Interest income 789 773 3,097 3,019 2,417 2,245 2,355
Interest expense 362 332 1,382 1,312 1,067 1,136 1,413
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 427 441 1,715 1,707 1,350 1,109 942
Provision for loan losses 2 15 52 81 30 15 3
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision 425 426 1,663 1,626 1,320 1,094 939
for loan losses
Non-interest income 17 15 61 60 50 51 39
Gain on sale of securities -- -- 26 35 -- -- --
Non-interest expense 295 300 1,306 1,101 961 819 759
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 147 141 444 620 409 326 219
Income tax expense 54 55 168 224 144 111 79
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 93 86 276 396 265 215 140
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings per share (4) $0.16 $0.15 $ .47 $ .69 $ .29 N/A N/A
====================================================================================================================================
SELECTED OPERATING RATIOS
Return on average assets 0.82% 0.78% 0.62% 0.90% 0.65% 0.57% 0.39%
Return on average equity 3.31% 3.08% 2.47% 3.72% 3.57% 4.52% 3.07%
Average equity to average assets 24.68% 25.23% 24.94% 24.27% 18.27% 12.70% 12.78%
Net interest rate spread 2.79% 3.00% 2.88% 3.03% 2.84% 2.68% 2.24%
Non-performing assets to total assets 0.21% 0.17% 0.12% 0.12% 0.10% 0.36% 0.34%
</TABLE>
6
<PAGE>
Selected Five-Year Financial and Other Data
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
---------------------------- -----------------------
1997 1996 1996(1) 1995 1994(2) 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend payout ratio 137.50% 133.33% 70.21% 34.78% 0.00% N/A N/A
Number of:
Real estate loans outstanding 446 441 445 442 439 458 476
Deposit accounts 4,382 4,432 4,370 4,479 4,355 4,494 4,426
Full service offices 2 2 2 2 2 2 2
</TABLE>
- ------------------
(1) During the third quarter of 1996, the FDIC issued a one-time special
assessment on all SAIF insured institutions. This assessment of
$212,000 reduce income before taxes by $212,000. If this assessment had
not been made, net income would have been $407,000 and earnings per
share would have been $0.69.
(2) On July 7, 1994, the Corporation issued 595,125 shares of common stock.
Net proceeds from the stock issuance totalled $5,599,272.
(3) On January 1, 1994, the Corporation adopted the Financial Accounting
Standards Board's ("FASB") Statement of Accounting Standards Number 115
("SFAS" 115). As a result of adopting SFAS 115, the securities which
are classified as "available-for-sale" are reported at fair value.
(4) Earnings per share are based on the weighted average number of common
and common equivalent shares outstanding. For 1994, earnings per share
was based on net income subsequent to the Corporation's issuance of
common stock on July 7, 1994.
PRICE RANGE OF COMPANY COMMON STOCK; DIVIDENDS
The shares of Company Common Stock are traded in the over-the-counter
market, including the OTC Bulletin Board under the symbol "BCKB". The table
below sets forth the high and low bid quotations for the shares of Company
Common Stock reported during the periods indicated based on information
published by The National Quotation Bureau, Inc. The Company Common Stock
commenced trading in July 1994.
HIGH LOW
Jan. 1, 1995 - March 31, 1995 13 5/8 11
April 1, 1995 - June 30, 1995 14 1/2 12 1/2
July 1, 1995 - Sept. 30, 1995 14 1/2 12 1/2
Oct. 1, 1995 - Dec. 31, 1995 16 13 5/8
Jan. 1, 1996 - March 31, 1996 16 1/2 16
April 1, 1996 - June 30, 1996 16 1/2 16 1/2
July 1, 1996 - Sept. 30, 1996 17 16 1/2
Oct. 1, 1996 - Dec. 31, 1996 16 1/2 16 1/2
Jan. 1, 1997 - March 31, 1997 18 16 1/2
7
<PAGE>
On May 16, 1997, the last business day prior to public announcement of
the execution of the letter of intent concerning the Merger Agreement, the high
and low bid quotations per share were $18.75 and $18.50. On __________ ____,
199__, the most recent date hereto, the high and low bid quotations per share
were $__________ and $__________. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission, and may not represent actual
transactions.
On January 14, 1997, the Board of Directors of the Company declared a
$0.14 per share regular semi-annual cash dividend and a $0.08 per share special
cash dividend paid on February 18, 1997 to Stockholders of record as of January
31, 1997. During the year ended December 31, 1996, the Company paid regular cash
dividends totalling $0.26 per common share and a special cash dividend of $0.07
per share. During the year ended December 31, 1995, the Company paid regular
cash dividends totalling $0.24 per common share.
THE SPECIAL MEETING
General
This Proxy Statement is being furnished by the Company to its
stockholders in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Special Meeting to be held on ________,
1997, and any adjournment or adjournments thereof, to consider and vote upon a
proposal to approve the Merger Agreement and a proposal for adjournment in the
event there are insufficient votes to approve the Merger Agreement and any other
business as may properly come before the Special Meeting.
After having been submitted, the enclosed proxy may be revoked by the
person giving it, at any time before it is exercised, by: (i) submitting written
notice of revocation of such proxy to the Secretary of the Company; (ii)
submitting a proxy having a later date; or (iii) such person appearing at the
Special Meeting and revoking the proxy. All shares represented by valid proxies
will be exercised in the manner specified thereon. If no specification is made,
such shares will be voted in favor of approval of the Merger Agreement and in
favor of adjournment for further solicitation.
Directors, officers and employees of the Company may solicit Proxies
from Company stockholders, either personally or by telephone, telegraph or other
form of communication. Such persons will receive no additional compensation for
such services. The Company has retained __________ to assist in soliciting
proxies and to send proxy materials to brokerage houses and other custodians,
nominees and fiduciaries for transmittal to their principals, at a cost of
$__________, plus out-of-pocket expenses. All expenses associated with the
solicitation of proxies will be paid by the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT, BELIEVES IT IS IN THE BEST INTERESTS OF THE COMPANY
AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS ITS APPROVAL BY THE
COMPANY STOCKHOLDERS. SEE "THE MERGERS -- BACKGROUND AND REASONS."
Record Date; Vote Required
The Board of Directors of the Company has fixed __________ ____, 1997,
as the Record Date for determining stockholders entitled to notice of and to
vote at the Special Meeting, and accordingly, only holders of the Company Common
Stock of record at the close of business on that day will be entitled
8
<PAGE>
to notice of and to vote at the Special Meeting. The number of shares of the
Company Common Stock outstanding on the Record Date was __________, each of such
shares being entitled to one vote.
As to the approval of the Merger Agreement by checking the appropriate
box, a stockholder may: (i) vote "FOR" approval of the Merger Agreement (ii)
vote "AGAINST" the Agreement, or (iii) "ABSTAIN." The Merger Agreement must be
approved by a vote of a majority of the shares of the Common Stock entitled to
vote, without regard to (a) Broker Non-votes, or (b) proxies marked "ABSTAIN" as
to that matter.
As to the approval of the proposal to adjourn the Special Meeting in
the event that there is an insufficient number of shares present in person or by
proxy to approve the Merger Agreement; a stockholder may: (i) vote "FOR" the
adjournment; (ii) vote "AGAINST"; or (iii) "ABSTAIN." Approval of the
adjournment requires the affirmative vote of the holders of a majority of the
Common Stock present in person or by proxy at the Special Meeting, without
regard to (a) Broker Non-votes, or (b) proxies marked "ABSTAIN" as to that
matter.
The directors and executive officers of the Company (including certain
of their related interests) beneficially owned, as of the Record Date, and are
entitled to vote at the Special Meeting 106,066 shares of the Company Common
Stock, which represents 17.6% of the outstanding shares of Company Common Stock
entitled to be voted at the Special Meeting. Accordingly, assuming that the
directors and executive officers of the Company vote their shares of the Company
Common Stock in favor of approval of the Merger Agreement, approval of the
Merger Agreement will require the affirmative vote of the holders of an
additional 32.4% of the outstanding shares of the Company Common Stock entitled
to be voted at the Special Meeting in order for the Merger Agreement to be
approved at the Special Meeting. It should be noted that the ESOP and the
Company's restricted stock plans hold 3.9% and 0.5% of the Company's Common
Stock, respectively.
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST APPROVAL OF THE MERGER AGREEMENT.
PROPOSAL I - THE MERGERS
THE FOLLOWING INFORMATION RELATING TO THE MERGERS IS NOT INTENDED TO BE
A COMPLETE DESCRIPTION OF ALL INFORMATION RELATING TO THE MERGERS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS PROXY STATEMENT, INCLUDING THE ANNEXES HERETO, AND IN THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT IS
ATTACHED AS ANNEX A TO THIS PROXY STATEMENT AND REFERENCE IS MADE THERETO FOR A
COMPLETE DESCRIPTION OF THE TERMS OF THE MERGERS. STOCKHOLDERS OF THE COMPANY
ARE URGED TO READ THE MERGER AGREEMENT CAREFULLY.
9
<PAGE>
General
Under the terms of the Merger Agreement, the Company and HBAC would
merge with and into HBAC (the "Corporate Merger") and the Savings Bank would
concurrently or subsequently merge with and into Raleigh (the "Bank Merger").
Upon consummation of the Corporate Merger, each outstanding share of the Company
Common Stock (except certain shares held by the Company and shares held by
stockholders who have properly exercised dissenter's rights) would be converted
automatically and without any action on the part of the holder thereof, into the
right to receive a cash payment of $25.64 from HBAC (each outstanding stock
option would also be converted into a right to receive a cash payment of $25.64,
less the option exercise price).
In addition to this Cash Consideration of $25.64, in the event the
Corporate Merger occurs on or after October 1, 1997, an additional cash payment
of $0.02 per share will be provided by HBAC for each month, or part of one
month, that the Corporate Merger is not effective, unless the delay in requested
by the Company, in which case no additional cash payment will occur.
The Corporate Merger and the Bank Merger are expected to occur
contemporaneously, although HBAC may waive the requirement that the Bank Merger
occur contemporaneously with the Corporate Merger. A waiver of this requirement
will not affect the amount or timing of the payment of the Cash Consideration.
Background and Reasons
Background. In recognition of the trend towards consolidation and
increasing competition in the financial services industry, among other reasons,
the Board of Directors of the Company (the "Board") determined to hire a
financial advisor in January 1997. Baxter Fentriss was hired by the Company to
evaluate strategic alternatives available to the Company, including remaining
independent and acquisitions of or by the Company, and to provide guidance as to
possible courses of action. While considering the alternative of remaining
independent and not deciding to put the Company up for sale, the Board
instructed management, with the assistance of Baxter Fentriss, to determine the
level of interest that might exist on the part of other potential acquirors of
the Company.
Baxter Fentriss contacted a number of financial institutions and
holding companies, from inside and outside the Company's region, that it and
management believed would have a strategic interest in the Company as well as
have the financial resources necessary to successfully complete such a
transaction. After execution of confidentiality agreements, interested parties
were provided with copies of a confidential offering memorandum which had been
prepared by the Company and Baxter Fentriss. Baxter Fentriss contacted
approximately 30 companies, including Horizon. Copies of the confidential
offering memorandum were provided to the 16 companies which were interested in
receiving information. In April 1997, four of these companies provided
preliminary indications of interest in acquiring the Company. Two of the four
interested parties submitted preliminary indications of interest which
contemplated a merger for stock. After discussing the preliminary indications of
interest with Baxter Fentriss, management determined that the preliminary
indication of interest from Horizon merited further discussion because of the
level of consideration indicated and other factors. The preliminary indication
of interest was subject to completion of satisfactory preliminary due diligence
and additional data concerning the Company and the Savings Bank was subsequently
provided to Horizon.
10
<PAGE>
The Board and Baxter Fentriss met on May 1, 1997, to assess and
consider, among other things, the terms and conditions of the preliminary
indications of interest as well as other strategic options, including remaining
independent. At this meeting, Baxter Fentriss made a detailed presentation
relating to the preliminary indications of interest and the financial
institutions and holding companies which submitted them, as well as updated
background information relating to the value of the Company and recent merger
and acquisition pricing.
The Board met on May 16, 1997 to further assess and consider strategic
options, including the indication of interest from Horizon. At this meeting, the
Board authorized Mr. Sellards to continue discussions with Horizon and, if
appropriate, to execute a non-binding letter of intent of merger with Horizon.
Following that meeting, discussions between the Company and Horizon continued
and resulted in the execution of a non-binding letter of intent of merger with
Horizon on May 19, 1997. The letter of intent required the execution of a
definitive merger agreement no later than May 30, 1997. Following execution of
the letter of intent, Horizon and the Company continued discussion concerning
the proposed terms of the Merger Agreement.
On May 29, 1997, the Board met again to consider the proposed
definitive merger agreement with Horizon. By this date, the Merger Agreement
provided for the use of HBAC to facilitate the transaction. At that meeting,
Baxter Fentriss gave the Board its opinion that the consideration to be received
by the stockholders of the Company from HBAC was fair from a financial point of
view. After extensive discussion, the Board voted to approve the Merger
Agreement.
Company Reasons for the Mergers. The Company believes that the Mergers
are fair to, and in the best interests of the Company and its stockholders.
Accordingly, the Board has unanimously adopted the Merger Agreement. The Board
therefore unanimously recommends that the Company's stockholders vote "For" the
approval of the Merger Agreement.
In reaching its determination that the Mergers are fair to, and in the
best interest of the Company and its stockholders, the Board considered a number
of factors both from a short-term and long-term perspective, including, without
limitation, the following:
(i) the Board's familiarity with and review of the Company's business,
operations, financial condition, earnings and prospects;
(ii) the current and prospective economic environment and competitive
and regulatory constraints facing financial institutions and
particularly the Company;
(iii) the opportunities for growth and leveraging the Company's
capital;
(iv) the ability to generate an acceptable return on equity without
taking undue risk;
(v) the Board's review, based in part on presentations by Baxter
Fentriss and the due diligence reviews by the Company's management, as
well as its financial and legal advisors of the business, operations,
financial condition, earnings and prospects of parties who submitted
indications of interest;
11
<PAGE>
(vi) the advice of Baxter Fentriss that a business combination with,
and the acquisition proposal by, HBAC was fair to the Company's
stockholders from a financial point of view;
(vii) the Board's review of the alternative of continuing to remain
independent. In this regard, the Board considered, based in part on the
analyses of Baxter Fentriss, the range of possible values to the
Company's stockholders that could potentially be obtained as an
independent entity given possible levels of future earnings. In this
connection, the Board was aware of certain risks of remaining
independent, including, among other things, the increased competition
in the Company's markets, and the costs and operational risks
associated with the facilities upgrades which would be necessary in
order for the Company to maintain its competitiveness;
(viii) the Board's evaluation of the risks to consummation of the
Mergers, including, among others, the risks associated with obtaining
all necessary regulatory approvals without the imposition of any
condition which differs from conditions customarily imposed in
approving acquisitions of the type contemplated by the Merger Agreement
and compliance with which would materially adversely affect the
reasonably anticipated benefits of the transactions to HBAC; and
(ix) the terms and conditions of the Merger Agreement and the other
documents executed in connection with the Mergers.
In view of the variety of factors considered in connection with its
evaluation of the Mergers, the Board did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching its determination.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
Opinion of Financial Advisor
Baxter Fentriss has acted as financial advisor to Beckley Bancorp, Inc.
and Beckley Federal Savings Bank, (collectively referred to as "Beckley") in
connection with the merger. Baxter Fentriss assisted Beckley in identifying
prospective acquirors. On May 30, 1997, Baxter Fentriss delivered to Beckley its
opinion as of such date, and on the basis of matters referred to herein, the
offer is fair, from a financial point of view, to the holders of Beckley Common
Stock. In rendering its opinion, Baxter Fentriss consulted with the management
of Beckley and Horizon, reviewed the Merger Agreement, and certain
publicly-available information on the parties; and reviewed certain additional
materials made available by the management of the respective banks.
In addition Baxter Fentriss discussed with the management of Beckley
and Horizon their respective businesses and outlook. No limitations were imposed
by Beckley's Board of Directors upon Baxter Fentriss with respect to the
investigation made or procedures followed by it in rendering its opinion. The
full text of Baxter Fentriss' written opinion is attached as Appendix B to this
Proxy Statement-Prospectus and should be read in its entirety with respect to
the procedures followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken by Baxter Fentriss in
connection therewith.
Baxter Fentriss' opinion is directed to Beckley's Board of Directors
only, and is directed only to the fairness, from a financial point of view, of
the consideration received. It does not address
12
<PAGE>
Beckley's underlying business decision to effect the proposed merger, nor does
it constitute a recommendation to any Beckley shareholder as to how such
shareholder should vote with respect to the merger at the Special Meeting or as
to any other matter.
Baxter Fentriss' opinion was one of many factors taken into
consideration by Beckley's Board of Directors in making its determination to
approve the Merger Agreement, and the receipt of Baxter Fentriss' opinion is a
condition precedent to Beckley consummating the merger. The opinion of Baxter
Fentriss does not address the relative merits of the Mergers as compared to any
alternative business strategies that might exist for Beckley or the effect of
any other business combination in which Beckley might engage.
Baxter Fentriss, as part of its investment banking business, is
continually engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and valuations for
estate, corporate and other purposes. Baxter Fentriss is a nationally recognized
advisor to firms in the financial services industry on mergers and acquisitions.
Beckley selected Baxter Fentriss as its financial advisor because Baxter
Fentriss is an investment banking firm focusing on bank and thrift transactions,
and because of the firm's extensive experience and expertise in transactions
similar to the merger. Baxter Fentriss is not affiliated with Horizon or
Beckley.
In connection with rendering its opinion to Beckley's Board of
Directors, Baxter Fentriss performed a variety of financial analyses. In
conducting its analyses and arriving at its opinion as expressed herein, Baxter
Fentriss considered such financial and other factors as it deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial condition and results of operations of Horizon
and Beckley including interest income, interest expense, interest sensitivity,
noninterest income, noninterest expense, earnings, book value, returns on assets
and equity, capitalization, the amount and type of non-performing assets, the
impact of holding certain non-earning real estate assets, the reserve for loan
losses and possible tax consequences resulting from the transaction; (ii) the
business prospects of Horizon and Beckley, (iii) the economies of Horizon's and
Beckley's respective market areas; (iv) the historical and current market for
Beckley Common Stock, and, (v) the nature and terms of certain other merger
transactions that it believed to be relevant. Baxter Fentriss also considered
its assessment of general economic, market, financial and regulatory conditions
and trends, as well as its knowledge of the financial institutions industry, its
experience in connection with similar transactions, its knowledge of securities
valuation generally, and its knowledge of merger transactions in West Virginia.
In connection with rendering its opinion, Baxter Fentriss reviewed (i)
the Merger Agreement, (ii) drafts of this Proxy Statement, (iii) the Annual
Reports to shareholders, including the audited financial statements of Beckley
for the year ended December 31, 1994, 1995, and 1996; (iv) the Annual Reports to
shareholders, including the audited financial statements of Horizon for the year
ended December 31, 1994, 1995, and 1996, (v) the annual reports on Form 10-KSB
and 10-K for Beckley and Horizon, respectively, for the year ended December 31,
1996, (vi) unaudited, condensed balance sheets and statements of income as of
March 31, 1997, (vii) certain additional financial and operating information
with respect to the business, operations and prospects of Horizon and Beckley as
it deemed appropriate. Baxter Fentriss also (a) held discussions with members of
the senior management of Horizon and Beckley regarding the historical and
current business operation, financial condition and future prospects of their
respective companies, (b) reviewed the historical market prices and trading
activity for the common stock of Beckley; (c) compared the results of operations
of Beckley and Horizon with those of certain banking
13
<PAGE>
companies that it deemed to be relevant, (d) analyzed the pro-forma financial
impact of the merger on Horizon, and (e) analyzed the pro forma financial impact
of the merger on Beckley.
The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Moreover, the evaluation of fairness, from a financial point of
view, of the cash payment to holders of Beckley Common Stock was to some extent
a subjective one based on the experience and judgment of Baxter Fentriss and not
merely the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, Baxter Fentriss believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and of the factors considered by it, without considering all
analyses and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of evaluation resulting from any particular
analysis described below should not be taken to be Baxter Fentriss' view of the
actual value of Beckley or Horizon.
In performing its analyses, Baxter Fentriss made numerous assumptions
with respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Beckley or Horizon. The
analyses performed by Baxter Fentriss are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold. In rendering its opinion, Baxter Fentriss
assumed that, in the course of obtaining the necessary regulatory approvals for
the merger, no conditions will be imposed that will have a material adverse
effect on the contemplated benefits of the merger, on a pro-forma basis, to
Beckley.
The following is a summary of selected analyses performed by Baxter
Fentriss in connection with its opinion.
1. Stock Price History. Baxter Fentriss studied the history of the
trading prices and volume for Beckley Common Stock and compared that to publicly
traded banks and thrifts in West Virginia and to the price offered by Horizon.
As of December 31, 1996, Beckley's book value was $18.76. There is a very thin
trading market for Beckley Common Stock. The stock has traded recently in the
$11.00 to $18.75 range. A price of $25.64 represents a substantial premium over
this range.
2. Comparative Analysis. Baxter Fentriss compared the price to earnings
multiple, price to book multiple, and price to assets multiple of the Horizon
offer with other comparable merger transactions in West Virginia. The
comparative multiples included both bank and thrift sales during the last 3
years.
3. Pro-Forma Impact. Baxter Fentriss considered the pro-forma impact of
the transaction and concluded the transaction should have a positive long-term
impact on Horizon shareholders and would likely be approved by banking
regulators.
4. Discounted Cash Flow Analysis. Baxter Fentriss performed a
discounted cash flow analysis to determine hypothetical present values of a
share of Beckley's common stock as a 5 and 10 year investment. Under this
analysis, Baxter Fentriss considered various scenarios for the performance
14
<PAGE>
of Beckley's stock using (i) a range from 6% to 12% in the growth of Beckley's
earnings and dividends and (ii) a range from 10 time to 18 times earnings as the
terminal value for Beckley's stock. A discount rate of 12% was applied to these
alternative growth and value scenarios. These ranges of discount rates, growth
alternatives and terminal values were chosen based upon what Baxter Fentriss, in
its judgment, considered to be appropriate taking into account, among other
things, Beckley's past and current performance, the general level of inflation,
rates of return for fixed income and equity securities in the marketplace
generally and for companies with similar risk profiles. In all of the scenarios
considered, the present value of a share of Beckley's common stock was
calculated at less than that of the Horizon offer. Thus, Baxter Fentriss'
discounted cash flow analysis indicated that Beckley shareholders would be in a
better financial position by receiving the Consideration offered in the merger
transaction rather than continuing to hold Beckley's Common Stock.
Using publicly available information on Horizon and applying the
capital guidelines of banking regulators, Baxter Fentriss' analysis indicated
that the merger would not seriously dilute the capital and earnings capacity of
Horizon and would, therefore, likely not be opposed by the banking regulatory
agencies from a capital perspective. Furthermore, Baxter Fentriss considered the
likely market overlap and the Federal Reserve guidelines with regard to market
concentration and did not believe there to be a significant issue with regard to
possible antitrust concerns.
Baxter Fentriss has relied, without any independent verification, upon
the accuracy and completeness of all financial and other information reviewed.
Baxter Fentriss has assumed that all estimates, including those as to possible
economies of scale, were reasonably prepared by management, and reflect their
best current judgments. Baxter Fentriss did not make an independent appraisal of
the assets or liabilities of either Beckley or Horizon, and has not been
furnished such an appraisal.
No company or transaction used as a comparison in the above analysis is
identical to Beckley, Horizon, or the merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading values of
the companies used for comparison in the above analysis.
Baxter Fentriss has been, or will be, paid (i) a merger fee, based on
successful completion of the proposed merger, equal to 1.0% of aggregate
consideration received by Beckley or shareholders of Beckley and (ii) reasonable
out-of-pocket expenses for its services. Beckley has agreed to indemnify Baxter
Fentriss against certain liabilities, including certain liabilities under
federal securities laws.
Certain Federal Income Tax Consequences
The following is a discussion of certain federal income tax
consequences of the Corporate Merger. The discussion is included for general
information purposes only and may not apply to special situations, such as the
Company's stockholders, if any, who received their Company Common Stock upon the
exercise of employee stock options or otherwise as compensation, and the
Company's stockholders that are insurance companies, securities dealers,
financial institutions or foreign persons.
The receipt of cash by a stockholder of the Company in exchange for
shares of the Company Common Stock pursuant to the Merger Agreement will
constitute a taxable transaction to such stockholder for federal income tax
purposes. In general, a stockholder will recognize gain or loss upon the
surrender
15
<PAGE>
of the stockholder's Company Common Stock equal to the difference, if any,
between (i) the sum of the cash payment of $25.64 (plus any additional cash
compensation) per share received in exchange for the shares of the Company
Common Stock, and (ii) the stockholder's tax basis in such Company Common Stock.
Any gain or loss will be treated as capital gain or loss if the Company Common
Stock exchanged was held as a capital asset in the hands of the stockholder.
The cash payments due to the holders of the Company Common Stock upon
the exchange thereof pursuant to the Merger Agreement (other than certain exempt
entities and persons) will be subject to a 31% backup withholding tax by the
exchange agent under federal income tax law unless certain requirements are met.
Generally, the exchange agent will be required to deduct and withhold the tax if
(i) the stockholder fails to furnish a taxpayer identification number ("TIN") to
the exchange agent or fails to certify under penalty of perjury that such TIN is
correct, (ii) the Internal Revenue Service ("IRS") notifies the exchange agent
that the TIN furnished by the stockholder is incorrect, (iii) the IRS notifies
the exchange agent that the stockholder has failed to report interest, dividends
or original issue discount in the past, or (iv) there has been a failure by the
stockholder to certify under penalty of perjury that such stockholder is not
subject to the 31% backup withholding tax. Any amounts withheld by the exchange
agent in collection of the 31% backup withholding tax will reduce the federal
income tax liability of the stockholders from whom such tax was withheld. The
TIN of an individual stockholder is that stockholder's Social Security number.
No ruling has been or will be requested from the IRS as to any of the
tax effects of any of the transactions discussed in this Proxy Statement to
stockholders of the Company, and no opinion of counsel has been or will be
rendered to the Company with respect to any of the tax effects of the Corporate
Merger to the Company's stockholders. There is no assurance that applicable tax
laws will not change prior to the Effective Date.
Because certain tax consequences of the Corporate Merger may vary
depending upon the particular circumstances of each stockholder and other
factors, each stockholder of the Company is urged to consult such holder's own
tax advisor to determine the particular tax consequences to such holder of the
Corporate Merger (including the application and effect of state and local income
and other tax laws).
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE MERGER AGREEMENT WHICH IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT.
The Mergers
Under the terms of the Merger Agreement, HBAC would merge with the
Company and the Savings Bank would merge with Raleigh. Upon consummation of the
Corporate Merger, each outstanding share of the Company Common Stock (except
certain shares held by the Company as treasury stock and shares held by
stockholders who have properly exercised dissenter's rights) would be converted,
by virtue of the Corporate Merger, automatically and without any action on the
part of the holder thereof, into the right to receive a cash payment of $25.64
from HBAC. In addition to this Cash Consideration of $25.64, in the event the
Corporate Merger occurs on or after October 1, 1997, an additional cash
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payment of $0.02 per share will be provided by HBAC for each month, or part of
one month, that the Corporate Merger is not effective, unless the delay in
requested by the Company, in which case no additional cash payment will occur.
The foregoing would not have any effect on the consideration to be
received by the Company stockholders or on the tax consequences of the Corporate
Merger to the Company Stockholders.
Effective Date
Subject to the conditions of the obligations of the parties to effect
the Mergers, the Corporate Merger will become effective (the "Effective Date")
at the time specified in the Certificate of Merger for the Corporate Merger,
which shall be executed at the completion of the closing of the Corporate Merger
and in no event be more than 10 days following the completion of the Corporate
Merger. Subject to the foregoing, it is currently anticipated that the Mergers
will be consummated during the fourth quarter of 1997. See "-- Exchange of the
Company Common Stock Certificates" and "-- Conditions to Consummation;
Termination."
Exchange of the Company Common Stock Certificates
As promptly as practicable after the Effective Date, HBAC will send or
cause to be sent to each record holder of the Company Common Stock immediately
prior to the Effective Date, transmittal materials for use in exchanging all of
such holder's certificates representing shares of Company Common Stock for a
check representing the amount of cash to which such holder is entitled, without
any interest thereon. The transmittal materials will contain information and
instructions with respect to the surrender and exchange of such certificates.
THE COMPANY'S STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
The Cash Consideration into which such holder's shares are converted on
the Effective Date will be delivered by or on behalf of HBAC, to such holder
only upon delivery to __________ (the "Exchange Agent") of the certificates
formerly representing all of such shares owned by such holder (or indemnity
satisfactory to HBAC and the Exchange Agent, in their judgment, if any of such
certificates are lost, stolen or destroyed). No interest will be paid on such
Cash Consideration to which such holder shall be entitled to receive upon such
delivery.
After the Effective Date, the stock transfer books of the Company will
be closed and there will be no further transfers on the transfer books of the
Company of the shares of the Company Common Stock that were outstanding
immediately prior to the Effective Date.
Interests of Certain Persons
Certain members of the Company's management and its Board may be deemed
to have interests in the Mergers in addition to their interests, if any, as
stockholders of the Company. These interests are described in more detail below.
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Employment Agreement. President Duane K. Sellards has an employment
agreement with the Savings Bank that provides for certain payments and benefits
in the event his employment with the Savings Bank is terminated following a
change of control as defined in the employment agreement. The execution of the
terms of the Merger Agreement would constitute a change of control for purposes
of this agreement and the employment of President Sellards will be terminated
upon the consummation of the Mergers. At March 31, 1997, the estimated amount of
payments to President Sellards would be $283,000. This payment will be in
addition to other benefits Mr. Sellards may receive, as discussed below.
Advisory Agreements. As of the Effective Date of the Mergers, the
members of the board of directors of the Savings Bank will serve as non-voting
directors of Raleigh. These directors will, among other things, be obligated to
use their best efforts to cause the continuation of customer loans and deposits
with Raleigh. Each of these directors will be paid $200 per month for a six
month period.
Insurance Coverage. The Company currently has an insurance policy for
its directors and officers that covers these individuals in the event they are
subject to a lawsuit in connection with their duties as officers and directors.
Pursuant to the Merger Agreement, the Company may purchase insurance coverage
under its director and officer liability policy at such cost not to exceed
$40,000, unless HBAC can obtain the same coverage at less cost, in which case
the Company will purchase the coverage obtained by HBAC. This insurance is
intended to provide coverage following the Mergers for actions of officers and
directors taken prior to the Mergers. This insurance coverage reduces the
potential exposure of officers and directors for actions taken by them prior to
the Merger.
Employee Stock Ownership Plan. The Company maintains an employee stock
ownership plan, (the "ESOP"), for the exclusive benefit of participating
employees. On or before the Closing Date of the Mergers, the Company will
terminate the ESOP and allocate and distribute the assets of the ESOP to plan
participants and beneficiaries. At March 31, 1997, the estimated benefits
payable to President Sellards was $68,800. Upon consummation of the Mergers, the
additional estimated payment to be made by the ESOP to Mr. Sellards, in
connection with his interest as a participant in the ESOP, is $90,000, assuming
the Cash Consideration is $25.64 per share.
Stock Options. Certain officers and employees as well as directors of
the Company and the Savings Bank have been granted options under two option
plans of the Company (the "Option Plans") to purchase, in the aggregate, 17,850
shares of Common Stock for $15.625 per share and 41,539 shares of Common Stock
for $18.25 per share. As of the Effective Date of the Mergers, the Option Plans
will terminate, and officers, employees and directors holding options will
receive the difference between the exercise price and the Cash Consideration to
be paid in the Mergers (i.e., either $10.015 or $7.39 per share of Common Stock
under option, assuming Cash Consideration totalling $25.64 per share)). Each of
the six directors, including Mr. Sellards, will receive $74,100 in exchange for
their options. See "Proposal I -- Approval of the Plan -- Calculation of the
Purchase Price."
Restricted Stock. Each of the directors, including the President, have
been awarded shares of restricted stock under a management stock bonus plan (the
"MSBP"). As of the Effective Date of the Mergers, the MSBP will terminate, all
unvested restricted stock awarded to directors of the Savings Bank will become
100% vested, and directors who were awarded restricted stock will receive the
Cash Consideration per share of previously unvested restricted stock. Assuming
Cash Consideration of $25.64 per share, each director, including Mr. Sellards,
will receive $12,200 in exchange for their unvested restricted stock.
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Employee Benefits
The Mergers will not result in any payment to any person as a result of
any employment agreement, including without limitation any severance or
unemployment compensation, to any director, officer, employee or consultant,
other than Duane K. Sellards. In accordance with the Merger Agreement, HBAC will
use its best efforts to retain all other employees of the Savings Bank after the
completion of the Mergers. Any individual, other than Mr. Sellards, employed by
the Savings Bank shall be entitled to severance compensation equal to three (3)
months salary if not retained by HBAC or Raleigh. "Retained" shall mean the
offer of continued employment under substantially the same terms for at least
one (1) year following the Mergers.
As soon as administratively practicable after the Effective Date, the
employees of the Company and the Savings Bank employed on the Effective Date
(the "Employees") will generally be entitled to participate in Raleigh's group
hospitalization, medical, life and disability insurance plans, thrift plan,
severance plan or other plans, on substantially the same terms and conditions as
applicable to comparable employees of Raleigh (including as to group
hospitalization and medical plans, their dependents, and the waiver of
pre-existing condition prohibitions and without any uninsured waiting periods,
to the extent such Employees and dependents are participating in the Savings
Bank's group medical plan on such terms on the Effective Date), giving effect to
years of service with the Savings Bank as if such service were with Raleigh for
purposes of eligibility and vesting.
Appraisal Rights
Under the Delaware General Corporate Law (the "DGCL") applicable to the
Company, any stockholder who does not wish to accept the consideration provided
for in the Merger Agreement has the right to dissent from the Merger Agreement
and to demand appraisal of, and to be paid the fair value for, such
stockholder's shares of Company Common Stock (exclusive of any element of value
arising from the accomplishment or expectation of the Mergers), provided that
the stockholder complies with the provisions of Section 262 of the DGCL
("Appraisal Rights").
The following is intended as a brief summary of certain provisions of
the statutory procedures required to be followed by a stockholder in order to
dissent from the Merger Agreement and perfect the stockholder's Appraisal
Rights. This summary, however, is not a complete statement of all applicable
requirements and is qualified in its entirety by reference to Section 262 of the
DGCL, the text of which is set forth in ANNEX C hereto.
If any stockholder elects to demand appraisal of such stockholder's
shares of Company Common Stock, the stockholder must satisfy each of the
following conditions:
(i) the stockholder must deliver to the Company a written demand for
appraisal of such stockholder's shares of Company Common Stock before
the vote with respect to the Merger Agreement is taken (this written
demand for appraisal must be in addition to and separate from any proxy
or vote abstaining from or against the Merger Agreement; voting against
or failing to vote for the Merger Agreement by itself does not
constitute a written demand for appraisal; and
(ii) the stockholder must not vote in favor of the Merger Agreement (an
abstention or failure to vote will satisfy this requirement, but a vote
in favor of the Merger Agreement, by proxy or in person, will
constitute a waiver of the stockholder's Appraisal Rights in respect of
the shares
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of Company Common Stock so voted and will nullify any previously filed
written demand for appraisal).
If any stockholder fails to comply with either of these conditions and
the Corporate Merger becomes effective, the stockholder will be entitled to
receive the consideration provided for in the Merger Agreement, but will have no
Appraisal Rights with respect to such stockholder's shares of Company Common
Stock.
All written demands for appraisal should be delivered either in person
to the Corporate Secretary at the Special Meeting or by mail (certified mail,
return receipt requested, is recommended) to: Corporate Secretary, Beckley
Bancorp, Inc., 200 Main Street, Beckley, West Virginia 25802-1069, before the
vote on the Merger Agreement is taken at the Special Meeting, and should be
executed by, or on behalf of, the holder of record of the shares of Company
Common Stock. The demand must reasonably inform the Company of the identity of
the stockholder and the intention of the stockholder to demand appraisal of such
stockholder's shares of Company Common Stock.
In addition, a holder of shares of the Company wishing to exercise
Appraisal Rights must hold such shares of record on the date the written demand
for appraisal is made and must hold such shares continuously through the
Effective Date of the Mergers. To be effective, a written demand for appraisal
must be made by or in the name of the registered stockholder, fully and
correctly, as the stockholder's name appears on such stockholder's stock
certificate(s) and cannot be made by the beneficial owner if the beneficial
owner does not also hold the shares of Company Common Stock of record. The
beneficial holder must, in such cases, have the registered owner submit the
required demand in respect of such shares of Company Common Stock.
If shares of Company Common Stock are owned of record in a fiduciary
capacity, such as trustee, guardian or custodian, execution of a demand for
appraisal should be made in such a capacity, and if the shares of Company Common
Stock are owned of record by more than one person, as in joint tenancy or
tenancy in common, the demand should be executed by or for all joint owners. An
authorized agent, including one for two or more joint owners, may execute the
demand for appraisal for a stockholder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, he or she is a nominee for others. A record holder, such
as a broker, who holds shares as nominee for several beneficial owners may
exercise his or her rights of appraisal with respect to the shares of Company
Common Stock held of one or more beneficial owners, while not exercising this
right for other beneficial owners. In such case, the written demand should state
the number of shares of Company Common Stock as to which appraisal is sought.
Where no number of shares of Company Common Stock is expressly mentioned, the
demand will be presumed to cover all shares of Company Common Stock held in the
name of such record owner.
Within ten days after the Effective Date, the continuing corporation,
whether HBAC, the Company, or Horizon, must provide notice of the date upon
which the Corporate Merger became effective to each stockholder who so filed a
written demand for appraisal and who did not vote in favor of the Merger
Agreement. Within 120 days after the Effective Date, but not thereafter, either
the continuing corporation or any stockholder who has complied with the
requirements of Section 262 may file a petition in the Delaware Court of
Chancery (the "Court") demanding a determination of the fair value of the shares
of Company Common Stock held by all stockholders entitled to appraisal. It is
not expected that HBAC, the Company or Horizon would file such a petition in the
event there are dissenting stockholders. Inasmuch as the continuing corporation
has no obligation to file such a petition, the failure
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of a stockholder to do so within the period specified could nullify such
stockholder's previously written demand for appraisal. At any time within 60
days after the Effective Date, a stockholder has the right to withdraw the
demand and to accept the payment of the consideration provided for in the Merger
Agreement.
If a petition for appraisal is duly filed by a stockholder and a copy
thereof is delivered to the continuing corporation, the continuing corporation
will then be obligated within 20 days thereafter to provide the Court with a
duly verified list containing the names and addresses of all stockholders who
have demanded an appraisal of their shares of Company Common Stock. After notice
to such stockholders, the Court is empowered to conduct a hearing upon the
petition, to determine those stockholders who have complied with Section 262 and
who have become entitled to Appraisal Rights. The Court may require the
stockholders who have demanded payment for their shares of Company Common Stock
to submit their stock certificates to the Register in Chancery for notation
thereon of the pendency of the appraisal proceeding; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceeding as to
such stockholder.
After determination of the stockholders entitled to an appraisal, the
Court will appraise the shares of Company Common Stock, determining their fair
value exclusive of any element of value arising from the accomplishment or
expectation of the Mergers. In determining fair value, the Court is required to
take into account all relevant factors. When the value is so determined, the
Court will direct the payment by the continuing corporation of such value, with
interest thereon accrued during the pendency of the proceeding if the Court so
determines, to the stockholders entitled to receive the same, upon surrender to
the continuing corporation by such holders of the certificates representing such
shares of Company Common Stock.
Stockholders considering seeking appraisal should be aware that, if the
Corporate Merger is consummated, the fair value of their shares of Company
Common Stock determined under Section 262 could be more, the same, or less than
the consideration that they would be entitled to receive pursuant to the Merger
Agreement if they do not demand appraisal of their shares of Company Common
Stock, and that investment banking opinions as to fairness from a financial
point of view are not necessarily opinions as to fair value under Section 262.
Costs of the appraisal proceeding may be imposed upon the parties
thereto (i.e., the Company and the stockholders participating in the appraisal
proceeding) by the Court as the Court deems equitable in the circumstances. Upon
the application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares of Company Common Stock entitled to Appraisal Rights.
Any stockholder who demands Appraisal Rights will not, after the
Effective Date, be entitled to vote shares of Company Common Stock subject to
such demand for any purpose or to receive payments of dividends or any other
distribution with respect to such shares of Company Common Stock (other than
with respect to payment as of a record date prior to the Effective Date) or to
receive the consideration provided for in the Merger Agreement; however, if no
petition for appraisal is filed within 120 days after the Effective Date, or if
such stockholder delivers a written withdrawal of such stockholder's demand for
appraisal and an acceptance of the Corporate Merger, either within 60 days after
the Effective Date, or thereafter with the written approval of the continuing
corporation, then the right of such stockholder to
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appraisal will cease and such stockholder will be entitled to receive the
consideration provided for in the Merger Agreement without interest.
Failure to follow the steps required by Section 262 for perfecting
Appraisal Rights may result in the loss of such rights. In view of the
complexity of Section 262, stockholders of the Company who are considering
dissenting from the Merger Agreement should consult their legal advisors and
should see ANNEX C.
Business Pending Consummation
The Company and the Savings Bank have agreed in the Merger Agreement to
carry on their business in substantially the same manner their business was
conducted prior to the date of this Merger Agreement, and have agreed not to
take certain actions relating to the operation of the Company pending
consummation of the Mergers, without the prior written consent of HBAC, except
as otherwise permitted by the Merger Agreement. These actions include, without
limitation: (i) amending their Certificate of Incorporation, Charter or Bylaws;
(ii) changing or creating additional capital stock or issuing or redeeming any
shares of capital stock; (iii) granting or issuing any new or additional options
or warrants; (iv) paying any dividends; (v) entering into or modifying any
employment agreements or employee benefit plans; (vi) increasing the rate of
compensation or paying any bonus (other than standard customary adjustments and
merit increases consistent with past practices) to any of its directors,
officers or employees; (vii) making any changes in its accounting practices,
methods or procedures, except as required by GAAP or governmental regulations or
authorities; (viii) disposing of or agreeing to dispose of any material portion
of its assets or acquiring or agreeing to acquire any substantial portion of the
business or property of any other entity; (ix) incurring any indebtedness of
borrowed money or any debt liability or obligation (other than in the ordinary
course of business consistent with past practices); (x) mortgaging or subjecting
any of its assets to any lien or encumbrance (other than in the ordinary course
of business consistent with past practices); (xi) waiving, releasing or
compromising any material rights in its favor (other than in the ordinary course
of business), except in good faith for fair value, nor taking any such action
with respect to any of its directors, officers or shareholders or their family
members; (xii) making any contributions to its ESOP exceeding the outstanding
principal balance or the limits of deductibility under the Internal Revenue
Code, but will otherwise make contributions to the ESOP as required; (xiii)
opening branch offices; (xiv) changing any material aspect of their business; or
(xv) encouraging, initiating or soliciting interest from any entity, other than
HBAC, for the merger, purchase or acquisition of the Company or its
subsidiaries.
Regulatory Approvals
The Mergers are subject to the prior approval of the OTS, FDIC, West
Virginia Board and the FRB.
The Bank Merger is, and therefore the Mergers are, subject to the prior
approval by the Federal Reserve Board, the FDIC, the OTS and the West Virginia
Board. The Bank Holding Company Act of 1956, as amended (the "BHC Act"), governs
the Federal Reserve Board's approval process. The BHC Act provides that the
Federal Reserve Board may not approve any transaction (i) which would result in
a monopoly or which would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States, or (ii) the effect of which in any section of the country may
be to substantially lessen competition, or tend to create a monopoly, or which
in any other manner might restrain trade, unless the Federal Reserve Board finds
that the anti-
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competitive effects of the proposed transaction are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served.
In conducting its review of any application for approval under the BHC
Act, the Federal Reserve Board must consider the financial and managerial
resources and future prospects of the institutions involved, and the convenience
and needs of the communities that the institutions will serve. The Federal
Reserve Board may deny an application if it determines that the financial or
managerial resources of the acquiring bank holding company are inadequate. The
BHC Act also provides that a transaction approved by the Federal Reserve Board
may not be consummated for 30 days after approval to allow for review by the
Department of Justice under the federal antitrust laws. If, however, the
Department of Justice does not commence a legal action during this 30-day
period, it may not thereafter challenge the transaction except in an action
commenced under Section 2 of the Sherman Antitrust Act.
Consummation of the merger is also subject to approval by the West
Virginia Board under the West Virginia banking statutes regulating interstate
combinations. The West Virginia Board must consider whether (i) the Merger would
result in a monopoly, or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any section of West Virginia, (ii) the Merger would have the effect in any
section of West Virginia of substantially lessening competition, or would tend
to create a monopoly or in any other manner would be in restraint of trade,
unless the anti-competitive effects of the proposed merger are clearly
outweighed in the public interest by the probable effect of the Merger in
meeting the convenience and needs of the communities to be served or (iii) the
merger would be contrary to the best interests of the shareholders or customers
of the Company and the Savings Bank.
The BHC Act and West Virginia law provide for the publication of notice
of, and the opportunity of administrative hearings relating to, the respective
applications for approval noted and described above. Interested parties may
intervene in the approval proceedings. If an interested party intervenes, such
intervention could substantially delay the regulatory approvals required for
consummation of the Merger.
[An application seeking approval of the Merger was filed with the OTS
on _________, 1997. Applications seeking approval of the Mergers were filed with
the Federal Reserve Board, FDIC and the West Virginia Board on _______, 1997.
The Federal Reserve Board approved the application on ______, 1997, and the West
Virginia Board approved the application on ____________, 1997.]
The Mergers cannot proceed in the absence of the requisite regulatory
approvals. There can be no assurance that such regulatory approvals will be
obtained, and, if the Mergers are approved, there can be no assurance as to the
date of any such approvals. There can also be no assurance that any such
approvals will not contain a condition or requirement which causes such
approvals to fail to satisfy the conditions set forth in the Merger Agreement
and described below under "-- Conditions to Consummation; Termination." There
can likewise be no assurance that the U.S. Department of Justice or a state
Attorney General will not challenge the Mergers or, if such a challenge is made,
as to the result thereof.
Conditions To Consummation; Termination
Consummation of the Mergers is subject, among other things, to: (i)
approval of the transactions contemplated by the Merger Agreement by the
requisite vote of the stockholders of the Company; (ii) receipt of the
regulatory approvals referred to under "-- Regulatory Approvals" without any
condition or
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requirement which, in the reasonable opinion of HBAC, would so materially
adversely impact the economic or business benefits to HBAC of the transactions
contemplated by the Merger Agreement so as to render inadvisable the
consummation of the Mergers; (iii) there being in effect no order, decree or
injunction of any court or agency of competent jurisdiction that enjoins or
prohibits the Mergers; or (iv) all outstanding stock options to purchase shares
of Company Common Stock shall have been canceled on or prior to the Effective
Date.
Consummation of the Mergers is also subject to the satisfaction or
waiver of various other conditions specified in the Merger Agreement, including,
among others, the delivery by the Company and HBAC, each to the other, of (a)
opinions of their respective counsel reasonably satisfactory to the addressees
of such opinions, and (b) certificates executed by certain of their respective
executive officers as to due performance and compliance in all material respects
with the agreements and covenants in the Merger Agreement and the truth and
correctness of the representations and warranties.
The Merger Agreement provides that prior to the Effective Date, either
before or after receipt of the required stockholder approval, the Merger
Agreement may be terminated: (i) by mutual consent of HBAC and the Company; or
(ii) by either HBAC or the Company in the event of a breach by the other party
of any representation, warranty, or covenant contained in the Merger Agreement,
which breach cannot or is not cured within 30 days after written notice thereof
is given to the party committing such breach.
Section 7.2 of the Merger Agreement provides that the Merger Agreement
may be terminated by (i) HBAC in the event that (a) any of the conditions to the
obligations of HBAC shall not have been satisfied or waived, (b) the Company
failed to perform its obligations and agreements under the Merger Agreement, (c)
HBAC determines any of the representations or warranties of the Company are or
have become false and misleading, or (d) the Company's or HBAC's shareholders
failed to ratify and approve the Mergers; or (ii) the Company in the event that
(a) any of the conditions or obligations of the Company shall not have been
satisfied or waived, (b) HBAC shall have failed to perform its obligations and
agreements under the Merger Agreement, (c) the Company determines any of the
representations or warranties of HBAC are or have become false and misleading,
(d) the Company's or HBAC's shareholders failed to ratify and approve the
Mergers, (e) the Company has not received from its investment advisor a
satisfactory Fairness Opinion, (f) the Corporate Merger is not completed by
January 10, 1998, or (g) the Company receives a bona fide proposal prior to the
consummation of the Corporate Merger that the Board of Directors of the Company
believes is financially more favorable to the Company's shareholders, provided
HBAC does not make within four business days of notice of such proposal, an
offer at least as favorable as the third-party proposal.
Waiver; Amendment
Prior to the Effective Date, any provision of the Merger Agreement may
be: (i) waived in writing by the party benefitted by the provision; or (ii)
amended or modified at any time (including the structure of the transaction)
only by an agreement in writing among the parties thereto approved by their
respective Boards of Directors and executed in the same manner as the Merger
Agreement.
Expenses; Termination Fees
All expenses incurred by or on behalf of the parties in connection with
the Merger Agreement and the transactions contemplated thereby shall be borne by
the party incurring the same.
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The Company shall be entitled to pursue its remedies at law or receive
reimbursement of its out-of-pocket expenses from HBAC for up to $150,000 if it
terminates the Merger Agreement as the result of a breach by HBAC, Horizon, or
Raleigh. HBAC shall be entitled to a fee of $500,000 following the occurrence of
an Acquisition Event, defined in the Merger Agreement to include a merger or
similar transaction involving the Company or the Savings Bank, or a purchase,
lease or other acquisition of beneficial ownership of more than 25% of the
voting power of the Company or of the Savings Bank by any entity other than HBAC
or an affiliate of HBAC.
PROPOSAL II -- ADJOURNMENT OF THE MEETING
Approval of the Merger Agreement requires the affirmative vote of at
least a majority of the votes entitled to be cast by the holders of the Common
Stock. In the event there is an insufficient number of shares present in person
or by proxy at the Special Meeting to approve the Agreement, the Board of
Directors intends to adjourn the Special Meeting to a later date. The place and
date to which the Special Meeting would be adjourned would be announced at the
Special Meeting.
The effect of any such adjournment would be to permit the Company to
solicit additional proxies for approval of the Merger Agreement. While such an
adjournment would not invalidate any proxies previously filed, including those
voting against the Merger Agreement, it would give the Company the opportunity
to solicit additional proxies in favor of the Merger Agreement.
The Board of Directors recommends a vote "FOR" approval of the
adjournment under the circumstances described herein. Approval of the
adjournment requires the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy at the Special Meeting.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
If the Corporate Merger is not completed, the next annual meeting of
stockholders of the Company is expected to be held in April 1998. Any proposal
that a stockholder wishes to have included in the Company's Proxy Statement for
the 1998 Annual Meeting must be received by the Secretary of the Company at the
Company's executive offices, 200 Main Street, Beckley, West Virginia 25802-1069,
no later than December 22, 1997.
LEGAL OPINIONS
Certain legal matters associated with the Mergers will be passed upon
by Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C., as counsel for the
Company, and by Robinson & McElwee LLP as counsel for Horizon, HBAC and Raleigh.
ACCOUNTANTS
The consolidated balance sheets of the Company as of December 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996, included in the Company's 1996 Annual Report to Stockholders
which is incorporated by reference in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, have been incorporated herein in
reliance on the report of Mason
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& Bashaw, CPA's, A.C. independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
Representatives of Mason & Bashaw, CPA's, A.C., will be present at the
Special Meeting, will be given an opportunity to make a statement, if they so
desire, and will be available to respond to any appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no matters
which will be presented for consideration at the Special Meeting other than as
set forth in the Notice of Special Meeting accompanying this Proxy Statement.
However, if any other matters shall come before the meeting or any adjournments
thereof and be voted upon, the enclosed Proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such Proxy as to any such matters.
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ANNEX A
AGREEMENT AND
PLAN OF MERGER
BY AND BETWEEN
HB ACQUISITION COMPANY
AND
BECKLEY BANCORP, INC.
THIS AGREEMENT (hereinafter called "Agreement") is entered into as of
the 30 day May, 1997, by and between HB ACQUISITION COMPANY and BECKLEY
BANCORP, INC. and joined in by BECKLEY FEDERAL SAVINGS BANK and BANK OF RALEIGH.
WHEREAS, HB Acquisition Company ("NewCo") is a newly formed West
Virginia corporation with its principal office and place of business located in
Beckley, West Virginia; and
WHEREAS, Bank of Raleigh ("Raleigh") is a West Virginia state bank with
its principal office and place of business located in Beckley, West Virginia;
and
WHEREAS, Horizon Bancorp, Inc. ("Horizon") is the sole shareholder of
NewCo and the sole shareholder of Raleigh; and
WHEREAS, Beckley Federal Savings Bank ("Beckley") is a federal savings
bank with its principal office and place of business located in Beckley, West
Virginia, having one subsidiary, Two Hundred Corporation ("THC"); and
WHEREAS, Beckley Bancorp, Inc. ("BBI") is the sole shareholder of
Beckley, and has principal offices located in Beckley, West Virginia; and
WHEREAS, NewCo and BBI have agreed that it is in their mutual best
interests and in the best interests of their respective shareholders for NewCo
to be merged with BBI with BBI as the surviving corporation with the effect that
each of the outstanding shares of BBI's common stock ("BBI Stock") and all
outstanding stock options ("BBI Options") will be acquired for cash all in the
manner and upon the terms and conditions contained in this Agreement (the
"Merger"); and
WHEREAS, to effectuate the foregoing, NewCo and BBI desire to adopt
this Agreement as a plan of merger; and
WHEREAS, NewCo's Board of Directors has approved this Agreement and
will recommend to its sole shareholder, Horizon, that it approve the
transactions described herein; and
WHEREAS, BBI's Board of Directors has approved this Agreement and will
recommend to its shareholders that they approve the transactions described
herein;
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NOW, THEREFORE, in consideration of the premises, the mutual benefits
to be derived from this Agreement, and of the representations, warranties,
conditions, covenants and promises herein contained, and subject to the terms
and conditions hereof, NewCo and BBI intending to be legally bound hereby adopt
and make this Agreement and mutually agree as follows:
ARTICLE I. THE PLAN OF MERGER
1.1 Names of Merging Corporations. The names of the corporations proposed to be
merged are BECKLEY BANCORP, INC. and HB ACQUISITION COMPANY.
1.2. Nature of Transaction. Subject to the provisions of this Agreement, at the
"Effective Time", defined below, BBI and NewCo shall be merged with BBI as the
surviving corporation (the "Merger").
1.3. Effect of Merger; Surviving Corporation; Bank Merger. At the Effective Time
and by reason of the Merger, the separate corporate existence of NewCo shall
cease while the corporate existence of BBI as the surviving corporation in the
Merger shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger. Contemporaneously with the Merger, Beckley shall be merged with and into
Raleigh, whereupon the separate corporate existence of Beckley shall cease (the
"Bank Merger"). NewCo may but is not required to waive the requirement that the
Bank Merger occur contemporaneously with the Merger. Within seven (7) days of
the date of this Agreement, NewCo and BBI agree to cause Raleigh and Beckley,
respectively, to execute a bank merger agreement substantially in the form of
that agreement attached hereto as Exhibit A and to submit the same to their
respective shareholders for approval no later than June 30, 1997.
1.4. Assets and Liabilities of BBI and NewCo. At the Effective Time and by
reason of the Merger, and in accordance with applicable law, all of the
property, assets and rights of every kind and character of NewCo (including
without limitation all real, personal or mixed property, all debts due on
whatever account, all other choses in action, insurance policies, and every
other interest of or belonging to or due to NewCo, whether tangible or
intangible) shall vest in BBI as the surviving corporation, and BBI as the
surviving corporation shall succeed to all the rights, privileges, immunities,
powers, purposes and franchises of a public or private nature and shall assume
the liabilities and lawful obligations of NewCo, all without any conveyance,
assignment or further act or deed whereupon BBI as the surviving entity shall
continue.
1.5. Cancellation and Payment for Stock and Options.
a. Cancellation of BBI Stock and BBI Options; Cash Consideration. At the
Effective Time all rights of BBI's shareholders with respect to all
then outstanding shares of BBI Stock shall cease to exist and the
holders of shares of BBI Stock shall cease to be and shall have no
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further rights as shareholders of BBI. All BBI Options existing and
unexercised at the Effective Time shall be canceled. All rights to
acquire BBI Stock under the Beckley Management Stock Bonus Plan
("MSBP") shall be canceled. In exchange for each outstanding share of
BBI Stock or fraction thereof (other than shares held by BBI as
treasury shares or as to which dissenters rights are properly
exercised) each holder of such Stock shall receive cash in the amount
of Twenty-Five Dollars and Sixty Four Cents ($25.64) per share subject
to increase as provided below if Closing does not occur by September
30, 1997 (the "Cash Payment"). In the event of any Stock split, Stock
dividend or other recapitalization by BBI, the Cash Payment shall be
adjusted proportionately. The holders of BBI Options ("Option Holders)
shall receive in exchange for cancellation thereof the Cash Payment
less the amount required at the Effective Time to exercise the option.
Holders of restricted Stock awards under the MSBP ("Award Holders")
shall receive in exchange for cancellation of such awards and all
further rights to any Stock or awards under the MSBP the Cash Payment;
provided; however, on or prior to the Effective Time, BBI may cancel
the BBI Options and MSBP stock awards in exchange for a cash payment to
the Award Holders or Option Holders equivalent to that which would
otherwise be paid as of the Effective Time by NewCo, less applicable
tax withholding. The Cash Payment shall increase by Two Cents (2 cents)
per share for each month or portion thereof beginning October 1, 1997
that the Merger is not effective unless such delay is requested by BBI,
in which case no increase shall occur for the amount of delay
occasioned by the BBI request. The total shares (including an option as
a share and including restricted Stock) to be acquired hereunder is Six
Hundred Sixty Thousand Eight Hundred and Fifty Four (660,854) shares
such being the total number of shares outstanding (i) assuming all BBI
Options were exercised and (ii) including MSBP stock awards.
b. Surrender of Certificates. Following the Effective Time, certificates
representing shares of BBI Stock outstanding at the Effective Time
(herein sometimes referred to as the "Certificates") shall be
surrendered for payment as follows. As promptly as practicable
following the Effective Time, NewCo shall send or cause to be sent to
each former BBI shareholder of record immediately prior to the
Effective Time written instructions and transmittal materials (a
"Transmittal Letter") for use in surrendering Certificates. Upon the
proper surrender and delivery in accordance with NewCo's instructions
and accompanied by a properly completed Transmittal Letter by a former
BBI shareholder of his, her or its Certificates(s), NewCo shall remit
or cause to be remitted to the shareholder the Cash Payment to which
the shareholder is entitled. In the case of BBI Options, prior to
Closing, NewCo shall send or cause to be sent to each Option Holder a
letter acknowledging cancellation of the option rights ("Cancellation
Letter"). Upon receipt of a properly completed Cancellation Letter,
NewCo shall remit or cause to be remitted to the sender the Cash
Payment to which such person is entitled as soon as practicable after
the Effective Time. Following the Effective Time, there shall be no
transfers of BBI Stock on the stock transfer books of BBI or the
registration of any transfer of a Certificate by any holder thereof.
c. Dissenters. Any shareholder of BBI who properly exercises the right of
dissent and appraisal with respect to the Merger ("Dissenters Rights")
shall be entitled to receive
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payment of the fair value of his or her shares of BBI Stock in the
manner and pursuant to the procedures provided by applicable law.
Shares of BBI Stock held by persons who exercise Dissenters Rights
shall not be exchanged for the Cash Payment; provided, however, that if
any shareholder of BBI who exercises Dissenters Rights shall fail to
perfect his or her right to dissent or effectively shall waive or lose
such right, then each of his or her shares of BBI Stock, at NewCo's
sole option, shall be deemed to have been exchanged for the Cash
Payment as of the Effective Time.
d. Lost Certificates. After the Effective Time, any former shareholder of
BBI whose Certificate evidencing shares of BBI Stock has been lost,
destroyed, stolen or otherwise is missing shall be entitled to receive
the Cash Payment to which he or she is entitled upon compliance with
reasonable conditions imposed by NewCo including, without limitation, a
requirement that the shareholder provide a lost instruments indemnity
or surety bond in form, substance and amount satisfactory to NewCo and
execute an affidavit of ownership and entitlement.
e. Outstanding NewCo Stock. The status of the shares of NewCo common stock
which are outstanding immediately prior to the Effective Time shall not
be affected by the Merger. Such stock shall be and become by operation
of law the sole outstanding stock of the surviving corporation.
1.6. Certificate of Incorporation, Bylaws and Management. The Certificate of
Incorporation and Bylaws of BBI in effect at the Effective Time shall be the
Certificate of Incorporation and Bylaws of the surviving corporation. The
officers and directors of NewCo in office at the Effective Time shall become the
officers and directors of the surviving corporation and shall continue to hold
such offices until removed as provided by law or until the election or
appointment of their respective successors. The directors and officers of BBI
shall resign at the Effective Time.
1.7. Closing and Effective Time. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Robinson &
McElwee LLP in Charleston, West Virginia, or at such other place as NewCo shall
designate, on a date specified by NewCo (the "Closing Date") after the
expiration of any and all required waiting periods following the receipt of
required approvals of the Merger and the Bank Merger by governmental or
regulatory authorities. Notwithstanding the foregoing, BBI may postpone Closing
to no later than November 1, 1997 provided (i) such delay shall not jeopardize
merely by the passage of time associated with such delay the likelihood that the
transactions described herein will be consummated, (ii) the delay will not cause
additional significant expense to either party, and (iii) BBI reasonably
believes that such delay will benefit its shareholders as a result of a
reasonably anticipated changes in any law applicable to such shareholders. At
the Closing, NewCo and BBI shall take such actions including without limitation
the delivery of certain closing documents and the execution of such Certificates
of Merger as are required herein and as otherwise shall be required by law to
consummate the Merger and the Bank Merger and cause them to become effective.
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<PAGE>
Subject to the terms and conditions set forth herein (including without
limitation the receipt of all required approvals of governmental and regulatory
authorities), the Merger shall become effective on the date and at the time (the
"Effective Time") specified in the Certificate of Merger for the Merger filed
with the appropriate governmental body in accordance with law; provided,
however, that the Effective Time shall in no event be more than ten (10) days
following the Closing Date.
1.8 Reservation of Right to Restructure. NewCo reserves the right to restructure
the proposed acquisition in any manner which does not lessen the Cash Payment
nor causes Beckley or BBI to receive any less benefit or protection as provided
for herein.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of BBI. Except as otherwise disclosed herein
or disclosed to NewCo in writing in the form of a document specifically
designated as a "Disclosure Statement" (the "BBI Disclosure Statement") which
shall be delivered by BBI to NewCo within fifteen (15) days of the execution of
this Agreement, to the best of its knowledge, BBI hereby represents and warrants
to NewCo as follows:
a. Organization; Standing; Power. BBI and Beckley (i) are duly organized
and incorporated, validly existing and in good standing (as a unitary
savings and loan holding company and a federal savings bank,
respectively) under the laws of the State of Delaware and federal law,
respectively; (ii) have all requisite power and authority to own,
lease and operate their properties and to carry on their business as
now being conducted; (iii) are duly qualified to do business in West
Virginia and in each other jurisdiction in which the character of the
properties owned, leased or operated by them therein or in which the
transaction of their business makes such qualification necessary,
except where failure so to qualify would not have a material adverse
effect on Beckley or BBI; and (iv) are not transacting business or
operating any properties owned or leased by them in violation of any
provision of federal, state or local law or any rule or regulation
promulgated thereunder, which violation would have a material adverse
effect on Beckley or BBI.
b. Capital Stock. BBI's authorized capital stock consists of One Million
Two Hundred Fifty Thousand (1,250,000) shares of common stock and Two
Hundred Fifty Thousand (250,000) shares of preferred stock, of which
Six Hundred One Thousand Four Hundred Sixty Five (601,465) shares of
common stock ("BBI Stock") are issued and outstanding and constitute
BBI's only outstanding securities. BBI has Fifty Nine Thousand Three
Hundred Eighty Nine (59,389) shares of common stock subject to option
agreements and Four Thousand Two Hundred Eighty Four (4,284) shares of
common stock held under the MSBP of which Four Thousand Two Hundred
Eighty Four (4,284) shares have been allocated to participants under
the MSBP.
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Each outstanding share of BBI Stock (i) has been duly
authorized and is validly issued and outstanding, and is fully paid and
nonassessable, (ii) has not been issued in violation of the preemptive
rights of any shareholder, and (iii) is subject to the registration and
reporting requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act"). The BBI Stock trades on the over-the-counter
market (OTC Bulletin Board) under the symbol "BCKB."
Beckley's authorized capital stock consists of (i) One Million Two Hundred
Fifty Thousand (1,250,000) shares of common stock, One Cent ($.01) par
value, of which One Hundred Thousand (100,000) shares ("Beckley
Stock") are outstanding and issued to BBI and which constitute
Beckley's only outstanding securities and (ii) Two Hundred Fifty
Thousand (250,000) shares of preferred stock ($0.01 par value ), none
of which are issued and outstanding. Each outstanding share of Beckley
Stock has been duly authorized and is validly issued and outstanding
and is fully paid and nonassessable.
c. Subsidiaries. Beckley is BBI's only subsidiary. Beckley has one
subsidiary, THC. Except as set forth in the BBI Disclosure Statement,
neither Beckley, THC nor BBI own any stock or other equity interest in
any other corporation, service corporation, joint venture, partnership
or other entity, nor is any commitment, agreement or understanding to
acquire any such stock or equity interest binding or enforceable upon
Beckley, BBI or THC.
d. Convertible Securities, Options, Etc. Except as shown on the BBI
Disclosure Statement, Beckley, BBI and THC do not have any outstanding
(i) securities or other obligations (including debentures or other
debt instruments) which are convertible into shares of Beckley Stock,
or BBI Stock or THC Stock or into any other securities of Beckley,
BBI, or THC (ii) options, warrants, rights, calls or other commitments
of any nature which entitle any person to receive or acquire any
shares of Beckley Stock, or BBI Stock or THC Stock or any other
securities of Beckley, BBI, or THC or (iii) plan, agreement or other
arrangement pursuant to which shares of Beckley Stock , or THC or BBI
Stock or any other securities of Beckley, BBI or THC or options,
warrants, rights, calls, or other commitments of any nature pertaining
thereto, have been or will be issued.
e. Authorization and Validity of Agreement. This Agreement has been duly
and validly approved by BBI's Board of Directors and executed and
delivered on BBI's behalf. Subject only to approval of this Agreement
by the shareholders of BBI in the manner required by law and required
regulatory approval, (i) BBI has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations and
agreements and carry out the transactions described herein, (ii) all
corporate proceedings and approvals required to authorize BBI to enter
into this Agreement and to perform its obligations and agreements and
carry out the transactions described herein have been duly and
properly completed or obtained, and (iii) this Agreement constitutes
the valid and binding agreement of BBI enforceable in accordance with
its terms (except to the extent enforceability may be limited by (A)
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws from
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time to time in effect which affect creditors' rights generally, (B)
legal and equitable limitations on the availability of injunctive
relief, specific performance and other equitable remedies, and (C)
general principles of equity and applicable laws or court decisions
limiting the enforceability of indemnification provisions).
f. Validity of Transactions and Absence of Required Consents or Waivers.
Neither the execution and delivery of this Agreement, nor the
consummation of the transactions described herein, nor compliance by
BBI with any of its obligations or agreements contained herein, will:
(i) conflict with or result in a breach of the terms and conditions
of, or constitute a default or violation under any provision of, the
Certificate of Incorporation, Charter or Bylaws of Beckley or BBI, or
any material contract, agreement, lease, mortgage, note, bond,
indenture, license, or obligation or understanding (oral or written)
to which Beckley or BBI is bound or by which it, its business, capital
stock or any of its properties or assets may be affected; (ii) result
in the creation or imposition of any lien, claim, interest, charge,
restriction, or encumbrance upon any of the properties or assets of
Beckley or BBI; (iii) violate any applicable federal or state statute,
law, rule or regulation, or any judgment, order, writ, injunction or
decree of any court, administrative or regulatory agency or
governmental body; (iv) result in the acceleration of any obligation
or indebtedness of Beckley or BBI; or (v) interfere with or otherwise
adversely affect the ability of either Beckley or BBI to carry on its
business as presently conducted.
No consents, approvals or waivers are required to be obtained
from any person or entity in connection with BBI's execution and
delivery of this Agreement, or the performance of its obligations or
agreements or the consummation of the transactions described herein,
except for required approvals of BBI's and Beckley's shareholders and
of governmental or regulatory authorities.
g. Regulatory Reports. Beckley and BBI have timely filed all reports,
registrations and statements, together with any amendments required to
be made with respect thereto, that are required to be filed with (i)
the Federal Deposit Insurance Corporation (the "FDIC") including the
Savings Association Insurance Fund ("SAIF"), (ii) the Securities and
Exchange Commission (the "SEC"), (iii) the Office of Thrift
Supervision (the "OTS") and/or (iv) any other governmental or
regulatory authorities having jurisdiction over Beckley or BBI. All
such reports, registrations and statements filed by Beckley and BBI
with the FDIC, the OTS, the SEC or other such regulatory authority are
collectively referred to hereinafter as the "Regulatory Reports". As
of their respective dates, the Regulatory Reports complied in all
material respects with all the statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they
were filed and were accurate in all material respects. Neither Beckley
nor BBI has been notified that any such Regulatory Reports were
deficient in any material respect as to form or content. Following the
date of this Agreement, Beckley and BBI shall deliver to NewCo,
simultaneous with the filing thereof, a copy of each report,
registration, statement, or other regulatory filing made by Beckley or
BBI with the FDIC,
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<PAGE>
the OTS, the SEC, or any other regulatory authority unless such
delivery is contrary to law or regulation.
h. Financial Statements. BBI has delivered to NewCo a copy of its
consolidated balance sheets as of December 31, 1995 and December 31,
1996, and its consolidated statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31,
1994, December 31, 1995 and December 31, 1996, together with notes
thereto and the audit reports (collectively, the "BBI Financial
Statements"), and (ii) its consolidated balance sheet as of March 31,
1997 and its statement of operations for the three (3) months ended
March 31, 1997 (the "BBI Interim Financial Statements"); and,
following the date of this Agreement, BBI promptly will deliver to
NewCo all other annual or interim financial statements prepared by or
for Beckley or BBI. The BBI Financial Statements and the BBI Interim
Financial Statements (including any related notes and schedules
thereto) were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated and with Regulation S-X of the 1934
Securities Exchange Act and present fairly BBI's financial position,
results of operations and cash flows as of the dates indicated and for
the periods specified therein. The BBI Financial Statements through
December 31, 1996 have been audited by Mason and Bashaw, CPA's, A.C.,
BBI's independent certified public accountants.
i. Tax Returns and Other Tax Matters. (i) Through December 31, 1996,
Beckley, BBI and THC have timely filed or caused to be filed all
federal, state and local tax returns and reports which are required by
law to have been filed, and, to the best knowledge and belief of
management of BBI, all such returns and reports were true, correct and
complete and contained all material information required to be
contained therein; (ii) all federal, state and local income, business
and occupation, franchise, sales, use, property, excise, withholding,
employment and other taxes (including interest and penalties), charges
and assessments which have become due from or been assessed or levied
against Beckley, BBI or THC or their respective properties have been
fully paid or, if not yet due, a reserve or accrual which is adequate
in all material respects for the payment of all such taxes to be paid
and the obligation for such unpaid taxes is reflected on the BBI
Financial Statements; (iii) except as set forth in BBI's Disclosure
Statement, the tax returns and reports of Beckley, BBI and THC have
not been subject to audit by the Internal Revenue Service (the "IRS")
or the Department of Tax and Revenue of the State of West Virginia or
any other state in the last ten (10) years, and neither Beckley, BBI
nor THC has received any indication of the pendency of any audit or
examination in connection with any tax return or report and have no
knowledge that any such return or report is subject to adjustment; and
(iv) neither Beckley, BBI nor THC has executed any waiver or extended
the statute of limitations (or been asked to execute a waiver or
extend a statute of limitation) with respect to any tax year, the
audit of any tax return or report or the assessment or collection of
any tax.
j. Absence of Material Adverse Changes. Since March 31, 1997, Beckley,
BBI and THC have conducted their business only in the ordinary course,
and there has been no material
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adverse change, and there has occurred no event or development and
there currently exists no condition or circumstance which, with the
lapse of time or otherwise, may or could cause, create or result in a
material adverse change, in or affecting the financial condition of
Beckley, BBI or THC or in their results of operations, prospects,
business, assets, loan portfolio, investments, properties or
operations except as may be set forth in the BBI Disclosure Statement.
k. Absence of Undisclosed Liabilities. Beckley, BBI and THC do not have
any liabilities or obligations, whether matured or unmatured, accrued,
absolute, contingent or otherwise, whether due or to become due
(including without limitation tax liabilities or unfunded liabilities
under employee benefit plans or arrangements), other than (i) those
reflected in the BBI Disclosure Statement, BBI Financial Statements or
the BBI Interim Financial Statements, or (ii) obligations or
liabilities incurred in the ordinary course of their business since
April 30, 1997 which are not in the aggregate, material to Beckley, BBI
and THC.
l. Compliance with Existing Obligations. Beckley, BBI and THC have
performed in all material respects all obligations required to be
performed by them under, and they are not in default in any respect
under, or in violation in any respect of, the terms and conditions of
their respective Certificate of Incorporation, Charter or Bylaws,
and/or any contract, agreement, lease, mortgage, note, bond, indenture,
license, obligation, understanding or other undertaking (whether oral
or written) to which Beckley, BBI or THC is bound or by which the
business, capital stock or any property or asset of Beckley, BBI or THC
may be affected.
m. Litigation and Compliance with Law. (i) There are no actions, suits,
arbitrations, controversies or other proceedings or investigations
(or, to the best knowledge and belief of management of Beckley and
BBI, any facts or circumstances which reasonably could result in
such), including without limitation any such action by any
governmental or regulatory authority, which currently exist or are
ongoing, pending or, to the best knowledge and belief of management of
Beckley and BBI threatened, contemplated or probable of assertion,
against, relating to or otherwise affecting Beckley, BBI or THC or any
of their properties, assets or employees which, if determined
adversely, could result in liability on the part of Beckley, BBI or
THC for, or subject Beckley, BBI or THC to, monetary damages, fines or
penalties or an injunction, or which could have a material adverse
effect on the financial condition, results of operations, prospects,
business, assets, loan portfolio, investments, properties or
operations of Beckley, BBI or THC or on the ability of BBI to
consummate the Merger or Beckley to consummate the Bank Merger.
(ii) Beckley, BBI and THC have all licenses, permits, orders,
authorizations or approvals ("Permits") of any federal, state, local or
foreign governmental or regulatory body that are material to or
necessary for the conduct of their business or to own, lease and
operate their properties; all such Permits are in full force and
effect; no violations are or have been recorded or noted by an
supervisory agency or body in respect of any such Permits; and no
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proceeding is pending or, to the best knowledge of management of
Beckley or BBI, threatened or probable of assertion to suspend,
cancel, revoke or limit any Permit.
(iii) Neither Beckley, BBI nor THC is subject to any
supervisory agreement, enforcement order, writ, injunction, capital
directive, supervisory directive, memorandum of understanding or other
similar agreement, order, directive, memorandum or consent of, with or
issued by any regulatory or other governmental authority (including
without limitation the FDIC or the OTS) relating to its financial
condition, directors or officers, employees, operations, capital,
regulatory compliance, or otherwise; there are no judgments, orders,
stipulations, injunctions, decrees or awards against Beckley, BBI or
THC which in any manner limit, restrict, regulate, enjoin, or prohibit
any present or past business or practice of Beckley, BBI or THC; and,
neither Beckley, BBI nor THC has been advised nor has any reason to
believe that any regulatory or other governmental authority or any
court is contemplating, threatening or requesting the issuance of any
such agreement, order, injunction, directive, memorandum, judgment,
stipulation, decree or award.
(iv) Neither Beckley, BBI nor THC is in violation or default
in any material respect under, and each has complied in all material
respects with, all laws, statutes, ordinances, rules, regulations,
orders, writs, injunctions or decrees of any court or federal, state,
municipal or other governmental or regulatory authority having
jurisdiction or authority over it or its business operations,
properties or assets (including without limitation the Consumer Credit
Protection Act, and all other laws and regulations applicable to
extensions of credit by Beckley) and to the best of the knowledge and
belief of the directors of Beckley and BBI, there is no basis for any
claim by any person or authority for compensation, reimbursement or
damages or otherwise for any violation of any of the foregoing.
n. Real Properties. The BBI Disclosure Statement and/or the BBI Financial
Statements lists all real property owned by Beckley, BBI and THC
including improvements thereon (including Beckley's banking facilities
and all other real estate or foreclosed properties including
improvements thereon owned by Beckley) ("Real Property") and all
leases pertaining to any such Real Property to which Beckley, BBI or
THC is a party ("Real Property Leases"). With respect to all Real
Property, Beckley, BBI or THC has good and marketable title to such
Real Property and owns the same free and clear of all mortgages,
liens, leases, encumbrances, title defects and exceptions to title
other than (i) the lien of current taxes not yet due and payable, and
(ii) such imperfections of title and restrictions, covenants and
easements (including utility easements) which do not materially affect
the value of the Real Property and which do not and will not
materially detract from, interfere with or restrict the present or
future use of the properties subject thereto or affected thereby. With
respect to each Real Property Lease (i) such lease is valid and
enforceable in accordance with its terms, (ii) there currently exists
no circumstance or condition which constitutes an event of default by
Beckley, BBI or THC(as lessor or lessee) or its respective lessor or
lessee which, with the passage of time or the giving of required
notices will or could
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constitute such an event of default, and (iii) the execution and
delivery of this Agreement does not constitute an event of default
thereunder.
To the best of the knowledge and belief of management of
Beckley and BBI, the Real Property complies in all material respects
with all applicable federal, state and local laws, regulations,
ordinances or orders of any governmental authority, including those
relating to zoning, building and use permits, and the Real Property may
be used under applicable zoning ordinances for commercial purposes or
its historical purpose as a matter of right rather than as a
conditional or nonconforming use.
Except as disclosed in the BBI Disclosure Statement, all
improvements and fixtures included in or on the Real Property are in
good condition and repair, ordinary wear and tear excepted, and there
does not exist any condition which interferes (or will interfere after
the Merger) with the use or affects the economic value thereof.
o. Loans, Accounts, Notes and Other Receivables. (i) All loans, accounts,
notes and other receivables reflected as assets on Beckley's books and
records (A) have resulted from bona fide business transactions in the
ordinary course of Beckley's operations, (B) generally were made in all
material respects in accordance with Beckley's standard loan policies
and procedures, and (C) are owned by Beckley free and clear of all
liens, encumbrances,
assignments, participation or repurchase agreements or other exceptions
to title or to the ownership or collection rights of any other person
or entity.
(ii) All records of Beckley regarding all outstanding loans,
accounts, notes, and other receivables, and all other real estate
owned, are accurate in all material respects, and, with respect to each
loan which Beckley's loan documentation indicates is secured by any
real or personal property or property rights ("Loan Collateral"), such
loan is secured by valid, perfected and enforceable liens on all such
Loan Collateral having the priority described in Beckley's records of
such loan.
(iii) To the best knowledge of Beckley and BBI, each loan
reflected as an asset on Beckley's books, and each guaranty therefore,
is the legal, valid and binding obligation of the obligor or guarantor
thereon, and no defense, offset or counterclaim has been asserted with
respect to any such loan or guaranty.
(iv) Beckley previously has furnished to NewCo (A) a written
listing of each loan, extension of credit or other asset of Beckley
which, as of March 31, 1997, is classified by the OTS, or by Beckley as
"Loss," "Doubtful," "Substandard," or "Special Mention" (or otherwise
by words of similar import), or which Beckley has designated as a
special asset or for special handling or placed on any "watch list"
because of concerns regarding the ultimate collectibility or
deteriorating condition of such asset or any obligor or Loan Collateral
therefor, and (B) a written listing of each loan or extension of credit
of Beckley which, as of March 31, 1997, was past due as to the payment
of principal and/or interest, or as to which
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any obligor thereon (including the borrower or any guarantor) otherwise
was in default, is the subject of a proceeding in bankruptcy or
otherwise has indicated any inability or intention not to repay such
loan or extension of credit in a timely manner. Each such listing is
accurate and complete as of the date indicated.
(v) Beckley's reserve for possible losses (the "Loan Loss
Reserve") has been established in conformity with GAAP, sound banking
practices and all applicable requirements of the FDIC and rules and
policies of the OTS and, in the best judgment of management of Beckley
and BBI, is reasonable in view of the size and character of Beckley's
loan portfolio, current economic conditions and other relevant factors,
and is adequate to provide for losses relating to or the risk of loss
inherent in Beckley's loan portfolio and other real estate owned. At
March 31, 1997, Beckley's Loan Loss Reserve was Three Hundred and Five
Thousand Dollars ($305,000.00). Since that date, such reserve has not
been adjusted below the greater of $305,000.00 or 1.47% of outstanding
loans.
p. Securities Portfolio and Investments. Other than as disclosed in the
BBI Disclosure Statement, all securities owned by Beckley, BBI or THC
(whether owned of record or beneficially) are held free and clear of
all mortgages, liens, pledges, encumbrances, or any other restriction
or rights of any other person or entity, whether contractual or
statutory, which would materially impair the ability of Beckley, BBI
or THC to dispose freely of any such security and/or otherwise to
realize the benefits of ownership thereof at any time. There are no
voting trusts or other agreements or undertakings to which Beckley,
BBI or THC is a party with respect to the voting of any such
securities. With respect to all "repurchase agreements" to which
Beckley has "purchased" securities under agreement to resell, Beckley
has a valid, perfected first lien or security interest in the
government securities or other collateral securing the repurchase
agreement, and the value of the collateral securing each such
repurchase agreement equals or exceeds the amount of the debt owed to
Beckley which is secured by such collateral.
Except for fluctuations in the market values of United States
Treasury and agency or municipal securities, since March 31, 1997,
there has been no significant deterioration or material adverse change
in the quality, or any material decrease in the value, of Beckley's or
BBI's securities portfolio as a whole nor has any portion of such
portfolio been handled as a trading as opposed to an investment
account.
q. Personal Property and Other Assets. All assets of Beckley, BBI or THC
other than those other assets referred to in Paragraphs 2.1.o. and
2.1.p. (but including all banking equipment, data processing
equipment, vehicles, and all other personal property located in or
used in the operation of each office of Beckley or otherwise used by
Beckley, BBI or THC in the operation of its business) are owned by
Beckley, BBI or THC free and clear of all liens, encumbrances, leases,
title defects, or exceptions to title. Except as set forth in the BBI
Disclosure Statement, all of Beckley's, BBI's and THC's personal
property material to its
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respective business is in good operating condition and repair,
ordinary wear and tear excepted.
r. Patents and Trademarks. Beckley, BBI and THC each own, possess or have
the right to use any and all patents, licenses, trademarks, trade
names, copyrights, trade secrets, and proprietary and other
confidential information necessary to conduct their business as now
conducted; and, neither Beckley, BBI nor THC has violated, or currently
is in conflict with, any patent, license, trademark, trade name,
copyright, or proprietary right of any other person or entity.
s. Environmental Matters. (i) Beckley has delivered to NewCo copies of all
written reports, correspondence, notices, or other materials, if any,
in its possession pertaining to environmental surveys or assessments of
the Real Property or any of Beckley's Loan Collateral and any
improvements thereon, or to any violation of "Environmental Laws" (as
defined below) on, affecting or otherwise involving the Real Property,
any Loan Collateral or otherwise involving Beckley, BBI or THC.
(ii) There has been no presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution,
labeling, reporting, testing, processing, emission, discharge, release,
threatened release, control, removal, clean-up, or remediation of any
Hazardous Substances (as defined below) by any person prior to the date
hereof on, from or relating to the Real Property or, to the best of the
knowledge and belief of management of Beckley and BBI, the Loan
Collateral, which constitutes a violation of any Environmental Laws.
(iii) Neither Beckley, BBI nor THC is subject to any claims,
demands, causes of action, suits, proceedings, losses, damages,
penalties, liabilities, obligations, costs, or expenses of any kind and
nature which arise out of, under or in connection with, or which result
from or are based upon the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution,
labeling, reporting, testing, processing, emission, discharge, release,
threatened release, control, removal, clean-up, or remediation of any
Hazardous Substances on, from or relating to the Real Property or, to
the best of the knowledge and belief of management of Beckley and BBI,
any Loan Collateral by Beckley or any other person or entity.
(iv) No facts, events or conditions relating to the Real
Property or, to the best knowledge of management of Beckley and BBI,
any Loan Collateral, or the operations of Beckley at any of its office
locations, will prevent, hinder or limit continued compliance with
Environmental Laws, or give rise to any investigatory, emergency
removal, remedial, or corrective actions, obligations or liabilities
(whether accrued, absolute, contingent, unliquidated, or otherwise)
pursuant to Environmental Laws.
(v) For purposes of this Agreement, "Environmental Laws" shall include:
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(A) all federal, state and local statutes, regulations, ordinances,
orders, decrees, and similar provisions having the force or
effect of law,
(B) all contractual agreements, and
(C) all common law, concerning public health and safety, worker
health and safety, and pollution or protection of the
environment, including withoutlimitation all standards of conduct
and bases of obligations relating to the presence, use,
production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing,
processing, discharge, release, threatened release, control,
emergency removal, clean-up or remediation of any Hazardous
Substances (including without limitation the Comprehensive
Environmental Response Compensation and Liability Act, the
Superfund Amendment and Reauthorization Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous
Materials Transportation Act, the Resource Conservation and
Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic
Substances Control Act, any "Superfund" or "Superlien" law, the
Americans with Disabilities Act, and the Occupational Safety and
Health Act), as such may now or at any time hereafter be defined
or in effect.
For purposes of this Agreement, "Hazardous Substances" shall
include hazardous, toxic or otherwise regulated materials, substances
or wastes; chemical substances or mixtures; pesticides; pollutants;
contaminants; toxic chemicals; oil or other petroleum products,
byproducts, or constituents (including but not limited to crude oil,
diesel oil, fuel oil, gasoline, lubrication oil, oil refuse, oil mixed
with other waste, oil sludge, and all other liquid hydrocarbons
regardless of specific gravity); asbestos or asbestos containing
material; flammable explosives; polychlorinated biphenyls ("PCBs") or
any material containing PCBS; radioactive materials; biological micro
organisms, viruses, fungi, spores; environmental tobacco smoke; radon
or radon gas; formaldehyde or any material containing formaldehyde;
fumigants; any material or substance comprising or contributing to
conditions known as "sick building syndrome," "building-related
illness" or similar conditions (or exposures; and/or any hazardous,
toxic, regulated or dangerous waste, substance or material defined as
such by the United States Environmental Protection Agency or any other
federal, state or local governmental agency or political subdivision
thereof, or for the purpose of or by any Environmental Laws, as now or
at any time hereafter may be in effect.
t. Absence of Brokerage or Finders Commissions. Other than Baxter
Fentriss & Co., no person or firm has been retained by or has acted on
behalf of, pursuant to any agreement, arrangement or understanding
with, or under the authority of Beckley, BBI, or THC or any of their
Boards of Directors, as a broker, finder or agent or has performed
similar functions or otherwise is or may be entitled to receive or
claim a brokerage fee or other commission in connection with the
transactions described herein, and neither BBI, Beckley nor THC has
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agreed to pay any brokerage fee or other commission to any person or
entity in connection with the transactions described herein.
u. Employment Agreements and Matters. Other than the January 1, 1997
employment agreement with Duane K. Sellards ("Sellards Contract"),
neither Beckley, BBI nor THC is a party to or bound by any oral or
written employment agreement, express or implied, with any of its
directors, officers or employees, or to any collective bargaining
agreement with any of its employees, any labor union or any other
collective bargaining unit or organization. Each of Beckley, BBI and
THC (i) has paid in full to or accrued on behalf of all its respective
directors, officers and employees all compensation for labor or
services rendered, including all wages, salaries, commissions, bonuses,
fees and other direct compensation for all labor or services performed
by them to the date of this Agreement and all vacation pay, sick pay,
severance pay and other amounts promised to the extent required by law
or when Beckley, BBI or THC has a policy or practice of making such
payments, and (ii) is in compliance with all applicable federal, state
and local laws, statutes, rules and regulations with regard to
employment and employment practices, terms and conditions, and wages
and hours and other compensation matters. There is no pending, or to
its knowledge, threatened dispute or strike involving Beckley, BBI or
THC and any of their respective employees, or any pending or to its
knowledge or threatened proceeding in which it is asserted that
Beckley, BBI or THC has committed an unfair labor practice; and,
neither Beckley nor BBI nor THC is aware of any activity involving it
or any of its employees seeking to certify a collective bargaining unit
or engaging in any other labor organization activity.
v. Material Contracts. Except for those documents described in the BBI
Disclosure Statement neither Beckley nor BBI nor THC is a party to or
bound by any agreement (i) involving money or other property in an
amount or with a value in excess of Fifty Thousand Dollars ($50,000),
(ii) which is not to be performed in full prior to September 30, 1997,
(iii) which calls for the provision of goods or services to Beckley,
BBI or THC and cannot be terminated without material penalty upon
written notice to the other party thereto, (iv) which is material to
Beckley, BBI or THC and was not entered into in the ordinary course of
business, (v) which involves hedging, options or any similar trading
activity, or interest rate exchanges or swaps, (vi) which commits
Beckley to extend any loan or credit (with the exception of letters of
credit, lines of credit and loan commitments extended in the ordinary
course of Beckley's business), (vii) which involves the purchase or
sale of any assets of Beckley, BBI, or THC, or the purchase, sale,
issuance, redemption or transfer of any capital stock or other
securities of Beckley, BBI, or THC, or (viii) with any director,
officer or principal shareholder of Beckley, BBI or THC including
without limitation any employment or consulting agreement, but not
including any agreement relating to loans or other banking services
which were made in the ordinary course of Beckley's business and on
substantially the same terms and conditions as were prevailing at that
time for similar agreements with unrelated persons.
Neither Beckley nor BBI nor THC is in default in any material
respect, and there has not occurred any event which with the lapse of
time or giving of notice or both would
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constitute such a default, under any contract, lease, insurance policy,
commitment, or arrangement to which it is a party or by which it or its
property is or may be bound or affected or under which it or its
property receives benefits, where the consequences of such default
would have a material adverse effect on the financial condition,
results of operations, prospects, business, assets, loan portfolio,
investments, properties, or operations of Beckley, BBI or THC.
w. Employee Benefit Plans. (i) The BBI Disclosure Statement contains a
true and complete list of all bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, and stock option plans;
all employment and severance contracts; all medical, dental, health,
and life insurance plans; all vacation, sickness and other leave plans,
disability and death benefit plans; and all other employee benefit
plans, contracts or arrangements maintained or contributed to by
Beckley, BBI or THC for the benefit of any employees, former employees,
directors, former directors, or any of their beneficiaries
(collectively, the "Plans"). True and complete copies of all Plans,
including, but not limited to, any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto,
will be promptly supplied to NewCo Except as provided in the BBI
Disclosure Statement, neither Beckley, BBI nor THC maintains, sponsors,
contributes to or otherwise participates in any "Employee Benefit Plan"
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), any "Multi-employer Plan"
within the meaning of Section 3(37) of ERISA, any "Multiple Employer
Welfare Arrangement" within the meaning of Section 3(40) of ERISA or
would be subject to any withdrawal liability under any Multi- employer
Plan. Except as set forth in the BBI Disclosure Statement, each Plan
which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA and which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") has received a determination letter from the IRS and neither
Beckley, BBI nor THC is aware of any circumstances reasonably likely to
result in the revocation or denial of any such favorable determination
letter. All reports and returns with respect to the Plans (and any
Plans previously maintained by Beckley or BBI) required to be filed
with any governmental department, agency, service or other authority,
including without limitation Internal Revenue Service Form 5500 (Annual
Report), have been properly and timely filed.
(ii) All "Employee Benefit Plans" maintained by or otherwise
covering employees or former employees of Beckley, BBI or THC to the
extent subject to ERISA, currently are, and at all times have been, in
compliance with all material provisions and requirements of ERISA.
There is no pending or threatened litigation relating to any Plan or
any such Plan previously maintained by Beckley, BBI or THC. Neither
Beckley nor BBI nor THC has engaged in a transaction with respect to
any Plan that could subject Beckley, BBI or THC to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA
and none of them has any welfare or benefit plan which promises or
provides for post-retirement or post-employment benefits or payments.
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(iii) Beckley will promptly deliver to NewCo a true, correct
and complete copy (including copies of all amendments thereto) of any
Retirement Plan of Beckley, BBI or THC (the "Retirement Plans"),
together with true, correct and complete copies of the summary plan
description relating to the Retirement Plans, the most recent
determination letter received from the IRS regarding the Retirement
Plans, and the most recent Annual Report (Form 5500 series) and related
schedules, if any, for the Retirement Plans.
Except as disclosed in the BBI Disclosure Statement, the
Retirement Plans are qualified under the provisions of Section 401(a)
of the Code, the trust under each Retirement Plan is an exempt trust
under Section 501(a) of the Code, and a favorable determination letter
with respect to each Retirement Plan has been obtained. There are no
issues relating to said qualification or exemption of any Retirement
Plan currently pending before the IRS, the United States Department of
Labor, the Pension Benefit Guaranty Corporation or any court. The
Retirement Plans and the administration thereof meet (and have met
since the establishment of the Retirement Plan) all of the applicable
requirements of ERISA, the Code and all other laws, rules and
regulations applicable to the Retirement Plans and do not violate (and
since the establishment of the Retirement Plan have not violated) any
of the applicable provisions of ERISA, the Code and such other laws,
rules and regulations. Without limiting the generality of the
foregoing, all reports and returns with respect to the Retirement Plans
required to be filed with any governmental department, agency, service,
or other authority have been properly and timely filed. There are no
issues or disputes with respect to the Retirement Plans or the
administration thereof currently existing between Beckley, BBI, or THC
or any trustee or other fiduciary thereunder, and any governmental
agency, any current or former employee of Beckley, BBI or THC or
beneficiary of any such employee or any other person or entity. No
"reportable event" within the meaning of Section 4043(b) of ERISA has
occurred at any time with respect to the Retirement Plans.
(iv) No liability under subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by Beckley, BBI or THC with
respect to any Retirement Plan or with respect to any other ongoing,
frozen or terminated defined benefit pension plan currently or formerly
maintained by Beckley, BBI or THC. Neither Beckley nor BBI nor THC
presently contributes to a "Multi-employer Plan" or has contributed to
such a plan. All contributions required to be made pursuant to the
terms of each of the Plans (including without limitation the Retirement
Plans and any other "pension plan" (as defined in Section 3(2) of
ERISA) maintained by Beckley, BBI or THC) have been timely made. Except
as disclosed in the BBI Disclosure Statement, no Retirement Plan or any
other "pension plan" maintained by Beckley, BBI or THC has an
"accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA. Neither
Beckley nor BBI nor THC has provided, or is required to provide,
security to any "pension plan" or to any "Single Employer Plan"
pursuant to Section 401(a)(29) of the Code. Under the Retirement Plans
and any other "pension plan" maintained by Beckley, BBI or THC as of
the last day of the most recent plan year ended prior to the date
hereof, the actuarially determined present value of all "benefit
liabilities," within the meaning of Section 4001(a)(16) of ERISA (as
determined on the
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basis of the actuarial assumptions contained in the plan's most recent
actuarial valuation) did not exceed the then current value of the
assets of such plan, and there has been no material change in the
financial condition of any such plan since the last day of the most
recent plan year.
(v) There are no restrictions on the rights of Beckley, BBI or
THC to amend or terminate any Plan without incurring any liability
thereunder. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (except
as otherwise specifically provided herein) (A) result in any payment to
any person (including without limitation any severance compensation or
payment, unemployment compensation, "golden parachute" or "change in
control" payment, or otherwise) becoming due under any plan or
agreement to any director, officer, employee, or consultant, (B)
increase any benefits otherwise payable under any plan or agreement, or
(C) result in any acceleration of the time of payment or vesting of any
such benefit except that the Sellards' Contract, the MSBP and BBI
option plan will accelerate.
x. Insurance. Beckley, BBI and THC have in effect a "banker's blanket
bond" and other policies of general liability, casualty, directors and
officers liability, employee fidelity, errors and omissions, and other
property and liability insurance as listed in the BBI Disclosure
Statement (the "Policies") . The Policies provide coverage in such
amounts and against such liabilities, casualties, losses, or risks as
is customary or reasonable for entities engaged in the businesses of
Beckley, BBI or THC or as is required by applicable law or regulation;
and, in the reasonable opinion of management of Beckley and BBI, the
insurance coverage provided under the Policies is considered reasonable
and adequate in all respects for Beckley, BBI and THC. Each of the
Policies is in full force and effect and is valid and enforceable in
accordance with its terms, and is underwritten by an insurer of
recognized financial responsibility; and, Beckley, BBI and THC have
taken all requisite actions (including the giving of required notices)
under each such Policy in order to preserve all rights thereunder with
respect to all matters. Neither Beckley nor BBI nor THC is in default
under the provisions of, has received notice of cancellation or
nonrenewal of or any premium increase on, or has any knowledge of any
failure to pay any premium on or any inaccuracy in any application for
any Policy. There are no pending claims with respect to any Policy (and
neither Beckley nor BBI nor THC is aware of any facts which would form
the basis of any such claim), and neither Beckley nor BBI nor THC has
knowledge of any facts or of the occurrence of any event that is
reasonably likely to form the basis for any such claim.
y. Insurance of Deposit. All deposits of Beckley are insured by SAIF of
the FDIC to the maximum extent permitted by law, all deposit insurance
premiums due from Beckley to the FDIC have been paid in full in a
timely fashion, and, to the best of the knowledge and belief of
Beckley's executive officers, no proceedings have been commenced or are
contemplated by the FDIC or otherwise to terminate such insurance.
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z. Options Granted; Awards. The BBI Disclosure Statement (i) lists the
number of outstanding options held by and the name of the holder for
each person to whom a stock option has been granted and currently is
outstanding under any stock option for Beckley, BBI or THC and (ii)
lists the number of shares and the name of each Award Holder for all
shares involving the MSBP.
aa. Obstacles to Regulatory Approval or Tax Treatment. To the best of the
knowledge and belief of BBI, there exists no fact or condition
(including Beckley's record of compliance with the Community
Reinvestment Act) relating to Beckley, BBI or THC that may reasonably
be expected to (i) prevent or materially impede or delay Beckley, BBI
or THC from obtaining the regulatory approvals required in order to
consummate transactions described herein, and, if any such fact or
condition becomes known to Beckley or BBI, BBI shall promptly (and in
any event within three (3) days after obtaining such knowledge)
communicate such fact or condition to NewCo.
bb. Disclosure. To the best of the knowledge and belief of BBI, all written
statements, certificates, schedules, lists, or other written
information furnished by or on behalf of Beckley, BBI or THC at any
time to NewCo in connection with this Agreement (including without
limitation the statements contained herein), when considered as a
whole, will be accurate in all material respects.
2.2. Representations and Warranties of NewCo. NewCo hereby represents and
warrants to BBI as follows:
a. Organization; Standing; Power. NewCo (i) is duly organized and
incorporated, validly existing and in good standing under the laws of
West Virginia, (ii) has all requisite power and authority (corporate
and other) to own its properties and conduct its business as now being
conducted, (iii) is duly qualified to do business and is in good
standing in each other jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of
its business makes such qualification necessary except where failure so
to qualify would not have a material adverse effect on NewCo and its
affiliates considered as one enterprise, and (iv) is not transacting
business, or operating any properties owned or leased by it, in
violation of any provision of federal or state law or any rule or
regulation promulgated thereunder, which violation would have a
material adverse effect on NewCo and its affiliates considered as one
enterprise.
b. Capital Stock. NewCo's authorized capital stock consists of Five
Thousand (5,000) shares of common Stock ("NewCo Stock"). As of the date
of this Agreement, an aggregate of Five Thousand (5,000) shares of
NewCo Stock had been issued and were outstanding, all of which are
owned by Horizon. NewCo's outstanding capital stock has been duly
authorized and validly issued, and is fully paid and nonassessable.
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c. Authorization and Validity of Agreement. This Agreement has been duly
and validly approved by NewCo's Board of Directors and executed and
delivered on NewCo's behalf. Subject only to approval and ratification
of this Agreement by Horizon as the sole shareholder of NewCo in the
manner required by law and required regulatory approvals, (i) NewCo has
the corporate power and authority to execute and deliver this Agreement
and to perform its obligations and agreements and carry out the
transactions described herein, (ii) all corporate proceedings required
to be taken to authorize NewCo to enter into this Agreement and to
perform its respective obligations and agreements and carry out the
transactions described herein have been duly and properly taken, and
(iii) this Agreement constitutes the valid and binding agreement of
NewCo enforceable in accordance with its terms (except to the extent
enforceability may be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
which affect creditors' rights generally, (B) legal and equitable
limitations on the availability of injunctive relief, specific
performance and other equitable remedies, and (C) general principles of
equity and applicable laws or court decisions limiting the
enforceability of indemnification provisions).
d. Validity of Transactions; Absence of Required Consents or Waivers.
Except where the same would not have a material adverse effect on NewCo
and its affiliates considered as one enterprise, neither the execution
and delivery of this Agreement, nor the consummation of the
transactions described herein, nor compliance by NewCo with any of its
obligations or agreements contained herein, will:
(i) conflict with or result in a breach of the terms and
conditions of, or constitute a default or violation under any provision
of, NewCo's Certificate of Incorporation, Charter or Bylaws, or any
contract, agreement, lease, mortgage, note, bond, indenture, license,
or obligation or understanding (oral or written) to which NewCo is
bound or by which it, its business, capital stock or any of its
properties or assets may be affected;
(ii) result in the creation or imposition of any lien,
claim, interest, charge, restriction or encumbrance upon any of NewCo's
properties or assets;
(iii) violate any applicable federal or state statute, law,
rule or regulation, or any order, writ, injunction, or decree of any
court, administrative or regulatory agency or governmental body;
(iv) result in the acceleration of any obligation or
indebtedness of NewCo; or,
(v) interfere with or otherwise adversely affect NewCo's
ability to carry on its business as presently conducted.
No consents, approvals or waivers are required to be obtained
from any person or entity in connection with NewCo's execution and
delivery of this Agreement, or the
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performance of its obligations or agreements or the consummation of the
transactions described herein, except for required approvals of NewCo's
shareholder and of governmental or regulatory authorities.
e. Obstacles to Regulatory Approval or Tax Treatment. To the best of the
knowledge and belief of the executive officers of NewCo, no fact or
condition (including the record of compliance with the Community
Reinvestment Act by Raleigh) relating to NewCo exists that may
reasonably be expected to (i) prevent or materially impede or delay
NewCo from obtaining the regulatory approvals required in order to
consummate transactions described herein, and, if any such fact or
condition becomes known to the executive officers of NewCo, NewCo
promptly (and in any event within three (3) days after obtaining such
knowledge) shall communicate such fact or condition to BBI.
f. Disclosure. To the best of the knowledge and belief of NewCo, all
written statements, certificates, schedules, lists or written
information furnished by or on behalf of NewCo at any time to BBI in
connection with this Agreement (including without limitation the
statements contained herein), when considered as a whole, will be
accurate and complete in all material respects. Each document delivered
or to be delivered by NewCo to BBI is or will be a true and complete
copy of such document, unmodified except by another document delivered
by NewCo.
g. Financial Capability. NewCo has sufficient financial resources
available to it to consummate the transactions contemplated herein and
to make the required Cash Payment.
h. Other Transactions. NewCo may have negotiations for the acquisition of
other banking institutions. Nothing contained herein shall in any
manner limit the ability of NewCo or any of its affiliates including
Horizon to acquire additional banking institutions or other
corporations, either before or after the Effective Date, for such
consideration (cash, notes, common or preferred stock) and upon such
terms and conditions as deemed appropriate by NewCo or Horizon or other
affiliates as the case may be. Notwithstanding the foregoing, NewCo
will not, and will use its best efforts to cause its affiliates to not,
make or agree to make any acquisition or take any action that
materially adversely affect its ability to consummate the transaction
contemplated hereby in a reasonably timely manner.
ARTICLE III. COVENANTS OF BBI
3.1. Affirmative Covenants of BBI. BBI hereby covenants and agrees as
follows with NewCo.:
a. BBI Option Holders. BBI will use its best efforts to cause each Option
Holder listed in the BBI Disclosure Statement (as well as each
additional person who shall become a BBI Option Holder after the date
of this Agreement) to execute and deliver to NewCo prior to the
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Closing the Cancellation Letter relating to cancellation of such option
rights in return for the Cash Payment all in form and content
reasonably satisfactory to NewCo.
b. Conduct of Business Prior to Effective Time. While the parties
recognize that the operation of Beckley, BBI and THC until the
Effective Time is the responsibility of Beckley, BBI , THC and their
Board of Directors and officers, BBI agrees that, between the date of
this Agreement and the Effective Time, Beckley, BBI and THC
respectively will carry on its business, in substantially the same
manner as such business heretofore was conducted, and, to the extent
consistent with such business and within its reasonable ability to do
so, BBI agrees that it and, where applicable, Beckley and THC will:
(i) preserve intact their present business organization, keep
available their present officers, and preserve their relationships with
customers, depositors, creditors, correspondents, suppliers, and others
having business relationships with them;
(ii) maintain all of their properties and equipment in
customary repair, order and condition, ordinary wear and tear excepted;
(iii) maintain their books of account and records in the
usual, regular and ordinary manner in accordance with sound business
practices applied on a consistent basis;
(iv) comply with all laws, rules and regulations applicable t
them, their properties, assets or employees and to the conduct of their
business;
(v) continue to maintain in force insurance; not modify any
bonds or policies of insurance in effect as of the date hereof unless
the same, as modified, provides substantially equivalent coverage; and,
not cancel, allow to be terminated or, to the extent available, fail to
renew, any such bond or policy of insurance unless the same is replaced
with a bond or policy providing substantially equivalent coverage;
(vi) promptly provide to NewCo such information about Beckley,
BBI and THC and their financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties
or operations, as NewCo reasonably shall request.
c. Periodic Information Regarding Loans. All new extensions of credit by
Beckley in excess of $100,000 and any further extensions of credit to
existing borrowers that have not made timely payments in the past will
be submitted to NewCo on a before-the-fact basis for NewCo's review but
not approval within three (3) business days prior to Beckley's issuance
of a commitment on such loan.
Additionally, Beckley agrees to make available and provide to
NewCo the following information with respect to its loans and other
extensions of credit (such assets herein referred to as "Loans") as of
March 31, 1997, and as of the end of each month thereafter until
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the Effective Time, such information for each month to be in form and
substance as is usual and customary in the conduct of its business and
to be furnished within fifteen (15) days of the end of each month
ending after the date hereof:
(i) a list of Loans past due for sixty (60) days or more
as to principal or interest;
(ii) the amount of the Loan Loss Reserve (to be furnished
within fifteen (15) days of the end of each calendar quarter after the
date hereof unless prepared on a more frequent basis), which shall
include a list of all classified or "watch list" Loans, along with the
outstanding balance and amount specifically allocated to the Loan Loss
Reserve for each such classified or "watch list" Loan;
(iii) a list of Loans in nonaccrual status;
(iv) a list of all Loans over Fifty Thousand Dollars
($50,000.00) without principal reduction for a period of longer than
one year;
(v) a list of all foreclosed real property or other real
estate owned and all repossessed personal property;
(vi) a list of reworked or restructured Loans over Fifty
Thousand Dollars ($50,000.00) and still outstanding, including original
terms, restructured terms and status;
(vii) a list of all impaired loans as so classified under
GAAP; and
(viii) a list of any litigation by or against Beckley
pertaining to any Loans or credits, which list shall contain a
description of circumstances surrounding such litigation, its present
status and management's evaluation of such litigation.
d. Notice of Certain Changes or Events. Following the execution of this
Agreement and up to the Effective Time, BBI promptly will notify NewCo
in writing of and provide to it such information as it shall request
regarding (i) any material adverse change in its consolidated financial
condition, consolidated results of operations, business, assets, loan
portfolio, investments, properties or operations, or of the actual or
prospective occurrence of any condition or event of which it has actual
knowledge, which, with the lapse of time or otherwise, may or could
cause, create or result in any such material adverse change, or (ii)
the actual or prospective existence or occurrence of any condition or
event of which it has actual knowledge which, with the lapse of time or
otherwise, has caused or may or could cause any statement,
representation or warranty of Beckley, BBI or THC herein to be or
become inaccurate, misleading or incomplete, or which has resulted or
may or could cause, create or result in the breach or violation of any
of Beckley's or BBI's covenants or agreements contained herein or in
the failure of any of the conditions described in Paragraphs 6.1. or
6.3. below.
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e. Consents to Assignment of Leases. Beckley, BBI and THC will use its
best efforts to obtain all required consents of its lessors to the
assignment to NewCo or Raleigh of their rights and obligations under
any personal property leases, each of which consents shall be in such
form as shall be specified by NewCo.
f. Further Action; Instruments of Transfer, etc. Beckley and BBI each
covenants and agrees with NewCo that it (i) will use its best efforts
in good faith to take or cause to be taken all action required of
Beckley, BBI or THC hereunder as promptly as practicable so as to
permit the consummation of the transactions described herein at the
earliest possible date, (ii) shall perform all acts and execute and
deliver to NewCo all documents or instruments required herein or as
otherwise shall be reasonably necessary or useful to or requested of
BBI in consummating such transactions, and, (iii) will cooperate with
NewCo in every way in carrying out, and will pursue diligently the
expeditious completion of, such transactions.
g. Bank Merger. NewCo and BBI each agrees to promptly proceed to prepare
or cause to be prepared all documents and submit or cause to be
submitted all necessary requests for approvals required to effect the
Bank Merger. Each party agrees to keep the other reasonably advised of
its actions in this regard and to furnish each other with copies of all
notices, agreements, filings and matters pertaining thereto.
h. Sellards' Contract. As of the close of business on the Effective Time,
BBI and Beckley shall terminate the employment of Duane K. Sellards and
shall accrue and immediately pay such individual in the form of a lump
sum payment or installments at his election the amounts due such
individual under Section 12(a) of the Sellards' Contract provided
Sellards must give written notice of his election to receive a lump sum
or to receive periodic payments to both BBI and NewCo at least thirty
(30) days prior to commencement of any payments to him.
i. Benefit Plans. On or prior to the Effective Time, or as soon as
administratively feasible thereafter, Beckley and BBI shall take such
actions as they deem necessary and appropriate with respect to the
termination and distribution of benefits payable under the BBI Employee
Stock Ownership Plan and Trust ("ESOP") in accordance with its terms,
Beckley's defined benefit plan, the Stock Option Plan, the MSBP and the
termination of the employment of Duane K. Sellards, President, and the
payment of sums due and payable in accordance with the Sellards'
Contract. As of the Effective Time, NewCo shall deliver in immediately
available funds to the ESOP Trust the Cash Payment per share multiplied
by the number of shares of BBI Stock held by the ESOP. The ESOP shall
thereafter immediately make distribution of benefits. The plan
administrative committees and plan trustee committees (collectively,
the "Responsible Parties") in place with respect to such plans, trusts
and agreements as of the date of the Merger shall remain in place as of
the Effective Time and thereafter for as long as is deemed necessary to
finalize all actions associated with such plan termination and benefits
distribution. Further, the Responsible Parties shall be indemnified for
all actions taken after the Effective Time that are necessary and
appropriate for the
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completion of their responsibilities in the same manner as if such
actions were taken prior to the Effective Time, provided, however, that
said persons must consult with and follow the reasonable directives of
NewCo after the Effective Time. NewCo agrees that such directives will
not cause material delay in the distribution of benefits.
3.2. Negative Covenants of BBI. BBI hereby covenants and agrees that, between
the date hereof and the Effective Time, BBI or, if applicable, Beckley, or THC,
will not do any of the following things or take any of the following actions
without the prior written consent and authorization of NewCo which consent and
authorization shall not be unreasonably withheld:
a. Amendments to Certificate of Incorporation, etc. Amend its Certificate
of Incorporation, Charter or Bylaws.
b. Change in Capital Stock. (i) Make any change in its authorized capital
Stock, or create any other or additional authorized capital Stock or
other securities, or (ii) issue, sell, purchase, redeem, retire,
reclassify, combine, or split any shares of its capital Stock or other
securities (including securities convertible into capital Stock), or
enter into any agreement or understanding with respect to any such
action except pursuant to Stock benefit plans currently in effect and
legally binding commitments currently in effect.
c. Options, Warrants and Rights. Grant or issue any new or additional
options, warrants, calls, puts or other rights of any kind relating to
the purchase, redemption or conversion of shares of its capital Stock
or any other securities (including securities convertible into capital
Stock) or enter into any agreement or understanding with respect to any
such action or to award any further Stock rights under the MSBP.
d. Dividends. Declare or pay any dividends on outstanding shares of
capital Stock or make any other distributions on or in respect of any
shares of its capital Stock or otherwise to its shareholders.
e. Employment, Benefit or Retirement Agreements or Plans. Except as
contemplated by this Agreement or as required by law (i) enter into or
become bound by any oral or written contract, agreement or commitment
for the employment or compensation of any director, officer, employee
or consultant which is not immediately terminable by Beckley, BBI or
THC without cost or other liability on no more than thirty (30) days'
notice; (ii) adopt, enter into or become bound by any new or additional
profit-sharing, bonus, incentive, change in control or "golden
parachute," Stock option, Stock purchase, pension, retirement,
insurance (hospitalization, life or other), paid leave (sick leave,
vacation leave or other), or similar contract, agreement, commitment,
understanding, plan, or arrangement (whether formal or informal) with
respect to or which provides for benefits for any of its current or
former directors, officers, employees, or consultants; or (iii) enter
into or become bound by any contract with or commitment to any labor or
trade union or association or any collective bargaining group.
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f. Increase in Compensation. Increase the compensation or benefits of, or
pay any bonus or other special or additional compensation to, any of
its directors, officers, employees or consultants, other than standard,
customary adjustments and merit increases consistent with past
practices.
g. Accounting Practices. Make any changes in its accounting methods,
practices or procedures or in depreciation or amortization policies,
schedules or rates heretofore applied except as required by GAAP or
governmental regulations or authorities.
h. Acquisitions; Additional Branch Offices. Directly or indirectly (i)
acquire or merge with, or acquire any branch or all or any significant
part of the assets of, any other person or entity, (ii) open any new
branch office, or (iii) enter into or become bound by any contract,
agreement, commitment or letter of intent relating to, or otherwise
take or agree to take any action in furtherance of, any such
transaction or the opening of a new branch office.
i. Changes in Business Practices. Except as may be required by the FDIC,
the OTS, or any other governmental or other regulatory agency or as
shall be required by applicable law, regulation or this Agreement, (i)
change in any material respect the nature of its business or the manner
in which it conducts its business, (ii) discontinue any material
portion or line of its business, or (iii) change in any material
respect its lending, investment, asset-liability management or other
material banking or business policies (except to the extent required by
Paragraphs 3.1.b. above). Beckley and BBI may purchase tail coverage
under its director and officers liability policy to provide coverage to
its directors and officers after the Effective Time in such amount and
duration as shall be reasonably available and at such cost not to
exceed Forty Thousand Dollars ($40,000.00). If NewCo can obtain the
same coverage at less cost then BBI agrees to purchase the coverage
arranged by NewCo.
j. Exclusive Merger Agreement. Directly or indirectly, through any person
(i) encourage, solicit or attempt to initiate or procure discussions,
negotiations or offers with or from any person or entity (other than
NewCo) relating to a merger or other acquisition of BBI or the purchase
or acquisition of any BBI Stock, BBI Stock or any THC Stock, any branch
office of Beckley or all or any significant part of THC's, Beckley's or
BBI's assets; or provide assistance to any person in connection with
any such offer; (ii) except to the extent required by law, disclose to
any person or entity any information not customarily disclosed to the
public concerning Beckley, BBI or THC or their respective business, or
afford to any other person or entity access to its properties,
facilities, books or records; (iii) sell or transfer any branch office
of Beckley or all or any significant part of Beckley's, BBI's, or THC's
assets to any other person or entity; or (iv) subject to its fiduciary
duty to its shareholders enter into or become bound by any contract,
agreement, commitment or letter of intent relating to, or otherwise
take or agree to take any action in furtherance of, any such
transaction.
k. Acquisition or Disposition of Assets. (i) Sell or lease (as lessor), or
enter into or become bound by any contract, agreement, option or
commitment relating to the sale, lease (as lessor)
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or other disposition of any real estate; or sell or lease (as lessor),
or enter into or become bound by any contract, agreement, option or
commitment relating to the sale, lease (as lessor) or other disposition
of any equipment or any other fixed or capital asset (other than real
estate) having a book value or a fair market value, whichever is
greater, of more than Fifty Thousand Dollars ($50,000) for any
individual item or asset, or more than Fifty Thousand Dollars ($50,000)
in the aggregate for all such items or assets;
(ii) Purchase or lease (as lessee), or enter into or become
bound by any contract, agreement, option or commitment relating to the
purchase, lease (as lessee) or other acquisition of any real property;
or purchase or lease (as lessee), or enter into or become bound by any
contract, agreement, option or commitment relating to the purchase,
lease (as lessee) or other acquisition of any equipment or any other
fixed assets (other than real estate) having a purchase price, or
involving aggregate lease payments, in excess of Fifty Thousand Dollars
($50,000) for any individual item or asset, or more than One Hundred
Thousand Dollars ($100,000) in the aggregate for all such items or
assets;
(iii) Sell, purchase or repurchase, or enter into or become
bound by any contract, agreement, option or commitment to sell,
purchase or repurchase, any loan or other receivable or any
participation in any loan or other receivable other than in the
ordinary course of business or as required by the OTS or the FDIC; or
(iv) Sell or dispose of, or enter into or become bound by any
contract, agreement, option or commitment relating to the sale or other
disposition of, any other asset (whether tangible or intangible, and
including without limitation any trade name, trademark, copyright,
service mark or intellectual property right or license); or assign its
right to or otherwise give any other person its permission or consent
to use or do business under the corporate name of Beckley, BBI or THC
or any name similar thereto; or release, transfer or waive any license
or right granted to it by any other person to use any trademark, trade
name, copyright, service mark, or intellectual property right.
Notwithstanding the foregoing, Beckley may foreclose, bid in
or otherwise dispose of Loan Collateral (real or personal) according to
its usual and customary practice.
l. Debt; Liabilities. Except in the ordinary course of its business
consistent with its past practices, (i) enter into or become bound by
any promissory note, loan agreement or other agreement or arrangement
pertaining to its borrowing of money, (ii) assume, guarantee, endorse
or otherwise become responsible or liable for any obligation of any
other person or entity, or (iii) incur any other liability or
obligation (absolute or contingent).
m. Liens; Encumbrances. Mortgage, pledge or subject any of its assets to,
or permit any of its assets to become or (with the exception of those
liens and encumbrances specifically described in the BBI Disclosure
Statement) remain subject to, any lien or any other encumbrance (other
than in the ordinary course of business consistent with its past
practices
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in connection with securing of public funds, deposits, repurchase
agreements or other similar operating matters).
n. Waiver of Rights. Waive, release or compromise any material rights in
its favor (except in the ordinary course of business) except in good
faith for fair value in money or money's worth, nor waive, release or
compromise any rights against or with respect to any of its officers,
directors or shareholders or members of families of officers, directors
or shareholders.
o. Retirement Contributions. Notwithstanding anything in this Agreement to
the contrary, Beckley or BBI will make a cash contributions to the ESOP
on or before the Effective Date in an amount not to exceed the
outstanding principal balance on the ESOP promissory note by and
between the ESOP Trust and BBI; provided that such Beckley or BBI
contributions shall be limited to the extent that it will not exceed
the limits of tax deductibility under the Code for any ESOP plan years
ending on or before the Effective Time. Such contributions shall not be
considered in determining whether there has been a material adverse
change to the business operations or financial statements of Beckley or
BBI.
ARTICLE IV. COVENANTS OF NEWCO
4.1. Covenants of Raleigh. NewCo hereby covenants and agrees as follows with
BBI:
a. Employment Agreement. (i) The existing employment agreement with the
President of Beckley (a true copy of which has been furnished to NewCo)
shall be terminated at the Effective Time with payments as called for
therein to be made (if not previously paid by BBI or Beckley) by NewCo
or BBI. (ii) NewCo will use its best efforts to retain all Beckley
employees (other than Sellards) after the Merger. Any individual (other
than Duane Sellards) employed by Beckley at the Effective Time shall be
entitled to severance compensation equal to three (3) months salary if
not retained by NewCo or Raleigh. For purposes hereof, "retained" shall
mean the offer of continuation of employment under substantially the
same terms with the same or similar duties at a location in Raleigh
County, West Virginia for a period of at least one (1) year subject to
termination for cause. "Cause" shall mean dishonesty, unexcused absence
from work or gross insubordination. NewCo or Raleigh will give any
employee at least thirty (30) days notice that he or she will not be
retained after the Merger.
b. Employee Benefits. NewCo agrees that after the Merger, all employees of
Beckley and dependents covered under the Beckley health plans or
welfare plans as the case may be that are retained by NewCo or Raleigh
shall (i) be covered under the Raleigh health plan with no uninsured
waiting periods or exclusion for pre-existing conditions, (ii) receive
credit for prior service at Beckley under the Raleigh vacation plan and
receive credit (up to a maximum of ninety (90) days) for unused sick
days under the Raleigh sick leave plan, (iii) immediately
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become participants in the Raleigh pension and 401(k) plan, and (iv)
immediately be entitled to vested benefits under the Raleigh 401(k)
plan. The normal vesting schedule will apply for the Raleigh pension
plan with no credit for past service as a Beckley employee. In
addition, all retained employees shall be eligible to otherwise receive
benefits available to other Raleigh employees similarly situated.
ARTICLE V. MUTUAL AGREEMENTS
5.1. Shareholders Meeting; Proxy Statement.
a. Meeting of Shareholders. BBI shall cause a special meeting of its
shareholders (the "Shareholders Meetings") to be held as soon as
reasonably possible for the purpose of BBI's shareholders voting on the
approval of the Merger. BBI shall act upon approval of the Bank Merger
by no later than June 30, 1997. In connection with the call and conduct
of and all other matters relating to the Shareholders Meeting
(including the solicitation of proxies), BBI shall fully comply with
all provisions of applicable law and regulations and with BBI's
respective governing instruments.
b. Preparation and Distribution of Proxy Statement. BBI shall prepare a
"Proxy Statement" for distribution to BBI's shareholders as BBI's proxy
statement relating to BBI's solicitation of proxies for use at its
shareholders meeting. The Proxy Statement shall be in such form and
shall contain or be accompanied by such information as is required by
applicable law and regulations. BBI shall use its best efforts to file
such statement with the SEC by July 1, 1997.
c. Recommendation of BBI's Board of Directors and Voting of Shares. Unless
due to a material change in circumstances or for any other reason BBI's
Board of Directors reasonably believes that such a recommendation would
violate the directors' fiduciary duties or obligations as such to BBI
or to its shareholders, BBI's Board of Directors shall recommend to
BBI's shareholders that they vote their shares of BBI Stock at the
Shareholders Meeting to ratify and approve this Agreement and the
Merger, and the Proxy Statement mailed to BBI's shareholders will so
indicate and state that BBI's Board of Directors considers the Merger
to be advisable and in the best interests of BBI and its shareholders.
Each director of BBI has agreed and represented to BBI for the benefit
of NewCo that he or she intends to vote all shares of BBI Stock owned
by him or her in favor of the Agreement and the Merger.
d. Information for Proxy Statement. NewCo, Beckley and BBI each agrees to
promptly respond and to use its best efforts to cause its directors,
officers, accountants and affiliates to promptly respond, to requests
by BBI and its counsel for information for inclusion in the Proxy
Statement. NewCo, Beckley and BBI each hereby covenants with the other
that none of the information provided by it for inclusion in the Proxy
Statement will, at the time of its
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mailing to shareholders, contain any untrue statement of a material
fact or omit any material fact required to be stated therein or
necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading; and,
at all times following such mailing up to and including the Effective
Time, none of such information contained in the Proxy Statement, as it
may be amended or supplemented, will contain any untrue statement of a
material fact or omit any material fact required to be stated therein
or necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
5.2. Regulatory Approvals. As soon as practicable after the date of this
Agreement, NewCo, Raleigh, Beckley and BBI each shall prepare and file, or cause
to be prepared and filed, all applications for regulatory approvals and actions
as may be required of them, respectively, by applicable law and regulations with
respect to the Merger and the Bank Merger (including applications to the FDIC,
the West Virginia Board, the OTS and to any other applicable federal or state
banking, or other regulatory authority). Each such party shall use their
respective best efforts in good faith to obtain all necessary regulatory
approvals required for consummation of the mergers described herein. Each such
party shall cooperate with each other party in the preparation of all
applications to regulatory authorities and, upon request, promptly shall furnish
all documents, information, financial statements, or other material that may be
required by any other party to complete any such application; and, before the
filing therefore, each party to this Agreement shall have the right to review
and comment on the form and content of any such application to be filed by any
other party. Should the appearance of any of the officers, directors, employees,
or counsel of any of the parties hereto be requested by any other party or by
any governmental agency at any hearing in connection with any such application,
such party shall promptly use its best efforts to arrange for such appearance.
5.3. Access. Following the date of this Agreement and to and including the
Effective Time, Beckley , BBI and THC shall provide NewCo and Raleigh and its
employees, accountants, counsel, or other representatives, with access to all
its books, records, files, and other information (whether maintained
electronically or otherwise), to all its properties and facilities, and to all
its employees, accountants, counsel, and consultants as NewCo shall, in its sole
discretion, consider to be necessary or appropriate; provided, however, that any
investigation or reviews conducted by NewCo ("Due Diligence") shall be performed
in such a manner as will not interfere unreasonably with Beckley's or BBI's
normal operations or with Beckley's relationship with its customers or
employees, and shall be conducted in accordance with procedures established by
the parties having due regard for the foregoing. NewCo shall provide Beckley and
its representatives with such access to such records as may be necessary for an
evaluation of the financial ability of NewCo to complete this acquisition and
remit the Cash Payment.
5.4. Costs. Subject to the provisions of Paragraph 7.3. below, and whether or
not this Agreement shall be terminated or the Merger shall be consummated, NewCo
and Beckley each shall pay its own legal, accounting and financial advisory fees
and all its other costs and expenses incurred or to be incurred in connection
with the execution and performance of its obligations under this Agreement
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or otherwise in connection with this Agreement and the transactions described
herein (including without limitation all accounting fees, legal fees, printing
costs, travel expenses, and the cost of fairness opinions).
5.5. Announcements. BBI and NewCo each agrees that no person other than the
parties to this Agreement is authorized to make any public announcements or
statements about this Agreement or any of the transactions described herein, and
that, without the prior review and consent of the others (which consent shall
not unreasonably be denied or delayed), no party hereto may make any public
announcement, statement or disclosure as to the terms and conditions of this
Agreement or the transactions described herein, except for such disclosures as
may be required incidental to obtaining the prior approval of any regulatory
agency or official to the consummation of the transactions described herein.
However, notwithstanding anything contained herein to the contrary, prior review
and consent shall not be required if in the good faith opinion of counsel to
NewCo or BBI any such disclosure by NewCo or BBI is required by law or otherwise
is prudent.
5.6. Confidentiality. NewCo, Beckley and BBI each agrees that it shall treat as
confidential and not disclose to any unauthorized person any documents or other
information obtained from or learned about the other during the course of the
negotiation of this Agreement and the carrying out of the events and
transactions described herein (including any information obtained during the
course of any due diligence investigation or review provided for herein or
otherwise) and which documents or other information relates in any way to the
business, operations, personnel, customers or financial condition of such other
party; and, that it will not use any such documents or other information for any
purpose except for the purposes for which such documents and information were
provided to it and in furtherance of the transactions described herein. However,
the above obligations of confidentiality shall not prohibit the disclosure of
any such document or information by any party to this Agreement to the extent
(i) such document or information is then available generally to the public or is
already known to the person or entity to whom disclosure is proposed to be made
(other than through the previous actions of such party in violation of this
Paragraph 5.6), (ii) such document or information was available to the
disclosing party on a nonconfidential basis prior to the same being obtained
pursuant to this Agreement, (iii) disclosure is required by subpoena or order of
a court or regulatory authority of competent jurisdiction, or by the SEC or
other regulatory authorities in connection with the transactions described
herein, or (iv) to the extent that, in the reasonable opinion of legal counsel
to such party, disclosure otherwise is required by law.
In the event this Agreement is terminated for any reason, then each of
the parties hereto immediately shall return to the other party all copies of any
and all documents or other written materials or information (including computer
generated and stored data) of or relating to such other party which were
obtained from them during the course of the negotiation of this Agreement and
the carrying out of the events and transactions described herein (whether during
the course of any due diligence investigation or review provided for herein or
otherwise) and which documents or other information relates in any way to the
business, operations, personnel, customers or financial condition of such other
party.
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The parties' obligations of confidentiality under this Paragraph 5.6.
shall survive and remain in effect following any termination of this Agreement.
5.7. Tax-Free Reorganization. NewCo and Beckley each undertakes and agrees to
use its best efforts to cause the Bank Merger to qualify as a tax-free
"reorganization" within the meaning of Section 368 of the Code and that neither
shall take or permit its representatives to take any action that would cause the
Bank Merger to fail to so qualify as a tax-free reorganization. NewCo and BBI
each undertakes and agrees to use their best efforts to cause the Merger to
qualify as a purchase of stock within the meaning of Section 368(a) of the Code.
5.8. Transition Team. NewCo and Beckley shall create a transition team comprised
of management of Beckley and staff and representatives of NewCo (the "Transition
Team"). The purpose of the Transition Team shall be to provide detailed guidance
to NewCo in fulfilling and consummating the Merger. The Transition Team shall
meet as needed until the Effective Time. Members of the Transition Team shall
receive no compensation for such service. After the Effective Time, the
directors of Beckley shall serve as advisory, non-voting directors of Raleigh
for a period of six (6) months. As advisory directors such persons shall attend
meetings as requested, provide advice and information with regard to the
previous operations of Beckley, actively support the operations of Raleigh and
use their best efforts to cause the continuation of customer loan and deposit
business with Raleigh. Advisory directors shall be paid Two Hundred Dollars
($200.00) per month.
ARTICLE VI. CONDITIONS PRECEDENT TO MERGER
6.1. Conditions to all Parties' Obligations. Notwithstanding any other provision
of this Agreement to the contrary, the obligations of each of the parties to
this Agreement to consummate the transactions described herein shall be
conditioned upon the satisfaction of each of the following conditions precedent
on or prior to the Closing Date:
a. Approval by Governmental Regulatory Authorities; No Disadvantageous
Conditions.
(i) The Merger described herein shall have been approved, to
the extent required by law, by the OTS, the FDIC, and the West Virginia
Board, and by all other governmental or regulatory agencies or
authorities having jurisdiction over such transactions;
(ii) No governmental or regulatory agency or authority shall
have withdrawn its approval of the Merger or imposed any condition on
the Merger or conditioned its approval thereof, which condition is
reasonably deemed by NewCo to be materially disadvantageous or
burdensome or to so materially adversely impact the economic or
business benefits of this Agreement to NewCo as to render it
inadvisable for it to consummate the Merger;
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(iii) All waiting periods required following necessary
approvals of the Merger by regulatory agencies and by the United States
Department of Justice shall have expired, and, in connection with such
review, no objection to the Merger shall have been raised; and
(iv) All other consents, approvals and permissions, and the
satisfaction of all of the requirements prescribed by law or
regulation, necessary to the carrying out of the Merger contemplated
herein shall have been procured.
b. Adverse Proceedings, Injunction, Etc. There shall not be (i) any order,
decree or injunction of any court or agency of competent jurisdiction
which enjoins or prohibits the Merger or any of the other transactions
described herein or any of the parties hereto from consummating any
such transaction, (ii) any pending or threatened investigation of the
Merger or any of such other transactions by the United States
Department of Justice, or any actual or threatened litigation under
federal antitrust laws relating to the Merger or any other such
transaction, (iii) any suit, action or proceeding by any person
(including any governmental, administrative or regulatory agency),
pending or threatened before any court or governmental agency in which
it is sought to restrain or prohibit BBI or NewCo from consummating the
Merger or carrying out any of the terms or provisions of this
Agreement, or (iv) any other suit, claim, action or proceeding pending
or threatened against NewCo or BBI or any of their respective officers
or directors which shall reasonably be considered by NewCo or BBI to be
materially burdensome in relation to the proposed Merger or materially
adverse in relation to the financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties,
or operations of either such corporation, and which has not been
dismissed, terminated or resolved to the satisfaction of all parties
hereto within ninety (90) days of the institution or threat thereof.
c. Approval by Shareholders. The shareholder of NewCo and the shareholders
of BBI and Beckley shall each have duly approved, ratified and
confirmed this Agreement and the transaction contemplated herein, all
to the extent required by and in accordance with the provisions of this
Agreement, applicable law, and applicable provisions of their
respective governing instruments.
d. No Termination or Abandonment. This Agreement shall not have been
terminated or abandoned by any party hereto.
e. Date to Complete. The Merger shall have been completed by January 10,
1998.
6.2. Additional Conditions to BBI's Obligations. Notwithstanding any other
provision of this Agreement to the contrary, BBI's separate obligation to
consummate the transactions described herein shall be conditioned upon the
satisfaction of each of the following conditions precedent on or prior to the
Closing Date:
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a. Compliance with Laws. NewCo shall have complied in all material
respects with all federal and state laws and regulations applicable to
the transactions described herein and where the violation of or failure
to comply with any such law or regulation could or may have a material
adverse effect on the consolidated financial condition, results of
operations, prospects, businesses, assets, loan portfolio, investments,
properties, or operations of NewCo and its affiliates considered as one
enterprise.
b. NewCo's Representations and Warranties and Performance of Agreements;
Officers' Certificate. Unless waived in writing by BBI as provided
below, each of the representations and warranties of NewCo contained in
this Agreement shall have been true and correct as of the date hereof
and shall remain true and correct on and as of the Effective Time with
the same force and effect as though made on and as of such date, except
(i) for changes which are not, in the aggregate, material and adverse
to the consolidated financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties
or operations of NewCo and its affiliates considered as one enterprise,
and (ii) as otherwise contemplated by this Agreement; and NewCo shall
have performed in all material respects all of its obligations,
covenants and agreements hereunder to be performed by it on or before
the Closing Date.
BBI shall have received a certificate dated as of the Closing
Date and executed by NewCo to the foregoing effect and as to such other
matters as may be reasonably requested by BBI.
c. Legal Opinion of Horizon Counsel. BBI shall have received from Robinson
& McElwee LLP, counsel for NewCo, a written opinion dated as of the
Closing Date and substantially in the form of Exhibit B attached hereto
or otherwise in form and substance reasonably satisfactory to BBI.
d. Other Documents and Information from Raleigh. NewCo shall have provided
to BBI correct and complete copies of its Certificate of Incorporation,
Bylaws, and board resolutions (all certified by its Secretary),
together with certificates of the incumbency of its officers and such
other closing documents and information as may be reasonably requested
by BBI or its counsel.
e. Certificate of Merger; Other Actions. A Certificate of Merger in the
form described in Paragraph 1.7. above shall have been duly executed
and delivered by NewCo as provided in that Paragraph.
f. Acceptance by BBI's Counsel. The form and substance of all legal
matters described herein or related to the transactions contemplated
herein shall be reasonably acceptable to BBI's legal counsel.
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g. Fairness Opinion. Beckley and BBI shall have received from its
financial advisor, Baxter Fentriss and Co., a written opinion (the
"Fairness Opinion"), dated as of a date prior to the mailing of the
Proxy Statement to BBI's shareholders in connection with the BBI
Shareholders Meeting, to the effect that the terms of the Merger are
fair, from a financial point of view, to BBI and its shareholders.
h. Horizon Guarantee. Horizon shall have agreed in writing to guarantee
the payment of all obligations or liabilities of NewCo by no later than
June 30, 1997.
6.3. Additional Conditions to NewCo's Obligations. Notwithstanding any other
provision of this Agreement to the contrary, NewCo's obligations to consummate
the transactions described herein shall be conditioned upon the satisfaction of
each of the following conditions precedent on or prior to the Closing Date:
a. Material Adverse Change. There shall not have occurred any material
adverse change in the consolidated financial condition, results of
operations, businesses, assets, loan portfolio, investments, or
properties of BBI, and there shall not have occurred any event or
development and there shall not exist any condition or circumstance
which, with the lapse of time or otherwise, may or could cause, create
or result in any such material adverse change.
b. Compliance with Laws. BBI shall have complied in all material respects
with all federal and state laws and regulations applicable to the
transactions described herein and where the violation of or failure to
comply with any such law or regulation could or may have a material
adverse effect on the consolidated financial condition, results of
operations, prospects, business assets, loan portfolio, properties, or
operations of BBI or Beckley.
c. BBI's Representations and Warranties and Performance of Agreements;
Officers' Certificate. Unless waived in writing by NewCo as provided
below, each of the representations and warranties of BBI contained in
this Agreement as supplemented by the BBI Disclosure Statement shall
have been true and correct as of the date hereof and shall remain true
and correct on and as of the Effective Time with the same force and
effect as though made on and as of such date, except (i) for changes
which are not, in the aggregate, material and adverse to the
consolidated financial condition, results of operations, businesses,
assets, loan portfolio, investments, and properties of BBI, and (ii) as
otherwise contemplated by this Agreement; and BBI shall have performed
in all material respects all its obligations, covenants and agreements
hereunder to be performed by it on or before the Closing Date.
NewCo shall have received a certificate dated as of the
Closing Date and executed by BBI and its President and Chief Financial
Officer to the foregoing effect and as to such other matters as may be
reasonably requested by NewCo.
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d. Cancellation Letters from Option Holders. NewCo shall have received the
Cancellation Letters in form and content satisfactory to NewCo and
signed by all persons listed in the BBI Disclosure Statement as Option
Holders.
e. Legal Opinion of Beckley Counsel. NewCo shall have received from
Malizia, Spidi, Sloane & Fisch, P.C., counsel to Beckley and BBI, a
written opinion, dated as of the Closing Date and substantially in the
form of Exhibit C attached hereto or otherwise in form and substance
reasonably satisfactory to NewCo.
f. Other Documents and Information from BBI. BBI shall have provided to
NewCo correct and complete copies of BBI's Certificate of
Incorporation, Bylaws and board and shareholder resolutions (all
certified by BBI's Secretary), together with certificates of the
incumbency of BBI's officers and such other closing documents and
information as may be reasonably requested by NewCo or its counsel.
g. Consents to Assignment of Leases. Beckley and BBI shall each have
obtained all required consents to the assignment to NewCo of its rights
and obligations under any personal property lease material to the
business of Beckley or BBI or any Real Property Lease, and such
consents shall be in such form and substance as shall be satisfactory
to NewCo.
h. Certificate of Merger; Other Actions. A Certificate of Merger in the
form described in Paragraph 1.7. above shall have been duly executed
and delivered by BBI as provided in that Paragraph.
i. Completion of Due Diligence. By no later than June 30, 1997, NewCo
shall have completed its Due Diligence and shall be satisfied in its
sole discretion with the results of that examination.
j. Acceptance by NewCo's Counsel. The form and substance of all legal
matters described herein or related to the transactions contemplated
herein shall be reasonably acceptable to NewCo's legal counsel.
k. Fairness Opinion. NewCo shall have received a letter from its
investment advisor prior to June 30, 1997 in form and substance
satisfactory to NewCo that the transaction is fair from a financial
standpoint to the shareholder of NewCo.
l. Bank Merger. The Bank Merger shall be capable of being consummated
contemporaneously with Closing of the Merger without any material
adverse condition or limitation which would prevent, hinder, or
restrict NewCo from continuing the operations of Beckley and BBI after
the Merger in the same manner as said operations had been conducted
previously and BBI shall have approved the Bank Merger by June 30, 1997
in its capacity as sole shareholder of Beckley.
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ARTICLE VII. TERMINATION; BREACH; REMEDIES
7.1. Mutual Termination. At any time prior to the Effective Time (and whether
before or after approval hereof by the shareholders of BBI and/or approval by
the shareholder of NewCo), this Agreement may be terminated by the mutual
agreement of NewCo and BBI. Upon any such mutual termination, all obligations of
BBI and NewCo hereunder shall terminate and each party shall pay its own costs
and expenses as provided herein.
7.2. Unilateral Termination. This Agreement may be terminated by either NewCo or
BBI (whether before or after approval hereof by BBI's shareholders and/or
approval by the shareholder of NewCo) upon written notice to the other parties
and under the circumstances described below.
a. Termination by New. Co. This Agreement may be terminated by NewCo by
action of its Board of Directors or Executive Committee:
(i) if any of the conditions to the obligations of NewCo shall
not have been materially satisfied or effectively waived in writing by
NewCo (except to the extent that the failure of such condition to be
satisfied has been caused by the failure of NewCo to satisfy any of its
obligations, covenants or agreements contained herein);
(ii) if BBI shall have violated or failed to fully perform
any of its obligations, covenants or agreements contained herein in any
material respect;
(iii) if NewCo determines at any time that any of BBI's
representations or warranties contained herein and in any other
certificate or writing delivered pursuant to this Agreement shall have
been false or misleading in any material respect when made, or that
there has occurred any event or development or that there exists any
condition or circumstance which has caused or, with the lapse of time
or otherwise, may or could cause any such representations or warranties
to become false or misleading in any material respect;
(iv) if BBI's shareholders do not ratify and approve the
Merger and/or do not ratify and approve this Agreement and the Merger
to the extent required by law.
(v) if NewCo's shareholder does not ratify and approve this
Agreement and the Merger by June 30, 1997.
However, before NewCo may terminate this Agreement for any of the
reasons specified above in (i), (ii) or (iii) of this paragraph, it shall give
written notice to BBI as provided herein stating its intent to terminate and a
description of the specific breach, default, violation or other condition giving
rise to its right to so terminate, and, such termination by NewCo shall not
become effective if, within thirty (30) days following the giving of such
notice, BBI shall cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of NewCo. In the event BBI cannot or
does not cure such breach, default or violation or satisfy such condition to the
reasonable
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satisfaction of NewCo within such thirty (30) day period, NewCo shall have
thirty (30) days to notify BBI of its intention to terminate this Agreement. A
failure to so notify BBI will be deemed to be a waiver by NewCo of the breach,
default or violation pursuant to Paragraph 9.2. below.
b. Termination by BBI. This Agreement may be terminated by BBI:
(i) if any of the conditions to the obligations of BBI shall
not have been satisfied or effectively waived in writing by BBI (except
to the extent that the failure of such condition to be satisfied has
been caused by the failure of BBI to satisfy any of its obligations,
covenants or agreements contained herein);
(ii) if NewCo shall have violated or failed to fully perform
any of its obligations, covenants or agreements contained herein in any
material respect;
(iii) if BBI determines at any time that any of NewCo's
representations and warranties contained herein or in any other
certificate or writing delivered pursuant to this Agreement shall have
been false or misleading in any material respect when made, or that
there has occurred any event or development or that there exists any
condition or circumstance which has caused or, with the lapse of time
or otherwise, may or could cause any such representations or warranties
to become false or misleading in any material respect;
(iv) if BBI's shareholders do not ratify and approve the
Merger and do not ratify and approve this Agreement and the Merger to
the extent required by law; or
(v) if NewCo's shareholder does not ratify and approve
this Agreement and the Merger; or
(vi) if BBI does not receive from its investment advisor
the Fairness Opinion in a form reasonably satisfactory to BBI and its
counsel; or
(vii) if the Merger is not completed by January 10, 1998;
or
(viii) If prior to the Effective Time, a corporation,
partnership, person or other entity or group shall have made a bona
fide proposal that Beckley and/or BBI has considered and that the Board
of Directors of Beckley and/or BBI believes, in good faith after
consultation with its financial advisors, is more favorable, from a
financial point of view, to the shareholders of Beckley and/or BBI than
the proposal set forth in this Agreement (a Superior Proposal");
provided, that NewCo does not make, within four (4) business days of
NewCo's receiving notice of such third-party proposal, an offer that
the Board of Directors of Beckley and/or BBI believes, in good faith
after consultation with its financial advisor, is at least as
favorable, from a financial point of view, to the shareholders of
Beckley and/or BBI as such Superior Proposal.
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However, before BBI may terminate this Agreement for any of the reasons
specified above in clause (i), (ii), (iii), or (v) of this paragraph, it shall
give written notice to NewCo as provided herein stating its intent to terminate
and a description of the specific breach, default, violation, or other condition
giving rise to its right to so terminate, and, such termination by BBI shall not
become effective if, within thirty (30) days following the giving of such
notice, NewCo shall cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of BBI. In the event NewCo cannot or
does not cure such breach, default or violation or satisfy such condition to the
reasonable satisfaction of BBI within such thirty (30) day period, BBI shall
have thirty (30) days to notify NewCo of its intention to terminate this
Agreement. A failure to so notify NewCo will be deemed to be a waiver by BBI of
the breach, default or violation pursuant to Paragraph 9.2. below.
7.3. Breach; Remedies. Except as otherwise provided below, in the event of a
material breach by BBI of any of its representations or warranties contained in
this Agreement or in any other certificate or writing delivered pursuant to this
Agreement, or in the event of its failure to perform or violation of any of its
obligations, agreements or covenants contained in Paragraphs 3.1 or 3.2, or
Paragraphs 5.1. through 5.9. of this Agreement, then NewCo may, in addition to
other remedies available to it under law or equity terminate this Agreement
prior to the Effective Time.
In the event of a breach by NewCo of any of its representations or
warranties contained in this Agreement, or in the event of its failure to
perform or violation of any of its obligations, agreements or covenants
contained in this Agreement, then BBI may terminate this Agreement prior to the
Effective Time. In the event of any such termination of this Agreement by BBI,
then BBI may elect to either (i) receive reimbursement from NewCo for up to (but
not more than) One Hundred Fifty Thousand Dollars ($150,000.00) in out-of-pocket
expenses which actually have been incurred by BBI, or (ii) to pursue its
remedies at law. If BBI elects to be reimbursed, it must notify NewCo of that
election within thirty (30) days of termination.
7.4 Payment upon Termination - Subsequent Acquisition Transaction. If this
Agreement is terminated by Beckley and/or BBI pursuant to Section 7.2(b) (viii)
and prior thereto Beckley and/or BBI shall have entered into an agreement to
engage in an Acquisition Event (as defined herein) or an Acquisition Event shall
have occurred or the Board of Directors of Beckley and/or BBI shall have
authorized or approved an Acquisition Event or shall have publicly announced an
intention to authorize or approve or shall have recommended that the
shareholders of Beckley and/or BBI approve or accept any Acquisition Event, then
Beckley and/or BBI shall promptly, but in no event later than five (5) business
days after the first of such events shall have occurred, pay NewCo a fee equal
to Five Hundred Thousand Dollars ($500,000).
"Acquisition Event" means any of the following: (i) a merger,
consolidation or similar transaction involving Beckley, BBI, or any successor;
(ii) a purchase, lease or other acquisition in one or a series of related
transactions of assets of Beckley or BBI; (iii) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or a similar
transaction) in one or a series of related transactions of beneficial ownership
of securities representing 25% or more of the
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voting power of Beckley or BBI, in each case with or by a person or entity other
than NewCo or an affiliate of NewCo.
ARTICLE VIII. INDEMNIFICATION
8.1. Agreement to Indemnify. BBI and NewCo hereby agree that in the event this
Agreement is terminated for any reason and the Merger is not consummated, then
they will indemnify each other as provided below.
a. By BBI. BBI shall indemnify, hold harmless and defend NewCo from and
against any and all claims, disputes, demands, causes of action, suits,
proceedings, losses, damages, liabilities, obligations, costs and
expenses of every kind and nature, including without limitation
reasonable attorneys' fees and legal costs and expenses in connection
therewith, whether known or unknown, and whether now existing or
hereafter arising, which may be threatened against, incurred,
undertaken, received or paid by NewCo:
(i) in connection with or which arise out of or result from or
are based upon (A) BBI's operations or business transactions or its
relationship with any of its employees, or (B) BBI's failure to comply
with any statute or regulation of any federal, state or local
government or agency (or any political subdivision thereof) in
connection with the transactions described in this Agreement;
(ii) in connection with or which arise out of or result from
or are based upon any fact, condition or circumstance that constitutes
a material breach by BBI of, or any inaccuracy, incompleteness or
inadequacy in, any of its representations or warranties under or in
connection with this Agreement, or any failure of BBI to perform any of
its covenants, agreements or obligations under or in connection with
this Agreement; and
(iii) in connection with or which arise out of or result from
or are based upon any information provided by BBI which is included in
the Proxy Statement and which information causes the Proxy Statement at
the time of its mailing to BBI's shareholders to contain any untrue
statement of a material fact or to omit any material fact required to
be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were
made, not false or misleading.
b. By NewCo. NewCo shall indemnify, hold harmless and defend BBI from and
against any and all claims, disputes, demands, causes of action, suits,
proceedings, losses, damages, liabilities, obligations, costs, and
expenses of every kind and nature, including without limitation
reasonable attorneys' fees and legal costs and expenses in connection
therewith, whether known or unknown, and whether now existing or
hereafter arising, which may be threatened against, incurred,
undertaken, received or paid by BBI:
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(i) in connection with or which arise out of or result from or
are based upon (A) NewCo's operations or business transactions or its
relationship with any of its employees, or (B) NewCo's failure to
comply with any statute or regulation of any federal, state or local
government or agency (or any political subdivision thereof) in
connection with the transactions described in this Agreement;
(ii) in connection with or which arise out of or result from
or are based upon of any fact, condition or circumstance that
constitutes a breach by NewCo of, or any inaccuracy, incompleteness or
inadequacy in, any of its representations or warranties under or in
connection with this Agreement, or any failure of NewCo to perform any
of its covenants, agreements or obligations under or in connection with
this Agreement; and,
(iii) in connection with or which arise out of or result from
or are based upon any information provided by it which is included in
the Proxy Statement and which information causes the Proxy Statement at
the time of its mailing to BBI's shareholders to contain any untrue
statement of a material fact or to omit any material fact required to
be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were
made, not false or misleading.
8.2. Procedure for Claiming Indemnification.
a. By NewCo. If any matter subject to indemnification hereunder arises in
the form of a claim against NewCo, its successors and assigns
(collectively, "Indemnitee") (herein referred to as a "Third Party
Claim"), the applicable Indemnitee promptly shall give notice and
details thereof, including copies of all pleadings and pertinent
documents, to BBI. Within fifteen (15) days of such notice, BBI either
(i) shall pay the Third Party Claim either in full or upon agreed
compromise or (ii) shall notify the applicable Indemnitee and NewCo
that BBI disputes the Third Party Claim and intends to defend against
it, and thereafter shall so defend and pay any adverse final judgment
or award in regard thereto. Such defense shall be controlled by BBI and
the cost of such defense shall be borne by BBI except that the
applicable Indemnitee shall have the right to participate in such
defense at its own expense and provided that BBI shall have no right in
connection with any such defense or the resolution of any such Third
Party Claim to impose any cost, restriction, limitation or condition of
any kind upon any of the parties comprising Indemnitee hereunder. NewCo
agrees that it shall cooperate in all reasonable respects in the
defense of any such Third Party Claim, including making personnel,
books and records relevant to the Third Party Claim available to BBI
without charge therefor except for out-of-pocket expenses. If BBI fails
to take action within fifteen (15) days as hereinabove provided or,
having taken such action, thereafter fails diligently to defend and
resolve the Third Party Claim, the parties comprising Indemnitee shall
have the right to pay, compromise or defend the Third Party Claim and
to assert the indemnification provisions hereof. Each of the parties
comprising Indemnitee also
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shall have the right, exercisable in good faith, to take such action as
may be necessary to avoid a default prior to the assumption of the
defense of the Third Party Claim by BBI.
b. By BBI. If any matter subject to indemnification hereunder arises in
the form of a claim against BBI or its successors and assigns (herein
referred to as a "Third Party Claim"), BBI promptly shall give notice
and details thereof, including copies of all pleadings and pertinent
documents, to NewCo Within fifteen (15) days of such notice, NewCo
either (i) shall pay the Third Party Claim either in full or upon
agreed compromise or (ii) shall notify BBI that NewCo disputes the
Third Party Claim and intends to defend against it, and thereafter
shall so defend and pay any adverse final judgment or award in regard
thereto. Such defense shall be controlled by NewCo and the cost of such
defense shall be borne by NewCo except that BBI shall have the right to
participate in such defense at its own expense and provided that NewCo
shall have no right in connection with any such defense or the
resolution of any such Third Party Claim to impose any cost,
restriction, limitation or condition of any kind upon BBI. BBI agrees
that it shall cooperate in all reasonable respects in the defense of
any such Third Party Claim, including making personnel, books and
records relevant to the Third Party Claim available to NewCo without
charge therefor except for out-of-pocket expenses. If NewCo fails to
take action within fifteen (15) days as hereinabove provided or, having
taken such action, thereafter fails diligently to defend and resolve
the Third Party Claim, BBI shall have the right to pay, compromise or
defend the Third Party Claim and to assert the indemnification
provisions hereof. BBI also shall have the right, exercisable in good
faith, to take such action as may be necessary to avoid a default prior
to the assumption of the defense of the Third Party Claim by NewCo.
ARTICLE IX. MISCELLANEOUS PROVISIONS
9.1. Survival of Representations, Warranties, Indemnification and Other
Agreements.
a. Representations, Warranties and Other Agreements. Other than those
representations, warranties, agreements and covenants which by their
terms are intended to survive the Merger, none of the representations,
warranties or agreements herein shall survive the effectiveness of the
Merger, and no party shall have any right after the Effective Time to
recover damages or any other relief from any other party to this
Agreement by reason of any breach of representation or warranty, any
nonfulfillment or nonperformance of any agreement contained herein, or
otherwise.
b. Indemnification. The parties' indemnification agreements and
obligations contained herein shall become effective only in the event
this Agreement is terminated, and neither of the parties shall have any
obligations under Paragraph 8.1. in the event of or following
consummation of the Merger.
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9.2. Waiver. Any term or condition of this Agreement may be waived (except as to
matters of regulatory approvals and approvals required by law), either in whole
or in part, at any time by the party which is, and whose shareholders are,
entitled to the benefits thereof; provided, however, that any such waiver shall
be effective only upon a determination by the waiving party (through action of
its Board of Directors) that such waiver would not adversely affect the
interests of the waiving party or its shareholders; and, provided further, that
no waiver of any term or condition of this Agreement by any party shall be
effective unless such waiver is in writing and signed by the waiving party or as
provided in Paragraphs 7.2.a. and 7.2.b. above, or be construed to be a waiver
of any succeeding breach of the same term or condition. No failure or delay of
any party to exercise any power, or to insist upon a strict compliance by any
other party of any obligation, and no custom or practice at variance with any
terms hereof, shall constitute a waiver of the right of any party to demand full
and complete compliance with such terms.
9.3. Amendment. This Agreement may be amended, modified or supplemented at any
time or from time to time prior to the Effective Time, and either before or
after its approval by the shareholders of BBI, by an agreement in writing
approved by a majority of the Boards of Directors of NewCo and BBI executed in
the same manner as this Agreement.
9.4. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally or by
courier, or mailed by certified mail, return receipt requested, postage prepaid,
and addressed as follows:
If to Beckley or BBI, to: Beckley Bancorp Inc.
President and CEO
Attn: Mr. Duane K. Sellards
200 Main Street
Post Office Box 1069
Beckley, West Virginia 25802-1069
With a copy to: Malizia, Spidi, Sloane & Fisch, P.C.
Attn: John J. Spidi, Esq.
One Franklin Square
1301 K St., N.W., Suite 700 East
Washington, DC 20005
If to NewCo, to: HB Acquisition Company
Attn: Mr. C. Duane Blankenship
President
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One Park Avenue
Box D
Beckley, West Virginia 25802-2803
With copy to: Edward M. Payne, III, Esquire
File, Payne, Scherer & File
Law Building
130 Main Street
Beckley, West Virginia 25801
David K. Higgins, Esquire
Robinson & McElwee LLP
Post Office Box 1791
Charleston, West Virginia 25326
If to Raleigh, to: Bank of Raleigh
Attn: Mr. Frank S. Harkins, Jr.
President
One Park Avenue
Box D
Beckley, West Virginia 25802-2803
With copy to: Edward M. Payne, III, Esquire
File, Payne, Scherer & File
Law Building
130 Main Street
Beckley, West Virginia 25801
David K. Higgins, Esquire
Robinson & McElwee LLP
Post Office Box 1791
Charleston, West Virginia 25326
9.5. Further Assurance. BBI and NewCo each agree to furnish to the other such
further assurances with respect to the matters contemplated herein and their
respective agreements, covenants, representations and warranties contained
herein, including the opinion of legal counsel, as such other party may
reasonably request.
44
<PAGE>
9.6. Headings and Captions. Headings and captions of the sections and paragraphs
of this Agreement have been inserted for convenience of reference only and do
not constitute a part hereof.
9.7. Entire Agreement. This Agreement (including all schedules and exhibits
attached hereto and all documents incorporated herein by reference) contains the
entire agreement of the parties with respect to the transactions described
herein and supersedes any and all other oral or written agreements) heretofore
made, and there are no representations or inducements by or to, or any
agreements between, any of the parties hereto other than those contained herein
in writing.
9.8. Severability of Provisions. The invalidity or unenforceability of any term,
phrase, clause, paragraph, restriction, covenant, agreement or other provision
hereof shall in no way affect the validity or enforceability of any other
provision or part hereof.
9.9. Assignment. Except to the extent provided for restructuring, this Agreement
may not be assigned by any party hereto except with the prior written consent of
the other parties hereto.
9.10. Counterparts. Any number of counterparts of this Agreement may be signed
and delivered, each of which shall be considered an original and which together
shall constitute one agreement.
9.11. Governing Law. This Agreement is made in and shall be construed and
enforced in accordance with the laws of West Virginia.
9.12. Inspection. Any right of NewCo hereunder to investigate or inspect the
assets, books, records, files, and other information of BBI in no way shall
establish any presumption that NewCo should have conducted any investigation or
that such right has been exercised by NewCo, its agents, representatives, or
others. Any investigations or inspections that have been made by NewCo, by its
agents, representatives, or others prior to the Closing Date shall not be deemed
in any way in derogation or limitation of the covenants, representations and
warranties made by or on behalf of BBI in this Agreement.
[This space left blank intentionally]
45
<PAGE>
IN WITNESS WHEREOF, NewCo, Raleigh, BBI, and Beckley have each caused
this Agreement to be executed in its name by its duly authorized officers and
its corporate seal to be affixed hereto as of the date first above written.
HB ACQUISITION COMPANY
By:/s/C. Duane Blankenship
------------------------------------------------
Its: President
[CORPORATE SEAL]
/s/ E. M. Payne
------------------------------------------------
Its: Secretary
BANK OF RALEIGH
By: /s/ Charles S. Houck
------------------------------------------------
Its: Executive Vice President
[CORPORATE SEAL]
BECKLEY BANCORP, INC.
By: /s/ Duane K. Sellards
------------------------------------------------
Its: President
[CORPORATE SEAL]
By: /s/ Ned H. Ragland, Jr.
------------------------------------------------
Its: Secretary
BECKLEY FEDERAL SAVINGS BANK
By: /s/ Duane K. Sellards
------------------------------------------------
Its: President
[CORPORATE SEAL]
46
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), made and entered
into as of the ______ day of ________, 1997, by and between BANK OF RALEIGH, a
West Virginia state banking corporation with its principal offices located in
Beckley, West Virginia, (hereinafter "Raleigh"), and BECKLEY FEDERAL SAVINGS
BANK, a federal savings bank national banking association with its principal
offices located in Beckley, West Virginia, (hereinafter "Beckley").
WHEREAS, Beckley is a federal savings bank with its principal offices
located in Beckley, West Virginia with an authorized capital of
$__________________ divided into _______ shares of common stock with par value
of __________ Dollars ($______) and __________ shares of preferred stock with a
par value of ________ Dollars ($_______) and a capital stock account of
$__________ consisting of ________ issued and outstanding shares, with a surplus
of $__________ and undivided profits, including retained earnings of
$____________ as of ___________________, 1997; and
WHEREAS, all of the issued and outstanding stock of Beckley is owned by
Beckley Bancorp, Inc., a Delaware corporation; and
WHEREAS, Raleigh is a West Virginia state bank with its principal
offices located in Beckley, West Virginia with an authorized capital of
$__________________ divided into _______ shares of common stock with par value
of __________ Dollars ($______) and a capital stock account of $__________
consisting of ________ issued and outstanding shares, with a surplus of
$__________ and undivided profits, including retained earnings of $____________
as of ___________________, 1997; and
WHEREAS, all of the issued and outstanding stock of Raleigh is owned by
Horizon Bancorp, Inc., a West Virginia corporation; and
WHEREAS, pursuant to the terms and conditions of that certain Agreement
and Plan of Merger dated as of May ____, 1997, Beckley Bancorp, Inc., the sole
shareholder of Beckley, and HB Acquisition Company will merge, with Beckley
Bancorp, Inc. as the surviving corporation and a wholly owned subsidiary of
Horizon Bancorp, Inc. (the "Prior Merger"); and
WHEREAS, immediately after consummation of the Prior Merger, and
subject to receipt of all regulatory and shareholder approvals, Beckley will
merge with and into Raleigh, with Raleigh as the surviving corporation, pursuant
to this Agreement; and
Exhibit A - 1
<PAGE>
WHEREAS, the Board of Directors of Beckley and the Board of Directors
of Raleigh have each approved this Agreement and have authorized the execution
hereof in counterparts.
NOW, THEREFORE, for and in consideration of the promises and the mutual
agreements hereinafter set forth, and in accordance with the provisions of
applicable law, the parties agree as follows:
SECTION 1: THE MERGER
(1) The Merger. On the Effective Date (as defined herein) and subject
to the terms and conditions hereof, Beckley shall merge with and into Raleigh
(the "Merger"), under the charter of Raleigh. Raleigh shall be the surviving
bank (hereinafter sometimes called the "Surviving Bank") and shall conduct its
banking operations under the title of Bank of Raleigh.
(2) General Effect of Merger. From and after the Effective Date:
(a) The corporate existence of Beckley shall be merged into
and continued in Raleigh as the Surviving Bank, and the Surviving Bank shall be
deemed to be the same business and corporate entity as Raleigh. As of the
Effective Date, the separate existence and corporate organization of Beckley
shall cease.
(b) All of the rights, franchises, powers, privileges and
permissions of Raleigh and Beckley in and to every type of asset and property,
real, personal and mixed, and choses in action shall be passed to and be vested
in Raleigh as the Surviving Bank by virtue of the merger, without any further
act, deed, order or decree, and Raleigh, as the Surviving Bank, shall automat
ically, without any order or other action on the part of any court or otherwise,
hold and enjoy all rights of property, franchises and interests, including
appointments, designations, nominations and all other rights and interests as
trustee, executor, administrator, registrar, transfer agent, guardian, assignee,
receiver, committee or other fiduciary, in the same manner and to the same
extent as were held or enjoyed by Raleigh or Beckley immediately prior to the
Effective Date.
(c) Raleigh as the Surviving Bank shall be responsible for all
liabilities, duties, obligations and undertakings of every kind and description
of Raleigh and Beckley as they existed immediately prior to the Effective Date.
SECTION 2: THE SURVIVING BANK
(1) Title. Unless and until the same shall be properly changed, the
name of and title under which the Surviving Bank shall conduct its banking
operations shall be Bank of Raleigh.
(2) Business Locations. The main and branch offices and other places of
business of the Surviving Bank shall be the same locations used by Raleigh and
Beckley immediately prior to the Effective Date.
Exhibit A - 2
<PAGE>
(3) Articles of Incorporation, Charter and Bylaws. The Articles of
Incorporation, Charter and Bylaws of Raleigh, as in effect on the Effective
Date, shall continue unchanged as the Articles of Incorporation, Charter and
Bylaws of the Surviving Bank.
(4) Directors and Officers. The directors and officers of Raleigh on
the Effective Date shall continue as the directors and officers of the Surviving
Bank and said directors and officers shall hold office as prescribed in the
Bylaws of Raleigh and applicable law until their successors shall have been
elected and shall qualify.
SECTION 3: ON THE EFFECTIVE DATE OF THE MERGER
(1) Conversion of Shares. On the Effective Date, Horizon Bancorp, Inc.
will own all of the outstanding shares of Bank of Raleigh as well as all of the
outstanding shares of Beckley Bancorp, Inc., which in turns will own all of the
outstanding shares of Beckley. On the Effective Date, all of the outstanding
shares of Beckley shall be surrendered and canceled. The shares of Raleigh
outstanding as of the Effective Date shall be unaffected as a result of the
Merger. No new shares of stock shall be issued by reason of this Merger.
SECTION 4: REGULATORY APPROVAL
Prior to the Effective Date, Raleigh and Beckley shall use their best
efforts in good faith to take or cause to be taken as promptly as practicable
all such steps as shall be necessary to obtain all necessary regulatory
approvals.
SECTION 5: CONDITIONS PRECEDENT, CLOSING DATE AND EFFECTIVE DATE
(1) Conditions Precedent. The consummation of this Agreement and the
Merger is conditioned upon the following:
(a) The sole shareholder of Raleigh and the sole shareholder
of Beckley shall each have approved this Agreement as required by law.
(b) All required regulatory approvals shall have been obtained
and all other consents, approvals and permissions and the satisfaction of all
the requirements prescribed by law which are necessary to the carrying out of
the transactions contemplated hereby shall have been procured; and
(c) All delay periods and all periods for review, objection or
appeal of or to any of the consents, approvals or permissions required with
respect to the consummation of the Merger and this Agreement shall have expired.
(2) Closing Date. The closing shall be held at such time and place
as Raleigh and Beckley shall agree upon. The time and date of closing are herein
called the "Closing Date".
Exhibit A - 3
<PAGE>
(3) Effective Date. The Merger shall become effective (the "Effective
Date") on the date on which the Certificate of Merger is issued by the Secretary
of State of West Virginia.
SECTION 6: TERMINATION OF AGREEMENT
(1) Grounds for Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
the mutual written consent of Raleigh and Beckley.
(2) Automatic Termination. In the event the Prior Merger is not
consummated as of January 10, 1998, then this Agreement shall automatically
terminate as of midnight of said date, unless extended by the mutual agreement
of the parties.
(3) Effect of Termination; Right to Proceed. In the event this
Agreement shall be terminated as hereinabove provided, all further obligations
of Raleigh and Beckley under this Agreement shall terminate without further
liability of Raleigh to Beckley or Beckley to Raleigh.
SECTION 7: GOVERNING LAW, SUCCESSORS AND ASSIGNS, COUNTERPARTS,
ENTIRE AGREEMENT
This Agreement (a) shall be governed by and construed under and in
accordance with the laws of the United States of America and of the State of
West Virginia; (b) shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
that this Agreement may not be assigned by any party without the written consent
of the other parties hereto; (c) may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become
effective and binding as to Raleigh and Beckley when one or more counterparts
shall have been signed and delivered by Raleigh and Beckley; and (d) embodies
the entire agreement and understanding, and supersedes all prior agreements and
understandings, between Raleigh and Beckley relating to the subject matter
hereof.
SECTION 8: EFFECT OF CAPTIONS
The captions in this Agreement are included for convenience only and
shall not in any way affect the interpretation or construction of any of the
provisions hereof.
SECTION 9: AMENDMENTS
This Agreement may be amended by the written agreement of Raleigh and
Beckley at any time prior to the Closing Date with respect to any of the terms
contained herein.
SECTION 10: WAIVER
Exhibit A - 4
<PAGE>
Except with respect to required approvals of applicable regulatory
authorities and shareholders, either party may, by written instrument signed by
its President at any time, extend the time for the performance of any of the
obligations or other acts of the other and may waive, with respect to the other:
(i) compliance with any of the covenants, undertakings or agreements, or
satisfaction of any of the conditions to its obligations contained in this
Agreement, and/or (ii) the performance of any obligations set out herein.
SECTION 11: EXPENSES
Unless otherwise agreed, each of the parties hereto will pay, without a
right of reimbursement from the other party and whether or not the transactions
contemplated by this Agreement shall be consummated, the costs incurred by it
incident to the performance of its obligations under this Agreement and to the
consummation of the Merger and of the other transactions contemplated herein,
including the fees and disbursements of counsel, accountants and consultants
employed by such party in connection therewith.
SECTION 12: AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS
Raleigh and Beckley each agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, Raleigh and Beckley have each caused this Agreement
to be executed on its behalf by its officers duly authorized all by a resolution
of their respective boards of directors, and witness the signature hereto of
each said boards of directors as of the day and year first above written.
BANK OF RALEIGH
-----------------------------------
, President
------------------------
ATTEST:
- ----------------------------
- ----------
BECKLEY FEDERAL SAVINGS BANK
Exhibit A - 5
<PAGE>
-----------------------------------
, President
------------------------
ATTEST:
- -----------------------------
- ---------------,
Exhibit A - 6
<PAGE>
EXHIBIT B
Form of Legal Opinion of Counsel for HB Acquisition Company
________________, 199___
Beckley Bancorp, Inc.
- ----------------------------
- ----------------------------
Gentlemen and Ladies:
We have acted as counsel to HB Acquisition Company ("HBAC") and Bank of
Raleigh ("Raleigh") in connection with the Agreement and Plan of Merger by and
between HBAC, Raleigh, Beckley Bancorp, Inc. ("BBI"), and Beckley Federal
Savings Bank ("Beckley") dated May ______, 1997, (the "Agreement") whereunder
HBAC and BBI will merge, with BBI as the surviving corporation (the "Merger").
As such counsel, we have reviewed such organizational documents, indentures,
contracts, deeds, instruments, minutes, actions of the Board of Directors and
shareholders of HBAC and such other documents as we have deemed necessary as a
basis for the opinions expressed herein, which are being delivered to you
pursuant to the Agreement. Capitalized terms appearing herein and not otherwise
defined are used as defined in the Agreement.
In reviewing the documents referred to above, we have assumed without
inquiry the genuineness of all signatures, and the conformity with originals of
all documents submitted to us as copies. We have assumed that BBI has and had
the power to enter into and to perform the Merger, and all other instruments in
which its joinder is contemplated in connection with the Agreement. We have also
assumed BBI's due authorization, execution and delivery of the Agreement and
other instruments described therein and the validity, binding effect and
enforceability thereof with respect to BBI in accordance with their respective
terms. We have relied as to certain factual matters on representations of HBAC
contained in the Agreement, on certificates of officers of HBAC and certain
public officials or agencies.
Whenever we state our opinion to be to our knowledge, we mean that our
attorneys who have given substantive legal attention to representation of HBAC
in the transaction have not made any investigation to acquire actual knowledge
of the existence or absence of the facts forming the basis for such opinion, but
are without information generally which contradicts the existence or absence of
the facts forming the basis for such opinion.
Exhibit B - 1
<PAGE>
Based upon and subject to the foregoing and the qualifications set
forth below, it is our opinion that, except as disclosed in the Agreement or the
Disclosure Statement given by HBAC in connection therewith:
1. HBAC (i) is duly organized and incorporated, validly existing and in
good standing under the laws of West Virginia, (ii) has all requisite
power and authority (corporate and other) to own its properties and
conduct its businesses as now being conducted, and (iii) is duly
qualified to do business and is in good standing in West Virginia and,
to our knowledge, in each other jurisdiction in which the character of
the properties owned or leased by it therein or in which the
transaction of its respective businesses makes such qualification
necessary, except where failure so to qualify would not have a material
adverse effect on HBAC, and its affiliates considered as one
enterprise.
2. HBAC's authorized capital stock consists of ________ (___________)
shares of One Dollar ($1.00) par value per share common stock ("HBAC
Stock"). All of the outstanding shares of HBAC are owned by Horizon
Bancorp, Inc.
3. HBAC has the corporate power and authority to execute and deliver the
Agreement and to perform its obligations and agreements and carry out
the transactions described therein; the Board of Directors of HBAC has
taken all action required by law, its Certificate of Incorporation and
its Bylaws to authorize the execution and delivery of the Agreement;
and the Board of Directors and the sole shareholder of HBAC has taken
all action required by applicable law and its Certificate of
Incorporation and Bylaws to authorize the Merger.
4. The execution and delivery of the Agreement did not, and the
consummation of the transactions described therein will not, violate
any provision of, the Certificate of Incorporation or Bylaws of HBAC,
or, to our knowledge, any contract, agreement, lease, mortgage, note,
bond, indenture, license, or obligation or understanding to which HBAC
is a party or which is material to the business of HBAC and its
affiliates considered as one enterprise, or any order, judgment or
decree known to us to be applicable to HBAC or result in the creation
of any security interest, lien, charge or encumbrance upon any of the
property or assets of HBAC under any material instrument or agreement
know to us to which it is a party.
5. The Agreement has been executed and delivered by HBAC, and is, assuming
due authorization, execution and delivery by BBI and Beckley, a valid
and binding agreement of HBAC in accordance with its terms (except to
the extent enforceability may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to
time in effect which affect creditors' rights generally, (B) legal and
equitable limitations on the availability of injunctive relief,
specific performance and other equitable remedies, (C) general
principles of equity governing and limiting the availability of
specific performance, injunctive relief and other equitable remedies
and (D) applicable laws and regulations and
Exhibit B - 2
<PAGE>
the application of principles of public policy underlying such laws and
regulations limiting the enforceability of indemnification provisions).
6. We are not aware of any material suit, legal proceeding or
investigation pending or threatened, against HBAC, except as previously
disclosed in the HBAC Disclosure Statement and other than ordinary
routine litigation incidental to the business of HBAC; provided,
however, that we are not counsel to HBAC in any litigation and with
respect to litigation we are relying solely upon the representations
and warranties of HBAC made in the Agreement with respect to material
litigation and on HBAC's officer's certificate.
4. The execution and delivery of the Agreement did not, and the
consummation of the transactions described therein will not, violate
any provision of, the Certificate of Incorporation or Bylaws of HBAC,
or, to our knowledge, any contract, agreement, lease, mortgage, note,
bond, indenture, license, or obligation or understanding to which HBAC
is a party or which is material to the business of HBAC and its
affiliates considered as one enterprise, or any order, judgment or
decree known to us to be applicable to HBAC or result in the creation
of any security interest, lien, charge or encumbrance upon any of the
property or assets of HBAC under any material instrument or agreement
know to us to which it is a party.
5. No consents, approvals or waivers are required to be obtained from any
person or entity in connection with HBAC's execution and delivery of
the Agreement, or, to our knowledge, the performance of its obligations
or agreements or the consummation of the transactions described
therein, except for required approvals of governmental or regulatory
authorities and shareholders which have been obtained.
We are licensed to practice in the State of West Virginia, and our
opinions are not intended to, and do not, cover the laws of any other state. To
the extent that matters as to which we have opined may be governed by the laws
of any other state, our opinions are given as if such matters were governed by
the laws of the State of West Virginia. Our opinion is based upon reported
decisions of the West Virginia Supreme Court of Appeals as of the date hereof
and we assume no obligation to advise you of changes that may hereafter be
brought to our attention.
The opinions rendered herein are solely for your benefit and are not to
be used, circulated or otherwise referred to without our prior written consent.
Very truly yours,
Exhibit B - 3
<PAGE>
EXHIBIT C
Form of Legal Opinion of Counsel for Beckley Bancorp, Inc.
_________________, 199___
HB Acquisition Company
- ----------------------
- ----------------------
Gentlemen and Ladies:
We have acted as special counsel to Beckley Bancorp, Inc. ("BBI") and
Beckley Federal Beckley ("Beckley") in connection with in connection with the
Agreement and Plan of Merger by and between HB Acquisition Company ("HBAC"),
Bank of Raleigh, BBI, and Beckley dated May ______, 1997, (the "Agreement")
whereunder HBAC and BBI will merge, with BBI as the surviving corporation (the
"Merger"). This opinion is given pursuant to Section 6.3(e) of the Agreement.
Capitalized terms not otherwise defined herein shall have the meanings as set
forth in the Agreement.
As special counsel for BBI and Beckley we have examined such corporate
records, certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purpose of rendering this opinion.
In the course of our examination we have assumed the genuineness of all
signatures on original documents, and the due execution and delivery of all
documents requiring due execution and delivery for the effectiveness thereof. As
to matters of fact relating to our opinion, we have relied on certificates and
written statements of officers of BBI and Beckley and upon the representations
and warranties of BBI and Beckley made in the Agreement. With respect to
questions of good standing, we have relied solely upon the official letters of
appropriate governmental authorities. We have also assumed for the purposes of
the opinions expressed herein that the Agreement is a valid and binding
obligation of HBAC.
Each of the opinions hereinafter expressed is subject to the following
further qualifications whether or not such opinions refer to such
qualifications:
(1) We have made no independent investigation as to the accuracy or
completeness of any representation, warranty, data or other factual information,
written or oral, set forth herein, made
Exhibit C - 1
<PAGE>
or furnished in connection with the Agreement or the transactions contemplated
thereby or in any of the other documents referred to herein.
(2) Attorneys at our firm are licensed to practice law in the District
of Columbia. The opinions expressed herein are limited to the federal securities
and banking laws and regulations and Delaware laws applicable to BBI and Beckley
in connection with the Merger and the Agreement, and we do not opine on any
other federal law or the laws of any other applicable jurisdiction.
(3) We have acted as special counsel solely in connection with the
application of federal securities and banking laws and regulations and Delaware
laws applicable to the Merger and the Agreement and, consequently, there may
exist matters of a legal nature concerning BBI and Beckley or affiliated parties
in connection with which we have not been consulted and have not represented BBI
or Beckley.
(4) Our opinions below are limited to the matters expressly set forth
in this opinion letter, and no opinion is to be implied or inferred beyond the
matters stated. Without limiting the foregoing, we express no opinion as to the
anti-fraud provisions of federal and state securities laws.
(5) We offer no opinion and do not purport to opine as to the
enforceability of provisions contained in any documents relating to the Merger
or contemplated by the Agreement or documents as to which BBI or Beckley is a
party (a) relating to disclaimers, liability limitations with respect to third
parties, releases, or legal or equitable rights, or discharges of defenses and
remedies, (b) fixing the amount of liquidated damages, (c) requiring the payment
of interest on interest, (d) providing for indemnification or contribution, and
(e) relating to the payment of attorney's fees.
(6) This opinion should in no way be construed as an opinion as to the
materiality of the contents of the Proxy Statement.
(7) Except as otherwise expressly stated, this opinion shall be
governed and interpreted in accordance with the Legal Opinion Accord of the
American Bar Association Section of Business Law (1991).
Based upon and subject to the foregoing and the qualifications set
forth below, it is our opinion that, except as disclosed in the Agreement or the
Disclosure Statement given by BBI in connection therewith:
1. BBI (i) is duly organized and incorporated, validly existing and in
good standing (as a unitary savings and loan holding company) under the
laws of the State of Delaware; (ii) has all requisite power and
authority (corporate and other) to own, lease and operate its
properties and to carry on its business as now being conducted; and
(iii) is duly qualified to do business in the State of West Virginia,
and, to our knowledge, in each other jurisdiction in which the
character of the properties owned, leased or operated by it therein or
in which the transaction
Exhibit C - 2
<PAGE>
of its business made such qualification necessary, except where failure
so to qualify would not have a material adverse effect on BBI and its
subsidiaries considered as one enterprise.
2. Beckley (i) is duly organized and incorporated, validly existing and
has a corporate existence (as a federal Beckley) under the laws of the
United States of America; (ii) has all requisite power and authority
(corporate and other) to own, lease and operate its properties and to
carry on its business as now being conducted; and (iii) has a corporate
existence in West Virginia, and, to our knowledge, in each other
jurisdiction in which the character of the properties owned, leased or
operated by it therein or in which the transaction of its business
makes such qualification necessary, except where failure so to qualify
would not have a material adverse effect on Beckley.
3. BBI and Beckley each has the corporate power and authority to execute
and deliver the Agreement and to perform its respective obligations and
agreements and carry out the transactions described therein; the Board
of Directors of BBI and Beckley have each taken all action required by
law, its Certificate of Incorporation, Charter and Bylaws to authorize
the execution and delivery of the Agreement; and the Board of Directors
and the shareholders of BBI and Beckley have each taken all action
required by applicable law and its Certificate of Incorporation,
Charter and Bylaws to authorize the Merger.
4. The execution and delivery of the Agreement did not, and the
consummation of the transactions described therein will not, violate
any provision of, the Certificate of Incorporation or Bylaws of BBI or
the Charter or Bylaws of Beckley, or, to our knowledge, any contract,
agreement, lease, mortgage, note, bond, indenture, license, or
obligation or understanding to which BBI or Beckley is a party or which
is material to the business of BBI and Beckley taken as a whole, or any
order, judgment or decree known to us to be applicable to BBI or
Beckley or result in the creation of any security interest, lien,
charge or encumbrance upon any of the property or assets of BBI or
Beckley under any material instrument or agreement know to us to which
it is a party.
5. The Agreement has been executed and delivered by BBI and Beckley, and
is, assuming due authorization, execution and delivery by HBAC, a valid
and binding agreement of BBI and Beckley in accordance with its terms.
6. We are not aware of any material suit, legal proceeding or
investigation pending or threatened, against BBI or Beckley, except as
previously disclosed in the BBI Disclosure Statement and other than
ordinary routine litigation incidental to the business of BBI and
Beckley; provided, however, that we are not counsel to BBI or Beckley
in any litigation and with respect to litigation we are relying solely
upon the representations and warranties of BBI and Beckley made in the
Agreement with respect to material litigation and on BBI's officer's
certificate.
7. Each outstanding share of BBI stock and Beckley stock (i) has been duly
authorized and is validly issued and outstanding, and is fully paid and
nonassessable. Except as disclosed in
Exhibit C - 3
<PAGE>
the Agreement or in the BBI Disclosure Statement, neither BBI nor
Beckley has any outstanding (i) securities or other obligations
(including debentures or other debt instruments) which are convertible
into shares of BBI Stock or Beckley Stock or into any other securities
of BBI or Beckley, (ii) options, warrants, rights, calls or other
commitments of any nature which entitle any person to receive or
acquire any shares of BBI Stock or Beckley Stock or any other
securities of BBI or Beckley, or (iii) plan, agreement or other
arrangement pursuant to which shares of BBI Stock or Beckley Stock or
any other securities of BBI or Beckley, or options, warrants, rights,
calls or other commitments of any nature pertaining thereto, have been
or may be issued.
8. No term or provision of the Certificate of Incorporation or Bylaws of
BBI or the Charter or Bylaws of Beckley, or to our knowledge, any
mortgage, indenture, agreement, contract or other instruments known to
us to which BBI or Beckley is a party or which may be binding upon its
respective properties, requires the consent or authorization of any
other person, firm or corporation as a condition precedent to the
consummation of the Merger.
9. No consent or approval by any governmental authority is required under
the laws of the United States of America or the State of Delaware in
connection with the execution and delivery by BBI and Beckley of the
Agreement or the consummation of the transactions contemplated by the
Agreement, other than those approvals contemplated by the Agreement.
10. The Proxy Statement delivered to the shareholders of BBI complied as to
form in all material respects with applicable regulations of the
Securities and Exchange Commission.
As used in the opinions expressed herein, the phrase "to our knowledge"
used herein refers only to the actual current knowledge of the attorneys within
our firm who have given substantive attention to BBI or Beckley in connection
with the transactions contemplated by the Agreement and does not (a) include
constructive notice of matters or information, or (b) imply that we have
undertaken any independent investigation (i) with any persons outside of our
firm or (ii) as to the accuracy or completeness of any factual representation,
information or matter made or furnished in connection with the transactions
contemplated by the Agreement. Furthermore, such reference means only that we do
not know of any fact or circumstances contradicting the statements made herein,
and does not imply that we know the statements to be correct or have any basis
for such statements.
This opinion is being rendered solely for the benefit of the addressee
hereof and may not be relied upon by, nor may copies be delivered to, any other
person without our prior written consent. This opinion is given as of the date
hereof, is expressly limited to the facts existing as of such date and we assume
no obligations to advise you of changes that may hereafter be brought to our
attention.
Very truly yours,
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
Exhibit C - 4
<PAGE>
ANNEX B
[Baxter Fentriss and Company Letterhead]
May 30, 1997
The Board of Directors
Beckley Bancorp, Inc.
200 Main Street
Beckley, West Virginia 25801
Dear Members of the Board:
Beckley Bancorp, Inc., Beckley, West Virginia ("Beckley") and Horizon Bancorp,
Inc., Beckley, West Virginia ("Horizon") have entered into an agreement
providing for the acquisition of Beckley by Horizon ("Acquisition"). The terms
of the Acquisition are set forth in the Agreement and Plan of Merger dated May
30, 1997.
The terms of the Acquisition provide that, with the possible exception of those
shares as to which dissenter's rights may be perfected, each common share of
Beckley will be converted into the right to receive $25.64 cash, subject to
certain adjustments ("Consideration").
You have asked our opinion as to whether the proposed transaction pursuant to
the term of the Acquisition are fair to the respective shareholders of Beckley
from a financial point of view.
In rendering our opinion, we have evaluated the consolidated financial
statements of Beckley available to us from published sources. In addition, we
have, among other things: (a) to the extent deemed relevant, analyzed selected
public information of certain other financial institutions and compared Beckley
and Horizon from a financial point of view to the other financial institutions:
(b) considered the historical market price of the common stock of Beckley; (c)
compared the terms of the Acquisition with the terms of certain other comparable
transactions to the extent information concerning such acquisitions was publicly
available; (d) reviewed the drafts of the Agreement and Plan of Merger and
related documents; and (e) made such other analyses and examinations as we
deemed necessary. We also met with various senior officers of Beckley and
Horizon to discuss the foregoing as well as other matters that may be relevant.
<PAGE>
Baxter Fentriss and Company
Richmond, Virginia
We have not independently verified the financial and other information
concerning Beckley, or Horizon, or other data which we have considered in our
review. We have assumed the accuracy and completeness of all such information;
however, we have no reason to believe that such information is not accurate and
complete. Our conclusion is rendered on the basis of securities market
conditions prevailing as of the date hereof and on the conditions and prospects,
financial and otherwise, of Beckley and Horizon as they exist and are known to
us as of March 31, 1997.
We have acted as financial advisor to Beckley in connection with the Acquisition
and will receive from Beckley a fee for our services, a significant portion of
which is contingent upon the consummation of the Acquisition.
It is understood that this opinion may be included in its entirety in any
communication by Beckley or the Board of Directors to the stockholders of
Beckley. The opinion may not, however, be summarized, excerpted from or
otherwise publicly referred to without our prior written consent.
Based on the foregoing, and subject to the limitations described above, we are
of the opinion that the consideration is fair to the shareholders of Beckley
from a financial point of view.
Sincerely,
/s/ Baxter Fentriss and Company
Baxter Fentriss and Company
<PAGE>
ANNEX C
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
ss.262 Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the holders of
the surviving corporation as provided in subsection (f) of ss.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant to
ss.ss.251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in respect
thereof;
C-1
<PAGE>
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss.253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall include
in such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to take
such action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the surviving
or resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in favor of
or
C-2
<PAGE>
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
ss.228 or ss.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the
C-3
<PAGE>
effective date of the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the date of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who having complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose
C-4
<PAGE>
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
262, L. '96, eff.2-1-96 and Ch. 349, L. '96, eff. 7-1-96).
C-5
<PAGE>
EXHIBIT 1
BECKLEY BANCORP, INC.
[EAGLE LOGO]
ANNUAL REPORT
1996
<PAGE>
Contents
Letter to Stockholders.................................................. 1
Selected Five-Year Financial and Other Data............................. 2
Management's Discussion and Analysis.................................... 3
Report of Independent Accountants....................................... 10
Consolidated Financial Statements....................................... 11
Notes to Consolidated Financial Statements.............................. 16
Directors and Executive Officers........................................ 32
Corporate Information.......................................Inside Back Cover
<PAGE>
To Our Stockholders:
We are pleased to provide you with this report on the performance of
Beckley Bancorp, Inc. for 1996. This year has brought many changes to the
regulatory environment in which we operate. We believe that most of these
changes will be beneficial to the Corporation and the Savings Bank industry as a
whole.
As discussed in detail in this report, the issue of deposit insurance
premiums has been of great concern to us. For over a year, our subsidiary
Savings Bank was forced to operate at a material competitive disadvantage to
commercial banks due to a premium disparity between the Bank Insurance Fund
("BIF"), whose members are primarily commercial banks, and the Savings
Association Insurance Fund ("SAIF"), of which we are a member. On September 30,
1996, the President signed a bill into law which significantly reduced the
premiums paid by the Savings Bank. Although this law is expected to reduce the
amount of deposit insurance premiums paid by the Savings Bank in 1997 by
approximately 70%, the enactment of this law did not come without a price. The
law required all SAIF insured institutions, such as our Savings Bank, to pay a
one-time special assessment to fully capitalize the SAIF which resulted in a
charge to pre-tax income of $212,000 during the third quarter. As a result, the
Savings Bank experienced its first quarterly loss since its founding.
The newly enacted law also addressed the merger of the two insurance
funds and the possibility of requiring thrift institutions, such as the Savings
Bank, to convert to a commercial bank charter. In addition, the enactment of
another law addressed the bad debt reserves of the Savings Bank. The Savings
Bank has previously deducted approximately $1.4 million for income tax purposes
for bad debt reserves. Prior to the enactment of this new law, a number of
factors, including the conversion to a commercial bank charter, would have
triggered the recapture of all or part of such reserves. The tax impact of such
recapture would have had a significant negative impact on the earnings and
capital of the Savings Bank. However, because of this law, the Savings Bank will
now be able to complete more effectively with commercial banks or convert to a
commercial bank charter without fear of facing such a severe income tax burden.
As previously discussed, the one-time special SAIF assessment had a
significant negative impact on our net income for the year. Net income for 1996
was $276,000 which is a $120,000, or a 30%, decrease from a net income of
$396,000 for 1995. However, excluding the special SAIF assessment for
comparative purposes, net income for 1996 would have been approximately
$407,000, or a 3% increase over 1995. The average
<PAGE>
yield on interest earning assets increased slightly to 7.07% while the average
cost of interest bearing liabilities also experienced a slight increase to
4.19%. This resulted in a slight reduction in the net yield on interest earning
assets to 3.91%
Our lending portfolio continues to perform at above average levels and
is an area of which we are particularly proud. At December 31, 1996, accumulated
non-accruing loans totalled only 0.26% of total loans. Total loans receivable
increased by $4.3 million, or 26.18%, during the year. Mortgage loan
originations totalled $4.5 million and non-mortgage loan originations totalled
$5.9 million. The majority of mortgage loans originated during the year
consisted of loans secured by one- to four-family dwellings. Non-mortgage loan
originations consisted primarily of loans secured by automobiles. We are pleased
to be able to assist the members of our local community in financing their homes
and automobiles.
Total assets increased to $46 million during the year. The year end
equity to assets ratio stood at 24.5%
During the year ended December 31, 1996, the Corporation paid regular
cash dividends totalling $0.26 per common share and a special cash dividend of
$0.07 per share. In January 1997, the Board of Directors declared a $0.08 per
common share special cash dividend in addition to a semi-annual cash dividend of
$0.14 per common share. We are pleased to be able to pay these dividends and
will determine future dividends based on the Corporation's relative performance
along with other factors.
We are pleased with our 1996 performance and are now concentrating on
1997. The Board and management are continually looking for ways to improve
long-term shareholder value. As always, we appreciate the strong and loyal
support that our stockholders and employees have given us and ask for your
continued support in the future.
/s/ Tracy L. Riffe
Tracy L. Riffe
Chairman of the Board
/s/ Duane K. Sellards
Duane K. Sellards
President and
Chief Executive Officer
1
<PAGE>
SELECTED FIVE YEAR FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1996(1) 1995 1994(2) 1993 1992
---- ---- ---- ---- ----
(In Thousands)
Selected financial
condition data:
<S> <C> <C> <C> <C> <C>
Total assets $ 45,964 $ 45,213 $ 42,372 $ 37,883 $ 36,680
Loans receivable, net 16,484 15,966 13,792 12,086 10,917
Investment securities(3) 6,995 9,014 11,412 1,061 5,545
Collateralized mortgage-
backed obligations
and other mortgage-
backed securities(3) 16,484 17,954 14,546 17,189 12,489
Deposit accounts 32,246 33,427 32,191 32,790 31,727
Shareholders' equity 11,282 11,268 9,843 4,868 4,653
Selected operations data:
Interest income 3,097 3,109 2,417 2,245 2,355
Interest expense 1,382 1,312 1,067 1,136 1,413
- -----------------------------------------------------------------------------------
Net interest income 1,715 1,707 1,350 1,109 942
Provision for loan losses 52 81 30 15 3
- -----------------------------------------------------------------------------------
Net interest income after
provision for loan losses 1,663 1,626 1,320 1,094 942
Non-interest income 61 60 50 51 39
Gain on sale of securities 26 35 - - -
Non-interest expense 1,306 1,101 961 819 759
- -----------------------------------------------------------------------------------
Income before income taxes 444 620 409 326 219
Income tax expense 168 224 144 111 79
- -----------------------------------------------------------------------------------
Net income 276 396 265 215 140
- -----------------------------------------------------------------------------------
Earnings per share(4) $ .47 $ .69 $ .29 N/A N/A
===================================================================================
Selected Operating Ratios:
Return on average assets 0.62% 0.90% 0.65% 0.57% 0.39%
Return on average equity 2.47% 3.72% 3.57% 4.52% 3.07%
Average equity to
average assets 24.94% 24.27% 18.27% 12.70% 12.78%
Net interest rate spread 2.88% 3.03% 2.84% 2.68% 2.24%
Non-performing assets to
total assets 0.12% 0.12% 0.10% 0.36% 0.34%
Dividend payout ratio 70.21% 34.78% 0% N/A N/A
Number of:
Real estate loans
outstanding 445 442 439 458 476
Deposit accounts 4,370 4,479 4,355 4,494 4,426
Full service offices 2 2 2 2 2
(1) During the third quarter of 1996, the FDIC issued a one-time special
assessment on all SAIF insured institutions. This assessment of $212,000
reduced income before taxes by $212,000. If this assessment had not been
made, net income would have been $409,000 and earnings per share would
have been $0.69. See Note 12 to the Consolidated Financial Statements.
(2) One July 7, 1994 the Corporation issued 595,125 shares of common stock.
Net proceeds from the stock issuance totalled $5,599,272. See Note 2 to
the Consolidated Financial Statements.
(3) On January 1, 1994, the Corporation adopted the Financial Accounting
Standards Board's ("FASB") Statement of Accounting Standards Number 115
("SFAS" 115). As a result of adopting SFAS 115, the securities which are
classified as "available-for-sale" are reported at fair value. See
"Management's Discussion and Analysis - Impact of New Accounting
Standards" for detailed information.
(4) Earnings per share are based on the weighted average number of common and
common equivalent shares outstanding. For 1994, earnings per share was
based on net income subsequent to the Corporation's issuance of common
stock on July 7, 1994. See Note 1 to the Consolidated Financial
Statements.
</TABLE>
2
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Business of the Corporation and Beckley Federal Savings Bank
Beckley Bancorp, Inc. (the "Corporation") is a Delaware chartered
corporation with its headquarters located in Beckley, West Virginia. The
Corporation was organized in March 1994 at the direction of Beckley Federal
Savings Bank (the "Savings Bank") for the purpose of acquiring all of the
capital stock that the Savings Bank issued upon its conversion from the mutual
to stock form of ownership. The Corporation is a unitary savings and loan
holding company which, under existing laws, generally is not restricted in the
types of business activities in which it may engage provided that the Savings
Bank retains a specified amount of its assets in housing-related investments. At
the present time, because the Corporation does not conduct any active business,
the Corporation does not intend to employ any persons other than officers of the
Savings Bank. The Corporation utilizes the support staff of the Savings Bank
from time to time.
Beckley Federal is a federally chartered stock savings bank located in
Beckley, West Virginia. The Savings Bank was initially chartered in December
1939 under the name of Beckley Federal Savings and Loan Association and
commenced operations in early 1940. In 1990, the Savings Bank changed its mutual
charter from that of a federal savings and loan association to that of a federal
savings bank and concurrently changed its name to Beckley Federal Savings Bank.
The Savings Bank's deposits are federally insured by the Federal Deposit
Insurance Corporation ("FDIC"). Beckley Federal is primarily engaged in
attracting deposits from the general public and using those funds to originate
mortgage loans for the purchase or refinance of single-family homes in Beckley,
West Virginia and surrounding communities and for the purchase of
mortgage-backed and other securities. To a lesser extent, the Savings Bank also
originates consumer loans, construction loans and non-residential real estate
loans.
The largest component of the Corporation's net income is net interest
income, which is the difference between interest income and interest expense.
Consequently, the Corporation's earnings are primarily dependent on it net
interest income, which is determined by (i) the difference ("interest rate
spread") between rates of interest earned on interest-earning assets and rates
paid on interest-bearing liabilities, and (ii) the relative amounts of
interest-earning assets and interest-bearing liabilities. Because most deposits
react more quickly to market interest rate movements than do traditional
mortgage loans and long term investment securities due to their shorter terms to
maturity, sharp increases in interest rates will generally adversely affect the
Corporation's earnings. The Corporation's net income is also affected by its
provision for loan losses, as well as the amount of non-interest income and
non-interest expenses, such as salaries and employee benefits, deposit insurance
premiums, occupancy and equipment costs and income taxes. Each of these
components is discussed under "Results of Operations".
Currently, the Federal Deposit Insurance Corporation ("FDIC") administers
two separate insurance funds, the Bank Insurance Fund ("BIF"), whose members are
primarily commercial banks, and the Savings Association Insurance Fund ("SAIF"),
whose members are primarily savings associations such as the Savings Bank. In
September 1995, the FDIC lowered the insurance premium for members of the BIF to
a range of between 0.04% and 0.31% of deposits. Additionally, effective January
1996, the total annual premium for most BIF members was further reduced to a
flat fee of $2,000. During this period, the Savings Bank was paying an annual
insurance premium to the SAIF equal to 0.23% of deposits. This disparity placed
all SAIF members, including the Savings Bank, at a material competitive
disadvantage.
On September 30, 1996, a bill was signed into law by the President
mandating a one-time special premium assessment on the deposits of all SAIF
members of approximately .657% based on the March 31, 1995 assessment base to
fully capitalize the SAIF. This resulted in the Bank incurring a one-time charge
of $212,000 on September 30, 1996. As a result of this new law, the Savings Bank
expects to pay a premium equal to .065% of insured deposits for the years 1997
through 1999. During these years, most BIF institutions are expected to pay
premiums equal to .013% of deposits. Thereafter, assessments for BIF and SAIF
members should be equal.
3
<PAGE>
The new law also contained additional provisions which are of great
importance to the Savings Bank. The U.S. Department of the Treasury is required
to provide Congress with a report, due in early 1997, on the effects of
re-chartering thrifts to bank charters. Depending on the report, the possibility
exists that all thrifts will be required to obtain a bank charter. If this is
done on or before January 1, 1999, the BIF and SAIF will be merged at that time
and assessments for both BIF and SAIF insured institutions will become equal on
that date.
An additional bill was signed into law during 1996 addressing the bad debt
reserves of thrift institutions. Under prior law, if the Savings Bank were to
change to a commercial bank charter, fail to maintain at least 60% of its assets
as "qualifying assets", as defined in the Internal Revenue Code, or be merged
into a commercial bank, it would be required to, in effect, reverse the tax
deductions previously taken for additions to its bad debt reserves. The amount
of pre-1988 reserves on the books of the Savings Bank at December 31, 1996, for
which no current or deferred provision for income taxes had been established,
was approximately $1.4 million. As a result of the enactment of the new law, the
Savings Bank will now be able to change to a commercial bank charter, diversify
its asset structure or be merged into a commercial bank without having to
recapture any of its pre-1988 reserve additions. Any reserves accumulated above
the December 31, 1987 level will be subject to recapture. The Savings Bank has
not added to its bad debt reserve since the December 1987 level.
As discussed in detail in the Corporation's 1995 Annual Report, the
Savings Bank is planning on constructing a new office building on a piece of
property currently owned which is adjacent to its branch facility. Due to
unexpected delays in the architectural process and the winter weather season,
construction has not yet begun. Prior to the end of the second quarter of 1997,
the Board will again review the plans and anticipated costs associated with the
proposed building before giving final approval to commence construction.
As of December 31, 1996, the Savings Bank has incurred approximately
$112,000 in architectural and engineering fees associated with the proposed
building. Such fees are expected to be capitalized as part of the cost of the
project. Should the project be terminated for any reason, such fees will be
charged to non-interest expense in the period in which termination occurs and
net income will likely be reduced by a material amount.
Financial Condition
At December 31, 1996, the Corporation's total assets were $45.96 million,
increasing $0.75 million, or 1.7% from $45.21 million at December 31, 1995. This
increase was primarily due to an increase in loans receivable and partially
offset by decreases in investment securities and collateralized mortgage
obligations and other mortgage-backed securities.
Cash and cash equivalents decreased slightly during the year. At December
31, 1996, cash and cash equivalents totalled $1.25 million compared to $1.37
million one year earlier. This decrease is equal to $0.12 million, or 8.8% and
is primarily attributable to a $0.05 million decrease in the balance in interest
bearing deposits and a $.07 million decrease in cash and due from banks.
The Corporation's investment securities decreased $2.02 million, or 22.4%
from $9.01 million at December 31, 1995 to $6.99 million at December 31, 1996.
This decrease is the result of a $3.00 million decrease in the amortized cost of
securities classified as held-to-maturity and partially offset by a $0.75
million increase in the amortized cost of securities classified as
available-for-sale, a $0.23 million increase in the gross unrealized gains on
securities classified as available-for-sale.
Collateralized mortgage obligations and other mortgage-backed securities
decreased $1.47 million, or 8.2% to $16.48 million at December 31, 1996 from
$17.95 million one year earlier. This decrease resulted from a $0.45 million
decrease in the unrealized gains on securities classified as available-for-sale
and principal repayments and prepayments of $1.02 million.
Net loans increased $4.21 million, or 26.4% from $15.97 million at
December 31, 1995 to $20.18 million at December 31, 1996. This increase is
primarily attributable to a net increase in loans made to customers.
Approximately 500 non-mortgage loans were originated during the year totalling
$5.91 million net of principal repayments of $2.71 million. This represents an
increase of 118.6% to $5.90 million
4
<PAGE>
at December 31, 1996 from $2.70 million at December 31, 1995. The increase in
the non-mortgage loan portfolio primarily consists of loans secured by new and
used automobiles. Mortgage loan originations totalled $4.49 million which was
offset by principal repayments of $3.44 million. As a result of the substantial
increase in the non-mortgage loan portfolio, the allowance for loan losses was
increased by $0.05 million.
Bank premises and equipment increased $0.11 million, or 24.9% from $0.44
million at December 31, 1995 to $0.55 million at December 31, 1996. This
increase is primarily due to expenditures relating to the proposed new office
building and partially offset by depreciation expense. See the previous section
entitled "Business of the Corporation and Beckley Federal Savings Bank" for
details of such expenditures and the proposed office building.
Total liabilities increased $0.73 million, or 2.2% from $33.95 million at
December 31, 1995 to $34.68 million at December 31, 1996. This increase is
primarily attributable to an increase in advances from the Federal Home Loan
Bank and partially offset by a decrease in deposit accounts.
Deposit accounts decreased $1.18 million, or 3.5% from $33.43 million at
December 31, 1995 to $32.25 million at December 31, 1996. This is the result of
decreases in the balances in passbook savings and NOW/Super NOW and money market
checking accounts which is partially offset by an increase in the balances in
certificate of deposit accounts.
Income taxes payable decreased $0.01 million, or 100% from $0.01 million
at December 31, 1995 to $0 at December 31, 1996. This is the result of decreased
taxable income in 1996 resulting in a small prepaid income tax balance which is
included in other assets.
Federal Home Loan Bank advances increased from $0 at December 31, 1995 to
$2.00 million at December 31, 1996. The Bank has used these funds for investment
in short-term government agency securities. Details of the advances can be found
in Note 9 to the Consolidated Financial Statements.
Deferred income taxes decreased $0.1 million, or 43.7% to $0.12 million at
December 31, 1996 from $0.22 million one year earlier. This is primarily due to
a decrease in the fair values of securities classified as available-for-sale.
Shareholders' equity increased $0.01 million, or 0.1% from $11.27 million
at December 31, 1995 to $11.28 million at December 31, 1996. This increase is
primarily attributable to net income of $0.28 million. Several other factors
affected the separate components of stockholders' equity including dividend
payments, Employee Stock Ownership Plan allocations and the issuance of
additional shares of common stock to the Management Stock Bonus Plan. In
addition, the Corporation experienced a $0.14 million decrease in the net
unrealized gain on securities classified as available-for-sale. Please refer to
the Consolidated Statements of Changes in Stockholders' Equity, which is a part
of the Consolidated Financial Statements, for specific details.
Results of Operation
Net income for the year ended December 31, 1996 decreased $120,000 or
30.4% to $276,000 from $396,000 for the year ended December 31, 1995. This
decrease was primarily due to a one-time special assessment by the Savings
Association Insurance Fund. This assessment resulted in a pre-tax charge to
income of $212,000. See the section entitled "Business of the Corporation and
Beckley Federal Savings Bank for specific information on this assessment. Had
this assessment not been made during the year, net income for the year ended
December 31, 1996 would have increased approximately $11,000 to $407,000, or
2.8% over the previous year.
Interest income increased $78,000, or 2.6% from $3,019,000 for the year
ended December 31, 1995 to $3,097,000 for the year ended December 31, 1996.
Increased interest income on loans and collateralized mortgage obligations
partially offset by decreased interest income on investments and interest
bearing deposits represents a majority of the increase. The Rate/Volume Analysis
Table included herein provides additional detail on the separate components of
interest income.
Interest expense for the year ended December 31, 1996 increased $69,000,
or 5.3% to $1,382,000 from $1,313,000 for the year ended December 31, 1995.
5
<PAGE>
Average Balance Sheet
- ---------------------
The following table sets forth certain information relating to the Bank's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid. Such yields and costs are derived by dividing income or expense by the
average balance of assets or liabilities, respectively, for the periods shown.
Average balances are derived from month end balances. Management does not
believe that the use of month end balances instead of average daily balances has
caused any material difference in the information presented.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------------
1996 1995 1994
-------------------------------- ------------------------------ -----------------------------
Average Average Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- -------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1) $ 18,523 $ 1,539 8.31% $ 14,933 $ 1,244 8.33% $ 12,909 $ 1,065 8.25%
Collateralized mortgage-
obligations and other
mortgage-backed securities 17,136 1,120 6.54 16,792 1,146 6.82 16,624 916 5.51
Investment securities(2) 7,976 427 5.35 10,848 617 5.69 9,933 426 4.29
Other interest-earning
assets(3) 173 11 6.36 174 12 6.90 172 10 5.81
-------- ------- ----- -------- ------- ----- -------- ------- ----
Total interest-earning
assets $ 43,808 $ 3,097 7.07% $ 42,747 $ 3,019 7.06% $ 39,638 $ 2,417 6.10%
======== ======= ==== ======== ======= ==== ======== ======= ====
Noninterest-earning assets 968 1,091 987
-------- -------- --------
Total assets $ 44,776 $ 43,838 $ 40,625
======== ======== ========
Interest-bearing liabilities:
Deposit accounts $ 32,270 1,345 4.17 $ 32,580 1,312 4.03 $ 32,775 $ 1,067 3.26
Other interest bearing
liabilities 692 37 5.85 - - - - - -
-------- ------- ----- -------- ------- ---- -------- ------- ----
Total interest-bearing
liabilities $ 32,962 $ 1,382 4.19% $ 32,580 $ 1,312 4.03% $ 32,775 $ 1,067 4.86%
======== ======= ==== ======== ======= ==== ======== ======= ====
Non-interest-bearing liabilities. 648 620 427
-------- ------- --------
Total liabilities $ 33,610 $ 32,200 $ 33,202
======== ======== ========
Retained earnings' 11,166 10,638 7,423
-------- -------- --------
Total liabilities and
retained earnings $ 44,776 $ 43,838 $ 40,625
======== ======== ========
Net interest income $ 1,715 $ 1,707 $ 1,350
======== ======= =======
Interest rate spread (4) 2.88% 3.03% 2.84%
====== ====== ======
Net yield on interest earning
assets(5) 3.91% 3.99% 3.41%
====== ====== ======
Ratio of average interest-
earning assets to average
interest-bearing liabilities 135.75% 131.21% 120.94%
====== ======= ======
</TABLE>
- -----------------------------------
(1) Average balances include non accrual loans.
(2) Includes interest bearing deposits in other financial institutions.
(3) Consists primarily of FHLB stock.
(4) Interest-rate spread represents the difference between the average yield
on interest-earning assets and the average cost of interest-
bearing liabilities.
(5) Net yield on interest earning assets represents net interest income as a
percentage of average interest-earning assets.
6
<PAGE>
Rate\Volume Analysis
- ---------------------
The table below sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest earning assets and interest bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in average volume multiplied by prior rate), (ii) changes in rate
(changes in rate multiplied by prior volume), and (iii) changes in rate-volume
(changes in rate multiplied by the change in average volume).
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
---------------------------------------- ---------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
---------------------------------------- ---------------------------------------
Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net
-------- -------- -------- ------ --------- ------- --------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-income:
Loans receivable $ 299 $ (3) $ (1) $ 295 $ 167 $ 10 $ 2 $ 179
Collateralized mortgage
obligations and other
mortgage-backed securities 22 (47) (1) (26) 9 219 2 230
Investment securities (163) (37) 10 (190) 39 139 13 191
Other interest earning assets - (1) - (1) - 2 - 2
------- ------- ------- ------- ------- ------- ------- -------
Total interest-earning assets $ 158 $ (88) $ 8 $ 78 $ 215 $ 370 $ 17 $ 602
======= ======= ======= ======= ======= ======= ======= =======
Interest-expense:
Savings accounts $ (12) $ 45 $ 0 $ 33 $ (6) $ 253 $ (2) $ 245
Other interest-bearing
liabilities - - 37 37 - - - -
Total interest-bearing
liabilities $ (12) $ 45 $ 37 $ 70 $ (6) $ 253 $ (2) $ 245
======= ======= ======= ======= ======= ======= ======= =======
Net change in net interest income $ 170 $ 133 $ (29) $ 8 $ 221 $ 117 $ 19 $ 357
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
This increase was mainly due to an increase in the average yields paid on
deposit accounts and interest expense on advances from the Federal Home Loan
Bank. For the year ended December 31, 1996, the average yield paid on deposit
accounts was 4.17% compared to 4.03% for the year ended December 31, 1995.
Net interest income increased $8,000, or 0.5% for the year ended December
31, 1996 to $1,715,000 from $1,707,000 for the year ended December 31, 1995.
This slight increase was the result of increased interest income which was
partially offset by increased interest expense. The average interest rate spread
decreased to 2.88% from 3.03% and the net yield on interest earning assets
decreased to 3.91% from 3.99%.
The allowance for loan losses was increased by $52,000 for the year ended
December 31, 1996 compared to an increase of $81,000 for the year ended December
31, 1995. The increase in this allowance is charged against income through the
provision for loan losses. The provision for loan losses is adjusted to reflect
the results of management's periodic evaluation of the adequacy of the
Corporation's allowance for such losses. The adequacy of the allowance is
determined by an evaluation of the loan portfolio including an evaluation of
each delinquent loan, past loan loss experience, current economic conditions,
volume, growth and the composition of the loan portfolio, and other relevant
factors. The adequacy of the allowance is reviewed on a quarterly basis. While
the Corporation maintains its allowance for losses on loans at a level it
considers to be adequate to provide for potential losses, there can be no
assurance that further additions will not be made to the allowance and that
losses, if any, will not exceed the amount provided by the allowance. The
increase in the provision for the year ended December 31, 1996 was primarily
7
<PAGE>
due to an increase in the size of the Corporation's non-mortgage loan portfolio,
which generally has a higher level of credit risk than loans secured by real
property.
Non-interest income decreased by $8,000, or 8.5% to $87,000 for the year
ended December 31, 1996 from $95,000 for the year ended December 31, 1995. The
primary contributor to this decrease was a $35,000 gain on the sales of
collateralized mortgage obligations and investment securities for the year ended
December 31, 1995 versus a $26,000 gain on the sale of investment securities for
the year ended December 31, 1996.
Non-interest expenses increased by $205,000, or 18.7% from $1,101,000 for
the year ended December 31, 1995 to $1,306,000 for the year ended December 31,
1996. This increase is the direct result of a one-time special assessment of the
Savings Association Insurance Fund of $212,000. See the section entitled
"Business of the Corporation and Beckley Federal Savings Bank for specific
information on this assessment. Excluding the effect of the special assessment,
non-interest expenses decreased by $6,000, or 0.6%. Occupancy and equipment
expense increased by $10,000 and other non-interest expenses decreased by
$4,000. Data processing expenses decreased by $8,000.
Income tax expense decreased $56,000, or 24.9% from $224,000 (an effective
tax rate of 35.9% on taxable income for federal and state income taxes) for the
year ended December 31, 1995 to $168,000 (an effective tax rate of 36.2% on
taxable income for federal and state income taxes) for the year ended December
31, 1996. The primary reason for this decrease was a decrease in pre-tax income.
Asset and Liability Management / Management Strategy
The Savings Bank's investment strategy remains focused on the origination
of one-to-four family mortgage loans and relatively short term non-mortgage
loans combined with investments in mortgage-backed and other securities issued
and guaranteed by agencies of the U.S. Government and government sponsored
enterprises. The Savings Bank's mortgage lending programs allow it to serve the
housing needs of its local community by offering long-term fixed and adjustable
rate loans. Although the long-term fixed rate loans increase the Savings Bank's
interest rate risk, the Savings Bank uses adjustable rate mortgage loans and
adjustable rate mortgage-backed securities to minimize this risk. Investments in
agency securities are generally directed into instruments having either an
adjustable interest rate or a maturity of three years or less.
To provide for a stable source of funding for the Savings Bank's
investment objectives, the Savings Bank continually manages the interest rates
it pays on its deposits. Through its deposit management strategies, the Savings
Bank has historically been able to control its cost of funds while maintaining a
stable deposit base and providing convenient and quality services to its
customers. These strategies have also allowed the Savings Bank to maintain
profitability and a strong capital position through growth at a rate that does
not exceed its ability to generate earnings.
Liquidity and Capital Resources
The Savings Bank is required to maintain minimum levels of liquid assets,
as defined by the Office of Thrift Supervision (the "OTS). This requirement,
which may be varied from time to time, depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The required minimum ratio is currently 5%. The Savings Bank has historically
maintained a level of liquid assets in excess of regulatory requirements, and
the Savings Bank's liquidity ratio averaged 20.12% during the month ended
December 31, 1996. The Savings Bank manages its liquidity ratio to meet its
funding needs including" deposit outflows; disbursement of payments collected
from borrowers for taxes and insurance; and loan principal disbursements. The
Savings Bank also manages its liquidity ratio to meet its asset and liability
management objectives.
The Savings Bank's primary sources of funds are deposits, amortization and
prepayment of loans, maturities of investment securities and funds provided from
operations. While scheduled loan repayments are a relatively predictable source
of funds, deposit flows and loan prepayments are greatly influenced by general
interest rates, economic
8
<PAGE>
conditions and competition. The Savings Bank strives to
manage the pricing of its deposits to maintain a balanced stream of cash flows
commensurate with its loan commitments and other predictable funding needs. The
Savings Bank also has other sources of liquidity if a need for additional funds
arises. Additional sources of funds include advances from the Federal Home Loan
Bank of Pittsburgh along with readily marketable investment securities and
mortgage-backed and related securities.
The Savings Bank anticipates that it will have sufficient funds available
to meet its current loan commitments, normal savings withdrawals and the
proposed construction project. At December 31, 1996, the Savings Bank had
outstanding loan commitments of $133,000. In addition, it had certificates of
deposit scheduled to mature within one year of $15,722,000. Management believes
that a substantial portion of such deposits will remain with the Savings Bank.
As required by the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA"), the OTS prescribed three separate standards of capital
adequacy. The regulations require financial institutions to have minimum
tangible capital equal to 1.50% of tangible assets; minimum core capital equal
to 3.00% of adjusted tangible assets; and minimum risk-based capital equal to
8.00% of risk-adjusted assets. At December 31, 1996, the Savings Bank's capital
was well in excess of regulatory requirements as follows: Tangible Capital was
equal to 16.9% of tangible assets; Core Capital was equal to 16.9% of adjusted
tangible assets; and Risk-based Capital was equal to 42.4% of risk-adjusted
assets. For additional detail on the Savings Bank's capital position, see Note
12 to the Consolidated Financial Statements.
In August 1993, the OTS adopted a final rule incorporating an interest
rate risk component into the risk-based capital regulation. Under the rule, an
institution with a greater than "normal" level of interest rate risk will be
subject to a deduction of its interest rate risk component from its total
capital for purposes of calculating the risk-based capital requirement. Because
the Savings Bank's asset size was less than $300 million and its risk-based
capital ratio was in excess of 12% at December 31, 1996, it is not currently
subject to the interest rate risk component.
Impact of New Accounting Standards
In October 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards Number 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," which became effective for the
Corporation beginning January 1, 1996. SFAS 123 requires increased disclosure of
compensation expense arising from both fixed and performance-based stock
compensation plans. Such expense will be measured as the fair value of the award
at the date it is granted using an option pricing model. SFAS 123 encourages,
rather than requires, companies to adopt a new method that accounts for stock
compensation awards based on their estimated fair value. Companies are permitted
to continue accounting for stock-based compensation under Accounting Principles
Board ("APB") Opinion No. 25, however, certain items must be disclosed in the
notes to the financial statements. The Corporation has continued its application
of APB 25 in the consolidated financial statements and has disclosed pro forma
net income and earnings per share in a Note 11 to the Consolidated Financial
Statements, determined as if the Corporation had applied the new method.
Impact of Inflation and Changing Prices
The consolidated financial statements of the Corporation and notes
thereto, presented elsewhere herein, have been prepared in accordance with
generally accepted accounting principles ("GAAP"). GAAP requires the measurement
of financial position and operating results in terms of historical dollars
without considering the change in the relative purchasing power of money over
time and due to inflation. The impact of inflation is reflected in the increased
cost of the Corporation's operations. Unlike most industrial companies, nearly
all of the assets and liabilities of the Corporation are monetary in nature. As
a result, interest rates have a greater impact on the Corporation's performance
than does the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the price of
goods and services.
9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders of
Beckley Bancorp, Inc. and Subsidiary
Beckley, West Virginia
We have audited the accompanying consolidated statements of financial
condition of Beckley Bancorp, Inc. and Subsidiary as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Beckley Bancorp, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
results of their consolidated operations and cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Mason & Bashaw
Certified Public Accountants
Beckley, West Virginia
January 27, 1997
10
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
December 31,
1996 1995
- -----------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and Cash Equivalents (Note 1) $ 1,249,750 $ 1,370,888
Investment Securities (Notes 1 and 3)
Available-for-sale (at fair value) 5,997,247 5,021,058
Held-to-maturity (fair values of $997,500 and
$3,993,000, respectively) 997,417 3,992,627
Collateralized Mortgage Obligations and Other
Mortgage-backed Securities (Notes 1 and 4)
Available-for-sale (at fair value) 16,483,878 17,953,830
Loans receivable, net (Notes 1 and 5) 20,180,072 15,965,582
Bank premises and equipment (Notes 1 and 6) 550,853 440,929
Federal Home Loan Bank stock - at cost 171,900 175,900
Accrued interest receivable (Note 7) 268,456 252,892
Other assets 64,501 39,626
- ------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 45,964,074 $ 45,213,332
======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposit accounts (Note 8) $ 32,246,179 $ 33,426,976
Income taxes payable (Note 10) xx 98,609
Federal Home Loan Bank advances (Note 9) 2,000,000 xx
Deferred income tax (Notes 1 and 10) 121,470 215,579
Other liabilities 314,466 203,914
- ------------------------------------------------------------------------------------------------------
Total Liabilities 34,682,115 33,945,078
======================================================================================================
Commitments (Note 13)
Stockholders' Equity (Note 2)
Preferred stock (par value of $.01 per share,
250,000 shares authorized; no shares issued
and outstanding) xx xx
Common stock (par value of $.10 per share,
1,250,000 shares authorized; 601,465 shares
issued and outstanding) 60,146 60,146
Additional paid-in capital 5,674,043 5,659,403
Retained earnings, substantially restricted (Notes 2 and 10) 105,474,077 5,390,944
Net unrealized gain on securities available-for-sale 285,649 425,522
Unearned compensation - ESOP (Note 11) (153,289) (184,818)
Unearned compensation - Management Stock Bonus Plan (Note 11) (58,667) (82,943)
- ------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 11,281,959 11,268,254
======================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,964,074 $ 45,213,332
======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
11
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME:
<S> <C> <C> <C>
Loans, including certain fees $1,539,467 $1,244,361 $1,064,541
Investment securities 340,773 422,872 120,508
Mortgage-backed securities 313,440 364,835 347,732
Collateralized mortgage obligations 806,347 781,501 567,971
Interest bearing deposit accounts 72,462 182,170 295,885
Dividends, FHLB and other 24,580 23,508 20,594
- ------------------------------------------------------------------------------------
Total Interest Income 3,097,069 3,019,247 2,417,231
- ------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 1,344,909 1,312,569 1,061,352
Other 37,107 xx 6,334
- ------------------------------------------------------------------------------------
Total Interest Expense 1,382,016 1,312,569 1,067,686
- ------------------------------------------------------------------------------------
Net Interest Income 1,715,053 1,706,678 1,349,545
Provision for losses on loans (Notes 1 and 5) 52,000 81,000 30,000
- ------------------------------------------------------------------------------------
Net Interest Income After Provision For
Losses On Loans 1,663,053 1,625,678 1,319,545
- ------------------------------------------------------------------------------------
NONINTEREST INCOME:
Service charges on deposit accounts 48,418 46,657 40,865
Gain on sale of investments available-for-
sale (Note 3) 25,688 4,901 xx
Gain on sale of collateralized mortgage
obligations available-for-sale (Note 4) xx 30,010 xx
Other income 13,097 13,692 9,561
- ------------------------------------------------------------------------------------
Total Noninterest Income 87,203 95,260 50,426
- ------------------------------------------------------------------------------------
NONINTEREST EXPENSES:
Salaries and employee benefits (Note 11) 515,203 515,233 469,603
Occupancy and equipment expense 79,916 70,508 66,022
Savings Association Insurance Fund assessment
(Note 12) 211,647 xx xx
Federal insurance premiums 71,425 74,393 77,864
Data processing expenses 112,564 120,730 112,744
Other (Note 14) 315,567 319,876 235,260
- ------------------------------------------------------------------------------------
Total Noninterest Expenses 1,306,322 1,100,740 961,493
- ------------------------------------------------------------------------------------
Income Before Income Taxes 443,934 620,198 408,478
Provision for income taxes (Note 10) 168,416 224,404 143,667
- ------------------------------------------------------------------------------------
Net Income $ 275,518 $ 395,794 $ 264,811
====================================================================================
Earnings Per Common Share (For Period
Subsequent to Initial Issuance of Common
Stock on July 7, 1994) $ .47 $ .69 $ .29
====================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended December 31, 1996, 1995 and 1994
Additional
Common Paid-In
Stock Capital
- ------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1994 $ xx $ xx
Net unrealized gain upon adoption of FASB 115,
net of income taxes (Note 1) xx xx
Sale and issuance of 595,125 shares of common stock
(Note 2) 59,512 5,539,760
Change in unrealized gain (loss) on securities
available-for-sale, net of tax (Note 1) xx xx
Common stock committed to be released for allocation -
ESOP (Note 10) xx xx
Increase in fair market value over cost of ESOP shares
committed to be released (Note 10) xx 2,232
Net income for year ended December 31, 1994 xx xx
- ------------------------------------------------------------------------------------
Balance at December 31, 1994 59,512 5,541,992
Dividends on common stock xx xx
Additional shares issued (6,340)/purchased (800) for
Management Stock Bonus Plan - at market value (Note 10) 634 107,146
Common stock committed to be released for allocation - ESOP xx xx
Increase in fair market value over cost of ESOP shares
committed to be released xx 10,265
Amortization of unearned compensation - Management Stock
Bonus Plan xx xx
Change in unrealized gain (loss) on securities available-
for-sale, net of tax (Notes 3 and 4) xx xx
Net income for year ended December 31, 1995 xx xx
-------- ----------
Balance at December 31, 1995 60,146 5,659,403
Dividends on common stock xx xx
Common stock committed to be released for allocation - ESOP xx xx
Increase in fair market value over cost of ESOP shares
committed to be released xx 14,640
Amortization of unearned compensation - Management
Stock Bonus Plan xx xx
Change in unrealized gain on securities available-for-sale,
net of tax (Notes 3 and 4) xx xx
Net income for year ended December 31, 1996 xx xx
- ------------------------------------------------------------------------------------
Balance at December 31, 1996 $60,146 $5,674,043
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31, 1996, 1995 and 1994
Unrealized Unearned
Retained Gain (Loss) Compensation
Earnings - on Securities Unearned Management
Substantially Available- Compensa- Stock
Restricted for-Sale tion - ESOP Bonus Plan Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 4,868,027 $ xx $ xx $ xx $ 4,868,027
Net unrealized gain upon adoption of FASB 115,
net of income taxes (Note 1) xx 395,248 xx xx 395,248
Sale and issuance of 595,125 shares of common stock
(Note 2) xx xx (238,050) xx 5,361,222
Change in unrealized gain (loss) on securities
available-for-sale, net of tax (Note 1) xx (1,072,218) xx xx (1,072,218)
Common stock committed to be released for allocation -
ESOP (Note 10) xx xx 23,805 xx 23,805
Increase in fair market value over cost of ESOP shares
committed to be released (Note 10) xx xx xx xx 2,232
Net income for year ended December 31, 1994 264,811 xx xx xx 264,811
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 5,132,838 (676,970) (214,245) xx 9,843,127
Dividends on common stock (137,688) xx xx xx (137,688)
Additional shares issued (6,340)/purchased (800) for
Management Stock Bonus Plan - at market value (Note 10) xx xx xx (121,380) (13,600)
Common stock committed to be released for allocation - ESOP xx xx 29,427 xx 29,427
Increase in fair market value over cost of ESOP shares
committed to be released xx xx xx xx 10,265
Amortization of unearned compensation - Management Stock
Bonus Plan xx xx xx 38,437 38,437
Change in unrealized gain (loss) on securities available-
for-sale, net of tax (Notes 3 and 4) xx 1,102,492 xx xx 1,102,492
Net income for year ended December 31, 1995 395,794 xx xx xx 395,794
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 5,390,944 425,522 (184,818) (82,943) 11,268,254
Dividends on common stock (192,385) xx xx xx (192,385)
Common stock committed to be released for allocation - ESOP xx xx 31,529 xx 31,529
Increase in fair market value over cost of ESOP shares
committed to be released xx xx xx xx 14,640
Amortization of unearned compensation - Management
Stock Bonus Plan xx xx xx 24,276 24,276
Change in unrealized gain on securities available-for-sale,
net of tax (Notes 3 and 4) xx (139,873) xx xx (139,873)
Net income for year ended December 31, 1996 275,518 xx xx xx 275,518
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 5,474,077 $ 285,649 $ (153,28) $ (58,667) $11,281,959
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
<S> <C> <C> <C>
Interest and dividends received $ 3,041,730 $ 3,026,274 $ 2,300,986
Service charges and other income 61,515 60,349 50,426
Interest paid (1,344,939) (1,312,566) (1,067,631)
Cash paid to employees and suppliers (1,239,677) (1,007,379) (903,142)
Income taxes paid (294,814) (187,266) (148,257)
- ---------------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 223,815 579,412 232,382
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED (USED) BY INVESTING
ACTIVITIES:
Proceeds from sale of securities available for sale:
Investment security 50,688 960,938 xx
Collateralized mortgage obligation xx 993,589 xx
Purchases of investment securities:
Available-for-sale (3,000,000) (4,201,663) (3,417,570)
Held-to-maturity (3,492,054) (48,898,192) (6,700,000)
Purchases of CMO and mortgage-backed securities:
Available-for-sale xx (3,920,001) (4,555,114)
Proceeds from maturities or calls of
investment securities:
Available-for-sale 2,250,000 3,500,000 xx
Held-to-maturity 6,500,000 51,580,082 xx
Principal repayments on CMO's and mortgage-backed securities:
Available-for-sale 1,015,981 812,151 5,874,397
Net increase in loans to customers (4,258,689) (2,251,727) (1,744,870)
Redemption (purchase) of FHLB stock 4,000 (6,500) 10,700
Purchases of equipment (19,656) (21,655) (21,540)
Payments for architectural fees (110,337) xx xx
- ---------------------------------------------------------------------------------------------------------------
Net Cash Used By Investing Activities (1,060,067) (1,452,978) (10,553,99)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Net decrease in customers' deposit accounts (1,180,797) (1,235,743) (599,131)
Advances from FHLB 2,000,000 xx xx
Changes in other liabilities 88,296 (93,473) 94,737
Acquisition of common stock for MSBP plan xx (13,600) xx
Net proceeds from sale of stock xx xx 5,599,272
Dividends paid (192,385) (137,688) xx
Purchase of stock by ESOP xx xx (238,050)
- ---------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 715,114 990,982 4,856,828
- ---------------------------------------------------------------------------------------------------------------
(Decrease) Increase in Cash and Cash Equivalents (121,138) 117,416 (5,464,787)
Cash and cash equivalents, beginning of year 1,370,888 1,253,472 6,718,259
- ---------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year (Note 1) $ 1,249,750 $ 1,370,888 $ 1,253,472
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
- --------------------------------------------------------------------------------------
RECONCILEMENT OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 275,518 $ 395,794 $ 264,811
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 20,069 15,079 13,038
(Accretion) and amortization - net (31,974) (16,302) (19,062)
Provision for loan losses 52,000 81,000 30,000
Deferred income tax credit (11,962) (24,996) (7,646)
Gain on sale of securities (25,688) (34,911) xx
Deferred loan fees (7,801) (2,807) 8,878
ESOP benefits amortized 31,529 29,427 23,805
Amortization of unearned compensation - MSBP 24,276 38,437 xx
Increase in fair value of ESOP plan shares
committed to be released for allocation 14,640 10,265 2,232
(Increase) decrease in accrued interest
receivable and other assets (24,612) 30,458 (102,563)
Increase in prepaid income taxes (15,827) xx xx
Increase (decrease) in accrued interest
payable and other liabilities 22,256 (4,166) 15,833
(Decrease) increase in income taxes payable (98,609) 62,134 3,056
- ---------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities $ 223,815 $ 579,412 $ 232,382
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Beckley Bancorp, Inc.'s (the "Parent Company") principal asset is its
wholly-owned subsidiary, Beckley Federal Savings Bank (the "Savings Bank"). The
Savings Bank is a federally chartered stock savings bank organized and existing
under the laws of the United States Home Owner's Loan Act. The Savings Bank
provides a variety of financial services to individual and business customers
through its two locations in Beckley, West Virginia. This Southern West Virginia
area has been historically dependent on the coal mining industry. The Bank's
primary deposit products are interest-bearing checking, savings and certificate
accounts. Its primary lending product is single-family residential loans.
BASIS OF ACCOUNTING: The accounting and reporting practices of Beckley
Bancorp, Inc. and Subsidiary conform, in all material respects, to generally
accepted accounting principles ("GAAP") and to practices within the savings bank
industry. The following is a summary of the significant policies.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Beckley Bancorp, Inc. and Beckley Federal Savings Bank, its
wholly owned subsidiary. All material intercompany accounts and transactions
have been eliminated in the consolidation.
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, demand deposits with banks and short-term
interest bearing deposits at the Federal Home Loan Bank with an original
maturity of three months or less. Cash and cash equivalents at December 31,
1996, 1995 and 1994 are detailed as follows:
1996 1995 1994
---------- ----------- ----------
Cash and due from banks $ 333,952 $ 405,754 $ 576,772
FHLB demand deposit 915,798 965,134 676,700
---------- ----------- ----------
$1,249,750 $1,370,888 $1,253,472
========== =========== ==========
INVESTMENT, CMO'S AND OTHER MORTGAGE-BACKED SECURITIES: FASB Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities" requires
that debt securities that the Company has both the positive intent and ability
to hold to maturity be carried at amortized cost. Debt securities that the
Company does not have the positive intent or ability to hold to maturity and all
marketable equity securities are classified as available-for-sale and carried at
estimated fair value. Unrealized holding gains and losses on securities
classified as available- for-sale are carried as a separate component of
shareholders' equity, net of taxes.
The Bank's mortgage-backed and related securities consist of mortgage-backed
participation certificates (PC's) and collateralized mortgage obligations
(CMO's). All of these securities have been issued by the Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC")
and Government National Mortgage Association ("GNMA"). The Bank's PC portfolio
consists of both fixed-rate and adjustable-rate instruments while the Bank's CMO
portfolio consists entirely of adjustable-rate instruments. All of the
adjustable-rate instruments have interest rates that reset monthly based on a
widely-used cost of funds index. At December 31, 1996, none of the Bank's CMO's
were classified as high risk under the Federal Financial Institution Examination
Council's guidelines, as adopted by the Office of Thrift Supervision under
thrift bulletin 52, for this type of investment.
Prior to January 1, 1994, the Bank classified all investments in equity,
debt, CMO and mortgage-backed securities as held for investment. Because of the
issuance of Statement 115, the Bank reevaluated its investment policies and as a
result concluded that all of its investment securities (equity, debt and
mortgage-backed) should be classified as available-for-sale upon adoption of the
Statement. Application of the new rules resulted in an increase of $395,248 in
equity, net of a $252,699 tax effect, as of January 1, 1994, representing the
recognition in equity of the unrealized appreciation at January 1, 1994.
Effective November 15, 1995, the FASB offered entities a one-time opportunity
to reclassify their accounting securities among Statement 115's three categories
(trading, available-for-sale and held-to-maturity). The Bank has made no
reclassifications under the provisions which expired December 31, 1995.
The amortized cost of debt securities classified as held-to-maturity or
available- for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest income
from investments. Interest and dividends
16
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
are included in income from investments, while principal payments received on
mortgage-backed securities reduce the original investment. The cost of
securities sold is based on the specific identification method.
LOANS: Loans are stated at the unpaid principal amount outstanding, net of
unearned income, deferred fees and the allowance for losses. Interest on loans
is credited to income as earned and accrued, only if deemed collectible. The
Bank discontinues recognizing accrued interest when a loan is specifically
determined to be impaired or when payment of interest becomes past due by more
than ninety days. Unpaid interest previously accrued on those loans is reversed
from income. Non- accrual loans may be restored to accrual status when principal
and interest become current and full payment of principal and interest is
expected.
Loan origination fees and certain costs of originating and closing mortgage
loans are deferred and recognized over the life of the loans as an adjustment of
yield. These amounts are not considered material to operations.
ALLOWANCE FOR LOSSES ON LOANS: The allowance for loan losses is maintained at
a level believed adequate by management to absorb potential losses in the loan
portfolio. The amount of the allowance is based upon management's evaluation of
the collectibility of the loan portfolio, including historical loan loss
experience, growth and composition of the loan portfolio, known and inherent
risks in the portfolio, current economic conditions, adverse situations which
may affect the borrower's ability to repay, and the estimated value of any
underlying collateral. The allowance is increased by provisions for loan losses
charged against income, and reduced by charge-offs, net of recoveries.
Additions to the allowance for loan losses on mortgage loans are not
deductible for Federal income tax purposes. A separate bad debt deduction for
income tax purposes has been established (see Note 10). Additions to the
allowance for losses on consumer loans are generally tax deductible to the
extent that charge-offs are made during the tax year.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS: Real estate acquired in
settlement of loans is recorded, on the date acquired, at the lower of the
Bank's cost or management's estimate of its fair market value. Subsequent
adjustments made to reflect any decline in value below management's original
estimates are charged to current operations through the provision for losses on
real estate owned. Operating expenses of such properties, related income, and
gains and losses on their disposition are included in operations. The Bank held
no real estate acquired in the settlement of loans at December 31, 1996 or 1995.
BANK PREMISES AND EQUIPMENT: Office properties and equipment are carried at
cost less accumulated depreciation. Depreciation is computed primarily on the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives used to compute depreciation are: buildings and
improvements, ten to forty years; and furniture, fixtures and equipment, five to
ten years.
INCOME TAXES: The Bank has adopted SFAS No. 109, "Accounting for Income
Taxes," which requires an asset and liability approach to financial accounting
and reporting for income taxes (see Note 10). The difference between the
financial statement and tax bases of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
differences that have future tax consequences using the currently enacted tax
rates. Valuation allowances are established, if necessary, to reduce the
deferred tax asset to the amount that will more likely than not be realized.
Income tax expense is the current tax payable or refundable for the period plus
or minus the net change in the deferred tax assets and liabilities. The Bank
files a consolidated return with its subsidiary and allocates tax provisions
based upon the entities separate taxable income.
EARNINGS PER SHARE: The Company completed its initial stock offering on July
7, 1994, and, accordingly, earnings per share for 1994 was computed on net
income subsequent to July 7, 1994 and the weighted average number of common and
common equivalent shares outstanding. Common equivalent shares include shares
issuable upon exercise of dilutive options outstanding determined under the
treasury stock method. The Company accounts for the shares acquired by its ESOP
in accordance with Statement of Position 93-6 and the shares acquired for its
Management Stock Bonus Plan ("MSBP") in a manner similar to the ESOP shares;
shares acquired by the ESOP are not considered in the weighted average shares
outstanding until the shares are committed for allocation to an employee's
individual account. The weighted average number of common and common equivalent
shares outstanding for the periods indicated below are:
17
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies (Continued)
July 27, 1994 through December 31, 1994 571,320 shares
January 1, 1995 through December 31, 1995 574,050 shares
January 1, 1996 through December 31, 1996 584,965 shares
===============================================================================
USE OF ESTIMATES: The preparation of the financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts in the financial statements. Actual results could differ from
those estimates. Two such material estimates are the allowance for loan losses
and fair value of financial instruments (Note 15). Management uses current
available information to determine the allowance amount each reporting period.
Changes in local economic conditions, requirements of regulators and other
factors may require the bank to make further additions to the allowance for loan
losses. Therefore, it is reasonably possible that these estimates could change
materially in the future.
NEW ACCOUNTING PRONOUNCEMENTS: The Financial Accounting Standards Board
(FASB) has issued the following pronouncements.
The FASB has issued SFAS No. 122, "Accounting for Mortgage Service Rights"
and SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." SFAS No. 122 deals with selling or
securitizing of loans when mortgage servicing rights are retained. SFAS No. 125,
which is effective after December 31, 1996, provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities.
During 1996, Beckley Bancorp, Inc. and Subsidiary did not sell or securitize
loans and retain the mortgage servicing rights. Management does not anticipate
that SFAS No. 122 and No. 125 will have any impact upon its prospective
financial statements.
RECLASSIFICATIONS: Certain amounts in the 1994 and 1995 financial statements
have been reclassified to conform with the 1996 presentation.
OTHER POLICIES: Accounting policies regarding benefit plans and the fair
values of financial instruments are disclosed in Notes 11 and 15, respectively.
Note 2 - Conversion to Stock Ownership
At a special meeting on June 27, 1994, the members of the Savings Bank
approved management's plan to convert the Savings Bank from a federally
chartered mutual savings bank to a federally chartered stock savings bank. Under
the plan, the Parent Company acquired 100% of the stock of the Savings Bank for
$2,799,636. As part of the conversion to stock form, the Savings Bank formed an
Employee Stock Ownership Plan("ESOP") for eligible employees (see Note 11).
Shares of the Parent Company were offered for subscription to eligible members
of the Savings Bank, the Savings Bank's Employee Stock Ownership Plan (the
"ESOP") and certain other persons, as of specified dates, subject to various
subscription priorities. All stock was purchased in the subscription offering.
The transaction was in the form of a pooling of interests.
On July 7, 1994, Beckley Bancorp, Inc. (a Delaware Corporation) sold and
issued 595,125 shares of $.10 par value common stock at $10 per share (inclusive
of 23,805 shares acquired by the ESOP) and became the parent company of the
Savings Bank. Net proceeds of $5,599,272, representing gross proceeds net of
accumulated conversion and underwriting cost of $351,978, were reflected as
common stock and additional paid-in capital in the accompanying statement of
financial condition.
In accordance with OTS Regulations, at the time of conversion, the Savings
Bank segregated and restricted $4,868,027 of retained earnings in a liquidation
account for the benefit of eligible deposit account holders who continue to
maintain their accounts at the Savings Bank after the conversion. In the event
of a complete liquidation of the Savings Bank subsequent to the conversion, each
eligible account holder will be entitled to receive a distribution from the
liquidation account in an amount proportionate to the current adjusted balances
of all qualifying deposits then held. The liquidation account will be reduced
annually at December 31st to the extent that eligible account holders have
reduced their qualifying deposits. The liquidation account approximated
$1,812,000 at December 31, 1996.
Subsequent to the conversion, the Parent Company or the Savings Bank may not
declare or pay a cash dividend on any of its shares of common stock if the
effect would reduce stockholders' equity below either the amount required for
the liquidation account discussed above or the applicable regulatory capital
requirements or if such declaration and payment would otherwise violate
regulatory requirements.
18
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 3 - Investment Securities
The following is a summary of available-for-sale and held-to-maturity
securities:
<TABLE>
<CAPTION>
Available-for-Sale Securities
- ------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
====================================================================================
December 31, 1996
FHLB - Floating rate
(Weighted average interest rate
<S> <C> <C> <C> <C>
of 4.31%) $1,985,878 $ 2,820 $ (928) $1,987,770
FHLB callable bonds - Fixed rate
(Weighted average interest rate
of 5.87%) 2,000,000 xx (20,211) 1,979,789
FHLMC callable bond - Fixed rate
(Weighted average interest rate
of 8%) 1,000,000 8,167 xx 1,008,167
FHLMC stock 36,249 985,272 xx 1,021,521
- ------------------------------------------------------------------------------------
$5,022,127 $ 996,259 $ (21,139) $5,997,247
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Security
- -------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- -------------------------------------------------------------------------------------
December 31, 1996
<S> <C> <C> <C> <C>
FHLB - Discount note $ 997,417 $ 83 $ xx $ 997,500
=====================================================================================
Weighted average interest rate 5.47%
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Available-for-Sale Securities
- --------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- --------------------------------------------------------------------------------------
December 31, 1995
FHLB - Floating rate
(Weighted average interest rate
<S> <C> <C> <C> <C>
of 4.59%) $1,969,502 $ 7,347 $ (20,000) $1,956,849
FHLB callable bonds - Fixed rate
(Weighted average interest rate
of 6.88%) 2,003,750 933 xx 2,004,683
U.S. Treasury Bill (interest rate
of 5.39%) 243,244 589 xx 243,833
FHLMC stock and other marketable
securities 61,249 754,444 xx 815,693
- ------------------------------------------------------------------------------------
$4,277,745 $ 763,313 $ (20,000) $5,021,058
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Security
- --------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- --------------------------------------------------------------------------------------
December 31, 1995
<S> <C> <C> <C> <C>
FHLB - Discount note $3,992,627 $ 373 $ xx $3,993,000
======================================================================================
Weighted average interest rate 5.53%
======================================================================================
</TABLE>
19
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 3 - Investment Securities (continued)
The gross realized gain on sales proceeds of $50,688 and $960,938 on
available- for-sale securities totaled $25,688 and $4,901 for the years ended
December 31, 1996 and 1995. There were no realized losses. There were no sales
of investments securities during 1994. The adjustment, net of income tax, to
unrealized gains (losses) on available-for-sale investment securities included
as a separate component of shareholders' equity totaled $146,039, $332,165 and
($118,427) in 1996, 1995 and 1994, respectively.
The amortized cost and estimated fair value of investment securities at
December 31, 1996, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because the issuers of the securities
may have the right to prepay obligations without prepayment penalties.
Estimated
Amortized Fair
Cost Value
============================================================================
Available-for-Sale:
Due in one year or less $1,495,017 $1,494,878
Due after one year through five years 2,490,861 2,472,681
Due after five years through ten years 1,000,000 1,008,167
- ----------------------------------------------------------------------------
4,985,878 4,975,726
Equity securities 36,249 1,021,521
- ----------------------------------------------------------------------------
$5,022,127 $5,997,247
============================================================================
Held-to-Maturity:
Due in one year or less $ 997,417 $ 997,500
============================================================================
Investment securities with a carrying value of $495,806 had been pledged to
secure public deposits at December 31, 1996. There were no pledged securities at
December 31, 1995.
Note 4 - Collateralized Mortgage Obligations and Other Mortgage-Backed
Securities
The following is a summary of collateralized mortgage obligations and other
mortgage-backed securities:
<TABLE>
<CAPTION>
Available-for-Sale Securities
- -------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
=====================================================================================
<S> <C> <C> <C> <C>
December 31, 1996
Floating rate collateralized
mortgage obligations:
FNMA issues $ 9,636,540 $ 11,682 $ (459,549) $ 9,188,673
FHLMC issues 3,028,047 21,887 (109,055) 2,940,879
(Weighted average interest
rate of 6.15%)
Mortgage-backed P.C.'s:
GNMA fixed rate 471,942 47,711 xx 519,653
FHLMC fixed rate 529,346 25,226 xx 554,572
FNMA fixed rate 7,132 905 xx 8,037
FHLMC adj. rate 89,033 xx (1,933) 87,100
FNMA adj. rate 3,243,548 528 (59,112) 3,184,964
- --------------------------------------------------------------------------------------
(Weighted average interest
rate of 6.88%) $17,005,588 $ 107,939 $ (629,649) $16,483,878
======================================================================================
</TABLE>
20
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 4 - Collateralized Mortgage Obligations and Other Mortgage-Backed
Securities (Continued)
<TABLE>
<CAPTION>
Available-for-Sale Securities
- ------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
====================================================================================
December 31, 1995
Floating rate collateralized
mortgage obligations:
<S> <C> <C> <C> <C>
FNMA issues $10,025,926 $ 15,784 $ (144,678) $ 9,897,032
FHLMC issues 3,027,816 26,796 (52,043) 3,002,569
(Weighted average interest
rate of 6.44%)
Mortgage-backed P.C.'s:
GNMA fixed rate 616,790 62,226 xx 679,016
FHLMC fixed rate 611,621 32,394 xx 644,015
FNMA fixed rate 7,322 858 xx 8,180
FHLMC adj. rate 102,107 xx (1,072) 101,035
FNMA adj. rate 3,630,133 13,714 (21,864) 3,621,983
- ------------------------------------------------------------------------------------
(Weighted average interest
rate of 7.15%)
$18,021,715 $ 151,772 $ (219,657) $17,953,830
====================================================================================
</TABLE>
The Bank has no principal only, interest only, or residual tranches in its
collateralized mortgage obligation portfolio.
The gross realized gain on sales proceeds of $993,589 on available-for-sale
collateralized mortgage obligations totaled $30,010 for the year ended December
31, 1995. There were no sales of these securities during 1996 and 1995. The
adjustment, net of income tax, to unrealized gains (losses) on
available-for-sale collateralized mortgage obligations and other mortgage-backed
securities included as a separate component of shareholders' equity totaled
($285,912), $770,327 and ($953,791) in 1996, 1995 and 1994, respectively.
There were no pledged collateralized mortgage obligations and other
mortgage-backed securities at December 31, 1996 and 1995.
Note 5 - Loans Receivable
Loans receivable at December 31, 1996 and 1995, consisted of the following:
1996 1995
==============================================================================
First mortgage loans:
One to four family dwellings $13,101,985 $12,213,937
Commercial 1,408,898 1,237,487
Construction 96,231 102,650
Loans secured by deposits 616,719 616,829
Consumer installment loans:
Auto and other personal 5,179,214 2,056,542
Commercial 103,538 24,907
- -----------------------------------------------------------------------------
Total Loans 20,506,585 16,252,352
Less: Allowance for losses (303,183) (255,000)
Net deferred loan fees and reserve for
uncollected interest. (23,330) (31,770)
- -----------------------------------------------------------------------------
$20,180,072 $15,965,582
=============================================================================
Weighted average interest rate 8.14% 8.34%
=============================================================================
21
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 5 - Loans Receivable (continued)
Nonaccruing loans at December 31 were as follows:
1996 1995
=====================================================================
Accumulated nonaccruing loans $ 53,176 $ 52,978
=====================================================================
Interest and fees on loans would have increased $1,166, $1,805 and $288 in
1996, 1995 and 1994, respectively, if nonaccruing loans had been accruing
interest at contract rates. Interest income recorded on such loans during 1996,
1995 and 1994 totaled $7,142, $2,923 and $2,998, respectively.
Activity in the allowance for loan losses is summarized as follows:
1996 1995 1994
- -----------------------------------------------------------------------
Balance, beginning of year $255,000 $174,000 $144,000
Provision for loan losses 52,000 81,000 30,000
Loans charged-off (3,817) xx xx
- -----------------------------------------------------------------------
Balance, end of year $303,183 $255,000 $174,000
=======================================================================
The Bank primarily originates single-family residential mortgage loans within
the Raleigh County, West Virginia area. General policy is to lend up to 80% of
the appraised value of the property securing the loan. Historically, Raleigh
County has been subject to economic fluctuations within the coal mining
industry.
Loans delinquent over 90 days for principal and interest payments
approximated .26% of the total loan balances at December 31, 1996. Management
anticipates no loss on these loans due to the collateral value exceeding the
loan principal outstanding.
The Bank was required to adopt the provisions of FASB 114 "Accounting by
Creditors for Impairment of a Loan" and FASB 118 "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures" during 1995. The
statements require that impaired loans that are within their scope be measured
on the present value of expected future cash flows discounted at the loan's
effective interest rate, or as a practical expedient, at the loan's observable
market price or the fair market value of the collateral if the loan is
collateral dependent. Management has evaluated the loan portfolio at December
31, 1996 and 1995 and have determined that no impaired loans existed.
The Bank has granted loans to certain directors and officers of the Savings
Bank. Related party loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than normal risk of
collectibility. The aggregate dollar amount of these loans was $289,154 and
$196,946 at December 31, 1996 and 1995, respectively. During 1996, new loans
were $149,384 and repayments totaled $57,176.
Note 6 - Bank Premises and Equipment
The following is a detail of office properties and equipment at December 31,
1996 and 1995:
1996 1995
=========================================================================
Land and land improvements $379,953 $379,953
Office building - main 74,332 74,332
Office building - branch 86,570 86,570
Architectural fees, survey and other costs -
1729 Harper Road 112,492 2,155
Equipment, furniture and fixtures 317,064 299,566
- -------------------------------------------------------------------------
970,411 842,576
Accumulated depreciation 419,558 401,647
- -------------------------------------------------------------------------
$550,853 $440,929
=========================================================================
Architectural fees, survey and other costs are related to the future
construction of a new main office at 1729 Harper Road, Beckley, West Virginia.
The most recent proposal to construct the facility, as designed, totalled $1.513
million. Management is evaluating the construction costs and consideration is
being given to reducing the size of the currently designed facility. The Bank
has not entered into any formal contracts to construct the new main office.
22
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 7 - Accrued Interest Receivable
Accrued interest receivable at December 31 is summarized as follows:
1996 1995
===========================================================================
Interest bearing deposits $ 4,473 $ 14,291
Investment securities 55,835 39,977
Collateralized mortgage obligations 61,186 66,144
Mortgage-backed securities 28,950 34,367
Loans 118,012 98,113
- ----------------------------------------------------------------------------
$268,456 $252,892
============================================================================
Note 8 - Deposit Accounts
Deposit accounts at December 31 are comprised of:
<TABLE>
<CAPTION>
December 31,
1996
Account Type Interest Rate 1996 1995
========================================================================================
<S> <C> <C> <C>
Commercial NOW and business checking 0.00 - 1.0% $ 105,267 $ 256,046
Passbook, including 90 day and club
accounts 3.06 - 3.94% 7,368,380 8,140,105
NOW/SuperNOW accounts 2.00 - 2.47% 3,377,686 4,141,468
Money market checking 2.00 - 2.90% 1,366,923 1,584,198
Savings certificates 3.00 - 4.0% 312,653 5,802,065
4.01 - 5.0% 4,760,677 1,487,940
5.01 - 6.0% 13,829,657 8,497,439
6.01 - 7.0% 1,032,581 3,416,416
7.01 - 8.0% 92,355 101,299
- ----------------------------------------------------------------------------------------
$32,246,179 $33,426,976
=========================================================================================
</TABLE>
The weighted average interest rate of all deposits for the years ended
December 31, 1996 and 1995 was 4.25% and 4.03%, respectively.
The aggregate amount of certificates of deposit of $100,000 or more was
$3,839,000 at December 31, 1996 and $3,537,000 at December 31, 1995.
Scheduled maturities of savings certificates at December 31, 1996 are as
follows:
Weighted
Average
Interest
Balance Rate
===================================================================
Under 3 months $ 5,438,402 4.93%
4 to 12 months 10,283,477 5.15%
13 to 36 months 4,257,356 5.51%
37 to 48 months 48,688 5.29%
- -------------------------------------------------------------------
$20,027,923 5.17%
===================================================================
Interest expense by deposit category for the years ended December 31 is as
follows:
1996 1995 1994
===============================================================================
Passbook savings, including 90-day
and club accounts 234,410 $ 271,436 $ 369,379
NOW and money market accounts 123,473 145,326 150,429
Savings certificates 987,026 895,807 541,544
- -------------------------------------------------------------------------------
1,344,909 $1,312,569 $1,061,352
===============================================================================
23
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 9 - Advances from Federal Home Loan Bank
Advances from the Federal Home Loan Bank at December 31, 1996 are as follows:
Short-term fixed rate - 5.93%,
due 1/15/97 $1,000,000
Repo plus - 5.55%, due 3/18/97 1,000,000
- ------------------------------------------------------------
$2,000,000
============================================================
The advances are unsecured with principal and interest payable at maturity. At
December 31, 1996, the Bank had a remaining unsecured credit line of $1,473,000
with the Federal Home Loan Bank ("FHLB"). The Bank also has the capacity to
borrow up to $13.5 million in additional funds from the FHLB using certain
assets as collateral.
Note 10 - Income Taxes
The Bank has previously qualified under provisions of the Internal Revenue
Code that allowed a special bad debt deduction limited generally to a percentage
of otherwise taxable income ("percentage of taxable income method") and subject
to certain limitations based upon aggregate loans and deposits. Under such
provisions, the Bank had established a bad debt reserve, for income tax purposes
only, of approximately $1,464,000. As a result of the Small Business Act of
1996, the "percentage of taxable income method" has been eliminated for tax
years beginning after December 31, 1995. The Bank is now required to use the
"experience method" for establishing bad debt reserves for income tax purposes.
The reserve previously established will become the Bank's beginning balance of
its experience reserve. Such reserves will be used to absorb losses on mortgage
loans for income tax purposes.
All or a portion of the $1,464,000 may be subject to income tax recapture
only if the Bank should liquidate or if the balance in its mortgage loan
portfolio at the end of any year falls below the balance in such portfolio at
December 31, 1987. Under these circumstances, all or a portion of the reserve
would be subject to Federal income tax at the then applicable rates. Management
does not anticipate the occurrence of any event that would cause any portion of
this reserve to be subject to recapture.
Income tax expense for the years ending December 31 is summarized as follows:
1996 1995 1994
================================================================
Federal:
Current $166,830 $236,121 $140,140
Deferred (10,933) (23,240) (7,066)
State:
Current 13,548 13,279 11,173
Deferred (1,029) (1,756) (580)
- ----------------------------------------------------------------
$168,416 $224,404 $143,667
================================================================
A reconciliation of the differences between the tax provision and tax expense
computed by applying the federal statutory income tax rate is as follows:
1996 1995 1994
================================================================================
Statutory Federal income tax rate 34% 34% 34%
- --------------------------------------------------------------------------------
Expected income tax expense at federal rate $150,900 $210,800 $138,900
Increase (decrease) in provision
resulting from:
State income taxes, net of
federal benefit 8,942 9,065 7,400
Dividends received deduction (3,275) (2,810) (2,475)
Other 11,849 7,349 (158)
- -------------------------------------------------------------------------------
$168,416 $224,404 $143,667
===============================================================================
Income tax expense applicable to securities transactions approximated $9,200 and
$13,000 for the years ended December 31, 1996 and 1995, respectively.
The net deferred tax liability in the accompanying balance sheet includes the
following amounts of deferred tax assets and liabilities:
24
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 10 - Income Taxes (continued)
1996 1995
==============================================================================
Deferred tax asset:
Deferred loan fees $ 4,275 $ 5,992
Consumer loan loss reserve 56,601 41,382
Accrued health insurance 7,156 7,524
Unearned management stock bonus plan 5,103 5,326
- ------------------------------------------------------------------------------
73,135 60,224
Less valuation allowance (7,156) (7,524)
- ------------------------------------------------------------------------------
65,979 52,700
- ------------------------------------------------------------------------------
Deferred tax liability:
Post 1987 tax loan loss reserve (295) (295)
Accelerated depreciation for tax purposes (19,392) (18,075)
Unrealized gain on securities available-for-sale
(Note 1) (167,762) (249,909)
- ------------------------------------------------------------------------------
(187,449) (268,279)
- ------------------------------------------------------------------------------
Net Deferred Tax Liability $(121,470) $(215,579)
==============================================================================
The valuation allowance was established to reduce the deferred tax asset to
the amount that will more likely than not be realized.
Note 11 - Benefit Plans
Employee Retirement Plan:
Beckley Federal Savings Bank participates in the Financial Institutions
Retirement Fund multi-employer pension plan. This noncontributory defined
benefit plan covers all eligible employees meeting certain service and age
requirements. The plan operates on a fiscal year ending on June 30, and it is
the policy of the Bank to fund the normal cost of the plan. Plan contributions
for the years ending June 30, 1997, 1996 and 1995 were $4,647, $17,398 and
$38,709, respectively. Due to the fully funded status of the plan, the 1996
contribution was reduced below previous levels due to a future employee
contribution offset of $25,011. Pension plan expense was $10,958, $29,017 and
$35,270 for the years ended December 31, 1996, 1995 and 1994. If the plan ever
became underfunded and the Bank withdrew from the plan, it would be responsible
for its share of any unfunded benefit obligations. The data available at
December 31, 1996 from the administrators of the plan is not sufficient to
develop or determine the Bank's share of the pension plan's accumulated benefit
obligation, or the net assets attributable to the plan. The Bank has no
intention of withdrawing from the plan.
Employee Stock Ownership Plan:
At the time of the stock conversion, the Savings Bank established an employer
leveraged Employee Stock Ownership Plan ("ESOP") that covers all full-time
employees, age 21 and with one year of service. The ESOP borrowed $238,050 from
the Parent Company to purchase 23,805 shares of the Company's common stock, the
loan being collateralized by the common stock. The Savings Bank makes annual
contributions of $23,805 to the ESOP, which is equal to the ESOP debt service
requirement. As shares are committed to be released from collateral, the Savings
Bank reports compensation expense equal to the current market price of the
shares, and the shares become outstanding for earnings per share computations.
Dividends on allocated ESOP shares are recorded as a reduction in retained
earnings; dividends on unallocated ESOP shares are retained to service the
ESOP's loan from the Company. ESOP compensation expense was $48,121, $41,596 and
$26,037 for the years ended December 31, 1996, 1995 and 1994. The ESOP shares as
of December 31, 1996 were as follows:
Allocated shares 4,787
Shares committed to be released 3,153
Unreleased shares 15,329
- ----------------------------------------------------------------
Total ESOP Shares 23,269
================================================================
Fair value of unreleased shares at
December 31, 1996 $264,425
================================================================
25
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 11 - Benefit Plans (continued)
Management Stock Bonus Plan:
Upon approval by the Stockholders on May 23, 1995, the Savings Bank
established a Management Stock Bonus Plan ("MSBP"), the objective of which is to
reward and retain personnel of experience and ability in key positions of
responsibility with the Savings Bank. A maximum of 23,805 shares can be
purchased by the Plan. Upon the adoption of the Plan, five non-employee
Directors and one employee Director were awarded 1,190 non-forfeitable, except
for cause, plan shares each to be allocated at the rate of one-fifth as of the
Effective Date and an additional one-fifth following each of the next four
successive years. The total plan shares to be awarded to non-employee directors
shall not exceed 5,950 in the aggregate under the Plan. All employees are
eligible to receive benefits under the MSBP at the sole discretion of a
committee of not less than three non-employee members of the Savings Bank Board.
The MSBP is managed by trustees who are non-employee directors of the Savings
Bank.
The MSBP purchased 7,140 shares of the Parent Company's stock for $121,380
during 1995. Of the shares purchased, 6,340 were newly issued by Beckley
Bancorp, Inc. These shares were granted in the form of restricted stock payable
20% upon date of award (May 23, 1995) and the remaining shares issuable equally
over a four-year period beginning May 23, 1996. Compensation expense in the
amount of the fair market value of the common stock at the date of grant to the
individual, will be recognized over the period during which the shares are
payable. A recipient of such restricted stock is entitled to all voting and
other stockholder rights (including the right to receive dividends on issued and
non-issued shares), except that the shares, while restricted, may not be sold,
pledged or otherwise disposed of. If a recipient of such restricted stock grant
terminates employment for reasons other than death, disability or retirement,
the recipient forfeits all rights to the unissued shares under restriction. If
the participant's service terminates as a result of death, disability,
retirement or a change in control of the Savings Bank, all restrictions expire
and all shares unissued become unrestricted. The Board of Directors can
terminate the MSBP at any time, and if it does so, any shares not allocated will
revert to the Company.
Compensation expense under the plan was $20,751 and $36,914 for the years
ending December 31, 1996 and 1995, respectively.
Stock Option Plan:
Upon approval of the Stockholders, on May 23, 1995, Beckley Bancorp, Inc.
adopted the 1994 Stock Option Plan. The aggregate number of shares with respect
to which awards may be made pursuant to the Plan was limited to 59,512. On June
11, 1996, the Board of Directors of the Company adopted the 1996 Directors'
Stock Option Plan. A total of 30,000 shares were transferred from the 1994 Plan
into the 1996 Plan. The purpose of the Plans is to provide additional incentive
to certain officers, directors and key employees by facilitating their purchase
of a stock interest in the Company. The Option Plans provide for a term of ten
years, after which no awards may be made, unless such Plans are earlier
terminated by the Board of Directors.
The Option Plans are administered by a committee consisting of the
non-employee members of the Board of Directors (the "Option Committee"). The
Option Committee selects the employees to whom options are to be granted and the
number of shares to be granted. The option price may not be less than 100% of
the fair market value of the shares on the date of the grant, and no option
shall be exercisable after the expiration of ten years from the grant date. In
the case of any director or employee who owns more than 10% of the outstanding
common stock at the time the option is granted, the option price may not be less
than 110% of the fair market value of the shares on the date of the grant, and
the option shall not be exercisable after the expiration of five years from the
grant date. The exercise price may be paid in cash, shares of the common stock,
or a combination of both.
The following table provides details of the activity within the Option Plans
during the twelve-month period ended December 31, 1996:
Weighted-
Average
Exercise
Options Price
=============================================================================
Outstanding, January 1 17,250 $15.63
Granted 42,262 $18.25
Exercised xx
Forfeited (123) $18.25
- -----------------------------------------------------------------------------
Outstanding, December 31 59,389 $17.49
=============================================================================
Exercisable at end of year 58,868 $17.48
=============================================================================
Weighted-average fair value of options granted
during the year $5.46
=============================================================================
26
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 11 - Benefit Plans (continued)
No options have expired under the Plans. The exercise prices on the options
outstanding range from $15.625 to $18.25 per share. The weighted average
remaining life of the options outstanding is 9.2 years.
Financial Accounting Standard No. 123, which became effective for 1996,
requires pro forma disclosures for companies that do not adopt its fair value
accounting method for stock-based compensation. Accordingly, the following pro
forma information presents net income and earnings per share had the Standard's
fair value method been used to measure compensation cost for stock option plans.
Compensation cost actually recognized for stock options was $0 for 1996 and
1995.
1996 1995
==================================================================
Net income as reported $275,518 $395,794
Pro forma net income $ 97,606 $337,830
Earnings per share as reported $ .47 $ .69
Pro forma earnings per share $ .17 $ .59
==================================================================
In future years, the pro forma effect of not applying this standard is not
expected to increase as additional options are not expected to be granted.
However, if additional options are granted in future years, the granting of such
options will likely increase the pro forma effect of not applying this standard.
The value of the options granted were estimated using the Black-Scholes
Option Value Model. For the options granted in 1995, the significant assumptions
used were (1) a risk-free interest rate of 6.50%, (2) a volatility factor on the
stock price of .066542, (3) an expected dividend yield of 2.00%, and (4) an
estimated life of ten years. For the options granted in 1996, assumptions used
were (1) a weighted-average risk-free interest rate of 6.84%, (2) a
weighted-average volatility factor of .090948, (3) an expected dividend yield of
2.00%, and (4) a weighted-average estimated life of ten years.
Note 12 - Regulatory Requirements and Restrictions
Beckley Federal Savings Bank is subject to requirements and restrictions
imposed by various federal regulators. These requirements, among other things,
establish minimum levels of capital and require that minimum cash reserve
balances be maintained.
The Savings Bank currently exceeds the following regulatory capital
requirements issued by the Office of Thrift Supervision pursuant to FIRREA: 1.5%
tangible capital requirement, 3% core capital requirement and 8% risked-based
capital requirement. The following schedule shows the Savings Bank's compliance
with regulatory capital standards at December 31, 1996:
<TABLE>
<CAPTION>
(In Thousands)
Risk-
Tangible Core Based
Capital Capital Capital
=====================================================================================
<S> <C> <C> <C>
Total stockholder's equity of Savings Bank $ 8,009 $ 8,009 $ 8,009
Adjustments:
Net unrealized gain on securities available
for sale (286) (286) (286)
Allowance for loan losses (limited to 1.25% of
risk-weighted assets) xx xx 235
Regulatory capital - computed 7,723 7,723 7,958
Minimum capital requirement 685 1,371 1,503
- -------------------------------------------------------------------------------------
Regulatory capital - excess $ 7,038 $ 6,352 $ 6,455
=====================================================================================
Regulatory capital - requirement 1.5% 3.0% 8.0%
Regulatory capital - computed 16.9% 16.9% 42.4%
</TABLE>
At December 31, 1996, regulatory assets used in computing tangible and core
capital requirements were $45,690,000. Total risk weighted assets at this date
were $18,790,000.
There were no material differences between the net income and retained
earnings presented in these financial statements and those reported for
regulatory purposes for each of the years ended December 31, 1996, 1995 and
1994.
27
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 12 - Regulatory Requirements and Restrictions (continued)
The Federal Deposit Insurance Corporation ("FDIC") currently administers two
separate deposit insurance funds, the Bank Insurance Fund ("BIF") and the
Savings Association Insurance Fund ("SAIF"). Due to the BIF being fully funded
and SAIF being underfunded, effective September 30, 1995, the FDIC substantially
lowered the insurance premium of the BIF members while maintaining the higher
rate for all SAIF members. Additionally, effective January 1996, the total
annual premium for most BIF members was lowered further to a flat $2,000 per
year. These reductions in insurance premiums for BIF members placed SAIF
members, such as the bank, at a material competitive disadvantage to BIF
members.
Effective September 30, 1996, federal law was revised to mandate a one-time
special premium assessment on SAIF members, such as the Bank, of approximately
65.7% per $100 of insured deposits held on March 31, 1995. The special
assessment was made to fully capitalize the SAIF to be at par with the BIF. The
Bank recorded a $211,647 pre-tax expense for this assessment during 1996.
Beginning January 1, 1997, deposit insurance assessments for SAIF members were
reduced to approximately 6.4% per $100 of insured deposits on an annual basis
through the end of 1999. During this same period, BIF members are expected to be
assessed approximately 1.3% per $100 of insured deposits. Beginning January 1,
2000, assessments for the BIF and SAIF members should be the same rate. The
higher premiums paid by SAIF members during this period will be used to pay the
obligations of the Financing Corporations debt obligation. Assuming the above
reduction, beginning January 1, 1997, the rate of deposit insurance premium
assessed the Bank will decline by approximately 70%.
Note 13 - Commitments
Loan commitments at December 31, 1996 were $133,000 for fixed and adjustable
rate real estate loans. The weighted average interest rate on these loan
commitments was 7.30% and they were approved under normal loan underwriting
standards established by the Bank.
Effective March 1, 1993, Beckley Federal Savings Bank entered into a
five-year agreement with FiServ, Inc. for the use of its data processing
services. The contract calls for annual increases over the prior year price not
to exceed 4%. The Bank may terminate the agreement by giving 180 days' written
notice. Total expense relating to the agreement was $49,789 in 1996, $52,818 in
1995 and $51,126 in 1994.
Effective January 1, 1997, the Bank entered into an employment agreement with
President Duane K. Sellards. The agreement is for a term of three years and has
a base salary of $116,000. The agreement is terminable by the Bank for just
cause, as defined by the agreement. Termination without just cause requires a
continuation of the agreement while an involuntary termination requires a lump
sum payment.
On January 22, 1997, the Board of Directors of Beckley Federal Savings Bank
received approval from the Office of Thrift Supervision to declare, at its next
regular meeting, a cash dividend to the Parent equal to 100% of the net income
for the year ended December 31, 1996. On January 14, 1997, the Board of
Directors of Beckley Bancorp, Inc. declared a $0.14 per share cash dividend and
$.08 special dividend payable on February 18, 1997 to the Corporation's
shareholder's of record as of January 31, 1997.
Note 14 - Other Expenses
Other operating expenses for the years ended 1996, 1995 and 1994 include:
<TABLE>
<CAPTION>
1996 1995 1994
=====================================================================================
<S> <C> <C> <C>
Director's fees $ 39,600 $ 39,000 $ 39,000
Management stock bonus plan - Non-employee
directors 17,292 30,762 xx
Payroll taxes 32,926 32,152 30,219
Personal property, franchise and other taxes 39,166 27,052 23,128
Legal, auditing and examinations 70,145 82,676 47,593
Other 116,438 108,234 95,320
- --------------------------------------------------------------------------------------
$315,567 $319,876 $235,260
======================================================================================
</TABLE>
28
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 15 - Fair Value of Financial Instruments
The following disclosures of the estimated fair value of financial
instruments are made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The Bank adopted the
provisions of SFAS No. 107 during the year ended December 31, 1995. The
estimated fair value amounts have been determined by Beckley Bancorp, Inc. and
Subsidiary using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the Bank could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts.
The Bank's estimated fair value of financial instruments as of December 31
are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
=======================================================================================
Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1,250 $ 1,250 $ 1,371 $ 1,371
Investment securities:
Available-for-sale 5,997 5,997 5,021 5,021
Held-to-maturity 997 997 3,993 3,993
CMO's and other mortgage-backed
securities - available-for-sale 16,484 16,484 17,954 17,954
Loans receivable, net 20,180 20,283 15,966 16,337
Federal Home Loan Bank stock 172 172 176 176
Liabilities:
Demand and savings deposits 12,218 12,218 14,122 14,122
Certificates of deposit 20,028 20,038 19,305 19,336
Federal Home Loan Bank advances 2,000 2,000 xx xx
</TABLE>
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------
Contract Estimated Contract Estimated
or Unrealized or Unrealized
Notional Gain Notional Gain
Amount (Loss) Amount (Loss)
======================================================================================
Off-balance sheet financial instruments:
<S> <C> <C> <C> <C>
Lending commitments, fixed rate $ 133 $ xx $ 69 $ 2
======================================================================================
</TABLE>
The following methods and assumptions were used to determine the fair value
of financial instruments:
Cash and Cash Equivalents - For cash and cash equivalents, the carrying
amount is a reasonable estimate of fair value.
Investment Securities - Fair values are based on quotes provided by a
recognized pricing service.
Collateralized and Other Mortgage-Backed Securities - Fair values are
based on quotes provided by a recognized pricing service.
Loans Receivable - Fair values are estimated for portfolios with similar
financial characteristics. Loans are segregated by type, such as single
family residential mortgages, multi-family residential mortgages,
non-residential and installment loans. Each loan category is further
segmented into fixed and variable interest rate categories. Future cash
flows of these loans are discounted using the current rates at which
similar loans would be made to borrowers with similar credit ratings and
for the same remaining maturities.
29
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 15 - Fair Value of Financial Instruments (continued)
Federal Home Loan Bank Stock - The carrying value of capital stock of the
Federal Home Loan Bank approximates its fair value.
Demand Deposits - The fair value of NOW accounts and savings accounts was
the amount payable on demand at the reporting date.
Time Certificates - The fair value was determined using the discounted
cash flow method. The discount rate used was the rate currently offered on
similar products.
Federal Home Loan Bank advance - The fair value was determined using the
discounted cash flow method. The discount rate used was the rate currently
offered on similar products.
Loan Commitments - Fixed Rate - The estimated fair value of commitments to
originate fixed-rate loans is determined based on the difference between
current levels of interest rates and the committed rates.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date. Therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
Note 16 - Parent Company Only Condensed Financial Information
Beckley Bancorp, Inc. was organized to serve as the holding company for
Beckley Federal Savings Bank and began operations on July 7, 1994 in conjunction
with the Savings Bank's mutual-to-stock conversion and the Company's initial
public offering of common stock. The Company's (Parent company only) balance
sheets as of December 31, 1996 and 1995 and related statements of income and
cash flows for December 31, 1996 and 1995 and for the period from inception
(July 7, 1994) to December 31, 1994 are as follows:
BECKLEY BANCORP, INC.
BALANCE SHEETS
December 31, 1996 and 1995 1996 1995
=============================================================================
Assets
Cash and cash equivalents $ 120,341 $ 288,036
Investment in Beckley Federal Savings Bank 8,008,569 8,196,801
Loan to Beckley Federal Savings Bank 3,010,000 2,617,000
Loan to Savings Bank ESOP 153,289 184,818
Other 942 1,192
- -----------------------------------------------------------------------------
Total Assets $11,293,141 $11,287,847
=============================================================================
Liabilities and Stockholders' Equity
Other liabilities $ 3,945 $ 8,420
Income taxes payable 7,237 11,173
Stockholders' Equity 11,281,959 11,268,254
- -----------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $11,293,141 $11,287,847
=============================================================================
30
<PAGE>
BECKLEY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 16 - Parent Company Only Condensed Financial Information (continued)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31, 1996, 1995 and
Period From Inception (July 7, 1994) to
December 31, 1994 1996 1995 1994
====================================================================================
Income:
<S> <C> <C> <C>
Interest on loans $ 140,112 $ 139,626 $ 65,352
Dividends from subsidiary 358,880 241,778 xx
- -------------------------------------------------------------------------------------
498,992 381,404 65,352
- -------------------------------------------------------------------------------------
Professional fees and other expenses 62,259 75,518 28,828
- -------------------------------------------------------------------------------------
Income before income taxes and (excess
dividends) equity in undistributed earnings
of subsidiary 436,733 305,886 36,524
Provision for income taxes 31,171 27,194 13,491
- -------------------------------------------------------------------------------------
405,562 278,692 23,033
(Excess dividends) equity in undistributed
net income of subsidiary (130,044) 117,102 241,778
- -------------------------------------------------------------------------------------
Net Income $ 275,518 $ 395,794 $ 264,811
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and
Period From Inception (July 7, 1994) to
December 31, 1994 1996 1995 1994
=====================================================================================
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 275,518 $ 395,794 $ 264,811
Adjustments to reconcile net income to net
cash provided by operating activities:
Excess dividends (equity) in undistributed
net income of subsidiary 130,044 (117,102) (241,778)
Decrease (increase) in other assets 250 (1,192) xx
Increase in other liabilities (8,411) 4,318 15,275
Other (11,240) xx xx
- -------------------------------------------------------------------------------------
Net Cash Provided by Operations 386,161 281,818 38,308
- -------------------------------------------------------------------------------------
Cash Flows From (Used by) Investing Activities:
Payments received on loans 31,529 29,427 xx
Loans originated, net of payments (393,000) xx (2,617,000)
Purchase of Savings Bank subsidiary stock xx xx (2,799,636)
- -------------------------------------------------------------------------------------
Net Cash (Used) Provided by Investing
Activities (361,471) 29,427 (5,416,636)
- --------------------------------------------------------------------------------------
Cash Flows (Used by) From Financing Activities:
Proceeds from issuance of common stock for
Management Stock Bonus Plan xx 107,780 xx
Cash dividends paid (192,385) (137,688) xx
Proceeds from sale of stock - net xx xx 5,599,272
Purchase of stock by ESOP less payments xx xx (214,245)
- --------------------------------------------------------------------------------------
Net Cash (Used) Provided by Financing
Activities (192,385) (29,908) 5,385,027
- --------------------------------------------------------------------------------------
(Decrease) increase in cash and cash
equivalents (167,695) 281,337 6,699
Cash and cash equivalents, beginning of year 288,036 6,699 xx
======================================================================================
Cash and Cash Equivalents, End of Year $ 120,341 $ 288,036 $ 6,699
======================================================================================
Supplemental Disclosures:
Interest Paid $ xx $ xx $ 6,334
======================================================================================
Income Taxes Paid $ 34,857 $ 20,942 $ xx
======================================================================================
</TABLE>
31
<PAGE>
Directors and Officers
Board of Directors of Beckley Bancorp, Inc.
and Beckley Federal Savings Bank
Robert N. File
Attorney-At-Law, Partner
File, Payne, Scherer & File
Arnold Graybeal
Vice President and Treasurer
Boyce, Graybeal & Sayre, Inc.
James H. Perry, Jr.
Real Estate Sales Agent
Coldwell-Banker, Raleigh Real Estate Center
Ned H. Ragland, Jr.
Attorney-At-Law, Proprietor
Ragland Law Offices
Tracy L. Riffe
Chairman of the Board
Retired President & CEO
of Beckley Federal Savings Bank
Duane K. Sellards
President and Chief Executive Officer
Executive Officers of Beckley Bancorp, Inc.
and Beckley Federal Savings Bank
Tracy L. Riffe
Chairman of the Board
Duane K. Sellards
President and
Chief Executive Officer
Ned H. Ragland, Jr.
Secretary and Treasurer
Brian K. Pate
Vice President and
Chief Financial Officer
Janet F. Zutaut
Vice President of
Beckley Federal Savings Bank
32
<PAGE>
Corporate Information
Corporate Offices
200 Main Street, P.O. Box 1069
Beckley, West Virginia 25802-1069
Telephone: (304) 252-6201
Transfer Agent
American Securities Transfer & Trust, Inc.
938 Quail Street, Suite 101
Lakewood, Colorado 80215-5513
Telephone: (303) 234-5300
Stock Listing
Over-the-Counter Market (NASD Bulletin Board)
Trading Symbol: BCKB
Independent Auditors
Mason and Bashaw, CPA's, A.C.
112 Main Street
Beckley, West Virginia 25801
Special Counsel
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square
1301 K Street, N.W., Suite 700 East
Washington, D.C. 20005
Annual Meeting
The Annual Meeting of Stockholders will be held at 10:00 a.m. on
Tuesday, May 20, 1997, at the Raleigh County Armory Civic Center, 200
Armory Drive, Beckley, West Virginia.
FORM 10-K
A copy of the Corporation's Annual Report on Form 10-KSB, as filed with
the Securities and Exchange Commission, will be furnished without
charge to stockholders as of the record date upon written request.
Requests should be directed to the Corporate Offices, Attention: Chief
Financial Officer.
Quarterly Stock and Dividend Information
Since its issuance in July 1994, the Corporation's common stock has been
traded in the over-the-counter market. The following table reflects high and low
bids information as published by the National Quotation Bureau, Inc. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down, or
commission, and may not represent actual transactions.
HIGH LOW
Jan. 1. 1995 - March 31, 1995 13 5/8 11
April 1, 1995 - June 30, 1995 14 1/2 12 1/2
July 1, 1995 - Sept. 30, 1995 14 1/2 12 1/2
Oct. 1, 1995 - Dec. 31, 1995 16 13 5/8
Jan. 1, 1996 - March 31, 1996 16 1/2 16
April 1, 1996 - June 30, 1996 16 1/2 16 1/2
July 1, 1996 - Sept, 30, 1996 17 16 1/2
Oct. 1, 1996 - Dec. 31, 1996 16 1/2 16 1/2
The number of stockholders of record of common stock as of March 15, 1997,
was approximately 259. This does not reflect the number of persons or entities
who held stock in nominee or "street" name through various brokerage firms. At
March 15, 1997, there were 601, 465 shares of common stock outstanding.
On January 14, 1997, the Board of Directors of the Corporation declared a
$0.14 per share regular semi-annual cash dividend and a $0.08 per share special
cash dividend payable on February 18th to stockholders of record as of January
31st. The Corporation expects to continue its policy of paying regular cash
dividends; however, further declarations of dividends by the Corporation's
Board of Directors will depend on a number of factors, including investment
opportunities available to the Corporation or the Savings Bank, capital
requirements, regulatory limitations, the Corporation's and the Savings Bank's
results of operations and financial condition, tax considerations, and general
economic conditions.
Because the Savings Bank meets its fully phased-in capital requirements,
it is permitted to pay dividends to the Corporation during any calendar year
equal to the greater of (1) 100% of its net income, plus an amount that would
reduce by one-half its "surplus capital ratio" (defined as the amount of capital
in excess of the fully phased-in requirement) at the beginning of the calendar
year, or (2) 75% of its net income over the most recent four-quarter period.
Under Delaware law, the Corporation may pay dividends to its stockholders in an
amount of its surplus (the amount of capital in excess of the par value of its
surplus.)
<PAGE>
[LOGO]
BECKLEY BANCORP, INC.
200 Main Street, P.O. Box 1069
Beckley, West Virginia 25802-1069
Telephone (304) 252-6201
<PAGE>
EXHIBIT 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
-----------------------------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---- SECURITES EXCHANGE ACT OF 1934
For the transition period from to
------------ ---------------------------------
Commission File Number: 0-23878
----------------------------------------------------
BECKLEY BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 55-0733525
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
200 MAIN STREET, BECKLEY, WEST VIRGINIA 25801
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(304) 252-6201
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the regristrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of April 25, 1997:
Class Outstanding
----- -----------
$.10 par value common stock 601,465 shares
<PAGE>
BECKLEY BANCORP, INC.
INDEX
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. - Financial Statements
------
Consolidated Statements of Financial Position
as of March 31, 1997 (Unaudited) and as of
December 31, 1996 1
Consolidated Statements of Income for the
Three Months Ended March 31, 1997 and
1996 (Unaudited) 2
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1997
and 1996 (Unaudited) 3 - 4
Consolidated Statements of Shareholders'
Equity for the Three Months Ended March
31, 1997 and 1996 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6 - 8
Item 2. - Managements Discussion and Analysis of
Financial Condition and Results of
Operations 9 - 13
PART II - OTHER INFORMATION
Item 5. - Other Information 13
-------
Item 6. - Exhibits and Reports on Form 8-K 13
-------
SIGNATURES 14
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
(Unaudited) *1
ASSETS
<S> <C> <C>
Cash and due from banks $ 388 $ 334
Interest bearing deposits in other banks 1,522 916
Securities available for sale 4,961 5,997
Securities held-to-maturity (market
value of $997) -- 997
Collateralized mortgage obligations and
other mortgage-backed securities
available-for-sale 16,289 16,484
Loans receivable, net - Note 4 20,403 20,180
Bank premises and equipment, at cost
net of accumulated depreciation 545 551
Federal Home Loan Bank stock - at cost 175 172
Accrued interest receivable 285 268
Other assets 55 65
------------- -------------
TOTAL ASSETS 44,623 45,964
------------- -------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts 32,975 32,246
Short-term borrowings -- 2,000
Deferred income tax liability 90 121
Accrued expenses and other liabilities 344 315
------------- -------------
TOTAL LIABILITIES 33,409 34,682
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
250,000 shares authorized, none issued -- --
Common stock, $.10 par value,
1,250,000 shares authorized,
601,465 shares issued and outstanding 60 60
Additional paid-in-capital 5,678 5,674
Retained earnings (substantially restricted) 5,438 5,474
Unearned ESOP shares, at cost (142) (153)
Unearned MSBP shares, at cost (52) (59)
Net unrealized gain on
securities available for sale 232 286
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 11,214 11,282
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44,623 $ 45,964
============= =============
</TABLE>
*1 - Derived from the audited financial statements.
The accompanying notes are an integral part of these statements.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
-----------------------------
1997 1996
-------- ---------
INTEREST AND DIVIDEND INCOME
<S> <C> <C>
Loans, including certain fees $ 419 $ 363
Investment securities 78 85
Collateralized mortgage obligations and
other mortgage-backed securities 267 294
Interest bearing deposit accounts 19 25
Dividends, FHLB and other 6 6
------- -------
TOTAL INTEREST INCOME 789 773
------- -------
INTEREST EXPENSE
Deposit Accounts 346 332
Other 16 --
------- -------
TOTAL INTEREST EXPENSE 362 332
------- -------
NET INTEREST INCOME 427 441
Provision for losses on loans 2 15
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON LOANS 425 426
------- -------
NON-INTEREST INCOME
Service charges on deposit accounts 13 11
Other income 4 4
------- -------
TOTAL NON-INTEREST INCOME 17 15
------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 138 137
Occupancy and equipment expense 21 22
Federal deposit insurance premiums 5 19
Service bureau and other data processing 31 32
Other 100 90
------- -------
TOTAL NON-INTEREST EXPENSE 295 300
------- -------
INCOME BEFORE INCOME TAXES 147 141
------- -------
Provision for income taxes 54 55
------- -------
NET INCOME $ 93 $ 86
======= =======
EARNINGS PER COMMON SHARE - Note 3 $0.16 $0.15
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-------------- --------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 93 $ 86
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6 6
(Accretion) and amortization, net (16) (16)
Provision for losses on loans 2 15
Decrease in deferred loan fees (3) (4)
Amortized ESOP benefits 16 15
Amortized MSBP compensation 6 5
Increase in accrued income and
other assets (7) (17)
Increase (decrease) in accrued expenses and
other liabilities 29 (143)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 126 (53)
----------- -----------
INVESTING ACTIVITIES:
Principal repayments and redemptions on
collateralized mortgage obligations and
other mortgage-backed securities
- Available-for-sale 150 225
Purchases of investment securities
- Available-for-sale -- (1,000)
- Held-to-maturity (2,491) (2,495)
Proceeds from maturities or calls of
investment securities
- Available-for-sale 1,000 1,000
- Held-to-maturity 3,500 6,500
Net (increase) decrease in loans made
to customers (222) (1,644)
Redemption of Federal Home Loan Bank stock -- 4
Purchase of Federal Home Loan Bank stock (3) --
Additions to premises and equipment -- (11)
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES $ 1,934 $ 2,579
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
------------- -------------
FINANCING ACTIVITIES:
<S> <C> <C>
Net increase/(decrease) in deposit accounts $ 729 $ (1,006)
Proceeds from short-term borrowings 1,000 --
Maturities of short-term borrowings (3,000) --
Cash dividends paid on common stock (129) (116)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (1,400) (1,122)
----------- -----------
Increase in cash and cash equivalents 660 1,404
Cash and cash equivalents, beginning
of year 1,250 1,371
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,910 $ 2,775
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 357 $ 327
=========== ===========
Income taxes $ -- $ 101
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Unrealized
Gains/
(Losses) on
Additional Deferred Unearned Available
Common Paid-in Retained ESOP MSBP For-Sale
Stock Capital Earnings Benefit Compensation Securities TOTAL
---------- ----------- --------- --------- ------------- ---------- ----------
THREE MONTHS ENDED MARCH 31, 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 60 $ 5,659 $ 5,391 $ (185) $ (83) 426 $ 11,268
Payment of $0.13 per share regular
cash dividend on February 15, 1996 (75) (75)
Payment of $0.07 per share special
cash dividend on February 15, 1996 (41) (41)
Net income, three months ended
March 31, 1996 86 86
Change in unrealized gain/(loss)
on available-for-sale
securities, net of tax (50) (50)
Change in unearned ESOP shares 4 11 15
Change in unearned MSBP shares (1) 6 5
---------- ----------- --------- --------- ------------- ----------- --------
Balance, March 31, 1996 $ 60 $ 5,662 $ 5,361 $ (174) $ (77) 376 $ 11,208
========== =========== ========= ========= ============= =========== ========
THREE MONTHS ENDED MARCH 31, 1997
Balance, December 31, 1996 $ 60 $ 5,674 $ 5,474 $ (153) $ (59) 286 $ 11,282
Payment of $0.14 per share regular
cash dividend on February 18, 1997 (82) (82)
Payment of $0.08 per share special
cash dividend on February 18, 1997 (47) (47)
Net income, three months ended
March 31, 1997 93 93
Change in unrealized gain/(loss)
on available-for-sale
securities, net of tax (54) (54)
Change in unearned ESOP shares 5 11 16
Change in unearned MSBP shares (1) 7 6
---------- ----------- --------- --------- ------------- ------------ --------
Balance, March 31, 1997 $ 60 $ 5,678 $ 5,438 $ (142) $ (52) 232 $ 11,214
========== =========== ========= ========= ============= ============ ========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION / Item 1.- (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The unaudited consolidated financial
statements include the accounts of Beckley Bancorp, Inc. (the
"Corporation") and Beckley Federal Savings Bank (the "Savings Bank"),
its wholly owned subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.
BASIS OF ACCOUNTING: The accompanying unaudited consolidated financial
statements were prepared in accordance with generally accepted
accounting principles for interim financial information and with
instructions for Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all information and disclosures
required by generally accepted accounting principles for complete
financial statements. However, all normal recurring adjustments have
been made which, in the opinion of management, are necessary to the fair
presentation of the financial statements.
The results of operations for the three month period ended March 31,
1997 are not necessarily indicative of the results which may be expected
for the year ending December 31, 1997.
LOANS: Loans are stated at the unpaid principal amount outstanding, net
of unearned income, deferred fees and the allowance for losses. Interest
on loans is credited to income as earned and accrued, only if deemed
collectible. The Bank discontinues recognizing accrued interest when a
loan is specifically determined to be impaired or when payment of
interest becomes past due by more than ninety days. Unpaid interest
previously accrued on these loans is reversed from income. Non-accrual
loans may be restored to accrual status when principal and interest
become current and full payment of principal and interest is expected.
Loan origination fees and certain costs of originating and closing
mortgage loans are deferred and recognized over the life of the loans as
an adjustment of yield. These amounts are not considered material to
operations.
ALLOWANCE FOR LOSSES ON LOANS: The allowance for loan losses
is maintained at a level believed adequate by management to
absorb potential losses in the loan portfolio. The amount of
the allowance is based upon management's evaluation of the
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
collectibility of the loan portfolio. The amount of the allowance is
based upon management's evaluation of the collectibility of the loan
portfolio, including historical loan loss experience, growth and
composition of the loan portfolio, known and inherent risks in the
portfolio, current economic conditions, adverse situations which may
affect the borrowers' ability to repay, and the estimated value of any
underlying collateral. The allowance is increased by provisions for loan
losses charged against income, and reduced by charge-offs, net of
recoveries.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS: Real estate acquired in
settlement of loans is recorded, on the date acquired, at the lower of
the Bank's cost or management's estimate of its fair market value.
Subsequent adjustments made to reflect any decline in value below
management's original estimates are charged to current operations
through the provision for losses on real estate owned. Operating
expenses of such properties, related income, and gains and losses on
their disposition are included in operations. The Bank held no real
estate acquired in settlement of loans at March 31, 1997 or December 31,
1996.
NOTE 2. EARNINGS PER SHARE
Earnings per share were computed using the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares include shares issuable upon exercise of dilutive options
outstanding determined under the treasury stock method. The Corporation
accounts for the shares acquired by its ESOP in accordance with
Statement of Position 93-6 and the shares acquired for its Management
Stock Bonus Plan ("MSBP") in a manner similar to the ESOP shares; shares
acquired by the ESOP and MSBP are not considered in the weighted average
shares outstanding until the shares are committed for allocation or
allocated to an employee's individual account.
<PAGE>
NOTE 3 LOANS RECEIVABLE
Loans receivable at March 31, 1997 and December 31, 1996, consisted of
the following:
<TABLE>
<CAPTION>
(In thousands)
Mar 31, Dec 31,
1997 1996
---------- -------
<S> <C> <C>
First mortgage loans:
One to four family dwellings $ 13,070 $ 13,102
Multi-family dwellings and
non-residential property 1,521 1,409
Construction 188 96
Loans secured by deposits 605 616
Non-mortgage loans, consumer
and commercial 5,344 5,283
---------- ---------
TOTAL LOANS 20,728 20,506
Less:
Allowance for losses (305) (303)
Net deferred loan fees and
reserve for uncollected
interest (20) (23)
----------- ----------
LOANS RECEIVABLE, NET $ 20,403 $ 20,180
----------- ---------
Non-accruing loans at March 31
and December 31 were
as follows: $ 94 $ 53
----------- ---------
</TABLE>
In accordance with the provisions of FASB 114, "Accounting by Creditors
for Impairment of a Loan," and FASB 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," the Bank
measures impaired loans on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair
market value of the collateral if the loan is collateral dependent.
Management has evaluated the loan portfolio and has determined that no
impaired loans existed at March 31, 1997 or December 31, 1996.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Total Assets decreased by $1.3 million, or 2.8%, from $45.9 million at December
31, 1996 to $44.6 million at March 31, 1997. This decrease was primarily
attributable to the maturities of $2.0 million in investment securities of which
the proceeds were used to repay short term borrowings. This decrease was
partially offset by an increase in cash and cash equivalents of $0.7 million,
which resulted from an increase in deposit account balances.
Cash and Cash Equivalents increased $0.7 million, or 58.3%, from $1.2 million at
December 31, 1996 to $1.9 million at March 31, 1997. This increase was primarily
due to an increase in deposit account balances.
Investment Securities decreased by $2.0 million, or 28.6%, from $7.0 million at
December 31, 1996 to $5.0 million at March 31, 1997. This decrease was
attributable to the maturity of a $1.0 million short-term investment security
classified as held-to- maturity and a $1.0 million short-term investment
security classified as available-for-sale. The proceeds from the maturities were
used to repay short-term borrowings of $2.0 million.
Collateralized Mortgage Obligations and Other Mortgage-Backed Securities
decreased $0.2 million, or 1.2%, from $16.5 million at December 31, 1996 to
$16.3 million at March 31, 1997. This decrease was due to principal repayments
on the securities.
Loans Receivable increased $0.2 million, or 1.0%, from $20.2 million at December
31, 1996 to $20.4 million at March 31, 1997. This increase was primarily the
result of small increases in both mortgage and non-mortgage loans receivable.
Management increased the allowance for losses on loans by $2,000 during the
quarter. There were no charge-offs during the quarter. The increase in the
allowance for losses on loans is further discussed in "Management's Discussion
and Analysis of Results of Operations - Provision for Losses on Loans."
Total Liabilities decreased $1.3 million, or 3.7%, from $34.7 million at
December 31, 1996 to $33.4 million at March 31, 1997. This decrease was
primarily due to a $2.0 million decrease in short-term borrowings which was
partially offset by a $0.7 million increase in deposit account balances.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
(Continued)
Deposit Accounts increased $0.7 million, or 2.2%, from $32.2 million at December
31, 1996 to $32.9 million at March 31, 1997. This increase was the result of
approximately $0.4 million of customer deposits in excess of customer
withdrawals and $0.3 million interest being credited to customer deposit
accounts during the quarter.
Short-term borrowings decreased $2.0 million, or 100%, to zero at March 31,
1997. This decrease resulted from the maturities of such borrowings.
Stockholders' Equity decreased $0.1 million, or 0.9%, from $11.3 million at
December 31, 1996 to $11.2 million at March 31, 1997. This decrease was
primarily due to the payment of regular and special cash dividends on February
18, 1997 of $129,000 and a $54,000 decrease, net of income taxes, in the market
value of securities classified as available-for-sale. These decreases were
partially offset by the Corporation's net income for the quarter of $93,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1997
Net income for the three month period ended March 31, 1997 increased $7,000, or
8.1% from $86,000 for the same period in 1996 to $93,000 in 1997. This increase
was primarily due to a decrease in non-interest expense.
Interest income for the three month period ended March 31, 1997 increased
$16,000, or 2.1%, from $773,000 for the same period in 1996 to $789,000 in 1997.
This increase was the result of increased interest income on loans of
approximately $56,000. This increase was partially offset by a decreases in
interest income on collateralized mortgage obligations and other mortgage-backed
securities of approximately $27,000 and in interest income on investment
securites of approximately $7,000 and on interest bearing deposit accounts of
approximately $6,000. The increases and decreases in the separate components of
interest income were primarily the result of changes in the average balances of
the investments relating to each component.
Interest expense for the three month period ended March 31, 1997 increased
$30,000, or 9.0%, from $332,000 for the same period in 1996 to $362,000 in 1997.
This increase was primarily due to interest expense on short-term borrowings of
$16,000 and increased interest expense on deposit accounts of $14,000 as a
result of a general market increase in the average interest rates paid on
deposit accounts.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1997 (Continued)
Net interest income for the three month period ended March 31, 1997 decreased
$14,000, or 3.2%, from $441,000 for the same period in 1996 to $427,000 in 1997.
This decrease was primarily due to a $30,000 increase in interest expense which
was partially offset by a $16,000 increase in interest income.
Provision for loan losses was increased by $2,000 for the three month period
ended March 31, 1997 compared to an increase of $15,000 for the same period in
1996. Management's periodic evaluation of the adequacy of the allowance for
losses on loans, which included an evaluation of each delinquent loan, past loan
loss experience, current economic conditions, volume, growth and composition of
the loan portfolio and other relevant factors, at March 31, 1997 indicated that
the allowance should be increased by $2,000. As indicated by the evaluation,
management increased the allowance for losses on loans primarily to reflect the
inherent risk associated with the growth in the non-mortgage loan portfolio.
Although, at March 31, 1997, management believed the allowance to be adequate,
there can be no assurances that further additions will not be made and that any
losses that may occur will not exceed the amount provided by the allowance.
Non-interest expense for the three month period ended March 31, 1996 decreased
$5,000, or 1.7%, from $300,000 for the same period in 1996 to $295,000 in 1997.
This decrease was primarily due to a $14,000, or 73.7% decrease in federal
deposit insurance premiums. The decrease in deposit insurance premiums was
partially offset by a net increase of $9,000 in the other components of
non-interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Savings Bank is required to maintain minimum levels of liquid assets, as
defined by the Office of Thrift Supervision (OTS) regulations. This requirement,
which may be varied from time to time depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The required minimum ratio is currently 5%. The Savings Bank's liquidity ratio
averaged 16.7% during March, 1997. The Savings Bank manages its liquidity ratio
to meet its funding needs, including: deposit outflows; disbursement of payments
collected from borrowers for taxes and insurance; and loan principal
disbursements. The Savings Bank also manages its liquidity ratio to meet its
asset and liability management objectives.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
In addition to funds provided from operations, the Savings Bank's primary
sources of funds are: savings deposits; principal repayments on loans and
mortgage-backed and related securities; and matured or called investment
securities. If necessary, the Savings Bank has the ability to borrow funds from
the Federal Home Loan Bank of Pittsburgh, although the need is not anticipated.
Scheduled loan repayments and maturing investment securities are a relatively
predictable source of funds. However, savings deposit flows and prepayments on
loans and mortgage-backed and related securities are significantly influenced by
changes in market interest rates, economic conditions, and competition. The
Savings Bank strives to manage the pricing of its deposits to maintain a
balanced stream of cash flows commensurate with its loan commitments and other
predictable funding needs.
The Savings Bank invests its excess funds in an interest bearing overnight
deposit account with the Federal Home Loan Bank of Pittsburgh. This provides
sufficient liquidity to meet immediate loan commitment and savings withdrawal
funding requirements. When applicable, cash in excess of immediate funding needs
is invested into longer-term investments and mortgage-backed and related
securities which typically earn a higher yield than overnight deposits. These
types of investments may qualify as liquid investments under OTS regulations,
depending upon their stated maturities.
The Savings Bank anticipates that it will have sufficient funds available to
meet its current loan commitments and normal savings withdrawals. At March 31,
1997 the Savings Bank had outstanding loan commitments of $6,000. In addition,
it had certificates of deposit scheduled to mature within one year of $16.0
million. Management believes that a substantial portion of such deposits will
remain with the Savings Bank.
As required by the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 (FIRREA), the Office of Thrift Supervision (OTS) prescribed three
separate standards of capital adequacy. The regulations require financial
institutions to have minimum tangible capital equal to 1.50% of tangible assets;
minimum core capital equal to 3.00% of adjusted tangible assets; and minimum
risk-based capital equal to 8.00% of risk-weighted assets.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The following table sets forth the Savings Bank's regulatory capital position at
March 31, 1997, as compared to the minimum regulatory requirements:
Amount Percent of
------ ----------
(in thousands) Adjusted Assets
-------------- ---------------
Tangible Capital:1
Actual $7,606 17.13%
Required 666 1.50%
------ ------
Excess $6,940 15.63%
------ ------
Core Capital:1
Actual $7,606 17.13%
Required 1,332 3.00%
------ ------
Excess $6,274 14.13%
------ ------
Risk-Based Capital:2
Actual $7,840 42.06%
Required 1,491 8.00%
------ ------
Excess $6,349 34.06%
------ ------
1 Based on tangible and core assets of $44,398
2 Based on risk-weighted assets of $18,640
PART II - OTHER INFORMATION
Item 5. - Other Information
Dividend Payments - On January 14, 1997, the Board of Directors of the
Corporation declared a $0.14 per share regular semi-annual cash dividend and an
$0.08 per share special cash dividend payable on February 18, 1997 to
stockholders of record as of January 31, 1997. The Corporation expects to
continue its policy of paying regular semi-annual cash dividends; however,
further declarations of dividends will depend on a number of factors, including
investment opportunities, capital requirements, regulatory limitations, results
of operations and financial condition, tax considerations, and general economic
conditions.
Item 6. - Exhibits and Reports on Form 8-K
(a) None
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE>
BECKLEY BANCORP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BECKLEY BANCORP, INC.
Date: April 30, 1997 By: /s/ Duane K. Sellards
------------------- ----------------------
DUANE K. SELLARDS
President and Chief
Executive Officer
Date: April 30, 1997 By: /s/ Brian K. Pate
------------------- ------------------
BRIAN K. PATE
Vice President and Chief
Financial Officer
<PAGE>
REVOCABLE PROXY
BECKLEY BANCORP, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
ON ________, 1997
The undersigned stockholder of Beckley Bancorp, Inc. (the "Company")
hereby constitutes and appoints the Proxy Committee of the Board of Directors,
and each of them, as the true and lawful proxies and attorneys-in-fact of the
undersigned, with full power of substitution in each of them, to represent and
to vote, as designated on the reverse hereof, all shares of common stock, par
value $0.10 per share, of the Company that the undersigned is entitled to vote
at the Special Meeting of Stockholders of the Company to be held in the
____________ Room of the Raleigh County Armory-Civic Center, 200 Armory Drive,
Beckley, West Virginia, on ______, ________, 1997, at __________ __.m., Eastern
time, and at any and all adjournments thereof. The undersigned hereby revokes
any proxy previously given and acknowledges receipt of a copy of the
accompanying Proxy Statement for the Special Meeting and Notice of Special
Meeting of Stockholders.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, IT WILL BE
VOTED "FOR" THE PROPOSALS.
FOR AGAINST ABSTAIN
--- ------- -------
1. To consider and vote upon a proposal to approve [ ] [ ] [ ]
the Agreement and Plan of Merger, dated as of
May 30, 1997, by and among the Company,
Beckley Federal Savings Bank ("the Savings
Bank"), HB Acquisition Company ("HBAC"),
and Bank of Raleigh ("Raleigh"), pursuant to
which (i) HBAC would merge with the
Company (the "Corporate Merger") and the
Savings Bank would merge with Raleigh, (ii)
each outstanding share of the Company common
stock (excluding certain shares held by the
Company or by stockholders who have properly
exercised dissenter's rights) would be converted
into the right to receive a cash payment of
$25.64 from HBAC upon completion of the
Corporate Merger (each outstanding stock option
would also be entitled to receive $25.64, less the
option exercise price), all on and subject to the
terms and conditions contained therein.
2. To approve a proposal to adjourn the Special
Meeting to permit further solicitation of proxies
in the event that an insufficient number of
shares is present in person or by proxy
to approve the Merger Agreement. FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special
Meeting, or at any adjournment or adjournments thereof, and after notification
to the Secretary of the Company at the Special Meeting of the stockholder's
decision to terminate this proxy, the power of said attorneys and proxies shall
be deemed terminated and of no further force and effect. The undersigned may
also revoke this proxy by filing a subsequently dated proxy or by notifying the
Secretary of the Company of his or her decision to terminate this proxy.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting and a Proxy Statement dated
______________________, 1997.
Please check here if you plan
Dated: , 1997 |_| to attend the Special Meeting.
---------------
- -------------------------------- ---------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- -------------------------------- ---------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Beckley Bancorp, Inc.
---------------------
(Name of Registrant as Specified in Its Charter)
- ----------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
common stock, $0.10 par value per share; option, right to buy
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
660,854
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
601,465 shares @ $25.64; 0,000 options @ $7.39; 29,389 options @ $10.015;
- --------------------------------------------------------------------------------
660,854 shares and options with assumed additional consideration @ $0.02.
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$15,950,809.91
- --------------------------------------------------------------------------------
(5) Total fee paid:
$3,190.16
---------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
