SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the fiscal year ended March 31, 1997
--------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
------------ ------------
Commission File No. 0-24468
GUTHRIE SAVINGS, INC.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
Oklahoma 73-1452383
- --------------------------------------------- ------------------
(State or Other Jurisdiction of Incorporation I.R.S. Employer
or Organization) Identification No.
120 North Division, Guthrie, Oklahoma 73044
- ------------------------------------- ------------------
(Address of Principal Executive Offices (Zip Code)
Issuer's Telephone Number, Including Area Code: (405) 282-2201
---------------
Securities registered under to Section 12(b) of the Exchange Act: None
----
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
---------------------------------------
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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.
YES X NO .
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $3,828,698.
The aggregate market value of the voting stock held by non-affiliates
of the registrant, based on the average bid and asked price of the registrant's
Common Stock on June 10, 1997, was $5,344,626.88 ($17.125 per share based on
312,095 shares of Common Stock outstanding).
As of June 10, 1997, there were issued and outstanding 416,839 shares
of the registrant's Common Stock.
Transition Small Business Disclosure Format (check one):
YES NO X
--- ---
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year ended
March 31, 1997. (Part II)
2. Portions of the Proxy Statement for the Annual Meeting of Stockholders
for the Fiscal Year ended March 31, 1997. (Part III)
<PAGE>
PART I
Item 1. Business
- ------- --------
Business of the Company
Guthrie Savings, Inc. (the "Company") is an Oklahoma-chartered
corporation organized in May 1994 at the direction of Guthrie Federal Savings
and Loan Association (the "Association") in connection with the Association's
conversion from the mutual to stock form. On October 11, 1994, the Association
completed its conversion and changed its name to Guthrie Federal Savings Bank
(the "Bank") and became a wholly owned subsidiary of the Company. The Company 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 the Bank retains a specified amount of its assets in housing-related
investments. At March 31, 1997, the Company had total consolidated assets of
$49.0 million and stockholders' equity of $7.8 million.
Business of the Bank
The Bank is a federally chartered stock savings bank headquartered in
Guthrie, Oklahoma. The Bank was founded in 1906 with a charter from the
Territory of Oklahoma under the name of "Employees Building and Loan
Association." Employees Building and Loan Association became known as "Guthrie
Savings and Loan Association" in 1968 when it changed its name. In early August
1994, the Bank became a federal association under the name "Guthrie Federal
Savings and Loan Association." The Bank changed its name to Guthrie Federal
Savings Bank in October of 1994 in connection with its conversion from mutual to
stock form. The Bank's deposits have been federally insured by the Savings
Association Insurance Fund ("SAIF") and its predecessor, the Federal Savings and
Loan Insurance Corporation, since 1948, and the Bank is a member of the Federal
Home Loan Bank (the "FHLB") System.
The Bank is primarily engaged in attracting deposits from the general
public and using those funds to originate real estate loans on one- to
four-family residences and, to a lesser extent, consumer loans. The Bank has one
office in Guthrie, Oklahoma, which is located in its primary market area of
Logan County, Oklahoma. In addition, the Bank holds interest-bearing deposits in
other financial institutions and invests in mortgage-backed securities and
investment securities. The Bank offers its customers fixed-rate and
adjustable-rate mortgage loans, as well as consumer loans, including home equity
and savings account loans. Federal National Mortgage Association ("FNMA") and
Federal Home Loan Mortgage Corporation ("FHLMC") fixed-rate mortgage loans and
Federal Housing Administration/Veterans Administration ("FHA/VA") loans are
originated under a correspondent banking relationship with mortgage banking
companies. Adjustable-rate mortgage loans and fixed-rate mortgage loans with
terms of up to 30 years are originated for retention in the Bank's portfolio.
All installment loans are retained in the Bank's portfolio.
The Bank is subject to examination and comprehensive regulation by the
Office of Thrift Supervision ("OTS") and its deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC") under the SAIF. The Bank is a member of
and owns capital stock in the FHLB of Topeka, which is one of the 12 regional
banks in the FHLB System.
The principal sources of funds for the Bank's lending activities are
deposits and the amortization, repayment, and maturity of loans, investment
securities, and mortgage-backed securities. Principal sources of income are
interest and fees on loans, mortgage-backed certificates, investment securities,
and deposits held in other financial institutions. The Bank's principal expense
is interest paid on deposits.
2
<PAGE>
Market Area and Competition
Logan County, Oklahoma is considered to be the Bank's primary market
area. Agriculture and the oil and gas industry dominate the economy. During the
past several years, the economic conditions in this area have stabilized from
the major downturn in activity experienced during the mid- to late-1980s.
During its 90 year existence, the Bank has focused on serving its
customers located in the Oklahoma communities of Guthrie and surrounding
communities in Logan County, and to a lesser extent, the cities of Kingfisher
and Stillwater and parts of the Oklahoma counties of Payne, Kingfisher, and
Oklahoma. The Bank is one of nine local thrifts and commercial banks serving
Logan County. Guthrie must also compete with credit unions and mortgage banking
companies located outside of Logan County.
The Bank encounters strong competition both in the attraction of
deposits and origination of real estate and other loans. Competition comes
primarily from seven savings institutions and commercial banks with offices in
Logan County. In addition, the Bank competes with credit unions and mortgage
banking companies that operate in Logan County. Due to their size, many of the
Bank's competitors possess greater financial and marketing resources. The Bank
competes for savings accounts by offering depositors competitive interest rates
and a high level of personal service.
Competition for mortgage loans is not limited to local financial
institutions. The Bank competes for loans primarily through the interest rates
and loan fees it charges and the efficiency and quality of services it provides
borrowers, real estate brokers and contractors.
The Bank's market place has seen moderate unemployment and some
population decline. Because of the lack of economic growth and stagnant
population, the Bank has had to invest in mortgage-backed and investment
securities.
Lending Activities
General. The Bank's loan portfolio predominantly consists of
adjustable-and fixed-rate mortgage loans secured by one- to four-family
residences and, to a lesser extent, land and lot development loans,
non-residential loans, and loans for other dwelling units. The Bank also makes
consumer loans, including automobile and savings account loans.
3
<PAGE>
Analysis of Loan Portfolio. Set forth below is selected data relating
to the composition of the Company's loan portfolio by type of loan and type of
security on the dates indicated:
<TABLE>
<CAPTION>
1996 1997
----------------------- ----------------------------
Type of Loan: $ % $ %
- ------------ ----- ----- ----- -----
<S> <C> <C> <C> <C>
Real estate loans:
Construction....................................... $ 1,490 6.49% $ 1,791 7.64
Residential........................................ 18,484 80.46 18,154 77.38
Non-residential.................................... 1,496 6.51 1,657 7.06
Second mortgage and other equity................... 896 3.90 1,223 5.21
Consumer loans:
Savings account.................................... 508 2.21 403 1.72
Automobile......................................... 733 3.19 998 4.25
Other.............................................. 339 1.48 327 1.39
------ ------ ------ ------
Gross loans...................................... 23,946 104.24 24,553 104.65
Less:
Loans in process................................... (506) (2.20) (642) (2.74)
Deferred loan origination fees and costs........... (77) (0.34) (73) (0.31)
Allowance for loan losses.......................... (391) (1.70) (377) (1.60)
------ ------ ------ ------
Total loans, net..................................... $22,972 100.00% $23,461 100.00
====== ====== ====== ======
Type of Security:
Residential real estate:
1-4 family....................................... $19,940 86.80% $20,288 86.48
Other dwelling units............................. 352 1.53 301 1.29
Land............................................. 578 2.52 579 2.47
Non-residential...................................... 1,496 6.51 1,657 7.06
Savings accounts..................................... 508 2.21 403 1.72
Automobiles.......................................... 733 3.19 998 4.25
Other................................................ 339 1.48 327 1.39
Less:
Loans in process................................... (506) (2.20) (642) (2.74)
Deferred loan origination fees and costs........... (77) (0.34) (73) (.31)
Allowance for loan losses.......................... (391) (1.70) (377) (1.61)
------- ------ ------ ------
Total loans, net................................. $22,972 100.00% $23,461 100.00
====== ====== ====== ======
</TABLE>
4
<PAGE>
Loan Maturity Tables
The following table sets forth the maturity of the Company's loan
portfolio at March 31, 1997. The table does not include prepayments or scheduled
principal repayments. Prepayments and scheduled principal repayments on loans
totalled $5.2 million and $5.2 million for the years ended March 31, 1996 and
1997, respectively. All mortgage loans are shown as maturing based on
contractual maturities.
<TABLE>
<CAPTION>
Other
1-4 Family Residential,
Real Estate Land,
Mortgage Commercial Construction Consumer Total
-------- ---------- ------------ -------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Non-performing $ 301 $ 86 $ -- $ 32 $ 419
Amounts Due:
1 Year or less.................. 35 44 1,791 445 2,315
After 1 year:
1 to 5 years.................. 1,119 226 -- 1,193 2,538
Over 5 years.................. 17,042 2,181 -- 58 19,281
------- ------- ------- ------- -------
Total due after one year........ 18,161 2,407 -- 1,251 21,819
------- ------- ------- ------- -------
Total amount due................ $ 18,497 $ 2,537 $ 1,791 $ 1,728 $ 24,553
======= ======= ======= ======= =======
Less:
Allowance for loan loss......... (377)
Loans in process................ (642)
Deferred loan fees.............. (73)
-------
Loans receivable, net......... $ 23,461
=======
</TABLE>
5
<PAGE>
The following table sets forth the dollar amount of all loans due after
March 31, 1998 which have pre-determined fixed interest rates or which have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
Floating or
Adjustable
Fixed Rates Rates Total
----------- ----- -----
(In Thousands)
<S> <C> <C> <C>
One- to four-family.................. $ 8,802 $ 9,359 $ 18,161
Other residential, land
and commercial..................... 1,066 1,341 2,407
Consumer............................. 1,251 -- 1,251
------- ------- -------
Total.............................. $ 11,119 $ 10,700 $ 21,819
======= ======= =======
</TABLE>
Residential Loans. The Bank's primary lending activity consists of the
origination of one- to four-family, owner-occupied, residential mortgage loans
secured by property located in the Bank's primary market area. Management
believes that this policy of focusing on one- to four-family lending has been
effective in contributing to net interest income while keeping loan
delinquencies and losses to a minimum. The Bank also originates a small number
of residential real estate loans secured by multi-family dwellings.
The Bank currently offers, for retention in its portfolio and for
correspondent banks and mortgage banking companies, adjustable-rate mortgages
("ARMs") that adjust every one and three years and have terms from one to 30
years, and fixed-rate mortgage loans with terms of one to 30 years. The interest
rates on ARMs are based on treasury bill rates and the national cost of funds.
The Bank considers the market factors and competitive rates on loans as well as
its own cost of funds when determining the rates on the loans that it offers.
The Bank has a small network of correspondents to whom the Bank refers loans
that it does not wish to originate for its portfolio. The Bank originates
adjustable-rate loans for its own loan portfolio. The Bank originates fixed-rate
loans with terms of 30 years or less for its portfolio. The Bank also refers
FHA/VA loans to its correspondents. Although the Bank only originates fixed rate
and adjustable-rate mortgage loans for its own portfolio, they are generally
underwritten to Federal Home Loan Mortgage Corporation ("FHLMC") standards.
Generally, during periods of rising interest rates, the risk of default
on an ARM is considered to be greater than the risk of default on a fixed-rate
loan due to the upward adjustment of interest costs to the borrower. ARM loans
are made at up to 90% of the loan to value ratio. The Bank does not originate
ARMs with negative amortization.
Regulations limit the amount that a savings association may lend in
relationship to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination. Such regulations
permit a maximum loan-to-value ratio of 100% for residential property and 90%
for all other real estate loans. The Bank's lending policies, however, generally
limit the maximum loan-to-value ratio to 80% of the appraised value of the
property, based on an independent or staff appraisal. When the Bank makes a loan
in excess of 80% of the appraised value or purchase price, private mortgage
insurance is required for at least the amount of the loan in excess of 80% of
the appraised value.
The loan-to-value ratio, maturity, and other provisions of the
residential real estate loans made by the Bank reflect the policy of making
loans generally below the maximum limits permitted under applicable regulations.
The Bank requires an independent or staff appraisal, title insurance or an
attorney's opinion with an abstract, flood hazard insurance (if applicable), and
fire and casualty insurance
6
<PAGE>
on all properties securing real estate loans made by the Bank. The Bank reserves
the right to approve the selection of which title insurance companies' policies
are acceptable to insure real estate in loan transactions.
While one- to four-family residential real estate loans are normally
originated with one to 30 year terms, such loans typically remain outstanding
for substantially shorter periods because borrowers often prepay their loans in
full upon sale of the property pledged as security or upon refinancing the
original loan. In addition, substantially all of the fixed-interest rate loans
in the Bank's loan portfolio contain due-on-sale clauses providing that the Bank
may declare the unpaid amount due and payable upon the sale of the property
securing the loan. The Bank enforces these due-on-sale clauses to the extent
permitted by law. Thus, average loan maturity is a function of, among other
factors, the level of purchase and sale activity in the real estate market,
prevailing interest rates and the interest rates payable on outstanding loans.
Second Mortgage Loans. The Bank makes loans on real estate secured by
secondary, or junior, mortgages. Secondary mortgage loans possess somewhat
greater risk than primary mortgage loans since the security underlying the
second mortgage loan must first be used to satisfy the obligation under the
primary mortgage loan. The Bank's lending policies for second mortgage loans
secured by one- to four-family residences are similar to those used for
residential loans, including the required loan-to-value ratio. The Bank does not
currently originate any second mortgage loans outside its primary market area.
Land Loans. The Bank makes loans secured by raw land, in amounts up to
65% of the appraised value of the land. The loans are primarily secured by lots
in the Bank's primary market area. Although those loans are generally considered
to be of a higher credit risk than home loans, the Bank has not experienced a
high rate of delinquencies.
Consumer Loans. Consumer loans consist of personal unsecured loans,
home improvement loans, automobile loans and savings account loans, at fixed
rates.
The underwriting standards employed by the Bank for consumer loans
include a determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. In addition, the stability of the applicant's monthly income from primary
employment is considered during the underwriting process. Creditworthiness of
the applicant is of primary consideration; however, the underwriting process
also includes a comparison of the value of the security in relation to the
proposed loan amount.
Consumer loans entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or secured
by assets that depreciate rapidly, such as automobiles, mobile homes, boats, and
recreational vehicles. In such cases, repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment for the
outstanding loan and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In particular, amounts
realizable on the sale of repossessed automobiles may be significantly reduced
based upon the condition of the automobiles and the lack of demand for used
automobiles. The Bank adds a general provision to its consumer loan loss
allowance, based on general economic conditions, prior loss experience and
management's periodic evaluation.
Commercial Real Estate Loans. Loans secured by commercial real estate
are originated in amounts up to 80% of the appraised value of the property. Such
appraised value is determined by an independent appraiser previously approved by
the Bank. The Bank's commercial real estate loans are permanent loans secured by
improved property such as small office buildings, retail stores, small strip
7
<PAGE>
plazas, and other non-residential buildings. The Bank originates commercial real
estate loans with amortization periods of one to 20 years, primarily as
adjustable-rate mortgages.
Loans secured by commercial real estate generally involve a greater
degree of risk than residential mortgage loans and carry larger loan balances.
This increased credit risk is a result of several factors, including the
concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income-producing properties, and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by commercial real estate is
typically dependent upon the successful operation of the related real estate
project. If the cash flow from the project is reduced, the borrower's ability to
repay the loan may be impaired. At March 31, 1997, the largest commercial real
estate loan was secured by a health care facility and had a balance of $528,000
and was current.
Construction Loans. The Bank primarily makes construction loans to
individuals to construct single-family owner-occupied homes, for which the Bank
also provides permanent financing. Construction financing is generally
considered to involve a higher degree of risk of loss than long-term financing
on improved, occupied real estate. Risk of loss on a construction loan is
dependent largely upon the accuracy of the initial estimate of the property's
value at completion of construction or development and the estimated cost
(including interest) of construction. During the construction phase, a number of
factors could result in delays and cost overruns. If the estimate of
construction costs proves to be inaccurate, the Bank may be required to advance
funds beyond the amount originally committed to permit completion of the
development. If the estimate of value proves to be inaccurate, the Bank may be
confronted, at or prior to the maturity of the loan, with a project having a
value that is insufficient to assure full repayment.
Loan Purchases and Sales. The Bank did not sell or purchase loans
during the years ended March 31, 1996 and 1997. Instead, the Bank has offered
30-year fixed rate mortgage loans that are underwritten by correspondent banks
and mortgage banking companies. The Bank has generally not purchased loans
during the past five years.
Loan Commitments. The Bank issues written, formal commitments to
prospective borrowers on all real estate approved loans. The commitment requires
acceptance within 10 days of the date of issuance. For commercial real estate
loans or commercial loans in general, the commitment is issued for approximately
10 days and must be closed within 30 days of issuance. Commitments for consumer
loans expire 30 days after issuance. At March 31, 1997, the Bank had $0 in
commitments to originate mortgage loans.
Loan Processing Fees. In addition to interest earned on loans, the Bank
recognizes service charges that consist primarily of late charges. The Bank
recognized loan processing fees of $13,737, and $14,636 for the years ended
March 31, 1996, and 1997, respectively.
Loans to One Borrower. A savings association may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of the
association's unimpaired capital and surplus. An additional amount may be lent,
equal to 10% of unimpaired capital and surplus, under certain circumstances.
8
<PAGE>
Loan Delinquencies. Loans are reviewed on a regular basis and are
generally placed on a non-accrual status when the loan becomes more than 90 days
delinquent and, in the opinion of management, the collection of additional
interest is doubtful. Interest accrued and unpaid at the time a loan is placed
on non-accrual status is charged against interest income. Subsequent interest
payments, if any, are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the ultimate
collectibility of the loan.
Real estate acquired by the Bank as a result of foreclosure or by deed
in lieu of foreclosure is classified as foreclosed real estate until such time
as it is sold. When foreclosed real estate is acquired, it is recorded at the
lower of fair value or cost. Valuations are periodically performed by management
and subsequent charges to general mortgage loan reserves are taken when it is
determined that the carrying value of the property exceeds the fair value less
estimated costs to sell.
The following table sets forth information regarding non-accrual loans,
real estate owned, and other repossessed assets and loans that are 90 days or
more delinquent but on which the Company was accruing interest at the dates
indicated.
<TABLE>
<CAPTION>
At March 31,
1996 1997
---- ----
(Dollars in Thousands)
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
Permanent loans secured by 1-4 dwelling units................................... $ 531 $ 301
All other mortgage loans........................................................ 57 86
Non-mortgage loans:
Commercial...................................................................... 0 0
Consumer........................................................................ 36 32
------- ------
Total............................................................................. $ 624 $ 419
======= ======
Accruing loans which are contractually past due 90 days or more:
Mortgage loans:
Permanent loans secured by 1-4 dwelling units................................... 0 0
All other mortgage loans........................................................ 0 0
-------- ------
Total............................................................................. $ 0 $ 0
======== ======
Total non-accrual and accrual loans............................................... $ 624 $ 419
======= ======
Real estate owned................................................................. $ 0 $ 0
======== ======
Total nonperforming assets........................................................ $ 624 $ 419
======= ======
Total non-accrual and accrual loans to net loans.................................. 2.72% 1.79%
======= ======
Total non-accrual and accrual loans to total assets............................... 1.33% .85%
======= ======
Total nonperforming assets to total assets........................................ 1.33% .85%
======= ======
</TABLE>
Interest income that would have been recorded on renegotiated loans and
loans accounted for on a non-accrual basis under the original terms of such
loans was $65,000 and $47,600 for the years ended March 31, 1996 and 1997,
respectively. Amounts foregone and not included in the Bank's interest income
for the years ended March 31, 1996 and 1997 totalled $20,000 and $4,500,
respectively.
9
<PAGE>
Classified Assets. OTS regulations provide for a classification system
for problem assets of insured institutions which covers all problem assets.
Under this classification system, problem assets of insured institutions are
classified as "substandard," "doubtful," or "loss." An asset is considered
substandard if it is inadequately protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, if any. Substandard assets
include those characterized by the "distinct possibility" that the insured
institution will sustain "some loss" if the deficiencies are not corrected.
Assets classified as doubtful have all of the weaknesses inherent in those
classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of currently
existing facts, conditions and values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories. In addition, the Bank
maintains an internal "watchlist" of all loans that were removed from
classification during the prior one-year period.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. An institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS, which may order the establishment of additional general or specific loss
allowances. A portion of general loss allowances established to cover possible
losses related to assets classified as substandard or doubtful may be included
in determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital. At
March 31, 1997, that Bank had a general loan loss allowance of $267,000.
Real Estate Owned. Real estate acquired by the Bank as a result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until it is sold. When property is acquired it is recorded at the lower of the
cost or fair value.
The Bank held no real estate owned at March 31, 1997.
Allowance for Loan and Real Estate Losses. It is management's policy to
provide for losses on unidentified loans in its loan portfolio and foreclosed
real estate. A provision for loan losses is charged to operations based on
management's evaluation of the potential losses that may be incurred in the
Bank's loan portfolio. Such evaluation, which includes a review of all loans of
which full collectibility of interest and principal may not be reasonably
assured, considers, among other matters, the estimated net realizable value of
the underlying collateral. During the years ended March 31, 1996 and 1997, the
Bank charged (credited) $(132,000) and $1,000, respectively, to the provision
for loan losses and $0 and $0, respectively, to the provision for losses on real
estate owned and other repossessed assets.
Management will continue to review the entire loan portfolio to
determine the extent, if any, to which further additional loss provisions may be
deemed necessary. There can be no assurance that the allowance for losses will
be adequate to cover losses which may in fact be realized in the future and that
significant additional provisions for losses will not be required.
10
<PAGE>
The distribution of the Bank's allowance for losses on loans at the
dates indicated is summarized as follows:
<TABLE>
<CAPTION>
At March 31,
------------------------------------------
1996 1997
--------------------------------- --------------------
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Residential real estate................... $260 87.15% $256 86.21%
Commercial real estate.................... 26 6.25 27 6.75
Consumer.................................. 105 6.60 94 7.04
--- ------ ---- -----
Total..................................... $391 100.00% $377 100.00%
=== ====== ==== ======
</TABLE>
11
<PAGE>
The following table sets forth information with respect to the Bank's
allowance for loan losses at the dates indicated:
<TABLE>
<CAPTION>
At March 31,
1996 1997
---- ----
(Dollars in Thousands)
<S> <C> <C>
Total loans outstanding, net.................................................. $22,972 $ 23,461
====== =======
Average loans outstanding..................................................... $22,729 $ 22,895
====== =======
Allowance balances (at beginning of period)................................... 539 391
Provision (credit):
Residential................................................................. (135) 0
Consumer.................................................................... 3 1
-------- -------
(132) 1
------- -------
Charge-offs:
Residential................................................................. (24) (5)
Consumer.................................................................... (6) (24)
-------- -------
(30) (29)
-------- --------
Recoveries:
Residential................................................................ 2 0
Consumer.................................................................... 12 14
-------- --------
14 14
-------- --------
Net (charge-offs) recoveries.................................................. (16) (15)
-------- --------
Allowance balance (at end of period).......................................... $ 391 $ 377
======= ========
Allowance for loan losses as a percent of total loans
outstanding, net............................................................ 1.70% 1.61%
Net loans charged off as a percent of average loans
outstanding................................................................. 0.07% 0.07%
</TABLE>
12
<PAGE>
The following table sets forth information with respect to the Bank's
allowance for losses on real estate owned and other repossessed assets at the
dates indicated:
<TABLE>
<CAPTION>
At March 31,
----------------------------
1996 1997
---- ----
(Dollars in Thousands)
<S> <C> <C>
Total real estate owned and other
repossessed assets, net........................................... $ 0 $ 0
==== ====
Allowance balances-beginning........................................ $ 8 $ 0
Provision........................................................... 0 0
Net charge-offs..................................................... (8) 0
---- ----
Allowance balances - ending......................................... $ 0 $ 0
==== ====
Allowance for losses on real estate owned and
other repossessed assets to net real estate
owned and other repossessed assets................................ 0.00% 0.00%
===== =====
</TABLE>
Mortgage-Backed Securities and Investment Activities
General. The Bank is required under federal regulations to maintain a
minimum amount of liquid assets which may be invested in specified short-term
securities and certain other investments. The Bank has generally maintained a
liquidity portfolio well in excess of regulatory requirements. Liquidity levels
may be increased or decreased depending upon the yields on investment
alternatives and upon management's judgment as to the attractiveness of the
yields then available in relation to other opportunities and its expectation of
future yield levels, as well as management's projections as to the short-term
demand for funds to be used in the Bank's loan origination and other activities.
At March 31, 1997, the Bank had an investment portfolio of approximately $10.8
million, consisting primarily of U.S. government agency obligations, U.S.
Treasury securities, and FHLB stock, as permitted by the OTS regulations. The
Bank has found its level of investment securities has increased in recent years
as a result of repayments and prepayments on loans and mortgage-backed
securities exceeding loan demand. The Bank has invested in mortgage-backed
securities to offset this excess liquidity principally in Government National
Mortgage Association ("GNMA") ARMs, Federal National Mortgage Association
("FNMA") ARMs, and FHLMC ARMs.
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities. SFAS No. 115 requires the Bank to
classify all of its investments in debt and equity securities ("securities")
into three categories. Debt securities which management has the positive intent
and ability to hold until maturity are to be classified as held-to-maturity.
Securities that are bought and held principally for the purpose of selling them
in the near term are to be classified as trading securities. All other
securities are to be classified as available-for-sale securities.
Unrealized holding gains and losses for trading securities are to be
included in earnings. Unrealized gains and losses for available-for-sale
securities are to be excluded from earnings and reported net of income tax
effect as a separate component of shareholders' equity until realized.
Investments classified as held-to-maturity are to be accounted for at amortized
cost. The Bank adopted SFAS No. 115 effective April 1, 1994, and designated its
investment and mortgage-backed securities portfolio into the required three
categories. As a result of SFAS No. 115, the Bank reviewed and classified its
securities as held-for-investment or available-for-sale.
13
<PAGE>
SFAS No. 115 requires the Bank to account for a portion of its holding
of debt securities at market value (as opposed to amortized cost) and may result
in greater volatility in its earnings and capital position. It also may
discourage investment in longer term debt securities, which tend to have higher
yields than short-term debt securities, and hence reduce the earnings of the
Bank. No securities can be moved from a particular category without Board
approval.
The market value of investments and mortgage-backed securities held to
maturity at March 31, 1997, was $8.6 million and $13.2 million, resulting in a
net unrealized loss at such dates of approximately $121,000 and $88,000,
respectively. The Bank anticipates having the ability to fund all of its
investing activities from funds held on deposit at FHLB of Topeka. The Bank will
continue to seek high quality investments with short to intermediate maturities
and duration from one to five years. At March 31, 1997, the securities
classified as available for sale had a carrying value of $2.1 million net of an
unrealized loss of $70,000.
The Revenue Reconciliation Act of 1993 added a Section 475 to the
Internal Revenue Code. Section 475 is a mark-to-market tax provision that is
different from SFAS No. 115. The term "securities" in the tax statute includes
not just traditional debt and equity securities, but mortgages as well. Section
475 and the temporary regulations issued thereunder apply to "dealer"
institutions that regularly buy or sell more than a nominal amount of securities
in the ordinary course of a trade or business. Section 475 requires the Bank to
identify securities held for sale within the meaning of the tax code and include
unrealized gains or losses on related security transactions with its fiscal tax
return. The tax reporting of unrealized gains and losses on securities held for
sale as defined by Section 475 and the related regulations, if different from
SFAS No. 115, is a temporary difference as defined under SFAS No. 109 and the
recording of a related deferred tax liability or asset will not affect generally
accepted accounting principles ("GAAP") basis net income. At March 31, 1997, the
Bank did not have any investments subject to Section 475.
Mortgage-Backed Securities
To supplement lending activities in periods of deposit growth and/or
declining loan demand, the Bank has increased its investments in residential
mortgage-backed securities during recent years. Although such securities are
held for investment, they can serve as collateral for borrowings and, through
repayments, as a source of liquidity.
The mortgage-backed securities portfolio as of March 31, 1997,
consisted primarily of adjustable-rate certificates issued by FHLMC ($1.4
million), GNMA ($3.2 million), and FNMA ($848,000). To a lesser extent the
mortgage backed securities portfolio also contains fixed-rate certificates
issued by FHLMC, GNMA, and FNMA. At March 31, 1997, the carrying value of
mortgage-backed securities totalled $7.9 million or 16.09% of total assets. The
market value of such securities totalled approximately $7.7 million at March 31,
1997, resulting in a net unrealized loss of $142,000 in this portfolio.
Additionally, as of March 31, 1997, the Bank held investments in collateralized
mortgage obligations amounting to $5.4 million, which had an unrealized gain of
$54,000.
Mortgage-backed securities represent a participation interest in a pool
of single-family or multi-family mortgages, the principal and interest payments
on which are passed from the mortgage originators, through intermediaries
(generally quasi-governmental agencies) that pool and repackage the
participation interests in the form of securities, to investors such as the
Bank. Such quasi-governmental agencies, which guarantee the payment of principal
and interest to investors, primarily include FHLMC, FNMA, and GNMA.
14
<PAGE>
FHLMC is a corporation chartered by the United States Government and
owned by the 12 Federal Home Loan Banks and federally insured savings
institutions. FHLMC issues participation certificates backed principally by
conventional mortgage loans. FHLMC guarantees the timely payment of interest and
the ultimate return of principal within one year. FHLMC securities are indirect
obligations of the United States Government. FNMA is a private corporation
chartered by Congress with a mandate to establish a secondary market for
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest, and FNMA securities are indirect obligations of the United States
Government. GNMA is a government agency within the Department of Housing and
Urban Development ("HUD") which is intended to help finance government assisted
housing programs. GNMA guarantees the timely payment of principal and interest,
and GNMA securities are backed by the full faith and credit of the United States
Government. Since FHLMC, FNMA and GNMA were established to provide support for
low- and middle-income housing, there are limits to the maximum size of loans
that qualify for these programs. GNMA limits its maximum loan size for Veterans
Administration ("VA") loans and for Federal Housing Authority ("FHA") loans.
FNMA and FHLMC limit their loans. To accommodate larger-sized loans, and loans
that, for other reasons, do not conform to the agency programs, a number of
private institutions have established their own home-loan origination and
securitization programs.
Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed-rate mortgages or
adjustable-rate mortgage loans. Mortgage-backed securities are generally
referred to as mortgage participation certificates or pass-through certificates.
As a result, the interest rate risk characteristics of the underlying pool of
mortgages (i.e., fixed rate or adjustable rate) as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed pass-through
security is equal to the life of the underlying mortgages. Mortgage-backed
securities issued by FHLMC, FNMA, and GNMA make up a majority of the
pass-through market.
The collateralized mortgage obligations ("CMOs") (in the form of real
estate mortgage investment conduits) held by Registrant at March 31, 1997
totaled $5.4 million and consisted of CMOs issued by FHLMC, FNMA and private
issuers. The aggregate book value of CMOs issued by any one private issuer did
not exceed 10% of stockholders' equity at March 31, 1997 or 1996. The portfolio
of CMOs held in the Company's mortgage-backed securities portfolio at March 31,
1997 did not include any residual interests in CMOs. Further, at March 31, 1997,
the Company's mortgage-backed securities portfolio did not include any
"stripped" CMOs (i.e., CMOs that pay interest only and do not repay principal or
CMOs that repay principal only and do not pay interest).
15
<PAGE>
The following table sets forth the carrying value of the Company's
mortgage-backed securities portfolio at the dates indicated:
<TABLE>
<CAPTION>
At March 31,
------------ Weighted
Average Rate
1996 1997 March 31, 1997
---- ---- --------------
(Dollars in Thousands)
<S> <C> <C> <C>
Held to Maturity:
GNMA ARMs.............................. $3,728 $ 3,163 6.89%
FNMA ARMs.............................. 964 848 6.55
FHLMC ARMs............................. 1,612 1,420 6.09
FHLMC-fixed rate....................... 1,548 1,374 7.03
FNMA-fixed rate........................ 922 696 6.52
GNMA-fixed rate........................ 454 388 8.00
Collateralized mortgage
obligations-government
agency issue......................... 200 5,384 6.89
----- ------- ------
Total mortgage-backed
securities........................... $9,428 $ 13,273 6.81%
===== ======= ======
</TABLE>
Mortgage-Backed Securities Maturity. The following table sets forth the
maturity of the Company's mortgage-backed securities portfolio at March 31,
1997. The table does not include scheduled principal payments or estimated
prepayments. All mortgage-backed securities are shown as maturing based on
contractual maturities.
Contractual
Maturities Due
--------------
(In Thousands)
Less than 1 year................................. $ --
1 to 3 years..................................... --
3 to 5 years..................................... 375
5 to 10 years.................................... 471
10 to 20 years................................... 1,245
Over 20 years.................................... 11,182
--------
Total mortgage-backed securities................. $ 13,273
========
16
<PAGE>
Investment Portfolio. The following table sets forth the carrying value
of the Company's investment securities portfolio, short-term investments, and
FHLB stock, at the dates indicated. At March 31, 1997, the market value of the
Company's investment securities portfolio was $10.6 million.
<TABLE>
<CAPTION>
At March 31,
----------------------------
1996 1997
---- ----
(In Thousands)
<S> <C> <C>
Investment Securities:
Held to Maturity:
U.S. Government Securities.................................... $ 1,551 $ 0
U.S. Agency Securities (1).................................... 8,200 8,700
------ -----
Total Debt Securities...................................... 9,751 8,700
------ -----
Available for Sale:
U.S. Agency Securities ......................................... 1,445 1,430
U.S. League Stock............................................... 95 0
FHLB Stock...................................................... 592 632
Other Equity Securities (2)..................................... 1 0
------ ------
2,133 2,062
------ ------
Total Investments............................................. $11,884 $10,762
====== ======
</TABLE>
- -------------------
(1) Consists of bonds and notes issued by the FHLB and FNMA. FHLB bonds
owned at March 31, 1996 and 1997 included $1.0 million, at cost, of
dual indexed or inverse floating rate structures whose yield may not
move consistent with general interest rate movements.
(2) Consists of equity investment in prior service bureau.
The market value of investments and mortgage-backed securities held to
maturity at March 31, 1997, was $8.6 million and $13.2 million, resulting in a
net unrealized loss at such dates of approximately $121,000 and $88,000,
respectively. The Bank anticipates having the ability to fund all of its
investing activities from funds held on deposit at FHLB of Topeka. The Bank will
continue to seek high quality investments with short to intermediate maturities
and duration from one to five years.
17
<PAGE>
Investment Portfolio Maturities
The following table sets forth certain information regarding the
carrying values, weighted average yields, and maturities of the Company's debt
securities portfolio at March 31, 1997.
<TABLE>
<CAPTION>
As of March 31, 1997
--------------------------------------------------------------------------------------------------------------------
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total Debt Securities
---------------- ----------------- ----------------- ------------------- ---------------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
-------- ------- ------- ------- ------- ------ ------- ------- -------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to maturity:
U.S. Agency
Securities... $ 500 4.44% $ 5,200 6.51% $ 3,000 6.86% $ -- --% $ 8,700 6.51% $ 8,579
---- ----- ------- ---- ------ ---- ----- ----- ------- ---- -------
Available for Sale:
U.S. Agency
Securities... 482 6.33 948 6.89 -- -- 1,430 6.70 1,430
---- ----- ------- ------ ------ ----- ----- ----- ------- ---- -------
Total.... $ 500 4.44% $ 5,682 6.50% $ 3,948 6.87% $ -- --% $10,130 6.54% $ 10,009
==== ===== ======= ===== ====== ===== ====== ====== ======= ===== =======
</TABLE>
18
<PAGE>
Sources of Funds
General. Deposits are the major source of the Bank's funds for lending
and other investment purposes. The Bank derives funds from amortization and
prepayment of loans and mortgage-backed securities, maturities of investment
securities, and operations. Scheduled loan principal repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are significantly influenced by general interest rates and market conditions.
The Bank may also utilize advances from the FHLB of Topeka and other borrowings
as a source of funds.
Deposits. Consumer and commercial deposits are attracted principally
from within the Bank's primary market area through the offering of a broad
selection of deposit instruments including regular savings, demand and NOW
accounts, and term certificate accounts (including negotiated jumbo certificates
in denominations of $100,000 or more). Deposit account terms vary according to
the minimum balance required, the time period the funds must remain on deposit,
and the interest rate, among other factors.
Jumbo Certificate Accounts. The following table indicates the
approximate amount of the Company's certificate accounts of $100,000 or more by
time remaining until maturity as of March 31, 1997.
Certificates
Accounts
Maturity Period (In Thousands)
- ---------------
Within three months.............................. $ 463
Over three through six months.................... 355
Over six through twelve months................... 690
Over twelve months............................... 410
-------
Total...................................... $ 1,918
=======
Borrowings
Deposits are the primary source of funds of the Bank's lending and
investment activities and for its general business purposes. The Bank may obtain
advances from the FHLB of Topeka to supplement its supply of lendable funds.
Advances from the FHLB of Topeka would typically be secured by a pledge of the
Bank's stock in the FHLB of Topeka and a portion of the Bank's first mortgage
loans and certain other assets. The Bank, if the need arises, may also access
the Federal Reserve Bank discount window to supplement its supply of lendable
funds and to meet deposit withdrawal requirements.
To supplement lending activities in periods of deposit growth and/or
declining loan demand, the Bank has increased its investments in residential
mortgage-backed securities. Although such securities are held for investment,
they can serve as collateral for borrowings and, through repayments, as a source
of liquidity.
19
<PAGE>
The following table sets forth certain information regarding short-term
borrowings by the Company at the end of and during the periods indicated,
consisting of amounts borrowed under a line of credit with the FHLB of Topeka.
<TABLE>
<CAPTION>
At or For the Year Ended
March 31,
-------------------------
1996 1997
---- ----
(Dollars in Thousands)
<S> <C> <C>
Weighted average rate paid.......................... 0.00% 6.90%
Maximum amount of borrowings outstanding
at any month end.................................. $1,200 $2,000
Approximate average short-term
borrowings outstanding............................ $ 0 $ 326
Approximate weighted average rate (1)............... 6.06% 5.45%
</TABLE>
- --------------
(1) Average balances represent the arithmetic average of month-end balances.
Subsidiary Activity
The Company has one wholly-owned subsidiary, the Bank. The Bank is
permitted to invest up to 2% of its assets in the capital stock of, or secured
or unsecured loans to, subsidiary corporations, with an additional investment of
1% of assets when such additional investment is utilized primarily for community
development purposes. As of March 31, 1997, the Bank had no subsidiaries.
Employees
Substantially all of the activities of the Company are conducted
through the Bank, therefore, at March 31, 1997, the Company did not have any
salaried employees.
As of March 31, 1997, the Bank had 14 full-time employees and two
part-time employees. None of the Bank's employees are represented by a
collective bargaining group. The Bank believes that its relationship with its
employees is good.
Regulation
Set forth below is a brief description of certain laws which related to
the regulation of the Company and the Bank. The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
Company Regulation
General. The Company is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Company is required to
register and file reports with the OTS and is subject to regulation and
examination by the OTS. In addition, the OTS has enforcement authority over the
Company and its non-savings association subsidiaries, should such subsidiaries
be formed, which also permits the OTS to restrict or prohibit activities that
are determined to be a serious risk to the subsidiary savings association. This
regulation and oversight is intended primarily for the protection of the
depositors of the Bank and not for the benefit of stockholders of the Company.
20
<PAGE>
Qualified Thrift Lender Test. As a unitary savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank satisfies the Qualified Thrift Lender ("QTL") test. If the Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Company and any of its subsidiaries (other than the Bank or any other
SAIF-insured savings association) would become subject to restrictions
applicable to bank holding companies unless such other associations each also
qualify as a QTL and were acquired in a supervisory acquisition. See "-
Regulation of the Bank Qualified Thrift Lender Test."
Restrictions on Acquisitions. The Company must obtain approval from the
OTS before acquiring control of any other SAIF-insured association. Such
acquisitions are generally prohibited if they result in a multiple savings and
loan holding company controlling savings associations in more than one state.
However, such interstate acquisitions are permitted based on specific state
authorization or in a supervisory acquisition of a failing savings association.
Subject to appropriate regulatory approvals, a bank holding company can
acquire control of a savings association, and if it controls a savings
association, merge or consolidate the assets and liabilities of the savings
association with, or transfer assets and liabilities to, any subsidiary bank
which is a member of the BIF with the approval of the appropriate federal
banking agency and the Federal Reserve Board. Generally, federal savings
associations can acquire, or be acquired by, any insured depository institution.
Regulation of the Bank
General. As a federally chartered, SAIF-insured savings association,
the Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board.
The OTS, in conjunction with the FDIC, regularly examines the Bank and
prepares reports for the consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's operations. The Bank's relationship
with its depositors and borrowers is also regulated to a great extent by federal
and state law, especially in such matters as the ownership of savings accounts
and the form and content of the Bank's mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in such regulations, whether by the OTS, the FDIC, or the
Congress could have a material adverse impact on the Company, the Bank, and
their operations.
Insurance of Deposit Accounts. The Bank's deposit accounts are insured
by the SAIF to a maximum of $100,000 for each insured member (as defined by law
and regulation). Insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
21
<PAGE>
applicable law, regulation, rule, order or condition imposed by the FDIC or the
institution's primary regulator. The FDIC may also prohibit an insured
depository institution from engaging in any activity the FDIC determines poses a
serious threat to the SAIF.
The FDIC charges an annual assessment for the insurance of deposits
based on the risk a particular institution poses to its deposit insurance fund,
depending upon the institution's risk classification. This risk classification
is based on an institution's capital group and supervisory subgroup assignment.
In addition, the FDIC is authorized to increase deposit insurance rates on a
semi-annual basis if it determines that such action is necessary to cause the
balance in the SAIF to reach the designated reserve ratio of 1.25% of
SAIF-insured deposits within a reasonable period of time. The FDIC may impose
special assessments on SAIF members to repay amounts borrowed from the U.S.
Treasury or for any other reason deemed necessary by the FDIC. Prior to
September 30, 1996, savings associations paid within a range of .23% to .31% of
domestic deposits and the SAIF was substantially underfunded. By comparison,
prior to September 30, 1996, members of the Bank Insurance Fund ("BIF"),
predominantly commercial banks, were required to pay substantially lower, or
virtually no, federal deposit insurance premiums.
Effective September 30, 1996, federal law was revised to mandate a
one-time special assessment on SAIF members such as the Bank of approximately
.657% of deposits held on March 31, 1995. The Bank recorded a $225,000 pre-tax
expense for this assessment at September 30, 1996. Beginning January 1, 1997,
deposit insurance assessments for SAIF members were reduced to approximately
.064% of deposits on an annual basis; this rate may continue through the end of
1999. During this same period, BIF members are expected to be annually assessed
approximately .013% of deposits. Thereafter, assessments for BIF and SAIF
members should be the same and the SAIF and BIF may be merged. It is expected
that these continuing assessments for both SAIF and BIF members will be used to
repay outstanding Financing Corporation bond obligations. As a result of these
changes, beginning January 1, 1997, the rate of deposit insurance assessed the
Bank substantially declined.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) a leverage ratio (core capital) equal to
at least 3% of total adjusted assets, and (3) a risk-based capital requirement
equal to 8.0% of total risk-weighted assets.
Dividend and Other Capital Distribution Limitations. OTS regulations
require the Bank to give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends to the Company.
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out merger and other distributions charged against capital. The rule
establishes three tiers of institutions, based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory approval. As of
March 31, 1997, the Bank was a Tier 1 institution. In the event the Bank's
capital fell below its fully phased-in requirement or the OTS notified it that
it was in need of more than normal supervision, the
22
<PAGE>
Bank's ability to make capital distributions could be restricted. In addition,
the OTS could prohibit a proposed capital distribution by any institution, which
would otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice.
In addition, the Bank may not declare or pay a cash dividend on its
capital stock if the effect thereof would be to reduce the regulatory capital of
the Bank below the amount required for the liquidation account to be established
pursuant to the Bank's Plan of Conversion. Finally, a savings association is
prohibited from making a capital distribution if, after making the distribution,
the savings association would be undercapitalized (not meet any one of its
minimum regulatory capital requirements).
Qualified Thrift Lender Test. Savings institutions must meet a QTL
test. If the Bank maintains an appropriate level of Qualified Thrift Investments
(primarily residential mortgages and related investments, including certain
mortgage-related securities) ("QTIs") and otherwise qualifies as a QTL, it will
continue to enjoy full borrowing privileges from the FHLB of Topeka. The
required percentage of QTIs is 65% of portfolio assets (defined as all assets
minus intangible assets, property used by the institution in conducting its
business and liquid assets equal to 10% of total assets). Certain assets are
subject to a percentage limitation of 20% of portfolio assets. In addition,
savings associations may include shares of stock of the FHLBs, FNMA and FHLMC as
qualifying QTIs. An association must be in compliance with the QTL test on a
monthly basis in nine out of every 12 months. As of March 31, 1997, the Bank was
in compliance with its QTL requirement with 82.4% of its assets invested in
QTIs.
A savings association that does not meet a QTL test must either convert
to a bank charter or comply with the following restrictions on its operations:
(i) the savings association may not engage in any new activity or make any new
investment, directly or indirectly, unless such activity or investment is
permissible for a national bank; (ii) the branching powers of the savings
association shall be restricted to those of a national bank; (iii) the savings
association shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the savings association shall be subject to the rules
regarding payment of dividends by a national bank. Upon the expiration of three
years from the date the savings association ceases to be a QTL, it must cease
any activity and not retain any investment not permissible for a national bank
and immediately repay any outstanding FHLB advances (subject to safety and
soundness considerations).
Liquidity Requirements. All savings associations are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. At March 31, 1997, the Bank's required liquid
asset ratio was 20.8%.
Federal Home Loan Bank System. The Bank is a member of the FHLB of
Topeka, which is one of 12 regional FHLBs that administers the home financing
credit function of savings associations. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations of the FHLB
System. It makes loans to members (i.e., advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Topeka in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year.
23
<PAGE>
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW, and Super
NOW checking accounts) and non-personal time deposits. The balances maintained
to meet the reserve requirements imposed by the Federal Reserve Board may be
used to satisfy the liquidity requirements that are imposed by the OTS. At March
31, 1997, the Bank was in compliance with these Federal Reserve Board
requirements.
Item 2. Description of Property
- -------------------------------
(a) Properties.
Currently, the Company does not own real property but utilizes the
offices of the Bank. The Bank operates from its office located at 120 North
Division, Guthrie, Oklahoma. The Bank owns this office facility which was opened
in 1975 and has 6,000 square feet.
(b) Investment Policies.
See "Item 1. Business" above for a general description of the Bank's
investment policies and any regulatory or Board of Directors' percentage of
assets limitations regarding certain investments. All of the Bank's investment
policies are reviewed and approved by the Board of Directors of the Bank, and
such policies, subject to regulatory restrictions (if any), can be changed
without a vote of stockholders. The Bank's investments are primarily acquired to
produce income, and to a lesser extent, possible capital gain.
(1) Investments in Real Estate or Interests in Real Estate. See "Item 1.
Business - Lending Activities," "Item 1. Business - Regulation of the Bank," and
"Item 2. Description of Property. (a) Properties" above.
(2) Investments in Real Estate Mortgages. See "Item 1. Business - Lending
Activities" and "Item 1. Business - Regulation of the Bank."
(3) Investments in Securities of or Interests in Persons Primarily Engaged
in Real Estate Activities. See "Item 1. Business - Lending Activities," "Item 1.
Business - Regulation of the Bank," and "Item 1. Business - Subsidiary
Activity."
(c) Description of Real Estate and Operating Data.
Not Applicable.
Item 3. Legal Proceedings
- -------------------------
There are various claims and lawsuits in which the Company or the Bank
are periodically involved, such as claims to enforce liens, condemnation
proceedings on properties in which the Bank holds security interests, claims
involving the making and servicing of real property loans, and other issues
incident to the Bank's business. In the opinion of management, no material loss
is expected from any of such pending claims or lawsuits.
24
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
- ------------------------------------------------------------------
The information contained under the section captioned "Corporate
Profile and Stock Price Information" on page 2 of the Company's Annual Report to
Stockholders for the fiscal year ended March 31, 1997 (the "Annual Report"), is
incorporated herein by reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
- -------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 5 to 16 of the Annual Report is incorporated herein by reference.
Item 7. Financial Statements
- ------------------------------
The Registrant's financial statements listed under Item 13 are
incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants On Accounting and
Financial Disclosure
- --------------------------------------------------------------------------------
There were no changes in or disagreements with accountants on
accounting and financial disclosure during the last fiscal year.
PART III
Item 9. Directors Executive Officers, Promoters and Control Persons: Compliance
with Section 16(a) of the Exchange Act.
- --------------------------------------------------------------------------------
The information contained under the section captioned "I - Information
with Respect to Nominee for Director, Directors Continuing in Office, and
Executive Officers" in the Registrant's definitive proxy statement for the
Registrant's Annual Meeting of Stockholders to be held July 22, 1997 (the "Proxy
Statement") is incorporated herein by reference.
Additional information concerning executive officers is included in the
Proxy Statement in the section captioned "Section 16(a) Beneficial Ownership
Reporting Compliance."
Item 10. Executive Compensation
- --------------------------------
The information contained in the section captioned "Directors and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.
25
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Voting Securities and
Principal Holders Thereof" in the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the chart in the section captioned "Voting
Securities and Principal Holders Thereof" and to the first
chart in the section captioned "I - Information with Respect
to Nominee for Director, Directors Continuing in Office, and
Executive Officers" in the Proxy Statement.
(c) Management of the Registrant knows of no arrangements,
including any pledge by any person of securities of the
Registrant, the operation of which may at a subsequent date
result in a change in control of the Registrant.
Item 12. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Certain Relationships and Related
Transactions" in the Proxy Statement.
Item 13. Exhibits, List and Reports on Form 8-K
- -----------------------------------------------
(a) The following documents are filed as a part of this report:
1. The following financial statements and the report of
independent accountants of the Registrant included in the Registrant's Annual
Report to Stockholders for the fiscal year ending March 31, 1997, are
incorporated herein by reference and also in Item 7 of this report.
Report of Independent Auditors
Consolidated Statements of Financial Condition as of March 31, 1997 and
1996.
Consolidated Statements of Operations for the Years Ended March 31,
1997, 1996, and 1995.
Consolidated Statements of Stockholders' Equity for the Years Ended
March 31, 1997, 1996, and 1995.
Consolidated Statements of Cash Flows for the Years Ended March 31,
1997, 1996, and 1995.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules for which provision is made
in the applicable accounting regulations of the SEC are not required under the
related instructions or are inapplicable and therefore have been omitted.
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
3. The following exhibits are included in this Report or incorporated herein by
reference:
(a) List of Exhibits:
3(i) Certificate of Incorporation of Guthrie Savings, Inc.*
3(ii) Bylaws of Guthrie Savings, Inc.*
10.1 Change in Control Severance Agreement with William Cunningham
10.2 Change in Control Severance Agreement with H. Stephen Ochs
10.3 Change in Control Severance Agreement with Kathleen A. Warner
10.4 1994 Stock Option Plan
10.5 Management Stock Bonus Plan
10.6 Indemnification Agreement from Guthrie Savings, Inc.
10.7 Indemnification Agreement from Guthrie Federal Savings Bank
13 Annual Report to Stockholders for the fiscal year ended March 31, 1997
21 Subsidiaries of the Registrant**
23 Consent of Regier Carr & Monroe, L.L.P.
27 Financial Data Schedule***
(b) A report on Form 8-K (Items 5 and 7), dated January 14, 1997,
was filed during the last quarter of the period covered by
this report.
</TABLE>
- ---------------------
* Incorporated by reference to the registration statement on Form S-1 (File
No. 33-90286) declared effective by the Commission on August 12, 1994.
** Incorporated by reference to the Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 (File No. 0-24468) filed with the SEC.
*** Filed in electronic format only.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GUTHRIE SAVINGS, INC.
Dated: June 25, 1997 By: /s/ William L. Cunningham
-------------------------
William L. Cunningham
President, Chief Executive
Officer, and Director (Duly
Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By: /s/ William L. Cunningham By: /s/ H. Stephen Ochs
William L. Cunningham H. Stephen Ochs
President, Chief Executive Officer, Vice President and Director
and Director (Principal Executive
Officer)
Date: June 25, 1997 Date: June 25, 1997
By: /s/ Keith Camerer By: /s/ James V. Seaman
Keith Camerer James V. Seamans
Director Director
Date: June 25, 1997 Date: June 25, 1997
By: /s/ Alvin R. Powell, Jr. By: /s/ Kimberly D. Walker
--------------------------- ----------------------
Alvin R. Powell, Jr. Kimberly D. Walker
Director Treasurer (Principal Accounting and
and Financial Officer)
Date: June 25, 1997 Date: June 25, 1997
</TABLE>
EXHIBIT 10.1
<PAGE>
CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") entered into
this 11th day of February, 1997 ("Effective Date"), by and between Guthrie
Savings, Inc. (the "Company") and William L.
Cunningham (the "Employee").
WHEREAS, the Employee is currently an officer and an employee of the
Company and its subsidiary, Guthrie Federal Savings Bank ("Subsidiary") as
President and is experienced in all phases of the business of the Company and
the Subsidiary; and
WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities of the Company and Employee if the Company should undergo a
Change in Control (as defined hereinafter in the Agreement) after the Effective
Date.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
President of the Company and the Subsidiary. The Employee shall render such
administrative and management services to the Company and the Subsidiary as are
currently rendered and as are customarily performed by persons situated in a
similar executive capacity. The Employee's other duties shall be such as the
Board of Directors for the Company (the "Board of Directors" or "Board") may
from time to time reasonably direct, including normal duties as an officer of
the Company and the Subsidiary.
2. Term of Agreement. The term of this Agreement shall be for the
period commencing on the Effective Date and ending thirty-six (36) months
thereafter. Additionally, on or before each annual anniversary date from the
Effective Date, the term of this Agreement may be extended for an additional one
year period beyond the then effective expiration date upon a determination and
resolution of the Board of Directors that the performance of the Employee has
met the requirements and standards of the Board, and that the term of such
Agreement shall be extended.
3. Termination of Employment in Connection with or
Subsequent to a Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment during the term of this
Agreement following any Change in Control of the Company or Subsidiary, absent
Just Cause, Employee shall be paid an amount equal to the product of 2.99 times
the Employee's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Calculation of the "base amount" shall include compensation paid by
the Company and the Subsidiary. Said
1
<PAGE>
sum shall be paid, at the option of Employee, either in one (1) lump sum within
thirty (30) days of such termination discounted to the present value of such
payment using as the discount rate the "prime rate" as published in the Wall
Street Journal Eastern Edition as of the date of such payment, or in periodic
payments over the next 36 months or the remaining term of this Agreement
whichever is less, as if Employee's employment had not been terminated, and such
payments shall be in lieu of any other future payments which the Employee would
be otherwise entitled to receive. Notwithstanding the forgoing, all sums payable
hereunder shall be reduced in such manner and to such extent so that no such
payments made hereunder when aggregated with all other payments to be made to
the Employee by the Company or the Subsidiary shall be deemed an "excess
parachute payment" in accordance with Section 280G of the Code and be subject to
the excise tax provided at Section 4999(a) of the Code. The term "Change in
Control" shall mean: (i) the execution of an agreement for the sale of all, or a
material portion, of the assets of the Company; (ii) the execution of an
agreement for a merger or recapitalization of the Company or any merger or
recapitalization whereby the Company is not the surviving entity; (iii) a change
of control of the Company, as otherwise defined or determined by the Office of
Thrift Supervision or regulations promulgated by it; or (iv) the acquisition,
directly or indirectly, of the beneficial ownership (within the meaning of that
term as it is used in Section 13(d) of the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder) of twenty-five percent (25%)
or more of the outstanding voting securities of the Company by any person,
trust, entity or group. The term "person" refers to an individual other than the
Employee or a corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary except as provided at Sections 4(b), 4(c), 4(d), 4(e) and 5, Employee
may voluntary terminate his employment under this Agreement within twelve (12)
months following a Change in Control, and Employee shall thereupon be entitled
to receive the payment described in Section 3(a) of this Agreement, upon the
occurrence, or within ninety (90) days thereafter, of any of the following
events, which have not been consented to in advance by the Employee in writing:
(i) if Employee would be required to move his personal residence or perform his
principal executive functions more than thirty-five (35) miles from the
Employee's primary office as of the signing of this Agreement; (ii) if in the
organizational structure of the Company or Subsidiary, Employee would be
required to report to a person or persons other than the President of the
Company or the Subsidiary; (iii) if the Company or Subsidiary should fail to
maintain existing employee benefits plans, including material fringe benefit,
stock option and retirement plans, except to the extent that such reduction in
benefit programs is part of an overall adjustment in benefits for all employees
of the Company or
2
<PAGE>
Subsidiary and does not disproportionately adversely impact the Employee; (iv)
if Employee would be assigned duties and responsibilities other than those
normally associated with his or her position as referenced at Section 1, herein;
(v) if Employee's responsibilities or authority have in any way been materially
diminished or reduced; or (vi) if Employee would not be elected or reelected to
the Board of Directors of the Company.
4. Other Changes in Employment Status.
(a) Except as provided for at Section 3, herein, the Board of Directors
may terminate the Employee's employment at any time, but any termination by the
Board of Directors other than termination for Just Cause, shall not prejudice
the Employee's right to compensation or other benefits under the Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for Just Cause. Termination for "Just Cause" shall
include termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final
cease- and-desist order, or material breach of any provision of the Agreement.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Subsidiary's affairs by an order issued
under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Company under this
Agreement shall terminate, as of the effective date of the order, but the vested
rights of the parties shall not be affected.
(c) If the Subsidiary is in default (as defined in Section 3(x)(1) of
FDIA) all obligations under this Agreement may in its discretion terminate as of
the date of default, but this paragraph shall not affect any vested rights of
the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Subsidiary: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Subsidiary under the authority contained in Section 13(c) of FDIA; or (ii)
by the Director of the OTS, or his or her designee, at the time that the
Director of the OTS, or his or her designee approves a supervisory merger to
resolve problems related to operation of the Subsidiary or when the Subsidiary
is determined by the Director of the OTS to be in an unsafe or unsound
condition.
3
<PAGE>
Any rights of the parties that have already vested, however, shall not be
affected by such action.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
5. Suspension of Employment . If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Subsidiary's
affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)), the Company's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Company may in its
discretion, (i) pay the Employee all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate any of its
obligations which were suspended.
6. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) The Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Company.
7. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
8. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Oklahoma, except to the extent that Federal law shall be
deemed to apply.
9. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Company, and
judgment upon the award rendered may be entered in any court having jurisdiction
4
<PAGE>
thereof, except to the extend that the parties may otherwise reach a mutual
settlement of such issue. The Company shall reimburse Employee for all
reasonable costs and expenses, including reasonable attorneys' fees, arising
from such dispute, proceedings or actions, following the delivery of the
decision of the arbitrator finding in favor of the Employee. Further, a
settlement of the matter approved by the Board of the Company may include a
provision for the reimbursement by the Company to the Employee for all
reasonable costs and expenses, including reasonable attorneys' fees, arising
from such dispute, proceedings or actions, or the Board of the Company may
authorize such reimbursement of such reasonable costs and expenses by separate
action upon a written action and determination of the Board. Such reimbursement
shall be paid within ten (10) days of Employee furnishing to the Company
evidence, which may be in the form, among other things, of a canceled check or
receipt, of such costs or expenses incurred by Employee.
11. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and first hereinabove written.
GUTHRIE SAVINGS, INC.
ATTEST: By:/s/Keith Camerer
/s/Deborah K. Bozarth
Secretary
WITNESS:
/s/Colleen Freeman /s/William L. Cunningham
William L. Cunningham, Employee
EXHIBIT 10.2
<PAGE>
CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") entered into
this 11th day of February, 1997 ("Effective Date"), by and between Guthrie
Savings, Inc. (the "Company") and H. Stephen Ochs (the "Employee").
WHEREAS, the Employee is currently an officer and an employee of the
Company and its subsidiary, Guthrie Federal Savings Bank ("Subsidiary") as Vice
President and is experienced in all phases of the business of the Company and
the Subsidiary; and
WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities of the Company and Employee if the Company should undergo a
Change in Control (as defined hereinafter in the Agreement) after the Effective
Date.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the Vice
President of the Company and the Subsidiary. The Employee shall render such
administrative and management services to the Company and the Subsidiary as are
currently rendered and as are customarily performed by persons situated in a
similar executive capacity. The Employee's other duties shall be such as the
Board of Directors for the Company (the "Board of Directors" or "Board") may
from time to time reasonably direct, including normal duties as an officer of
the Company and the Subsidiary.
2. Term of Agreement. The term of this Agreement shall be for the
period commencing on the Effective Date and ending thirty-six (36) months
thereafter. Additionally, on or before each annual anniversary date from the
Effective Date, the term of this Agreement may be extended for an additional one
year period beyond the then effective expiration date upon a determination and
resolution of the Board of Directors that the performance of the Employee has
met the requirements and standards of the Board, and that the term of such
Agreement shall be extended.
3. Termination of Employment in Connection with or
Subsequent to a Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment during the term of this
Agreement following any Change in Control of the Company or Subsidiary, absent
Just Cause, Employee shall be paid an amount equal to the product of 2.00 times
the Employee's cash compensation received during the twelve month period prior
to termination of employment in accordance with Section 3 of this Agreement.
Said sum shall be paid, at the option of Employee, either in one (1) lump sum
within thirty (30) days of such
1
<PAGE>
termination discounted to the present value of such payment using as the
discount rate the "prime rate" as published in the Wall Street Journal Eastern
Edition as of the date of such payment, or in periodic payments over the next 24
months or the remaining term of this Agreement whichever is less, as if
Employee's employment had not been terminated, and such payments shall be in
lieu of any other future payments which the Employee would be otherwise entitled
to receive. Notwithstanding the forgoing, all sums payable hereunder shall be
reduced in such manner and to such extent as may be required so that no such
payments made hereunder when aggregated with all other payments to be made to
the Employee by the Company or the Subsidiary shall be deemed an "excess
parachute payment" in accordance with Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code") and regulations promulgated thereunder and be
subject to the excise tax provided at Section 4999(a) of the Code. Calculation
of the "base amount" shall include compensation paid by the Company and the
Subsidiary. The term "Change in Control" shall mean: (i) the execution of an
agreement for the sale of all, or a material portion, of the assets of the
Company; (ii) the execution of an agreement for a merger or recapitalization of
the Company or any merger or recapitalization whereby the Company is not the
surviving entity; (iii) a change of control of the Company, as otherwise defined
or determined by the Office of Thrift Supervision or regulations promulgated by
it; or (iv) the acquisition, directly or indirectly, of the beneficial ownership
(within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Company by any person, trust, entity or group. The term
"person" refers to an individual other than the Employee or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary except as provided at Sections 4(b), 4(c), 4(d), 4(e) and 5, Employee
may voluntary terminate his employment under this Agreement within twelve (12)
months following a Change in Control, and Employee shall thereupon be entitled
to receive the payment described in Section 3(a) of this Agreement, upon the
occurrence, or within ninety (90) days thereafter, of any of the following
events, which have not been consented to in advance by the Employee in writing:
(i) if Employee would be required to move his personal residence or perform his
principal executive functions more than thirty-five (35) miles from the
Employee's primary office as of the signing of this Agreement; (ii) if in the
organizational structure of the Company or Subsidiary, Employee would be
required to report to a person or persons other than the President of the
Company or the Subsidiary; (iii) if the Company or Subsidiary should fail to
maintain existing employee benefits plans, including material fringe benefit,
stock option and retirement plans, except to the
2
<PAGE>
extent that such reduction in benefit programs is part of an overall adjustment
in benefits for all employees of the Company or Subsidiary and does not
disproportionately adversely impact the Employee; (iv) if Employee would be
assigned duties and responsibilities other than those normally associated with
his or her position as referenced at Section 1, herein; (v) if Employee's
responsibilities or authority have in any way been materially diminished or
reduced; or (vi) if Employee would not be elected or reelected to the Board of
Directors of the Company.
4. Other Changes in Employment Status.
(a) Except as provided for at Section 3, herein, the Board of Directors
may terminate the Employee's employment at any time, but any termination by the
Board of Directors other than termination for Just Cause, shall not prejudice
the Employee's right to compensation or other benefits under the Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for Just Cause. Termination for "Just Cause" shall
include termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final
cease- and-desist order, or material breach of any provision of the Agreement.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Subsidiary's affairs by an order issued
under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Company under this
Agreement shall terminate, as of the effective date of the order, but the vested
rights of the parties shall not be affected.
(c) If the Subsidiary is in default (as defined in Section 3(x)(1) of
FDIA) all obligations under this Agreement may in its discretion terminate as of
the date of default, but this paragraph shall not affect any vested rights of
the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Subsidiary: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Subsidiary under the authority contained in Section 13(c) of FDIA; or (ii)
by the Director of the OTS, or his or her designee, at the time that the
Director of the OTS, or his or her designee approves a supervisory merger to
resolve problems related to operation of the Subsidiary or when the Subsidiary
is determined by
3
<PAGE>
the Director of the OTS to be in an unsafe or unsound condition. Any rights of
the parties that have already vested, however, shall not be affected by such
action.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
5. Suspension of Employment . If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Subsidiary's
affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)), the Company's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Company may in its
discretion, (i) pay the Employee all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate any of its
obligations which were suspended.
6. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) The Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Company.
7. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
8. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Oklahoma, except to the extent that Federal law shall be
deemed to apply.
9. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Company, and
judgment upon the
4
<PAGE>
award rendered may be entered in any court having jurisdiction thereof, except
to the extend that the parties may otherwise reach a mutual settlement of such
issue. The Company shall reimburse Employee for all reasonable costs and
expenses, including reasonable attorneys' fees, arising from such dispute,
proceedings or actions, following the delivery of the decision of the arbitrator
finding in favor of the Employee. Further, a settlement of the matter approved
by the Board of the Company may include a provision for the reimbursement by the
Company to the Employee for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Company may authorize such reimbursement of such reasonable
costs and expenses by separate action upon a written action and determination of
the Board. Such reimbursement shall be paid within ten (10) days of Employee
furnishing to the Company evidence, which may be in the form, among other
things, of a canceled check or receipt, of such costs or expenses incurred by
Employee.
11. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and first hereinabove written.
GUTHRIE SAVINGS, INC.
ATTEST: By:/s/Keith Camerer
/s/Deborah K. Bozarth
Secretary
WITNESS:
/s/Colleen Freeman /s/H. Stephen Ochs
H. Stephen Ochs, Employee
EXHIBIT 10.3
<PAGE>
CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") entered into
this 11th day of February, 1997 ("Effective Date"), by and between Guthrie
Savings, Inc. (the "Company") and Kathleen A.
Warner (the "Employee").
WHEREAS, the Employee is currently an officer and an employee of the
Company and its subsidiary, Guthrie Federal Savings Bank ("Subsidiary") as Vice
President and is experienced in all phases of the business of the Company and
the Subsidiary; and
WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities of the Company and Employee if the Company should undergo a
Change in Control (as defined hereinafter in the Agreement) after the Effective
Date.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the Vice
President of the Company and the Subsidiary. The Employee shall render such
administrative and management services to the Company and the Subsidiary as are
currently rendered and as are customarily performed by persons situated in a
similar executive capacity. The Employee's other duties shall be such as the
Board of Directors for the Company (the "Board of Directors" or "Board") may
from time to time reasonably direct, including normal duties as an officer of
the Company and the Subsidiary.
2. Term of Agreement. The term of this Agreement shall be for the
period commencing on the Effective Date and ending thirty-six (36) months
thereafter. Additionally, on or before each annual anniversary date from the
Effective Date, the term of this Agreement may be extended for an additional one
year period beyond the then effective expiration date upon a determination and
resolution of the Board of Directors that the performance of the Employee has
met the requirements and standards of the Board, and that the term of such
Agreement shall be extended.
3. Termination of Employment in Connection with or
Subsequent to a Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment during the term of this
Agreement following any Change in Control of the Company or Subsidiary, absent
Just Cause, Employee shall be paid an amount equal to the product of 2.00 times
the Employee's cash compensation received during the twelve month period prior
to termination of employment in accordance with Section 3 of this Agreement.
Said sum shall be paid, at the option of Employee, either in one (1) lump sum
within thirty (30) days of such
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termination discounted to the present value of such payment using as the
discount rate the "prime rate" as published in the Wall Street Journal Eastern
Edition as of the date of such payment, or in periodic payments over the next 24
months or the remaining term of this Agreement whichever is less, as if
Employee's employment had not been terminated, and such payments shall be in
lieu of any other future payments which the Employee would be otherwise entitled
to receive. Notwithstanding the forgoing, all sums payable hereunder shall be
reduced in such manner and to such extent as may be required so that no such
payments made hereunder when aggregated with all other payments to be made to
the Employee by the Company or the Subsidiary shall be deemed an "excess
parachute payment" in accordance with Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code") and regulations promulgated thereunder and be
subject to the excise tax provided at Section 4999(a) of the Code. Calculation
of the "base amount" shall include compensation paid by the Company and the
Subsidiary. The term "Change in Control" shall mean: (i) the execution of an
agreement for the sale of all, or a material portion, of the assets of the
Company; (ii) the execution of an agreement for a merger or recapitalization of
the Company or any merger or recapitalization whereby the Company is not the
surviving entity; (iii) a change of control of the Company, as otherwise defined
or determined by the Office of Thrift Supervision or regulations promulgated by
it; or (iv) the acquisition, directly or indirectly, of the beneficial ownership
(within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Company by any person, trust, entity or group. The term
"person" refers to an individual other than the Employee or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary except as provided at Sections 4(b), 4(c), 4(d), 4(e) and 5, Employee
may voluntary terminate his employment under this Agreement within twelve (12)
months following a Change in Control, and Employee shall thereupon be entitled
to receive the payment described in Section 3(a) of this Agreement, upon the
occurrence, or within ninety (90) days thereafter, of any of the following
events, which have not been consented to in advance by the Employee in writing:
(i) if Employee would be required to move his personal residence or perform his
principal executive functions more than thirty-five (35) miles from the
Employee's primary office as of the signing of this Agreement; (ii) if in the
organizational structure of the Company or Subsidiary, Employee would be
required to report to a person or persons other than the President of the
Company or the Subsidiary; (iii) if the Company or Subsidiary should fail to
maintain existing employee benefits plans, including material fringe benefit,
stock option and retirement plans, except to the
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extent that such reduction in benefit programs is part of an overall adjustment
in benefits for all employees of the Company or Subsidiary and does not
disproportionately adversely impact the Employee; (iv) if Employee would be
assigned duties and responsibilities other than those normally associated with
his or her position as referenced at Section 1, herein; or (v) if Employee's
responsibilities or authority have in any way been materially diminished or
reduced.
4. Other Changes in Employment Status.
(a) Except as provided for at Section 3, herein, the Board of Directors
may terminate the Employee's employment at any time, but any termination by the
Board of Directors other than termination for Just Cause, shall not prejudice
the Employee's right to compensation or other benefits under the Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for Just Cause. Termination for "Just Cause" shall
include termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final
cease- and-desist order, or material breach of any provision of the Agreement.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Subsidiary's affairs by an order issued
under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Company under this
Agreement shall terminate, as of the effective date of the order, but the vested
rights of the parties shall not be affected.
(c) If the Subsidiary is in default (as defined in Section 3(x)(1) of
FDIA) all obligations under this Agreement may in its discretion terminate as of
the date of default, but this paragraph shall not affect any vested rights of
the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Subsidiary: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Subsidiary under the authority contained in Section 13(c) of FDIA; or (ii)
by the Director of the OTS, or his or her designee, at the time that the
Director of the OTS, or his or her designee approves a supervisory merger to
resolve problems related to operation of the Subsidiary or when the Subsidiary
is determined by the Director of the OTS to be in an unsafe or unsound
condition.
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Any rights of the parties that have already vested, however, shall not be
affected by such action.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
5. Suspension of Employment . If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Subsidiary's
affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)), the Company's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Company may in its
discretion, (i) pay the Employee all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate any of its
obligations which were suspended.
6. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) The Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Company.
7. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
8. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Oklahoma, except to the extent that Federal law shall be
deemed to apply.
9. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Company, and
judgment upon the award rendered may be entered in any court having jurisdiction
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thereof, except to the extend that the parties may otherwise reach a mutual
settlement of such issue. The Company shall reimburse Employee for all
reasonable costs and expenses, including reasonable attorneys' fees, arising
from such dispute, proceedings or actions, following the delivery of the
decision of the arbitrator finding in favor of the Employee. Further, a
settlement of the matter approved by the Board of the Company may include a
provision for the reimbursement by the Company to the Employee for all
reasonable costs and expenses, including reasonable attorneys' fees, arising
from such dispute, proceedings or actions, or the Board of the Company may
authorize such reimbursement of such reasonable costs and expenses by separate
action upon a written action and determination of the Board. Such reimbursement
shall be paid within ten (10) days of Employee furnishing to the Company
evidence, which may be in the form, among other things, of a canceled check or
receipt, of such costs or expenses incurred by Employee.
11. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and first hereinabove written.
GUTHRIE SAVINGS, INC.
ATTEST: By:/s/Keith Camerer
/s/Deborah K. Bozarth
Secretary
WITNESS:
/s/Colleen Freeman /s/Kathleen A. Warner
Kathleen A. Warner, Employee
EXHIBIT 10.4
<PAGE>
GUTHRIE SAVINGS, INC.
1994 STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the Guthrie Savings,
Inc. ("Corporation") 1994 Stock Option Plan (the "Plan"). The purpose of the
Plan is to attract and retain the best available personnel for positions of
substantial responsibility and to provide additional incentive to officers,
directors and key employees of the Corporation, or any present or future parent
or subsidiary of the Corporation to promote the success of the business. The
Plan is intended to provide for the grant of "Incentive Stock Options," within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and Non-Incentive Stock Options, options that do not so qualify. Each
and every one of the provisions of the Plan relating to Incentive Stock Options
shall be interpreted to conform to the requirements of Section 422 of the Code.
2. Definitions. As used herein, the following definitions shall apply.
(a) "Award" means the grant by the Committee of an Incentive
Stock Option or a Non-Incentive Stock Option, or any combination thereof, as
provided in the Plan.
(b) "Bank" shall mean Guthrie Federal Savings Bank, or any
successor corporation thereto.
(c) "Board" shall mean the Board of Directors of the
Corporation, or any successor or parent corporation thereto.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with paragraph 5(a) of the Plan.
(f) "Common Stock" shall mean common stock, par value $.01
per share, of the Corporation, or any successor or parent corporation thereto.
(g) "Continuous Employment" or "Continuous Status as an
Employee" shall mean the absence of any interruption or termination of
employment with the Corporation or any present or future Parent or Subsidiary of
the Corporation. Employment shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the
Corporation or in the case of transfers between payroll locations, of the
Corporation or between the Corporation, its Parent, its Subsidiaries or a
successor.
(h) "Corporation" shall mean the Guthrie Savings, Inc., the
parent corporation for the Bank, or any successor or Parent thereof.
(i) "Director" shall mean a member of the Board of the
Corporation, or any successor or parent corporation thereto.
(j) "Effective Date" shall mean the date specified in Section
15 hereof.
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(k) "Employee" shall mean any person employed by the
Corporation or any present or future Parent or Subsidiary of the Corporation.
(l) "Incentive Stock Option" or "ISO" shall mean an option to
purchase Shares granted by the Committee pursuant to Section 8 hereof which is
subject to the limitations and restrictions of Section 8 hereof and is intended
to qualify under Section 422 of the Code.
(m) "Non-Incentive Stock Option" or "Non-ISO" shall mean an
option to purchase Shares granted pursuant to Section 9 hereof, which option is
not intended to qualify under Section 422 of the Code.
(n) "Option" shall mean an Incentive or Non-Incentive Stock
Option granted pursuant to this Plan providing the holder of such Option with
the right to purchase Common Stock.
(o) "Optioned Stock" shall mean stock subject to an Option
granted pursuant to the Plan.
(p) "Optionee" shall mean any person who receives an Option
or Award pursuant to the Plan.
(q) "Parent" shall mean any present or future corporation
which would be a "parent corporation" as defined in Subsections 424(e) and (g)
of the Code.
(r) "Participant" means any director, officer or key employee
of the Corporation or any Parent or Subsidiary of the Corporation or any other
person providing a service to the Corporation who is selected by the Committee
to receive an Award, or who by the express terms of the Plan is granted an
Award.
(s) "Plan" shall mean the Guthrie Savings, Inc. 1994 Stock
Option Plan.
(t) "Share" shall mean one share of the Common Stock.
(u) "Subsidiary" shall mean any present or future corporation
which would be a "subsidiary corporation" as defined in Subsections 424(f) and
(g) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 13 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 51,512.1 Such
Shares may either be authorized but unissued shares or treasury shares.
An Award shall not be considered to be made under the Plan with respect
to any Option which terminates prior to its exercise, and new Awards may be
granted under the Plan with respect to the number of Shares as to which such
termination has occurred.
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1 10% of shares issued in the initial stock offering.
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4. Six Month Holding Period.
A total of six months must elapse between the date of the
grant of an Option and the date of the sale of Common Stock received through the
exercise of an Option.
5. Administration of the Plan.
(a) (i) Composition of the Committee. Except as indicated in
paragraph 5(a)(ii) below, the Plan shall be administered by the Committee
consisting of at least three non-employee Directors of the Corporation appointed
by the Board and serving at the pleasure of the Board. Officers, Directors, key
employees and other persons who are designated by the Committee shall be
eligible to receive Awards under the Plan, and all persons designated as members
of the Committee shall be "disinterested persons" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934.
(ii) For the purpose of granting Awards to directors,
the selection of any Director to whom Awards may be granted, as well as the
number of Shares subject to Awards, must be determined by a "disinterested
committee", as defined in Rule 16b-3 under the Securities Exchange Act of 1934.
(b) Powers of the Committee. The Committee is authorized (but
only to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The Chairman of the Corporation and such other officers as
shall be designated by the Committee are hereby authorized to execute
instruments evidencing Awards on behalf of the Corporation and to cause them to
be delivered to the Participants.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
6. Eligibility.
(i) Awards may be granted to officers, Directors,
key employees and other persons. The Committee shall from time to time determine
the officers, Directors, key employees and other persons who shall be granted
Awards under the Plan, the number to be granted to each such officer, Director,
key employee and other persons under the Plan, and whether Awards granted to
each such Participant under the Plan shall be Incentive and/or Non-Incentive
Stock Options. In selecting Participants and in determining the number of Shares
of Common Stock to be granted to each such Participant pursuant to each Award
granted under the Plan, the Committee may consider the nature of the services
rendered by each such Participant, each such Participant's current and potential
contribution to the Corporation and such other factors as the Committee may, in
its sole discretion, deem relevant.
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Officers, Directors, key employees or other persons who have been granted an
Award may, if otherwise eligible, be granted additional Awards.
(ii) The aggregate fair market value (determined
as of the date the Option is granted) of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by each Employee
during any calendar year (under all Incentive Stock Option plans, as defined in
Section 422 of the Code, of the Corporation or any present or future Parent or
Subsidiary of the Corporation) shall not exceed $100,000. Notwithstanding the
prior provisions of this Section 6, the Committee may grant Options in excess of
the foregoing limitations, provided said Options shall be clearly and
specifically designated as not being Incentive Stock Options, as defined in
Section 422 of the Code.
(iii) In no event shall Shares subject to Options
granted to non-employee Directors in the aggregate under this Plan exceed more
than 30% of the total number of Shares authorized for delivery under this Plan
pursuant to Section 3 herein or 5% to any individual non-employee Director.
7. Term of the Plan. The Plan shall continue in effect for a term of
ten (10) years from the Effective Date, unless sooner terminated pursuant to
Section 18 hereof. No Option shall be granted under the Plan after ten (10)
years from the Effective Date.
8. Terms and Conditions of Incentive Stock Options. Incentive Stock
Options may be granted only to Participants who are Employees. Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each and every
Incentive Stock Option granted pursuant to the Plan shall comply with, and be
subject to, the following terms and conditions:
(a) Option Price.
(i) The price per Share at which each Incentive
Stock Option granted under the Plan may be exercised shall not, as to any
particular Incentive Stock Option, be less than the fair market value of the
Common Stock at the time such Incentive Stock Option is granted. For such
purposes, if the Common Stock is traded otherwise than on a national securities
exchange at the time of the granting of an Option, then the price per Share of
the Optioned Stock shall be not less than the mean between the bid and asked
price on the date the Incentive Stock Option is granted or, if there is no bid
and asked price on said date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is available, then the
price per Share shall be not less than the fair market value of the Common Stock
at the time such Option is granted as determined by the Committee in good faith.
If the Common Stock is listed on a national securities exchange at the time of
the granting of an Incentive Stock Option, then the price per Share shall be not
less than the average of the highest and lowest selling price on such exchange
on the date such Incentive Stock Option is granted or, if there were no sales on
said date, then the price shall be not less than the mean between the bid and
asked price on such date.
(ii) In the case of an Employee who owns Common
Stock representing more than ten percent (10%) of the outstanding Common Stock
at the time the Incentive Stock Option is granted, the Incentive Stock Option
price shall not be less than one hundred and ten percent (110%) of the fair
market value of the Common Stock at the time the Incentive Stock Option is
granted.
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(b) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Incentive Stock Option granted under the Plan
shall be made at the time of exercise of each such Incentive Stock Option and
shall be paid in cash (in United States Dollars), Common Stock or a combination
of cash and Common Stock. Common Stock utilized in full or partial payment of
the exercise price shall be valued at its fair market value at the date of
exercise. The Corporation shall accept full or partial payment in Common Stock
only to the extent permitted by applicable law. No Shares of Common Stock shall
be issued until full payment therefor has been received by the Corporation, and
no Optionee shall have any of the rights of a stockholder of the Corporation
until Shares of Common Stock are issued to him.
(c) Term of Incentive Stock Option. The term of each Incentive
Stock Option granted pursuant to the Plan shall be not more than ten (10) years
from the date each such Incentive Stock Option is granted, provided that in the
case of an Employee who owns stock representing more than ten percent (10%) of
the Common Stock outstanding at the time the Incentive Stock Option is granted,
the term of the Incentive Stock Option shall not exceed five (5) years.
(d) Exercise Generally. Except as otherwise provided in
Section 10 hereof, no Incentive Stock Option may be exercised unless the
Optionee shall have been in the employ of the Corporation at all times during
the period beginning with the date of grant of any such Incentive Stock Option
and ending on the date three (3) months prior to the date of exercise of any
such Incentive Stock Option. The Committee may impose additional conditions upon
the right of an Optionee to exercise any Incentive Stock Option granted
hereunder which are not inconsistent with the terms of the Plan or the
requirements for qualification as an Incentive Stock Option under Section 422 of
the Code. Notwithstanding anything herein to the contrary, such Options will be
first exercisable at the rate of 20% on the one year anniversary of the date of
grant and 20% annually thereafter; provided however that the exercisability of
such Options shall be accelerated in the event of death, disability or change in
control in accordance with the Plan.
(e) Cashless Exercise. An Optionee who has held an Incentive
Stock Option for at least six months may engage in the "cashless exercise" of
the Option. In a cashless exercise, an Optionee gives the Corporation written
notice of the exercise of the Option together with an order to a registered
broker-dealer or equivalent third party, to sell part or all of the Optioned
Stock and to deliver enough of the proceeds to the Corporation to pay the Option
price and any applicable withholding taxes. If the Optionee does not sell the
Optioned Stock through a registered broker-dealer or equivalent third party, he
can give the Corporation written notice of the exercise of the Option and the
third party purchaser of the Optioned Stock shall pay the Option price plus any
applicable withholding taxes to the Corporation.
(f) Transferability. Any Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
9. Terms and Conditions of Non-Incentive Stock Options. Each
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
and every Non-Incentive Stock Option granted pursuant to the Plan shall comply
with and be subject to the following terms and conditions.
(a) Options Granted to Directors. Subject to the limitations
of Section 6(iii), Non- Incentive Stock Options to purchase 2,575 shares of
Common Stock will be granted to each other
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Director who is not an Employee as of the Effective Date, at an exercise price
equal to the fair market value of the Common Stock on such date of grant.
Options may be granted to newly appointed or elected non-employee Directors
within the sole discretion of the Committee. The Option will be first
exercisable at the rate of 20% on the one year anniversary of stockholder
ratification of the Plan and 20% annually thereafter during such periods of
service as a director or director emeritus, and will remain exercisable for up
to ten years from such date of grant. The price per Share at which such Options
granted shall be exercisable shall be equal to the fair market value of the
Common Stock at the time such Options are granted. For such purposes, if the
Common Stock is traded otherwise than on a national securities exchange at the
time of the granting of the Options, then the price per Share of the Optioned
Stock shall be not less than the mean between the bid and asked price on the
date the Options are granted or, if there is no bid and asked price on said
date, then on the next prior business day on which there was a bid and asked
price. If no such bid and asked price is available, then the price per Share
shall be determined by the Committee. If the Common Stock is listed on a
national securities exchange at the time of the granting of an Options, then the
price per Share shall be not less than the average of the highest and lowest
selling price on such exchange on the date such Options are granted or, if there
were no sales on said date, then the price shall be not less than the mean
between the bid and asked price on such date. Such Options shall continue to be
exercisable for a period of ten years following the date of grant without regard
to the continued services of such Directors as a Director or Director Emeritus,
or in the event of such person's death during the term of his directorship, by
the personal representative of his estate or person or persons to whom his
rights under such Option shall have passed by will or by laws of descent and
distribution. Unless otherwise inapplicable, or inconsistent with the provisions
of this paragraph, the Options to be granted to Directors hereunder shall be
subject to all other provisions of this Plan.
(b) Option Price. The exercise price per Share of Common Stock
for each Non-Incentive Stock Option granted pursuant to the Plan, other than
Options granted pursuant to Section 9(a) herein, shall be at such price as the
Committee may determine in its sole discretion, but in no event less than the
fair market value of such Common Stock on the Date of Grant as determined by the
Committee in good faith.
(c) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Non-Incentive Stock Option granted under the
Plan shall be made at the time of exercise of each such Non-Incentive Stock
Option and shall be paid in cash (in United States Dollars), Common Stock or a
combination of cash and Common Stock. Common Stock utilized in full or partial
payment of the exercise price shall be valued at its fair market value at the
date of exercise. The Corporation shall accept full or partial payment in Common
Stock only to the extent permitted by applicable law. No Shares of Common Stock
shall be issued until full payment therefor has been received by the Corporation
and no Optionee shall have any of the rights of a stockholder of the Corporation
until the Shares of Common Stock are issued to him.
(d) Term. The term of each Non-Incentive Stock Option granted
pursuant to the Plan shall be not more than ten (10) years from the date each
such Non-Incentive Stock Option is granted.
(e) Exercise Generally. The Committee may impose additional
conditions upon the right of any Participant to exercise any Non-Incentive Stock
Option granted hereunder which is not inconsistent with the terms of the Plan.
(f) Cashless Exercise. An Optionee who has held a Non-
Incentive Stock Option for at least six months may engage in the "cashless
exercise" of the Option. In a cashless exercise, an
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Optionee gives the Corporation written notice of the exercise of the Option
together with an order to a registered broker-dealer or equivalent third party,
to sell part or all of the Optioned Stock and to deliver enough of the proceeds
to the Corporation to pay the Option price and any applicable withholding taxes.
If the Optionee does not sell the Optioned Stock through a registered
broker-dealer or equivalent third party, he can give the Corporation written
notice of the exercise of the Option and the third party purchaser of the
Optioned Stock shall pay the Option price plus any applicable withholding taxes
to the Corporation.
(g) Transferability. Any Non-Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
10. Effect of Termination of Employment, Disability or Death on
Incentive Stock Options.
(a) Termination of Employment. In the event that any
Optionee's employment with the Corporation shall terminate for any reason, other
than Permanent and Total Disability (as such term is defined in Section 22(e)(3)
of the Code) or death, all of any such Optionee's Incentive Stock Options, and
all of any such Optionee's rights to purchase or receive Shares of Common Stock
pursuant thereto, shall automatically terminate on the earlier of (i) the
respective expiration dates of any such Incentive Stock Options, (ii) the
expiration of not more than three (3) months after the date of such termination
of employment, or (iii) at such later date as determined by the Committee at the
time of the grant of such awards, but only if, and to the extent that, the
Optionee was entitled to exercise any such Incentive Stock Options at the date
of such termination of employment. In the event that a subsidiary ceases to be a
subsidiary of the Corporation, the employment of all of its employees who are
not immediately thereafter employees of the Corporation shall be deemed to
terminate upon the date such subsidiary so ceases to be a Subsidiary of the
Corporation. Notwithstanding anything herein to the contrary, upon termination
of employment for "cause" as defined at 12 C.F.R. 563.39(b)(1) as determined by
the Board of Directors, all Options held by such Participant shall cease to be
exercisable as of the date of such termination of employment.
(b) Disability. In the event that any Optionee's employment
with the Corporation shall terminate as the result of the Permanent and Total
Disability of such Optionee, such Optionee may exercise any Incentive Stock
Options granted to him pursuant to the Plan at any time prior to the earlier of
(i) the respective expiration dates of any such Incentive Stock Options or (ii)
the date which is one (1) year after the date of such termination of employment,
but only if, and to the extent that, the Optionee was entitled to exercise any
such Incentive Stock Options at the date of such termination of employment.
(c) Death. In the event of the death of an Optionee, any
Incentive Stock Options granted to such Optionee may be exercised by the person
or persons to whom the Optionee's rights under any such Incentive Stock Options
pass by will or by the laws of descent and distribution (including the
Optionee's estate during the period of administration) at any time prior to the
earlier of (i) the respective expiration dates of any such Incentive Stock
Options or (ii) the date which is two (2) years after the date of death of such
Optionee but only if, and to the extent that, the Optionee was entitled to
exercise any such Incentive Stock Options at the date of death. For purposes of
this Section 10(c), any Incentive Stock Option held by an Optionee shall be
considered exercisable at the date of his death if the only unsatisfied
condition precedent to the exercisability of such Incentive Stock Option at the
date of death is the passage of a specified period of time. At the discretion of
the Committee, upon exercise of such Options the
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Optionee may receive Shares or cash or combination thereof. If cash shall be
paid in lieu of Shares, such cash shall be equal to the difference between the
fair market value of such Shares and the exercise price of such Options on the
exercise date.
(d) Incentive Stock Options Deemed Exercisable. For purposes
of Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any
Optionee shall be considered exercisable at the date of termination of his
employment if any such Incentive Stock Option would have been exercisable at
such date of termination of employment.
(e) Termination of Incentive Stock Options. To the extent that
any Incentive Stock Option granted under the Plan to any Optionee whose
employment with the Corporation terminates shall not have been exercised within
the applicable period set forth in this Section 10, any such Incentive Stock
Option, and all rights to purchase or receive Shares of Common Stock pursuant
thereto, as the case may be, shall terminate on the last day of the applicable
period.
11. Effect of Termination of Employment, Disability or Death on
Non-Incentive Stock Options. The terms and conditions of Non-Incentive Stock
Options relating to the effect of the termination of an Optionee's employment,
disability of an Optionee or his death shall be such terms and conditions as the
Committee shall, in its sole discretion, determine at the time of termination,
unless specifically provided for by the terms of the Agreement at the time of
grant of the Award.
12. Right of Repurchase and Restrictions on Disposition. The Committee,
in its sole discretion, may include, as a term of any Incentive Stock Option or
Non-Incentive Stock Option, the right (the "Repurchase Right"), but not the
obligation, to repurchase all or any amount of the Shares acquired by an
Optionee pursuant to the exercise of any such Options. The intent of the
Repurchase Right is to encourage the continued employment of the Optionee. The
Repurchase Right shall provide for, among other things, a specified duration of
the Repurchase Right, a specified price per Share to be paid upon the exercise
of the Repurchase Right and a restriction on the disposition of the Shares by
the Optionee during the period of the Repurchase Right. The Repurchase Right may
permit the Corporation to transfer or assign such right to another party. The
Corporation may exercise the Repurchase Right only to the extent permitted by
applicable law.
13. Recapitalization, Merger, Consolidation, Change in Control and
Similar Transactions.
(a) Adjustment. Subject to any required action by the
stockholders of the Corporation, within the sole discretion of the Committee,
the aggregate number of Shares of Common Stock for which Options may be granted
hereunder, the number of Shares of Common Stock covered by each outstanding
Option, and the exercise price per Share of Common Stock of each such Option,
shall all be proportionately adjusted for any increase or decrease in the number
of issued and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt of consideration by the Corporation (other than
Shares held by dissenting stockholders).
(b) Change in Control. All outstanding Awards shall become
immediately exercisable in the event of a change in control the Corporation, as
determined by the Committee. In the
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event of such a change in control, the Optionee shall, at the discretion of the
Committee, be entitled to receive cash in an amount equal to the fair market
value of the Common Stock subject to any Incentive or Non-Incentive Stock Option
over the Option Price of such Shares, in exchange for the surrender of such
Options by the Optionee on that date in the event of a change in control of the
Corporation. For purposes of this Section 13, "change in control" shall mean:
(i) the execution of an agreement for the sale of all, or a material portion, of
the assets of the Corporation; (ii) the execution of an agreement for a merger
or recapitalization of the Corporation or any merger or recapitalization whereby
the Corporation is not the surviving entity; (iii) a change of control of the
Corporation, as otherwise defined or determined by the Office of Thrift
Supervision or regulations promulgated by it; or (iv) the acquisition, directly
or indirectly, of the beneficial ownership (within the meaning of that term as
it is used in Section 13(d) of the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder) of twenty-five percent (25%) or more of
the outstanding voting securities of the Corporation by any person, trust,
entity or group. This limitation shall not apply to the purchase of shares by
underwriters in connection with a public offering of Corporation stock, or the
purchase of shares of up to 25% of any class of securities of the Corporation by
a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a change
in control has occurred shall be conclusive and binding.
(c) Extraordinary Corporate Action. Subject to any required
action by the stockholders of the Corporation, in the event of any change in
control, recapitalization, merger, consolidation, exchange of Shares, spin-off,
reorganization, tender offer, liquidation or other extraordinary corporate
action or event, the Committee, in its sole discretion, shall have the power,
prior or subsequent to such action or event to:
(i) appropriately adjust the number of Shares of
Common Stock subject to each Option, the exercise price per Share of Common
Stock, and the consideration to be given or received by the Corporation upon the
exercise of any outstanding Option;
(ii) cancel any or all previously granted Options,
provided that appropriate consideration is paid to the Optionee in connection
therewith; and/or
(iii) make such other adjustments in connection with
the Plan as the Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable; provided, however, that no action shall be taken by
the Committee which would cause Incentive Stock Options granted pursuant to the
Plan to fail to meet the requirements of Section 422 of the Code.
Except as expressly provided in Sections 13(a) and 13(b)
hereof, no Optionee shall have any rights by reason of the occurrence of any of
the events described in this Section 13.
(d) Acceleration. The Committee shall at all times have
the power to accelerate the exercise date of Options previously granted under
the Plan.
14. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Except, however, for purposes of
compliance with Section 16 of the Securities Exchange Act of 1934, the date
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of grant of an Option shall be deemed the later of the date of grant or the date
of stockholder approval of the Plan. Notice of the determination of the grant of
an Option shall be given to each individual to whom an Option is so granted
within a reasonable time after the date of such grant in a form determined by
the Committee.
15. Effective Date. The Plan shall become effective upon the date of
ratification of the Plan by the stockholders of the Corporation, subject to
approval or non-objection by the Office of Thrift Supervision, if applicable.
The Committee may grant options prior to the Effective Date with such option
grants to be effective upon the date of stockholder ratification of the Plan.
16. Ratification by Stockholders. The Plan shall be ratified by
stockholders of the Corporation within twelve (12) months before or after the
date the Plan is approved by the Board.
17. Modification of Options. At any time and from time to time, the
Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on him by the grant of a new
Option at such time, or shall not materially decrease the Optionee's benefits
under the Option without the consent of the holder of the Option, except as
otherwise permitted under Section 18 hereof.
18. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may increase (other
than as provided in Section 13 hereof) the maximum number of Shares permitted to
be optioned under the Plan, materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility for participation in the Plan unless such action of the Board shall
be subject to approval or ratification by the stockholders of the Corporation.
(b) Change in Applicable Law. Notwithstanding any other
provision contained in the Plan, in the event of a change in any federal or
state law, rule or regulation which would make the exercise of all or part of
any previously granted Incentive and/or Non-Incentive Stock Option unlawful or
subject the Corporation to any penalty, the Committee may restrict any such
exercise without the consent of the Optionee or other holder thereof in order to
comply with any such law, rule or regulation or to avoid any such penalty.
19. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law and the requirements
of any stock exchange upon which the Shares may then be listed.
The inability of the Corporation to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Corporation's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder shall relieve the Corporation of any
liability in respect of the non-issuance or sale of such Shares.
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As a condition to the exercise of an Option, the Corporation may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
20. Reservation of Shares. During the term of the Plan, the Corporation
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
21. Unsecured Obligation. No Participant under the Plan shall have any
interest in any fund or special asset of the Corporation by reason of the Plan
or the grant of any Incentive or Non-Incentive Stock Option under the Plan. No
trust fund shall be created in connection with the Plan or any grant of any
Incentive or Non-Incentive Stock Option hereunder and there shall be no required
funding of amounts which may become payable to any Participant.
22. Withholding Tax. The Corporation shall have the right to deduct
from all amounts paid in cash with respect to the cashless exercise of Options
under the Plan any taxes required by law to be withheld with respect to such
cash payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option pursuant to the Plan, the Corporation
shall have the right to require the Participant or such other person to pay the
Corporation the amount of any taxes which the Corporation is required to
withhold with respect to such Shares, or, in lieu thereof, to retain, or sell
without notice, a number of such Shares sufficient to cover the amount required
to be withheld.
23. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Oklahoma, except to the extent that
federal law shall be deemed to apply.
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EXHIBIT 10.5
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Guthrie Federal Savings Bank
Management Stock Bonus Plan
and Trust Agreement
Article I
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ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Guthrie Federal Savings Bank ("Savings Bank") hereby establishes
the Management Stock Bonus Plan (the "Plan") and Trust (the "Trust") upon the
terms and conditions hereinafter stated in this Management Stock Bonus Plan and
Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
Article II
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PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility with the Savings Bank
and its subsidiaries, by providing such key employees of the Savings Bank and
its subsidiaries with an equity interest in the parent corporation of the
Savings Bank, Guthrie Savings, Inc. ("Parent"), as compensation for their future
professional contributions and service to the Savings Bank and its subsidiaries.
Article III
-----------
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meaning as set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Beneficiary" means the person or persons designated by the
Recipient to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, Recipient's estate.
3.02 "Board" means the Board of Directors of the Savings Bank, or any
successor corporation or Parent thereto.
3.03 "Committee" means the Management Stock Bonus Plan Committee
appointed by the Board pursuant to Article IV hereof.
3.04 "Common Stock" means shares of the common stock, $.10 par value
per share, of the Savings Bank or any successor corporation or Parent thereto.
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3.05 "Employee" means any person who is employed by the Savings Bank or
a Subsidiary.
3.06 "Effective Date" shall mean the date of stockholder ratification
of the Plan by the Parent's stockholders.
3.07 "Parent" shall mean Guthrie Savings, Inc., the parent corporation
of the Savings Bank.
3.08 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Recipient pursuant to the Plan.
3.09 "Plan Share Award" means a right granted to an Employee under this
Plan to receive Plan Shares.
3.10 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.03 and 5.04.
3.11 "Recipient" means an Employee who receives a Plan Share Award
under the Plan.
3.12 "Savings Bank" means Guthrie Federal Savings Bank, and any
successor corporation thereto.
3.13 "Subsidiary" means those subsidiaries of the Savings Bank which,
with the consent of the Board, agree to participate in this Plan.
3.14 "Trustee" or "Trustee Committee" means that person(s) or entity
nominated by the Committee and approved by the Board pursuant to Sections 4.01
and 4.02 to hold legal title to the Plan assets for the purposes set forth
herein.
Article IV
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ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of not less than three
non-employee members of the Board, which shall have all of the powers allocated
to it in this and other sections of the Plan. All persons designated as members
of the Committee shall be "disinterested persons" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended ("1934 Act"). The
interpretation and construction by the Committee of any provisions of the Plan
or of any Plan Share Award granted hereunder shall be final and binding. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee may
adopt such rules, regulations and procedures as it deems appropriate for the
conduct of its affairs. The Committee shall report its actions and decisions
with respect to the Plan to the Board at appropriate times, but in no event less
than one time per calendar year. The Committee shall recommend to the Board one
or more persons or entity to act as Trustee(s) in accordance with the provision
of this Plan and Trust and the terms of Article VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee or
Trustees shall be appointed or approved by, and will serve at the pleasure of
the Board. The Board may in its
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discretion from time to time remove members from, or add members to, the
Committee, and may remove, replace or add Trustees. The Board shall have all of
the powers allocated to it in this and other sections of the Plan, may take any
action under or with respect to the Plan which the Committee is authorized to
take, and may reverse or override any action taken or decision made by the
Committee under or with respect to the Plan, provided, however, that the Board
may not revoke any Plan Share Award already made except as provided in Section
7.01(b) herein. Members of the Board who are eligible for or who have been
granted Plan Share Awards may not vote on any matters affecting the
administration of the Plan or the grant of Plan Shares or Plan Share Awards
(although such members may be counted in determining the existence of a quorum
at any meeting of the Board during which actions taken). Further, with respect
to all actions taken by the Board in regard to the Plan, such action shall be
taken by a majority of the Board where such a majority of the directors acting
in the matter are "disinterested persons" within the meaning of Rule 16b-3
promulgated under the 1934 Act.
4.03 Limitation on Liability. No member of the Board or the Committee
or the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Share Awards granted under it. If a member of
the Board or Committee or any Trustee is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by any reason of
anything done or not done by him in such capacity under or with respect to the
Plan, the Parent shall indemnify such member against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Parent and its Subsidiaries and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Article V
---------
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board of Directors of the
Savings Bank shall determine the amounts (or the method of computing the
amounts) to be contributed by the Savings Bank to the Trust established under
this Plan. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Employees shall be permitted.
5.02 Initial Investment. Any funds held by the Trust prior to
investment in the Common Stock shall be invested by the Trustee in such
interest-bearing account or accounts at the Savings Bank as the Trustee shall
determine to be appropriate.
5.03 Investment of Trust Assets. Following ratification of the Plan by
stockholders of the Parent and receipt of any other necessary regulatory
approvals, the Trust shall purchase Common Stock of the Parent in an amount
equal to up to 100% of the Trust's assets, after providing for any required
withholding as needed for tax purposes, provided, however, that the Trust shall
not purchase more than 4% of the aggregate shares of Common Stock issued by the
Parent in the mutual-to-stock conversion of the Savings Bank ("Conversion"). The
Trustee shall purchase shares of Common Stock in the open market or, in the
alternative, shall purchase authorized but unissued shares of the Common Stock
from the Parent sufficient to fund the Plan Share Reserve.
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5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Section 6.02, or the
decision of the Committee to return Plan Shares to the Parent, the Plan Share
Reserve shall be reduced by the number of Shares subject to the Awards so
allocated or returned. Any Shares subject to an Award which may not be earned
because of forfeiture by the Recipient pursuant to Section 7.01 shall be added
to the Plan Share Reserve.
Article VI
----------
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Employees of the Savings Bank and its Subsidiaries
are eligible to receive Plan Share Awards within the sole discretion of the
Committee.
6.02 Allocations. The Committee will determine which of the Employees
referenced in Section 6.01 above will be granted Plan Share Awards and the
number of Shares covered by each Award, provided, however, that in no event
shall any Awards be made which will violate the Charter or Bylaws of the Savings
Bank or its Parent or Subsidiaries or any applicable federal or state law or
regulation. In the event Shares are forfeited for any reason or additional
Shares are purchased by the Trustee, the Committee may, from time to time,
determine which of the Employees referenced in Section 6.01 above will be
granted additional Plan Share Awards to be awarded from forfeited Shares. In
selecting those Employees to whom Plan Share Awards will be granted and the
number of shares covered by such Awards, the Committee shall consider the
position duties and responsibilities of the eligible Employees, the value of
their services to the Savings Bank and its Subsidiaries, and any other factors
the Committee may deem relevant. All actions by the Committee shall be deemed
final, except to the extent that such actions are revoked by the Board.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.02 that a Plan Share Award is to be
made, the Committee shall notify the Recipient in writing of the grant of the
Award, the number of Plan Shares covered by the Award, and the terms upon which
the Plan Shares subject to the award may be earned. The date on which the
Committee so notifies the Recipient shall be considered the date of grant of the
Plan Share Awards. The Committee shall maintain records as to all grants of Plan
Share Awards under the Plan.
6.04 Allocations Not Required. Notwithstanding anything to the contrary
in Sections 6.01 and 6.02, no Employee shall have any right or entitlement to
receive a Plan Share Award hereunder, such Awards being at the total discretion
of the Committee and the Board, nor shall the Employees as a group have such a
right. The Committee may, with the approval of the Board (or, if so directed by
the Board) return all Common Stock in the Plan Share Reserve to the Savings Bank
at any time, and cease issuing Plan Share Awards.
6.05 Awards to Directors. Notwithstanding anything herein to the
contrary, upon the Effective Date, a Plan Share Award consisting of 1,023 Plan
Shares shall be awarded to each director of the Savings Bank that is not
otherwise an Employee. Such Plan Share Award shall be earned and non-
forfeitable at the rate of one-fifth as of the Effective Date and an additional
one-fifth following each of the next four successive years during such periods
of service as a director or director emeritus. Further, such Plan Share Award
shall be immediately 100% earned and non-forfeitable in the event of the death
or disability of such director, or a change in control of the Savings Bank or
Parent as provided in Section 7.01(d) herein. Subsequent to the Effective Date,
Plan Share Awards may be awarded to newly elected
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or appointed directors of the Savings Bank by the Committee, provided that total
Plan Share Awards to non-employee directors of the Savings Bank shall not exceed
30% of total Plan Shares in the aggregate under the Plan or 5% to any individual
non-employee director.
Article VII
-----------
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earnings Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically state to the
contrary at the time a Plan Share Award is granted, Plan Shares subject to an
Award shall be earned and non-forfeitable by a Recipient at the rate of
one-fifth of such Award following one year after granting of such Award, and an
additional one-fifth following each of the next four successive years; provided
that such Recipient remains an Employee during such period. Notwithstanding
anything herein to the contrary, in no event shall a Plan Share Award granted
hereunder be earned and non-forfeitable by a Recipient more rapidly than at the
rate of one-fifth of such Award as of the one year anniversary of the date of
granting of the Award and an additional one-fifth following each of the next
four successive years.
(b) Revocation for Misconduct. Notwithstanding anything herein to the
contrary, the Board may, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to the
Recipient, whether or not yet earned, in the case of an Employee who is
discharged from the employ of the Parent, Savings Bank or a Subsidiary for Cause
(as hereinafter defined), or who is discovered after termination of employment
to have engaged in conduct that would have justified termination for cause.
"Cause" is defined as personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profits, intentional failure to
perform stated duties, willful violation of a material provision of any law,
rule or regulation (other than traffic violations and similar offense), or a
material violation of a final cease-and-desist order or any other action which
results in a substantial financial loss to the Parent, Savings Bank or its
Subsidiaries. A determination of "Cause" shall be made by the Board within its
sole discretion.
(c) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Recipient whose employment with
the Parent, Savings Bank or a Subsidiary terminates due to death or disability
(as determined by the Committee), shall be deemed earned as of the Recipient's
last day of employment with the Parent, Savings Bank or Subsidiary and shall be
distributed as soon a practicable thereafter.
(d) Exception for Termination after a Change in Control.
Notwithstanding the general rule contained in Section 7.01 above, all Plan
Shares subject to a Plan Share Award held by a recipient shall be deemed to be
immediately 100% earned and non-forfeitable in the event of a "change in
control" of the Parent or Savings Bank and shall be distributed as soon as
practicable thereafter. For purposes of this Plan, "change in control" shall
mean: (i) the execution of an agreement for the sale of all, or a material
portion, of the assets of the Parent or Savings Bank; (ii) the execution of an
agreement for a merger or recapitalization of the Parent or Savings Bank or any
merger or recapitalization whereby the
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Parent or Savings Bank is not the surviving entity; (iii) a change of control of
the Parent or Savings Bank, as otherwise defined or determined by the Office of
Thrift Supervision or regulations promulgated by it; or (iv) the acquisition,
directly or indirectly, of the beneficial ownership (within the meaning of that
term as it is used in Section 13(d) of the 1934 Act and the rules and
regulations promulgated thereunder) of twenty-five percent (25%) or more of the
outstanding voting securities of the Parent or Savings Bank by any person,
trust, entity or group. This limitation shall not apply to the purchase of
shares of up to 25% of any class of securities of the Parent or Savings Bank by
a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a change
in control has occurred shall be conclusive and binding.
7.02 Payment of Dividends. A holder of a Plan Share Award, whether or
not non-forfeitable, shall also be entitled to receive an amount equal to any
cash dividends declared and paid with respect to shares of Common Stock
represented by such Plan Share Award between the date the relevant Plan Share
Award was initially granted to such Recipient and the date the Plan Shares are
distributed. Such dividend amounts shall be held in arrears under the Trust and
distributed upon vesting of the applicable Plan Share Award.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
Subsections (d) and (e) below, Plan Shares shall be distributed to the Recipient
or his Beneficiary, as the case may be, as soon as practicable after they have
been earned. No fractional shares shall be distributed. Notwithstanding anything
herein to the contrary, at the discretion of the Committee, Plan Shares may be
distributed prior to such shares being 100% earned, provided that such Plan
Shares shall contain a restrictive legend detailing the applicable limitations
of such shares with respect to transfer and forfeiture.
(b) Form of Distribution. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earning thereon) shall be made in cash.
Notwithstanding anything within the Plan to the contrary, upon a Change in
Control whereby substantially all of the Common Stock of the Company shall be
acquired for cash, all Plan Shares associated with Plan Share Awards, together
with any shares representing stock dividends associated with Plan Share Awards,
shall be, at the sole discretion of the Committee, distributed as of the
effective date of such Change in Control, or as soon as administratively
feasible thereafter, in the form of cash equal to the consideration received in
exchange for such Common Stock represented by such Plan Shares.
(c) Withholding. The Trustee may withhold from any payment or
distribution made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such payment is not
sufficient, the Trustee may require the Recipient or Beneficiary to have the
Trustee withhold from delivery a number of Plan Shares having a fair market
value, at the time withheld, sufficient to satisfy such withholding and
employment taxes, or to pay to the Trustee the amount required to be withheld as
a condition of delivering the Plan Shares. The Trustee shall pay over to the
Parent,
B-6
<PAGE>
Savings Bank or Subsidiary which employs or employed such recipient any such
amount withheld from or paid by the Recipient or Beneficiary.
(d) Timing: Exception for 10% Shareholders. Notwithstanding Subsection
(a) above, no Plan Shares may be distributed prior to the date which is five (5)
years from the effective date of the Savings Bank's Conversion to the extent the
Recipient or Beneficiary, as the case may be, would after receipt of such Shares
own in excess of ten percent (10%) of the issued and outstanding shares of
Common Stock held by parties other than Parent, unless such action is approved
in advance by a majority vote of disinterested directors of the Board. Any Plan
Shares remaining undistributed solely by reason of the operation of this
Subsection (d) shall be distributed to the Recipient or his Beneficiary on the
date which is five years from the effective date of the Savings Bank's
Conversion.
(e) Regulatory Exceptions. No Plan Shares shall be distributed,
however, unless and until all of the requirements of all applicable law and
regulation shall have been fully complied with, including the receipt of
approval of the Plan by the stockholders of the Parent by such vote, if any, as
may be required by applicable law and regulations as determined by the Board.
7.04 Voting of Plan Shares. After a Plan Share Award has become earned
and non- forfeitable, the Recipient shall be entitled to direct the Trustee as
to the voting of the Plan Shares which are covered by the Plan Share Award and
which have not yet been distributed pursuant to Section 7.03, subject to rules
and procedures adopted by the Committee for this purpose. All shares of Common
Stock held by the Trust as to which Recipients are not entitled to direct, or
have not directed, the voting of, shall be voted by the Trustee as directed by
the Committee.
Article VIII
------------
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that
the Trustee shall have complete authority and discretion with respect to the
management, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust, except those attributable to cash dividends paid
with respect to Plan Shares not held in the Plan Share Reserve, in Common Stock
to the fullest extent practicable, and except to the extent that the Trustee
determines that the holding of monies in cash or cash equivalents is necessary
to meet the obligations of the Trust. In performing their duties, the Trustees
shall have the power to do all things and execute such instruments as may be
deemed necessary or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
the Common Stock without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and
in making such investment, the Trustees are authorized to purchase
Common Stock from
B-7
<PAGE>
Parent or from any other source, and such Common Stock so purchased may
be outstanding, newly issued, or Treasury shares.
(b) To invest in any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of deposit
(including those issued by the Savings Bank), obligations of the United
States government or its agencies or such other investments as shall be
considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the
name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a segregated account
or held in common with other assets.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust
assets shall be allocated in accordance with a reasonable procedure adopted by
the Committee, to bookkeeping accounts for Recipients or to the general account
of the Trust, depending on the nature and allocation of the assets generating
such earnings, gains and losses. In particular, any earnings on cash dividends
received with respect to shares of Common Stock shall be allocated to accounts
for Recipients, except to the extent that such cash dividends are distributed to
Recipients, if such shares are the subject of outstanding Plan Share Awards, or,
otherwise to the Plan Share Reserve.
8.05 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be paid by the Savings Bank.
B-8
<PAGE>
8.06 Indemnification. The Parent shall indemnify, defend and hold the
Trustee harmless against all claims, expenses and liabilities arising out of or
related to the exercise of the Trustee's powers and the discharge of their
duties hereunder, unless the same shall be due to their gross negligence or
willful misconduct.
Article IX
----------
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for issuance pursuant to the Plan Share Awards and the number
of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Parent.
9.02 Amendment and Termination of the Plan. The Board may, by
resolution, at any time, amend or terminate the Plan. The power to amend or
terminate the Plan shall include the power to direct the Trustee to return to
the Parent all or any part of the assets of the Trust, including shares of
Common Stock held in the Plan Share Reserve, as well as shares of Common Stock
and other assets subject to Plan Share Awards but not yet earned by the
Employees to whom they are allocated. However, the termination of the Trust
shall not affect a Recipients right to earn Plan Share Awards and to the
distribution of Common Stock relating thereto, including earnings thereon, in
accordance with the terms of this Plan and the grant by the Committee or the
Board.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Recipient, and during the lifetime of the Recipient,
Plan Shares may only be earned by and paid to the Recipient who was notified in
writing of the Award by the Committee pursuant to Section 6.03. No Recipient or
Beneficiary shall have any right in or claim to any assets of the Plan or Trust,
nor shall the Parent, Savings Bank, or any Subsidiary be subject to any claim
for benefits hereunder.
9.04 Employment Rights. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee to continue in the employ
of the Parent, Savings Bank, or a Subsidiary thereof.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights of a stockholder with respect to any Plan Shares covered by a
Plan Share Award, except as expressly provided in Sections 7.02 and 7.04 above,
prior to the time said Plan Shares are actually distributed to him.
9.06 Governing Law. The Plan and Trust shall be governed and construed
under the laws of the State of Oklahoma, except to the extent that Federal Law
shall be deemed applicable.
9.07 Effective Date. The Plan shall be as effective as of the date of
ratification of the Plan by stockholders of the Parent.
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<PAGE>
9.08 Term of Plan. This Plan shall remain in effect until the earlier
of (1) termination by the Board, (2) the distribution of all assets of the
Trust, or (3) 21 years from the Effective Date. Termination of the Plan shall
not effect any Plan Share Awards previously granted, and such Awards shall
remain valid and in effect until they have been earned and paid, or by their
terms expire or are forfeited.
9.09 Tax Status of Trust. It is intended that the trust established
hereby be treated as grantor trust of the Savings Bank under the provisions of
Section 671 et seq. of the Internal Revenue Code, as the same may be amended
from time to time.
B-10
Indemnification Agreement
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT entered into this 10th day of March, 1997, by and
between Guthrie Savings, Inc., a corporation duly organized and existing under
the laws of the State of Oklahoma (the "COMPANY"), with its principal place of
business situated in Guthrie, Logan County, Oklahoma, and James V. Seaman,
William L. Cunningham, Keith Camerer, Alvin R. Powell, Jr., and H. Stephen Ochs,
(collectively referred to as the "Directors"), and William L. Cunningham, H.
Stephen Ochs, Kathleen Warner, Deborah K. Bozarth, Kimberly Walker, Colleen
Freeman (collectively referred to as the "Officers", and individually as
"Officer").
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, the parties hereto do hereby agree as follows:
A. Persons. The COMPANY shall indemnify, to the extent provided in
paragraphs B, D or F:
1. any person who is or was a director, officer, employee, of the
COMPANY or any wholly owned subsidiary of the COMPANY, including Guthrie Federal
Savings Bank (collectively, the "Subsidiary"); and
2. any person who serves or served at the COMPANY's or
SUBSIDIARY's request as a director, officer, employee, partner or trustee of
another corporation, partnership, joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending or
completed action or suit by or in the right of the COMPANY against a person
named in paragraph A by reason of his holding a position named in paragraph A,
the COMPANY shall indemnify him if he satisfies the standard in paragraph C, for
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, except to the
extent that such individual shall otherwise be indemnified by a SUBSIDIARY.
C. Standard -- Derivative Suits. In case of a threatened, pending
or completed action or suit by or in the right of the COMPANY, a person named in
paragraph A shall be indemnified only if:
1. he is successful on the merits or otherwise; or
2. he acted in good faith in the transaction which is the subject
of the suit or action, and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the COMPANY, including, but not limited to, the
taking of any and all actions in connection with the COMPANY's response to any
tender offer or any offer or proposal of another party to engage in a Business
Combination (as defined at Article XIV of the Company's Certificate of
Incorporation ("Certificate")) not approved by the board of directors. However,
he shall not be indemnified in respect of any claim, issue or matter as to which
he has been adjudged liable to the COMPANY unless (and only to the extent that)
the Court of Chancery or the court in which the suit was brought shall
determine, upon application, that despite the adjudication but
<PAGE>
in view of all the circumstances, he is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending or
completed suit, action or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the COMPANY, together
hereafter referred to as a nonderivative suit, against a person named in
paragraph A by reason of his holding a position named in paragraph A, the
COMPANY shall indemnify him if he satisfies the standard in paragraph E, for
amounts actually and reasonably incurred by him in connection with the defense
or settlement of the nonderivative suit, including, but not limited to (i)
expenses (including attorneys' fees), (ii) amounts paid in settlement, (iii)
judgments, and (iv) fines, except to the extent that such individual shall
otherwise be indemnified by a SUBSIDIARY.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit,
a person named in paragraph A shall be indemnified only if:
1. he is successful on the merits or otherwise; or
2. he acted in good faith in the transaction which is the
subject of the nonderivative suit and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the COMPANY, including, but not
limited to, the taking of any and all actions in connection with the COMPANY's
response to any tender offer or any offer or proposal of another party to engage
in a Business Combination (as defined in Article XIV of the Certificate) not
approved by the board of directors and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. The
termination of a nonderivative suit by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent shall not, in itself, create
a presumption that the person failed to satisfy the standard of this paragraph
E.2.
F. Determination That Standard Has Been Met. A determination that
the standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in paragraph C.2 (second sentence), the determination may be
made by:
1. the board of directors by a majority vote of a quorum
consisting of directors of the COMPANY who were not parties to the action, suit
or proceeding; or
2. independent legal counsel (appointed by a majority of the
disinterested directors of the COMPANY, whether or not a quorum) in a written
opinion; or
3. the stockholders of the COMPANY.
G. Proration. Anyone making a determination under paragraph F may
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The COMPANY may pay in advance any expenses
(including attorneys' fees) which may become subject to indemnification under
paragraphs A-G if the person receiving the payment undertakes in writing to
repay the same if it is ultimately
2
<PAGE>
determined that he is not entitled to indemnification by the COMPANY under
paragraphs A-G.
I. Nonexclusive. The indemnification and advancement of expenses
provided by paragraphs A-H or otherwise granted pursuant to Oklahoma law shall
not be exclusive of any other rights to which a person may be entitled by law,
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
J. Continuation. The indemnification and advance payment provided by
paragraphs A-H shall continue as to a person who has ceased to hold a position
named in paragraph A and shall inure to his heirs, executors and administrators.
K. Insurance. The COMPANY may purchase and maintain insurance on behalf
of any person who holds or who has held any position named in paragraph A,
against any liability asserted against him and incurred by him in any such
position, or arising out of his status as such, whether or not the COMPANY would
have power to indemnify him against such liability under paragraphs A-H of
Article XVIII of the Certificate.
L. Savings Clause.
1. If Article XVIII of the Certificate or any portion of this Agreement
shall be invalidated on any ground by any court of competent jurisdiction, then
the COMPANY shall nevertheless indemnify each director, officer, employee, and
agent of the COMPANY as to costs, charges, and expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement with respect to any
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the COMPANY to the full
extent permitted by any applicable portion of Article XVIII of the Certificate
that shall not have been invalidated and to the full extent permitted by
applicable law.
2. If Oklahoma law is amended to permit further indemnification of the
directors, officers, employees and agents of the COMPANY and its SUBSIDIARY,
then the COMPANY shall indemnify such persons to the fullest extent permitted by
Oklahoma law, as so amended. Any repeal or modification of Article XVIII of the
Certificate by the stockholders of the COMPANY shall not adversely affect any
right or protection of a director, officer, employee or agent existing at the
time of such repeal or modification.
M. Regulatory Limitations.
a) Notwithstanding anything herein to the contrary, no indemnification
shall be made in accordance with this Agreement if such action would result in
the COMPANY being in violation of a final cease and desist order issued by the
Office of Thrift Supervision or the Federal Deposit Insurance Corporation.
(b) Notwithstanding anything herein to the contrary, the
indemnification provided for in accordance with this Agreement is subject to and
qualified by the limitations as contained at 12 U.S.C. 1821(k) to the extent
applicable.
3
<PAGE>
N. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of such
together shall constitute one and the same instrument.
O. Headings and Construction. The headings contained in this Agreement
are inserted for convenience only, and shall not constitute a part hereof.
P. Binding Effect. This agreement shall be binding upon all parties
signatory hereto and their respective heirs, legal representatives, successors
and assigns.
Q. Invalidity. If any one or more of the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect the
remaining provisions of this Agreement, and this document shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein.
R. Entire Purchase Contract. This Agreement constitutes the entire
Agreement between the parties hereto and supersedes any and all prior and
contemporaneous negotiations, agreements and understandings between the parties
hereto pertaining to the subject matter hereof.
S. Examination. The parties' signatory hereto hereby state and
acknowledge that they have heretofore examined, reviewed and inspected all
books, records, documents and related data regarding the COMPANY. Pursuant to
such exercise, each party's signatory hereto states and acknowledges that it is
satisfied in all respects regarding the assets, liabilities, claims, rights,
duties and business affairs of the COMPANY. Each of the undersigned further
acknowledges that he/she has read this Agreement, understands the contents
thereof, and has had the opportunity for an independent attorney of his/her
choosing who is not a party hereto, to review this Agreement on his/her behalf
and has been advised accordingly by such independent attorney.
T. Governing Law. It is agreed between the parties hereto that this
Agreement shall be construed by the laws of the State of Oklahoma, except to the
extent that federal law shall be deemed to preempt such state law.
4
INDEMNIFICATION AGREEMENT
THIS AGREEMENT entered into this 10th day of March, 1997, by and
between Guthrie Federal Savings Bank, a federally chartered stock savings bank,
duly organized and existing under the laws of the United States of America (the
"BANK"), with its principal place of business situated in Guthrie, Logan County,
Oklahoma, and James V. Seaman, William L. Cunningham, Keith Camerer, Alvin R.
Powell, Jr., and H. Stephen Ochs, (collectively referred to as the "Directors"),
and William L. Cunningham, H. Stephen Ochs, Kathleen Warner, Deborah K. Bozarth,
Kimberly Walker, Colleen Freeman (collectively referred to as the "Officers",
and individually as "Officer").
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, the parties hereto do hereby agree as follows:
1. DEFINITION. For purposes of this Agreement, the following terms
shall have the following meaning:
a) Qualified Action. The term "qualified action" means any judicial or
administrative proceeding, or threatened proceeding, whether civil, criminal, or
otherwise, including any appeal or other proceeding for review;
b) Court. The term "court" includes, without limitation, any court to
which or in which any appeal or any proceeding for review is brought.
c) Final Judgment. The term "final judgment" means a judgment, decree
or order which is not appealable or as to which the period for appeal has
expired with no appeal taken.
d) Settlement. The term "settlement" includes entry of a judgment by
consent or confession or a plea of guilty or nolo contendere.
References in this section to any individual or other persons,
including any association, shall include legal representatives, successors, and
assigns thereof.
2. INDEMNITY. The BANK, in consideration of, and as an inducement to
the Directors to serve on the BANK'S Board of Directors, and to the Officers of
the BANK for their service, subject to the terms and conditions of this
Agreement, agrees to indemnify and hold harmless the Directors and Officers from
and against liability for the following:
a) Any amount for which a Director or Officer, becomes liable under a
judgment in a qualified action; and
b) Reasonable costs and expenses, including reasonable attorney's fees,
actually paid or incurred by a Director or Officer in defending or settling a
qualified action, or in enforcing his or her rights under this Agreement if he
or she attains a favorable judgment in such qualified enforcement action.
<PAGE>
c) The BANK shall have the power to indemnify any Director or Officer
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative by reason of the fact that he/she is or was a
director of the BANK, against expenses (incurred but not limited to attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he/she
acted in good faith and in a manner he/she reasonably believed to be in or not
opposed to the best interests of the BANK, and, with respect to any criminal
action or proceeding had no reasonable cause to believe his/her conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea or nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he/she reasonably believed to be in or not opposed o
the best interest of the BANK, and with respect to any criminal action or
proceeding, has reasonable cause to believe that his/her conduct was unlawful.
d) The BANK shall have the power to indemnify any Director or Officer
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the BANK to procure a
judgment in its factor by reason of the fact that he/she is or was a director of
the BANK, against expenses (including but not limited to attorney fees) actually
and reasonably incurred by him/her in connection with the defense or settlement
of such action or suit if he/she acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the BANK and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such Director shall have been adjudged to be liable for negligence
or misconduct in the performance of his/her duty to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine upon application, that despite the adjudication or liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
3. CONDITIONS PRECEDENT. THE BANK shall indemnify a Director or Officer
as provided herein, only if:
a) Final judgment on the merits is entered in favor of the Director or
Officer seeking indemnification; or
b) In case of:
1) Settlement,
2) Final judgment against him or her, or
3) Final judgment in his or her favor, other than on the
merits, if a majority of the disinterested Directors
of the BANK determine that he or she was acting in
good faith within the scope of his or her employment
or authority as he or she could reasonably have
perceived it under the circumstances and for a
purpose he or she could have believed under the
circumstances was in the best interests of the BANK
or its depositors or shareholders.
2
<PAGE>
c) Any indemnification under subsections (a) or (b) (unless ordered by
a court) shall be made by the BANK only as authorized in the specific case upon
a determination that indemnification of the Director or Officer is proper in the
circumstances because he/she has met the applicable standard of conduct set
forth in subsections (a) or (b). Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceedings, or (2) by the
shareholders.
d) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person.
4. INSURANCE. The BANK may obtain insurance to protect it and its
Directors and Officers from potential losses arising from claims against either
of them for alleged wrongful acts, or wrongful acts, committed in their capacity
as Directors or Officers. However, no right exists to secure insurance providing
for payment of losses of any Director or Officer incurred as a consequence of
his or her willful or criminal misconduct.
5. PAYMENT OF EXPENSES. If a majority of the Directors of the BANK
conclude that, in connection with a qualified action, a Director or Officer
ultimately may become entitled to indemnification under this Agreement, the
Directors or Officers may authorize payment of reasonable costs and expenses,
including reasonable attorneys' fees, arising from the defense or settlement of
such qualified action. Nothing in this paragraph shall prevent the Directors or
Officers of the BANK from imposing such conditions on a payment of expenses as
they deem warranted and in the interests of the BANK. Prior to making any
advance payment of expenses under this paragraph, the BANK shall obtain a
written agreement from the affected Director or Officer that the BANK will be
repaid if the Director or Officer on whose behalf payment is made is later
determined not to be entitled to such indemnification. The BANK may also require
an undertaking of the Director or Officer by or on behalf of the Director or
Officer to repay such amount unless it shall ultimately be determined that he or
she is entitled to be indemnified by the BANK as provided in this Agreement.
6. EXCLUSIONS. A Director or Officer shall not be entitled to
indemnification in connection with any action, suit, or proceeding, arising out
of or relating to conduct of the director or Officer which constitutes:
a) A breach of the Director's or Officer's duty of loyalty to the BANK
or its shareholders;
b) An act or omission not in good faith or which involves intentional
misconduct or a violation of law; or
c) Any transaction from which the Director or Officer seeking
indemnification derived an improper personal benefit.
3
<PAGE>
7. REGULATORY LIMITATIONS.
a) Notwithstanding anything herein to the contrary, no indemnification
shall be made in accordance with this Agreement unless the BANK gives the Office
Of Thrift Supervision ("OTS") at least 60 days' notice of its intention to make
such indemnification in accordance with OTS regulations at 12 CFR 545.121. Such
notice shall state the facts on which the action arose, the terms of any
settlement, and any disposition of the action by a court. Such notice, a copy
thereof, and a certified copy of the resolution containing the required
determination by the Board of Directors shall be sent to the Regional Director
of the OTS, who shall promptly acknowledge receipt thereof. The notice period
shall run from the date of such receipt. No such indemnification shall be made
if the Regional Director of the OTS advises the BANK in writing, within such
notice period, of its objection thereto.
(b) Notwithstanding anything herein to the contrary, the
indemnification provided for in accordance with this Agreement is subject to and
qualified by the limitations as contained at 12 U.S.C. 1821(k).
8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of such
together shall constitute one and the same instrument.
9. HEADINGS AND CONSTRUCTION. The headings contained in this Agreement
are inserted for convenience only, and shall not constitute a part hereof.
10. BINDING EFFECT. This agreement shall be binding upon all parties
signatory hereto and their respective heirs, legal representatives, successors
and assigns.
11. INVALIDITY. If any one or more of the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect the
remaining provisions of this Agreement, and this document shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein.
12. ENTIRE PURCHASE CONTRACT. This Agreement constitutes the entire
Agreement between the parties hereto and supersedes any and all prior and
contemporaneous negotiations, agreements and understandings between the parties
hereto pertaining to the subject matter hereof.
13. EXAMINATION. The parties' signatory hereto hereby state and
acknowledge that they have heretofore examined, reviewed and inspected all
books, records, documents and related data regarding the BANK. Pursuant to such
exercise, each party's signatory hereto states and acknowledges that it is
satisfied in all respects regarding the assets, liabilities, claims, rights,
duties and business affairs of the BANK. Each of the undersigned further
acknowledges that he/she has read this Agreement, understands the contents
thereof, and has had the opportunity for an independent attorney of his/her
choosing who is not a party hereto, to review this Agreement on his/her behalf
and has been advised accordingly by such independent attorney.
14. GOVERNING LAW. It is agreed between the parties hereto that this
Agreement shall be construed by the laws of the State of Oklahoma, except to the
extent that federal law shall be deemed to preempt such state law.
4
EXHIBIT 13
<PAGE>
[** LOGO **]
Guthrie Savings, Inc.
Annual Report - 1997
<PAGE>
Guthrie Savings, Inc.
ANNUAL REPORT - 1997
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Letter to
Stockholders............................................................. 1
Corporate Profile and Stock Price
Information.............................................................. 2
Five-Year Financial
Summary.................................................................. 3
Management's Discussion and
Analysis................................................................. 5
Independent Auditor's
Report................................................................... F-1
Consolidated Financial
Statements............................................................... F-2
Notes to Consolidated Financial
Statements............................................................... F-7
Corporate
Information.............................................................. 17
<PAGE>
To Our Stockholders:
It is our pleasure to present to you the annual report of Guthrie Savings,
Inc. for the year ending March 31, 1997.
Net income for the year ended March 31, 1997 was $380,380 or $0.89 per share.
This represents a 34.97% decrease in income from the year ended March 31, 1996.
This decrease is the direct result of a special assessment of SAIF insurance.
On September 30, 1996, President Clinton signed into law a bill that provided
for a special assessment of SAIF insured institutions amounting to 65.7 basis
points applied to the institutions deposit base measured as of March 31, 1995.
The total amount of the special assessment for Guthrie Federal Savings Bank was
$225,433, which was accrued as of September 30, 1996. The after tax effect of
the assessment was to reduce net income by approximately $149,000 for the twelve
months ended March 31, 1997. Without the effect of the assessment net income
would have been approximately $530,000 for the twelve months ended March 31,
1997. Earnings per share without the effect of the assessment would have been
approximately $1.24 for the year ended March 31, 1997.
Total assets increased 4.76% to $49.0 million during the year while total
deposits decreased 5.56% to $34.3 million. Stockholders' equity was $8.0 million
at March 31, 1996 compared to $7.8 million at March 31, 1997. This decrease is
the result of an approved repurchase of 34,268 shares of outstanding stock.
In January the Board of Directors declared a $0.50 per share dividend payable to
stockholders of record January 31, 1997. This dividend was the third dividend
declared by the Bank since the issuance of our stock in October 1994. The cash
dividend was paid as a result of the continued profitability of the Company and
its wholly owned subsidiary, Guthrie Federal Savings Bank.
The Company was approved to repurchase an additional 15 % of our outstanding
shares before October 11, 1997. If this repurchase is completed, the total
amount of stock repurchased will be 25% of the original outstanding shares.
As always, we will concentrate our efforts on building shareholder value while
maintaining and building on our financial strength.
We appreciate the strong and loyal support that our stockholders and employees
have given us during the past years and ask for your continued support in the
future.
Sincerely,
/s/ William L. Cunningham
William L. Cunningham
President and Chief Executive Officer
- 1 -
<PAGE>
Guthrie Savings, Inc..
Corporate Profile and Related Information
Guthrie Savings, Inc. (the "Company") is the parent company for Guthrie Federal
Savings Bank (the "Bank"). The Company is an Oklahoma corporation organized in
May 1994 at the direction of Guthrie Federal Savings and Loan Association (the
"Association") in connection with the Association's conversion from the mutual
to stock form of ownership (the "Conversion"). On October 11, 1994, the
Association completed its conversion and changed its name to Guthrie Federal
Savings Bank and became a wholly owned subsidiary of the Company. The Company 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 the Bank retains a specified amount of its assets in housing-related
investments. At the present time, since the Company does not conduct any active
business, the Company does not intend to employ any persons other than officers
but utilizes the support staff and facilities of the Bank from time to time.
Guthrie Federal Savings Bank is a federally chartered stock savings bank
headquartered in Guthrie, Oklahoma. The Bank was founded in 1906 with a charter
from the Territory of Oklahoma under the name of "Employees Building and Loan
Association." Employees Building and Loan Association became known as "Guthrie
Savings and Loan Association" in 1968 when it changed its name. In early August
1994, Guthrie became a federal association under the name "Guthrie Federal
Savings and Loan Association." The Bank changed its name to Guthrie Federal
Savings Bank in October of 1994 in connection with its conversion from mutual to
stock form. The Bank's deposits have been federally insured by the Savings
Association Insurance Fund ("SAIF") and its predecessor, the Federal Savings and
Loan Insurance Corporation, since 1948, and the Bank is a member of the Federal
Home Loan Bank (the "FHLB") System.
Guthrie Federal Savings Bank is primarily engaged in attracting deposits from
the general public and using those deposits, together with other funds, to
originate real estate loans on one-to four-family residences and, to a lesser
extent, consumer loans. The Bank has one office in Guthrie, Oklahoma, which is
located in its primary market area of Logan County, Oklahoma. In addition, the
Bank holds interest bearing deposits in other financial institutions and invests
in mortgage-backed securities and investment securities. The Bank offers its
customers fixed-rate and adjustable-rate mortgage loans, as well as consumer
loans, including home equity and savings account loans.
Stock Market Information
There were 450,359 shares of common stock (net of treasury stock) of Guthrie
Savings, Inc. outstanding on March 31, 1997, held by approximately 200
stockholders of record (not including the number of persons or entities holding
the stock in nominee or street name though various brokerage firms). Since its
issuance in October 1994, the Company's common stock has been traded in the
over-the-counter market. The following table reflects high and low bid
information for stock quotations as published by the National Daily Quotation
System "pink sheets". These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions.
Year Ended March 31,
-----------------------------------------
1997 1996
---------------- --------------------
HIGH LOW HIGH LOW
------- ------ -------- -------
First Quarter 13 1/2 13 13 10 1/4
Second Quarter 13 1/2 13 13 1/2 12 1/2
Third Quarter 14 13 13 3/8 13 1/4
Fourth Quarter 14 1/2 14 13 1/2 13 3/8
During the year ended March 31, 1997 the Board of Directors declared and paid a
dividend of $0.50 per share. During the year ended March 31, 1996 the Company
declared a dividend of $0.50 per share that was paid on April 10, 1996. The
Company's ability to pay dividends to shareholders is largely dependent upon the
dividends it receives from the Bank. The Bank is subject to regulatory
limitations on the amount of cash dividends it may pay. The Bank may not declare
or pay a cash dividend on any of its stock if the effect thereof would cause the
Bank's regulatory capital to be reduced below (1) the amount required for the
liquidation account established in connection with the Bank's conversion from
mutual to stock form, or (2) the regulatory capital requirements imposed by the
Office of Thrift Supervision ("OTS").
- 2 -
<PAGE>
<TABLE>
<CAPTION>
Guthrie Savings, Inc.
=========================================================================================================
FIVE-YEAR FINANCIAL SUMMARY
Selected Financial Condition Data (Dollars in Thousands) (*)
=========================================================================================================
At March 31, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 49,047 $ 46,820 $ 44,727 $ 42,839 $ 44,723
Loans receivable 23,461 22,972 23,182 21,630 23,867
Investment securities held-to-maturity 8,700 9,751 8,366 5,485 3,281
Investment securities available-for-sale 2,062 2,133 929 659 0
Mortgage-backed securities held-to-maturity 13,273 9,428 9,869 11,145 14,025
Cash and cash equivalents 523 1,402 1,090 2,392 2,226
Deposits 34,293 36,311 34,543 39,084 41,194
Borrowed money 6,700 2,000 1,700 - -
Stockholders' equity 7,805 8,049 8,236 3,410 2,746
</TABLE>
<TABLE>
<CAPTION>
Summary of Operations (Dollars in Thousands) (*)
- ---------------------------------------------------------------------------------------------------------
Year Ended March 31, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 3,632 $ 3,416 $ 3,198 $ 3,274 $ 3,695
Interest expense 1,833 1,761 1,489 1,512 1,950
-------- -------- -------- -------- --------
Net interest income 1,799 1,655 1,709 1,762 1,745
Provision for loan losses 1 (132) 12 70 247
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses 1,798 1,787 1,697 1,692 1,498
Non-interest income 251 336 193 215 243
Non-interest expense (1) 1,416 1,229 1,095 1,093 967
-------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of accounting change 633 894 795 814 774
Provision for income taxes 253 309 250 278 264
-------- -------- -------- -------- --------
Income before cumulative effect of
accounting change 380 585 545 536 510
Cumulative effect of accounting change - - - 128 0
-------- -------- -------- -------- --------
Net income $ 380 $ 585 $ 545 $ 664 $ 510
======== ======== ======== ======== ========
Earnings per share* (2) $ 0.89 $ 1.25 $ 0.48 $ - $ -
======== ======== ======== ======== ========
Dividends per share (2) $ 0.50 $ 0.50 $ 0.20 $ - $ -
======== ======== ======== ======== ========
Book value per common share
outstanding at March 31 $ 17.33 $ 16.61 $ 15.99 $ - $ -
======== ======== ======== ======== ========
</TABLE>
* Data presented prior to October 11, 1994, the date of conversion, is for
Guthrie Federal Savings Bank only.
(1) For 1997, includes $225,000 for a special assessment to recapitalize the
federal deposit insurance fund to which Guthrie Federal Savings Bank pays
premiums.
(2) For periods following conversion from mutual to stock on October 11, 1994
(1995 - October 11, 1994 through March 31, 1995).
- 3 -
<PAGE>
<TABLE>
<CAPTION>
Guthrie Savings, Inc.
========================================================================================================
FIVE-YEAR FINANCIAL SUMMARY
Selected Ratios and Other Data (*)
========================================================================================================
Year Ended March 31, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Return on average assets 0.79% 1.30% 1.24% 1.51% 1.10
Return on average equity 4.89 7.12 10.39 22.53 20.49
Average equity to average assets 16.13 18.18 11.93 6.71 5.38
Equity to assets at period end 15.91 17.19 18.41 7.96 6.14
Net interest spread 3.14 2.98 3.59 3.95 3.77
Net yield on average interest earning assets 3.81 3.78 4.02 4.15 3.92
Non-performing loans to total assets 0.85 1.33 1.80 1.35 3.07
Non-performing loans to net loans 1.79 2.72 3.46 2.68 5.75
Non-performing assets to total assets 0.85 1.33 1.94 1.80 3.55
Allowance for loan losses to total loans 1.61 1.70 2.33 2.58 2.68
Dividend payout 55.32 38.08 17.38
Number of:
Real estate loans outstanding 550 576 621 633 738
Deposit accounts 4,538 4,772 4,744 5,133 5,335
</TABLE>
[GRAPHIC OMITTED - Net Income using data from chart on prior page]
[GRAPHIC OMITTED - Non-performing Assets/Total Assets, using data from chart
above]
[GRAPHIC OMITTED - Total Assets, using data from chart on prior page]
[GRAPHIC OMITTED - Stockholders' Equity, using data from chart on prior page]
(*) Data presented prior to October 11, 1994, the date of conversion, is for
Guthrie Federal Savings Bank only.
- 4 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
On October 11, 1994, Guthrie Federal Savings and Loan Association completed its
conversion from a federally chartered mutual savings association to a federally
chartered mutual savings bank and changed its name to Guthrie Federal Savings
Bank. The Bank was simultaneously acquired by Guthrie Savings, Inc., a
corporation which was formed to act as the holding company of the Bank. At the
date of conversion, the Company completed the sale of 515,125 shares of common
stock, $0.01 par value, through concurrent Subscription and Community Offerings
at $10.00 per share. The $5,151,250 raised in the stock offering was comprised
of approximately $4,291,250 in cash and $860,000 of funds withdrawn by
depositors from existing accounts. Net proceeds from the Conversion were
$4,356,175, after recognizing Conversion expenses and underwriting costs of
$382,975 and the stock acquired by the Employees' Stock Ownership Plan ("ESOP").
Guthrie Federal Savings Bank is primarily engaged in the business of accepting
deposit accounts from the general public and using these funds to originate
mortgage loans for the purchase or refinancing of single-family residences
located in Logan and northern Oklahoma counties in Oklahoma, and for the
purchase of mortgage-backed and investment securities. The Bank also originates
automobile loans, second mortgage loans, and deposit loans.
The earnings of the Bank depend primarily on its level of net interest income,
which is the difference between interest income and interest expense. The Bank's
net interest income is a function of its interest rate spread, which is
determined by the difference between rates of interest earned on
interest-earning assets, and rates of interest paid on interest-bearing
liabilities. The Bank's earnings are also affected by its provision for losses
on loans, as well as the amount of non-interest income and non-interest expense,
such as compensation and related expenses, deposit insurance premiums, data
processing costs, and income taxes. Earnings of the Bank are also affected
significantly by general economic and competitive conditions, particularly
changes in market interest rates, government policies and actions of regulatory
authorities.
Financial Condition
Consolidated total assets increased $2,227,625, or 4.76%, from $46,819,631 at
March 31, 1996 to $49,047,256 at March 31, 1997. The principal factor
contributing to the growth in assets was an increase in mortgage-backed
securities funded largely through additional Federal Home Loan Bank advances.
Investment securities:
The Bank's securities portfolio provides liquidity for additional lending as
well as additional interest income. The investment securities in the portfolio
have varying maturities of ten years or less. Investment securities, including
available-for-sale, decreased $1,121,897, or 9.44% from $11,883,624 at March 31,
1996 to $10,761,727 at March 31, 1997. This decrease is directly related to the
increase in the mortgage-backed securities portfolio discussed in the next
paragraph; as securities matured, excess funds were used to purchase
mortgage-backed securities.
- 5 -
<PAGE>
Mortgage-backed securities:
Mortgage-backed securities increased $3,845,032, or 40.78%, from $9,428,366 at
March 31, 1996 to $13,273,398 at March 31, 1997. The Bank purchased $5,227,289
of mortgage-backed securities during the year ended March 31, 1997 compared to
purchases of $1,000,965 and $257,050 during the years ended March 31, 1996 and
1995, respectively. The Bank has been focusing on using its excess funds to
increase its mortgage-backed securities portfolio during the year ended March
31, 1997, contributing to the decrease in investment securities. As investment
securities matured during the year the proceeds were used to purchase
mortgage-backed securities. The Bank also used funds provided by FHLB adjustable
rate advances to purchase mortgage-backed securities. Collateralized mortgage
obligations ("CMO's") were purchased in conjunction with FHLB adjustable-rate
advances with the intent to match the interest rate base and repricing dates to
establish a desired interest rate spread. The yield on mortgage-backed
securities at March 31, 1997 was 6.81% compared to a yield on investment
securities of 6.49%. Mortgage-backed securities generally provide for lower
returns than loans originated by the Bank and are utilized when investable funds
exceed loan demand.
The Company had net unrealized losses on investment securities held-to-maturity,
not reflected on the consolidated financial statements, of $120,894 and $56,136
at March 31, 1997 and 1996, respectively. The Company had net unrealized losses
on mortgage-backed securities held-to-maturity, not reflected on the
consolidated financial statements, of $87,596 and $55,366 at March 31, 1997 and
1996, respectively. This overall decline in fair market value below the
amortized cost of these securities held-to-maturity at March 31, 1997 and 1996
is deemed to be due to temporary changes in the interest rate environment. The
Bank has capital sufficient to support these net unrealized losses. The Company
has experienced increases in the net unrealized losses on investments and
mortgage-backed securities held-to-maturity due to the current interest rate
environment.
Loans receivable:
Net loans receivable increased $489,692, or 2.13%, from $22,971,565 at March 31,
1996 to $23,461,257 at March 31, 1997. This growth in the loan portfolio is
attributed to increased lending activity as a result of increased loan demand.
This increase was primarily due to an increase in consumer and other loans of
$486,003 from $2,371,097 at March 31, 1996 to $2,857,100 at March 31, 1997.
The Bank has recognized impaired loans having recorded investments of $366,316
at March 31, 1997 and $348,895 at March 31, 1996. A loan is impaired when, based
on management's evaluation of current and historical information and events, it
is probable that all amounts due according to the contractual terms of the loan
agreement will not be collected. Loans which are classified as impaired are
typically collateral dependent; therefore, impairment is measured based upon the
fair value of the collateral less estimated costs to sell. Impairment is
recognized by creating a valuation allowance with a corresponding charge to
provision for loss on loans.
Management, as a part of the monitoring and evaluation of non-performing loans,
classifies loans in accordance with regulatory provisions as loss, doubtful or
substandard. Total loans classified as of March 31, 1997 and 1996, amounted to
$673,647 and $920,663, respectively, including loans recognized as impaired.
Those loans classified which are not recognized as impaired include loans which
are currently past due 60 days or more or have a past history of delinquency.
The level of classified loans has continued to decline primarily as a result of
improving economic conditions and real estate values. Classified loans have been
considered by management in the evaluation of the adequacy of the allowance for
loan loss. Management is unaware of any trends which it reasonably expects will
materially impact future operating results, liquidity, or capital resources.
- 6 -
<PAGE>
Foreclosed real estate:
There was no foreclosed real estate ("REO") at March 31, 1997 and 1996. REO has
been steadily decreasing during the last five years.
Deposits:
Deposits decreased from $36,310,860 at March 31, 1996 to $34,293,278 at March
31, 1997, a decrease of $2,017,582, or 5.56%. This decrease resulted, in part,
from higher interest rates being paid by the Bank on a promotional account
offered in April of 1995 for six month and one year certificates which matured
prior to March 31, 1997. Many of these deposits from customers other than the
Bank's local customer base were withdrawn after the promotion ended or within
the next deposit maturity cycle. The Bank continues to offer rates consistent
with rates offered by other financial institutions in the area but has not
focused on offering aggressive rates to increase the deposit base. The average
cost on deposits decreased slightly from 4.81% for the year ended March 31, 1996
to 4.42% for the year ended March 31, 1997.
Of the $23,202,273 in certificates of deposit held by the Bank at March 31,
1997, $18,517,517 of these deposits will mature during the year ended March 31,
1998. The majority of the Bank's time deposits consist of regular deposits from
consumers within the Bank's surrounding community rather than institutional or
brokered deposit accounts. As a result, most of these accounts of local
customers are expected to be renewed.
Advances and other borrowings from Federal Home Loan Bank: The Bank has
continued to utilize advances from the FHLB as a source of funds. Fixed term
advances from the FHLB totaled $6,000,000 and $2,000,000 at March 31,1997 and
1996, respectively. Of the fixed term advances at March 31, 1997, $2,000,000
were fixed rate advances and $4,000,000 were adjustable rate advances. The
advance outstanding at March 31, 1996 was at a fixed interest rate. The funds
provided by the adjustable rate advances were used primarily to purchase
mortgage-backed securities. The advances and related mortgage-backed security
purchases were initiated together and are intended to match the interest rate
base and repricing dates.
The Bank also has a line of credit with the FHLB with an outstanding balance of
$700,000 and $0 at March 31,1997 and 1996, respectively. The funds provided by
the line of credit are used to fund lending and for regular operations.
These borrowings resulted in a $4,700,000 increase in advances and other
borrowings from the FHLB from March 31, 1996 to March 31, 1997. The weighted
average cost of theses borrowings from the FHLB was 5.50% and 5.46% for the
years ended March 31, 1997 and 1996, respectively. Of the advances and other
borrowings outstanding at March 31, 1997, $6,004,000 matures during the year
ended March 31, 1998.
Asset and Liability Management
The ability to maximize net interest income is largely dependent upon the
achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes
- 7 -
<PAGE>
in interest rates over a period of time. A gap is considered positive when the
amount of interest-rate sensitive assets maturing, or repricing over a specified
period of time, exceeds the amount of interest-rate sensitive liabilities
maturing or repricing within that period and is considered negative when the
amount of interest-rate sensitive liabilities maturing or repricing over a
specified period of time exceeds the amount of interest-rate sensitive assets
maturing or repricing within that period. Generally, during a period of rising
interest rates, a negative gap within a given period of time would adversely
affect net interest income, while a positive gap within a given period of time
would result in an increase in net interest income; during a period of falling
interest rates, a negative gap within a given period of time would result in an
increase in net interest income while a positive gap within a given period of
time would have the opposite effect.
In an effort to reduce interest rate risk and protect it from the negative
effect of increases in interest rates, the Bank has instituted certain asset and
liability management measures. The primary elements of this strategy include:
(i) balance sheet restructuring, and (ii) asset/liability management.
Management's strategy for asset/liability management has consisted of (i)
minimizing the origination of fixed rate mortgage loans with maturities of more
than 15 years, (ii) originating adjustable rate mortgage loans for portfolio
where maturities exceed 15 years, (iii) originating consumer and equity loans
that are short-term or adjustable, (iv) collecting fee income from fixed rate
loans with terms of more than 15 years that the Bank refers to other financial
institution, and (v) focusing marketing efforts and pricing to extend the
average maturities on deposits.
Quarterly, the OTS prepares a report on the interest rate sensitivity of the net
portfolio value ("NPV") from information provided by Bank. The OTS adopted a
rule in August 1993 incorporating an interest rate risk ("IRR") component into
the risk-based capital rules. Implementation of the rule has been delayed until
the OTS has tested the process under which institutions may appeal such capital
deductions. The IRR component is a dollar amount that will be deducted from
total capital for the purpose of calculating an institution's risk-based capital
requirement and is measured in terms of the sensitivity of its NPV to changes in
interest rates. The NPV is the difference between incoming and outgoing
discounted cash flows from assets, liabilities, and off-balance sheet contracts.
An institution's IRR is measured as the change to its NPV as the result of a
hypothetical 200 basis point change in market interest rates. A resulting change
in NPV of more than 2% of the estimated market value of its assets will require
the institution to deduct from its capital 50% of that excess change. The rule
provides that the OTS will calculate the IRR component quarterly for each
institution. The following tables present the Bank's NPV as well as other data
as of March 31, 1997, as calculated by the OTS, based on information provided to
the OTS by the Bank.
<TABLE>
<CAPTION>
Change in Interest
Rates in Basis NPV as % of Present
Points (Rate Shock) Net Portfolio Value Value of Assets
- ------------------------- ----------------------------------------- --------------------
$ Amount $ Change Change % NPV Ratio Change
------------ ------------- ---------- ----------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+400 bp $ 4,856 (3,137) (39) % 10.48% -543 bp
+300 bp $ 5,744 (2,250) (28) % 12.11% -380 bp
+200 bp (1) $ 6,637 (1,356) (17) % 13.69% -222 bp
+100 bp $ 7,399 (594) (7) % 14.96% -95 bp
0 bp $ 7,993 15.91%
-100 bp $ 8,361 368 5 % 16.46% +55 bp
-200 bp $ 8,398 404 5 % 16.45% +54 bp
-300 bp $ 8,400 407 5 % 16.39% +48 bp
-400 bp $ 8,550 557 7 % 16.57% +66 bp
</TABLE>
- ---------------------
(1) Denotes rate shock used to compute interest rate risk capital component.
- 8 -
<PAGE>
<TABLE>
<CAPTION>
March 31, 1997
-------------------
Risk Measures (200 Basis Point Rate Shock):
<S> <C>
Pre-Shock NPV Ratio: NPV as % of Present Value of Assets 15.91 %
Exposure Measure: Post-Shock NPV Ratio 13.69 %
Sensitivity Measure: Change in NPV Ratio -222 bp
Calculation of Capital Component:
Change in NPV as % of Present Value of Assets 2.70 %
</TABLE>
Utilizing the data above, the Bank, at March 31,1997, would have been considered
by the OTS to have been subject to "above normal" interest rate risk and a
deduction from risk-based capital would have been required.
Set forth below is a breakout, by basis points of the Bank's NPV as of March 31,
1997 by assets, liabilities and off-balance sheet items.
<TABLE>
<CAPTION>
Net Portfolio Value -400 bp -300 bp -200 bp -100 bp Change +100 bp +200 bp +300 bp +400 bp
- ------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets $ 51,614 $ 51,253 $ 51,044 $ 50,804 $ 50,238 $ 49,447 $ 48,494 $ 47,413 $ 46,341
- -Liabilities 43,080 42,866 42,657 42,450 42,249 42,050 41,856 41,665 41,478
+Off Balance Sheet 16 13 11 7 4 2 (1) (4) (7)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- ---------
Net Portfolio Value $ 8,550 $ 8,400 $ 8,398 $ 8,361 $ 7,993 $ 7,399 $ 6,637 $ 5,744 $ 4,856
=========== =========== =========== =========== =========== =========== =========== ============= =========
</TABLE>
Certain assumptions utilized by the OTS in assessing the interest rate risk of
savings associations were employed in preparing the previous table. These
assumptions related to interest rates, loan prepayment rates, deposit decay
rates, and the market values of certain assets under the various interest rate
scenarios. It was also assumed that delinquency rates will not change as a
result of changes in interest rates although there can be no assurance that this
will be the case. Even if interest rates change in the designated amounts, there
can be no assurance that the Bank's assets and liabilities would perform as set
forth above.
Certain shortcomings are inherent in the preceding NPV tables because the data
reflect hypothetical changes in NPV based upon assumptions used by the OTS to
evaluate the Bank as well as other institutions. However, net interest income
should decline with instantaneous increases in interest rates while net interest
income should increase with instantaneous declines in interest rates. Generally,
during periods of increasing interest rates, the Bank's interest rate sensitive
liabilities would reprice faster than its interest rate sensitive assets causing
a decline in the Bank's interest rate spread and margin. This would result from
an increase in the Bank's cost of funds that would not be immediately offset by
an increase in its yield on earning assets. An increase in the cost of funds
without an equivalent increase in the yield on earning assets would tend to
reduce net interest income.
In times of decreasing interest rates, fixed rate assets could increase in value
and the lag in repricing of interest rate sensitive assets could be expected to
have a positive effect on the Bank's net interest income.
- 9 -
<PAGE>
Average Balances, Interest and Average Yields and Rates
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
presented. Average balances are derived from month-end balances. Management does
not believe that the use of month-end balances instead of daily average balances
has caused any material difference in the information presented.
<TABLE>
<CAPTION>
Years Ended March 31,
--------------------------------------------------------------
At March 31,
1997 1997 1996
----------- ------------------------------ -------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
-------- -------- ---------- --------- -------- ----------
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Loans receivable (1) 8.74% $ 22,895 $ 2,087 9.12% $ 22,729 $ 2,087 9.19%
Mortgage-backed securities 6.81% 12,146 775 6.38% 9,507 599 6.31%
Investment securities (2) 6.49% 11,224 735 6.55% 9,385 616 6.57%
Other interest-earning assets 5.72% 866 35 4.04% 2,170 114 5.27%
---- -------- ------- ------ -------- ------- -----
Total interest-earning assets 7.68% $ 47,131 $ 3,632 7.71% $ 43,791 $ 3,416 7.80%
==== ======== ======= ==== ======== ======= ====
Non-interest-earning assets: 1,151 1,376
-------- --------
Total assets $ 48,282 $ 45,167
======== ========
Interest-bearing liabilities:
Savings accounts 2.60% $ 3,136 $ 81 2.58% $ 3,481 $ 102 2.94%
Demand deposits 2.44% 8,249 201 2.44% 8,083 235 2.90%
Certificates of deposit 5.42% 23,187 1,247 5.38% 24,653 1,405 5.69%
Other borrowed funds 5.70% 5,545 305 5.50% 348 19 5.46%
---- -------- ------- ------ -------- ------- ------
Total interest-bearing liabilities 4.67% 40,117 $ 1,834 4.57% 36,565 $ 1,761 4.82%
==== ======== ======= ====== ======== ======== ======
Non-interest bearing liabilities 379 394
-------- --------
Total liabilities 40,496 $ 36,959
======== ========
Stockholder's equity 7,786 8,208
-------- --------
Total liabilities and stockholders'
equity 48,282 $ 45,167
======== ========
Net interest income $ 1,798 $ 1,655
======= =======
Interest rate spread (3) 3.01% 3.14% 2.98%
==== ====== ======
Net yield on interest-earning assets (4) 3.81% 3.78%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 117.48% 119.79%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Years Ended March 31,
-------------------------------
1995
--------------------------------
Average Average
Balance Interest Yield/Cost
--------- --------- -----------
Interest-earning assets:
<S> <C> <C> <C>
Loans receivable (1) $ 22,316 $ 2,036 9.12%
Mortgage-backed securities 10,341 584 5.65%
Investment securities (2) 7,975 498 6.24%
Other interest-earning assets 1,853 81 4.37%
-------- -------- ------
Total interest-earning assets $ 42,485 $ 3,199 7.53%
======== ======== ====
Non-interest-earning assets: 1,513
--------
Total assets $ 43,998
========
Interest-bearing liabilities:
Savings accounts $ 3,772 $ 113 3.00%
Demand deposits 9,426 278 2.95%
Certificates of deposit 23,736 1,039 4.38%
Other borrowed funds 916 59 6.44%
-------- -------- ------
Total interest-bearing liabilities $ 37,850 $ 1,489 3.93%
======== ======== ======
Non-interest bearing liabilities 898
--------
Total liabilities $ 38,748
========
Stockholder's equity 5,250
--------
Total liabilities and stockholders'
equity $ 43,998
========
Net interest income $ 1,710
========
Interest rate spread (3) 3.60%
======
Net yield on interest-earning assets (4) 4.03%
======
Ratio of average interest-earning assets
to average interest-bearing liabilities 112.25%
======
</TABLE>
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
-10 -
<PAGE>
The following Rate/Volume Analysis table presents, for the periods indicated,
information regarding changes in interest income and interest expense (in
thousands) of the Bank. 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 old rate); (ii)
changes in rates (changes in rate multiplied by old average volume); and (iii)
changes in rate-volume (changes in rate multiplied by the change in average
volume).
<TABLE>
<CAPTION>
Years Ended March 31,
---------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
---------------------------------- ---------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
---------------------------------- ---------------------------------
Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net
------ ------ ------ ------- ------- ------ ------ ------
(In Thousands)
Interest income:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable $ 15 $ (15) $ -- $ -- $ 38 $ 16 $ (3) $ 51
Mortgage-backed securities 167 7 2 176 (47) 68 (6) 15
Investment securities 121 (1) (1) 119 88 26 4 118
Other interest-earning assets (69) (26) 16 (79) 14 17 2 33
----- ----- ----- ----- ----- ---- ----- -----
Total interest-earning assets $ 234 $ (35) $ 17 $ 216 $ 93 127 $ (3) 217
===== ===== ===== ===== ===== ==== ===== =====
Interest expense:
Savings accounts $ (10) $ (13) $ 2 $ (21) $ (9) $ (2) $ -- (11)
Demand deposits 4 (37) (1) (34) (40) (5) 2 (43)
Certificates of deposits (84) (77) 3 (158) 40 311 15 366
Other borrowed funds 283 -- 3 286 (37) (9) 6 (40)
----- ----- ----- ----- ----- ---- ----- -----
Total interest-bearing liabilities $ 193 $(127) $ 7 $ 73 $ (46) $ 295 $ 23 $ 272
===== ===== ===== ===== ===== ==== ===== =====
Net change in interest income $ 41 $ 92 $ 10 $ 143 $ 139 (168) $ (26) $ (55)
===== ===== ===== ===== ===== ==== ===== =====
</TABLE>
Comparison of Operating Results for the Years Ended March 31, 1997 and 1996
General:
Net income decreased $204,578 or 34.97%, from $584,958 at March 31, 1997 to
$380,380 for the year ended March 31, 1997. This decrease related primarily to a
special one-time SAIF assessment of $225,433.
On September 30, 1996, President Clinton signed into law a bill that provided
for a special assessment of SAIF insured institutions amounting to 65.7 basis
points applied to the Bank's deposit base measured as of March 31, 1995. The
total amount of the special assessment for the Bank was included in expense and
paid during the year ended March 31, 1997. The after tax effect of the
assessment was to reduce net income by approximately $149,000 for the year ended
March 31, 1997. Without the effect of the assessment net income would have been
approximately $530,000 for the year ended March 31, 1997. Earnings per share
without the effect of the assessment would have been approximately $1.24 for the
year ended March 31, 1997.
Beginning January 1, 1997, deposit insurance assessments for SAIF members were
reduced to approximately 6.4 basis points of deposits on an annual basis and are
expected to remain at that rate through the end of 1999, down from the previous
level of 23 basis points, a reduction in the rate of
- 11 -
<PAGE>
deposit insurance assessed the Bank of approximately 70%. Through 1999 BIF
members are expected to be assessed at approximately 1.3 basis points on
deposits. Thereafter, assessments for BIF and SAIF members should be the same
and SAIF and BIF may be merged. It is expected that these continuing assessments
for both SAIF and BIF members will be used to repay outstanding Financing
Corporation bond obligations.
The disparity in insurance premiums between those required for the Bank and BIF
members could allow BIF members to attract and retain deposits at higher
interest rates and at a lower effective cost than the Bank. This could put
competitive pressure on the Bank to raise its interest rates paid on deposits,
thus increasing its cost of funds and possibly reducing net interest income.
Although the Bank has other sources of funds, these other sources may have
higher costs than those of deposits.
The operating results of the Company depend to a great degree on its net
interest income, which is the difference between interest income on
interest-earning assets, primarily loans, mortgage-backed securities and
investment securities, and interest expense on interest-bearing liabilities,
primarily deposits and borrowings. The Company's net income is also affected by
the level of its provision for losses on loans, non-interest income and
non-interest expense.
Net interest income:
The Bank's net interest income for the year ended March 31, 1997 increased
$143,107, or 8.65%, from $1,655,297 for the year ended March 31, 1996 to
$1,798,404 for the year ended March 31, 1997. Interest income increased $215,600
and interest expense increased $72,493. Yields on the Company's interest-earning
assets declined by 9 basis points during the year ended March 31, 1997, and the
rates paid on the Company's interest-bearing liabilities decreased by 25 basis
points resulting in a slight increase in the interest rate spread to 3.14% for
the year ended March 31, 1997 from 2.98% for the year ended March 31, 1996.
The $215,600 increase in total interest income is primarily the result of the
$175,716 increase in interest on mortgage-backed securities and $40,031 increase
in interest on investment securities. The increase in mortgage-backed
securities, as reflected in the Bank's rate/volume analysis, resulting from an
increase in the volume of mortgage-backed securities was $167,000.
The $72,493 increase in total interest expense consists primarily of a $285,501
increase in interest on borrowed funds offset by a $213,008 decrease in interest
expense on deposits. As reflected in the Bank's rate/volume analysis, the
increase in interest expense resulting from the increased volume of borrowed
funds was $283,000, while the net decrease in interest expense on deposits
resulting from the changes in rate was $127,000 and in volume was $90,000.
Provision for losses on loans:
The Bank currently maintains an allowance for loan losses based upon
management's periodic evaluation of known and inherent risks in the loan
portfolio, the Bank's past loss experience, adverse situations that may affect
the borrowers' ability to repay loans, estimated value of the underlying
collateral and current and expected market conditions. The provision for losses
on loans is the method by which the allowance for losses is adjusted during the
period. The provision for losses on loans directly impacts net interest income;
the amount of the provision for losses on loans reduces net interest income by
the same amount. Likewise, if a provision for losses on loans is regularly
recorded in prior periods and a smaller, or no, provision for losses on loans is
recorded during a subsequent period, the amount of the reduction has the effect
of increasing net interest income by that same amount.
- 12 -
<PAGE>
The provision for loan losses was $763 and ($131,875) for the years ended March
31, 1997 and 1996, respectively. The provision for loan losses decreased
significantly during the year ended March 31, 1996, as a result of management's
evaluation of the adequacy of the allowance for losses on loans after
considering the loan portfolio in conjunction with current and expected market
conditions. This decrease in the provision for losses on loans is primarily
attributable to an improving economy and real estate market in the primary
market area, resulting in a decrease in non-performing loans. The allowance for
loan losses as a percent of non-performing assets was 1.61% at March 31, 1997
and 1.70% at March 31, 1996. Charge-offs, net of recoveries, remained comparable
between 1997 and 1996, consisting of approximately $15,260 in 1997 and $16,372
in 1996.
While the Bank maintains its allowance for losses at a level that it considers
to be adequate to provide for potential losses, there can be no assurance that
further additions will not be made to the loss allowance and that such losses
will not exceed the estimated amounts.
Non-interest income:
Non-interest income decreased $84,888 from $336,165 for the year ended March 31,
1996 to $251,277 for the year ended March 31, 1997. During the year ended March
31, 1997, the Bank realized gains of $46,528 from the sale of certain equity
investments. This gain was offset by a decrease in gain from real estate
operations. During the year ended March 31, 1996 the Company experienced
$134,788 income from real estate operations from a gain on the sale of a parcel
of land that the bank obtained through foreclosure of a participation loan.
Non-interest expense:
Non-interest expense increased $186,506 or 15.17% for the year ended March 31,
1997 compared to March 31, 1996. The increase was primarily the result of the
special one-time SAIF assessment of $225,433, discussed earlier.
Exclusive of the special SAIF assessment incurred during the year ended March
31, 1997, non-interest expense decreased $39,000 from $1,229,369 for the year
ended March 31, 1996 to $1,190,442 for the year ended March 31, 1997. This
relates to decreases in professional fees and federal insurance premiums.
Federal insurance premiums decreased $19,354 or 23.53% due to the decrease in
insurance assessments which were effective January 1, 1997, as discussed
earlier.
Income taxes:
The Bank's income tax expense decreased $56,347, or 18.23%, from $309,010 for
the year ended March 31, 1996 to $252,663 for the year ended March 31, 1997.
This decrease in income tax resulted from a decrease in pre-tax income largely
attributable to the accrual of the special SAIF assessment. Tax benefit
attributable to the SAIF assessment was approximately $75,000.
Comparison of Operating Results for the Years Ended March 31, 1996 and 1995
General:
Net income increased $39,680, or 7.28%, from $545,278 for the year ended March
31, 1995 to $584,958 for the year ended March 31, 1996. This increase was
primarily the result of a decrease in the provision for losses on loans of
$143,576 and gain from real estate operations of $134,788. These items, which
- 13 -
<PAGE>
have contributed to income, would not be expected to be recurring in future
years. Income before income taxes, excluding these items would have been
$627,305 at March 31, 1996, compared to $794,934 for the year ended March 31,
1995. Partially due to a negative gap and a rising interest rate environment,
net interest income declined from $1,709,142 for 1995 to $1,655,297 for 1996.
Additionally, exclusive of the gain from real estate operations in 1996,
non-interest expense increased from $1,111,816 for 1995 to $1,229,369 for 1996.
Total interest income:
Total interest income increased $217,754, or 6.81%, from $3,198,633 for the year
ended March 31, 1995 to $3,416,387 for the year ended March 31, 1996. This
increase is primarily the result of an increase in investment securities during
the year ended March 31, 1996, this is reflected in the Bank's rate/volume
analysis as the increase in interest income resulting from the volume of
investment securities was $88,000.
Interest expense:
Total interest expense increased $271,599 or 18.23%, from $1,489,491 for the
year ended March 31, 1995 to $1,761,090 for the year ended March 31, 1996. This
increase is primarily due to an increase in market interest rates paid on
deposits and the relatively rapid repricing of the deposit base. This is
reflected in the Bank's rate/volume analysis as approximately $295,000 of the
increase in interest expense was due to interest rate changes. Although this
results in an increase in interest expense, there was a $46,000 reduction in
interest expense resulting from a decrease in the volume of interest-bearing
liabilities.
Net interest income:
As a result of rising interest rates during the year ended March 31, 1996, net
interest income declined from $1,709,142 for the year ended March 31, 1995 to
$1,655,297 for the year ended March 31, 1996. Net interest income declined
$168,000 as a result of rising interest rates. This was partially offset by an
increase in net interest income attributable to an increase in the volume of
interest bearing assets over interest bearing liabilities of $139,000.
Provision for losses on loans:
The provision for loan losses was ($131,875) and $11,701 for the years ended
March 31, 1996 and 1995, respectively. The provision for loan losses decreased
$143,576 for the year ended March 31, 1996 as a result of management's
evaluation of the adequacy of the allowance for losses on loans after
considering the loan portfolio in conjunction with current and expected market
conditions. The allowance for loan losses as a percent of non-performing assets
was 62.7% at March 31, 1996 compared to 63.1% at March 31, 1995.
Non-interest income:
Non-interest income increased $143,270 from $192,895 for the year ended March
31, 1995 to $336,165 for the year ended March 31, 1996. This increase is the
result in a gain from real estate operations. The Company experienced $134,788
income from real estate operations during the year ended March 31, 1996 compared
to a $16,418 loss from real estate operations for the year ended March 31, 1995.
The increase in income was the result of a gain on the sale of a parcel of land
that the bank obtained through foreclosure of a participation loan.
Non-interest expense:
Total non-interest expense increased $133,971 from $1,095,398 for the year ended
March 31, 1995 to $1,229,369 for the year ended March 31, 1996. Compensation and
related expenses increased $67,263 or
- 14 -
<PAGE>
13.08% from $514,244 for the year ended March 31, 1995 to $581,507 for the year
ended March 31, 1996, this primarily resulted from additional compensation
expense related to the ESOP and the Management Stock Bonus Plan (the "MSBP")
which were in place throughout all or most of the year. Compensation expense
included eight months of amortization expense relating to the MSBP. Professional
fees also increased $62,961 during the year from $71,783 for the year ended
March 31, 1995 to $134,744 for the year ended March 31, 1996, this increase
relates to additional professional services required as a result of the
conversion.
Income tax expense:
Income tax expense increased 23.77% from $249,660 for the year ended March 31,
1995 to $309,010 for the year ended March 31, 1996. This increase relates to an
increase in pre-tax income.
Liquidity and Capital Resources
Liquidity is measured by a financial institution's ability to raise funds
through deposits, borrowed funds, capital or the sale of highly marketable
assets such as available-for-sale securities. Additional sources of liquidity,
including cash flow from both repayment of loans and maturity of investment
securities, are also included in determining whether liquidity is satisfactory.
During the year ended March 31, 1997, cash and cash equivalents decreased by
$879,280 as compared to March 31, 1996. The decrease was the result of cash used
in investing activities of $3,237,915 off set by cash generated from operating
activities of $588,693 and financing activities of $1,769,942. The increase in
cash and cash equivalents used by investing activities resulted primarily from
the acquisition of held-to-maturity mortgage-backed securities. The increase in
cash provided by financing activities was largely attributable to an increase in
Federal Home Loan Bank ("FHLB") advances and borrowings of $4,700,000. As of
March 31, 1997, the Bank had an existing line of credit with the FHLB of
$2,500,000 against which the Bank had an outstanding balance of $700,000 that
could serve as an additional source of liquidity.
During 1996, cash and cash equivalents increased by $311,636, primarily as a
result of an increase in deposits of $1,764,923 resulting in total funds
provided by financing activities of $1,383,266. The Company also had net cash
provided by operating activities of $603,234. The cash provided by financing and
operating activities were partially offset by cash used by investing activities
of $1,674,864. Cash and cash equivalents used by investing activities resulted
primarily form the acquisition of held-to-maturity and available-for-sale
investment securities.
The Bank is required under applicable federal regulations to maintain specified
levels of "liquid" investments in qualifying types of U.S. Government, federal
agency and other investments having maturities of five years or less. Current
OTS regulations require that a savings bank maintain liquid assets of not less
than 5% of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less, of which short-term liquid assets must
consist of not less than 1%. At March 31, 1997, the Bank met its liquidity
requirement and expects to meet this requirement in the future. The Bank adjusts
liquidity as appropriate to meet its asset/liability objectives.
OTS has also set minimum capital requirements for savings banks such as the
Bank. The capital standards generally require the maintenance of regulatory
capital sufficient to meet a tangible capital requirement, a core capital
requirement and a risk-based capital requirement. At March 31, 1997 the Bank
exceeded all of the minimum capital requirements as currently required. Please
refer to Note 11 of the accompanying Notes to Consolidated Financial Statements
for more information regarding the Bank's regulatory capital position at March
31, 1997.
- 15 -
<PAGE>
Impact of Inflation and Changing Prices
The financial statements of Guthrie Savings, Inc. and notes thereto, presented
elsewhere herein, have been prepared in accordance with generally accepted
accounting principles, which require 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 Bank's operations.
Nearly all the assets and liabilities of the Bank are monetary. As a result,
interest rates have a greater impact on the Bank's performance than do the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the price of goods and services.
Impact of New Accounting Standards
Please refer to Note 1 of the accompanying Notes to Consolidated Financial
Statements for more information regarding the impact of new accounting
standards.
- 16 -
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders of
Guthrie Savings, Inc.
Guthrie, Oklahoma
We have audited the accompanying consolidated statements of financial condition
of Guthrie Savings, Inc. and subsidiary as of March 31, 1997 and 1996 and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the three years in the period ended March 31, 1997.
These financial statements are the responsibility of the Corporation'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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Guthrie Savings, Inc. and
subsidiary as of March 31, 1997 and 1996, and the results of their operations
and cash flows for each of the three years in the period ended March 31, 1997 in
conformity with generally accepted accounting principles.
/s/ Regier Carr & Monroe, L.L.P.
Regier Carr & Monroe, L.L.P.
April 26, 1997
Wichita, Kansas
F - 1
<PAGE>
Guthrie Savings, Inc.
Consolidated Statements of Financial Condition
March 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------ ------------
Cash and cash equivalents:
<S> <C> <C>
Interest bearing $ 311,624 $ 989,674
Non-interest bearing 211,205 412,435
------------ ------------
Total cash and cash equivalents 522,829 1,402,109
Investment securities held-to-maturity (estimated market
value of $8,579,106 and 9,694,395 at March 31,
1997 and 1996, respectively) 8,700,000 9,750,531
Investment securities available-for-sale 2,061,727 2,133,093
Mortgage-backed securities held-to-maturity (estimated
market value of $13,185,802 and $9,373,000 at
March 31, 1997 and 1996, respectively) 13,273,398 9,428,366
Loans receivable, net 23,461,257 22,971,565
Accrued income receivable 330,277 363,528
Real estate owned and other repossessed assets, net
Office properties and equipment, net 598,633 627,836
Income taxes receivable, current 31,758
Prepaid expenses and other assets 99,135 110,845
------------ ------------
Total assets $ 49,047,256 $ 46,819,631
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 34,293,278 $ 36,310,860
Advances and other borrowings from
Federal Home Loan Bank 6,700,000 2,000,000
Advances from borrowers for taxes and insurance 32,830 40,298
Dividend payable 222,740
Other liabilities and accrued expense 60,805 78,784
Deferred income 57,956 61,143
Income taxes payable, current 17,816
Deferred income taxes 79,531 57,151
------------ ------------
Total liabilities 41,242,216 38,770,976
------------ ------------
Commitments
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized; no shares outstanding
Common stock, $0.01 par value; 3,000,000 shares
authorized; 515,125 shares issued and outstanding 5,151 5,151
Additional paid-in capital 4,779,668 4,765,516
Retained income, substantially restricted 4,392,507 4,222,553
Unrealized loss on available-for-sale securities (46,379) (9,916)
Unamortized stock acquired by Employee Stock
Ownership Plan (309,075) (350,285)
Unamortized compensation related to Management
Stock Bonus Plan (134,836) (175,286)
Treasury stock, at cost, 64,766 and 30,498 shares
at March 31, 1997 and 1996, respectively (881,996) (409,078)
------------ ------------
Total stockholders' equity 7,805,040 8,048,655
------------ ------------
Total liabilities and stockholders' equity $ 49,047,256 $ 46,819,631
============ ============
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-2
<PAGE>
Guthrie Savings, Inc.
Consolidated Statements of Operations
Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
Interest income:
<S> <C> <C> <C>
Interest on loans $ 2,087,179 $ 2,087,326 $ 2,036,441
Interest on mortgage-backed securities 774,790 599,074 584,158
Interest and dividends on investment securities 770,018 729,987 578,034
----------- ----------- -----------
Total interest income 3,631,987 3,416,387 3,198,633
----------- ----------- -----------
Interest expense:
Deposits 1,528,658 1,741,666 1,429,948
Borrowed funds 304,925 19,424 59,543
----------- ----------- -----------
Total interest expense 1,833,583 1,761,090 1,489,491
----------- ----------- -----------
Net interest income 1,798,404 1,655,297 1,709,142
Provision for losses on loans 763 (131,875) 11,701
----------- ----------- -----------
Net interest income after loan loss
provision 1,797,641 1,787,172 1,697,441
----------- ----------- -----------
Non-interest income:
Service charges 164,561 166,907 176,076
Net gain on sale of investments 46,528
Gain (loss) from real estate operations 12 134,788 (16,418)
Other 40,176 34,470 33,237
----------- ----------- -----------
Total non-interest income 251,277 336,165 192,895
----------- ----------- -----------
Non-interest expense:
Compensation and related expenses 589,319 581,507 514,244
Occupancy expense 63,368 62,947 66,001
Professional fees 118,628 134,744 71,783
Federal insurance premium 62,913 82,267 87,970
SAIF special assessment 225,433
Data processing 83,210 93,594 88,305
Bank charges 57,922 52,438 53,326
Other expense 215,082 221,872 213,769
----------- ----------- -----------
Total non-interest expense 1,415,875 1,229,369 1,095,398
----------- ----------- -----------
Income before income taxes 633,043 893,968 794,938
----------- ----------- -----------
Income taxes:
Currently payable 211,499 205,832 237,504
Deferred tax expense (benefit) 41,164 103,178 12,156
----------- ----------- -----------
252,663 309,010 249,660
----------- ----------- -----------
Net income $ 380,380 $ 584,958 $ 545,278
=========== =========== ===========
Earnings per share (period subsequent to
initial issuance of common stock on
October 11, 1994 for 1995) $ 0.89 $ 1.25 $ 0.48
=========== =========== ===========
Weighted average common shares outstanding 425,222 467,697 473,915
=========== =========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-3
<PAGE>
Guthrie Savings, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Unamortized
Unrealized Common Unamortized
Gain (Loss) on Stock Compensation Total
Common Paid-In Retained Available-for- Acquired by Related to Treasury Stockholders'
Stock Capital Earnings Sale Securities ESOP MSBP Stock Equity
--------- ----------- ----------- --------------- ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1994 $ - $ - $ 3,409,840 $ - $ - $ - $ - $ 3,409,840
Net proceeds on common
stock issued in stock
conversion 5,151 4,763,124 (412,100) 4,356,175
Allocation of shares
by Employees' Stock
Ownership Plan 169 20,605 20,774
Net income for the year
ended March 31, 1995 545,278 545,278
Cash dividend paid ($0.20
per share) (94,783) (94,783)
Net change in unrealized
loss on available-for-
sale securities (915) (915)
-------- ----------- ----------- -------- ---------- ----------- ---------- -----------
Balance, March 31, 1995 5,151 4,763,293 3,860,335 (915) (391,495) - - 8,236,369
Acquisition of 20,605
shares of common stock
by Management Stock
Bonus Plan, 15,863
shares awarded, 4,742
held in treasury (9,518) (202,253) (63,312) (275,083)
Allocation of shares by
Employees' Stock
Ownership Plan 11,741 41,210 52,951
Amortization of
compensation related
to Management Stock
Bonus Plan 26,967 26,967
Net income for the year
ended March 31, 1996 584,958 584,958
Cash dividend paid
($0.50 per share) (222,740) (222,740)
Net change in unrealized
loss on available-for-
sale securities (9,001) (9,001)
Purchase of 25,756
treasury shares (345,766) (345,766)
-------- ----------- ----------- -------- ---------- ----------- ---------- -----------
Balance, March 31, 1996 5,151 4,765,516 4,222,553 (9,916) (350,285) (175,286) (409,078) 8,048,655
Allocation of shares by
Employees' Stock
Ownership Plan 14,152 41,210 55,362
Amortization of
compensation related
to Management Stock
Bonus Plan 40,450 40,450
Net income for the year
ended March 31, 1997 380,380 380,380
Cash dividend paid
($0.50 per share) (210,426) (210,426)
Net change in unrealized
loss on available-for-
sale securities (36,463) (36,463)
Purchase of 34,268
treasury shares (472,918) (472,918)
-------- ----------- ----------- -------- ---------- ----------- ---------- -----------
Balance, March 31, 1997 $ 5,151 $ 4,779,668 $ 4,392,507 $(46,379) $ (309,075) ($ 134,836) $ (881,996) $ 7,805,040
======== =========== =========== ======== ========== =========== ========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-4
<PAGE>
Guthrie Savings, Inc.
Consolidated Statements of Cash Flows
Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 380,380 $ 584,958 $ 545,278
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investments (46,528)
(Gain) loss on sale of real estate acquired
in settlement of loans 1,698 (114,611) (5,344)
Depreciation 37,027 48,245 54,918
Amortization of premiums and
discounts on investments and loans 3,660 24,535 29,156
Provision for losses on loans and real
estate owned 763 (131,875) 39,214
(Increase) decrease in accrued interest
receivable 33,251 (7,506) (58,552)
(Increase) decrease in other assets 11,710 3,368 (1,674)
Increase (decrease ) in accrued expenses (17,979) 18,332 (72,974)
Increase (decrease) in accrued and deferred
income taxes 90,738 123,516 (58,196)
Amortization related to ESOP and MSBP 95,812 79,918 20,774
Other non-cash items, net (1,839) (25,646) (8,419)
----------- ------------ ------------
Net cash provided by operating activities 588,693 603,234 484,181
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations and principal payments
on loans held-for-investment (485,968) 254,832 (1,465,163)
Proceeds from maturity of time deposits 200,000
Proceeds from maturities and calls of investment
securities held-to-maturity 1,550,000 2,850,000
Proceeds from sales of investment securities
available-for-sale 102,347
Proceeds from maturities and calls of investment
securities available-for-sale 300,000
Acquisition of investment securities held-to-maturity (500,000) (4,250,000) (2,899,531)
Acquisition of investment securities available-for-sale (39,700) (1,518,100) (300,000)
Repayment of mortgage-backed securities 1,357,171 1,415,997 1,501,042
Acquisition of mortgage-backed securities
held-to-maturity (5,227,289) (1,000,965) (257,050)
Acquisition of fixed assets (7,824) (12,800) (16,922)
Proceeds from sale of real estate acquired in settlement
of loans 13,348 286,122 39,604
Other investing activities 50 (25,287)
----------- ------------ ------------
Net cash used by investing activities (3,237,915) (1,674,864) (3,223,307)
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-5
<PAGE>
Guthrie Savings, Inc.
Consolidated Statements of Cash Flows (Continued)
Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Net increase (decrease) in deposits $ (2,016,506) $ 1,764,923 $ (4,542,902)
Net decrease in escrow accounts (7,468) (60,808) (1,161)
Proceeds from FHLB advance and other borrowings 12,000,000 2,300,000 2,700,000
Repayment of FHLB advance and other borrowings (7,300,000) (2,000,000) (1,000,000)
Proceeds from stock issuance, net of conversion
costs and stock acquired by ESOP 4,376,238
Purchase of treasury stock (472,918) (345,766)
Purchase of company stock by MSBP held in treasury (63,312)
Purchase of company stock by MSBP
awarded to participants (211,771)
Cash dividends paid (433,166) (94,783)
------------ ------------ ------------
Net cash provided by financing activities 1,769,942 1,383,266 1,437,392
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (879,280) 311,636 (1,301,734)
Cash and cash equivalents at beginning of year 1,402,109 1,090,473 2,392,207
------------ ------------ ------------
Cash and cash equivalents at end of year $ 522,829 $ 1,402,109 $ 1,090,473
============ ============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest on deposits, advances and other
borrowings $ 1,835,422 $ 1,760,621 $ 1,488,215
============ ============ ============
Income taxes $ 189,059 $ 226,170 $ 307,856
============ ============ ============
Transfers from loans to real estate acquired
through foreclosure $ 54,446 $ 107,333 $ 57,786
============ ============ ============
Transfers to (from) real estate acquired through
foreclosure from deferred income $ - $ (351) $ (11,398)
============ =========== ============
Loans to finance sale of real estate
through foreclosure $ 39,400 $ 32,500 $ 136,038
============ ============ ============
Dividend declared and payable $ - $ 222,740 $ -
============ ============ ============
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-6
<PAGE>
Guthrie Savings, Inc.
Notes to Consolidated Financial Statements
March 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies
Nature of operations:
Guthrie Savings, Inc. (the Company) is an Oklahoma corporation and is the
parent company of its wholly-owned subsidiary, Guthrie Federal Savings
Bank (the Bank). At the present time, the Company does not conduct any
active business.
Guthrie Federal Savings Bank is primarily engaged in attracting deposits
from the general public and using those deposits, together with other
funds, to originate real estate loans on one- to four-family residences,
and, to a lesser extent, consumer loans. The Bank has one office in
Guthrie, Oklahoma, which is located in its primary market area of Logan
County, Oklahoma. In addition, the Bank holds interest-bearing deposits
in other financial institutions and invests in mortgage-backed securities
and investment securities. The Bank offers its customers fixed-rate and
adjustable-rate mortgage loans, as well as consumer loans, including home
equity and savings account loans.
Principles of consolidation:
The accompanying consolidated financial statements include the accounts
of Guthrie Savings, Inc. and its wholly-owned subsidiary, Guthrie Federal
Savings Bank. Significant intercompany transactions and balances have
been eliminated.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ significantly
from those estimates.
Material estimates that are particularly susceptible to significant
change in the near-term relate to the determination of the allowance for
loan losses and the valuation of assets acquired in connection with
foreclosures or in satisfaction of loans. In connection with the
determination of the allowances for loan losses and the valuation of
assets acquired by foreclosure, management obtains independent appraisals
for significant properties.
Management believes that the allowances for losses on loans and
valuations of assets acquired by foreclosure are adequate and
appropriate. While management uses available information to recognize
losses on loans and assets acquired by foreclosure, future loss may be
accruable based on changes in economic conditions, particularly in
central Oklahoma. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the
Bank's allowances for losses on loans and valuations of assets acquired
by foreclosure. Such agencies may require the Bank to recognize
additional losses based on their judgment of information available to
them at the time of their examination.
F-7
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
Cash and cash equivalents:
Cash and cash equivalents include unrestricted cash on hand, demand
deposits maintained in depository institutions and other readily
convertible investments with original contractual terms to maturity of
three months or less.
Investment and mortgage-backed securities:
Investments, including mortgage-backed securities, are classified as
either held-to-maturity, trading, or available-for-sale. Held-to-maturity
securities are securities for which the Bank has the positive intent and
ability to hold to maturity and are reported at amortized cost. Trading
securities are securities held principally for resale are reported at
fair value, with unrealized changes in value reported in the
institution's income statement as part of its earnings.
Available-for-sale securities are securities not classified as trading
nor as held-to-maturity securities and are also reported at fair value,
but any unrealized appreciation or depreciation, net of tax effects, are
reported as a separate component of equity.
Gains or losses on sales of available-for-sale securities are determined
using the specific-identification method. All sales are made without
recourse.
Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
Loans receivable:
Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported at their
outstanding principal balances, net of deferred income on loans,
undisbursed loan proceeds and the allowance for loss on loans. Premiums
and discounts on loans are amortized into income using the interest
method.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated
value of any underlying collateral, current level of non-performing
assets, and current economic conditions.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received.
Loan origination fees and certain direct costs are capitalized and
recognized as an adjustment of the yield of the related loan.
Foreclosed real estate:
Real estate properties acquired through, or in lieu of, loan foreclosure
are to be sold and are initially recorded at fair value at the date of
foreclosure establishing a new cost basis. Valuations are periodically
performed by management, and an allowance for losses is established by a
charge to operations if the carrying value of a property exceeds the fair
value less estimated costs to sell. Revenue and expenses from operations
and changes in the valuation allowance are included in gain or loss on
foreclosed real estate. The historical average holding period for such
property is approximately one year.
F-8
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
Off-balance sheet instruments:
In the ordinary course of business the Bank has entered into off-balance
sheet financial instruments consisting of commitments to extend credit,
commitments under credit card arrangements, commercial letters of credit,
and standby letters of credit. Such financial instruments are recorded in
the financial statements when they are funded or related fees are
incurred or received.
Office properties and equipment:
Office properties and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on a straight-line basis or
accelerated methods over the estimated useful lives of five to fifty
years for buildings and improvements and three to twenty years for
furniture, fixtures, equipment and automobiles.
Income taxes:
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As changes
in tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
Stock-based compensation:
In October, 1995, the FASB issued SFAS No. 123, Accounting for
Stock-Based Compensation. This Statement establishes a fair-value-based
method of accounting for stock compensation plans with employees and
others. It applies to all arrangements under which employees receive
shares of stock or other equity instruments of the employer, or the
employer incurs liabilities to employees in amounts based on the price of
the employer's stock. Although encouraged to do so, entities are not
required to adopt the recognition and measurement aspects of SFAS No.
123, and may continue to account for stock-based compensation plans in
accordance with APB Opinion 25. The Company has adopted the recognition
and measurement provisions of SFAS No. 123 effective for the fiscal year
beginning April 1, 1996. SFAS No. 123 will effect the Company's stock
options granted after April 1, 1996. These options will be recognized and
measured in accordance with the fair-value-based method of accounting.
Impact of new accounting standards:
In June, 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. This
Statement established revised standards for recognition, measurement, and
disclosure of transfers and servicing of financial assets and
extinguishment of debt. Those standards are based on consistent
application of a financial-components approach that focuses on control.
Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered, and derecognizes liabilities when extinguished.
This Statement provides consistent standards for distinguishing transfers
of financial assets that are sales from transfers that are secured
borrowings. A transfer of financial assets in which the transferor
surrenders control over those assets is accounted for as a sale to the
extent that consideration other than beneficial interests in the
transferred assets is received in exchange. As issued, Statement No. 125
is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996, and is
to be applied prospectively. FASB issued SFAS No. 127 in January 1997
titled "Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125", an amendment of FASB Statement No. 125. This
statement postpones the effective date for certain provisions of SFAS No.
F-9
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
125 for one year. Specifically, all transfers of secured borrowings and
collateral are deferred until after December 31, 1997. Also, accounting
for transfers of repurchase agreements, dollar-rolls, securities lending,
and similar transactions are deferred until after December 31, 1997.
Earlier application of the Statement is not allowed. The statement's
impact on the Company will be based on future transfers of financial
assets.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. This
Statement establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or
potential common stock. This Statement simplifies the standards for
computing earnings per share and makes them comparable to international
EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. This Statement is effective
for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted.
This Statement requires restatement of all prior-period EPS data
presented. This statement is not expected to have a material effect on
the Company's financial statements.
The FASB issued SFAS No. 129, Disclosure of Information about Capital
Structure, in February, 1997. This Statement establishes standards for
disclosing information about an entity's capital structure and applies to
all entities. SFAS 129 codifies certain existing disclosures about an
entity's capital structure. This Statement is effective for financial
statement periods ending after December 15, 1997. This Statement is not
expected to have a material effect on the Company's financial statements.
Earnings per share:
Earnings per share of common stock has been computed on the basis of the
weighted average number of shares outstanding adjusted for unallocated
Employee Stock Ownership Plan (ESOP) shares and for incremental shares
related to outstanding options to purchase common stock.
Earnings per share of common stock for 1995 was computed by dividing net
income subsequent to conversion by the weighted average number of common
and common equivalent shares outstanding subsequent to conversion, less
unallocated shares acquired by the ESOP.
Financial statement presentation:
Certain items in prior year financial statements have been reclassified
to conform to the 1997 presentation.
F-10
<PAGE>
2. Investment Securities
The amortized cost and estimated market values of investment securities
at March 31 are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1997
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
Held-to-maturity:
<S> <C> <C> <C> <C>
Government Agency Securities $8,700,000 $ 18,323 $ 139,217 $8,579,106
----------- ---------- ---------- -----------
Total held-to-maturity $8,700,000 $ 18,323 $ 139,217 $8,579,106
========== ========== ========== ==========
Available-for-sale:
Government Agency Securities $1,500,000 $ - $ 70,273 $1,429,727
Stock in Federal Home Loan Bank,
at cost 632,000 632,000
----------- ---------- ---------- -----------
Total available-for-sale $2,132,000 $ - $ 70,273 $2,061,727
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ----------- ----------
Held-to-maturity:
<S> <C> <C> <C> <C>
United States Treasury Securities $1,550,531 $ 6,898 $ 0 $1,557,429
Government Agency Securities 8,200,000 47,500 110,534 8,136,966
---------- ---------- ----------- ----------
Total held-to-maturity $9,750,531 $ 54,398 $ 110,534 $9,694,395
========== ========== ========== ==========
Available-for-sale:
Government Agency Securities $1,500,000 $ - $ 55,065 $1,444,935
Stock in U.S. Savings League 55,000 40,040 95,040
Stock in Federal Home Loan Bank,
at cost 592,300 592,300
Other, at fair value 818 818
---------- ---------- ----------- ----------
Total available-for-sale $2,148,118 $ 40,040 $ 55,065 $2,133,093
========== ========== ========== ==========
</TABLE>
Other equity securities include a limited partnership investment in the
former data processor of the Bank. The partnership was in the process of
liquidation at March 31, 1996 and the investment was adjusted to
represent the Association's interest in the estimated net realizable
value of partnership assets. This partnership was dissolved prior to
March 31, 1997.
Government agency securities above include bonds and notes issued by
various government agencies. Those agencies include the following:
Federal Home Loan Bank, Fannie Mae, and Freddie Mac.
Government Agency Securities at March 31, 1997 and 1996 include
$1,000,000 of Federal Home Loan Bank bonds, at cost, with dual indexed or
inverse floating rate structures whose yield may not move consistent with
general interest rate movements.
F-11
<PAGE>
2. Investment Securities (Continued)
Federal Home Loan Bank members are required to maintain an investment in
stock at an amount equal to a percentage of outstanding home loans. Such
stock is assumed to have a market value which is equal to cost.
The amortized cost and estimated market value of debt securities at March
31, 1997, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties. The equity securities, including Federal Home Loan Bank Stock,
have been excluded from the maturity table below because they do not have
contractual maturities associated with debt securities.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Market Value
---------- ------------
Held-to-maturity:
<S> <C> <C>
Due in one year or less $ 500,000 $ 497,500
Due after one year through five years 5,200,000 5,159,376
Due after five years through ten years 3,000,000 2,922,230
---------- ------------
Total held-to-maturity $8,700,000 $8,579,106
========== ==========
Available-for-sale:
Due after one year through five years 500,000 481,917
Due after five years through ten years 1,000,000 947,810
---------- ------------
Total available-for-sale $1,500,000 $1,429,727
========== ==========
</TABLE>
There were realized gains on sales of investment securities
available-for-sale during the year ended March 31, 1997 of $46,528.
Proceeds from sales during the year ended March 31, 1997 totaled $102,347
and consisted of equity securities and an interest in an entity related
to the Bank's prior data processor, discussed earlier. There were no
realized gains or losses on sales of investment securities during the
years ended March 31, 1996 and 1995.
3. Mortgage-Backed Securities
As of March 31, 1997 and 1996, all mortgage-backed securities were
classified as held-to-maturity. Mortgage-backed securities consist of the
following:
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
FHLMC - fixed rate $ 1,380,450 $ 1,554,924
FHLMC - ARM's 1,376,203 1,561,354
GNMA - ARM's 3,114,748 3,669,165
FNMA - ARM's 825,458 937,910
GNMA - fixed rate 388,642 454,441
FNMA - fixed rate 684,623 905,840
Collateralized mortgage obligations-
government agency issue 5,383,306 200,897
------------ ------------
13,153,430 9,284,531
Unamortized premiums 127,799 155,454
Unamortized discounts (7,831) (11,619)
------------ ------------
$ 13,273,398 $ 9,428,366
============ ============
</TABLE>
F-12
<PAGE>
3. Mortgage-Backed Securities (Continued)
As of March 31, 1997 and 1996, gross unrealized gains and losses on
mortgage-backed securities are as follows:
<TABLE>
<CAPTION>
March 31, 1997
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FHLMC - fixed rate $ 1,374,266 $ 5,320 $ 28,561 $ 1,351,025
FHLMC - ARM's 1,420,037 48,564 1,371,473
GNMA - ARM's 3,163,609 10,285 27,539 3,146,355
FNMA - ARM's 847,681 31,481 816,200
GNMA - fixed rate 388,256 8,020 396,276
FNMA - fixed rate 695,621 29,167 666,454
Collateralized mortgage obligations-
government agency issue 5,383,928 54,091 5,438,019
----------- ----------- ----------- -----------
$13,273,398 $ 77,716 $ 165,312 $13,185,802
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FHLMC - fixed rate $1,547,901 $ 20,350 $ 15,267 $1,552,984
FHLMC - ARM's 1,612,398 860 25,556 1,587,702
GNMA - ARM's 3,728,225 11,641 18,200 3,721,666
FNMA - ARM's 963,478 21,453 942,025
GNMA - fixed rate 453,901 17,267 471,168
FNMA - fixed rate 922,293 25,798 896,495
Collateralized mortgage obligations-
government agency issue 200,170 790 200,960
---------- ---------- ---------- ----------
$9,428,366 $ 50,908 $ 106,274 $9,373,000
========== ========== ========== ==========
</TABLE>
Collateralized mortgage obligations consist of floating rate notes with
varying contractual principal maturities. The Bank has no principal only,
interest only, or residual collateralized mortgage obligations.
There were no realized gains or losses on sales of mortgage-backed
securities during the years ended March 31, 1997, 1996 and 1995.
There were no mortgage-backed securities classified as available-for-sale
as of March 31, 1997 and 1996.
F-13
<PAGE>
4. Loans Receivable
Loans receivable at March 31 are summarized as follows:
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
------------ ------------
First mortgage loans:
<S> <C> <C>
Secured by one to four family residences $ 17,273,266 $ 17,905,894
Secured by other properties 1,958,081 1,495,642
Construction loans 1,790,945 1,490,250
Other 579,276 578,004
------------ ------------
21,601,568 21,469,790
Less: Undisbursed loan proceeds (641,971) (506,148)
Unearned discounts and loan fees (72,996) (76,607)
Allowance for loan losses (282,444) (286,567)
------------ ------------
Total first mortgage loans 20,604,157 20,600,468
------------ ------------
Consumer and other loans:
Home equity and second mortgage 1,222,531 895,782
Loans on deposits 403,099 507,757
Other 1,325,718 1,072,203
------------ ------------
2,951,348 2,475,742
Less: Undisbursed loan proceeds (23)
Allowance for loan losses (94,248) (104,622)
------------ ------------
Total consumer and other loans 2,857,100 2,371,097
------------ ------------
Net loans receivable $ 23,461,257 $ 22,971,565
============ ============
</TABLE>
The following is an analysis of the allowance for loss on loans:
<TABLE>
<CAPTION>
March 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 391,189 $ 539,436 $ 557,545
Provision charged to operations 763 (131,875) 11,701
Loans charged off (29,056) (30,113) (36,270)
Recoveries 13,796 13,741 6,460
--------- --------- ---------
Balance, end of year $ 376,692 $ 391,189 $ 539,436
========= ========= =========
</TABLE>
Impairment of loans having recorded investments of $366,316 at March 31,
1997 and $348,895 at March 31, 1996 has been recognized in conformity
with FASB Statement No. 114, as amended by FASB Statement No. 118. The
average recorded investment in impaired loans during the years ended
March 31, 1997 and 1996, was $357,606 and $372,401, respectively. The
total allowance for loan losses related to theses loans was $109,397 and
$115,420 at March 31, 1997 and 1996. Interest income on impaired loans of
$45,964 and $36,239 was recognized for cash payments received for the
years ended March 31, 1997 and 1996, respectively.
It is Bank policy not to modify interest rates on loans associated with
troubled debt restructuring. The Bank is not committed to lend additional
funds to debtors whose loans have been modified.
See Note 16 for disclosure of loans to related parties.
F-14
<PAGE>
5. Accrued Income Receivable
Accrued interest receivable at March 31 is summarized as follows:
1997 1996
-------- --------
Mortgage-backed securities $ 62,345 $ 65,059
Loans receivable 127,419 134,589
Investments 140,513 163,880
-------- --------
$330,277 $363,528
======== ========
6. Foreclosed Real Estate
The Bank did not have any real estate owned or in judgment and other
repossessed assets at March 31, 1997 and 1996.
The following is a statement of changes in the allowance for loss account
for the years ended March 31:
1997 1996 1995
--------- -------- --------
Balance at beginning of year $ - $ 7,888 $ 33,354
Provision charged (credited) to income - - 27,513
Losses charged to allowance - (7,888) (52,979)
--------- -------- --------
Balance at end of year $ - $ - $ 7,888
======== ======== ========
Income (loss) from real estate operations for the years ended March 31 is
as follows:
1997 1996 1995
--------- --------- ---------
Gain on sale of real estate owned $ 1,439 $ 139,158 $ 21,356
Provision (27,513)
Rental income 500 150
Operating expenses (1,427) (4,870) (10,411)
--------- --------- ---------
$ 12 $ 134,788 ($ 16,418)
========= ========= =========
7. Office Properties and Equipment
Office properties and equipment are stated at cost less accumulated
depreciation as follows:
March 31,
--------------------------
1997 1996
----------- -----------
Land $ 398,332 $ 398,332
Building and improvements 622,292 622,292
Furniture and equipment 245,791 239,036
Automobiles 13,103 13,103
----------- -----------
1,279,518 1,272,763
Less accumulated depreciation (680,885) (644,927)
----------- -----------
$ 598,633 $ 627,836
=========== ===========
Depreciation expense (1995 - $54,918) $ 37,027 $ 48,245
=========== ===========
F-15
<PAGE>
8. Deposits
Deposits at March 31 are summarized as follows:
1997 1996
----------- -----------
Demand deposits $ 8,099,082 $ 8,271,818
Savings deposits 2,991,923 3,475,710
Certificates of deposit 23,202,273 24,563,332
----------- -----------
$34,293,278 $36,310,860
=========== ===========
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 was $1,918,481 and $1,623,692 at March 31, 1997
and 1996, respectively.
At March 31, 1997, scheduled maturities of certificates of deposit are as
follows:
Year Ending March 31,
- ---------------------
1998 $18,517,517
1999 2,891,863
2000 1,053,227
2001 317,981
2002 421,685
-----------
$23,202,273
===========
9. Advances and Other Borrowings from Federal Home Loan Bank
Advances and other borrowings from the Federal Home Loan Bank at March 31
are summarized as follows:
1997 1996
---------- ----------
Advances $6,000,000 $2,000,000
Line of credit 700,000
---------- ----------
$6,700,000 $2,000,000
========== ==========
At March 31, 1997, the Bank had $700,000 outstanding under a $2,500,000
line of credit with the Federal Home Loan Bank. The existing line of
credit expires August 15, 1997 and bears interest at the line of credit
rate established by the Federal Home Loan Bank. This rate is adjusted
from time to time, the rate as of March 31, 1997 was 6.90%. At March 31,
1996 the Bank had $0 outstanding under a $2,500,000 line of credit, due
August 15, 1996.
F-16
<PAGE>
9. Advances and Other Borrowings from Federal Home Loan Bank (Continued)
Advances from the Federal Home Loan Bank are subject to fixed and
adjustable interest rates and at March 31 consist of the following:
1997 1996
Fiscal -------------------------- --------------------------------
Year Weighted Weighted
Maturity Amount Average Rate Amount Average Rate
- -------- ----------- ------------ ------------- ------------
1998 $5,304,000 5.55 % $ 2,000,000 5.47%
1999 696,000 5.69
---------- ---- ------------- ----
$6,000,000 5.56 % $ 2,000,000 5.47%
========== ==== ============= ====
The advances and line of credit are collateralized by a blanket pledge
agreement, including all stock in Federal Home Loan Bank, qualifying
mortgage loans, certain mortgage-related securities and other
investments.
10. Income Taxes
The Company and subsidiary file consolidated federal income tax returns.
The Company's effective income tax rate was different than the statutory
federal income tax rate for the following reasons:
March 31,
-----------------------------------
1997 1996 1995
------ ------ ------
Statutory federal income tax 34.0 % 34.0 % 34.0 %
Increase (reductions) resulting from:
Adjust tax bad debt reserves 5.4
Non-deductible items 0.3 0.1 0.1
Other 0.2 0.5 (2.7)
---- ---- ----
39.9 % 34.6 % 31.4 %
==== ==== ====
F-17
<PAGE>
10. Income Taxes (Continued)
Deferred taxes are included in the accompanying Statement of Financial
Condition at March 31, 1997 and 1996 for the estimated future tax effects
of differences between the financial statement and federal income tax
basis of assets and liabilities given the provisions of currently enacted
tax laws. The net deferred tax asset (liability) at March 31, 1997 and
1996 was comprised of the following:
1997 1996
--------- ---------
Deferred tax assets:
Deferred loan fees and costs $ 11,184 $ 15,192
Allowance for loan losses 90,880 93,761
Unrealized loss on available-for-sale securities 23,893 5,109
Accrued compensation 13,275 12,956
--------- ---------
Total deferred tax assets 139,232 127,018
--------- ---------
Deferred tax liabilities:
Accumulated depreciation (9,402) (4,930)
Special bad debt deduction (87,267) (76,552)
FHLB stock dividends (122,094) (102,442)
Equity earnings (245)
--------- ---------
Total deferred tax liabilities (218,763) (184,169)
--------- ---------
Net asset (liability) $(79,531) $ (57,151)
======== =========
No valuation allowance was recorded against deferred tax assets at March
31, 1997 or 1996.
Prior to the year ended March 31, 1997, the Bank was allowed a special
bad debt deduction based on a percentage of taxable income (8%) or on
specified experience formulas, subject to certain limitations based upon
aggregate loan balances at the end of the year. The Bank used the
percentage-of-taxable income method in 1996 and 1995.
Effective with the tax year beginning April 1, 1996, the Bank is no
longer able to use the percentage of taxable income method and began to
recapture tax bad debt reserves of $377,949 over a six year period. The
Bank recaptured $62,992 in tax bad debt reserves during the year ended
March 31, 1997. The reserves to be recaptured consist of bad debt
deductions after December 31, 1987. If the amounts deducted prior to
December 31, 1987 are used for purposes other than for loan losses, such
as in a distribution in liquidation or otherwise, the amounts deducted
would be subject to federal income tax at the then current corporate tax
rate. The Bank had recorded a deferred tax asset related to the
allowance for loan losses reported for financial reporting purposes and
a deferred tax liability for special bad debt deductions after December
31, 1987. The Bank, in accordance with SFAS No. 109 had not recorded a
deferred tax liability of approximately $333,000 related to
approximately $979,000 of cumulative special bad debt deductions prior
to December 31, 1987.
At March 31,1997, the Corporation has net operating loss carryforward for
state income tax purposes of $624,126, which will expire March 31, 2006.
F-18
<PAGE>
11. Regulatory and Capital Matters
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary--actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital guidelines
that involve quantitative measures of the Bank's assets, liabilities,
and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of core and tangible capital (as defined in
the regulations) to assets (as defined) and core and total capital to
risk weight assets (as defined). Management believes, as of March 31,
1997, that the Bank meets all capital adequacy requirements to which it
is subject.
As of March 31, 1997, the most recent notification from the Office of
Thrift Supervision (OTS) categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based,
Tier I risk-based, and Tier I leverage ratios as set forth in the table.
There are no conditions or events since that notification that
management believes have changed the Bank's category.
The Bank's actual capital amounts (in thousands) and ratios are also
presented in the following table:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
---------------- ------------------- ---------------------
Amount Ratio Amount Ratio Amount Ratio
------- ------ -------- ------- ---------- -------
As of March 31, 1997:
<S> <C> <C> <C> <C> <C> <C>
Tangible Capital (to Assets) $6,586 13.4% $ 735 1.5% $ N/A
Total (Risk-Based) Capital
(to Risk Weighted Assets) 6,839 33.8% 1,618 8.0% 2,023 10.0%
Core (Tier I) Capital
(to Risk Weighted Assets) 6,586 32.6% N/A 1,214 6.0%
Core (Tier I) Capital - leverage
(to Assets) 6,586 13.4% 1,471 3.0% 2,452 5.0%
As of March 31, 1996:
Tangible Capital (to Assets) 6,302 13.5% 701 1.5% N/A
Total (Risk-Based) Capital
(to Risk Weighted Assets) 6,544 33.8% 1,548 8.0% 1,935 10.0%
Core (Tier I) Capital
(to Risk Weighted Assets) 6,302 32.6% N/A 1,161 6.0%
Core (Tier I) Capital - leveraged
(to Assets) 6,302 13.5% 1,402 3.0% 2,338 5.0%
</TABLE>
F-19
<PAGE>
11. Regulatory and Capital Matters (continued)
The following is a reconciliation of net worth to regulatory capital as
reported in the March 31, 1997 and 1996 reports to the Office of Thrift
Supervision:
March 31,
-------------------------
1997 1996
----------- -----------
Bank net worth per report
to Office of Thrift Supervision $ 6,540,000 $ 6,312,000
Rounding 251 50
----------- -----------
Net worth as reported in accompanying
financial statements (Bank only) 6,540,251 6,312,050
Adjustments to arrive at Core (Tier I)
and Tangible Capital:
Unrealized losses (gains) on certain
available-for-sale securities 46,000 (10,000)
----------- -----------
Core (Tier I) and Tangible Capital 6,586,251 6,302,050
Adjustments to arrive at Total Capital:
Allowable portion of general
allowance for loan losses 253,000 242,000
----------- -----------
Total Capital $ 6,839,251 $ 6,544,050
=========== ===========
12. Employee Benefits Plans
Defined benefit plan:
The Bank had a noncontributory defined benefit, insurance-related pension
plan for all eligible employees. Benefits were based on employee
compensation and years of service (not to exceed 37 years). The Bank's
funding policy was to contribute annually the minimum amount necessary to
fund the plan. Contributions were intended to provide not only for
benefits attributed to service to date but also for those expected to be
earned in the future. During the year ended March 31, 1994, the Bank
terminated the defined benefit pension plan. During the year ended March
31, 1995, an additional $8,826 was expended to fully fund the accumulated
benefit obligation of the terminated plan.
Employee Retirement Plan:
The Bank adopted a 401(k) defined contribution savings plan during the
year ended March 31, 1997. Substantially all employees are covered under
the contributory plan. Pension costs attributable to the year ended March
31, 1997 were $6,221, including all current service costs.
Employee Stock Ownership Plan:
Upon conversion from mutual to stock form, the Bank established an
employee stock ownership plan (ESOP). The original acquisition of 41,210
shares of Company stock by the plan was funded by a loan from the Company
to the ESOP, in the amount of $412,100. The loan, together with interest,
is to be repaid over a ten year period. The debt, which is accounted for
as a liability of the Bank and a receivable for the Company, has been
eliminated in consolidation.
The Bank makes annual contributions to the ESOP equal to the ESOP's debt
service less dividends received by the ESOP. All dividends received by
the ESOP are used to pay debt service. The ESOP shares initially were
pledged as collateral for its debt. As the debt is repaid, shares are
F-20
<PAGE>
12. Employee Benefits Plans (Continued)
released from the collateral and will be allocated to active employees,
based on the proportion of debt service paid in the year. The Bank
accounts for its ESOP in accordance with Statement of Position No. 93-6.
Accordingly, the debt of the ESOP is recorded as debt of the Bank and the
shares pledged as collateral are reported as unearned ESOP shares in the
Statement of Financial Condition. As of March 31, 1997, the balance of
indebtedness from the ESOP to the Company was $309,075, which is shown as
a deduction from stockholders' equity on the consolidated statement of
financial condition. As shares are released from collateral, the Company
reports compensation expense equal to the current market price of the
shares, and the shares become outstanding for earnings per share (EPS)
computations. Dividends on allocated ESOP shares are recorded as a
reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as compensation expense. ESOP compensation expense was $29,606,
72,526 and $8,197 for the years ended March 31, 1997, 1996 and 1995,
respectively. As of March 31, 1997, of the 41,210 shares of Company stock
acquired by the ESOP, 10,302 shares were allocated and 30,908 shares were
unallocated. The 30,908 unallocated shares had an estimated market value
of $463,620 at March 31, 1997.
Management Stock Bonus Plan:
During the year ended March 31, 1996, the Bank adopted a Management Stock
Bonus Plan (MSBP), the objective of which is to enable the Bank to retain
personnel of experience and ability in key positions of responsibility.
All employees of the Bank are eligible to receive benefits under the
MSBP. Benefits may be granted at the sole discretion of a committee
appointed by the Board of Directors. The MSBP is managed by trustees who
are non-employee directors and who have the responsibility to invest all
funds contributed by the Bank to the trust created for the MSBP.
The MSBP has purchased 20,605 shares of the Company's stock for $275,083.
Of these shares, 15,863 shares were granted in the form of restricted
stock payable over a five-year period at the rate of one-fifth of such
shares per year following the date of grant of the award. Compensation
expense, in the amount of the fair market value of the common stock at
the date of the grant to the employee, will be recognized pro rata over
the five years during which the shares are payable. A recipient of such
restricted stock will be entitled to all voting and other stockholder
rights, except that the shares, while restricted, may not be sold,
pledged or otherwise disposed of and are required to be held in escrow.
If a holder of such restricted stock terminates employment for reasons
other than death, disability or retirement, the employee forfeits all
rights to shares under restriction. If the participant's service
terminates as a result of death, disability, retirement or a change in
control of the Bank, all restrictions expire and all shares become
unrestricted. The 4,742 shares that have not been granted are accounted
for as treasury stock. 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.
13. Stock Option Plan
The Company's Board of Directors and stockholders ratified, effective
July 27, 1995, the 1994 Stock Option Plan (the Option Plan). Pursuant to
the Option Plan, 51,512 shares of common stock are reserved for issuance
by the Company upon exercise of stock options granted to officers,
directors and employees of the Company and Bank from time to time under
the Option Plan. The Option Plan provides for a term of ten years, after
which no awards may be made, unless earlier terminated by the Board of
Directors pursuant to the Option Plan.
F-21
<PAGE>
13. Stock Option Plan (Continued)
The Option Plan will be administered by a committee of at least three
non-employee directors designated by the Board of Directors (the Option
Committee). The Option Committee will select 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
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.
Effective with ratification of the Option Plan, the Option Committee
granted 39,661 shares of common stock, at an exercise price of $12.63 per
share. Except as otherwise noted, all such options shall be exercisable
at the rate of 20% on the one-year anniversary and 20% annually
thereafter, except that in the event that the fair market value of the
common stock subject to such grant to any one individual exceeds
$100,000, the amount in excess of $100,000 shall not be considered
exercisable until the next calendar year.
Notwithstanding anything herein to the contrary, in no event shall any
options granted be exercisable for a period of six months from the date
of grant, except in the event of the death or disability of the option
holder. Options shall be immediately exercisable in the event of the
retirement following not less than 10 years of service, death or
disability of the option holder, or upon change of control in the Company
as provided in the plan. As of March 31, 1997, no options have been
exercised and all options granted remain outstanding.
14. Financial Instruments with Off-Balance-Sheet Risk/Commitments
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financial needs of its
customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit
and commitments to sell investments. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of
the amount recognized in the Statement of Financial Condition. The
contract or notional amounts of those instruments reflect the extent of
involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of non-performance by
the other party to the financial instrument for loan commitments is
represented by the contractual notional amount of those instruments. The
Bank uses the same credit policies in making commitments as it does for
on-balance-sheet instruments.
At March 31, 1997 and 1996, the Bank had outstanding commitments to fund
real estate loans of $0 and $94,500, respectively. All commitments
outstanding at March 31, 1996 were for fixed rate loans at rates of 7
3/4% to 9 1/2%.
Loan commitments are agreements to lend to a customer as long as there is
no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and
may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily
F-22
<PAGE>
14. Financial Instruments with Off-Balance-Sheet Risk/Commitments (Continued)
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Bank upon extension of credit is
based on management's credit evaluation of the counter-party. Collateral
held is primarily residential real estate, but may include autos,
accounts receivable, inventory, property, plant and equipment.
The Bank had no commitments to purchase mortgage-backed securities or
investment securities at March 31, 1997 and 1996.
15. Significant Concentrations of Credit Risk
The Bank grants mortgage, consumer and business loans primarily to
customers within the state. Although the Bank has a diversified loan
portfolio, a substantial portion of its customers' ability to honor their
contracts is dependent upon the agribusiness and energy sectors of the
economy. The Bank's net investment in loans is subject to a significant
concentration of credit risk given that the investment is primarily
within a specific geographic area.
As of March 31, 1997, the Bank had a net investment of $23,461,257 in
loans receivable. These loans possess an inherent credit risk given the
uncertainty regarding the borrower's compliance with the terms of the
loan agreement. To reduce credit risk, the loans are secured by varying
forms of collateral, including first mortgages on real estate, liens on
personal property, savings accounts, etc. It is generally Bank policy to
file liens on titled property taken as collateral on loans, such as real
estate and autos. In the event of default, the Bank's policy is to
foreclose or repossess collateral on which it has filed liens.
In the event that any borrower completely failed to comply with the terms
of the loan agreement and the related collateral proved worthless, the
Bank would incur a loss equal to the loan balance.
16. Related Party Transactions
Directors and primary officers of the Company were customers of, and had
transactions with, the Bank in the ordinary course of business during the
years ended March 31, 1997 and 1996, and similar transactions are
expected in the future. All loans included in such transactions were made
on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other
persons and did not involve more than normal risk of loss or present
other unfavorable features. Principal officers, directors, employees and
companies in which they have partial ownership were indebted to the Bank
in the aggregate amount of approximately $312,023 and $365,709 at March
31, 1997 and 1996, respectively. The aggregate amount of deposits with
related parties at March 31, 1997 and 1996 were $280,805 and $264,519,
respectively.
F-23
<PAGE>
16. Related Party Transactions (Continued)
The following analysis is of loans made to principal officers and
directors which individually exceed $60,000 in the aggregate during the
year ended March 31, 1997 and 1996:
Balance March 31, 1995 $ 330,940
New loans 13,015
Repayments (195,135)
Other changes (13,956)
---------
Balance March 31, 1996 $ 134,864
---------
New loans 46,550
Repayments (59,733)
Other changes (45,403)
---------
Balance March 31, 1997 $ 76,278
=========
17. Conversion to Stock Form of Ownership
On February 8, 1994, the Board of Directors of the Bank adopted a Plan of
Conversion to convert from a state chartered mutual savings and loan
association to a federally chartered stock savings bank with the
concurrent formation of Guthrie Savings, Inc. to act as a holding company
of the Bank (the Conversion).
At the date of conversion, October 11, 1994, the Company completed the
sale of 515,125 shares of common stock, $0.01 par value, through
concurrent subscription and community offerings at $10.00 per share.
Included in the total shares outstanding are 41,210 shares which were
purchased by the Bank's ESOP at $10.00 per share. Net proceeds from the
conversion, after recognizing conversion expenses and underwriting costs
of $382,975 were $4,768,275. From the net proceeds, the Company used
$2,384,138 to purchase all of the capital stock of the Bank and $412,100
to fund the purchase of 41,210 shares of the Company stock by the ESOP
(Note 12).
The Bank may not declare or pay a cash dividend to the Company if the
effect would cause the net worth of the Bank to be reduced below either
the amount required for the "liquidation account" or the net worth
requirement imposed by the OTS. If all capital requirements continue to
be met, the Bank may not declare or pay a cash dividend in an amount in
excess of the Bank's net earnings for the fiscal year in which the
dividend is declared plus one-half of the surplus over the capital
requirements, without prior approval of the OTS.
Office of Thrift Supervision regulations require that upon conversion
from mutual to stock form of ownership, a "liquidation account" be
established by restricting a portion of net worth for the benefit of
eligible savings account holders who maintain their savings accounts with
the Bank after conversion. In the event of complete liquidation (and only
in such event) each savings account holder who continues to maintain
their savings account shall be entitled to receive a distribution from
the liquidation account after payment to all creditors but before any
liquidation distribution with respect to common stock. The initial
liquidation account was established at $3,534,000. This account may be
proportionately reduced for any subsequent reduction in the eligible
holder's savings accounts.
F-24
<PAGE>
18. Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value.
Cash and cash equivalents:
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Investment securities and mortgage-backed securities:
Fair values are based on quoted market prices or dealer quotes, if
available. If a quoted market price or dealer quote is not available,
fair value is estimated using quoted market prices for similar
securities.
Loans receivable:
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
Deposit liabilities:
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit are estimated
using the rates currently offered for deposits of similar remaining
maturities.
Advances and other borrowings from Federal Home Loan Bank:
The fair value of advances from the Federal Home Loan Bank are estimated
using the rates offered for similar borrowings.
Commitments to extend credit:
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates.
F-25
<PAGE>
18. Disclosures about Fair Value of Financial Instruments (Continued)
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
------------------- -------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(In Thousands) (In Thousands)
Financial assets:
Cash and cash equivalents:
<S> <C> <C> <C> <C>
Interest bearing $ 312 $ 312 $ 990 $ 990
Non-interest bearing 211 211 412 412
Investment securities held-to-maturity 8,700 8,579 9,751 9,694
Investment securities available-for-sale 2,062 2,062 2,133 2,133
Mortgage-backed securities held-to-maturity 13,273 13,186 9,428 9,373
Loans receivable 23,461 23,874 22,972 23,454
Financial liabilities:
Deposits 34,293 34,203 36,311 36,358
Advances and other borrowings from
Federal Home Loan Bank 6,700 6,677 2,000 1,981
</TABLE>
<TABLE>
<CAPTION>
Par Value Fair Value Par Value Fair Value
--------- ---------- --------- ----------
(In Thousands) (In Thousands)
Unrecognized financial instruments:
<S> <C> <C> <C> <C>
Commitments to extend credit $ - $ - $ 95 $ 1
</TABLE>
F-26
<PAGE>
19. Parent Company Financial Information
Condensed financial statements of Guthrie Savings, Inc. (Parent Company)
are shown below. The Parent Company has no significant operating
activities.
Condensed Statement of Financial Condition
As of March 31, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
Assets 1997 1996
------- -------
<S> <C> <C>
Cash and cash equivalents $ 82 $ 74
Investment in subsidiary 2,859 2,630
Loans receivable (subsidiary and ESOP) 1,139 1,900
Other 44 5
------- -------
Total assets $ 4,124 $ 4,609
======= =======
Liabilities and stockholders' equity
Liabilities:
Dividend payable $ - $ 222
Other 20
------- -------
Total liabilities - 242
------- -------
Stockholders' equity:
Common stock 5 5
Additional paid-in capital 4,779 4,765
Retained income 712 542
Net unrealized loss on available-for-sale securities (46) (10)
Unamortized amounts related to ESOP and MSBP (444) (526)
Treasury stock (882) (409)
------- -------
Total stockholders' equity 4,124 4,367
------- -------
Total liabilities and stockholders' equity $ 4,124 $ 4,609
======= =======
</TABLE>
Condensed Statement of Operations
Year Ended March 31, 1997, 1996 and 1995
(In Thousands)
1997 1996 1995
----- ----- -----
Equity earnings of subsidiary $ 419 $ 598 $ 245
Interest income 77 130 67
----- ----- -----
Total income 496 728 312
----- ----- -----
Other expenses 128 140 20
----- ----- -----
Income before income taxes 368 588 292
Income tax expense (12) 3 18
----- ----- -----
Net income $ 380 $ 585 $ 274
===== ===== =====
F-27
<PAGE>
19. Parent Company Financial Information (Continued)
Condensed Statement of Cash Flows
Year Ended March 31, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
Cash flows from operating activities
<S> <C> <C> <C>
Net income $ 380 $ 585 $ 274
Adjustments to reconcile net income to net cash
provided (used for) operating activities:
Equity in net income of subsidiary (419) (598) (245)
Increase in other assets (39) (5)
(Decrease) increase in other liabilities (242) 2 18
------- ------- -------
Net cash provided (used) by operating activities (320) (16) 47
------- ------- -------
Cash flow from investing activities:
Increase in investment in subsidiary (2,384)
Reduction of investment in subsidiary 250
Loans to subsidiary and ESOP, net 761 367 (2,267)
------- ------- -------
Net cash provided (used) by investing activities 1,011 367 (4,651)
------- ------- -------
Cash flows from financing activities:
Issuance of common stock, net 4,768
Cash dividends paid (210) (95)
Purchase of treasury stock (473) (346)
------- ------- -------
Net cash provided (used) by financing activities (683) (346) 4,673
------- ------- -------
Increase in cash and cash equivalents 8 5 69
Cash at beginning of year 74 69 -
------- ------- -------
Cash at end of year $ 82 $ 74 $ 69
======= ======= =======
</TABLE>
20. Recent Developments
Deposits of the Bank are insured by the SAIF as administered by the
FDIC. As a member of the SAIF, the Bank paid an insurance premium to the
FDIC equal to a minimum of 0.23% of its total deposits. The FDIC also
maintains another insurance fund, the Bank Insurance Fund (BIF), which
primarily insures commercial bank deposits. Effective September 30,
1995, the FDIC lowered the insurance premium of BIF insured deposits to
range of between 0.04% and 0.31% of deposits, with the result that most
commercial banks would pay the lower rate of 0.04%. Effective January 1,
1996, the annual insurance premium for most BIF members was lowered to
$2,000. These reductions in insurance premiums for BIF members placed
SAIF members at a competitive disadvantage to BIF members.
Effective September 30, 1996, federal law was revised to mandate a
one-time special assessment of SAIF members such as the Bank of
approximately .657% of deposits held on March 31, 1995. The Bank has
reflected a $225,433 pre-tax expense for this assessment for the year
ended March 31, 1997. Beginning January 1, 1997, deposit insurance
assessments for SAIF members were reduced to approximately .064% of
deposits on an annual basis and are expected to remain at that rate
through the end of 1999. During this same period, BIF members are
expected to be assessed approximately .013% of deposits. Thereafter,
assessments for BIF and SAIF members should be the same and SAIF and BIF
may be merged. It is expected that theses continuing assessments for
both SAIF and BIF members will be used to repay outstanding Financing
Corporation bond obligations. Based on this reduction, beginning January
1, 1997, the rate of deposit insurance assessed the Bank declined by
approximately 70%.
F-28
<PAGE>
OFFICE LOCATION
CORPORATE OFFICE
Guthrie Savings, Inc.
120 North Division
Guthrie, Oklahoma 73044
Board of Directors of Guthrie Savings, Inc.
William L. Cunningham H. Stephen Ochs
President and Chief Executive Officer Vice President
Keith Camerer James V. Seamans
Co-Owner, Jelsma Abstract Company Dentist
Alvin R. Powell, Jr.
Self Employed, Theater Owner/Real Estate Broker
Executive Officers of Guthrie Savings, Inc.
William L. Cunningham H. Stephen Ochs
President and Chief Executive Officer Vice President
Kathleen Ann Warner Deborah K. Bozarth
Vice President Secretary
Kimberly D. Walker Colleen T. Freeman
Treasurer Assistant Secretary
- -------------------------------------------------------------------------------
Corporate Counsel: Independent Auditors:
Brian W. Pierson Law Offices, Inc. Regier Carr & Monroe, L.L.P.
109 E. Oklahoma 300 West Douglas
P.O. Box 1459 Suite 100
Guthrie, Oklahoma 73044 Wichita, Kansas 67202
Special Counsel: Transfer Agent and Registrar:
Malizia, Spidi, Sloane & Fisch, P.C. American Securities Transfer, Inc.
One Franklin Square 1825 Lawrence Street, Suite 444
1301 K Street, N.W., Suite 700 East Denver, Colorado 80202-1817
Washington, D.C. 20005
The Company's Annual Report for the Year Ended March 31, 1997 filed with the
Securities and Exchange Commission on Form 10-KSB is available without charge
upon written request. For a copy of the Form 10-KSB or any other investor
information, please write or call Deborah K. Bozarth, Secretary, at the
Company's corporate office in Guthrie, Oklahoma. The annual meeting of
stockholders will be held on July 22, 1997 at 5:00 p.m. at Guthrie Federal
Savings Bank, located on 120 N. Division , Guthrie, Oklahoma.
- 17 -
EXHIBIT 23
<PAGE>
[LETTERHEAD OF REGIER CARR & MONROE, L.L.P.]
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Guthrie Savings, Inc., filed with the Securities and Exchange
Commission on March 1, 1996, of our report dated April 26, 1997 in this Annual
Report on Form 10-KSB of Guthrie Savings, Inc. for the fiscal year ended March
31, 1997.
/s/ Regier Carr & Monroe, L.L.P.
June 25, 1997
Wichita, Kansas
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 211
<INT-BEARING-DEPOSITS> 312
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,973
<INVESTMENTS-CARRYING> 21,973
<INVESTMENTS-MARKET> 21,765
<LOANS> 23,838
<ALLOWANCE> 377
<TOTAL-ASSETS> 49,047
<DEPOSITS> 34,293
<SHORT-TERM> 6,004
<LIABILITIES-OTHER> 249
<LONG-TERM> 696
0
0
<COMMON> 5
<OTHER-SE> 7,800
<TOTAL-LIABILITIES-AND-EQUITY> 49,047
<INTEREST-LOAN> 2,087
<INTEREST-INVEST> 1,545
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,632
<INTEREST-DEPOSIT> 1,529
<INTEREST-EXPENSE> 1,834
<INTEREST-INCOME-NET> 1,798
<LOAN-LOSSES> 1
<SECURITIES-GAINS> 47
<EXPENSE-OTHER> 1,416
<INCOME-PRETAX> 633
<INCOME-PRE-EXTRAORDINARY> 633
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
<YIELD-ACTUAL> 3.81
<LOANS-NON> 387
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<LOANS-TROUBLED> 813
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<ALLOWANCE-OPEN> 391
<CHARGE-OFFS> 28
<RECOVERIES> 14
<ALLOWANCE-CLOSE> 377
<ALLOWANCE-DOMESTIC> 377
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 267
</TABLE>
