Filed Pursuant to Rule 424(b)(3)
Registration No. 333-192294
PROSPECTUS
CARROLL BANCORP, INC.
Up to 62,491 shares of Common Stock issuable upon exercise of 124,982 Warrants
We are offering up to 62,491 shares of our common stock that are issuable upon the exercise of 124,982 warrants with an exercise price of $16.00 per whole share, all of which warrants we issued on March 24, 2014 as part of a public offering of Units, with each Unit consisting of one share of common stock and one warrant to purchase one-half of a share of common stock. No securities are being offered pursuant to this prospectus other than the shares of our common stock (the “Shares”) that will be issued upon the exercise of such warrants.
Our common stock is quoted on the OTC Market Group’s quotation system under the symbol “CROL.”
Investing in our securities involves a high degree of risk. See “Risk Factors” on page 4 of this prospectus and beginning on page 16 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 for more information.
This prospectus does not constitute an offer or solicitation by anyone in any state or other jurisdiction in which the person making such offer or solicitation is not qualified to do so or (i) to any person located in the state of California or (ii) otherwise to any person to whom it is unlawful to make such offer or solicitation.
These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
None of the Securities and Exchange Commission, Maryland Office of the Commissioner of Financial Regulation, Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, nor any state securities regulator has approved or disapproved of these securities or if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is April 21, 2014.
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You should read this prospectus together with additional information described under the headings “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.” If there is any inconsistency between the information in this prospectus and the documents incorporated by referenced herein, you should rely on the information in this prospectus.
You should rely only on the information contained in or incorporated by reference into this prospectus. We have not authorized anyone to provide you with any other or different information. If anyone provides you with information that is different from, or inconsistent with, the information in this prospectus, you should not rely on it. We believe the information in this prospectus is materially complete and correct as of the date on the front cover. We cannot, however, guarantee that the information will remain correct after that date. For that reason, you should assume that the information in this prospectus is accurate only as of the date on the front cover and that it may not still be accurate on a later date. This document may only be used where it is legal to sell these securities. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any issuances of common stock pursuant to the exercise of the warrants.
Neither we, nor any of our officers, directors, agents or representatives, make any representation to you about the legality of an investment in our securities. You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before exercising the warrants included in the Units.
This prospectus does not offer to sell, or ask for offers to buy, any of our securities in California or in any other state or other jurisdiction in which such offer or solicitation would be unlawful or where the person making the offer is not qualified to do so.
As used in this prospectus, “Carroll Bancorp,” “we,” “us,” and “ours” refer to Carroll Bancorp, Inc. and its subsidiaries. References to the “Bank” refer to Carroll Community Bank, a wholly owned subsidiary of Carroll Bancorp, Inc.
The following summary highlights material information in this prospectus. It may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, as well as the information incorporated by reference into this prospectus.
General
Carroll Bancorp, Inc. is a Maryland corporation that owns 100% of the outstanding common stock of Carroll Community Bank. On October 12, 2011, we completed our initial public offering of common stock in connection with the Bank’s conversion from a state-chartered mutual savings bank to a state-chartered commercial bank, a stock form of organization. We sold 359,456 shares of common stock at $10.00 per share raising $3.6 million of gross proceeds. Since the completion of the initial public offering, Carroll Bancorp has not engaged in any significant business activity other than owning the common stock of and maintaining deposits in the Bank and lending funds to the employee stock ownership plan trust.
At December 31, 2013, we had total assets of $107.7 million, loans outstanding, net, of $83.5 million, deposits of $91.8 million, stockholders’ equity of $8.4 million, and a book value per share of $23.41. Net income for the year ended December 31, 2013 was $222,000.
Carroll Community Bank is a state-chartered commercial bank headquartered in Sykesville, Maryland. The Bank was organized in 1870 as Sykesville Perpetual Building Association. The Association was chartered in 1887 and re-chartered and reorganized in 1907 when it became Sykesville Building Association of Carroll County. In October 1985 the Association was chartered as a federal mutual savings association. On September 12, 1988 the business name changed from Sykesville Building Association of Carroll County to Sykesville Federal Savings Association. In July 2010, Sykesville Federal Savings Association converted from a federal savings association to a Maryland-chartered mutual savings bank and changed its name to Carroll Community Bank. On October 12, 2011, the Bank converted from a state-chartered mutual savings bank to a state-chartered commercial bank, a stock form of organization, pursuant to its plan of conversion of which the formation of Carroll Bancorp and the completion of its initial public offering of common stock was a part.
Our business has consisted primarily of attracting and accepting deposits from the general public in the areas surrounding our offices and investing those deposits, together with funds generated from operations, primarily in residential mortgage loans and commercial real estate loans. We recently have increased, and intend to continue to increase, our focus on commercial real estate loans and related products, including demand deposit accounts, remote deposit capture and business internet banking to support the business community. We are committed to meeting the credit needs of our community, consistent with safe and sound operations.
We offer a variety of deposit products, including savings accounts, certificates of deposit, money market accounts, business and retail noninterest and interest bearing checking accounts and individual retirement accounts. We have two full service branches with each providing a drive-through facility and automated teller machine, or ATM, for our customers’ convenience.
We have based our strategic plan on the foundation of enhancing stockholder value, growth in market share and operating profitability. Our goals include maintaining credit quality, using technology to expand market share and implementing extensions of core banking services.
The primary market areas we serve are in Carroll and Howard Counties in Maryland. We are headquartered in Sykesville, Maryland, a suburban area located 20 miles west of the city of Baltimore, Maryland. Sykesville is located in the southeastern portion of Carroll County, close to the border of Howard and Baltimore Counties. Carroll Community Bank maintains one other branch office in the town of Westminster, located in central Carroll County.
As a bank holding company, Carroll Bancorp is required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of the Federal Reserve Board, and is subject to certain regulations of the Maryland Office of the Commissioner of Financial Regulation. Carroll Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission (the “SEC”) under the federal securities laws.
As a state chartered commercial bank, Carroll Community Bank is supervised and examined by the Maryland Office of the Commissioner of Financial Regulation, and by the Federal Deposit Insurance Corporation (the “FDIC”) as the insurer of its deposits and its primary federal regulator. Carroll Community Bank is also regulated to a lesser extent by the Federal Reserve Board, governing reserves to be maintained against deposits and other matters. Carroll Community Bank’s relationship with its depositors and borrowers also is regulated by state and federal law, including in matters concerning the ownership of deposit accounts and the form and content of Carroll Community Bank’s loan documents. This system of state and federal regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of
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the FDIC’s deposit insurance fund and depositors, and not for the protection of stockholders. Carroll Community Bank is periodically examined by the Maryland Office of the Commissioner of Financial Regulation and the FDIC to ensure that it satisfies applicable standards with respect to its capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest rates. Following examinations, the Maryland Office of the Commissioner of Financial Regulation and the FDIC prepare reports for the consideration of Carroll Community Bank’s board of directors on any operating deficiencies.
Our executive offices are located at 1321 Liberty Road, Sykesville, Maryland 21784. Our telephone number at this address is (410) 795-1900. Our website address iswww.carrollcobank.com. Information on our website is not incorporated by reference into this prospectus and is not a part of this prospectus.
Additional information about us is included in documents incorporated by reference in this prospectus. See “Information Incorporated by Reference.”
The Offering
| Issuer | Carroll Bancorp, Inc. | |
| Securities offered | 62,491 shares of common stock issuable upon the exercise of 124,982 outstanding warrants. | |
| Description of warrants | The warrants expire on March 20, 2017. Each warrant is exercisable for one-half of a share of common stock for an exercise price of $16.00 per whole share, subject to adjustment as described elsewhere in this prospectus. See “Description of Securities – Warrants.” | |
| Shares of common stock outstanding before this offering | Approximately 484,438 shares. (1) | |
| Common stock to be outstanding after the offering | If all of the warrants are exercised, approximately 546,929 shares. (1) | |
| Use of proceeds | The proceeds of this offering consist solely of the payment by warrant holders of the exercise price. We plan to use the net proceeds of this offering, if any, for general working capital purposes. | |
| OTC Market Group QB Marketplace Symbol | CROL | |
| Risk Factors | You should carefully read and consider the information set forth in the section entitled “Risk Factors” on page 4 of this prospectus, together with the other information contained in or incorporated by reference into this prospectus, before making a decision to invest in our securities. | |
| (1) | The number of shares of our common stock outstanding before and after the offering is based on 484,438 shares outstanding as of April 21, 2014. Unless otherwise indicated, the number of outstanding shares of common stock presented in this prospectus excludes 35,945 shares of our common stock that are available for future issuance under our stock option plan. |
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You should carefully consider the risks described under the heading, “Risk Factors”, in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2013 which are incorporated by reference into this prospectus before making an investment decision. You should also refer to the other information in this prospectus or incorporated by reference into this prospectus, including our financial statements and the related notes thereto. If any of the risks described actually occur, our business, results of operations and financial condition could suffer. In that event the trading price of our common shares could decline. The risks described also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information incorporated by reference into this prospectus contains forward-looking statements that are based on expectations, estimates, forecasts and projections regarding management’s beliefs and assumptions about the industry in which we operate. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause actual outcomes and results to differ materially from what is expressed or forecasted in such forward-looking statements. Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. You should not put undue reliance on any forward-looking statements.
Except as required by applicable law, we assume no obligation to update any forward-looking statements publicly or to update the reasons why actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
We received gross proceeds from the offer and sale of the Units of approximately $2.0 million.
We have not received any additional proceeds from the exercise of warrants to date. In the event of full exercise for cash of all of the warrants that remain outstanding, we will receive additional gross proceeds of approximately $1.0 million. The actual exercise of any of the outstanding warrants, however, is beyond our control and depends on a number of factors, including the market price of our common stock. There can be no assurance that any of the outstanding warrants will be exercised.
The principal reason for this offering is to provide shares of common stock issuable upon exercise of the warrants issued in connection with the offer and sale of the Units. While we have no specific plan for the proceeds, we expect to use the net proceeds of this offering, if any, for working capital and general corporate purposes.
DETERMINATION OF OFFERING PRICE
Our board of directors set the exercise price of the warrants equal to the subscription price of the Units in the original Unit offering. In determining the subscription price, our board of directors considered a number of factors, including historical and current trading prices for our common stock, the need to offer the Units at a price that would be attractive to investors relative to the then current trading and historical trading prices for our common stock, conditions in the stock market and the financial services industry in general, financial indicators and operating ratios of Carroll Bancorp compared to peer group companies, and our need for capital. In conjunction with its review of these factors, the board of directors also reviewed our history and prospects, including our past and present earnings, our prospects for future earnings, the outlook for our industry, our current financial condition and a range of discounts to market value represented by the subscription prices in various prior rights offerings.
The exercise price of the warrants is not necessarily related to our book value, tangible book value, earnings per share or any other established criteria of value and may or may not be considered the fair value of our common stock. After the date of this prospectus, our common stock may trade at prices above or below the exercise price. You should not consider the exercise price as an indication of value of our company or our common stock. You should not assume or expect that our shares of common stock will trade at or above the exercise price in any given time period. The market price of our common stock may decline during or after this offering, and you may not be able to exercise or sell the shares of our common stock. Before exercising you should make your own assessment of our business and financial condition, our prospects for the future and the terms of the warrants.
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General
Under our articles of incorporation, we are authorized to issue 9,000,000 shares of common stock, par value of $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share. As of April 21, 2014, we have 484,438 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. The shares of common stock of Carroll Bancorp underlying the warrants represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the FDIC or any other government agency.
Common Stock
Dividends. Under applicable law, Carroll Bancorp can pay dividends on its common stock if, after giving effect to the distribution, we would be able to pay our indebtedness as the indebtedness comes due in the usual course of business and its total assets exceed the sum of its liabilities and the amount needed, if Carroll Bancorp were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of any holders of capital stock who have a preference upon dissolution. Carroll Community Bank is also prohibited from paying dividends that would reduce its capital below the then adjusted balance of its liquidation account. Subject to all rights of holders of any other class or series of stock, the holders of our common stock are entitled to receive and share equally in dividends as may be declared by our board of directors out of funds legally available therefor. If we issue shares of preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends.
Voting Rights. The holders of our common stock have exclusive voting rights in Carroll Bancorp. They elect our board of directors and act on other matters as are required to be presented to them under Maryland law or as are otherwise presented to them by the board of directors. Generally, each holder of common stock is entitled to one vote per share and does not have any right to cumulate votes in the election of directors. Any person who beneficially owns more than 10% of the then-outstanding shares of our common stock, however, is not be entitled or permitted to vote any shares of common stock held in excess of the 10% limit. If we issue shares of preferred stock, holders of the preferred stock may also possess voting rights. Certain matters require the affirmative vote of at least two-thirds of the shares of our capital stock entitled to vote on the matter.
Liquidation. In the event of liquidation, dissolution or winding up of Carroll Bancorp, the holders of our common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of our assets. If preferred stock is then outstanding the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of our common stock are not be entitled to preemptive rights with respect to any shares that may be issued, unless such preemptive rights are approved by the board of directors. The common stock is not subject to redemption.
Rights of Objecting Holders. Our articles of incorporation provide that holders of our common stock will not be able to exercise their rights to demand “fair value” in any merger, share exchange or certain other transactions, as provided under the Maryland General Corporation Law, unless the board of directors expressly grants such rights.
Other. Holders of our common stock have no conversion rights, exercise rights or other subscription rights. There are no redemption or sinking fund provisions that apply to the common stock.
Preferred Stock
None of our authorized shares of preferred stock will be issued as part of the offering. Preferred stock may be issued with preferences and designations as our board of directors may from time to time determine. Our board of directors may, without stockholder approval, issue shares of preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.
Warrants
Common Stock Subject to Warrants. Each warrant initially represents the right to purchase one-half of a share of our common stock. The number of shares deliverable upon the exercise of each warrant is subject to the adjustments described below under the heading “— Adjustments to the Warrants.”
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Exercise of the Warrants. Each warrant has a three-year term and gives the holder the right to purchase one-half of a share of our common stock at an exercise price of $16.00 per whole share. All or any portion of the warrants may be exercised in whole or in part at any time or from time to time on or before 5:00 p.m., Eastern Time, on March 20, 2017, by surrender to the warrant agent of the warrant and a completed notice of exercise attached as an annex to the warrant and the payment of the exercise price per share for the shares of common stock for which the warrants are being exercised. The exercise price applicable to the warrants is subject to adjustment described below under the heading “— Adjustments to the Warrants.”
Upon exercise of warrants, the shares of common stock issuable upon exercise will be issued by our transfer agent to the exercising warrantholder. Certificates representing shares issued upon exercise of warrants will be issued in the name or names designated by the exercising warrantholder and will be delivered by the transfer agent to the exercising warrantholder (or its nominee or nominees). We will at all times reserve the aggregate number of shares of our common stock for which the warrants may be exercised.
Issuance of any shares of our common stock deliverable upon the exercise of warrants will be made without charge to the warrantholder for any issue or transfer tax or other incidental expense in respect of the issuance of those shares (other than liens or charges created by a warrantholder, income and franchise taxes incurred in connection with the exercise of the warrant or taxes in respect of any transfer occurring contemporaneously therewith).
The warrants may not be exercised, however, at any time when the offer and sale of the shares of common stock issuable upon exercise of the warrants is not covered by a current and effective registration statement under the Securities Act of 1933 or if such exercise would otherwise violate a law, rule, regulation or regulatory order or agreement applicable to Carroll Bancorp. Further, we will not issue shares of common stock pursuant to the exercise of the warrants to any person who, in our sole opinion, could be required to obtain prior clearance or approval from or submit a notice to any state or federal bank regulatory authority to acquire, own or control such shares if, as of the date such warrants are presented for exercise, such clearance or approval has not been obtained and/or any required waiting period has not expired.
Right as a Stockholder. The warrantholders have no rights or privileges of holders of our common stock, including any voting rights or rights to dividend payments, until (and then only to the extent) the warrants have been exercised.
Adjustments to the Warrants. The exercise price and the number shares underlying the warrants are subject to appropriate adjustment in the event of stock splits, reverse stock splits, stock dividends on our common stock, stock reclassifications and similar events affecting our common stock. In addition, if we consummate any merger, consolidation, sale or other reorganization event in which our common stock is converted into or exchanged for securities, cash or other property, then following such event, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property which the holders would have received had they exercised the warrants immediately prior to the reorganization event.
Amendment. The warrants may be amended and the observance of any material term of such warrants may be waived with the consent of a majority of the holders of the warrants, provided, that the consent of each affected warrantholder is necessary for any amendment (i) to increase the exercise price or to decrease the number of shares issuable upon exercise of the warrants (other than pursuant to the terms of the adjustment provisions in the warrant certificate described above), (ii) that would shorten the time period during which the warrants are exercisable, or (iii) that would change in a manner adverse to such warrantholder the terms of the adjustment provisions in the warrant certificate described above.
Fractional Shares. No fractional shares of common stock will be issued in connection with the exercise of a warrant. If you purchased an odd number of Units, or the exercise of a warrant would otherwise result in the issuance of a fractional number of shares, then the aggregate number of shares of common stock that your warrants permit you to purchase will be rounded down to the nearest whole share, with the total exercise price being adjusted accordingly. If adjustments to the warrants as described under “—Adjustments to the Warrants” result in a warrant being exercisable for fractional shares, then in lieu of any fractional share to which the warrantholder would otherwise be entitled, the holder will be entitled to receive a cash payment equal to the market price of the common stock on the last trading day preceding the date of exercise less the pro-rated exercise price for such fractional share.
Transferability. The warrants are not transferable or assignable other than by operation of law. As a result, the warrants may only be exercised by the stockholder who purchased the Units.
Warrant Agent. The warrants were issued pursuant to a warrant agreement by and between Carroll Bancorp and Registrar and Transfer Company, the warrant agent for the warrants. Under the warrant agreement, the warrant agent will act on our behalf in connection with the transfer (solely by operation of law), exchange, exercise and cancellation of the warrants and be required to maintain a registry recording the names and addresses of all registered holders of the warrants. The warrant agent received a fee in exchange for performing these duties under the warrant agreement and will be indemnified by us for liabilities not involving gross negligence, willful misconduct or bad faith and arising out of its service as warrant agent.
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Governing Law. The warrants are governed by Maryland law.
Anti-Takeover Provisions of Our Articles of Incorporation and Bylaws
General. A number of provisions of our articles of incorporation and bylaws deal with matters of corporate governance and certain rights of stockholders. The following discussion is a general summary of certain provisions of our articles and bylaws that might be deemed to have a potential “anti-takeover” effect. The following description of certain of the provisions of our articles and bylaws is necessarily general and reference should be made in each case to the articles and bylaws.
Directors. Our board of directors is divided into three classes. After the expiration of their initial terms pursuant to our articles of incorporation, the members of each class will be elected for a term of three years, and only one class of directors will be elected annually. Thus, it would take at least two annual elections to replace a majority of our directors. The bylaws establish qualifications for board members, including a residency requirement with respect to two-thirds of the board, an age restriction, restrictions on affiliations with competitors of Carroll Community Bank and restrictions based upon prior legal or regulatory violations. Further, the bylaws impose notice and information requirements in connection with the nomination by stockholders of candidates for election to the board of directors or the proposal by stockholders of business to be acted upon at an annual meeting of stockholders. Such notice and information requirements are applicable to all stockholder business proposals and nominations, and are in addition to any requirements under the federal securities laws.
In addition, as set forth in our articles of incorporation and bylaws, and assuming we satisfy the other requirements set forth in Section 3-802(b) of the Maryland General Corporation Law (the “MGCL”), any and all vacancies on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred and until the successor is elected and qualifies, except as may be provided by the board of directors in setting the terms of any class or series of preferred stock.
Evaluation of Offers. Our articles of incorporation provide that our board of directors, when evaluating certain transactions including a merger, consolidation, exchange offer for our securities or a transaction that would or may involve a change in control of Carroll Bancorp (whether by purchases of its securities, merger, consolidation, share exchange, dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or otherwise), may, in connection with the exercise of its business judgment in determining what is in the best interests of Carroll Bancorp and its stockholders and in making any recommendation to the stockholders, give due consideration to all relevant factors, including, but not limited to:
| • | the economic effect, both immediate and long-term, upon our stockholders, including stockholders, if any, who do not participate in the transaction; |
| • | the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, Carroll Bancorp and its subsidiaries and on the communities in which Carroll Bancorp and its subsidiaries operate or are located; |
| • | whether the proposal is acceptable based on our historical, current or projected future operating results or financial condition; |
| • | whether a more favorable price could be obtained for our stock or other securities in the future; |
| • | the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of Carroll Bancorp and its subsidiaries; |
| • | the future value of our stock or any other securities or the other entity to be involved in the proposed transaction; |
| • | any antitrust or other legal and regulatory issues that are raised by the proposal; |
| • | the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and |
| • | our ability to fulfill our objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations. |
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If the board of directors determines that any proposed transaction should be rejected, it may take any lawful action to defeat such transaction.
Restrictions on Call of Special Meetings. Our bylaws provide that special meetings of stockholders can be called only by the President, by a majority of the entire board of directors or upon the written request of stockholders entitled to cast at least a majority of all votes entitled to vote at the meeting.
Prohibition of Cumulative Voting. Our articles of incorporation prohibit cumulative voting for the election of directors.
Limitation of Voting Rights. Our articles of incorporation provide that in no event will any person who beneficially owns more than 10% of the then-outstanding shares of common stock be entitled or permitted to vote any of the shares of common stock held in excess of the 10% limit; provided that such 10% limit shall not apply if a majority of the unaffiliated directors approve the acquisition of shares in excess of the 10% limit prior to such acquisition.
Restrictions on Removing Directors from Office. The articles of incorporation provide that directors may be removed only for cause, and only by the affirmative vote of the holders of at least 80% of the voting power of all of our then-outstanding capital stock entitled to vote generally in the election of directors (after giving effect to the limitation on voting rights discussed above in “—Limitation of Voting Rights”).
Authorized but Unissued Shares. We have authorized but unissued shares of common and preferred stock. Our articles of incorporation authorize 9,000,000 shares of common stock and 1,000,000 shares of preferred stock. We are authorized to issue preferred stock from time to time in one or more series subject to applicable provisions of law, and the board of directors is authorized to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of such shares. The board may also classify and reclassify any unissued shares of common stock and issue such common stock without stockholder approval. In addition, the articles of incorporation provide that a majority of the whole board may, without action by the stockholders, amend the articles of incorporation to increase or decrease the aggregate number of shares of stock of any class or series that we have the authority to issue. In the event of a proposed merger, tender offer or other attempt to gain control of Carroll Bancorp that the board of directors does not approve, it would be possible for the board of directors to authorize the issuance of a series of preferred stock with rights and preferences that would impede the completion of the transaction or common stock that would render more difficult or discourage an attempt to gain control of us. An effect of the possible issuance of common stock or preferred stock therefore may be to deter a future attempt to gain control of Carroll Bancorp. The board of directors has no present plan or understanding to issue any preferred stock.
Amendments to Articles of Incorporation and Bylaws. Except as provided under “— Authorized but Unissued Shares,” above, regarding the amendment of the articles of incorporation by the board of directors to increase or decrease the number of shares of our stock authorized for issuance, or as otherwise allowed by law, any amendment to the articles of incorporation must be approved by two-thirds of our board of directors and holders of two-thirds of the outstanding shares of our voting stock.
The articles of incorporation also provide that the bylaws may be amended only by a majority of our board of directors.
Extraordinary Transactions. Our articles of incorporation provide that (i) any merger or consolidation of Carroll Bancorp or any subsidiary, which includes Carroll Community Bank, in which Carroll Bancorp or the subsidiary is not the successor or surviving entity, (ii) the sale, exchange, transfer, or other disposition of all or substantially all of our assets or any subsidiary’s assets, or (iii) our dissolution or liquidation, requires approval of holders of 80% of the shares of our capital stock entitled to vote on such transaction, provided that the affirmative vote of holders of a majority of the shares of our capital stock will be sufficient if at least two-thirds of the members of the board of directors have approved the transaction.
Change in Control Regulations
Federal law requires the approval of the Federal Reserve Board prior to any person or entity, or any persons or entities acting in concert, acquiring 10% or more of our common stock, and prior to certain other actions that are deemed pursuant to regulations of the Federal Reserve Board to constitute control.
Anti-Takeover Provisions of the Maryland General Corporation Law
In addition to the provisions contained in our articles of incorporation and bylaws, the MGCL includes certain provisions applicable to us that may have an anti-takeover effect, including, but not limited to, the provisions discussed below.
Business Combinations. Under the MGCL, certain “business combinations” between a Maryland corporation and an “Interested Stockholder” (as described in the MGCL) are prohibited for five years after the most recent date on which the Interested
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Stockholder became an Interested Stockholder, unless an exemption is available. Thereafter a business combination must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by holders of outstanding voting shares of the corporation; and (ii) two thirds of the votes entitled to be cast by holders of outstanding voting shares of the corporation other than shares held by the Interested Stockholder with whom the business combination is to be effected, unless the corporation’s stockholders receive a minimum price (as described in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the Interested Stockholder for its shares.
Maryland’s business combination statute does not apply to business combinations that are approved or exempted by the board of directors prior to the time that the Interested Stockholder becomes an Interested Stockholder. In addition, Maryland’s business combination statute does not apply to (i) a corporation that has fewer than 100 beneficial owners of its stock, unless the corporation specifically “opts in” to the business combination statute through a charter provision, or (ii) to a corporation that “opts out” of the business combination statute through a charter provision. Carroll Bancorp has not elected to “opt in” to or “opt out” of Maryland’s business combination statute through a charter provision.
Control Share Acquisitions. The MGCL provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights with respect to such control shares except to the extent approved by a vote of two thirds of the shares entitled to be voted on the matter, excluding shares of stock owned by the acquirer or by officers or directors who are employees of the corporation. “Control shares” are voting shares of stock which, if aggregated with all other such shares of stock previously acquired by the acquirer, or in respect of which the acquirer is able to exercise or direct the exercise of voting power except solely by virtue of a revocable proxy, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: (i) one tenth or more but less than one third; (ii) one third or more but less than a majority; or (iii) a majority of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and delivery of an “acquiring person statement”), may compel the corporation’s board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the holder’s voting rights with respect to the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders’ meeting.
Unless the corporation’s charter or bylaws provide otherwise, if voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement within ten days following a control share acquisition then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition or of any meeting of stockholders at which the voting rights of such shares are considered and not approved. Moreover, unless the charter or bylaws provide otherwise, if voting rights for control shares are approved at a stockholders’ meeting and the acquirer becomes entitled to exercise or direct the exercise of a majority or more of all voting power, other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.
Maryland’s control share acquisition statute does not apply to individuals or transactions that are approved or exempted (whether generally or specifically) in a charter or bylaw provision before the control share acquisition occurs. In addition, Maryland’s control share acquisition statute does not apply to a corporation that has fewer than 100 beneficial owners of its stock. Carroll Bancorp has not approved or exempted any individuals or transactions through a charter or bylaw provision.
Summary of Anti-Takeover Provisions
The foregoing provisions of our articles of incorporation and bylaws and Maryland law could have the effect of discouraging an acquisition of Carroll Bancorp or stock purchases in furtherance of an acquisition, and could accordingly, under certain circumstances, discourage transactions that might otherwise have a favorable effect on the price of our common stock. In addition, such provisions may make Carroll Bancorp less attractive to a potential acquiror and/or might result in stockholders receiving a lesser amount of consideration for their shares of common stock than otherwise could have been available.
Our board of directors believes that the provisions described above are prudent and will reduce vulnerability to takeover attempts and certain other transactions that are not negotiated with and approved by our board of directors. Our board of directors believes that these provisions are in our best interests and the best interests of our stockholders. In the board of directors’ judgment, the board of directors is in the best position to determine our true value and to negotiate more effectively for what may be in the best interests of our stockholders. Accordingly, the board of directors believes that it is in our best interests and in the best interests of our stockholders to encourage potential acquirors to negotiate directly with the board of directors and that these provisions will encourage such negotiations and discourage hostile takeover attempts.
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Despite the board of directors’ belief as to the benefits to us of the foregoing provisions, these provisions also may have the effect of discouraging a future takeover attempt in which stockholders might receive a substantial premium for their shares over then current market prices and may tend to perpetuate existing management. As a result, stockholders who might desire to participate in such a transaction may not have an opportunity to do so. The board of directors, however, believes that the potential benefits of these provisions outweigh their possible disadvantages.
Pursuant to the terms of the warrants, shares of common stock will be distributed to those holders who properly exercise the warrants and remit the payment of the exercise price.
The transfer agent and registrar for Carroll Bancorp’s common stock is Registrar and Transfer Company, Cranford, New Jersey.
The financial statements of Carroll Bancorp for the years ended December 31, 2013 and 2012 and for each of the years in the two-year period ended December 31, 2013, appearing in Carroll Bancorp’s annual report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on March 10, 2014, which is incorporated by reference into this prospectus, have been so incorporated by reference in reliance on the report of Stegman & Company, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The validity of the shares of common stock offered hereby and certain other legal matters were passed upon for us by Ober, Kaler, Grimes & Shriver, a Professional Corporation, Baltimore, Maryland, counsel to Carroll Bancorp.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are a public company and file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and copies of such material can be obtained from the SEC at prescribed rates. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the Public Reference Room. The SEC maintains an Internet Web site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, athttp://www.sec.gov. Our SEC filings are available to the public at the SEC’s website at, as well as on our Web site atwww.carrollcobank.com. The information and other content contained on or linked from our Web site are not part of this prospectus unless specifically incorporated by reference herein.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the information that we have filed with it, meaning we can disclose important information to you by referring you to those documents already on file with the SEC. The information incorporated by reference is considered to be part of this prospectus except for any information that is superseded by other information that is included in this prospectus.
This filing incorporates by reference the following documents, which we have previously filed with the SEC:
| • | Our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed on March 10, 2014; |
| • | Our definitive Proxy Statement for use in connection with the Annual Meeting of Stockholders to be held on April 21, 2014, as filed on March 17, 2014; and |
| • | Our Current Report on Form 8-K, as filed on March 25, 2014. |
You should rely only on the information contained in or incorporated by reference into this prospectus. We have not authorized anyone to provide you with any additional information.
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These documents may also be accessed through our website atwww.carrollcobank.com or as described under “Where You Can Find Additional Information.” The information and other content contained on or linked from our Web site are not part of this prospectus. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
We will provide, without charge, to each person, including any beneficial owner, to whom this prospectus is delivered, on the written or oral request of such person, a copy of any or all of the reports or documents incorporated by reference in this prospectus but not delivered with this prospectus. Any request may be made by writing or calling us at the following address or telephone number: Carroll Bancorp, Inc., 1321 Liberty Road, Sykesville, Maryland, 21784, Attention: Chief Financial Officer, (410) 795-1900, or via email at mgallina@carrollcobank.com.
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Up to 62,491 shares of Common Stock issuable upon exercise of
124,982 Warrants
CARROLL BANCORP, INC.
PROSPECTUS
April 21, 2014
