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SECURITIES AND EXCHANGE COMMISSION
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Pennsylvania | 6022 | 20-8420347 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
Malvern, Pennsylvania 19355
(610) 280-7100
Chairman and Chief Executive Officer
First Priority Financial Corp.
2 West Liberty Boulevard, Suite 104
Malvern, Pennsylvania 19355
(610) 280-7100
Jeffrey P. Waldron, Esquire Stevens & Lee, P.C. 620 Freedom Business Center Suite 200 King of Prussia, PA 19406 (610) 205-6000 | Charles J. Ferry, Esquire Rhoads & Sinon LLP M&T Bank Building, Twelfth Floor One South Market Square Harrisburg, PA 17108-1146 (717) 233-5731 |
Title of Each Class | Proposed Maximum | Proposed Maximum | ||||||||||||||||||||
of Securities to be | Amount to be | Offering Price Per | Aggregate Offering | Amount of | ||||||||||||||||||
Registered | registered(1) | Unit | Price | Registration Fee | ||||||||||||||||||
Common Stock, $1.00 par value per share | 976,137 | $ | 10.00 | (2) | $ | 9,761,370 | $ | 299.67 | ||||||||||||||
Warrants | 195,227 | $ | 12.50 | (3) | $ | 2,440,338 | $ | 74.92 | ||||||||||||||
(1) | Based upon the maximum number of shares and warrants of First Priority Financial Corp. that may be issued in respect of the same number of outstanding shares of common stock and related warrants of Prestige Community Bank. In accordance with Rule 416, this Registration Statement shall also register any additional shares of the Registrant’s common stock which may become issuable to prevent dilution resulting from stock splits, stock dividends or similar transactions as provided by the merger agreement. | |
(2) | Pursuant to Rule 457(f) under the Securities Act of 1933, as amended, and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is based on the price per share ($10.00) and the number of shares of First Priority Financial Corp. to be issued in the merger transaction. | |
(3) | Pursuant to Rule 457(g), the proposed maximum offering price per unit is based on the price at which the warrants may be exercised. |
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10:00 a.m.
Middletown Country Club
420 North Bellevue Avenue
Langhorne, Pennsylvania 19047
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104 Pheasant Run, Suite 130
Newtown, Pennsylvania 18940
• | To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of October 19, 2007, by and among First Priority Financial Corp., First Priority Bank, and Prestige Community Bank, that provides, among other things, for the acquisition of Prestige by First Priority Financial Corp. through the merger of Prestige with and into First Priority Bank, a wholly-owned subsidiary of First Priority Financial Corp. | ||
• | To consider and vote upon a proposal to adjourn the meeting, if necessary, if more time is needed to solicit proxies. | ||
• | To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting. |
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By Order of the Board of Directors, | ||||
Brent Kreiser | ||||
Secretary | ||||
January 4, 2008
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Change in Control Agreement, David E. Sparks | ||||||||
Change in Control Agreement, Lawrence E. Donato | ||||||||
Change in Control Agreement, Mary Ann Messmer | ||||||||
Consent of Beard Miller Company LLP | ||||||||
Consent of Howard R. Berlin | ||||||||
Consent of Samuel J. Worthington, Jr. | ||||||||
Consent of Christopher E. Spineo | ||||||||
Consent of Robert J. Fairbaugh |
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A. | Agreement and Plan of Merger, dated as of October 19, 2007, by and among First Priority Financial Corp., First Priority Bank, and Prestige Community Bank | A-1 | ||
B. | Opinion of Curtis Financial Group, LLC | B-1 | ||
C. | Statutory Provisions Relating to Dissenters’ Rights | C-1 |
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Q: | Why am I receiving this document? | |
A: | We are delivering this document to you because it is serving as both a proxy statement of Prestige and a prospectus of First Priority. It is a proxy statement because it is being used by the board of directors of Prestige to solicit the proxies of its common shareholders. It is a prospectus because First Priority is offering shares of its common stock and warrants in exchange for shares of Prestige common stock and warrants if the transaction is completed. | |
Q: | What matters will be considered at the special meeting? | |
A: | Prestige shareholders will be asked to vote in favor of adopting the merger agreement at the Prestige special meeting, to vote upon a proposal to adjourn the meeting, if necessary, if more time is needed to solicit proxies, and to transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting. | |
Q. | How does the Board of Directors of Prestige recommend I vote on the merger proposal? | |
A: | The board of directors of Prestige unanimously recommends that you vote “FOR” the proposal to approve the merger agreement. | |
Q. | What vote of Prestige shareholders is required in connection with the transaction? | |
A: | The affirmative vote of at least two-thirds of the outstanding shares of Prestige common stock is required to approve the merger agreement and the merger transaction. | |
Q: | Why is my vote important? | |
A: | If you do not return your proxy card or vote in person at the special meeting, it will be more difficult for Prestige to obtain the necessary quorum to hold the special meeting of shareholders. In addition, because a vote of at least two-thirds of outstanding Prestige shares is required to approve the merger agreement, if you do not vote it will have the same effect as a vote against the merger proposal. | |
Q: | How do I vote? | |
A: | If your shares are registered in your own name, you may vote in person at the special meeting or by returning your completed proxy card in the enclosed postage-paid envelope. If you return your signed proxy card, your shares will be voted in accordance with your instructions. If you return your signed proxy card, |
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but do not designate how you wish to vote, your shares will be voted “FOR” each proposal. |
Q: | If my shares are held in “street name” by my broker or similar custodian, will they vote my shares for me? | |
A: | Maybe. Your broker or custodian will vote your shares only if you provide instructions on how to vote. You should follow the directions provided by your broker or custodian. Without instructions, your shares will not be voted on the merger agreement. | |
Q: | Can I change my vote after I have mailed my signed proxy card? | |
A: | Yes. You may revoke your signed proxy card at any time before it is voted by signing and returning a proxy card with a later date, delivering a written revocation letter to Brent Kreiser, Chief Financial Officer of Prestige, or by attending the special meeting in person, notifying Mr. Kreiser, and voting by ballot at the special meeting. Mr. Kreiser’s mailing address is Prestige Community Bank, 104 Pheasant Run, Suite 130, Newtown, Pennsylvania 18940. Any shareholder entitled to vote in person at the special meeting may vote in person whether or not a proxy has been previously given, but the mere presence (without notifying Mr. Kreiser) of a shareholder at the special meeting will not constitute revocation of a previously given proxy. | |
Q: | Should I send in my Prestige stock and warrant certificates now? | |
A: | No. Shortly after the transaction is completed, First Priority will send you written instructions for exchanging your stock and warrant certificates. We will request that you return your Prestige stock and warrant certificates at that time. | |
Q: | How much of First Priority will Prestige shareholders own? | |
A: | After the transaction is completed and based upon the number of shares of common stock of First Priority and Prestige currently outstanding, Prestige shareholders will own approximately 31.7% of First Priority common stock outstanding. | |
Q: | What are the tax consequences of the transaction to Prestige shareholders? | |
A: | The exchange of shares of Prestige common stock and warrants for shares of First Priority common stock and warrants generally will not cause Prestige shareholders to recognize any gain or loss for federal income tax purposes. Prestige shareholders will, however, have to recognize income or gain in connection with any cash received in connection with the exercise of dissenters’ rights. |
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Q: | When do you expect to complete the transaction? | |
A: | We expect to complete the transaction in the first quarter of 2008. In addition to the approval of Prestige shareholders, we must also obtain regulatory approvals from the FDIC and the Pennsylvania Department of Banking. We expect to receive all necessary approvals no later than March 2008. | |
Q: | Whom should I call with questions or to obtain additional copies of this document? | |
A: | You should contact either: |
2 West Liberty Boulevard, Suite 104
Malvern, Pennsylvania 19355
Attention: Lawrence E. Donato
Telephone: (484) 527-4022
104 Pheasant Run, Suite 130
Newtown, Pennsylvania 18940
Attention: Brent Kreiser
Telephone: (215) 867-2400
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First Priority Bank
2 West Liberty Boulevard, Suite 104
Malvern, Pennsylvania 19355
(484) 527-4022
www.fpbk.com
104 Pheasant Run, Suite 130
Newtown, Pennsylvania 18940
(215) 867-2400
www.prestigecommunitybank.com
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• | First Priority will increase the size of the board of directors of First Priority to include four individuals designated by Prestige and First Priority Bank will increase the size of its board of directors to include five individuals designated by Prestige, in each case reasonably acceptable to First Priority; and | ||
• | For a period of three years following the merger transaction, Prestige will continue to operate as a separate division of First Priority Bank under the name Prestige Community Bank Division of First Priority Bank, and the officers of Prestige will continue as officers of such division. The Prestige Community Bank Division of First Priority Bank will have a separate board of advisors comprised of the current Prestige board of directors and three additional persons designated by First Priority. |
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• | file a written notice of intent to dissent with Prestige prior to the shareholder vote at the Prestige special meeting of shareholders; | ||
• | not vote in favor of the transaction; | ||
• | file a written demand for payment and deposit the certificates representing the Prestige shares for which dissenters’ rights are being asserted as requested by the notice that will be sent by Prestige or First Priority after receipt of your notice of intent to dissent from the transaction; and | ||
• | comply with certain other statutory procedures set forth in Pennsylvania law. |
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• | approval of the merger agreement by the shareholders of Prestige; | ||
• | receipt of all required regulatory approvals for the transaction and any waiting periods required by law must have expired or been terminated; | ||
• | the absence of legal restraints that prevent the completion of the transaction; and | ||
• | receipt of a legal opinion that the transaction will constitute a reorganization for federal income tax purposes. |
• | the transaction is not completed on or prior to June 30, 2008, if the failure to complete the transaction by that date is not due to a breach of the merger agreement by the party seeking to terminate it; | ||
• | a final denial of a required regulatory approval, if the failure to obtain regulatory approval is not due to a breach of the merger agreement by the party seeking to terminate it; | ||
• | a party has materially breached any representation, warranty or covenant in the merger agreement and such breaching party has not cured the breach by the earlier of 30 days of the date the non-breaching gives written notice of the breach to the breaching party or the effective time of the merger; or | ||
• | if Prestige’s shareholders do not approve the merger agreement at the special meeting. |
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• | if Prestige violates certain covenants relating to the solicitation, response, or initiation of an acquisition proposal with a party other than First Priority or an affiliate of First Priority; | ||
• | if the Prestige board of directors withdraws, modifies or qualifies its recommendation of the transaction to Prestige shareholders or takes any other action in connection with the special meeting inconsistent with such recommendation; or | ||
• | if the Prestige board of directors fails to call, give notice of, convene or hold a special meeting of Prestige shareholders to consider the transaction within six months of the date of the merger agreement. |
• | First Priority terminates the merger agreement because Prestige’s board of directors has done any of the following: (1) violated certain covenants relating to the initiation or solicitation of an acquisition proposal with a party other than First Priority or an affiliate of First Priority; (2) withdrawn, modified or qualified its recommendation of the transaction to Prestige shareholders; or (3) failed to call, give notice of, convene or hold a special meeting of shareholders within six months of the date of the merger agreement; | ||
• | Prestige terminates the merger agreement because Prestige has determined that an unsolicited acquisition proposal is more financially favorable to Prestige’s shareholders than the transactions contemplated by the merger agreement; | ||
• | First Priority or Prestige terminates the merger agreement because Prestige’s shareholders have failed to approve the merger agreement, and (1) prior to the special |
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• | First Priority or Prestige terminates the merger agreement because the transaction has not been completed by June 30, 2008, and within six months following such termination Prestige enters into a definitive agreement with respect to or consummates a separate merger transaction or other business combination. |
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Equivalent Market | ||||||||||||
First Priority | Prestige | Value Per Share | ||||||||||
Historical | Historical | of Prestige | ||||||||||
October 23, 2007 | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||
January 3, 2008 | 10.00 | 10.00 | 10.00 |
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Nine months ended | Year ended | |||||||
September 30, 2007 | December 31, 2006 | |||||||
Net Loss per common share: | ||||||||
Loss per basic and diluted share: | ||||||||
First Priority | $ | (0.84 | ) | $ | (1.16 | ) | ||
Prestige | N/A | N/A | ||||||
Pro forma combined | (0.84 | ) | (1.16 | ) | ||||
First Priority merger equivalent(1) | (0.84 | ) | (1.16 | ) | ||||
Cash dividends per share: | ||||||||
First Priority | $ | 0.00 | $ | 0.00 | ||||
Prestige | N/A | N/A | ||||||
Balance Sheet date: | ||||||||
Net book value per share: | ||||||||
First Priority | $ | 7.55 | $ | 8.37 | ||||
Prestige | 9.39 | N/A | ||||||
Pro forma combined | 8.11 | 8.37 | ||||||
First Priority merger equivalent(1) | 8.11 | 8.37 |
(1) | Calculated based on the exchange ratio of one share of First Priority common stock issued for each share of Prestige common stock outstanding and one warrant to purchase one share of First Priority common stock issued for each warrant outstanding to purchase one share of Prestige common stock. |
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At or for the | ||||||||||||||||
period from | ||||||||||||||||
At or for the nine months | At or for the | May 25, 2005 | ||||||||||||||
ended September 30, | year ended | (date of inception) | ||||||||||||||
(unaudited) | December 31, | to December 31, | ||||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Selected Financial Data: | ||||||||||||||||
Total assets | $ | 126,168 | $ | 73,756 | $ | 105,748 | $ | 30,841 | ||||||||
Securities available for sale | 8,030 | 37,999 | 52,994 | 29,987 | ||||||||||||
Loans receivable | 89,264 | 34,552 | 50,423 | 111 | ||||||||||||
Allowance for loan losses | 958 | 437 | 634 | 2 | ||||||||||||
Deposits | 106,485 | 40,249 | 64,417 | 789 | ||||||||||||
Short-term borrowings | 154 | 14,787 | 22,965 | 9,547 | ||||||||||||
Long-term debt | 380 | — | — | — | ||||||||||||
Shareholders’ equity | 15,909 | 18,262 | 17,638 | 20,050 | ||||||||||||
Book value per share | $ | 7.55 | $ | 8.66 | $ | 8.37 | $ | 9.51 | ||||||||
Selected Operating Data: | ||||||||||||||||
Interest income | $ | 5,037 | $ | 1,605 | $ | 2,793 | $ | 276 | ||||||||
Interest expense | 3,028 | 631 | 1,314 | 5 | ||||||||||||
Net interest income before provision for loan losses | 2,009 | 974 | 1,479 | 271 | ||||||||||||
Provision for loan losses | 324 | 435 | 632 | 2 | ||||||||||||
Net interest income after provision for loan losses | 1,685 | 539 | 847 | 269 | ||||||||||||
Non-interest income | 198 | 201 | 278 | — | ||||||||||||
Non-interest expense | 3,649 | 2,544 | 3,561 | 1,238 | ||||||||||||
Net loss | $ | (1,766 | ) | $ | (1,804 | ) | $ | (2,436 | ) | $ | (969 | ) | ||||
Loss per share — | ||||||||||||||||
—basic and diluted | $ | (0.84 | ) | $ | (0.86 | ) | $ | (1.16 | ) | $ | (0.46 | ) | ||||
Cash dividends per share | $ | — | $ | — | $ | — | $ | — | ||||||||
Return on average assets | -2.35 | % | -6.39 | % | -5.21 | % | -34.60 | % | ||||||||
Return on average shareholders’ equity | -14.08 | % | -12.57 | % | -12.89 | % | -35.99 | % | ||||||||
Average equity to average assets | 16.68 | % | 50.80 | % | 40.45 | % | 96.13 | % |
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
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As of September 30, 2007
First Priority | Prestige (1) | |||||||||||||||
Stand-Alone | Stand-Alone | Purchase | Pro Forma | |||||||||||||
September 30, 2007 | October 16, 2007 | Adjustments | Combined | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 28,396 | $ | 8,931 | $ | (250 | ) | $ | 37,077 | |||||||
Securities available for sale | 8,005 | 0 | 0 | 8,005 | ||||||||||||
Loans receivable, net of allowance for loan losses | 88,306 | 0 | 0 | 88,306 | ||||||||||||
Goodwill | 0 | 0 | 250 | (2) | 250 | |||||||||||
Other assets | 1,461 | 267 | 0 | 1,728 | ||||||||||||
Total Assets | $ | 126,168 | $ | 9,198 | $ | 0 | $ | 135,366 | ||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||
Liabilities | ||||||||||||||||
Deposits | $ | 106,485 | $ | 0 | $ | 0 | $ | 106,485 | ||||||||
Short-term borrowings | 154 | 0 | 0 | 154 | ||||||||||||
Long-term debt | 380 | 0 | 0 | 380 | ||||||||||||
Other liabilities | 3,240 | 0 | 0 | 3,240 | ||||||||||||
Total Liabilities | 110,259 | 0 | 0 | 110,259 | ||||||||||||
Shareholders’ Equity | ||||||||||||||||
Common equity | 15,909 | 9,198 | (3) | 0 | 25,107 | |||||||||||
Total Shareholders’ Equity | 15,909 | 9,198 | 0 | 25,107 | ||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 126,168 | $ | 9,198 | $ | 0 | $ | 135,366 | ||||||||
(1) | Prestige Community Bank was formed and opened for business on October 16, 2007. | |
(2) | To record estimate of cash paid for transaction costs. | |
(3) | Shareholders’ equity for Prestige resulted from initial pro-forma capital raised of $9.29 million, $436,210 raised shortly after opening and $34,790 for which subscriptions have been executed but funds have not yet been received, less $681 thousand of pre-opening organizational expenses, partially offset by interest earned on escrow funds of $118 thousand. |
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• | the strength of the United States economy in general and the strength of the regional and local economies in which First Priority and Prestige conduct operations; | ||
• | the effects of changing economic conditions in First Priority’s and Prestige’s market areas and nationally; | ||
• | the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; | ||
• | changes in federal and state banking, insurance, and investment laws and regulations which could impact First Priority’s operations; | ||
• | inflation, interest rate, market, and monetary fluctuations; | ||
• | First Priority’s ability in connection with this acquisition to (1) successfully integrate assets, liabilities, customers, systems, and management personnel First Priority acquires into its operations, (2) realize related revenue enhancements and cost savings |
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within expected time frames, and (3) cap its expected one time charges at anticipated levels and acquire assets and liabilities, which at acquisition closing, have fair values which support First Priority’s estimated values for such assets and liabilities; | |||
• | First Priority’s timely development of competitive new products and services in a changing environment and the acceptance of such products and services by customers; | ||
• | the impact of changes in financial services policies, laws, and regulations, including laws, regulations, policies, and practices concerning taxes, banking, capital, liquidity, proper accounting treatment, securities, and insurance, and the application thereof by regulatory bodies and the impact of changes in and interpretations of generally accepted accounting principles; | ||
• | failure to close the transaction to which this document relates on the expected closing date or at all; | ||
• | the occurrence of adverse changes in the securities markets; | ||
• | the effects of changes in technology or in consumer spending and savings habits; | ||
• | terrorist attacks in the United States or upon United States interests abroad, or armed conflicts involving the United States military; | ||
• | regulatory or judicial proceedings; | ||
• | changes in asset quality; and | ||
• | First Priority’s success in managing the risks involved in the foregoing. |
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• | approve and adopt the merger agreement; | ||
• | approve a proposal to adjourn the meeting if more time is needed to solicit proxies; and | ||
• | transact any other business that may properly be brought before the special meeting and any adjournment or postponement of the special meeting. |
• | shares of common stock present in person at the special meeting but not voting or abstaining on any matter; | ||
• | shares of common stock represented by a proxy on which the shareholder has not directed a vote or abstained on any matter; and | ||
• | shares of common stock represented by proxies from a broker that are voted on any issue other than a procedural motion. |
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• | because approval of the merger agreement by Prestige’s shareholders requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Prestige common stock at the special meeting, abstentions and broker non-votes will have the same effect as a vote against the proposal to approve the merger agreement; and | ||
• | because approval of the adjournment proposal requires the affirmative vote of a majority of all votes cast at the special meeting, abstentions and broker non-votes will not affect the vote on the adjournment proposal at the special meeting. |
• | delivering a written revocation letter or delivering a later dated proxy to Brent Kreiser, Chief Financial Officer of Prestige; | ||
• | submitting a proxy card with a later date; or |
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• | attending the special meeting, notifying Mr. Kreiser, and voting by ballot in person. |
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(1) | Together the bank’s capital positions would be significantly strengthened allowing for a higher lending limit and creating a stronger, sounder bank through the combination. | ||
(2) | Since First Priority Bank had been open for 24 months, there were significant regulatory, operational and credit efficiencies which Prestige would be able to take advantage of through a merger with First Priority Bank. | ||
(3) | First Priority Bank had an experienced management team which had successfully started Millennium Bank in 1998 and which sold in 2004. First Priority Bank was successfully opened in 2005 with over $20 million of capital. | ||
(4) | Both banks would benefit from a broader geographic market and First Priority Bank’s wealth management activities. |
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• | the merger consideration offered by First Priority; | ||
• | the board considered the fact that the merger would result in certain operational and start-up cost efficiencies that would effectively shorten Prestige’s time to reach a profitable status; | ||
• | the fact that First Priority Bank had an experienced management team which had successfully started two other de novo banking institutions; | ||
• | the expected treatment of the merger as a “reorganization” for United States federal income tax purposes; | ||
• | the fact that the board received a written opinion and a financial presentation from Curtis Financial Group, LLC at the October 18, 2007 meeting, to the effect that, as of such date and based upon and subject to the matters stated in its opinion, the transaction consideration was fair, from a financial point of view, to the holders of the Prestige common stock. The full text of the Curtis Financial Group opinion, which sets forth the assumptions made, matters considered and limitations on the review undertaken by Curtis Financial Group is attached to this document as Annex B and is incorporated herein by reference. Shareholders are urged to, and should, read the opinion of Curtis Financial Group; | ||
• | dissenters’ rights will be available to the holders of Prestige common stock under Pennsylvania law; | ||
• | the history of negotiations with respect to the merger agreement and the transactions contemplated thereby as the product of arm’s-length negotiations with First Priority; | ||
• | the increased capital will allow Prestige to make larger loans; |
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• | the types of business that First Priority provides and the expanded products and services that First Priority can provide as a result of combining the two organizations. The board believes that Prestige and First Priority have complementary business philosophies and the ability to grow as a strong community institution; | ||
• | information concerning First Priority’s business, financial condition, results of operations, asset quality and prospects, including the long-term growth potential of First Priority, the future growth prospects of First Priority combined with Prestige following the proposed transaction, the potential synergies expected from the transaction and the business risks associated with the transaction; | ||
• | the compatibility of the strategic plans of the two companies, particularly with respect to customer service, efficiency, credit quality, product diversification and the meeting of local banking needs; | ||
• | the expanded opportunities for revenue enhancement and synergies that are expected to result from the transaction. The board assessed possible synergies and recognized that the combined organization could reduce aggregate expenses that First Priority and Prestige incur in areas such as salaries and benefits, systems expense, professional and outside service fees, and communications expense; | ||
• | the terms of the $500,000 termination fee in favor of First Priority, including the risk that the termination fee might discourage third parties from offering to acquire Prestige by increasing the cost of a third party acquisition, and recognizing that the termination fee was a condition to First Priority’s willingness to enter into the merger agreement; | ||
• | the challenges of combining the businesses, assets and workforces of two companies and the risks of not achieving the expected operating efficiencies or growth; | ||
• | the risk of diverting management focus and resources from the many operational matters of a new institution while working to implement the transaction; | ||
• | the fact that some of Prestige’s directors and executive officers have interests in the transaction that are in addition to their interests as Prestige shareholders. See “FINANCIAL INTERESTS OF DIRECTORS AND OFFICERS” on page 60; and | ||
• | the risk that the transaction will not be consummated. |
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• | First Priority Bank’s capital position would be significantly strengthened allowing for a higher lending limit and creating a stronger, sounder bank; | ||
• | because First Priority Bank has been open for more than 24 months, there were significant regulatory, operational and credit efficiencies which both banks would be able to take advantage of through the merger; | ||
• | the combination with Prestige gives First Priority access to the affluent Bucks County market, including the ability to market First Priority Bank’s wealth management services in this market; | ||
• | First Priority Bank would double the number of its branches from two to four; | ||
• | increased capital resulting from the transaction will help fund the combined bank’s growth and permit First Priority Bank to leverage its balance sheet, which will facilitate the achievement of profitability; | ||
• | the merger consideration offered by First Priority; | ||
• | the compatibility of the strategic plans of the two companies, particularly with respect to customer service, efficiency, credit quality, product diversification and the meeting of local banking needs; | ||
• | the expanded opportunities for revenue enhancement and synergies that are expected to result from the transaction. The board assessed possible synergies and recognized that the combined organization could reduce aggregate expenses that First Priority and Prestige incur in areas such as salaries and benefits, systems expense, professional and outside service fees, and communications expense; | ||
• | the challenges of combining the businesses, assets and workforces of two companies and the risks of not achieving the expected operating efficiencies or growth; | ||
• | the Prestige organizers and board of directors were very active in the community and would be supportive of generating business; | ||
• | the expected treatment of the merger as a “reorganization” for United States federal income tax purposes; and | ||
• | the history of negotiations with respect to the merger agreement and the transactions contemplated thereby as the product of arm’s-length negotiations with Prestige. |
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• | reviewed the historical financial performance, recent financial position and general prospects of Prestige and First Priority using publicly available information; | ||
• | reviewed certain internal financial statements and other financial and operating data concerning Prestige and First Priority prepared by each bank’s management team; | ||
• | reviewed certain financial forecasts and other forward looking financial information prepared by each bank’s management team; |
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• | held discussions with the senior managements of each bank concerning the business, past and current operations, financial condition and future prospects of Prestige and First Priority; | ||
• | reviewed the financial terms and conditions set forth in the acquisition agreement; | ||
• | compared the financial terms of the acquisition with the financial terms, to the extent publicly available, of other transactions that Curtis deemed relevant; | ||
• | reviewed the relative contribution of assets, liabilities, equity and earnings of each bank to First Priority on a pro forma basis and the relative pro forma ownership of the shareholders of each bank in First Priority; | ||
• | prepared discounted dividend analysis of each bank using data and projections supplied by each bank’s management; | ||
• | reviewed the draft acquisition agreement dated October 18, 2007; | ||
• | reviewed a draft of this proxy statement/prospectus; and | ||
• | made such inquiries and took into account such other matters as Curtis deemed relevant, including Curtis’ assessment of general economic, market and monetary conditions. |
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Transaction value/Last twelve month’s earnings per share | Not Meaningful | |||
Transaction value/Book value | 100.0 | % | ||
Transaction price/Tangible book value | 100.0 | % | ||
Data does not reflect impact of options and warrants |
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Prestige | First Priority | |||||||
Loans, net | 0.0 | % | 100.0 | % | ||||
Total assets | 7.0 | % | 93.0 | % | ||||
Deposits | 0.0 | % | 100.0 | % | ||||
Total equity | 37.2 | % | 62.8 | % | ||||
Last twelve months’ (“LTM”) net income | 0.0 | % | 100.0 | % | ||||
LTM Net Interest Income | 0.0 | % | 100.0 | % | ||||
LTM Non-interest Income | 0.0 | % | 100.0 | % | ||||
Pro forma ownership | 30.9 | % | 69.1 | % |
(1) | Excluding purchase accounting adjustment and potential synergies. |
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Most Recent Period | ||||
Book value per share: | ||||
Prestige historical | $ | 10.00 | ||
First Priority historical | 7.55 | |||
Combined Company | 8.31 | |||
Prestige pro forma equivalent | 8.31 | |||
Tangible book value per share: | ||||
Prestige historical | $ | 10.00 | ||
First Priority historical | 7.55 | |||
Combined Company | 8.31 | |||
Prestige pro forma equivalent | 8.31 |
Year 1 Forecast | ||||
Forecasted Year 1 Cash dividends per share: | $ | 0.00 | ||
Prestige historical | 0.00 | |||
First Priority historical | 0.00 | |||
Combined Company | 0.00 | |||
Prestige pro forma equivalent | 0.00 | |||
Forecasted Year 1 net income (loss) per share: | ||||
Prestige historical | $ | (2.58 | ) | |
First Priority historical | (0.18 | ) | ||
Combined Company | (0.73 | ) | ||
Prestige pro forma equivalent | (0.73 | ) |
Canton Bancorp, Inc.
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First National Bank of Port Allegany
First Perry Bancorp, Inc.
First Resource Bank
Fleetwood Bank Corporation
FNBM Financial Corporation
GNB Financial Services, Inc.
JTNB Bancorp, Inc.
Landmark Community Bank
Mercersburg Financial Corp.
UNB Corporation
Union Bancorp, Inc.
Group Analysis
Peer Group Minimum | Peer Group Median | Peer Group Maximum | First Priority | |||||||||||||
Total assets(in millions) | $ | 60.3 | $ | 109.8 | $ | 159.6 | $ | 126.2 | ||||||||
Equity/assets | 9.2 | % | 10.1 | % | 16.1 | % | 12.6 | % | ||||||||
Tangible equity/assets | 9.2 | % | 10.1 | % | 16.1 | % | 12.6 | % | ||||||||
Gross Loans/Total Deposits | 53.0 | % | 85.2 | % | 127.0 | % | 83.8 | % | ||||||||
NCOs/ Avg Loans | -0.04 | % | 0.00 | % | 0.35 | % | 0.00 | % | ||||||||
NPAs+ 90 day past due /Total Assets | 0.00 | % | 0.70 | % | 2.28 | % | 0.00 | % | ||||||||
Loan Loss Reserves/ NPAs | 38.9 | % | 147.7 | % | 875.4 | % | N/M | |||||||||
LTM Return on average assets | -.61 | % | .52 | % | 1.25 | % | -1.91 | % | ||||||||
LTM Return on average equity | -3.37 | % | 5.00 | % | 11.40 | % | -11.47 | % | ||||||||
Net Interest Margin | 2.64 | % | 3.41 | % | 5.07 | % | 2.69 | % | ||||||||
Efficiency Ratio | 46.27 | % | 80.70 | % | 104.48 | % | 165.35 | % | ||||||||
Price/Book Value | 78.8 | % | 122.6 | % | 227.1 | % | N/A | |||||||||
Price/Tangible book value | 78.8 | % | 122.6 | % | 227.1 | % | N/A | |||||||||
Price/LTM earnings per share | 12.2 | x | 20.3 | x | 34.7 | x | N/A | |||||||||
Dividend Yield | 0.00 | % | 0.00 | % | 3.30 | % | 0.00 | % |
N/A = not available
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WashingtonFirst Bank
Madison National Bank
USA Bank
Patriot Federal Bank
Community National Bank
First Resource Bank
Clarion County Community Bank
HomeTown Bank
Virginia Company Bank
River City Bank
Main Street Bank
Peer Group Minimum | Peer Group Median | Peer Group Maximum | First Priority | |||||||||||||
Total assets(in millions) | $ | 30.2 | $ | 101.7 | $ | 242.1 | $ | 126.2 | ||||||||
Equity/assets | 10.1 | % | 15.8 | % | 83.0 | % | 12.6 | % | ||||||||
Tangible equity/assets | 8.7 | % | 15.8 | % | 83.0 | % | 12.6 | % | ||||||||
Gross Loans/Total Deposits | 19.7 | % | 93.8 | % | 102.5 | % | 83.8 | % | ||||||||
NCOs/ Avg Loans | 0.00 | % | 0.00 | % | 0.02 | % | 0.00 | % | ||||||||
NPAs+ 90 day past due /Total Assets | 0.00 | % | 0.06 | % | 0.96 | % | 0.00 | % | ||||||||
Loan Loss Reserves/ NPAs | 84.4 | % | 243.32 | % | 713.2 | % | N/M | |||||||||
LTM Return on average assets | -4.64 | % | -0.51 | % | 0.41 | % | -1.91 | % | ||||||||
LTM Return on average equity | -16.92 | % | -1.15 | % | 4.92 | % | -11.47 | % | ||||||||
Net Interest Margin | 2.90 | % | 3.72 | % | 4.63 | % | 2.69 | % | ||||||||
Efficiency Ratio | 71.47 | % | 99.25 | % | 213.88 | % | 165.35 | % | ||||||||
Price/Book Value | 70.4 | % | 126.4 | % | 197.7 | % | N/A | |||||||||
Price/Tangible book value | 70.4 | % | 127.7 | % | 197.7 | % | N/A | |||||||||
Price/LTM earnings per share | N/A | N/A | N/A | N/A | ||||||||||||
Dividend Yield | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % |
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Discount Rate | 14.0x | 16.0x | 18.0x | 20.0x | 22.0x | |||||||||||||||
11.0% | 10.47 | 11.96 | 13.46 | 14.95 | 16.45 | |||||||||||||||
12.0% | 10.01 | 11.44 | 12.87 | 14.30 | 15.72 | |||||||||||||||
13.0% | 9.57 | 10.94 | 12.31 | 13.67 | 15.04 | |||||||||||||||
14.0% | 9.16 | 10.47 | 11.78 | 13.08 | 14.39 | |||||||||||||||
15.0% | 8.77 | 10.02 | 11.27 | 12.53 | 13.78 | |||||||||||||||
16.0% | 8.40 | 9.60 | 10.80 | 11.99 | 13.19 |
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Discount Rate | 14.0x | 16.0x | 18.0x | 20.0x | 22.0x | |||||||||||||||
11.0% | 12.46 | 14.23 | 16.01 | 17.79 | 19.57 | |||||||||||||||
12.0% | 11.91 | 13.61 | 15.31 | 17.01 | 18.71 | |||||||||||||||
13.0% | 11.39 | 13.02 | 14.65 | 16.27 | 17.90 | |||||||||||||||
14.0% | 10.90 | 12.46 | 14.01 | 15.57 | 17.13 | |||||||||||||||
15.0% | 10.43 | 11.93 | 13.42 | 14.91 | 16.40 | |||||||||||||||
16.0% | 9.99 | 11.42 | 12.85 | 14.27 | 15.70 |
Discount Rate | 18.0x | 20.0x | 22.0x | 24.0x | 26.0x | |||||||||||||||
13.0% | 6.18 | 6.86 | 7.55 | 8.24 | 8.92 | |||||||||||||||
14.0% | 5.91 | 6.57 | 7.22 | 7.88 | 8.54 | |||||||||||||||
15.0% | 5.66 | 6.29 | 6.92 | 7.54 | 8.17 | |||||||||||||||
16.0% | 5.42 | 6.02 | 6.62 | 7.22 | 7.83 | |||||||||||||||
17.0% | 5.19 | 5.77 | 6.34 | 6.92 | 7.50 | |||||||||||||||
18.0% | 4.97 | 5.53 | 6.08 | 6.63 | 7.19 |
Discount Rate | 18.0x | 20.0x | 22.0x | 24.0x | 26.0x | |||||||||||||||
13.0% | 7.72 | 8.58 | 9.44 | 10.30 | 11.15 | |||||||||||||||
14.0% | 7.39 | 8.21 | 9.03 | 9.85 | 10.67 | |||||||||||||||
15.0% | 7.07 | 7.86 | 8.64 | 9.43 | 10.22 | |||||||||||||||
16.0% | 6.77 | 7.53 | 8.28 | 9.03 | 9.78 | |||||||||||||||
17.0% | 6.49 | 7.21 | 7.93 | 8.65 | 9.37 | |||||||||||||||
18.0% | 6.22 | 6.91 | 7.60 | 8.29 | 8.98 |
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• | each share of Prestige common stock outstanding will be converted into the right to receive one share of First Priority common stock; | ||
• | each outstanding warrant to acquire Prestige common stock at an exercise price of $12.50 per share on or before October 16, 2012 shall be converted into the right to receive a warrant to acquire First Priority common stock at an exercise price of $12.50 per share on or before October 16, 2012; and | ||
• | each option to acquire a share of Prestige common stock at an exercise price of $10.00 per share will be converted into the right to receive an option to acquire First Priority common stock at an exercise price of $10.00 per share. |
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• | prior to the vote of Prestige shareholders on the merger agreement at the special meeting, file a written notice of intention to demand payment of the fair value of your shares of Prestige common stock if the transaction is completed; | ||
• | make no change in your beneficial ownership of Prestige common stock from the date you give notice through the day of the transaction; and | ||
• | not vote your Prestige common stock for approval of the merger agreement. |
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• | a closing balance sheet and statement of income of Prestige for the fiscal year ending not more than 16 months before the date of remittance or notice, together with the latest available interim financial statements; | ||
• | a statement of First Priority’s estimate of the fair value of Prestige common stock; and | ||
• | a notice of the right of the dissenting shareholder to demand supplemental payment, accompanied by a copy of the relevant provisions of Pennsylvania law. |
• | the effective time of the transaction; | ||
• | timely receipt by Prestige or First Priority, as the case may be, of any demands for payment; or | ||
• | timely receipt by Prestige or First Priority, as the case may be, of any estimates by dissenters of the fair value; |
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• | that would result in a monopoly or that would further a combination or conspiracy to monopolize banking in the United States; or | ||
• | that could substantially lessen competition in any section of the country, that would tend to create a monopoly in any section of the country, or that would be in restraint of trade, unless the FDIC finds that the public interest in meeting the convenience and needs of the communities served outweighs the anti-competitive effects of the proposed transaction. |
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• | approval of the merger agreement by Prestige shareholders; | ||
• | receipt of all required regulatory approvals, including the expiration or termination of any notice and waiting periods; | ||
• | the absence of any legal order prohibiting the transaction; and | ||
• | delivery of a tax opinion to each of Prestige and First Priority. |
• | the accuracy in all material respects as of the date of the merger agreement and as of the effective time of the merger of the representations and warranties of First Priority and Prestige, except as to any representation or warranty which specifically relates to an earlier date and except where the breach would not individually or in the aggregate, constitute a material adverse effect with respect to the other party, except for certain representations as to which the material adverse effect qualification does not apply; | ||
• | the other party’s material performance of all its covenants and obligations except where the breach would not individually or in the aggregate, constitute a material adverse effect with respect to the other party; and | ||
• | other conditions customary for similar transactions, such as the receipt of officer certificates. |
• | the corporate organization of First Priority, First Priority Bank and Prestige; |
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• | the capitalization of First Priority and Prestige; | ||
• | the approval and enforceability of the agreement and plan of merger; | ||
• | required consents or approvals of regulatory authorities or third parties; | ||
• | the filing of all required regulatory reports; | ||
• | the preparation of financial statements in accordance with generally accepted accounting principles and, where appropriate, applicable regulatory accounting principles; | ||
• | the filing of tax returns and payment of taxes; | ||
• | the absence of any changes or events having a material adverse effect on First Priority and Prestige since their inception; | ||
• | the absence of undisclosed material pending or threatened litigation; | ||
• | compliance with applicable laws and regulations; | ||
• | retirement and other employee plans and matters relating to the Employee Retirement Income Security Act of 1974; | ||
• | the quality of title to assets and properties; | ||
• | the maintenance of adequate insurance; | ||
• | the absence of undisclosed brokers’ or finders’ fees; | ||
• | the absence of any orders issued by or written agreements with any governmental entity restricting the business of either party; | ||
• | the absence of material environmental violations, actions or liabilities; | ||
• | certain information regarding labor matters; and | ||
• | the accuracy of information supplied in connection with the registration statement filed by First Priority with the SEC, this document and all applications filed with regulatory authorities for approval of the agreement and plan of merger. |
• | the receipt by Prestige of a fairness opinion from a financial advisor with respect to the merger consideration; | ||
• | material contracts entered into by Prestige; |
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• | employment and consulting contracts and benefits matters; | ||
• | the absence of any derivative instruments to which Prestige is a party, including interest rate or other swaps, caps, floors, option agreements or other similar risk management arrangements; | ||
• | intellectual property rights; | ||
• | the provision for allowance for loan losses on the financial statements of Prestige in accordance with generally accepted accounting principles and applicable regulatory criteria; | ||
• | the validity and binding nature of loans reflected as assets in the financial statements of Prestige; | ||
• | the provision to First Priority of complete and correct information regarding Prestige’s investments; | ||
• | the inapplicability of the antitakeover provisions of Pennsylvania law to the agreement and plan of merger; | ||
• | compliance with the Community Reinvestment Act, the USA Patriot Act, anti-money laundering laws and other applicable laws; and | ||
• | transactions with affiliates. |
• | amend or change any provision of its articles of incorporation, charter or bylaws; | ||
• | change the number of authorized or issued shares of its capital stock, except for the issuance of shares of Prestige upon the exercise of outstanding stock options and warrants; | ||
• | issue or commit to issue any additional shares of capital stock, voting debt or any securities convertible into or exercisable for, or any rights, warrants or options to |
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acquire, any additional shares of capital stock or voting debt, other than the issuance of shares of common stock upon exercise of options or warrants; | |||
• | amend or reprice any outstanding right, option or warrant; | ||
• | split, combine or reclassify any shares of its capital stock; | ||
• | declare, set aside or pay any dividend or other distribution in respect of its capital stock; | ||
• | enter into any line of business other than community banking; | ||
• | increase the size of its board of directors; | ||
• | hire or terminate any officer or employee of Prestige; | ||
• | make any capital expenditures in excess of $5,000 in the aggregate; | ||
• | make application for the opening or relocation of any branch office; | ||
• | enter into or renew and lease for real property; | ||
• | incur any indebtedness for borrowed money or guarantee the obligations of any person (other than the endorsement of checks and other negotiable instruments in the normal process of collection), except in the ordinary course of business; | ||
• | make any changes in its accounting methods, except as may be required under generally accepted accounting principles; | ||
• | grant any retention, severance, or termination pay (other than pursuant to written policies or agreements of Prestige in effect on the date of the merger agreement) or enter into any new or amend any existing employment, severance or change in control agreement with, any employee, officer or director of Prestige; | ||
• | materially change its investment securities portfolio policy or make any investment other than in U. S. treasury securities, federal agency securities or any security rated AAA, or invest in any securities with a maturity of greater than ninety (90) days; | ||
• | make or acquire any loan (including without limitation, lines of credit and letters of credit) to any borrower or group of affiliated borrowers in excess of $90,000 in the aggregate, or increase, compromise, extend, renew or modify any existing loan in excess of $90,000; | ||
• | make any change in policies in any material respect with respect to the extension of credit, or the establishment of reserves with respect to the possible loss on loans or the charge off of losses incurred on loans, investments, deposits, asset and liability management, or other banking policies; |
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• | pay, discharge, settle or compromise any legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigation, other than any such payment, discharge, settlement or compromise in the ordinary course of business that involves solely money damages in the amount not in excess of $5,000 individually or $25,000 in the aggregate; | ||
• | waive, release, terminate, grant or transfer any rights of value or modify or change in any material respect any existing material agreement to which Prestige is a party, or enter into any agreement, arrangement or commitment not made in the ordinary course of business; | ||
• | take any action that would result in any of the conditions to the merger not being satisfied or being materially delayed or in regulatory approvals not being obtained or being materially delayed; | ||
• | incur any material expense that is not included in the operating budget contained in the application Prestige filed with each governmental entity in connection with its formation; | ||
• | hire any consultant, outside agency or professional services firm for an amount in excess of $5,000, except for professional services provided directly in connection with the merger; | ||
• | increase the compensation or fringe benefits of any present or former director, officer or employee; | ||
• | engage in any merger, acquisition or similar transaction; | ||
• | sell, lease, transfer, mortgage, encumber or otherwise dispose of any of its material assets or properties except as required by an existing contract or agreement; | ||
• | take any action which would result in any of the representations and warranties of Prestige in the merger agreement becoming untrue or in any of the conditions not being satisfied; or | ||
• | establish, adopt, amend or terminate any employee benefit plan. |
• | to call and convene a special meeting of shareholders to consider and vote on the merger agreement and recommend approval of the merger agreement; | ||
• | to permit a representative of First Priority to attend all management committee meetings of Prestige; |
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• | upon the request of First Priority, to have a Prestige representative confer on a regular basis with First Priority regarding the financial condition, operations and business matters of Prestige and the completion of the merger transaction; | ||
• | to deliver to First Priority, within 15 days after the end of each month, a consolidated balance sheet and statement of operations for such month for Prestige; | ||
• | to amend any nonqualified deferred compensation plans and employee benefit plans to the extent necessary to comply with section 409A of the Internal Revenue Code; | ||
• | to deliver to First Priority all personnel policy manuals and all employee handbooks regarding personnel policies and practices; | ||
• | to deliver to First Priority a written plan and operating budget detailing the steps necessary to complete the process of opening Prestige and the related costs; | ||
• | to promptly inform First Priority of the receipt of any legal, administrative or other proceedings or investigations relating to any alleged liability of Prestige under any labor or employment law; and | ||
• | to permit First Priority, at its own cost and expense, to conduct a phase I environmental audit on any physical location owned or occupied by Prestige; | ||
• | to maintain adequate insurance; | ||
• | to maintain accurate books and records; and | ||
• | to file all tax returns and pay all taxes when due. |
• | to cooperate with each other and use best efforts to identify those persons who may be deemed to be affiliates of Prestige; | ||
• | to use their best efforts to obtain all required regulatory approvals; and | ||
• | to the extent practical, to continue the employment on and after the closing date of substantially all employees of Prestige at the same locations and with the same or equivalent salary. |
• | to indemnify Prestige’s directors and officers against certain liabilities and maintain Prestige’s existing directors’ and officers’ liability insurance policy for a period of six years after the closing date; | ||
• | to increase the board of directors of First Priority to include four additional individuals designated by Prestige and to increase the board of directors for First |
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Priority Bank to include five additional individuals designated by Prestige, in each case, who are reasonably acceptable to First Priority; | |||
• | to permit a representative of Prestige reasonably acceptable to First Priority to attend committee meetings of First Priority and First Priority Bank; and | ||
• | to operate Prestige as a separate division of First Priority Bank for at least three years after the closing date. |
• | soliciting, initiating or encouraging any inquiries relating to or the making of any proposal or offer with respect to (i) a merger, reorganization, business combination, liquidation or other similar transaction, or (ii) a sale of 15% or more of the assets of Prestige, or any issuance or sale of 15% or more of the voting securities of Prestige (we refer to any such proposal or offer as an “acquisition proposal”); | ||
• | participating in any discussions or negotiations regarding an acquisition proposal, or facilitating a third party making an acquisition proposal; | ||
• | approving or recommending, or publicly proposing to approve or recommend, an acquisition proposal; or | ||
• | approving, recommending or entering into a letter of intent, agreement in principle or any other similar agreement relating to an acquisition proposal. |
• | amend the merger agreement; | ||
• | extend the time for the performance of any obligations or other acts required in the merger agreement; | ||
• | waive any inaccuracies in the representations and warranties contained in the merger agreement; or | ||
• | waive compliance with any of the agreements or conditions contained in the merger agreement, except for the requirements of shareholder approval, regulatory approval and the absence of any order, decree, or injunction preventing the transaction. |
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• | if the effective time of the merger does not occur on or before June 30, 2008; | ||
• | if either party has received a final nonappealable order from a regulatory authority whose approval or consent has been requested and will not be granted; | ||
• | a party has materially breached any representation, warranty or covenant in the merger agreement and such breach would have a material adverse effect on the breaching party, and such breaching party has not cured the breach by the earlier of 30 days of the date the non-breaching gives written notice of the breach to the breaching party or the effective time of the merger; or | ||
• | if Prestige’s shareholders do not approve the merger agreement at the special meeting. |
• | solicits, initiates or encourages an acquisition proposal; | ||
• | participates in any discussions or negotiations regarding an acquisition proposal, or facilitates a third party making an acquisition proposal; | ||
• | approves or recommends, or publicly proposes to approve or recommend, an acquisition proposal; |
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• | approves, recommends or enters into a letter of intent, agreement in principle or any other similar agreement relating to an acquisition proposal; | ||
• | withdraws, modifies or qualifies its recommendation of the transaction to Prestige shareholders or takes any other action in connection with the special meeting inconsistent with such recommendation; or | ||
• | fails to call, give notice of, convene or hold a special meeting of Prestige shareholders to consider the transaction within six months of the date of the merger agreement. |
• | by Prestige because its board of directors determines that an unsolicited acquisition proposal is more financially favorable to Prestige’s shareholders than the transactions contemplated by the merger agreement; | ||
• | by First Priority because Prestige materially breaches its covenant not to solicit other offers (see — “No Other Bids and Related Matters” on page 55); | ||
• | by First Priority because the board of directors of Prestige withdraws, modifies or qualifies its recommendation of the transaction to Prestige shareholders or takes any other action in connection with the special meeting inconsistent with such recommendation; | ||
• | by First Priority because the board of directors of Prestige fails to call, give notice of, convene or hold a special meeting of Prestige shareholders to consider the transaction within six months of the date of the merger agreement; | ||
• | by First Priority or Prestige because Prestige’s shareholders fail to approve the merger agreement, and (i) prior to the special shareholders’ meeting, a third party publicly announces or otherwise communicates to Prestige’s shareholders a proposal to acquire Prestige, and (ii) within 12 months from the date of such termination, Prestige agrees to engage in a business combination with such third party; or | ||
• | by First Priority or Prestige because the transaction is not completed by June 30, 2008, and within six months following such termination Prestige enters into a definitive agreement with respect to or consummates a merger transaction with a third party. |
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• | all liabilities and expenses relating to claims, actions, suits, proceedings, or investigations resulting from the person’s status as a director, officer, or employee of Prestige, whether pertaining to matters existing prior to the transaction and whether asserted prior to or after the transaction; and | ||
• | all liabilities and expenses relating to claims, actions, suits, proceedings, or investigations arising out of the merger agreement or the transactions contemplated by the merger agreement to the same extent as those officers, directors, and employees could be indemnified by Prestige. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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As of December 31, | ||||||||||||||||
As of | 2005 and for the | |||||||||||||||
December 31, | period from May 25, | |||||||||||||||
As of and for the nine | 2006 and for the | 2005 (date of | ||||||||||||||
months ended | year ended | inception) to | ||||||||||||||
September 30, | December 31, | December 31, | ||||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
(in thousands) | ||||||||||||||||
Total revenue (1) | $ | 2,207 | $ | 1,175 | $ | 1,757 | $ | 271 | ||||||||
Net loss | (1,766 | ) | (1,804 | ) | (2,436 | ) | (969 | ) | ||||||||
Total assets | 126,168 | 73,756 | 105,748 | 30,841 | ||||||||||||
Total loans | 89,264 | 34,552 | 50,423 | 111 | ||||||||||||
Total deposits | 106,485 | 40,249 | 64,417 | 789 |
(1) | Total revenue equals net interest income plus total non-interest income |
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For the nine months ended | For the nine months ended | |||||||||||||||||||||||
September 30, 2007 | September 30, 2006 | |||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||
Balance | Expense | Rate(1) | Balance | Expense | Rate(1) | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans receivable | $ | 68,018 | $ | 3,809 | 7.49 | % | $ | 14,603 | $ | 802 | 7.35 | % | ||||||||||||
Securities available for sale | 10,338 | 415 | 5.36 | % | 9,670 | 343 | 4.74 | % | ||||||||||||||||
Federal funds sold | 20,880 | 811 | 5.20 | % | 12,499 | 459 | 4.91 | % | ||||||||||||||||
Deposits with banks and other | 35 | 2 | 8.45 | % | 6 | 1 | 24.40 | % | ||||||||||||||||
Total interest earning assets | 99,271 | 5,037 | 6.78 | % | 36,778 | 1,605 | 5.83 | % | ||||||||||||||||
Non-interest-earning assets | 1,292 | 996 | ||||||||||||||||||||||
TOTAL ASSETS | $ | 100,563 | $ | 37,774 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Demand, interest-bearing | $ | 840 | 14 | 2.19 | % | $ | 358 | 6 | 2.22 | % | ||||||||||||||
Money market and savings | 38,395 | 1,428 | 4.97 | % | 13,102 | 466 | 4.75 | % | ||||||||||||||||
Time deposits | 39,607 | 1,570 | 5.30 | % | 3,154 | 118 | 5.00 | % | ||||||||||||||||
Borrowed funds | 390 | 16 | 5.53 | % | 926 | 41 | 5.87 | % | ||||||||||||||||
Total interest-bearing liabilities | 79,232 | 3,028 | 5.11 | % | 17,540 | 631 | 4.81 | % | ||||||||||||||||
Non interest-bearing liabilities: | ||||||||||||||||||||||||
Demand, non-interest bearing deposits | 3,674 | 731 | ||||||||||||||||||||||
Other liabilities | 887 | 312 | ||||||||||||||||||||||
Shareholders’ equity | 16,770 | 19,191 | ||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 100,563 | $ | 37,774 | ||||||||||||||||||||
Net interest income/rate spread | $ | 2,009 | 1.67 | % | $ | 74 | 1.02 | % | ||||||||||||||||
Net interest margin | 2.71 | % | 3.54 | % | ||||||||||||||||||||
(1) | Annualized for the nine month periods. |
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For the period from May 25, 2005 | ||||||||||||||||||||||||
For the year ended | (date of inception) to | |||||||||||||||||||||||
December 31, 2006 | December 31, 2005 | |||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate(1) | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans receivable | $ | 21,197 | $ | 1,576 | 7.44 | % | $ | 10 | $ | 1 | 6.72 | % | ||||||||||||
Securities available for sale | 11,070 | 544 | 4.91 | % | 2,213 | 53 | 3.92 | % | ||||||||||||||||
Federal funds sold | 13,377 | 671 | 5.02 | % | 1,922 | 48 | 4.13 | % | ||||||||||||||||
Deposits with banks and other | 17 | 2 | 9.26 | % | 358 | 8 | 3.86 | % | ||||||||||||||||
Interest on escrow balances | — | — | — | — | 166 | — | ||||||||||||||||||
Total interest earning assets | 45,661 | 2,793 | 6.12 | % | 4,503 | 276 | 10.10 | % | ||||||||||||||||
Non-interest-earning assets | 1,056 | 122 | ||||||||||||||||||||||
TOTAL ASSETS | $ | 46,717 | $ | 4,625 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Demand, interest-bearing | $ | 388 | 8 | 2.13 | % | $ | 17 | — | 4.17 | % | ||||||||||||||
Money market and savings | 17,442 | 848 | 4.86 | % | 17 | — | 3.68 | % | ||||||||||||||||
Time deposits | 7,682 | 401 | 5.22 | % | 22 | 1 | 4.18 | % | ||||||||||||||||
Borrowed funds | 954 | 57 | 5.94 | % | 86 | 4 | 7.17 | % | ||||||||||||||||
Total interest-bearing liabilities | 26,466 | 1,314 | 4.97 | % | 142 | 5 | 5.93 | % | ||||||||||||||||
Non interest-bearing liabilities: | ||||||||||||||||||||||||
Demand, non interest bearing | 996 | 30 | ||||||||||||||||||||||
Other liabilities | 357 | 7 | ||||||||||||||||||||||
Shareholders’ equity | 18,898 | 4,446 | ||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 46,717 | $ | 4,625 | ||||||||||||||||||||
Net interest income/rate spread | $ | 1,479 | 1.15 | % | $ | 271 | 4.17 | % | ||||||||||||||||
Net interest margin | 3.24 | % | 9.91 | % | ||||||||||||||||||||
(1) | Annualized for the period from May 25, 2005 (date of inception) to December 31, 2005. |
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Nine months ended September 30, | ||||||||||||
2007 vs. 2006 | ||||||||||||
Increase (Decrease) | ||||||||||||
Due to Change In | ||||||||||||
(In thousands) | ||||||||||||
Volume | Rate | Net Change | ||||||||||
Interest income: | ||||||||||||
Loans receivable | $ | 2,991 | $ | 16 | $ | 3,007 | ||||||
Securities available for sale | 25 | 47 | 72 | |||||||||
Federal funds sold | 323 | 29 | 352 | |||||||||
Deposits with banks and other | 1 | — | 1 | |||||||||
Total Interest Earning Assets | 3,340 | 92 | 3,432 | |||||||||
Interest expense: | ||||||||||||
Demand, interest-bearing | 8 | — | 8 | |||||||||
Money market and savings | 940 | 22 | 962 | |||||||||
Time deposits | 1,445 | 7 | 1,452 | |||||||||
Borrowed funds | (23 | ) | (2 | ) | (25 | ) | ||||||
Total interest bearing liabilities | 2,370 | 27 | 2,397 | |||||||||
Change in net interest income | $ | 970 | $ | 65 | $ | 1,035 | ||||||
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Year ended December 31, 2006 vs. | ||||||||||||
the period from May 25, 2005 (Date of | ||||||||||||
Inception) to December 31, 2005 | ||||||||||||
Increase (Decrease) | ||||||||||||
Due to Change In | ||||||||||||
(In thousands) | ||||||||||||
Volume | Rate | Net Change | ||||||||||
Interest income: | ||||||||||||
Loans receivable | $ | 1,575 | $ | — | $ | 1,575 | ||||||
Securities available for sale | 462 | 29 | 491 | |||||||||
Federal funds sold | 601 | 22 | 623 | |||||||||
Deposits with banks and other | 15 | (21 | ) | (6 | ) | |||||||
Interest on escrow balances | (166 | ) | — | (166 | ) | |||||||
Total interest earning assets | 2,487 | 30 | 2,517 | |||||||||
Interest expense: | ||||||||||||
Demand, interest-bearing | 8 | — | 8 | |||||||||
Money market and savings | 848 | — | 848 | |||||||||
Time deposits | 400 | — | 400 | |||||||||
Borrowed funds | 54 | (1 | ) | 53 | ||||||||
Total interest bearing liabilities | 1,310 | (1 | ) | 1,309 | ||||||||
Change in net interest income | $ | 1,177 | $ | 31 | $ | 1,208 | ||||||
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For the nine months ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
(in thousands) | ||||||||
Non-Interest Income | ||||||||
Wealth management fee income | $ | 160 | $ | 178 | ||||
Service charges on deposits | 9 | 1 | ||||||
Other branch fees | 9 | 2 | ||||||
Loan related fees | 12 | 7 | ||||||
Other | 8 | 13 | ||||||
Total Non-Interest Income | $ | 198 | $ | 201 | ||||
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For the year | ||||
ended | ||||
December 31, | ||||
2006 | ||||
(in thousands) | ||||
Non-Interest Income | ||||
Wealth management fee income | $ | 244 | ||
Service charges on deposits | 3 | |||
Other branch fees | 4 | |||
Loan related fees | 11 | |||
Other | 16 | |||
Total Non-Interest Income | $ | 278 | ||
For the nine months ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
(in thousands) | ||||||||
Non-Interest Expenses | ||||||||
Salaries and employee benefits | $ | 2,394 | $ | 1,718 | ||||
Occupancy and equipment | 314 | 254 | ||||||
Data processing equipment and operations | 171 | 110 | ||||||
Professional fees | 321 | 148 | ||||||
Marketing, advertising and business development | 118 | 170 | ||||||
Other | 331 | 144 | ||||||
Total Non-Interest Expenses | $ | 3,649 | $ | 2,544 | ||||
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Period from | ||||||||
May 25, 2005 | ||||||||
For the year | (date of | |||||||
ended | inception) to | |||||||
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(in thousands) | ||||||||
Non-Interest Expenses | ||||||||
Salaries and employee benefits | $ | 2,424 | $ | 716 | ||||
Occupancy and equipment | 334 | 218 | ||||||
Data processing equipment and operations | 162 | 61 | ||||||
Professional fees | 222 | 98 | ||||||
Marketing, advertising and business development | 204 | 46 | ||||||
Other | 215 | 99 | ||||||
Total Non-Interest Expenses | $ | 3,561 | $ | 1,238 | ||||
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At September 30, 2007 | ||||||||||||||||||||||||
After 1 Year | ||||||||||||||||||||||||
Within 1 Year | to 5 Years | Total | ||||||||||||||||||||||
Amount | Yield | Amount | Yield | Amount | Yield | |||||||||||||||||||
(In thousands except yields) | ||||||||||||||||||||||||
U.S. Government Securities | $ | 2,001 | 5.40 | % | $ | 6,004 | 5.35 | % | $ | 8,005 | 5.36 | % | ||||||||||||
Total investment securities available for sale | $ | 2,001 | 5.40 | % | $ | 6,004 | 5.35 | % | $ | 8,005 | 5.36 | % | ||||||||||||
September 30, 2007 | December 31, 2006 | December 31, 2005 | ||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. Government securities | $ | 8,000 | $ | 8,005 | $ | 52,993 | $ | 52,994 | $ | 29,986 | $ | 29,986 | ||||||||||||
Total Investments | $ | 8,000 | $ | 8,005 | $ | 52,993 | $ | 52,994 | $ | 29,986 | $ | 29,986 | ||||||||||||
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September 30, | December 31, | |||||||||||
2007 | 2006 | 2005 | ||||||||||
(In thousands) | ||||||||||||
Commercial | $ | 24,846 | $ | 14,138 | $ | — | ||||||
Commercial Real Estate | 19,708 | 12,473 | — | |||||||||
Residential Real Estate | 23,209 | 9,014 | — | |||||||||
Consumer | 21,387 | 14,724 | 111 | |||||||||
Total Loans | 89,150 | 50,349 | 111 | |||||||||
Net deferred loan costs | 114 | 74 | — | |||||||||
Total | $ | 89,264 | $ | 50,423 | $ | 111 | ||||||
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At September 30, 2007 | ||||||||||||||||
Maturities of Outstanding Loans | ||||||||||||||||
After 1 But | ||||||||||||||||
Within 1 Year | Within 5 Years | After 5 Years | Total Loans | |||||||||||||
(In thousands) | ||||||||||||||||
Commercial | $ | 13,299 | $ | 11,486 | $ | 61 | $ | 24,846 | ||||||||
Commercial Real Estate | 1,034 | 13,073 | 5,601 | 19,708 | ||||||||||||
Residential Real Estate | 1,795 | 9,614 | 11,800 | 23,209 | ||||||||||||
Consumer | 7,915 | 2,493 | 10,979 | 21,387 | ||||||||||||
Total Loans | $ | 24,043 | $ | 36,666 | $ | 28,441 | $ | 89,150 | ||||||||
Percentage composition of maturity | 27 | % | 41 | % | 32 | % | 100 | % | ||||||||
Fixed-rate loans as a percentage of total loans | 43 | % | ||||||||||||||
Floating-rate loans as a percentage of total loans | 57 | % |
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At December 31, 2006 | ||||||||||||||||
Maturities of Outstanding Loans | ||||||||||||||||
After 1 But | ||||||||||||||||
Within 1 Year | Within 5 Years | After 5 Years | Total Loans | |||||||||||||
(In thousands) | ||||||||||||||||
Commercial | $ | 9,545 | $ | 4,593 | $ | — | $ | 14,138 | ||||||||
Commercial Real Estate | 369 | 7,804 | 4,300 | 12,473 | ||||||||||||
Residential Real Estate | 342 | 5,084 | 3,588 | 9,014 | ||||||||||||
Consumer | 2,954 | 4,889 | 6,881 | 14,724 | ||||||||||||
Total Loans | $ | 13,210 | $ | 22,370 | $ | 14,769 | $ | 50,349 | ||||||||
Percentage composition of maturity | 26 | % | 45 | % | 29 | % | 100 | % | ||||||||
Fixed-rate loans as a percentage of total loans | 45 | % | ||||||||||||||
Floating-rate loans as a percentage of total loans | 55 | % |
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Period from May 25, | ||||||||||||||||
2005 (date of | ||||||||||||||||
Nine months ended | Year ended | inception) to | ||||||||||||||
September 30, | December 31, | December 31, | ||||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
Balance at the beginning of period | $ | 634 | $ | 2 | $ | 2 | $ | — | ||||||||
Net loans charged off | — | — | — | — | ||||||||||||
Provision charged to operations | 324 | 435 | 632 | 2 | ||||||||||||
Balance at end of period | $ | 958 | $ | 437 | $ | 634 | $ | 2 | ||||||||
Average loans | $ | 68,018 | $ | 14,603 | $ | 21,197 | $ | 10 | ||||||||
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(In thousands except percentage data) | ||||||||||||||||||||||||||||||||
At September 30, | At December 31, | |||||||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||||||||||||||||||
Loan | Loan | Loan | Loan | |||||||||||||||||||||||||||||
Category | Category | Category | Category | |||||||||||||||||||||||||||||
Amount | as a% of | Amount | as a% of | Amount | as a% of | Amount | as a% of | |||||||||||||||||||||||||
of | Total | of | Total | of | Total | of | Total | |||||||||||||||||||||||||
Allowance | Loans | Allowance | Loans | Allowance | Loans | Allowance | Loans | |||||||||||||||||||||||||
Commercial | $ | 71 | 27.9 | % | $ | 70 | 27.0 | % | $ | 106 | 28.1 | % | $ | — | 0.0 | % | ||||||||||||||||
Commercial Real Estate | 65 | 22.1 | % | 67 | 19.4 | % | 156 | 24.8 | % | — | 0.0 | % | ||||||||||||||||||||
Residential Real Estate | 42 | 26.0 | % | 19 | 27.2 | % | 18 | 17.9 | % | — | 0.0 | % | ||||||||||||||||||||
Consumer | 36 | 24.0 | % | 60 | 26.4 | % | 85 | 29.2 | % | — | 100.0 | % | ||||||||||||||||||||
Total Allocated | 214 | 100.0 | % | 216 | 100.0 | % | 365 | 100.0 | % | — | 100.0 | % | ||||||||||||||||||||
Unallocated | 744 | 0.0 | % | 221 | 0.0 | % | 269 | 0.0 | % | 2 | 0.0 | % | ||||||||||||||||||||
TOTAL | $ | 958 | 100.0 | % | $ | 437 | 100.0 | % | $ | 634 | 100.0 | % | $ | 2 | 100.0 | % | ||||||||||||||||
Allowance for loan losses as a percentage of total loans | 1.07 | % | 1.26 | % | 1.26 | % | 1.80 | % | ||||||||||||||||||||||||
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For the period from May | ||||||||||||||||||||||||||||||||
Year ended | 25, 2005 (date of | |||||||||||||||||||||||||||||||
Nine months ended September 30, | December 31, | inception) to | ||||||||||||||||||||||||||||||
2007 | 2006 | 2006 | December 31, 2005 | |||||||||||||||||||||||||||||
Amount | Rate | Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Demand, non-interest bearing | $ | 3,674 | $ | 731 | $ | 996 | $ | 30 | ||||||||||||||||||||||||
Demand, interest bearing | 840 | 2.19 | % | 358 | 2.22 | % | 388 | 2.13 | % | 17 | 4.17 | % | ||||||||||||||||||||
Money market and savings deposits | 38,395 | 4.97 | % | 13,102 | 4.75 | % | 17,442 | 4.86 | % | 17 | 3.68 | % | ||||||||||||||||||||
Time deposits | 39,607 | 5.30 | % | 3,154 | 5.00 | % | 7,682 | 5.22 | % | 22 | 4.18 | % | ||||||||||||||||||||
Total interest-bearing deposits | $ | 78,842 | 5.11 | % | $ | 16,614 | 4.74 | % | $ | 25,512 | 4.93 | % | $ | 56 | 4.03 | % | ||||||||||||||||
Total deposits | $ | 82,516 | $ | 17,345 | $ | 26,508 | $ | 86 | ||||||||||||||||||||||||
September 30, 2007 | ||||
(In thousands) | ||||
Three Months or Less | $ | 5,125 | ||
Over Three Through Six Months | 6,037 | |||
Over Six Through Twelve Months | 6,455 | |||
Over Twelve Months | 3,494 | |||
TOTAL | $ | 21,111 | ||
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Period from | ||||||||||||||||
May 25, 2005 | ||||||||||||||||
(date of | ||||||||||||||||
inception) | ||||||||||||||||
Nine months ended | Year ended | to | ||||||||||||||
September 30, | December 31, | December 31, | ||||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
(In thousands except percentage data) | ||||||||||||||||
Federal funds purchased: | ||||||||||||||||
Average balance during the year | $ | 150 | $ | 303 | $ | 281 | $ | 398 | ||||||||
Rate | 5.54 | % | 5.01 | % | 5.10 | % | 4.28 | % | ||||||||
Securities sold under agreements to repurchase: | ||||||||||||||||
Average balance during the year | $ | 34 | $ | — | $ | 5 | $ | — | ||||||||
Rate | 4.75 | % | 0.00 | % | 4.75 | % | 0.00 | % | ||||||||
Other short-term borrowings: | ||||||||||||||||
Average balance during the year | $ | 66 | $ | 622 | $ | 668 | $ | — | ||||||||
Rate | 6.40 | % | 6.29 | % | 6.31 | % | 0.00 | % | ||||||||
Maximum month end balance of short-term borrowings during the year | $ | 6,533 | $ | 36,608 | $ | 36,608 | $ | 9,547 |
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To Be | ||||||||||||
As of | As of | Considered | ||||||||||
September 30, | December 31, | “Well- | ||||||||||
2007 | 2006 | Capitalized” | ||||||||||
First Priority Bank: | ||||||||||||
Total risk-based capital | 19.58 | % | 31.20 | % | 10.00 | % | ||||||
Tier 1 risk-based capital | 18.46 | % | 30.12 | % | 6.00 | % | ||||||
Tier 1 leverage capital | 13.59 | % | 24.08 | % | 8.00 | % |
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Nine months | Nine months | |||||||||||
ended | Year ended | ended | ||||||||||
September 30, | December 31, | September 30, | ||||||||||
2007 | 2006 | 2006 | ||||||||||
Return on average assets | -2.35 | % | -5.21 | % | -6.39 | % | ||||||
Return on average equity | -14.08 | % | -12.89 | % | -12.57 | % | ||||||
Average equity to average assets ratio | 16.68 | % | 40.45 | % | 50.80 | % |
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As of September 30, 2007
(Dollars in thousands)
1-90 | 91-180 | 181-365 | 1-5 | 5 years | ||||||||||||||||||||
days | days | days | years | and over | Total | |||||||||||||||||||
Interest-Sensitive Assets | ||||||||||||||||||||||||
Federal Funds Sold | $ | 27,600 | $ | — | $ | — | $ | — | $ | — | $ | 27,600 | ||||||||||||
Loans receivable | 34,327 | 408 | 4,040 | 36,684 | 13,805 | 89,264 | ||||||||||||||||||
Investment Securities available for sale | 6,004 | — | 2,001 | — | — | 8,005 | ||||||||||||||||||
Total Interest Earning Assets | $ | 67,931 | $ | 408 | $ | 6,041 | $ | 36,684 | $ | 13,805 | $ | 124,869 | ||||||||||||
Cumulative Total | $ | 67,931 | $ | 68,339 | $ | 74,380 | $ | 111,064 | $ | 124,869 | ||||||||||||||
Interest-Sensitive Liabilities | ||||||||||||||||||||||||
Interest-bearing Demand | $ | 371 | $ | 278 | $ | 46 | $ | 93 | $ | 140 | $ | 928 | ||||||||||||
Savings Accounts | 12 | 10 | 2 | 2 | 22 | 48 | ||||||||||||||||||
Money Market Accounts | 42,617 | 458 | 458 | 458 | 1,833 | 45,824 | ||||||||||||||||||
Time Deposits | 8,977 | 13,838 | 20,192 | 11,925 | — | 54,932 | ||||||||||||||||||
Borrowed Funds | 534 | — | — | — | — | 534 | ||||||||||||||||||
Total | $ | 52,511 | $ | 14,584 | $ | 20,698 | $ | 12,478 | $ | 1,995 | $ | 102,266 | ||||||||||||
Cumulative Total | $ | 52,511 | $ | 67,095 | $ | 87,793 | $ | 100,271 | $ | 102,266 | ||||||||||||||
Gap | 15,420 | (14,176 | ) | (14,657 | ) | 24,206 | 11,810 | |||||||||||||||||
Cumulative Gap | $ | 15,420 | $ | 1,244 | $ | (13,413 | ) | $ | 10,793 | $ | 22,603 | |||||||||||||
Interest-sensitive assets/ Interest-sensitive liabilities (cumulative) | 1.3 | 1.0 | 0.8 | 1.1 | 1.2 | |||||||||||||||||||
Cumulative Gap/total earning assets | 12.3 | % | 1.0 | % | -10.7 | % | 8.6 | % | 18.1 | % |
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Payments Due by Period | ||||||||||||||||||||||||
Over 1 through 2 | Over 2 through 3 | Over 3 through 5 | ||||||||||||||||||||||
Within 1 Year | Years | Years | Years | Over 5 Years | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Time deposits | $ | 43,007 | $ | 5,631 | $ | 3,368 | $ | 2,926 | $ | — | $ | 54,932 | ||||||||||||
Operating lease obligations | 249 | 249 | 249 | 497 | 878 | 2,122 | ||||||||||||||||||
Long-term debt | — | — | — | — | 380 | 380 | ||||||||||||||||||
Short-term borrowings | 154 | — | — | — | — | 154 | ||||||||||||||||||
Accrued interest payable | 815 | — | — | — | — | 815 | ||||||||||||||||||
Total | $ | 44,225 | $ | 5,880 | $ | 3,617 | $ | 3,423 | $ | 1,258 | $ | 58,403 | ||||||||||||
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Director | ||||||||
Directors | Class | Since | Position(s) Held | |||||
John K. Desmond, Jr. | II | 2007 | Director | |||||
Lawrence E. Donato | III | 2007 | Director | |||||
Mary Ann Messmer | II | 2007 | Director | |||||
Alan P. Novak | III | 2007 | Director | |||||
Mel A. Shaftel | III | 2007 | Director | |||||
Vincent P. Small, Jr. | I | 2007 | Director | |||||
David E. Sparks | I | 2007 | Chairman of the Board | |||||
Scott J. Tarte | II | 2007 | Director | |||||
Richard M. Wesselt | II | 2007 | Director | |||||
William L. Wetty | I | 2007 | Director | |||||
Executive Officers | Position(s) Held | |||||||
David E. Sparks | Chairman, President and Chief Executive Officer | |||||||
Lawrence E. Donato | Chief Financial Officer | |||||||
Mary Ann Messmer | President and Chief Lending Officer, First Priority Bank |
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Mel A. Shaftel, Chairman | Scott J. Tarte | |||||
John K. Desmond, Jr. | Richard M. Wesselt | |||||
Alan P. Novak | William L. Wetty | |||||
Vincent P. Small, Jr. |
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John K. Desmond, Jr.
Alan P. Novak
Mel A. Shaftel
Scott J. Tarte
Richard M. Wesselt
William L. Wetty
• | Meeting the Demands of the Market — Our goal is to compensate our employees at competitive levels that position us as the employer of choice among our peers who provide similar financial services in the markets we serve. | ||
• | Aligning with Shareholders — We intend to use equity compensation as key component of our compensation mix to develop a culture of ownership among our key personnel and to align their individual financial interests with the interest of our shareholders. | ||
• | Driving Performance — We will base compensation in part on the attainment of company-wide, business unit and individual targets that return positive results to our bottom line. | ||
• | Reflecting our Business Philosophy — Our approach to compensation reflects our values and the way we do business in the communities we serve. |
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• | we operate in a highly regulated industry. We value experience in the financial services industry that promotes the safe and sound operation of First Priority Bank; | ||
• | we value executives with sufficient experience in our markets and the needs of our customers in various phases of the economic cycle; | ||
• | we operate in interest rate and credit markets and we value executives with sufficient experience with different products and investments in various phases of the economic cycle; | ||
• | we operate in interest rate and credit markets that are often volatile. We value disciplined decision-making that respects our business plan but adapts quickly to change; and | ||
• | we value the retention and development of incumbent executives who meet or exceed performance objectives. Recruiting executives can be expensive, unpredictable, and have a disruptive effect on our operations. |
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• | a defined contribution 401(k) retirement plan and discretionary profit-sharing plan; medical coverage (all employees share 17.5% of their elections); and pre-tax health and dependent care spending accounts. |
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Securities | ||||||||||||||||
Underlying Stock | Other | |||||||||||||||
Name & Position(1) | Year | Annual Compensation | Options(2) | Compensation(4) | ||||||||||||
David E. Sparks, | 2007 | $ | 175,000 | 60,000 | (3) | $ | 6,000 | |||||||||
Chairman, President | 2006 | $ | 100,000 | $ | 6,000 | |||||||||||
and Chief Executive | 2005 | $ | 36,615 | $ | 575 | |||||||||||
Officer of First Priority & Chairman and Chief Executive Officer of First Priority Bank | ||||||||||||||||
Lawrence E. Donato, | 2007 | $ | 157,000 | 45,000 | (3) | $ | 6,000 | |||||||||
Chief Financial | 2006 | $ | 150,000 | $ | 6,000 | |||||||||||
Officer of First | 2005 | $ | 55,023 | $ | 575 | |||||||||||
Priority & Chief Operating Officer of First Priority Bank | ||||||||||||||||
Mary Ann Messmer, | 2007 | $ | 157,000 | $ | 7,800 | |||||||||||
President and Chief | 2006 | $ | 150,000 | $ | 7,800 | |||||||||||
Lending Officer of | 2005 | $ | 131,923 | 45,000 | (3) | $ | 26,250 | |||||||||
First Priority Bank |
(1) | First Priority was formed on February 13, 2007 to serve as the holding company for First Priority Bank. Accordingly, the named officers have only held the positions listed for the holding company since that date. First Priority Bank was formed in November 2005. | |
(2) | Includes the stock options granted to executive officers under the first tranche of the 2005 Option Plan. Stock option grants vest in four years from the date of grant (December 22, 2009) and terminate in ten years (December 22, 2015) from the date of grant. Options granted may be exercised for one share of First Priority Bank common stock at an exercise price of $10.00 per share. | |
(3) | On December 14, 2006, each member of the board of directors of First Priority Bank agreed to cancel 1,000 stock options that were previously granted under First Priority Bank’s 2005 Option Plan in order to ensure the availability of stock options for current and future employees. For this reason, Mr. Sparks, Ms. Messmer and Mr. Donato presently have 59,000, 44,000 and 44,000 stock options, respectively. | |
(4) | Includes for Messrs. Sparks and Donato a car allowance for both years for business use of their vehicles. Included in other compensation for Ms. Messmer is a car allowance for business use of her vehicle of $7,800 in 2006 and $6,250 in 2005 and $20,000 awarded as a signing inducement in 2005. |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | Equity | |||||||||||||||||||||||||||||||||||
Plan | Incentive | |||||||||||||||||||||||||||||||||||
Awards: | Plan | |||||||||||||||||||||||||||||||||||
Number | Awards: | |||||||||||||||||||||||||||||||||||
Equity | of | Market or | ||||||||||||||||||||||||||||||||||
Incentive | Unearned | Payout | ||||||||||||||||||||||||||||||||||
Plan | Shares, | Value of | ||||||||||||||||||||||||||||||||||
Awards: | Market | Units or | Unearned | |||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Value of | Other | Shares, | |||||||||||||||||||||||||||||||
Securities | Number of | Securities | Shares | Shares or | Rights | Units or | ||||||||||||||||||||||||||||||
Underlying | Securities | Underlying | or Units | Units of | That | Other | ||||||||||||||||||||||||||||||
Unexercised | Underlying | Unexercised | Option | of Stock | Stock that | Have | Rights | |||||||||||||||||||||||||||||
Options | Unexercised Options | Unearned | Exercise | Option | That Have | Have Not | Not | That Have | ||||||||||||||||||||||||||||
(#) | (#) | Options | Price | Expiration | Not Vested | Vested | Vested | Not Vested | ||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||
David E. Sparks | 0 | 59,000 | 0 | $ | 10.00 | 12/22/15 | 59,000 | (1 | ) | 0 | 0 | |||||||||||||||||||||||||
Lawrence E. Donato | 0 | 44,000 | 0 | $ | 10.00 | 12/22/15 | 44,000 | (1 | ) | 0 | 0 | |||||||||||||||||||||||||
Mary Ann Messmer | 0 | 44,000 | 0 | $ | 10.00 | 12/22/15 | 44,000 | (1 | ) | 0 | 0 |
(1) | No active market exists for the common stock of First Priority. |
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Shares | ||||||||
Beneficially | Percent | |||||||
Name of Beneficial Owner | Owned(1) | Ownership | ||||||
John K. Desmond, Jr. | 60,000 | (2)(4)(5) | 2.83 | % | ||||
Lawrence E. Donato | 91,200 | (3)(4)(5) | 4.30 | % | ||||
Mary Ann Messmer | 15,000 | (3)(4)(5) | 0.71 | % | ||||
Alan P. Novak | 6,000 | (4)(5) | 0.28 | % | ||||
Mel A. Shaftel | 73,200 | (2)(4)(5) | 3.45 | % | ||||
Vincent P. Small, Jr. | 37,200 | (2)(5) | 1.76 | % | ||||
David E. Sparks | 181,200 | (3)(5) | 8.48 | % | ||||
Scott J. Tarte | 30,000 | (2)(5) | 1.42 | % | ||||
Richard M. Wesselt | 60,000 | (2) | 2.83 | % | ||||
William L. Wetty | 73,200 | (2)(4)(5) | 3.45 | % | ||||
Starboard Fund for New Bancs, LP Martin Fiascone, General Partner 200 West Adams Street, Suite 1015, Chicago, IL 60606 | 249,600 | 11.61 | % | |||||
Conwell Limited Partnership Jerome S. Goodman, General Partner 131-A-Gaither Drive, Mount Laurel, NJ 08054 | 144,000 | 6.67 | % | |||||
Wellington Limited Partnership Jerome S. Goodman, General Partner 131-A-Gaither Drive, Mount Laurel, NJ 08054 | 66,000 | 3.12 | % | |||||
Conestoga Management Company 103 Foulk Rd, Suite 205-18, Wilmington, DE 19803 | 120,000 | 5.64 | % | |||||
PRB Investors, LP 600 Third Ave, 17th Floor, New York, NY 10016 | 120,000 | 5.64 | % | |||||
All directors and executive officers as a group (10 persons) | 627,000 | (4) | 30.74 | % |
(1) | Shares are deemed to be beneficially owned by a person if he or she directly or indirectly has or shares the power to vote or dispose of the shares, whether or not he or she has any economic interest in the shares. Unless otherwise indicated, the named beneficial owner has sole voting and investment power with respect to the shares. Also includes shares the holder has the right to acquire within sixty (60) days and therefore amounts shown include immediately exercisable warrants to acquire First Priority common stock. As of the date of this proxy statement/prospectus, the number of shares represented by warrants which have been granted to all directors, executive officers and management as a group totaled 113,800 shares. | |
(2) | Excludes a total of 9,000 options granted during 2005 to each non-employee director (except Mr. Novak) under First Priority’s 2005 Stock Compensation Program (2005 Option Plan). All options granted under the 2005 Option Plan were granted at an exercise price of $10.00 per share, vest in four years and terminate ten years from the date of grant. Mr. Novak was granted 9,000 options from the second tranche at an exercise |
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price of $10.00 per share. Options issued to Mr. Novak vest in four years (March 23, 2010) from the date of grant and terminate ten years from the date of grant (March 23, 2016). | ||
(3) | Excludes the following number of options granted during 2005 under the first tranche of the 2005 Option Plan: Mr. Sparks — 59,000 stock options; Ms. Messmer — 44,000 stock options; Mr. Donato — 44,000 stock options. Options granted are at an exercise price of $10.00 per share, vest on the fourth anniversary of the grant date (December 22, 2009) and terminate ten years from the date of grant (December 22, 2015). | |
(4) | Mr. Desmond’s beneficial ownership includes 10,000 shares of common stock held by Mr. Desmond’s son with respect to which Mr. Desmond does not exercise voting or investment power. Ms. Messmer’s beneficial ownership includes 5,000 shares of common stock held jointly with her husband and 5,000 shares held in the name of her husband. Mr. Donato’s beneficial ownership includes 75,000 shares of common stock owned jointly with his wife and 1,000 shares of common stock owned by his children with respect to which Mr. Donato does not exercise voting and investment power. Mr. Novak’s beneficial ownership includes 5,000 shares of common stock owned by a limited partnership with respect to which Mr. Novak is a limited partner and does not exercise voting and investment power. Mr. Shaftel’s beneficial ownership includes 5,000 shares of common stock owned by a trust in which Mr. Shaftel shares voting and investment power. Mr. Sparks’ beneficial ownership includes 75,000 shares of common stock owned by his wife and 2,000 shares of common stock owned by his children with respect to which Mr. Sparks does not exercise voting and investment power. Mr. Wetty’s beneficial ownership includes 61,000 shares of common stock owned jointly with his wife. | |
(5) | Excludes the following number of shares of common stock issuable under the terms of a convertible debenture, that is not convertible until June, 2008: Mr. Desmond — 4,878 shares; Mr. Donato — 4,878 shares; Ms. Messmer — 487 shares; Mr. Novak — 975 shares; Mr. Shaftel — 4,878 shares; Mr. Small — 3,902 shares; Mr. Sparks — 4,878 shares; Mr. Tarte — 4,878 shares; Mr. Wetty — 4,878 shares. |
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Shares | ||||||||||||
Beneficially | ||||||||||||
Name of Beneficial Owner | Position | Owned (1)(2) | Percent Ownership | |||||||||
Michael J. Johnson | President & CEO, Director | 28,522 | 2.9 | % | ||||||||
Howard R. Berlin | Director | 135,000 | 13.8 | % | ||||||||
Samuel J. Worthington, Jr. | Chairman of the Board | 135,000 | 13.8 | % | ||||||||
Christopher E. Spinieo | Director | 46,000 | 4.7 | % | ||||||||
Patrick M. Smith | Director | 14,500 | 1.5 | % | ||||||||
Robert J. Fairbaugh | Director | 14,500 | 1.5 | % | ||||||||
Michael G. Wade | Director | 14,500 | 1.5 | % | ||||||||
Brent Kreiser | Chief Financial Officer | 13,000 | 1.3 | % | ||||||||
All directors and executives officers and management as a group (eight individuals) | 401,022 | 41.1 | % |
(1) | Shares are deemed to be beneficially owned by a person if he or she directly or indirectly has or shares the power to vote or dispose of the shares, whether or not he or she has any economic interest in the shares. Unless otherwise indicated, the named beneficial owner has sole voting and investment power with respect to the shares. Also includes shares the holder has the right to acquire within sixty (60) days and therefore amounts shown include immediately exercisable options or warrants to acquire Prestige common stock. As of the date of this proxy statement/prospectus, the number of shares represented by warrants which have been granted to all directors, executive officers and management as a group totaled 53,667 shares. | |
(2) | The number of shares indicated as beneficially owned by each director includes immediately exercisable options issued to each director awarded as a grant for their contribution to Prestige’s at-risk organizing capital. Mr. Worthington and Mr. Berlin each were issued 15,000 options, Mr. Spineo was issued 10,000 options and Messrs. Smith, Fairbaugh and Wade were each issued 2,500 options. |
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• | that directors can consider a number of the factors and groups (including shareholders) in determining whether a certain action is in the best interests of the corporation; | ||
• | that directors need not consider the interests of any particular group as dominant or controlling; | ||
• | directors, in order to satisfy the presumption that they have acted in the best interests of the corporation, need not satisfy any greater obligation or higher burden of proof for actions relating to an acquisition or potential acquisition of control; | ||
• | that actions relating to acquisitions of control that are approved by a majority of “disinterested directors” are presumed to satisfy the directors’ standard, unless it is proven by clear and convincing evidence that the directors did not assent to such action in good faith after reasonable investigation; and | ||
• | that the fiduciary duty of directors is solely to the corporation and may be enforced by the corporation or by a shareholder in a derivative action, but not by a shareholder directly. |
• | redeem any rights under, or to modify or render inapplicable, any shareholder rights plan; | ||
• | render inapplicable or make determinations under, provisions of the Pennsylvania Business Corporation Law of 1988, relating to control transactions, business |
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combinations, control-share acquisitions or disgorgement by certain controlling shareholders following attempts to acquire control; or |
• | act as the board of directors, a committee of the board or an individual director solely because of the effect such action might have on an acquisition or potential or proposed acquisition of control of the corporation or the consideration that might be offered or paid to shareholders in such an acquisition. |
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F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-10 | ||
F-11 | ||
F-12 | ||
F-13 | ||
F-14 | ||
F-15 |
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(In thousands, except per share data)
September 30, | December 31, | |||||||
2007 | 2006 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Cash and due from banks | $ | 796 | $ | 1,984 | ||||
Federal funds sold and securities purchased under agreements to resell | 27,600 | — | ||||||
Cash and Cash Equivalents | 28,396 | 1,984 | ||||||
Securities available for sale (amortized cost - 2007 $8,000; 2006 $52,993) | 8,005 | 52,994 | ||||||
Loans receivable | 89,264 | 50,423 | ||||||
Less: allowance for loan losses | 958 | 634 | ||||||
Net Loans | 88,306 | 49,789 | ||||||
Restricted investment in bank stock | 50 | 50 | ||||||
Premises and equipment, net | 605 | 424 | ||||||
Accrued interest receivable | 539 | 320 | ||||||
Other assets | 267 | 187 | ||||||
Total Assets | $ | 126,168 | $ | 105,748 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 4,753 | $ | 2,098 | ||||
Interest-bearing | 101,732 | 62,319 | ||||||
Total Deposits | 106,485 | 64,417 | ||||||
Short-term borrowings | 154 | 22,965 | ||||||
Long-term debt | 380 | — | ||||||
Accrued interest payable | 815 | 282 | ||||||
Other liabilities | 2,425 | 446 | ||||||
Total Liabilities | 110,259 | 88,110 | ||||||
Stockholders’ Equity | ||||||||
Preferred stock, $100 par value; authorized 10,000 shares; no shares issued or outstanding | — | — | ||||||
Common stock, $1 par value; authorized 10,000 shares; issued and outstanding 2,108 shares | 2,108 | 2,108 | ||||||
Surplus | 18,967 | 18,934 | ||||||
Accumulated deficit | (5,171 | ) | (3,405 | ) | ||||
Accumulated other comprehensive income | 5 | 1 | ||||||
Total Stockholders’ Equity | 15,909 | 17,638 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 126,168 | $ | 105,748 | ||||
See notes to consolidated financial statements |
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(In thousands, except per share data) (unaudited)
For the nine months ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
Interest Income | ||||||||
Loans receivable, including fees | $ | 3,809 | $ | 802 | ||||
Securities — taxable | 415 | 343 | ||||||
Interest bearing deposits and other | 2 | 1 | ||||||
Federal funds sold and securities purchased under agreements to resell | 811 | 459 | ||||||
Total Interest Income | 5,037 | 1,605 | ||||||
Interest Expense | ||||||||
Deposits | 3,012 | 590 | ||||||
Short-term borrowings | 11 | 41 | ||||||
Long-term debt | 5 | — | ||||||
Total Interest Expense | 3,028 | 631 | ||||||
Net Interest Income | 2,009 | 974 | ||||||
Provision for Loan Losses | 324 | 435 | ||||||
Net Interest Income after Provision for Loan Losses | 1,685 | 539 | ||||||
Non-Interest Income | ||||||||
Wealth management fee income | 160 | 178 | ||||||
Other | 38 | 23 | ||||||
Total Non-Interest Income | 198 | 201 | ||||||
Non-Interest Expenses | ||||||||
Salaries and employee benefits | 2,394 | 1,718 | ||||||
Occupancy and equipment | 314 | 254 | ||||||
Data processing equipment and operations | 171 | 110 | ||||||
Professional fees | 321 | 148 | ||||||
Marketing, advertising and business development | 118 | 170 | ||||||
Other | 331 | 144 | ||||||
Total Non-Interest Expenses | 3,649 | 2,544 | ||||||
Net Loss | $ | (1,766 | ) | $ | (1,804 | ) | ||
Loss per share | ||||||||
Basic and diluted | $ | (0.84 | ) | $ | (0.86 | ) | ||
Weighted average shares outstanding | ||||||||
Basic and diluted | 2,108 | 2,108 | ||||||
See notes to consolidated financial statements |
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(Dollars in thousands) (unaudited)
Accumulated | ||||||||||||||||||||
Other | ||||||||||||||||||||
Common | Accumulated | Comprehensive | ||||||||||||||||||
Stock | Surplus | Deficit | Income | Total | ||||||||||||||||
Balance — December 31, 2005 | $ | 2,108 | $ | 18,911 | $ | (969 | ) | $ | — | $ | 20,050 | |||||||||
Comprehensive loss: | ||||||||||||||||||||
Net loss | — | — | (1,804 | ) | — | (1,804 | ) | |||||||||||||
Net unrealized holding gain on available for sale securities arising during the period | — | — | — | 4 | 4 | |||||||||||||||
Total Comprehensive Loss | (1,800 | ) | ||||||||||||||||||
Stock options expense | — | 12 | — | — | 12 | |||||||||||||||
Balance — September 30, 2006 | $ | 2,108 | $ | 18,923 | $ | (2,773 | ) | $ | 4 | $ | 18,262 | |||||||||
Balance — December 31, 2006 | $ | 2,108 | $ | 18,934 | $ | (3,405 | ) | $ | 1 | $ | 17,638 | |||||||||
Comprehensive loss: | ||||||||||||||||||||
Net loss | — | — | (1,766 | ) | — | (1,766 | ) | |||||||||||||
Net unrealized holding gain on available for sale securities arising during the period | — | — | — | 4 | 4 | |||||||||||||||
Total Comprehensive Loss | (1,762 | ) | ||||||||||||||||||
Stock options expense | — | 33 | — | — | 33 | |||||||||||||||
Balance — September 30, 2007 | $ | 2,108 | $ | 18,967 | $ | (5,171 | ) | $ | 5 | $ | 15,909 | |||||||||
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(Dollars in thousands) (unaudited)
For the nine months ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (1,766 | ) | $ | (1,804 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Provision for loan losses | 324 | 435 | ||||||
Depreciation and amortization | 89 | 62 | ||||||
Net accretion of securities discounts | (140 | ) | (177 | ) | ||||
Stock based compensation expense | 33 | 12 | ||||||
Increase in accrued interest receivable | (232 | ) | (321 | ) | ||||
Increase in other assets | (80 | ) | (5 | ) | ||||
Increase in accrued interest payable | 533 | 90 | ||||||
Increase (decrease) in other liabilities | 1,995 | (120 | ) | |||||
Net Cash Provided by (Used in) Operating Activities | 756 | (1,828 | ) | |||||
Cash Flows from Investing Activities | ||||||||
Net increase in loans | (38,590 | ) | (34,442 | ) | ||||
Purchases of securities available for sale | (108,866 | ) | (201,830 | ) | ||||
Proceeds from maturities of securities available for sale | 154,000 | 194,000 | ||||||
Purchases of premises and equipment | (271 | ) | (80 | ) | ||||
Net Cash Provided by (Used in) Investing Activities | 6,273 | (42,352 | ) | |||||
Cash Flows from Financing Activities | ||||||||
Net increase in deposits | 41,814 | 39,494 | ||||||
Net (decrease) increase in short-term borrowings | (22,811 | ) | 5,239 | |||||
Net increase in long-term debt | 380 | — | ||||||
Net Cash Provided by Financing Activities | 19,383 | 44,733 | ||||||
Net Increase in Cash and Cash Equivalents | 26,412 | 553 | ||||||
Cash and Cash Equivalents — Beginning | 1,984 | 138 | ||||||
Cash and Cash Equivalents — Ending | $ | 28,396 | $ | 691 | ||||
Supplementary Cash Flows Information | ||||||||
Interest paid | $ | 2,495 | $ | 540 | ||||
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F-6
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Weighted | ||||||||
Average | ||||||||
Exercise | ||||||||
Shares | Price | |||||||
Outstanding at December 31, 2006 | 411,400 | $ | 10.00 | |||||
Granted in 2007 | 22,000 | 10.00 | ||||||
Forfeited/cancelled in 2007 | (12,400 | ) | 10.00 | |||||
Outstanding at September 30, 2007 | 421,000 | $ | 10.00 | |||||
Exercisable at September 30, 2007 | — | — | ||||||
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Nine Months | ||||||||
Ended September 30, | ||||||||
2007 | 2006 | |||||||
(In thousands, except | ||||||||
per share information) | ||||||||
Basic and diluted loss per share: | ||||||||
Net loss | $ | (1,766 | ) | $ | (1,804 | ) | ||
Weighted average common shares outstanding | 2,108 | 2,108 | ||||||
Basic and diluted loss per share | $ | (0.84 | ) | $ | (0.86 | ) |
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F-9
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First Priority Financial Corp.
Malvern, Pennsylvania
/s/ Beard Miller Company LLP | ||||
Beard Miller Company LLP | ||||
Reading, Pennsylvania December 6, 2007 |
F-10
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(In thousands, except per share data)
December 31, | ||||||||
2006 | 2005 | |||||||
Assets | ||||||||
Cash and due from banks | $ | 1,984 | $ | 135 | ||||
Interest bearing deposits | — | 3 | ||||||
Cash and Cash Equivalents | 1,984 | 138 | ||||||
Securities available for sale (amortized cost — 2006 $52,993; 2005 $29,986) | 52,994 | 29,986 | ||||||
Loans receivable | 50,423 | 111 | ||||||
Less: allowance for loan losses | 634 | 2 | ||||||
Net Loans | 49,789 | 109 | ||||||
Restricted investment in bank stock | 50 | 50 | ||||||
Premises and equipment, net | 424 | 428 | ||||||
Accrued interest receivable | 320 | — | ||||||
Other assets | 187 | 130 | ||||||
Total Assets | $ | 105,748 | $ | 30,841 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 2,098 | $ | 66 | ||||
Interest-bearing | 62,319 | 723 | ||||||
Total Deposits | 64,417 | 789 | ||||||
Short-term borrowings | 22,965 | 9,547 | ||||||
Accrued interest payable | 282 | 3 | ||||||
Other liabilities | 446 | 452 | ||||||
Total Liabilities | 88,110 | 10,791 | ||||||
Stockholders’ Equity | ||||||||
Preferred stock, $100 par value; authorized 10,000 shares; no shares issued or outstanding | — | — | ||||||
Common stock, $1 par value; authorized 10,000 shares; issued and outstanding 2,108 shares | 2,108 | 2,108 | ||||||
Surplus | 18,934 | 18,911 | ||||||
Accumulated deficit | (3,405 | ) | (969 | ) | ||||
Accumulated other comprehensive income | 1 | — | ||||||
Total Stockholders’ Equity | 17,638 | 20,050 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 105,748 | $ | 30,841 | ||||
F-11
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(In thousands, except per share data)
Period from | ||||||||
May 25, 2005 | ||||||||
(Date of | ||||||||
Year Ended | Inception) to | |||||||
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Interest Income | ||||||||
Loans receivable, including fees | $ | 1,576 | $ | 1 | ||||
Securities — taxable | 544 | 53 | ||||||
Interest bearing deposits and other | 2 | 174 | ||||||
Federal funds sold | 671 | 48 | ||||||
Total Interest Income | 2,793 | 276 | ||||||
Interest Expense | ||||||||
Deposits | 1,257 | 1 | ||||||
Short-term borrowings | 57 | 2 | ||||||
Other | — | 2 | ||||||
Total Interest Expense | 1,314 | 5 | ||||||
Net Interest Income | 1,479 | 271 | ||||||
Provision for Loan Losses | 632 | 2 | ||||||
Net Interest Income after Provision for Loan Losses | 847 | 269 | ||||||
Non-Interest Income | ||||||||
Wealth management fee income | 244 | — | ||||||
Other | 34 | — | ||||||
Total Non-Interest Income | 278 | — | ||||||
Non-Interest Expenses | ||||||||
Salaries and employee benefits | 2,424 | 716 | ||||||
Occupancy and equipment | 334 | 218 | ||||||
Data processing equipment and operations | 162 | 61 | ||||||
Professional fees | 222 | 98 | ||||||
Marketing, advertising, and business development | 204 | 46 | ||||||
Other | 215 | 99 | ||||||
Total Non-Interest Expenses | 3,561 | 1,238 | ||||||
Net Loss | $ | (2,436 | ) | $ | (969 | ) | ||
Loss per share | ||||||||
Basic and diluted | $ | (1.16 | ) | $ | (0.46 | ) | ||
Weighted average shares outstanding | ||||||||
Basic and diluted | 2,108 | 2,105 | ||||||
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Year Ended December 31, 2006 and Period from May 25, 2005
(Date of Inception) to December 31, 2005
(Dollars in thousands)
Accumulated | ||||||||||||||||||||
Other | ||||||||||||||||||||
Common | Accumulated | Comprehensive | ||||||||||||||||||
Stock | Surplus | Deficit | Income | Total | ||||||||||||||||
Balance — May 25, 2005 (Date of Inception) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Sale of common stock | 2,108 | 18,911 | — | — | 21,019 | |||||||||||||||
Net loss | — | — | (969 | ) | — | (969 | ) | |||||||||||||
Balance — December 31, 2005 | 2,108 | 18,911 | (969 | ) | — | 20,050 | ||||||||||||||
Comprehensive loss: | ||||||||||||||||||||
Net loss | — | — | (2,436 | ) | — | (2,436 | ) | |||||||||||||
Net unrealized holding gain on available for sale securities arising during the period | — | — | — | 1 | 1 | |||||||||||||||
Total Comprehensive Loss | (2,435 | ) | ||||||||||||||||||
Stock options expense | — | 23 | — | — | 23 | |||||||||||||||
Balance — December 31, 2006 | $ | 2,108 | $ | 18,934 | $ | (3,405 | ) | $ | 1 | $ | 17,638 | |||||||||
F-13
Table of Contents
(Dollars in thousands)
Period from | ||||||||
May 25, 2005 | ||||||||
(Date of | ||||||||
Year Ended | Inception) to | |||||||
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (2,436 | ) | $ | (969 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Provision for loan losses | 632 | 2 | ||||||
Depreciation and amortization | 84 | 11 | ||||||
Net accretion of securities discounts | (272 | ) | (53 | ) | ||||
Stock based compensation expense | 23 | — | ||||||
Increase in accrued interest receivable | (320 | ) | — | |||||
Increase in other assets | (58 | ) | (129 | ) | ||||
Increase in accrued interest payable | 279 | 3 | ||||||
Increase (decrease) in other liabilities | (5 | ) | 451 | |||||
Net Cash Used in Operating Activities | (2,073 | ) | (684 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Net increase in loans | (50,313 | ) | (110 | ) | ||||
Purchases of securities available for sale | (268,234 | ) | (49,934 | ) | ||||
Purchase of restricted stock | — | (50 | ) | |||||
Proceeds from maturities of securities available for sale | 245,500 | 20,000 | ||||||
Purchases of premises and equipment | (80 | ) | (439 | ) | ||||
Net Cash Used in Investing Activities | (73,127 | ) | (30,533 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Net increase in deposits | 63,628 | 789 | ||||||
Net increase in short-term borrowings | 13,418 | 9,547 | ||||||
Proceeds from sale of common stock | — | 21,019 | ||||||
Net Cash Provided by Financing Activities | 77,046 | 31,355 | ||||||
Net Increase in Cash and Cash Equivalents | 1,846 | 138 | ||||||
Cash and Cash Equivalents — Beginning | 138 | — | ||||||
Cash and Cash Equivalents — Ending | $ | 1,984 | $ | 138 | ||||
Supplementary Cash Flows Information | ||||||||
Interest paid | $ | 1,035 | $ | 2 | ||||
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December 31, 2006 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Available for sale | ||||||||||||||||
Obligations of other U.S. government agencies and corporations | $ | 52,993 | $ | 5 | $ | (4 | ) | $ | 52,994 | |||||||
Total investment securities available for sale | $ | 52,993 | $ | 5 | $ | (4 | ) | $ | 52,994 | |||||||
December 31, 2005 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Available for sale | ||||||||||||||||
Obligations of other U.S. government agencies and corporations | $ | 29,986 | $ | — | $ | — | $ | 29,986 | ||||||||
Total investment securities available for sale | $ | 29,986 | $ | — | $ | — | $ | 29,986 | ||||||||
December 31, 2006 | ||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||||||||||
Description of | # of | Fair | Unrealized | # of | Fair | Unrealized | # of | Fair | Unrealized | |||||||||||||||||||||||||||
Securities | Securities | Value | Losses | Securities | Value | Losses | Securities | Value | Losses | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Obligations of other U.S. government agencies and corporations | 2 | $ | 2,996 | $ | (4 | ) | — | $ | — | $ | — | 2 | $ | 2,996 | $ | (4 | ) | |||||||||||||||||||
Totals | 2 | $ | 2,996 | $ | (4 | ) | — | $ | — | $ | — | 2 | $ | 2,996 | $ | (4 | ) | |||||||||||||||||||
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December 31, 2006 | ||||||||
Available for Sale Securities | ||||||||
Amortized Cost | Fair Value | |||||||
(Dollars in thousands) | ||||||||
Due within one year | $ | 46,993 | $ | 46,993 | ||||
Due after one year through five years | 6,000 | 6,001 | ||||||
Total | $ | 52,993 | $ | 52,994 | ||||
2006 | 2005 | |||||||
(Dollars in thousands) | ||||||||
Commercial | $ | 14,138 | $ | — | ||||
Commercial real estate | 12,473 | — | ||||||
Residential real estate | 9,014 | — | ||||||
Home equity lines of credit | 7,328 | 76 | ||||||
Consumer | 7,396 | 35 | ||||||
Total Loans | 50,349 | 111 | ||||||
Less: | ||||||||
Allowance for loan losses | (634 | ) | (2 | ) | ||||
Net deferred loan costs | 74 | — | ||||||
Net Loans | $ | 49,789 | $ | 109 | ||||
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For the period from | ||||||||
May 25, 2005 (date | ||||||||
For the year ended | of inception to | |||||||
December 31, 2006 | December 31, 2005 | |||||||
(Dollars in thousands) | ||||||||
Balance , beginning of period | $ | 10 | $ | 0 | ||||
New loans | 1,157 | 70 | ||||||
Repayments and other reductions | (673 | ) | (60 | ) | ||||
Balance, December 31 | $ | 494 | $ | 10 | ||||
2006 | 2005 | |||||||
(Dollars in thousands) | ||||||||
Balance, beginning | $ | 2 | $ | — | ||||
Provision for loan losses | 632 | 2 | ||||||
Balance, ending | $ | 634 | $ | 2 | ||||
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2006 | 2005 | |||||||
(Dollars in thousands) | ||||||||
Leasehold improvements | $ | 139 | $ | 127 | ||||
Furniture, fixtures and equipment | 194 | 158 | ||||||
Automobile | 21 | — | ||||||
Computer equipment and data processing software | 165 | 154 | ||||||
519 | 439 | |||||||
Accumulated depreciation | (95 | ) | (11 | ) | ||||
$ | 424 | $ | 428 | |||||
2006 | 2005 | |||||||
(Dollars in thousands) | ||||||||
Demand, non-interest bearing | $ | 2,098 | $ | 66 | ||||
Demand, interest-bearing | 1,173 | 163 | ||||||
Money market and savings accounts | 33,737 | 305 | ||||||
Time, $100,000 and over | 12,588 | 200 | ||||||
Time, other | 14,821 | 55 | ||||||
$ | 64,417 | $ | 789 | |||||
2006 | ||||
(Dollars in thousands) | ||||
2007 | $ | 13,343 | ||
2008 | 13,593 | |||
2009 | 339 | |||
2010 | — | |||
2011 | 134 | |||
$ | 27,409 | |||
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F-28
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Minimum | ||||
Lease | ||||
Payments | ||||
(Dollars | ||||
in thousands) | ||||
2007 | $ | 240 | ||
2008 | 248 | |||
2009 | 249 | |||
2010 | 249 | |||
2011 | 249 | |||
Thereafter | 1,070 | |||
$ | 2,305 | |||
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Weighted | ||||||||
Average Exercise | ||||||||
Shares | Price | |||||||
Outstanding at May 25, 2005 | — | $ | — | |||||
Granted in 2005 | 381,500 | 10.00 | ||||||
Outstanding at December 31, 2005 | 381,500 | 10.00 | ||||||
Granted in 2006 | 55,400 | 10.00 | ||||||
Forfeited/cancelled in 2006 | (25,500 | ) | 10.00 | |||||
Outstanding at December 31, 2006 | 411,400 | $ | 10.00 | |||||
Exercisable at December 31, 2006 | — | — | ||||||
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Period from May 25, | |||||||||
For the year ended | 2005 (date of | ||||||||
December 31, | inception) to December | ||||||||
2006 | 31, 2005 | ||||||||
(Dollars in thousands except per share | |||||||||
information) | |||||||||
Net loss | $ | (2,436 | ) | $ | (969 | ) | |||
Stock-based compensation expense included in reported net loss, net of related tax effects | 22 | — | |||||||
Stock-based compensation expense determined under fair value based method for all awards, net of related tax effects | (256 | ) | (6 | ) | |||||
Pro forma | $ | (2,670 | ) | $ | (975 | ) | |||
Earnings per share (Basic and Diluted) | |||||||||
As reported | $ | (1.16 | ) | $ | (0.46 | ) | |||
Pro forma | $ | (1.27 | ) | $ | (0.46 | ) |
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2006 | 2005 | |||||||
(Dollars in thousands) | ||||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 186 | $ | 1 | ||||
Cash basis conversion | — | 14 | ||||||
Organization and start-up costs | 223 | 239 | ||||||
Net operating loss carryforwards | 819 | 80 | ||||||
Contribution carryforward | 1 | — | ||||||
Non-qualified stock option expense | 6 | — | ||||||
1,235 | 334 | |||||||
Valuation allowance | (1,148 | ) | (329 | ) | ||||
Total Deferred Tax Assets, Net of Valuation Allowance | 87 | 5 | ||||||
Deferred tax liabilities: | ||||||||
Discount accretion | 17 | 5 | ||||||
Property and equipment | 27 | — | ||||||
Cash basis conversions | 43 | — | ||||||
87 | 5 | |||||||
Net Deferred Tax Asset | $ | — | $ | — | ||||
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For the period from May | ||||||||
25, 2005 (date of | ||||||||
For the year ended | inception to December 31, | |||||||
December 31, 2006 | 2005 | |||||||
(In thousands, except per share information) | ||||||||
Basic and diluted loss per share | ||||||||
Net loss | $ | (2,436 | ) | $ | (969 | ) | ||
Weighted average common shares outstanding | 2,108 | 2,108 | ||||||
Basic and diluted loss per share | $ | (1.16 | ) | $ | (0.46 | ) |
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To be Well Capitalized under | ||||||||||||||||||||||||
Prompt Corrective Action | ||||||||||||||||||||||||
Actual | For Capital Adequacy Purposes | Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
December 31, 2006 | ||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 18,270 | 31.20 | % | $³ | 4,685 | ³ | 8.0 | % | $³ | 5,856 | ³ | 10.0 | % | ||||||||||
Tier 1 capital (to risk-weighted assets) | 17,636 | 30.12 | ³ | 2,343 | ³ | 4.0 | ³ | 3,514 | ³ | 6.0 | ||||||||||||||
Tier 1 capital (to total assets) | 17,636 | 24.08 | ³ | 5,860 | ³ | 8.0 | ³ | 5,860 | ³ | 8.0 | ||||||||||||||
December 31, 2005 | ||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 20,051 | 549.85 | % | $³ | 292 | ³ | 8.0 | % | $³ | 365 | ³ | 10.0 | % | ||||||||||
Tier 1 capital (to risk-weighted assets) | 20,050 | 549.80 | ³ | 146 | ³ | 4.0 | ³ | 219 | ³ | 6.0 | ||||||||||||||
Tier 1 capital (to total assets) | 20,050 | 94.15 | ³ | 1,704 | ³ | 8.0 | ³ | 1,704 | ³ | 8.0 |
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December 31, 2006 | ||||||||
Carrying Amount | Fair Value | |||||||
(Dollars in thousands) | ||||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 1,984 | $ | 1,984 | ||||
Securities available for sale | 52,994 | 52,994 | ||||||
Loans receivable, net | 49,789 | 50,085 | ||||||
Restricted stock | 50 | 50 | ||||||
Accrued interest receivable | 320 | 320 | ||||||
Liabilities: | ||||||||
Deposits | 64,417 | 64,370 | ||||||
Borrowings | 22,965 | 22,965 | ||||||
Accrued interest payable | 282 | 282 | ||||||
Off-balance sheet credit related instruments: | ||||||||
Commitments to extend credit | — | — |
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F-37
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INFORMATION NOT REQUIRED IN PROSPECTUS
2.1 | Agreement and Plan of Merger, dated as of October 19, 2007, by and among First Priority Financial Corp., First Priority Bank and Prestige Community Bank (included as Annex A to the proxy statement/prospectus and incorporated herein by reference) (schedules are omitted; First Priority Financial Corp. agrees to furnish copies of such schedules to the Commission upon request)* | ||
3.1 | Articles of Incorporation of First Priority Financial Corp. (attached as Exhibit B to the Proxy Statement/Prospectus filed as part of registration statement No. 333-140879 with the Securities and Exchange Commission on February 23, 2007 and incorporated herein by reference) | ||
3.2 | Bylaws of First Priority Financial Corp. (attached as Exhibit C to the Proxy Statement/Prospectus filed as part of registration statement No. 333-140879 with the Securities and Exchange Commission on February 23, 2007 and incorporated herein by reference) | ||
5.1 | Opinion and consent of Stevens & Lee as to the validity of the securities being issued* | ||
8.1 | Opinion of Stevens & Lee regarding the federal income tax consequence of the merger* |
II-1
Table of Contents
10.1 | First Priority Stock Compensation Program* | ||
10.2 | Change in Control Agreement between First Priority Bank and David E. Sparks | ||
10.3 | Change in Control Agreement between First Priority Bank and Lawrence E. Donato | ||
10.4 | Change in Control Agreement between First Priority Bank and Mary Ann Messmer | ||
21 | Subsidiaries of the Registrant* | ||
23.1 | Consent of Beard Miller Company LLP | ||
23.2 | Consent of Curtis Financial Group, LLC* | ||
23.3 | Consent of Stevens & Lee (incorporated by reference to Exhibit 5.1)* | ||
23.4 | Consent of Howard R. Berlin | ||
23.5 | Consent of Samuel J. Worthington, Jr. | ||
23.6 | Consent of Christopher E. Spineo | ||
23.7 | Consent of Robert J. Fairbaugh | ||
24.1 | Powers of Attorney of Directors and Officers (included on signature page)* | ||
99.1 | Form of Opinion of Curtis Financial Group, LLC (included as Annex B to the proxy statement/prospectus)* | ||
99.2 | Form of Proxy for the Special Meeting of Shareholders of Prestige Community Bank* |
* | Previously filed |
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II-4
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FIRST PRIORITY FINANCIAL CORP. (Registrant) | ||||
By: | /s/ David E. Sparks | |||
David E. Sparks, | ||||
Chairman and Chief Executive Officer |
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SIGNATURE | TITLE | DATE | ||
/s/ David E. Sparks | Chairman, Chief Executive Officer and Director (Principal Executive Officer) | January 4, 2008 | ||
/s/ Lawrence E. Donato | Chief Financial Officer and Director (Principal Financial and Accounting Officer) | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 | ||
/s/ David E. Sparks | Director | January 4, 2008 |
* | By David E. Sparks, Attorney-in-fact |
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Table of Contents
2.1 | Agreement and Plan of Merger, dated as of October 19, 2007, by and among First Priority Financial Corp., First Priority Bank and Prestige Community Bank (included as Annex A to the proxy statement/prospectus and incorporated herein by reference) (schedules are omitted; First Priority Financial Corp. agrees to furnish copies of such schedules to the Commission upon request) | ||
3.1 | Articles of Incorporation of First Priority Financial Corp. (attached as Exhibit B to the Proxy Statement/Prospectus filed as part of registration statement No. 333-140879 with the Securities and Exchange Commission on February 23, 2007 and incorporated herein by reference) | ||
3.2 | Bylaws of First Priority Financial Corp. (attached as Exhibit C to the Proxy Statement/Prospectus filed as part of registration statement No. 333-140879 with the Securities and Exchange Commission on February 23, 2007 and incorporated herein by reference) | ||
5.1 | Opinion and consent of Stevens & Lee as to the validity of the securities being issued* | ||
8.1 | Opinion of Stevens & Lee regarding the federal income tax consequence of the merger* | ||
10.1 | First Priority Stock Compensation Program* | ||
10.2 | Change in Control Agreement between First Priority Bank and David E. Sparks | ||
10.3 | Change in Control Agreement between First Priority Bank and Lawrence E. Donato | ||
10.4 | Change in Control Agreement between First Priority Bank and Mary Ann Messmer | ||
21 | Subsidiaries of the Registrant* | ||
23.1 | Consent of Beard Miller Company LLP | ||
23.3 | Consent of Curtis Financial Group, LLC* | ||
23.4 | Consent of Howard R. Berlin | ||
23.5 | Consent of Samuel J. Worthington, Jr. | ||
23.6 | Consent of Christopher E. Spineo | ||
23.7 | Consent of Robert J. Fairbaugh | ||
24.1 | Powers of Attorney of Directors and Officers (included on signature page)* |
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99.1 | Form of Opinion of Curtis Financial Group, LLC (included as Annex B to the proxy statement/prospectus)* | ||
99.2 | Form of Proxy for the Special Meeting of Shareholders of Prestige Community Bank* |
* | Previously filed |
II-8
Table of Contents
Table of Contents
Page | ||||
ARTICLE I THE MERGER | 1 | |||
1.1 The Merger | 1 | |||
1.2 Effective Time | 2 | |||
1.3 Effects of the Merger | 2 | |||
1.4 Closing of the Merger | 2 | |||
1.5 Articles of Incorporation and Bylaws | 2 | |||
1.6 Board of Directors and Officers | 2 | |||
1.7 Change to Structure of Merger | 2 | |||
ARTICLE II CONSIDERATION; EXCHANGE PROCEDURES | 3 | |||
2.1 Conversion of Prestige Common Stock | 3 | |||
ARTICLE III EXCHANGE OF CERTIFICATES FOR MERGER CONSIDERATION | 3 | |||
3.1 Exchange Agent | 3 | |||
3.2 Exchange of Shares | 3 | |||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PRESTIGE | �� | 4 | ||
4.1 Disclosure Schedule | 4 | |||
4.2 Corporate Organization | 5 | |||
4.3 Capitalization | 5 | |||
4.4 Authority; No Violation | 6 | |||
4.5 Consents and Approvals | 7 | |||
4.6 Reports | 7 | |||
4.7 Financial Statements | 8 | |||
4.8 Books and Records; Internal Controls | 8 | |||
4.9 Broker’s Fees | 9 | |||
4.10 Absence of Certain Changes or Events | 9 | |||
4.11 Legal Proceedings | 9 | |||
4.12 Taxes | 9 | |||
4.13 Employees; Employee Benefit Plans | 11 | |||
4.14 Compliance With Applicable Law | 12 | |||
4.15 Certain Contracts | 13 | |||
4.16 Agreements With Regulatory Agencies | 13 | |||
4.17 Prestige Information | 13 | |||
4.18 Title to Property | 14 | |||
4.19 Environmental Liability | 15 | |||
4.20 Derivative Instruments | 15 | |||
4.21 Opinion of Financial Advisor | 15 | |||
4.22 Intellectual Property | 15 |
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Page | ||||
4.23 Labor Matters | 16 | |||
4.24 Loan Matters | 17 | |||
4.25 Investment Portfolio | 17 | |||
4.26 Related Party Transactions | 17 | |||
4.27 Takeover Laws | 18 | |||
4.28 Community Reinvestment Act, Anti-Money Laundering and Customer Information Security | 18 | |||
4.29 Quality of Representations | 18 | |||
ARTICLE V REPRESENTATIONS AND WARRANTIES OF FPFC | 18 | |||
5.1 Disclosure Schedule; Disclosure Standard | 18 | |||
5.2 Corporate Organization | 19 | |||
5.3 Capitalization | 19 | |||
5.4 Authority; No Violation | 20 | |||
5.5 Consents and Approvals | 20 | |||
5.6 Financial Statements | 21 | |||
5.7 Books and Records; Internal Controls | 21 | |||
5.8 Broker’s Fees | 22 | |||
5.9 Absence of Certain Changes or Events | 22 | |||
5.10 Legal Proceedings | 22 | |||
5.11 Taxes | 22 | |||
5.12 Employees; Employee Benefit Plans | 23 | |||
5.13 Compliance With Applicable Law | 25 | |||
5.14 Agreements With Regulatory Agencies | 25 | |||
5.15 FPFC Information | 25 | |||
5.16 Environmental Liability | 26 | |||
5.17 Opinion of Financial Advisor | 26 | |||
5.18 Labor Matters | 26 | |||
5.19 Quality of Representations | 26 | |||
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS | 26 | |||
6.1 Conduct of Business of Prestige Prior to the Effective Time | 26 | |||
6.2 Prestige Forbearances | 27 | |||
ARTICLE VII ADDITIONAL AGREEMENTS | 29 | |||
7.1 Regulatory Matters | 29 | |||
7.2 Access to Information | 30 | |||
7.3 Shareholder Approval | 30 | |||
7.4 Acquisition Proposals | 31 | |||
7.5 Legal Conditions to Merger | 32 | |||
7.6 Employees; Employee Benefits | 33 | |||
7.7 Indemnification; Directors’ and Officers’ Insurance | 34 | |||
7.8 Advice of Changes | 35 | |||
7.9 Merger | 36 |
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Page | ||||
7.10 Current Information | 36 | |||
7.11 Undertakings by Prestige | 36 | |||
ARTICLE VIII CONDITIONS PRECEDENT | 37 | |||
8.1 Conditions to Each Party’s Obligation to Effect the Merger | 37 | |||
8.2 Conditions to Obligations of FPFC | 37 | |||
8.3 Conditions to Obligations of Prestige | 38 | |||
ARTICLE IX TERMINATION AND AMENDMENT | 38 | |||
9.1 Termination | 38 | |||
9.2 Effect of Termination | 39 | |||
9.3 Amendment | 41 | |||
9.4 Extension; Waiver | 41 | |||
ARTICLE X GENERAL PROVISIONS | 41 | |||
10.1 Nonsurvival of Representations, Warranties, and Agreements | 41 | |||
10.2 Expenses | 41 | |||
10.3 Notices | 42 | |||
10.4 Interpretation | 42 | |||
10.5 Counterparts | 43 | |||
10.6 Entire Agreement | 43 | |||
10.7 Governing Law | 43 | |||
10.8 Severability | 43 | |||
10.9 Publicity | 43 | |||
10.10 Assignment; Third Party Beneficiaries | 43 |
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Acquisition Proposal | 32 | |||
Agreement | 1 | |||
Articles of Merger | 2 | |||
Authorizations | 12 | |||
Banking Code | 1 | |||
BHCA | 7 | |||
Business Combination | 42 | |||
Certificate | 3 | |||
Change in Prestige Recommendation | 32 | |||
Closing | 2 | |||
Closing Date | 2 | |||
Code | 1 | |||
Effective Date | 48 | |||
Effective Time | 2 | |||
Environmental Laws | 15 | |||
ERISA | 11 | |||
ERISA Affiliate | 11 | |||
Exchange Act | 7 | |||
FDIA | 5 | |||
FDIC | 5 | |||
First Priority Bank | 1 | |||
FPFC | 1 | |||
FPFC Common Stock | 3 | |||
FPFC Disclosure Schedule | 19 | |||
FPFC Option | 3 | |||
FPFC Regulatory Agreement | 26 | |||
FPFC Warrant | 3 | |||
FRB | 7 | |||
GAAP | 5 | |||
Governmental Entity | 7 | |||
Indemnified Parties | 35 | |||
Insurance Amount | 36 | |||
Liens | 6 | |||
Loan | 17 | |||
Material Adverse Effect | 5 | |||
Merger | 1 | |||
PABCL | 1 | |||
Plan of Merger | 1 | |||
Plans | 11 | |||
Prestige | 1 | |||
Prestige Common Stock | 3 | |||
Prestige Contract | 13 | |||
Prestige Designees | 2 | |||
Prestige Disclosure Schedule | 4 | |||
Prestige Option | 3 | |||
Prestige Plans | 34 | |||
Prestige Recommendation | 32 | |||
Prestige Regulatory Agreement | 14 | |||
Prestige Regulatory Reports | 8 | |||
Prestige Shareholder Approval | 6 | |||
Prestige Shareholders Meeting | 32 | |||
Prestige Stock Plan | 6 | |||
Prestige Termination Fee | 41 | |||
Prestige Warrant | 3 | |||
Registration Statement | 7 | |||
Requisite Regulatory Approval | 7 | |||
SEC | 7 | |||
Superior Proposal | 33 | |||
Surviving Corporation | 1 | |||
Tax Return | 11 | |||
Taxes | 11 | |||
USA Patriot Act | 18 |
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2 West Liberty Blvd.
Suite 104
Malvern, Pennsylvania 19355
Attention: David E. Sparks, Chief Executive Officer
Fax No.: (610) 484-5038
620 Freedom Business Center
Suite 200
King of Prussia, Pennsylvania 19406
Attention: Jeffrey P. Waldron
Fax No.: (610) 371-7974
104 Pheasant Run
Newtown, Pennsylvania 18940
Attention: Michael Johnson, Chief Executive Officer
Fax No.: (215) 867-2409
One South Market Square, 12th Floor
Harrisburg, Pennsylvania 17108
Attention: Charles J. Ferry
Fax No.: (717) 231-6669
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FIRST PRIORITY FINANCIAL CORP. | ||||
By: | /s/ David E. Sparks | |||
Name: | David E. Sparks | |||
Title: | President and Chief Executive Officer | |||
FIRST PRIORITY BANK. | ||||
By: | /s/ David E. Sparks | |||
Name: | David E. Sparks | |||
Title: | Chief Executive Officer | |||
PRESTIGE COMMUNITY BANK | ||||
By: | /s/ Michael Johnson | |||
Name: | Michael Johnson | |||
Title: | President and Chief Executive Officer |
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FIRST PRIORITY BANK | ||||
By | /s/ David E. Sparks | |||
Name: David E. Sparks | ||||
Title: Chief Executive Officer | ||||
PRESTIGE COMMUNITY BANK | ||||
By | /s/ Michael Johnson | |||
Name: Michael Johnson | ||||
Title: President and Chief Executive Officer |
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Prestige Community Bank
104 Pheasant Run
Newtown, Pennsylvania 18940
(i) | reviewed the historical financial performance, recent financial position and general prospects of the Company and Buyer using publicly available information; | ||
(ii) | reviewed certain internal financial statements and other financial and operating data concerning the Company and Buyer prepared by the Company’s and/or Buyer’s management teams; |
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October 18, 2007
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(iii) | reviewed certain financial forecasts and other forward looking financial information prepared by the Company’s and Buyer’s management teams; | ||
(iv) | held discussions with the senior managements of the Company and Buyer concerning the business, past and current operations, financial condition and future prospects of the Company and Buyer; | ||
(v) | reviewed the financial terms and conditions set forth in the Agreement; | ||
(vi) | compared the financial performances of the Company and Buyer with that of certain other banking companies we deemed similar to the Company and Buyer; | ||
(vii) | compared the financial terms of the Transaction with the financial terms, to the extent publicly available, of other transactions that we deemed relevant; | ||
(viii) | prepared discounted dividend analysis of the Company and Buyer using data and projections supplied by Company and Buyer management; | ||
(ix) | reviewed the relative contribution of assets, liabilities, equity and earnings of the Company and Buyer on a pro forma basis and the relative pro forma ownership of the shareholders of Company and Buyer; and | ||
(x) | made such inquiries and took into account such other matters as we deemed relevant, including our assessment of general economic, market and monetary conditions. |
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Sincerely, CURTIS FINANCIAL GROUP, LLC | ||||
/s/ Curtis Financial Group, LLC | ||||
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Dissenters’ Rights
1 | 15 Pa. C.S.A. § 1571 et seq. |
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2 | 42 Pa.C.S.A. § 5301 et seq. |
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