SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
[ ] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TRI-COUNTY BANCORP, INC.
-------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: common stock
and rights to buy common stock (stock options)
(2) Aggregate number of securities to which transaction applies:
883,969 shares
72,207 stock options
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11. (set forth the amount on which the filing fee is
calculated and state how it was determined):
Pursuant to Rule 0-11, the fee was calculated by multiplying $11,667,022 (the
aggregate value of the transaction, including $529,013.20 cash to be paid for
stock options) by 1/50th of 1%.
(4) Proposed maximum aggregate value of transaction: $11,667,022
(5) Total fee paid: $2,333.41 (1/50th x 1% x $11,667,022)
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
TRI-COUNTY BANCORP, INC.
2201 Main Street
Torrington, Wyoming 82240-2317
Dear Fellow Stockholder:
On behalf of the Board of Directors, I want to invite you to attend a
Special Meeting of Stockholders ("Meeting") of Tri-County Bancorp, Inc.
("Tri-County"). The Meeting will be held at the main office of Tri-County,
located at 2201 Main Street, Torrington, Wyoming on Friday, March 23, 2001, at
2:00 p.m, local time.
The purpose of the Meeting is to vote on a proposal to approve the
Acquisition Agreement and Plan of Merger, dated January 24, 2001(the "Merger
Agreement"), entered into by and among Platte Valley Financial Service
Companies, Inc. ("Platte Valley"), Platte Valley Acquisition Company, Inc.
("AcqCo"), Platte Valley National Bank ("Platte Valley Bank"), Tri-County, and
Tri-County Bank, pursuant to which Tri-County would merge with AcqCo (the
"Merger") with Tri-County surviving (the "Merger"). AcqCo is a newly-formed
subsidiary of Platte Valley.
Upon consummation of the Merger, each outstanding share of Tri-County
common stock would be converted into the right, subject to adjustment, to
receive a cash payment of $12.60 from Platte Valley. Each share of Tri-County
common stock held as treasury stock by Tri-County will be canceled and retired.
Consummation of the Merger is subject to certain conditions, including approval
of the Merger Agreement by Tri-County's stockholders and approval of the Merger
by various regulatory agencies. Approval of the Merger Agreement requires the
affirmative vote by the holders of a majority of the outstanding common stock of
Tri-County.
The accompanying Notice of Special Meeting and Proxy Statement contain
information about the Merger. We urge you to carefully review such information,
and the information in Tri-County's 1999 Annual Report to Stockholders, and
Quarterly Report on Form 10-QSB, as amended, for the period ended September 30,
2000, copies of which are attached to the Proxy Statement.
The Board of Directors of Tri-County has unanimously approved the Merger
Agreement and unanimously recommends that the stockholders of Tri-County approve
the Merger Agreement. A failure to vote, either by not returning the enclosed
proxy or by checking the "Abstain" box thereon, will have the same effect as a
vote against approval of the Merger Agreement. Even if you plan to attend the
Meeting in person, please complete the enclosed proxy, sign, date and mail it
promptly in the enclosed postage-paid, return addressed envelope. You may revoke
your proxy by attending the Meeting and voting in person.
Sincerely,
/s/Robert L. Savage
---------------------------------------------------
Robert L. Savage
President and Chief Executive Officer
Please do not send your common stock certificates at this time. If the
Merger is consummated, you will be sent instructions regarding the surrender of
your stock certificates.
TRI-COUNTY BANCORP, INC.
2201 Main Street
Torrington, Wyoming 82240-2317
(307) 532-2111
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 23, 2001
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders ("Meeting")
of Tri County Bancorp, Inc. ("Tri-County") will be held at 2:00 p.m., Wyoming
Time, on Friday, March 23, 2001, or any adjournment or adjournments thereof, at
the main office of Tri-County, located at 2201 Main Street, Torrington, Wyoming
for the following purposes:
1. To consider and vote upon a proposal to approve the Acquisition
Agreement and Plan of Merger, dated as of January 24, 2001 (the "Merger
Agreement"), by and among Platte Valley Financial Service Companies,
Inc. ("Platte Valley"), Platte Valley Acquisition Company, Inc.
("AcqCo"), Platte Valley National Bank ("Platte Valley Bank"),
Tri-County, and Tri-County Bank, pursuant to which (i) Tri-County would
merge with AcqCo with Tri-County surviving (the "Merger"), and (ii)
each outstanding share of Tri-County common stock, par value $0.01 per
share, would be converted into the right, subject to adjustment, to
receive a cash payment of $12.60 from Platte Valley upon completion of
the Merger, subject to the terms and conditions contained in the Merger
Agreement;
2. To adjourn the Meeting to solicit additional votes if there is an
insufficient number of shares necessary to approve the Merger
Agreement; and
3. To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
A copy of the Merger Agreement is set forth in APPENDIX A to the
accompanying Proxy Statement. Stockholders are urged to read the Merger
Agreement in its entirety.
The Board of Directors of Tri-County has fixed February 9, 2001, as the
record date for the determination of stockholders entitled to notice of and to
vote at the Meeting, and accordingly, only holders of record of Tri-County
common stock at the close of business on that date will be entitled to notice of
and to vote at the Meeting or any adjournment or adjournments thereof. Approval
of the Merger Agreement requires the affirmative vote of a majority of the
holders of the outstanding common stock of Tri-County.
The Board of Directors of Tri-County unanimously recommends that
stockholders vote "For" approval of the Merger Agreement.
By Order of the Board of Directors of
TRI-COUNTY BANCORP, INC.
/s/Carl F. Rupp
----------------------------------------------------
Carl F. Rupp
Secretary
You are urged to complete, date, sign and return promptly the enclosed proxy in
the accompanying envelope, which requires no postage if mailed in the United
States. Your cooperation is appreciated. Your proxy will be voted with respect
to the matters identified thereon in accordance with any specifications on the
proxy. A failure to vote, either by not returning the enclosed proxy or by
checking the "Abstain" box thereon, will have the same effect as a vote against
approval of the Merger Agreement.
TRI-COUNTY BANCORP, INC.
2201 Main Street
Torrington, Wyoming 82240-2317
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 23, 2001
This Proxy Statement is being furnished by Tri-County Bancorp, Inc., a
Wyoming corporation ("Tri-County"), to the holders of Tri-County common stock,
par value $0.01 per share, in connection with the solicitation of proxies by
Tri-County's Board of Directors for use at a Special Meeting of Stockholders of
Tri-County to be held at 2:00 p.m., Wyoming Time, on Friday, March 23, 2001, at
the main office of Tri-County, located at 2201 Main Street, Torrington, Wyoming
(the "Meeting"), and at any adjournment or adjournments thereof.
This Proxy Statement, the accompanying Notice of Special Meeting and form
of proxy are first being mailed to the stockholders of record of Tri-County on
or about February 15, 2001.
The primary purpose of the special meeting is to consider and vote upon a
proposal to approve the Acquisition Agreement and Plan of Merger, dated as of
January 24, 2001 (the "Merger Agreement"), by and among Platte Valley Financial
Service Companies, Inc. ("Platte Valley"), Platte Valley Acquisition Company,
Inc. ("AcqCo"), Platte Valley National Bank ("Platte Valley Bank"), Tri County,
and Tri-County Bank, pursuant to which (i) Tri-County would merge with AcqCo
with Tri-County surviving (the "Merger"), and (ii) each outstanding share of
Tri-County common stock, par value $0.01 per share ("Tri-County Common Stock"),
would be converted into the right, subject to adjustment, to receive a cash
payment of $12.60 from Platte Valley upon completion of the Merger, subject to
the terms and conditions contained in the Merger Agreement. See the sections of
this Proxy Statement entitled "SUMMARY," "THE MERGER", "THE MERGER AGREEMENT"
and a copy of the Merger Agreement attached as APPENDIX A to this Proxy
Statement.
Tri-County Common Stock, par value $0.01 per share, is listed on the
Nasdaq SmallCap Market under the symbol "TRIC."
THE DATE OF THIS PROXY STATEMENT IS FEBRUARY 15, 2001
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Tri-County with the Securities and
Exchange Commission ("SEC") (File No. 0-23194) under Section 13(a) or 15(d) of
the Exchange Act are hereby incorporated by reference in this Proxy Statement:
(i) Tri-County's Annual Report on Form 10-KSB for the year ended
December 31, 1999;
(ii) Tri-County's Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 2000, June 30, 2000, and September 30, 2000; and
(iii) Tri-County's Current Reports on Form 8-K, dated December 12, 2000
and February 1, 2001.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein modifies or supersedes
that earlier statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement.
1
TABLE OF CONTENTS
PAGE NO.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 1
SUMMARY 3
SELECTED CONSOLIDATED FINANCIAL DATA 7
MARKET PRICE OF STOCK AND RELATED SECURITY HOLDER MATTERS 9
THE SPECIAL MEETING 9
General 9
Record Date: Vote Required 10
PROPOSAL I - THE MERGER 11
General 11
Background of the Merger 11
Tri-County's Reasons for the Merger and Recommendation 13
Possible Delisting of Tri-County Common Stock 14
Opinion of Financial Advisor 14
Federal Income Tax Consequences 17
THE MERGER AGREEMENT 18
The Merger 18
Closing date of the Merger 18
Possible Special Cash Dividend 18
Exchange of Tri-County Common Stock Certificates 19
Interests of Certain Persons 19
Post-Merger Benefits to Employees 20
Dissenter' Rights 20
Business Pending Consummation 21
Accounting Treatment 22
Regulatory Approvals 22
Conditions to Consummation; Termination 23
Waiver; Amendment 23
Expenses; Termination Fees 24
PROPOSAL II - ADJOURNMENT OF THE MEETING 24
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING 24
LEGAL OPINIONS 25
ACCOUNTANTS 25
OTHER MATTERS 25
FINANCIAL INFORMATION 25
APPENDICES
Appendix A - Agreement and Plan of Merger A-1
Appendix B - Opinion and Letter of Keefe, Bruyette & Woods, Inc. B-1
Appendix C - Wyoming Dissenters' Rights C-1
Appendix D - 1999 Annual Report to Stockholders D-1
Appendix E - Quarterly Report on Form 10-QSB for the quarter
ended September 30, 2000 E-1
2
SUMMARY
The following summary provides certain information relating to the Merger.
This summary is not intended to be a summary of all material information
relating to the Merger and is qualified in its entirety by reference to more
detailed information contained elsewhere in this Proxy Statement, including the
Appendices hereto, and in the documents incorporated by reference in this Proxy
Statement. A copy of the Merger Agreement is attached as APPENDIX A to this
Proxy Statement. Stockholders are urged to read carefully the entire Proxy
Statement and all the Appendices.
Platte Valley Financial Service Companies, Inc. ("Platte Valley")
Platte Valley is a Colorado corporation organized in 1996. It is
registered as a financial holding company with the Board of Governors of the
Federal Reserve System under the Federal Bank Holding Company Act of 1956, as
amended.
The principal executive office of Platte Valley is located at 1212 Circle
Drive, Scottsbluff, Nebraska 69369-2308 and the telephone number at that address
is (308) 632-7004. Platte Valley started its financial network of companies in
March 1996 and currently operates through seven subsidiaries: Platte Valley
National Bank-Torrington; Platte Valley Ag Credit Co. with one location in
Torrington, Wyoming and two locations in Nebraska; Platte Valley National
Mortgage Company with one location in Torrington, Wyoming and two locations in
Nebraska; Platte Valley Investment Center, Inc. with one location in Torrington,
Wyoming and one location in Nebraska; Platte Valley Lending Company-Scottsbluff;
J.G. Elliott Company with one location in Torrington, Wyoming and three
locations in Nebraska; and Platte Valley National Bank-Scottsbluff with six
locations in Nebraska.
At September 30, 2000, Platte Valley had consolidated assets of $221.1
million, deposits of $167.7 million and shareholders' equity of $20.6 million.
Platte Valley Acquisition Company, Inc. ("AcqCo")
AcqCo is a wholly-owned subsidiary of Platte Valley. AcqCo is a Colorado
corporation formed in January 2001 to acquire the shares of Tri-County. AcqCo
owns no assets.
The principal executive office of AcqCo is located at 1212 Circle Drive,
Scottsbluff, Nebraska 69369-2308 and the telephone number at that address is
(308) 632-7004.
Platte Valley National Bank - Torrington, Wyoming ("Platte Valley Bank")
Platte Valley Bank began operation in November 1999 as the result of
executing a "30 mile move" as defined by the Office of the Comptroller of the
Currency ("OCC"). Platte Valley National Bank-Morrill, Nebraska, had operated in
Nebraska for over 75 years prior to moving to Torrington, Wyoming. Platte Valley
Bank is a full service commercial bank offering insurance, brokerage, trust and
credit card services through affiliated companies.
The principal executive office of Platte Valley Bank is located at 1401
East M Street, Torrington, Wyoming 92240 and the telephone number at that
address is (307) 532-8040.
Tri-County and the Tri-County Bank
Tri-County is a Wyoming corporation organized in 1993 and became a unitary
savings and loan holding company upon the completion of the reorganization of
Tri-County Bank into the holding company form of ownership. At that time
Tri-County acquired all of the outstanding common stock of Tri-County Bank.
Tri-County Bank's common stock was originally issued in connection with
Tri-County Bank's conversion from mutual to stock form in September 1993.
Tri-County's principal asset is the stock of Tri-County Bank which is a
community-oriented institution offering a variety of financial services in
Torrington, Wyoming.
3
As of September 30, 2000, Tri-County reported total assets of $97.5
million, net loans of $58.8 million, deposits of $54.4 million, and
stockholders' equity of $10.3 million, and as of such date Tri-County operated
through three offices two of which are located in Torrington and Wheatland,
Wyoming and one of which is located in Cheyenne, Wyoming. For the fiscal year
ended December 31, 1999, and for the nine months ended September 30, 2000,
Tri-County reported net income of $794,000 and $290,000, respectively. The
principal executive offices of Tri-County and Tri-County Bank are located at
2201 Main Street, Torrington, Wyoming, and their telephone number is (307)
532-2111.
The Special Meeting; Record Date
The special meeting will be held on March 23, 2001, at 2:00 p.m., Mountain
Time, at the main office of Tri-County, located at 2201 Main Street, Torrington,
Wyoming, for the purpose of considering and voting upon a proposal to approve
the Merger Agreement.
The Board of Directors of Tri-County has fixed February 9, 2001, as the
record date for determining stockholders entitled to notice of and to vote at
the special meeting (the "Record Date"). As of such date, there were 883,969
shares of Tri-County Common Stock outstanding and entitled to be voted at the
special meeting.
The Merger
Under the terms of the Merger Agreement, Tri-County would merge with
AcqCo, with Tri-County surviving. Upon consummation of the Merger, each
outstanding share of Tri-County Common Stock would be converted into the right
to receive a cash payment of $12.60 (the "Cash Consideration") from Platte
Valley. Options will be cashed out for a price equal to $12.60 less the strike
price of the option. Tri-County Bank will sell its Torrington and Wheatland
branches to Platte Valley Bank and will move its headquarters to Cheyenne,
Wyoming.
Vote Required
Approval of the Merger Agreement requires the affirmative vote of a
majority of the holders of the outstanding common stock of Tri-County. Each
owner of Tri-County Common Stock on the Record Date will be entitled to one vote
for each share held of record upon each matter properly submitted at the special
meeting or any adjournment or adjournments thereof.
The directors and executive officers of Tri-County and their related
interests beneficially owned, as of the Record Date, and are entitled to vote at
the special meeting, 238,022 shares of Tri-County Common Stock, which represents
26.9% of the outstanding shares of Tri-County Common Stock entitled to be voted
at the special meeting.
Any stockholder voting in favor of the Merger Agreement may be prevented
from challenging such transaction in the future.
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
APPROVAL OF THE MERGER AGREEMENT.
4
Closing date of the Merger
Unless the Merger Agreement is terminated, a closing is to be held as soon
as practicable after the satisfaction or waiver of the conditions to the
obligations of the parties to consummate the Merger and in no event later than
June 30, 2001. At the closing, the proper officers of Tri-County and AcqCo will
execute Articles of Merger, which are to be filed with the States of Colorado
and Wyoming. The Merger will become effective on the date that the Articles of
Merger are filed. It is currently anticipated that the closing will take place,
and the Merger will become effective, during the end of the first calendar
quarter or beginning of the second quarter of 2001.
Recommendation of Tri-County's Board of Directors
The Board of Directors of Tri-County has approved the Merger Agreement by
unanimous vote, believes it is in the best interests of Tri-County and its
stockholders and unanimously recommends its approval by Tri-County's
stockholders.
Opinion of Financial Advisor
Keefe, Bruyette & Woods, Inc. ("KBW") rendered its oral opinion to
Tri-County's Board of Directors on January 23, 2001, and subsequently rendered
an additional formal written updated opinion dated January 24, 2001 (the
"Opinion") that, as of the respective dates of such opinions and subject to the
assumptions set forth therein, the cash consideration is fair to the holders of
Tri-County Common Stock from a financial point of view. For information
concerning the matters reviewed, assumptions made and factors considered by KBW
see "PROPOSAL I - THE MERGER - Opinion of Financial Advisor" and APPENDIX B to
this Proxy Statement, which sets forth a copy of KBW's written fairness opinion
dated January 24, 2001. Holders of Tri-County Common Stock are urged to, and
should, read the opinion in its entirety.
KBW's aggregate fee will be $100,000. KBW was paid approximately $10,000
of such advisory fee upon the signing of the Letter of Intent between Tri-County
and Platte Valley, $15,000 at the time of delivery of the fairness opinion and
the remainder will be paid upon the closing of this transaction.
Federal Income Tax Consequences
Stockholders are urged to consult their own tax advisors as to the
specific consequences to them of the Merger under applicable tax laws.
The receipt of cash by a stockholder of Tri-County in exchange for shares
of Tri-County Common Stock pursuant to the Merger Agreement will be a taxable
transaction to such stockholder for federal income tax purposes. In general, a
stockholder will recognize gain or loss upon the surrender of the stockholder's
common stock equal to the difference, if any, between (i) the sum of the cash
payment of $12.60 per share (subject to adjustment) received in exchange for the
shares of Tri-County Common Stock and (ii) the stockholder's tax basis in such
common stock.
Interests of Certain Persons
Certain directors or executive officers of Tri-County have interests in
the Merger in addition to their interests as stockholders of Tri-County
generally. These interests include, among others, provisions in the Merger
Agreement relating to indemnification and maintenance of director and officer
liability insurance coverage and the cashing out of stock options. These
interests also relate to certain benefits available as a result of a "change in
control" of Tri-County, such as the Merger, including, among others, the payment
of certain severance benefits under an existing employment agreements to
President Savage and two executive officers. The estimated aggregate amount of
payments to Mr. Savage and the two officers expected to be made in connection
with the Merger due to acceleration of benefits from the agreements is $321,920.
5
Dissenters' Rights
Stockholders of Tri-County are entitled to dissenters' rights in
connection with, or as a result of, the Merger. See "PROPOSAL I - THE MERGER --
Dissenters' Rights."
Business Pending Consummation
Tri-County has agreed in the Merger Agreement to carry on its business in
substantially the same manner its business was conducted prior to the date of
the Merger Agreement, and has agreed not to take certain actions relating to the
operation of Tri-County pending consummation of the Merger, without the prior
written consent of Platte Valley, except as otherwise permitted by the Merger
Agreement.
Regulatory Approvals
The Merger is subject to the prior approval or non-objection of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), the
Office of the Comptroller of the Currency (the "OCC"), the Office of Thrift
Supervision (the "OTS") and other regulatory authorities, if any. Applications
or waiver requests have been either filed with each of such regulatory
authorities for such approvals or will be filed in the near future. There can be
no assurance that the necessary regulatory approvals will be obtained or as to
the timing or conditions of such approvals. See "THE MERGER AGREEMENT --
Regulatory Approvals."
Conditions to Consummation; Termination
Consummation of the Merger is subject, among other things, to:
o approval of the transactions contemplated by the Merger Agreement by the
requisite vote of the stockholders of Tri-County;
o receipt of the regulatory approvals referred to under "THE MERGER
AGREEMENT -- Regulatory Approvals;"
o there being no material adverse change in the operations of Tri-County;
o no more than 2% of the stockholders of Tri-County can dissent from the
Merger; and
o there being no suit, action or proceeding pending or, in the case of
governmental bodies, threatened, which challenge the validity or
legality, or seeks to restrain the consummation, of the Merger or which
seeks to limit or otherwise affect in a material respect the operation
of Platte Valley Bank, or the operation of Tri-County and AcqCo
as a single entity, following the Merger.
The Merger Agreement may be terminated by mutual agreement of the Boards
of Directors of the parties. The Merger Agreement may also be terminated by the
Board of Directors of either Tri-County or Platte Valley if the Merger does not
occur on or before June 30, 2001, or if certain conditions set forth in the
Merger Agreement are not met.
6
Expenses; Termination Fees
In the event the Merger is not consummated, all expenses incurred by or on
behalf of the parties in connection with the Merger Agreement and the
transactions contemplated thereby shall be borne by the party incurring the
same.
Tri-County or Platte Valley will be entitled to receive $150,000 if the
Merger Agreement is terminated because of the other party's breach of a
representation, warranty, covenant or agreement under the Merger Agreement and
such party fails to cure the breach within 30 days following written demand.
Furthermore, Platte Valley will be entitled to receive $450,000 if the Merger
Agreement is terminated because Tri-County accepts a superior offer from another
potential acquiror.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial and other data for the last
five fiscal years are derived in part from the audited consolidated financial
statements of Tri-County. The consolidated financial and other data for the
nine-month periods ended September 30, 2000 and 1999, are derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which Tri-County considers necessary for a fair presentation of the financial
position and the results of operations of these periods. Operating results for
the nine months ended September 30, 2000 and 1999, are not necessarily
indicative of the results that may be expected for the entire fiscal year or any
other periods. The data for the nine months ended September 30, 2000 and 1999,
are annualized where applicable. The data should be read in conjunction with the
audited consolidated financial statements, related notes and other financial
information incorporated by reference herein.
At the At December 31,
Nine Months Ended
September 30,
2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA (In Thousands)
Balance Sheet Data
Total Assets $97,529 $88,516 $81,308 $89,961 $85,888 $65,766
Loans receivable, net 58,855 48,980 42,054 40,425 35,265 25,514
Mortgage-backed & investment
Securities - Available for sale 26,150 27,239 28,727 36,526 35,140 18,097
Mortgage-backed & investment
Securities - Held to Maturity 7,202 7,238 5,336 7,987 10,320 18,264
Deposits 54,441 51,809 45,974 45,405 48,533 44,583
FHLB advances 31,713 25,558 23,799 29,697 23,460 7,000
Stockholders' equity 10,287 10,251 10,421 13,827 13,146 13,496
7
Nine Months Ended Year Ended December 31,
September 30,
2000 1999 1999 1998 1997 1996 1995
------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (In Thousands)
DATA
Interest income $5,060 $4,368 $5,923 $6,173 $6,466 $5,494 $4,600
Net Interest income 1,862 1,858 2,505 2,627 2,744 2,468 2,266
Provision for loan loses -- -- -- -- -- -- --
Non-interest income 175 158 313 291 105 159 171
Non-interest expenses 1,596 1,188 1,658 1,564 1,623 1,811(1) 1,458
Net income 290 552 794 938 901 540(1) 649
At or For the
- -------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended December 31,
September 30,
2000 1999 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
FINANCIAL RATIOS &
OTHER DATA(2)
Return on average assets 0.42% 0.88% 0.94% 1.09% 1.02% 0.71%(1) 1.04%
Return on average
stockholders' equity 3.77% 7.13% 7.69% 6.72% 6.68% 4.05%(1) 4.96%
Average interest rate spread 2.39% 2.55% 2.53% 2.39% 2.48% 2.68% 2.69%
Net yield on average earning
Assets 2.81% 3.13% 3.07% 3.14% 3.19% 3.35% 3.62%
Non-interest expense to total
Assets 2.30% 1.90% 1.87% 1.92% 1.80% 2.11%(1) 2.22%
Average equity/average total
Assets 10.86% 12.37% 12.17% 16.03% 15.20% 16.82% 20.47%
Non-performing loans/total
Assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.04% 0.03%
Dividends/total income 99.25% 52.84% 49.27% 50.13% 42.95% 57.83%(1) 37.40%
PER SHARE INFORMATION(3)
Earnings per share - diluted $0.32 $0.59 $0.85 $0.78 $0.71 $0.41(1) $0.47
Dividends per share 0.33 0.33 0.44 0.43 0.33 0.25 0.19
Book value per share 11.75 11.49 11.31 11.86 11.84 10.80 10.53
- ----------------------------------------------
(1) Includes the effect of a one-time special assessment to recapitalize the SAIF.
(2) Annualized where appropriate.
(3) Restated to reflect 100% stock dividend paid December 8, 1997.
8
MARKET PRICE OF STOCK AND RELATED SECURITY HOLDER MATTERS
Since its issuance in September 1993, Tri-County Common Stock has been
traded over-the-counter on the Nasdaq SmallCap Market appearing under the symbol
"TRIC." The following table reflects the stock price as published by the Nasdaq
statistical report.
DIVIDENDS
1998 LOW HIGH DECLARED
First Quarter - 03/31/98 $13.13 $15.00 $.10
Second Quarter--06/30/98 $12.50 $16.50 $.11
Third Quarter--09/30/98 $11.50 $13.00 $.11
Fourth Quarter--12/31/98 $11.25 $14.00 $.11
1999
First Quarter - 03/31/99 $10.50 $14.69 $.11
Second Quarter--06/30/99 $ 9.81 $13.31 $.11
Third Quarter--09/30/99 $ 9.00 $13.75 $.11
Fourth Quarter--12/31/99 $ 8.25 $11.75 $.11
2000
First Quarter - 03/31/00 $8.88 $10.75 $.11
Second Quarter--06/30/00 $9.13 $11.75 $.11
Third Quarter--09/30/00 $8.63 $11.13 $.11
Fourth Quarter--12/31/00 $8.50 $11.63 $.11
The number of shareholders of record as of February 9, 2001 was
approximately 207. This does not reflect the number of persons or entities who
held stock in nominee or `Street" name through various brokerage firms. At
February 9, 2001 there were 883,969 shares outstanding. The Company completed a
tender offer for stock in December of 1998 whereby 314,125 shares were purchased
at a price of $14.00 per share. On January 29, 2001, Tri-County Common Stock
traded at $12.1875 per share.
Tri-County's ability to pay dividends to stockholders is dependent upon
the dividends it receives from Tri-County Bank. Tri-County Bank may not declare
or pay a cash dividend on any of its stock if the effect thereof would cause
Tri-County Bank's regulatory capital to be reduced below (1) the amount required
for the liquidation account established in connection with Tri-County Bank's
conversion from mutual to stock form, or (2) the regulatory capital requirements
imposed by the Tri-County Bank's chartering authority and primary federal
regulator.
THE SPECIAL MEETING
General
This Proxy Statement is being furnished by Tri-County to its stockholders
in connection with the solicitation of proxies by the Board of Directors of
Tri-County for use at the special meeting to be held on March 23, 2001, and any
adjournment or adjournments thereof, to consider and vote upon a proposal to
approve the Merger Agreement and any other business as may properly come before
the special meeting.
After having been submitted, the enclosed proxy may be revoked by the
person giving it, at any time before it is exercised, by: (i) submitting written
notice of revocation of such proxy to the Secretary of Tri-County; (ii)
submitting a proxy having a later date; or (iii) such person appearing at the
special meeting and revoking the proxy. All shares represented by valid proxies
will be exercised in the manner specified thereon. If no specification is made,
such shares will be voted in favor of approval of the Merger Agreement.
9
Directors, officers, and employees of Tri-County may solicit Proxies from
Tri-County stockholders, either personally or by telephone, telegraph or other
form of communication. Such persons will receive no additional compensation for
such services. Tri-County has retained no third party to assist in soliciting
proxies or to send proxy materials to brokerage houses and other custodians,
nominees and fiduciaries for transmittal to their principals. All expenses
associated with the solicitation of proxies will be paid by Tri-County.
THE BOARD OF DIRECTORS OF TRI-COUNTY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, BELIEVES IT IS IN THE BEST INTERESTS OF TRI-COUNTY AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS ITS APPROVAL BY TRI-COUNTY'S
STOCKHOLDERS.
Record Date; Vote Required
The Board of Directors of Tri-County has fixed February 9, 2001, as the
Record Date for determining stockholders entitled to notice of and to vote at
the special meeting, and accordingly, only holders of Tri-County Common Stock of
record at the close of business on that day will be entitled to notice of and to
vote at the special meeting. The number of shares of Tri-County Common Stock
outstanding on the Record Date was 883,969, each of such shares being entitled
to one vote.
As to the approval of the Merger Agreement by checking the appropriate
box, a stockholder may:
o vote "FOR" approval of the Merger Agreement
o vote "AGAINST" the Merger Agreement, or
o "ABSTAIN."
The Merger Agreement must be approved by a vote of a majority of the
shares of Tri-County Common Stock entitled to vote, without regard to (a) Broker
Non-votes, or (b) proxies marked "ABSTAIN" as to that matter.
The directors and executive officers of Tri-County and their related
interests beneficially owned, as of the Record Date, and are entitled to vote at
the special meeting 238,022 shares of Tri-County Common Stock, which represents
26.9% of the outstanding shares of Tri-County Common Stock entitled to be voted
at the special meeting.
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
APPROVAL OF THE MERGER AGREEMENT.
10
PROPOSAL I - THE MERGER
A COPY OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS PROXY
STATEMENT AND REFERENCE IS MADE THERETO FOR A COMPLETE DESCRIPTION OF THE TERMS
OF THE MERGER. STOCKHOLDERS OF TRI-COUNTY ARE URGED TO READ THE MERGER AGREEMENT
CAREFULLY.
General
Under the terms of the Merger Agreement, AcqCo would merge with and into
Tri-County, with Tri-County as the surviving entity. Upon consummation of the
Merger, each outstanding share of Tri-County Common Stock would be converted
automatically and without any action on the part of the holder thereof into the
right to receive a cash payment of $12.60 from Platte Valley.
Background of the Merger
Originally chartered in 1935, Tri-County Bank converted to a stock company
in 1993 and formed Tri-County Bancorp, Inc. as its holding company. The period
subsequent to the conversion has been one of continued and substantial change in
the banking industry, characterized by heightened regulatory scrutiny and
intensifying competition and consolidation. Management of Tri-County focused on
these changes and sought to best position Tri-County and its shareholders. Since
completing its conversion to stock form, the Tri-County board of directors have
analyzed and executed its business plan and considered various means to better
position Tri-County Bank to enable it to compete more effectively and produce
greater revenue. During this period of time, Tri-County met with various
advisors and attended conferences. Among other advisors, the board met with KBW
on several occasions to discuss alternative strategic options to enhance
shareholder value. Techniques utilized included cash and stock dividends, share
repurchases and enhancing the retail franchise through de novo locations as well
as changing the asset and liability mix from a traditional thrift to more
community bank-like.
Tri-County met with KBW on several occasions in the second half of 1997 to
review progress on its plan to enhance shareholder value as well as to review
the status of the current merger and acquisition market, the relative pricing
and the opportunities that might be available for Tri-County. Through
Tri-County's board's review of various methods of enhancing shareholder value
and profitability, it became clear to the board that Tri-County would need to
expand into different, more dynamic markets in order to effectively expand its
retail franchise at a substantial cost to operating earnings. Furthermore, even
if Tri-County were successful with its expansion plans, industry data and
competitive factors indicated short term profitability would suffer.
In October 1997, as part of Tri-County's continuing efforts to enhance
shareholder value, the Tri-County board agreed that Tri-County should formally
engage a financial advisor who would provide advice regarding methods of
enhancing shareholder value on a going forward basis, including through the
possible merger of Tri-County. KBW was retained assist Tri-County in that
effort.
In late1997 KBW met with management to create a list of potential merger
partners. A total of 18 institutions were identified during the process that
might have an interest in a small savings institution in southeast Wyoming. A
confidential inquiry commenced and five of these companies executed
confidentiality agreements and received a Confidential Investor Profile,
detailing Tri-County and its market area. All five declined to submit a proposal
for a merger or acquisition. The reasons submitted by the potential acquirors
included the following: Tri-County did not fit acquirors' profile for
acquisition candidates, market area, other deals pending and no interest in a
traditional thrift.
11
After receiving the results of this marketing effort in late 1997 and
determining that a merger partner was not a possibility, Tri-County regrouped
with its financial advisor to review its alternatives to enhance shareholder
value. After considering expanding its market area through acquisitions or de
novo, and after several meetings with KBW, Tri-County announced on October 20,
1998 a modified dutch auction tender to purchase up to 26.8% of the outstanding
stock of Tri-County. This strategy was chosen after considering many factors
including its current market price, the overall weakened market for small
publicly traded thrift institutions and Tri-County's need to utilize excess
capital and improve earnings per share and return on equity. In December 1998,
Tri-County announced the successful completion of its modified dutch auction
tender whereby Tri-County purchased 314,125 shares at $14.00 per share.
Upon completion of this large share repurchase, Tri-County refocused its
attention on the feedback that was received from the search for a merger
partner. In a quest to improve its competitive franchise, Tri-County examined a
number of market areas and determined to embark on a plan to expand into the
Cheyenne market area with a de novo location. The board realized short-term
profitability would be impaired due to the expansion costs but that in the long
run the franchise would be more valuable with the move into the Cheyenne market.
In March 1999, Tri-County filed an application with the OTS to open a branch in
Cheyenne. The branch was opened for business in April 2000.
During mid 2000, the president and chief executive officer and the
chairman of Platte Valley had some casual discussions with the President of
Tri-County about combining the companies, as both companies remain competitive
in certain market areas of their respective franchises. These casual
conversations resulted in the completion of preliminary financial analysis with
publicly available data regarding a possible combination of the companies. This
financial analysis provided support to continue discussions on a more formal
basis. On July 7, 2000, the board of directors met to discuss the possible
combination and authorized the President of Tri-County to continue discussion
and to exchange confidential information. A confidentiality agreement between
the two companies was signed on July 27, 2000 to allow for a more thorough
exchange of information. The reasons for this possible affiliation remained the
same as when Tri-County pursued a merger in 1997:
o difficult short-term profitability due to expansion into the Cheyenne
market,
o liquidity for its shares,
o market price of its stock and
o the overall prospects for market price appreciation for smaller publicly
traded thrift institutions.
Throughout the fall of 2000, the two companies exchanged information
pursuant to due diligence requests and the President of Tri-County gave the
board periodic updates of the discussions. The confidentially agreement between
Tri-County and Platte Valley was extended on a number of occasions to enable
Platte Valley to evaluate whether or not to make an offer to Tri-County. On
October 4, 2000, the board was briefed by the President as to a preliminary
indication of interest by Platte Valley. The board, while determining the offer
to be too vague at the time, authorized the President to continue conversations.
During November 2000, the parties began discussing in detail the terms of
a possible transaction. On October 27, 2000, the board met to consider a Platte
Valley cash offer. The Tri-County board determined the price to be too low and
authorized the President of Tri-County to seek a higher offer from Platte
Valley. Discussions continued and Platte Valley increased its cash offer of
$12.60 per share. On November 14, 2000, the board had extensive discussions on
the matter and authorized the President of Tri-County to negotiate a non-binding
letter of intent with more definite terms and subject to board review and
approval.
12
On December 6, 2000, Tri-County agreed to retain KBW to act as financial
advisor with respect to this transaction. On December 6, 2000, after reviewing
the terms of the letter of intent with its legal counsel and the financial terms
of the transaction, Tri-County's board of directors entered into a Letter of
Intent to be acquired by Platte Valley at $12.60 per share cash. The Letter of
Intent was subject completion of due diligence and a definitive merger
agreement. The Letter of Intent did contain a clause that prohibited Tri-County
from soliciting other purchasers once the Letter of Intent was announced.
However, it did not contain a break up fee in the event another potential
acquiror submitted a better proposal for the shareholders of Tri-County.
During the ensuing period before entering into the definitive merger
agreement, no other potential acquiror contacted Tri-County to discuss an
acquisition transaction. Following the completion of the due diligence period
and extensive document negotiation, the board of directors met on January 23,
2001 to consider the terms of a definitive merger agreement with Platte Valley.
The terms of the Merger Agreement were discussed and reviewed in detail with
counsel for Tri-County and KBW gave a presentation to the Board of Directors as
to the fairness of the transaction to Tri-County's stockholders from a financial
point of view. Upon further discussion, the Board of Directors authorized the
President to sign the agreement, and after the Platte Valley board accepted the
agreement in a meeting the next day, on January 24, 2001, the Merger Agreement
was signed by the parties.
Tri-County's Reasons for the Merger and Recommendation
The terms of the Merger Agreement, including the cash consideration to be
received by Tri-County's stockholders, were the result of arm's length
negotiations between the representatives of Tri-County and Platte Valley. In
addition to the factors discussed in "-- Background of the Merger," the Board of
Directors of Tri-County considered the following factors as material in deciding
to approve and recommend the terms of the Merger were:
o information concerning the financial condition, results of operations,
capital levels, asset quality and future prospects of Tri-County,
o industry and economic conditions,
o the impact of the Merger on the depositors, employees, customers
and communities served by Tri-County through expanded commercial,
consumer and retail banking products and services,
o the opinion of Tri-County's financial advisor as to the fairness of the
consideration to be received by the holders of Tri-County Common Stock
from a financial point of view,
o the general structure of the transaction and the compatibility of
management and business philosophy,
o the likelihood of receiving the requisite regulatory approvals in a timely
manner, and
o the ability of the combined enterprise to compete in relevant banking
and non-banking markets.
In making its determination, the Board did not ascribe relative weights to the
factors which it considered.
The Board of Directors of Tri-County believes that the Merger is in the
best interest of Tri-County and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT.
13
Possible Delisting of Tri-County Common Stock
From time-to-time, the Board of Directors has considered removing
Tri-County Common Stock from the Nasdaq SmallCap Market to save expenses. In the
event the Merger is not completed, it is likely that Tri-County will undertake
such action. Such delisting will make it more difficult to determine the price
and amount of future trade in Tri-County Common Stock because the stock will
trade on the "Pink Sheets."
Furthermore, Tri-County currently has 207 shareholders of record and is
therefore voluntarily files periodic reports (Forms 10-QSB, 10-KSB, proxy
statements, etc.) with the Securities and Exchange Commission. Furthermore, in
the event it is apparent the Merger will be approved by stockholders, Tri-County
may terminate its registration with the SEC. This would eliminate Tri-County's
public reporting requirements, thereby making it difficult to find the detailed
information provided pursuant to the SEC rules.
In the event the Merger is not completed, Tri-County will examine whether
or not to delist from the Nasdaq SmallCap Market and to terminate its
registration with the SEC.
Opinion of Financial Advisor
On December 6, 2000 Tri-County formally retained KBW to act as
Tri-County's financial advisor with respect to the acquisition of Tri-County.
KBW is regularly engaged in the valuation of banks, bank holding companies, and
savings banks in connection with mergers, acquisitions, and other
securities-related transactions. KBW is familiar with the market for common
stocks of publicly traded banks, thrifts, and bank and thrift holding companies.
The Tri-County board selected KBW on the basis of the firm's reputation and its
experience and expertise in transactions similar to the merger and its prior
work for and relationship with Tri-County.
Pursuant to its engagement, KBW was asked to render an opinion as to the
fairness from a financial point of view, of the merger consideration to
shareholders of Tri-County. KBW delivered its opinion to the Tri-County board
that, as of January 24, 2001, the merger consideration is fair, from a financial
point of view, to the shareholders of Tri-County. No limitations were imposed by
the Tri-County board of directors upon KBW with respect to the investigations
made or procedures followed by it in rendering its opinion. KBW has consented to
the inclusion herein of the summary of its opinion to the Tri-County board of
directors and to the reference to the entire opinion attached hereto as APPENDIX
B.
The full text of the opinion of KBW, which is attached as APPENDIX B to
this Proxy Statement, sets forth certain assumptions made, matters considered
and limitations on the review undertaken by KBW, and should be read in its
entirety. The summary of the opinion of KBW set forth in the Proxy Statement is
qualified in its entirety by reference to the opinion.
In rendering its opinion, KBW:
o Reviewed the Merger Agreement
o Reviewed Tri-County's Annual Reports, Proxy Statements and Form
10-KSB's for 1997, 1998 and 1999 and the unaudited quarterly
financial information for the quarter ended March 31, 2000, June 30,
2000 and September 30, 2000; and for Platte Valley, reviewed financial
statements for the years ended 1997, 1998 and 1999 and publicly-
available information for the nine-months ended September 30, 2000.
14
o Discussed with the president and board of directors of Tri-County
and its wholly owned subsidiary Tri-County Bank, the current position
and prospective outlook for Tri-County to enhance future shareholder
value;
o Discussed with the president of Platte Valley their financial condition
and capital plans;
o Considered historical quotations, levels of activity and prices of
recorded transactions in Tri-County's common stock;
o Reviewed financial and stock market data of other thrifts in a comparable
asset range to Tri-County;
o Reviewed certain recent acquisition transactions which KBW deemed
comparable in whole or in part; and
o Performed analyses which KBW considered appropriate.
In rendering its opinion, KBW assumed and relied upon the accuracy and
completeness of the financial information provided to it by Tri-County and
Platte Valley. In its review, with the consent of the Tri-County board, KBW did
not undertake any independent verification of the information provided to it,
nor did it make any independent appraisal or evaluation of the assets and
liabilities, and potential or contingent liabilities of Tri-County or Platte
Valley. Further, KBW performed financial analysis supported by the marketing
effort to find an acquiror for the company and the letter of intent process.
The preparation of a fairness opinion is a complex process involving
subjective judgements and is not necessarily susceptible to partial analysis or
summary description. In its analysis, KBW made numerous assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which are beyond the control of Tri-County or Platte Valley. Any
estimates contained in KBW's analysis are not necessarily indicative of future
results or values, which may be significantly more or less favorable than such
estimates. Except as described below, none of the financial analysis performed
by KBW was assigned a greater significance by KBW than any other.
Analysis of Bank Merger Transaction. KBW created 10 groups of merger
transactions for comparable analysis. In all cases the selling company was a
savings association. No company or transaction in the following analysis is
identical to Tri-County or Platte Valley or the contemplated transaction.
Accordingly, the analysis of the results of the foregoing is not formulaic;
rather it involves complex considerations and judgements concerning differences
in financial, market and operating characteristics of the companies and other
factors that could affect the public trading value of the companies to which
they are being compared.
15
Tri County Bancorp, Inc.
Summary of Selected M&A Transactions
Where the Target is a Thrift Institution
- --------------------------------------------------------------------------------
Deal Price to
-----------------------------
Tangible LTM Core Dep
Book EPS Assets Deposit Premium
- --------------------------------------------------------------------------------
M&A Group 1 & 6
1) Group 1 - All Pending Deals
(# = 26) Average 133.5% 21.6x 16.4% 25.2% 6.7%
Median 127.7% 19.7x 16.5% 25.1% 6.0%
6) Group 6 - All Completed Deals Since 3/31/00
(# = 51) Average 159.2% 21.8x 16.9% 23.8% 9.5%
Median 140.0% 18.3x 15.7% 22.8% 7.5%
M&A Group 2 & 7
2) Group 2 - Pending Deals with Deal Value between $5 million and $50 million
(# = 12) Average 115.6% 23.9x 17.6% 28.4% 4.7%
Median 112.3% 21.1x 15.6% 27.7% 4.8%
7) Group 7 - Completed Deals with Deal Value between $5 million and $50 million
(# = 24) Average 139.6% 22.6x 16.0% 22.5% 7.2%
Median 132.0% 18.3x 15.3% 20.0% 6.5%
M&A Group 3 & 8
3) Group 3 - Pending Deals with Target Equity to Assets between 7% and 14%
(# = 15) Average 143.4% 23.1x 15.4% 22.4% 8.3%
Median 133.0% 19.3x 13.7% 22.7% 7.5%
8) Group 8 - Completed Deals with Target Equity to Assets between 7% and 14%
(# = 27) Average 164.4% 18.3x 15.8% 22.0% 10.3%
Median 144.0% 15.6x 14.8% 21.7% 7.9%
M&A Group 4 & 9
4) Group 4 - Pending Deals with Target ROAE less than 8%
(# = 19) Average 131.5% 27.2x 18.7% 28.7% 6.6%
Median 121.2% 23.9x 19.8% 27.7% 6.4%
9) Group 9 - Completed Deals with Target ROAE less than 8%
(# = 33) Average 139.1% 26.1x 16.9% 23.8% 7.2%
Median 128.4% 22.6x 15.7% 21.7% 6.5%
M&A Group 5 & 10
5) Group 5 - Pending Deals in the Midwest, Southwest and West Regions
(# = 12) Average 123.4% 19.3x 15.3% 25.2% 4.7%
Median 118.5% 13.9x 12.8% 24.3% 4.8%
10)Group 10 - Completed Deals in the Midwest, Southwest and West Regions
(# = 26) Average 171.8% 21.2x 17.3% 24.5% 11.3%
Median 148.0% 18.3x 14.4% 21.1% 8.7%
Average and Median for Deal Value, Tangible Equity to Assets and ROAE
Pending
Average 130.2% 24.7x 17.2% 26.5% 6.5%
Median 122.2% 21.4x 16.3% 26.0% 6.3%
Completed
Average 147.7% 22.3x 16.2% 22.8% 8.2%
Median 134.8% 18.8x 15.3% 21.1% 7.0%
- --------------------------------------------------------------------------------------
Platte Valley Transaction
@$12.60 112.5% 37.3x 11.9% 21.3% 3.9%
- --------------------------------------------------------------------------------------
16
Based on the above information KBW concluded that the merger consideration
was fair from a financial point of view relative to comparable transactions.
Further, the fairness analysis considered (i) the relative historical
performance of the thrift stocks in general, especially small cap stocks, over
the past year; (ii) the relative historical returns on equity of Tri-County; and
(iii) the expected performance of Tri-County given additional considerations
such as business plan and operating earnings trends. The summary does not
purport to be a complete description of the analysis performed by KBW and should
not be construed independently of the other information considered by KBW in
rendering its opinion.
KBW will receive a fee equal to $100,000 for services rendered in
connection with advising and issuing a fairness opinion regarding the merger. As
of the date of the Proxy Statement, KBW has received $25,000 of the fee with the
remainder due at closing of the Merger.
Federal Income Tax Consequences
The following is a discussion of the material federal income tax
consequences of the Merger. The discussion of the material federal income tax
consequences may not apply to special situations, such as Tri-County's
stockholders, if any, who received the common stock upon the exercise of
employee stock options or otherwise as compensation, and Tri-County's
stockholders that are insurance companies, securities dealers, financial
institutions or foreign persons.
The receipt of cash by a stockholder of Tri-County in exchange for shares
of Tri-County Common Stock pursuant to the Merger Agreement will constitute a
taxable transaction to such stockholder for federal income tax purposes. In
general, a stockholder will recognize gain or loss upon the surrender of the
stockholder's Tri-County Common Stock equal to the difference, if any, between
(i) the sum of the cash payment per share received in exchange for the shares of
Tri-County Common Stock, and (ii) the stockholder's tax basis in such Tri-County
Common Stock. Any gain or loss will generally be treated as capital gain or loss
if Tri-County Common Stock exchanged was held as a capital asset in the hands of
the stockholder.
The cash payments due to the holders of Tri-County Common Stock upon the
exchange thereof pursuant to the Merger Agreement (other than certain exempt
entities and persons) will be subject to a backup withholding tax by the
exchange agent under federal income tax law unless certain requirements are met.
Generally, the exchange agent will be required to deduct and withhold the tax if
(i) the stockholder fails to furnish a taxpayer identification number ("TIN") to
the exchange agent or fails to certify under penalty of perjury that such TIN is
correct, (ii) the Internal Revenue Service ("IRS") notifies the exchange agent
that the TIN furnished by the stockholder is incorrect, (iii) the IRS notifies
the exchange agent that the stockholder has failed to report interest, dividends
or original issue discount in the past, or (iv) there has been a failure by the
stockholder to certify under penalty of perjury that such stockholder is not
subject to the backup withholding tax.
No ruling has been or will be requested from the IRS as to any of the tax
effects of any of the transactions discussed in this Proxy Statement to
stockholders of Tri-County, and no opinion of counsel has been or will be
rendered to Tri-County with respect to any of the tax effects of the Merger to
Tri-County's stockholders. There is no assurance that applicable tax laws will
not change, on a current or retroactive basis, prior to the close of the Merger.
Because the tax consequences of the Merger may vary depending upon the
particular circumstances of each stockholder and other factors, each stockholder
of Tri-County is urged to consult such holder's own tax advisor to determine the
particular tax consequences to such holder of the Merger (including the
application and effect of state and local income and other tax laws).
17
THE MERGER AGREEMENT
The following is a brief summary of the provisions of the Merger
Agreement. This summary is qualified in its entirety by reference to the full
text of the Merger Agreement which is attached as APPENDIX A to this Proxy
Statement.
The Merger
Under the terms of the Merger Agreement, AcqCo would merge with
Tri-County. Furthermore, the Merger Agreement provides that Tri-County Bank will
move its home office from Torrington, Wyoming to Cheyenne, Wyoming and sell its
Torrington and Wheatland offices to Platte Valley Bank. Upon consummation of the
Merger, each outstanding share of Tri-County Common Stock would be converted, by
virtue of the merger of AcqCo into Tri-County (with Tri-County surviving),
automatically and without any action on the part of the holder thereof, into the
right to receive a cash payment of $12.60 from Platte Valley. Options will be
cashed out for a price equal to $12.60 less the strike price of the option.
Closing date of the Merger
Unless the Merger Agreement is terminated, a closing is to be held as soon
as practicable after the satisfaction or waiver of the conditions to the
obligations of the parties to consummate the Merger and in no event later than
June 30, 2001. At the closing, the proper officers of Tri-County and AcqCo will
execute Articles of Merger, which are to be filed with the States of Wyoming and
Colorado. The Merger will become effective on the date that the Articles of
Merger are filed. It is currently anticipated that the closing will take place,
and the Merger will become effective, during the end of the first calendar
quarter or early in the second calendar quarter of 2001.
Possible Special Cash Dividend
If the merger is not completed by March 31, 2001 Tri-County may pay a
special dividend equal out of Current Net Operating Earnings, if any, as defined
below, but not exceeding $0.11 per share.
The Merger Agreement defines Current Net Operating Earnings as
Tri-County's current net income through the last day of the month prior to the
Closing Date, less
o all costs associated with the termination of Tri-County's ESOP and the
401(k) Plan, including all excise taxes, incurred or to be incurred, and
o Tri-County's expenses which exceed $170,000 attributable to the
negotiation and consummation of the Merger Agreement, incurred or to
be incurred, including but not limited to attorney's fees,
accounting fees, investment banker opinion costs, director and
officer insurance tail coverage costs, and proxy statement printing and
mailing costs, but excluding the following items (and net of tax effects):
a. Security gains and losses.
b. Costs associated with the buy-out of cashless options and
employment contracts.
c. The first $170,000 of the Tri-County's expenses attributable
to the negotiation and consummation of the Merger Agreement,
incurred or to be incurred, including, but not limited to,
attorney's fees, accounting fees, investment banker opinion
costs, director and officer tail coverage costs, and proxy
costs.
18
Exchange of Tri-County Common Stock Certificates
Platte Valley has designated Platte Valley Bank to act as the exchange
agent for the merger transaction. Platte Valley will, on or immediately prior to
the closing of the Merger, deposit with the exchange agent an amount equal to
100% of the Cash Consideration. Within three days of the close of the Merger,
the exchange agent shall subsequently deliver to Tri-County's stockholders a
letter of direction and transmittal form advising the procedure for surrendering
to the exchange agent the Tri-County Common Stock certificates. The exchange
agent shall, in accordance with the aforementioned letter of direction, pay to
Tri-County shareholders an amount equal to 100% of the Cash Consideration for
their shares.
Notwithstanding the tender or non-tender of the stock certificates,
effective as of the Closing date of the Merger all shares of Tri-County shall be
and become void and will cease to evidence any ownership interest in Tri-County
and will instead be converted into the right to receive a cash payment equal to
the Cash Consideration.
TRI-COUNTY'S STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
The Cash Consideration into which such holder's shares are converted on
the Closing date of the Merger will be delivered by or on behalf of Platte
Valley, to such holder only upon delivery to Platte Valley Bank of the
certificates formerly representing all of such shares owned by such holder (or a
lost stock certificate and indemnity bond satisfactory to Platte Valley and the
Platte Valley Bank, in their judgment, if any of such certificates are lost,
stolen or destroyed). No interest will be paid on such Cash Consideration which
such holder shall be entitled to receive upon such delivery.
After the Closing, the stock transfer books of Tri-County will be closed
and there will be no further transfers on the transfer books of Tri-County of
the shares of Tri-County Common Stock that were outstanding immediately prior to
the closing date of the Merger.
Interests of Certain Persons
Certain members of Tri-County's management and its Board may be deemed to
have interests in the Merger in addition to their interests, if any, as
stockholders of Tri-County. These interests are described in more detail below.
Employment Agreements. President Savage and two executive officers have
employment agreements with Tri-County Bank that provide for certain payments and
benefits in the event their employment with Tri-County Bank is terminated
following a change of control as defined in the employment agreement. The
execution of the terms of the Merger Agreement would constitute a change of
control for purposes of this agreement and the employment of President Savage
will be terminated upon the consummation of the Merger. The amount of payments
to President Savage and the two executive officers upon termination of their
employment as of the Closing date of the Merger will be a maximum of $321,920.
Stock Options. Pursuant to the Merger, the officers and directors of
Tri-County will receive the difference between $12.60 and the exercise price of
each of their outstanding options. The amount of payments to buy out all
options, including those issued to officers and directors, will equal
$529,013.20.
19
Insurance Coverage. Tri-County currently has an insurance policy for its
directors and officers that covers these individuals in the event they are
subject to a lawsuit in connection with their duties as officers and directors.
Pursuant to the Merger Agreement, Platte Valley will cause the officers and
directors of Tri-County and Tri-County Bank immediately prior to the Closing
date of the Merger to be covered for a period of three years from the closing
date of the Merger by the directors' and officers' liability insurance policy
maintained by Tri-County and Tri-County Bank (provided that Platte Valley may
substitute an insurance policy of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than the current
insurance policy). This insurance is intended to provide coverage following the
Merger for actions of officers and directors taken prior to the Merger. This
insurance coverage reduces the potential exposure of officers and directors for
actions taken by them prior to the Merger.
Termination of Tax-Qualified Benefit Plans. The Tri-County Bank ESOP and
401(k) will be terminated and any remaining assets will be distributed to the
participants.
Board Seats. The availability of any board seat on the boards of Platte
Valley or its subsidiaries will be at the sole discretion of Platte Valley. The
President of Tri-County will remain a director of Tri-County Bank through
December 2001.
Advisory Board/Non-Compete Agreements. Each director of Tri-County shall
be offered an Advisory Board seat with one of Platte Valley's banking
subsidiaries. The position will be for a term of two years and each director
serving as an advisory director will each receive $4,800 payable in equal
installments over a 24-month period.
Those directors not joining the Platte Valley advisory board will be
required to sign non-compete agreements. In consideration for signing such
agreements, Platte Valley will pay the director $4,800 payable in equal
installments over a 24-month period.
Post-Merger Benefits to Employees
In accordance with the Merger Agreement, Platte Valley will cause Platte
Valley Bank to allow the employees of Tri-County Bank who are offered and who
accept employment by Platte Valley Bank (the "Bank Employees") to participate in
any of Platte Valley Bank's employee benefit plans in which similarly situated
employees of Platte Valley Bank participate, to the same extent as comparable
employees of Platte Valley Bank. As of the Closing date of the Merger, Platte
Valley Bank will permit Tri-County Bank Employees to participate in Platte
Valley Bank's group hospitalization, medical, life and disability insurance
plans on substantially the same terms and conditions as applicable to comparable
employees of Platte Valley and its subsidiaries. As of the next entry date
following the Closing date of the Merger, Platte Valley Bank will permit the
Bank Employees to participate in Platte Valley Bank's defined contribution plan.
The Bank Employees will be given credit for their years of service with
Tri-County Bank or Tri-County for eligibility and vesting purposes under Platte
Valley Bank's defined contribution retirement plan. At closing all accrued
vacation as of December 31, 2000 will be cashed out. The Tri-County ESOP and
401(k) plan will be liquidated in accordance with their terms and the assets
distributed to the participants. With respect to its vacation, sick leave and
severance policies, Platte Valley Bank will recognize, for purposes of
eligibility to participate, vesting and benefits accrual purposes, all prior
years of service that any employee had with Tri-County Bank or Tri-County.
Tri-County Bank employees who are terminated by Platte Valley between the
date of the close of the Merger and December 31, 2001 for any reason other than
cause, shall be entitled to receive a severance benefit equal to two (2) week's
salary for every year or partial year of employment service with Tri-County or
Tri-County Bank, with a minimum severance benefit equal to two (2) weeks of
salary and the maximum severance benefit payable shall be three months weeks of
salary.
Dissenters' Rights
Under Wyoming Law, Tri-County shareholders have a right to dissent and
obtain the fair value of their shares by complying with the terms of Article 13
of the Wyoming Business Corporation Act, as amended ("WBCA"). The full text of
Article 13 of the WBCA can be found at APPENDIX C to this Proxy Statement.
20
The WBCA generally provides that a shareholder of a Wyoming corporation
that engages in a merger transaction shall have the right to demand from the
corporation the payment of the fair or appraised value of his stock in the
corporation, subject to the satisfaction of specified procedural requirements.
There are certain exceptions to dissenter's rights under the WBCA, however, none
are applicable in the Merger, therefore Tri-County shareholders have dissenters'
rights of appraisal under Article 13 of the WBCA in connection with the Merger.
A holder of shares of Tri-County wishing to exercise his dissenter rights
must deliver to the Secretary of Tri-County, before the vote on the Merger
Agreement at the Special Meeting, a writing which identifies such shareholder
and which states his intention to demand that he be paid the fair value for his
shares if the proposed Merger is effectuated. Furthermore, the shareholder must
effect no change in the beneficial ownership of his shares from the date of such
filing continuously through the closing date of the Merger of the Merger and
must refrain from voting his shares in approval of such action. A dissenter who
fails to satisfy the statutory requirements in any respect shall not acquire any
right to payment of the fair value of his shares under Article 13 of the WBCA. A
vote against the Merger Agreement shall not constitute the written notice
required by the WBCA. Any such shareholder who wishes to exercise such dissenter
rights should review carefully the discussion of such rights in this Proxy
Statement, including APPENDIX C hereto, because failure to timely and properly
comply with the procedures specified will result in the loss of dissenter rights
under the WBCA. All written demands for appraisal should be sent to delivered to
the attention of the Secretary of Tri-County Bancorp, Inc., 2201 Main Street,
Torrington, Wyoming 82240-2317 so as to be received prior to the vote at the
Special Meeting with respect to the Merger Agreement and the proposal to adjourn
the Special Meeting to solicit additional proxies.
If the Merger Agreement is approved by the required vote at the Special
Meeting, Tri-County shall mail a further notice to all dissenters who gave due
notice of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action setting forth the
following: (i) state where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment; (ii) supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the shares;
and (iii) be accompanied b a copy of Article 13 of the WBCA. The time set for
receipt of the demand and deposit of certificated shares shall be not less than
30 days from the mailing of the notice.
Business Pending Consummation
Tri-County and Tri-County Bank have agreed in the Merger Agreement to
carry on their business in substantially the same manner their business was
conducted prior to the date of this Merger Agreement, and have agreed not to
take certain actions relating to the operation of Tri-County pending
consummation of the Merger, without the prior written consent of Platte Valley,
except as otherwise permitted by the Merger Agreement. These prohibited actions
include, without limitation:
o amending their corporate documents;
o changing the number of shares of capital stock outstanding or issue any
additional options or warrants;
o entering into any contract over $10,000;
o entering into any employment agreement or granting additional benefits;
o taking any action contrary to preserving the business of Tri-County;
21
o paying any dividends;
o purchasing any securities; and
o underwriting any loans in excess or $150,000 or making any loans to
insiders.
Accounting Treatment
Platte Valley is expected to use the purchase method of accounting with
respect to its acquisition of Tri-County in the Merger.
Regulatory Approvals
The Merger and other transactions described in the Merger Agreement are
subject to the prior approval or non-objection of the Office of Thrift
Supervision ("OTS"), OCC, and Federal Reserve Board.
The Bank Holding Company Act of 1956, as amended (the "BHC Act"), governs
the Federal Reserve Board's approval process. The BHC Act provides that the
Federal Reserve Board may not approve any transaction (i) which would result in
a monopoly or which would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States, or (ii) the effect of which in any section of the country may
be to substantially lessen competition, or tend to create a monopoly, or which
in any other manner might restrain trade, unless the Federal Reserve Board finds
that the anti-competitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served.
In conducting its review of any application for approval under the BHC
Act, the Federal Reserve Board must consider the financial and managerial
resources and future prospects of the institutions involved, and the convenience
and needs of the communities that the institutions will serve. The Federal
Reserve Board may deny an application if it determines that the financial or
managerial resources of the acquiring bank holding company are inadequate.
The BHC Act provides for the publication of notice of, and the opportunity
of administrative hearings relating to, the respective applications for approval
noted and described above. Interested parties may intervene in the approval
proceedings. If an interested party intervenes, such intervention could
substantially delay the regulatory approvals required for consummation of the
Merger.
Applications seeking approval of the Merger were filed with the OTS and
the OCC in January 2001. The required regulatory approvals had not been received
as of the date of mailing of this Proxy Statement but Tri-County and Tri-County
Bank have no reason to believe that such approvals will not be received.
The Merger cannot proceed in the absence of the requisite regulatory
approvals. There can be no assurance that such regulatory approvals will be
obtained, and, if the Merger Agreement is approved, there can be no assurance as
to the date of any such approvals. There can also be no assurance that any such
approvals will not contain a condition or requirement which causes such
approvals to fail to satisfy the conditions set forth in the Merger Agreement
and described below under "-- Conditions to Consummation; Termination."
22
Tri-County is required to use its best efforts to obtain shareholder
approval of the Merger Agreement and is prohibited from seeking offers from
other entities after signing the Merger Agreement. However, if upon the receipt
of advice of counsel, Tri-County determines in good faith that to do so
otherwise would constitute a violation of the Board's fiduciary duties under
applicable law, they can accept another bona fide offer and not recommend the
Merger.
Conditions To Consummation; Termination
Consummation of the Merger is subject, among other things, to:
o approval of the transactions contemplated by the Merger Agreement by the
requisite vote of the stockholders of Tri-County;
o receipt of the regulatory approvals referred to under "-- Regulatory
Approvals"
o there being no material adverse change in the operations of Tri-County;
o no more than 2% of the stockholders of Tri-County can dissent from the
Merger; and
o there being no suit, action or proceeding pending or, in the case of
governmental bodies, threatened, which challenge the validity or
legality, or seeks to restrain the consummation, of the Merger or which
seeks to limit or otherwise affect in a material respect the operation
of Platte Valley Bank or its shareholders, or the operation of
Tri-County and or its shareholders.
Consummation of the Merger is also subject to the satisfaction or waiver
of various other conditions specified in the Merger Agreement, including, among
others, the delivery by Tri-County and Platte Valley, each to the other, of (a)
opinions of their respective counsel reasonably satisfactory to the addressees
of such opinions, and (b) certificates executed by certain of their respective
executive officers as to due performance and compliance in all material respects
with the agreements and covenants in the Merger Agreement and the truth and
correctness of the representations and warranties. The Merger Agreement provides
that prior to the Closing date of the Merger, either before or after receipt of
the required stockholder approval, the Merger Agreement may be terminated: (i)
by mutual consent of Platte Valley and Tri-County; or (ii) by either Platte
Valley or Tri-County in the event
o of a breach by the other party of any representation, warranty, or
covenant contained in the Merger Agreement, which breach cannot or is not
cured within 30 days after written notice thereof is given to the party
committing such breach; or
o any condition required by the Merger Agreement is not satisfied by June
30, 2001.
The Merger Agreement provides that Tri-County may terminate the Merger
Agreement if Tri-County receives an unsolicited offer to purchase or otherwise
acquire Tri-County and, pursuant to the Board's fiduciary duties to Tri-County
and its stockholders, the Board decides to terminate the Merger Agreement to
pursue such other offer. If Tri-County accepts such offer, it will be required
to pay Platte Valley a break-up fee of $450,000.
Waiver; Amendment
Prior to the Closing date of the Merger, any provision of the Merger
Agreement may be: (i) waived in writing by the party benefited by the provision;
or (ii) amended or modified at any time (including the structure of the
transaction) only by an agreement in writing among the parties thereto.
23
Expenses; Termination Fees
In the event the Merger is not consummated, all expenses incurred by or on
behalf of the parties in connection with the Merger Agreement and the
transactions contemplated thereby shall be borne by the party incurring the
same.
Tri-County or Platte Valley will be entitled to receive $150,000 if the
Merger Agreement is terminated because of the other party's breach of a
representation, warranty, covenant or agreement under the Merger Agreement and
such party fails to cure the breach within 30 days following written demand.
Furthermore, Platte Valley will be entitled to receive $450,000 if the Merger
Agreement is terminated because Tri-County accepts a superior offer from another
potential acquiror.
PROPOSAL II - ADJOURNMENT OF MEETING
In the event there is an insufficient number of shares present in person
or by proxy at the Special Meeting to approve the Merger Agreement, the
Tri-County Board of Directors intends to submit for shareholder approval at the
Special Meeting a proposal to adjourn the Special Meeting to a later date. The
place and date to which the Special Meeting would be adjourned would be
announced at the Special Meeting.
The adjournment would permit Tri-County to solicit additional proxies for
approval of the Merger Agreement. While such an adjournment would not invalidate
any proxies previously filed, including those voting against the Merger
Agreement, it would give Tri-County the opportunity to solicit additional
proxies in favor of the Merger Agreement if necessary.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE ADJOURNMENT UNDER
THE CIRCUMSTANCES DESCRIBED HEREIN. APPROVAL OF THE ADJOURNMENT REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF TRI-COUNTY COMMON
STOCK PRESENT IN PERSON OR BY PROXY AT THE MEETING.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, stockholders may present proper proposals for inclusion in a company's
proxy statement and for consideration at the next annual meeting of its
stockholders by submitting their proposals to the company in a timely manner.
Tri-County will hold its annual meeting only if the merger is not
completed. In order to be included in the proxy statement for the 2001 annual
meeting of Tri-County stockholders, stockholder proposals must be received by
Tri-County no later than December 1, 2000, and must otherwise comply with the
requirements of Rule 14a-8. In the event Tri-County holds its annual meeting
more than 30 days from April 26, 2001, then the deadline is a reasonable time
before Tri-County prints its proxy materials.
In addition, Tri-County's bylaws establish an advance notice procedure
with regard to certain matters, including stockholder proposals not included in
Tri-County's proxy statement to be brought before an annual meeting of
stockholders. In general, notice must be received by the Secretary of Tri-County
not less than 10 days nor more than 60 days prior to the annual meeting and must
contain specific information concerning the matter to be brought and other
stockholder information.
All notices or proposals to stockholders, whether or not to be included in
Tri-County's proxy materials, should be sent to the attention of the Secretary
of Tri-County at 2201 Main Street, Torrington, Wyoming 82240-2317.
24
LEGAL OPINIONS
Certain legal matters associated with the Merger will be passed upon by
Manatt, Phelps & Phillips, LLP, Los Angeles, D.C., as counsel for Tri-County and
by Rothgerber Johnson & Lyons, LLP, Denver, Colorado as counsel for Platte
Valley.
ACCOUNTANTS
The consolidated balance sheets of Tri-County as of December 31, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the two-year period ended
December 31, 1999, included in Tri-County's 1999 Annual Report to Stockholders
which is incorporated by reference in Tri-County's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999, have been incorporated herein in
reliance on the report of Dalby, Wendfard & Co., P.C., independent certified
public accountants, and upon the authority of said firm as experts in accounting
and auditing. Tri-County's independent certified public accountants are not
expected to attend the special meeting and therefore will not be available to
make a statement or respond to stockholders' questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no matters
which will be presented for consideration at the special meeting other than as
set forth in the Notice of Meeting accompanying this Proxy Statement. However,
if any other matters shall come before the special meeting or any adjournments
thereof and be voted upon, the enclosed Proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such Proxy as to any such matters.
FINANCIAL INFORMATION
The following documents are included as APPENDIX D AND APPENDIX E,
respectively, to this Proxy Statement:
o Tri-County's 1999 Annual Report to Stockholders, and
o Tri-County's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2000.
By Order of the Board of Directors
/s/Carl F. Rupp
--------------------------------------
Carl F. Rupp
Secretary
February 14, 2001
ANNEX A
REVOCABLE PROXY
TRI-COUNTY BANCORP, INC.
This Proxy is solicited on behalf of the Board of Directors for the
Special Meeting of Stockholders to be held on March 23, 2001 (the "Meeting").
The undersigned hereby appoints the Board of Directors of Tri-County
Bancorp, Inc. ("Tri-County"), or its designee, with the power of substitution,
to act as attorneys and proxies for the undersigned, to represent and to vote,
as designated below, all shares of Common Stock of Tri-County, which the
undersigned is entitled to vote at the Meeting and at any adjournment thereof.
The directors recommend a vote "FOR" Proposals 1 and 2.
FOR AGAINST ABSTAIN
1. Approval of the Acquisition Agreement and [ ] [ ] [ ]
Plan of Merger, dated as of January 24, 2001 by
and among Platte Valley Financial Service
Companies, Inc. ("Platte Valley), Platte Valley
Acquisition Company, Inc. ("AcqCo"), Platte
Valley National Bank, Tri-County, and
Tri-County Bank, pursuant to which (i) Tri-County
would merge with AcqCo with Tri-County surviving
(the "Merger"), and (ii) each outstanding share of
Tri-County common stock would be converted into
the right, subject to adjustment, to receive a cash
payment of $12.60 from Platte Valley upon
completion of the Merger, subject to the terms
and conditions contained in the agreement.
FOR AGAINST ABSTAIN
2. Adjourn the Meeting to solicit additional [ ] [ ] [ ]
votes to approve the Merger Agreement.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Proposals 1 and 2. In addition, this proxy will be voted at the
discretion of the proxy holder(s) upon any other matter that may properly come
before the Meeting, including any adjournment thereof.
Should the signatory(ies) be present and elects to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of
Tri-County at the Meeting of such person's decision to terminate this proxy, the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect. The signatory(ies) may also revoke this proxy by filing a
subsequently dated proxy or by written notification to the Secretary of
Tri-County of his or her decision to terminate this proxy.
The signatory(ies) acknowledge(s) receipt from Tri-County prior to the
execution of this proxy of Notice of the Meeting, a Proxy Statement dated
February 15, 2001.
Please check here if you
Dated: , 2001 [ ] plan to attend the meeting.
- -------------------------------
------------------------------------
SIGNATURE OF STOCKHOLDER
------------------------------------
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy card. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
APPENDIX A
ACQUISITION AGREEMENT
AND
PLAN OF MERGER
among
PLATTE VALLEY FINANCIAL SERVICE COMPANIES, INC.,
PLATTE VALLEY NATIONAL BANK,
PLATTE VALLEY ACQUISITION COMPANY, INC.
(In Organization),
TRI-COUNTY BANCORP, INC.
and
TRI-COUNTY BANK
As of January 24, 2001
A-1
ACQUISITION AGREEMENT AND PLAN OF MERGER
This Acquisition Agreement and Plan of Merger ("Agreement") is entered
into this 24th day of January, 2001, by and among Platte Valley Financial
Service Companies, Inc. ("Platte Valley"), Platte Valley National Bank located
in Torrington, Wyoming ("Platte Valley National Bank"), Tri-County Bancorp, Inc.
("Tri-County"), Tri-County Bank and Platte Valley Acquisition Company, Inc. (In
Organization) ("AcqCo").
RECITALS:
A. Platte Valley is a financial holding company organized and existing
under the laws of the State of Colorado, having its principal offices at 1212
Circle Drive, Scottsbluff, Nebraska 69361.
B. Platte Valley owns all of the capital stock of Platte Valley National
Bank, a national banking association.
C. Tri-County is a registered savings and loan holding company organized
and existing under the laws of Wyoming having its principal offices at 2201 Main
Street, Torrington, Wyoming 82240.
D. Tri-County owns all of the capital stock of Tri-County Bank, a
federally chartered stock savings bank ("Tri-County Bank") and all of the
capital stock of First Tri-County Services, Inc., a Wyoming corporation
("Tri-County Services"). Tri-County Bank and Tri-County Services are hereinafter
referred to together as the "Subsidiaries."
E. AcqCo will be a Colorado corporation organized as a wholly owned
subsidiary of Platte Valley solely for the purposes of acquiring Tri-County.
F. The respective Boards of Directors of Platte Valley and Tri-County have
determined that it is in the best interest of said corporations and their
respective shareholders that Platte Valley acquire 100% of the capital stock of
Tri-County through a merger of AcqCo with and into Tri-County on the terms and
conditions hereinafter set forth.
G. The respective Boards of Directors of Platte Valley and Tri-County
have, by resolutions, approved and authorized the execution and delivery of this
Agreement on the terms and conditions set forth herein.
THEREFORE, in consideration of the mutual covenants, promises, agreements
and provisions contained herein and subject to the satisfaction of the terms and
conditions set forth herein, and intending to be legally bound hereby, Platte
Valley and Tri-County agree as follows:
A-2
ARTICLE 1 - PRINCIPAL TERMS OF THE MERGER
1.1 The Plan of Merger. Subject to the terms and conditions of this
Agreement, including the receipt of all requisite regulatory and shareholder
approvals, the acquisition of Tri-County by Platte Valley (the "Merger") will be
carried out in the following manner:
a. Tri-County will cooperate in the preparation and filing by Platte
Valley of such applications to regulatory authorities as may be necessary to
obtain all approvals requisite to the consummation of the Merger, including
those described in Section 3.1(c) hereof.
b. Platte Valley and Tri-County will each cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
c. Tri-County shall call a meeting of its shareholders to approve
the Merger and shall solicit proxies in favor of the Merger.
d. Subject to the provisions of this Agreement, Articles of Merger
substantially in the form of Exhibit A attached hereto, shall be duly executed
and on the Closing Date (as defined in Section 1.2 hereof), or as soon
thereafter as reasonably practicable, filed with the Colorado Secretary of State
in accordance with the Colorado Business Corporation Act (the "CBCA") and with
the Wyoming Secretary of State in accordance with the Wyoming Business
Corporation Act ("WBCA"). The Merger shall become effective at the time
specified in the Articles of Merger (the "Effective Time").
e. At the Effective Time, AcqCo shall merge with and into
Tri-County, the separate existence of AcqCo shall cease, and Tri-County shall
continue as the surviving corporation. Tri-County, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation."
f. For each outstanding share of Tri-County common stock ($0.10 par
value) ("Tri-County Stock") held immediately prior to the Effective Time, the
shareholders of Tri-County (except those effectively exercising their
dissenter's rights of appraisal, as described in Section 2.2 hereof, shall
receive cash in the amount of $12.60 per share (the "Consideration") with a
maximum of 883,969 shares of Tri-County Stock (including shares held by the
Tri-County ESOP) outstanding at the Closing Date.
g. The holders of options for 72,207 shares of Tri-County Stock
shall receive total consideration not to exceed $529,013.20, as further
described in Section 2.4, and each such option shall be canceled.
h. Tri-County's expenses attributable to the negotiation and
consummation of this Agreement and the transactions contemplated hereby shall
not exceed $200,000 and any amount paid or accrued in excess thereof shall
result in a reduction of the aggregate Consideration paid in the amount of such
excess.
1.2 Closing Date. The "Closing Date" of the transaction shall be a date
which is at least ten (10) days after all of the conditions specified in Article
3 of this Agreement have all been satisfied and all applicable waiting periods
have expired, or such other date as is mutually agreed by the parties. The
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Rothgerber Johnson & Lyons LLP, 1200 17th Street,
Suite 3000, Denver, Colorado, on the Closing Date or at such other place as the
parties may agree. At the Closing, the parties shall exchange the various
agreements, certificates, instruments and documents to be delivered pursuant to
the terms of this Agreement.
A-3
1.3 The Surviving Corporation.
a. At the Effective Time, AcqCo shall cease to exist and Tri-County
shall be the "Surviving Corporation." The articles of incorporation and bylaws
of Tri-County as in effect immediately prior to the Effective Time will remain
the articles of incorporation and bylaws of Tri-County as the Surviving
Corporation after the Effective Time until amended or repealed in accordance
with their provisions and applicable law. The combined capitalization of
Tri-County and AcqCo immediately prior to the Effective Time shall be the
capitalization of Tri-County as the Surviving Corporation after the Effective
Time until changed by resolution of the Board of Directors or by action of its
shareholder. Except as set forth in Section 3.3(g) of this Agreement, the
directors and officers of Tri-County and Tri-County Bank immediately prior to
the Effective Time shall resign effective as of the Closing Date and their
successors shall be elected or qualified.
b. At and after the Effective Time, all rights, privileges, powers
and franchises and all property and assets of every kind and description of
AcqCo and Tri-County shall be vested in and be held and enjoyed by the Surviving
Corporation, without further act or deed, and all the estates and interests of
every kind of AcqCo and Tri-County, including all debts due to either of them,
shall be as effectively the property of the Surviving Corporation as they were
of AcqCo and Tri-County, and the title to any real estate vested by deed or
otherwise in either AcqCo or Tri-County shall not revert or be in any way
impaired by reason of the Merger. All rights of creditors and liens upon any
property of AcqCo or Tri-County shall be preserved unimpaired and all debts,
liabilities and duties of AcqCo and Tri-County shall be debts, liabilities and
duties of the Surviving Corporation and may be enforced against it to the same
extent as if said debts, liabilities, and duties had been incurred or contracted
by it.
ARTICLE 2 - DISTRIBUTIONS TO TRI-COUNTY SHAREHOLDERS
2.1 Delivery of Consideration. On or immediately prior to the Closing
Date, Platte Valley shall deliver to Platte Valley National Bank as paying agent
(the "Paying Agent") the aggregate Consideration to be paid. Any interest earned
on such cash while in the hands of the Paying Agent shall be the property of
Platte Valley. The Paying Agent subsequently shall deliver to the holders of
certificates formerly evidencing ownership of Tri-County Stock, upon receipt
from the holders thereof of such certificates, duly executed and in proper form
for transfer, the Consideration to which they are entitled pursuant to the
following provisions:
a. As soon as practical after the Effective Time the Paying Agent
shall send a notice and transmittal form to each record holder of a certificate
evidencing Tri-County Stock, advising such holder of the Merger and the
procedure for surrendering to the Paying Agent such certificate in exchange for
the Consideration. Each holder of such certificate, upon surrender of the same
to the Paying Agent in accordance with such transmittal form, shall be entitled
to receive the Consideration.
b. No transfer taxes shall be payable by any holder of record of
Tri-County Stock at the Effective Time in respect of the exchange of
certificates for the Consideration. If the Consideration for the Tri-County
Stock provided for herein is to be delivered to any person other than the
registered holder of the Tri-County Stock surrendered for exchange, the amount
of any stock-transfer or similar taxes (whether imposed on the holder of record
or such person) payable on account of the transfer to such person shall be paid
to the Paying Agent by such person. The Paying Agent may refuse to make such
exchange unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
c. After the Effective Time, each outstanding certificate which
theretofore represented Tri-County Stock shall until surrendered for exchange in
accordance with this Section 2.1 be deemed for all purposes to evidence only the
right to receive the Consideration. After the Effective Time, there shall be no
further registration or transfer of Tri-County Stock.
A-4
d. Any portion of the Consideration deposited with the Paying Agent
that remains unclaimed by the former holders of Tri-County Stock one hundred
eighty (180) days after the Effective Time shall be repaid or returned to Platte
Valley upon demand, and holders of Tri-County Stock who have not theretofore
complied with this Section 2.1 hereof shall thereafter look only to Platte
Valley for payment of their claim for the Consideration.
e. Notwithstanding anything to the contrary set forth herein, if any
holder of Tri-County Stock shall be unable to surrender his or her certificates
because such certificates have been lost or destroyed, such holder may deliver
in lieu thereof an indemnity bond in form and substance and with surety
satisfactory to Platte Valley or such other undertaking as may be approved by
Platte Valley.
2.2 Dissenting Shareholders. Any shares of Tri-County Stock held by
persons who have satisfied the requirements of the WBCA related to the rights of
dissenting shareholders ("Dissenters' Rights"), and have not effectively
withdrawn or lost such Dissenters' Rights, shall not be converted pursuant to
this Agreement, but the holders thereof shall be entitled only to such
Dissenters' Rights. Each dissenting shareholder who is entitled to payment for
his or her shares of Tri-County Stock pursuant to such Dissenters' Rights shall
receive payment from Platte Valley in an amount as determined pursuant to such
Dissenters' Rights.
2.3 Special Dividend. If the Merger is not consummated on or before March
31, 2001, Tri-County may declare and pay a special cash dividend to its
shareholders not exceeding the amount of Tri-County's Current Net Operating
Earnings and not exceeding $0.11 per share. "Current Net Operating Earnings" for
purposes of this Section 2.3 shall be calculated as set forth on Exhibit B
attached hereto.
2.4 Stock Options. Simultaneous with the Closing Date, Tri-County shall
redeem and pay to the holders of options for an aggregate of 72,207 shares of
Tri-County Stock an amount not to exceed $529,013.20, as follows: holders of
options for 68,207 shares (with an exercise price of $5.00 per share) shall
receive $7.60 per share and holders of options for 4,000 shares (with an
exercise price of $9.94 per share) shall receive $2.66 per share. Upon payment,
each such option shall be canceled. The 5,978 options with an exercise price in
excess of $12.60 shall be canceled. Tri-County shall not grant any additional
option for Tri-County Stock prior to the Merger.
2.5 Benefit Plans.
a. The Tri-County Federal Savings and Loan Association Employee
Stock Ownership Plan and Trust (the "ESOP") shall be terminated as of the
Closing Date according to its terms. The Tri-County Federal Savings Bank 401(k)
Plan and Trust (the "401(k) Plan") shall be terminated as of Tri-County Bank's
last payroll date immediately preceding the Closing Date. All other employee
benefit plans maintained by Tri-County or Tri-County Bank, or any predecessor to
either, other than the ESOP and the 401(k) Plan (the "Other Benefit Plans")
shall be terminated no later than the Closing Date.
b. Tri-County and Tri-County Bank shall take all actions necessary
to effect the termination of the ESOP and the 401(k) Plan and the Other Benefit
Plans as provided in this Agreement; provided, however, that any related
corporate action by Tri-County and Tri-County Bank shall be provided to and
approved by counsel for Platte Valley prior to the time that the action is
taken. Within 60 days after the Closing Date, Platte Valley through its counsel
shall prepare and submit a determination request to the Internal Revenue Service
with respect to the termination of the ESOP and of the 401(k) Plan. No benefit
will be distributed from the ESOP in connection with the termination of this
tax-qualified plan until a favorable ruling is received from the Internal
Revenue Service with respect to the termination of this plan. No benefit will be
distributed from the 401(k) Plan in connection with the termination of this
tax-qualified plan until a favorable ruling is received from the Internal
Revenue Service with respect to the termination of this plan.
A-5
c. Prior to the Closing Date, Tri-County and Tri-County Bank shall
have satisfied and discharged all of their outstanding or accrued obligations,
of every kind or description, with respect to the ESOP and the 401(k) Plan other
than any obligation arising exclusively in connection with the termination of
either such tax-qualified plan, or minor adjustments with respect to plan
operations as communicated by the plans' administrators to Platte Valley at or
prior to the Closing Date.
d. Prior to the Closing Date, Tri-County and Tri-County Bank shall
have satisfied and discharged all of their outstanding or accrued obligations,
of every kind or description, with respect to the Other Benefit Plans.
ARTICLE 3 - CONDITIONS
3.1 Mutual Conditions. The obligations of Tri-County and Platte Valley
under this Agreement are subject to and conditioned upon the satisfaction of,
prior to and on the Closing Date, each of the following conditions except as
both Tri-County and Platte Valley may waive in writing:
a. No Litigation. Except as described in the Tri-County Disclosure
Schedules attached hereto as Exhibit C ("Disclosure Schedules"), no suit,
action, claim or other proceeding having been threatened or pending before any
court, administrative or governmental agency which, in the reasonable opinion of
Tri-County or Platte Valley, presents a significant risk of restraint or
prohibition of the transactions contemplated hereby or the attainment of
material damages or other relief against Tri-County or its shareholders, the
Subsidiaries, or Platte Valley or its shareholders in connection therewith.
b. Shareholder Approval. Approval of the Merger by the holders of a
majority of the outstanding shares of Tri-County Stock.
c. Third-Party Approvals. Receipt of all authorizations, approvals,
and/or consents as well as the expiration of applicable waiting periods, of any
third parties without conditions, including federal or state governmental and/or
regulatory bodies and officials, necessary for the consummation of this
Agreement and for the continuation in all material respects of the business of
Platte Valley, Tri-County and the Subsidiaries, without interruption after the
Effective Time, in substantially the manner in which such business is now
conducted, and no such authorizations or approvals shall contain any conditions
or restrictions that Platte Valley reasonably believes will materially restrict
or limit the business or activities of Platte Valley, Tri-County or the
Subsidiaries or have a material adverse effect on their businesses, operations
or financial conditions taken as a whole, including but not limited to:
i. Approval of the Federal Reserve Board for Platte Valley
to acquire Tri-County by the Merger and to engage in a non-banking activity;
ii. Approval of the Office of Thrift Supervision ("OTS") for
Platte Valley to become a thrift holding company by the Merger and to move the
Tri-County Bank charter from its Torrington office to its Cheyenne office;
iii. Approval of the OTS and the Office of the Comptroller of
the Currency for Tri-County Bank to sell and for Platte Valley National Bank,
1401 East M, Torrington, Wyoming, to acquire the Torrington and Wheatland
branches of Tri-County Bank along with all of their assets and liabilities; and
iv. Approval of the OTS for a quasi-reorganization and/or
for Tri-County Bank to pay a dividend or otherwise transfer all of its excess
capital to Platte Valley.
A-6
3.2 Conditions in Favor of Tri-County. All obligations of Tri-County under
this Agreement are subject to and conditioned upon the satisfaction of, prior to
and on the Closing Date, each of the following conditions except as Tri-County
may waive in writing:
a. Representations, Warranties and Agreements. All of the
representations and warranties of Platte Valley, Platte Valley National Bank and
AcqCo contained in this Agreement or in any written statement, including without
limitation, financial statements, exhibits, certificates, schedules or other
documents delivered pursuant hereto or in connection with the transactions
contemplated hereby, being true in all material respects at the date hereof, and
at the Closing Date as if then made, and Platte Valley, Platte Valley National
Bank and AcqCo having performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
b. Officer's Certificate. Receipt by Tri-County of a certificate in
form and content satisfactory to Tri-County from the President of Platte Valley,
Platte Valley National Bank and AcqCo, dated the Closing Date, to the effect
that the representations and warranties made herein by Platte Valley, Platte
Valley National Bank or AcqCo were on the date hereof, and are on the Closing
Date, true and correct and that Platte Valley, Platte Valley National Bank and
AcqCo have performed the covenants, obligations and agreements undertaken by
them herein.
c. Secretary's Certificate. Receipt by Tri-County of a certificate
of the Secretary or an Assistant Secretary of Platte Valley, dated the Closing
Date, to the effect that all necessary approvals of the Merger by the Board of
Directors of Platte Valley, and by Platte Valley as the sole shareholder of
AcqCo, were obtained at meetings duly called for such purposes and as to the
incumbency of all corporate officers of Platte Valley at all relevant times.
d. Legal Opinion. Receipt by Tri-County of an opinion of legal
counsel for Platte Valley as of the Closing Date in the form attached hereto as
Exhibit D.
e. Authorization of Merger. All actions necessary to authorize the
execution, delivery and performance of this Agreement by Platte Valley and AcqCo
and the consummation of the transactions contemplated hereby having been duly
and validly taken by the Boards of Directors of Platte Valley and AcqCo, and
AcqCo shall have full power and right to merge with Tri-County pursuant to this
Agreement and the Articles of Merger.
f. Proper Actions and Documentation. All actions to be taken by
Platte Valley and AcqCo in connection with the transactions contemplated by this
Agreement having been taken, all documents incidental thereto being in a form
and substance reasonably satisfactory to Tri-County and its legal counsel, and
Tri-County having received copies of all documents that it may have reasonably
requested in connection with such transactions.
g. Fairness Opinion. Receipt by Tri-County of a fairness opinion
from its investment banker as of the date of this Agreement that the
Consideration to be received by Tri-County shareholders pursuant to this
Agreement is fair from a financial point of view and such opinion shall not have
been withdrawn on or before the Effective Time.
3.3 Conditions in Favor of Platte Valley and AcqCo. All obligations of
Platte Valley and AcqCo under this Agreement are subject to and shall be
conditioned upon the satisfaction of, prior to and on the Closing Date, each of
the following conditions except as Platte Valley may waive in writing:
A-7
a. Material Adverse. Since the date of this Agreement there having
been no material adverse changes, occurrences or developments in the business of
Tri-County or the Subsidiaries that have, or would be expected to have, a
material adverse effect on the business, operations or financial condition of
Tri-County or the Subsidiaries; and Platte Valley shall not have discovered any
fact or circumstance not disclosed by Tri-County or the Subsidiaries prior to
the date of this Agreement that has resulted in, or could reasonably be expected
to result in, a material adverse effect on the business, operations or financial
condition of Tri-County or the Subsidiaries. A "material adverse change" shall
not include (i) changes caused by general economic conditions or changes in
prevailing interest rates, (ii) payouts under existing employment agreements as
disclosed on the Disclosure Schedules, and (iii) costs, fees and expenses
related to the Merger not exceeding $200,000.
b. Representations, Warranties and Agreements. All of the
representations and warranties of Tri-County and the Subsidiaries contained in
this Agreement, in any attachment or exhibit hereto, or in any written
statement, including, without limitation, financial statements, Disclosure
Schedules, deeds, exhibits, certificates or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby, being true in
all material respects at the date hereof, and at the Closing Date as if then
made, and Tri-County and the Subsidiaries having performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by each of them prior to or at the Closing Date.
c. Officers' Certificate. Receipt by Platte Valley of a certificate
in form and content satisfactory to Platte Valley, from the Presidents of each
of Tri-County, Tri-County Bank and Tri-County Services, dated the Closing Date,
to the effect that the representations and warranties made herein by each such
entity were on the date hereof, and are on the Closing Date, true and correct in
all material respects and that Tri-County, Tri-County Bank and Tri-County
Services have performed the covenants, obligations and agreements undertaken by
each of them herein.
d. Secretary's Certificate. Receipt by Platte Valley of a
certificate of the Secretary or an Assistant Secretary of Tri-County, dated the
Closing Date, to the effect that all necessary approvals of the Merger by the
Board of Directors and shareholders of Tri-County were obtained at meetings duly
called for such purposes and as to the incumbency of all corporate officers of
Tri-County at all relevant times.
e. Legal Opinions. Receipt by Platte Valley of opinions of Tri-
County's legal counsel as of the Closing Date in the forms attached hereto as
Exhibit E and Exhibit F.
f. Non-Competition/Advisory Board Agreements. In exchange for
$4,800, payable in twenty-four (24) equal monthly installments, each director
and the chief executive officer of Tri-County having entered into either a
Non-Competition Agreement in the form attached hereto as Exhibit G or an
Advisory Board Agreement in the form attached hereto as Exhibit H, to be
effective at the Closing Date.
g. Resignations of Officers and DirectorsAll officers and directors
of Tri-County and Tri-County Bank shall have submitted their resignations from
such positions effective as of the Closing Date, except that Robert Savage shall
have submitted his resignation as a director of Tri-County Bank effective
December 31, 2001, and as an officer of Tri-County and Tri-County Bank and as a
director of Tri-County as of the Closing Date.
h. Dissenters' Rights. No more than 2.0% of the holders of
outstanding shares of Tri-County Stock shall have given notice that they intend
to assert Dissenters' Rights.
i. Proper Actions and Documentation. All actions to be taken by
Tri-County and the Subsidiaries in connection with the transactions contemplated
by this Agreement having been taken, all documents incidental thereto being in a
form and substance reasonably satisfactory to Platte Valley and its legal
counsel, and Platte Valley having received copies of all documents that it may
have reasonably requested in connection with such transactions.
A-8
j. Loans. Tri-County Bank shall have a loan loss reserve, credit
quality and loan administration which are reasonably satisfactory to Platte
Valley as of the Closing Date.
k. Shares Outstanding. Tri-County shall have no more than 883,969
shares of Tri-County Stock outstanding on the Closing Date.
l. Consents Tri-County shall have received the consents of all
creditors, lessors, vendors and other third parties as are necessary pursuant to
the contracts and other documents with which such persons conduct business with
Tri-County and as may be required to effect the Merger.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Tri-County and the Subsidiaries.
Except as set forth in its Disclosure Schedules or the Tri-County Statements (as
hereinafter defined), Tri-County and the Subsidiaries hereby represent and
warrant to Platte Valley as of the date hereof and up to and including the
Closing Date as follows:
a. Organization of Tri-County.
i. Tri-County is a corporation duly organized, validly
existing and in good standing under the laws of the Wyoming, and it has full
corporate power and authority, and possesses all material governmental,
regulatory and other permits, licenses and authorizations, necessary to carry on
its business as now conducted and to own and operate the properties and assets
it owns or operates, to enter into this Agreement and to perform its obligations
hereunder.
ii. Tri-County's authorized capital stock consists of
10,000,000 shares of common stock ($0.10 par value), of which 883,969 shares are
outstanding, all of which are validly issued, fully paid and non-assessable, and
5,000,000 shares of serial preferred stock ($0.10), of which no shares are
outstanding.
iii. Tri-County has no outstanding securities convertible into
shares of capital stock or existing options, warrants, calls, commitments or
other rights of any character granted or entered into by Tri-County relating to
its authorized or issued stock and no such rights will be granted or entered
into, other than options for 78,185 shares of Tri-County Stock described in
Section 2.4 hereto.
iv. There are no outstanding or unsatisfied preemptive rights
or rights of first refusal with respect to Tri-County's capital stock.
v. No shares of Tri-County's capital stock have been or will
be issued between the date hereof and the Closing Date.
vi. Attached to the Disclosure Schedules are complete and
correct copies of Tri-County's articles of incorporation and bylaws, both
certified as of a then recent date by the Secretary of Tri-County, the same to
remain unchanged up to and including the Closing Date.
b. Subsidiaries.
i. Except for the Subsidiaries, Tri-County does not have any
direct or indirect subsidiaries and does not have any interest in any
partnership, firm, association, corporation, or joint venture other than
investment securities purchased and loans made in the regular and usual course
of its business. Tri-County Bank is a savings bank duly organized, validly
existing and in good standing as a SAIF-insured financial institution under the
laws of the United States. Tri-County Services is duly organized, validly
existing and in good standing under the laws of the State of Wyoming.
A-9
ii. Tri-County Bank and Tri-County Services each have full
corporate power and authority, and possess all governmental, regulatory and
other permits, licenses and authorizations necessary to carry on their
businesses as they are now being conducted.
iii. The outstanding shares of capital stock of each of the
Subsidiaries are validly issued, fully paid and non-assessable and all such
shares are owned of record and beneficially by Tri-County or Tri-County Bank and
are not subject to any security interest, lien, encumbrance or any adverse claim
of any kind.
iv. There are no outstanding securities convertible into
shares of capital stock or existing options, warrants, calls, commitments or
other rights of any character granted or entered into by either of the
Subsidiaries relating to the capital stock of these subsidiaries and no such
rights will be granted or entered into and no shares of these subsidiaries will
be issued between the date hereof and the Closing Date.
v. Attached to Tri-County's Disclosure Schedules are complete
and correct copies as of the date hereof of (A) the charter and bylaws of
Tri-County Bank certified by an appropriate officer and (B) the articles of
incorporation and bylaws of Tri-County Services certified by an appropriate
officer, the same to remain unchanged up to and including the Closing Date.
c. Financial Statements. Attached hereto as Exhibit I are copies of
the following consolidated financial statements for Tri-County ("Tri-County
Statements"), all of which are accurate and complete in all material respects,
are in accordance with the books and records of Tri-County, have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout for the periods indicated and present fairly the consolidated
financial position of Tri-County and the consolidated results of Tri-County's
operations for the periods ended on the dates indicated, it being understood
that Tri-County's interim financial statements are not audited, not prepared
with related notes and are subject to normal year-end adjustments:
Consolidated Statements of Financial Condition, as of December 31,
1999 and 1998, and the related consolidated Statements of
Operations, Stockholders' Equity and Cash Flows for the years then
ended, audited by Dalby, Wendland & Co., P.C., and unaudited
consolidated Statements of Financial Condition as of November 30,
2000
d. Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the Tri-County Statements, Tri-County and the
Subsidiaries have no material liabilities or obligations, except those incurred
in the ordinary course of their business, whether accrued, absolute, contingent
or otherwise, including, governmental charges or lawsuits, or any tax
liabilities due or to become due whether (i) incurred in respect of or measured
by the consolidated income of Tri-County for any period up to the close of
business on the respective dates of the Tri-County Statements, or (ii) arising
out of transactions entered into, or any state of facts existing, prior thereto.
e. Absence of Certain Changes or Events. Since November 30, 2000,
and up to and including the Closing Date, except as disclosed in the Disclosure
Schedules, there has not been:
A-10
i. any material disposition of any of the assets of Tri-
County or the Subsidiaries other than in the ordinary course of its business and
for adequate consideration;
ii. any capital improvements, except for ordinary
maintenance and repairs, by Tri-County or the Subsidiaries or any purchase of
property by such entities at a cost in excess of $10,000 other than supplies in
the ordinary course of business;
iii. any physical damage, destruction or loss not covered by
insurance exceeding $10,000 in value or affecting in a material and adverse way
the property, assets, business or prospects of Tri-County or the Subsidiaries;
iv. any material change in the accounting methods or
practices of Tri-County unless required by regulation or generally accepted
accounting principles;
v. any material change in the capital structure, financial
condition, results of operation or business of Tri-County or the Subsidiaries;
vi. any increase in the compensation payable, or to become
payable, by Tri-County or the Subsidiaries to any of its respective officers or
employees, or any bonus, percentage compensation, service award or other like
benefit, granted, made or accrued to, or to the credit of, any of its officers
or employees, or any pension, retirement, deferred compensation or similar
payment or arrangement made or agreed to by Tri-County or the Subsidiaries other
than in accordance with preexisting plans or established standards, copies of
which are attached to the Disclosure Schedules.
f. Tax Matters.
i. Tri-County and the Subsidiaries have filed all federal,
state, municipal and local income, excise, property, special district, sales,
transfer and other tax returns and reports of information statements which are
required to be filed up to and including the date hereof and have paid all taxes
which have become due pursuant to such returns or pursuant to any assessment
which has become payable. Tri-County and the Subsidiaries will hereafter file
such returns as are required to be filed by them prior to the Closing Date and
will pay all taxes which become due pursuant to such returns or pursuant to any
assessments.
ii. The returns filed and to be filed by Tri-County and the
Subsidiaries have been and will be accurately and properly prepared.
iii. To the extent that any tax liability or assessment has
accrued as of November 30, 2000, but has not yet become payable or has been
proposed for assessment or determination as of November 30, 2000, but remains
unpaid, the same has been reflected as a liability on the November 30, 2000,
Tri-County Statements subject to normal year-end adjustments. Since November 30,
2000, Tri-County and the Subsidiaries have not incurred any liability with
respect to any such taxes except for normal taxes incurred in the ordinary and
regular course of their business, all of which will be fully accrued as a
liability on the books of Tri-County or the Subsidiaries at the Closing Date.
iv. Tri-County and the Subsidiaries have not executed or filed
with the Internal Revenue Service or any other taxing authority any agreement
extending the period for assessment or collection of any income taxes. As of the
date of this Agreement, there are no examinations, reviews, audits or
investigations of any tax return or report of Tri-County or the Subsidiaries
which are presently pending or threatened, and Tri-County and the Subsidiaries
are not parties to any pending action or proceeding by any governmental
authority for assessment or collection of income taxes.
A-11
g. Title to Properties; Absence of Liens and Encumbrances, Leases
Enforceable.
i. Tri-County and the Subsidiaries have good and marketable
title to their assets, real and personal (including those reflected in the
Tri-County Statements, except as thereafter sold or otherwise disposed of in the
ordinary course of business and for adequate consideration), free and clear of
all mortgages, pledges, liens, charges and encumbrances, except (A) investment
securities which are pledged to secure the deposit of public monies or monies
under the control of any court, (B) the lien of taxes not yet due and payable or
being contested in good faith by appropriate proceedings, and (C) such
imperfections of title and encumbrances, if any, and such liens, if any,
incidental to the conduct of their respective businesses or the ownership of
their respective assets as are not material in amount and do not affect the
value of, or interfere with the present use of, their assets or otherwise
materially impair their operations. The Disclosure Schedules briefly describe
all real property owned by Tri-County and the Subsidiaries.
ii. The structures and equipment owned or used by Tri-County
and the Subsidiaries comply with all applicable laws, regulations and ordinances
and are in good operating condition, subject to ordinary wear and tear.
iii. The real property, if any, leased by Tri-County or the
Subsidiaries is held under valid and enforceable leases, copies of which are
attached to the Disclosure Schedules. Tri-County and the Subsidiaries are not in
default under any such leases. All rentals due and payable have been paid.
h. Litigation. There are no material claims, actions, suits,
proceedings or investigations pending or threatened, by or against, or otherwise
materially affecting Tri-County or the Subsidiaries, or their assets, business
or properties, or the transactions contemplated by this Agreement, or their
directors, officers or employees in reference to actions taken by them in such
capacity at law or in equity, or before or by any federal, state, municipal or
other government department, commission, board, agency, instrumentality or
authority, nor, to Tri-County's knowledge, is there any valid basis for any such
action, proceeding or investigation, other than (i) claims by Tri-County and the
Subsidiaries in the ordinary course of their business for the recovery of loans
or protection of their interest as a secured or unsecured creditor, and (ii)
claims fully covered by insurance.
i. Power of Attorney and Bank Accounts. The Disclosure Schedules set
forth (A) the names of all persons holding a power of attorney from Tri-County
or the Subsidiaries, (B) the name of each bank in which Tri-County or either of
the Subsidiaries has an account and (C) a list of all loans or loan commitments
in which Tri-County or either of the Subsidiaries has only a participation and
which are serviced by a third person.
j. Proxy Statement. The information relating to the proxy statement
for the meeting of Tri-County shareholders to vote upon the Merger shall be
accurate and complete in all material respects, shall not omit to state any
material fact required to be stated therein or necessary to prevent such
information from being misleading, and shall comply in all material respects
with the requirements of federal securities laws.
k. Authority Relative to the Agreement.
i. The execution, delivery and performance of this Agreement
by Tri-County and Tri-County Bank has been duly and effectively authorized and
approved by the Boards of Directors of Tri-County and Tri-County Bank, subject
to the required vote of the Tri-County shareholders, and subject to obtaining
the regulatory approvals and other consents contemplated by this Agreement.
A-12
ii. This Agreement has been duly executed and delivered by
Tri-County and Tri-County Bank and constitutes a valid and binding obligation of
Tri-County and Tri-County Bank enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally and principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
iii. The consummation of the transactions contemplated by this
Agreement will not in any material respect conflict with, violate or result in a
material breach of or material default of in (A) any term, condition or
provision of the articles of incorporation or bylaws of Tri-County or the
charter, articles of incorporation or bylaws of the Subsidiaries; (B) any
applicable law, rule, regulation or order of any court or governmental agency;
or (C) any material agreement, lease, mortgage, note, contract or commitment of
any kind, oral or written, formal or informal, to which Tri-County or the
Subsidiaries is a party or by which they or their respective properties may be
bound.
l. Information Furnished to Platte. The documents furnished by
Tri-County to Platte Valley (the "Tri-County Documents"), including but not
limited to the Disclosure Schedules attached hereto as Exhibit C and the
Tri-County Statements, are true and complete copies of such documents and do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Except as contemplated
by this Agreement, there is no fact which Tri-County has not disclosed in the
Tri-County Documents, which materially and adversely affects the properties,
business, prospects, profits or condition (financial or otherwise) of Tri-County
or the Subsidiaries or the ability of Tri-County to perform this Agreement,
except that Tri-County makes no representation or warranty as to the effect of
general economic conditions, the condition of the financial markets, future
legislation or future regulatory action.
m. Compliance with Laws.
i. Tri-County and the Subsidiaries have all permits, licenses,
authorizations, orders and approvals of, and have made all filings, applications
and registrations with, federal, state, local or foreign governmental or
regulatory bodies that are required in order to permit them to own or lease
their properties and assets and to carry on their business as presently
conducted and that are material to their business; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the best knowledge of Tri-County, no suspension or cancellation of any
of them is threatened; and all such filings, applications and registrations are
current.
ii. The conduct by Tri-County and the Subsidiaries of their
business and the condition and use of their properties does not violate or
infringe, in any respect material to any such business, any applicable domestic
(federal, state or local) or foreign law, statute, ordinance, license or
regulation.
iii. Neither Tri-County nor the Subsidiaries are in default
under any order, license, regulation or demand of any federal, state, municipal
or other governmental agency or with respect to any order, writ, injunction or
decree of any court.
iv. Except for statutory or regulatory restrictions of general
application, no federal, state, municipal or other governmental authority has
placed any restriction on the business or properties of Tri-County or the
Subsidiaries which reasonably could be expected to have a material effect on the
business or properties of Tri-County or the Subsidiaries taken as a whole.
A-13
n. Employee Benefit Plans.
i. True, accurate and complete copies of all pension plans,
retirement plans, profit-sharing plans, deferred compensation agreements,
collective bargaining agreements, insurance plans or any other similar employee
benefit plans, agreements or arrangements of Tri-County and the Subsidiaries
(the "Plans") are listed in the Disclosure Schedules and have been furnished to
Platte Valley.
ii. Each Plan which is intended to provide tax-deferred
benefits under any provision of the Internal Revenue Code of 1986, as amended,
(the "Code"), meets all requirements that must be met in order for such
tax-deferred benefits to be available. There has been no change in any of the
documents delivered to Platte Valley under which each Plan is maintained and no
change, since each Plan's most recent valuation date, in the operation of the
Plan which could be expected to adversely affect or alter the tax status of, or
materially increase the cost of maintaining, any such Plan.
iii. The reporting and disclosure requirements of the Employee
Retirement Income Security Act of 1974 ("ERISA") and the Code, as applicable,
and the group health plan continuation coverage requirements of the Code and
ERISA have been fulfilled in all material respects. Tri-County has furnished or
made available to Platte Valley copies of all filings, if any, with the Internal
Revenue Service and the Department of Labor or other applicable authority for
each Plan's most recent plan year.
iv. Neither Tri-County, the Subsidiaries, any of the Plans,
any of the trusts created under any Plan nor any trustee, administrator or other
fiduciary of a Plan has, to Tri-County's best knowledge, engaged in a
"prohibited transaction," as such term is defined in the applicable provisions
of the Code or of ERISA, or otherwise taken or omitted any action which could
subject the Plans, Tri-County, the Subsidiaries, any of the trusts created under
a Plan or any trustee or administrator thereof, or any party dealing with such
Plans or trusts, to a material tax or penalty on prohibited transactions imposed
by ERISA or the Code or otherwise, and neither Tri-County, the Subsidiaries, any
Plan, any trust created under a Plan nor any other fiduciary of any Plan or its
attendant trust has breached its fiduciary duties under ERISA in a manner which
could result in a direct or indirect material liability to Tri-County, the
Subsidiaries, or the trustee or administrator of any Plan.
v. The Pension Benefit Guaranty Corporation has not instituted
proceedings to terminate (or appoint a trustee to administer) any Plan, and no
event has occurred or condition exists which might constitute grounds under
ERISA for the termination of (or the appointment of a trustee to administer) any
Plan.
vi. The minimum funding requirements under the Code and ERISA
have been satisfied with respect to each Plan.
o. Insurance. The properties of Tri-County and the Subsidiaries
are insured as disclosed in the Disclosure Schedules.
p. Environmental Protection.
i. To the best of Tri-County's knowledge, none of the assets
of Tri-County and the Subsidiaries (defined for purposes of this subsection as
the real property and tangible personal property owned or leased by Tri-County
or the Subsidiaries) contain any hazardous materials (defined as any substance
whose nature and/or quantity or existence, use, manufacture or effect render it
subject to federal, state or local regulation as potentially injurious to public
health or welfare, including, without limitation, friable asbestos or PCBs
("Hazardous Materials"), other than in such quantities which are incidental and
customary for the maintenance and operation of such assets (e.g., cleaning
fluids) ("Incidental Quantities").
A-14
ii. No notice or other communication has been made or issued
by any governmental agency having jurisdiction over Tri-County or the
Subsidiaries, or any other person, with respect to any alleged violation of any
federal, state or local laws, rules, regulations, ordinances and codes governing
Hazardous Materials and which are applicable to the assets of Tri-County and the
Subsidiaries.
iii. To the best of Tri-County's knowledge, all Hazardous
Materials which have been remediated from any assets of Tri-County or the
Subsidiaries prior to or during their ownership by Tri-County or the
Subsidiaries have been handled in compliance with all applicable laws.
iv. To the best of Tri-County's knowledge, except as disclosed
in Tri-County's or the Subsidiaries' loan files as of November 30, 2000, no
collateral securing any loan made by Tri-County or the Subsidiaries, contains
any Hazardous Materials, other than in Incidental Quantities.
q. Employee Relations. Copies of all employment and severance
agreements between Tri-County and the Subsidiaries and their employees have been
delivered to Platte Valley and are listed in the Disclosure Schedules.
Tri-County and the Subsidiaries have complied with all federal, state and local
laws or regulations applicable to them relating to the employment of labor and
the provisions of such laws or regulations relating to wages, nondiscriminatory
hiring and employment practices and procedures the violation of which would have
a materially adverse effect on the financial condition, operations or prospects
of Tri-County or the Subsidiaries. No claim has been made nor any proceeding
commenced against Tri-County or Subsidiaries for any wages, penalties or other
liabilities for failure to comply with any such laws or regulations. Neither
Tri-County nor the Subsidiaries is subject to any collective bargaining
agreement with its employees.
r. Material Contract Defaults. Neither Tri-County nor either of the
Subsidiaries is in default in any material respect under the terms of any
outstanding contract, agreement, lease or other commitment, which is material to
the business, operations, properties, assets, or the condition, financial or
otherwise, of Tri-County or the Subsidiaries, all of which are listed on the
Disclosure Schedules, or under the charter, articles of incorporation or bylaws
of Tri-County or the Subsidiaries, and no event has occurred which, with notice
or lapse of time, or both, may be or become an event of default under any such
contract, agreement, lease or other commitment or under the charter, articles of
incorporation, articles of association, or bylaws of Tri-County or the
Subsidiaries.
s. Agreements with Regulatory Authorities. Neither Tri-County nor
either of the Subsidiaries is a party to any written agreement or memorandum of
understanding with any federal or state administrative agency or commission or
other governmental authority or instrumentality charged with supervision or
regulation of banks or bank holding companies or engaged in the insurance of
deposits which restricts materially the conduct of its business or in any manner
relates to its capital adequacy, its credit policies or its management.
t. Certain Loans. Tri-County and the Subsidiaries have not, as of
the date hereof, and will not have as of the Closing Date, made any loan or any
commitment to loan to any officer or director of Tri-County or either of the
Subsidiaries, or any affiliate of Tri-County, the Subsidiaries or any director
of Tri-County or either of the Subsidiaries, other than has been disclosed on
the books and records of Tri-County to the Company and which meet applicable
regulatory requirements.
u. Absence of Illegal or Improper Payments. Neither Tri-County nor
either of the Subsidiaries has made any payments to any entities or persons,
governmental or otherwise, which payments are required to be disclosed under
applicable disclosure policies of any governmental authority, nor, to the best
knowledge and belief of Tri-County, have any directors, officers or employees of
Tri-County or either of the Subsidiaries made any such payment in their
capacities as directors, officer or employees of Tri-County or either of the
Subsidiaries.
A-15
v. Regulatory Requirements. Tri-County and the Subsidiaries have
accurately prepared and timely filed with the appropriate banking, securities
and other regulatory or governmental authorities all necessary reports and
filings and have paid all fees and assessments due and payable therewith. All
such reports and filings complied in all material respects with all the rules
and regulations promulgated by the applicable regulatory authority. There are no
examinations, reviews or investigations of any report or filing concerning
Tri-County or the Subsidiaries by a regulatory authority (except for regularly
scheduled OTS and Federal Deposit Insurance Corporation examinations) which are
currently pending or threatened, and neither Tri-County nor the Subsidiaries are
a part to any pending or threatened regulatory action or proceedings.
w. Reserves. The reserve for possible loan and lease losses shown in
the Tri-County Statements is adequate in all material respects, including under
the requirements of generally accepted accounting principles, to provide for
possible losses, net of recoveries relating to loans previously charged off, on
loans outstanding and as a percentage of loans no less than the percentage of
reserve to loans on November 30, 2000, and other real estate owned has been
written down or reserved for to reflect the amount Tri-County and the
Subsidiaries could expect to receive for such real estate were it sold net of
the costs of sale.
x. Loan Documentation. The documentation relating to each loan made
by Tri-County Bank, including security interests, mortgages and other liens,
with respect to the collateral for such loans, is adequate for the enforcement
of the loan except for inadequacies that will not in the aggregate have a
material adverse effect on the financial condition of Tri-County and the
Subsidiaries taken as a whole.
y. Brokers and Finders. Other than Keefe, Bruyette & Woods, Inc.,
neither Tri-County, the Subsidiaries nor any officer, director or employee of
Tri-County or the Subsidiaries has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Tri-County or the Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
4.2 Representations and Warranties of Platte Valley and AcqCo. Platte
Valley, Platte Valley National Bank and AcqCo hereby represent and warrant to
Tri-County as of the date hereto and up to and including the Closing Date as
follows:
a. Organization. Platte Valley and Platte Valley National Bank are,
and AcqCo will be upon the Closing Date, corporations duly organized, validly
existing and in good standing under the laws of the State of Colorado or the
United States, as the case may be, and have full corporate power and authority,
and possess all material governmental, regulatory and other permits, licenses
and authorizations necessary to carry on their respective businesses as now
conducted, to enter into this Agreement and to perform their obligations
hereunder.
b. Authority Relative to the Agreement.
i. The execution, delivery and performance of this Agreement
by Platte Valley has been duly and effectively authorized and approved by the
Boards of Directors of Platte Valley and Platte Valley National Bank, subject to
obtaining the regulatory approvals and other consents contemplated by this
Agreement.
ii. The approval of the shareholders of Platte Valley and
Platte Valley National Bank are not required for consummation of the
transactions contemplated by this Agreement.
A-16
iii. This Agreement has been duly executed and delivered by
Platte Valley and Platte Valley National Bank and constitutes a valid and
binding obligation of Platte Valley and Platte Valley National Bank enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditors' rights generally and principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law);
iv. The consummation of the transactions contemplated by this
Agreement will not in any material respect conflict with, violate or result in a
material breach of or material default in (A) any term, condition or provision
of the articles of incorporation, charter or bylaws of Platte Valley, Platte
Valley National Bank or AcqCo; (B) any applicable law, rule, regulation or order
of any court or governmental agency; or (C) any material agreement, lease,
mortgage, note, contract or commitment of any kind, oral or written, formal or
informal, to which either Platte Valley, Platte Valley National Bank or AcqCo is
a party or by which they or their properties may be bound.
c. Litigation. There are no material claims, actions, suits,
proceedings or investigations pending or threatened by or against or otherwise
materially affecting Platte Valley, Platte Valley National Bank or AcqCo which
would prevent or enjoin Platte Valley, Platte Valley National Bank or AcqCo from
carrying out their obligations under this Agreement.
d. Proxy Statement. Information provided by Platte Valley and Platte
Valley National Bank in writing for inclusion in the proxy statement for the
meeting of Tri-County shareholders to vote upon the Merger will be accurate and
complete in all material respects, will not omit to state any material fact
required to be stated therein or necessary to prevent such information from
being misleading, and will comply in all material respects with the requirements
of federal securities laws.
e. Funds Availability. Platte Valley has or will have adequate funds
to pay the Consideration. Platte Valley will promptly notify Tri-County in
writing if Platte Valley becomes aware that it no longer has funds available or
it appears that funds will not be available at the Effective Time to pay the
Consideration.
f. Applications to Regulators. All of the representations contained
in the applications filed by Platte Valley or Platte Valley National Bank with
regulators with or on behalf of Tri-County, will be at the time the same were
made accurate in all material respects, except Platte Valley and Platte Valley
National Bank make no representation as to matter contained therein that are
based on information provided by Tri-County to Platte Valley or Platte Valley
National Bank.
ARTICLE 5 - COVENANTS
5.1 Covenants of Tri-County. Tri-County covenants with Platte Valley as an
inducement to Platte Valley to enter into this Agreement that:
a. Access to Information Concerning Properties and Records.
Tri-County will give to Platte Valley and to its counsel, accountants and other
representatives ("advisers"), upon reasonable notice, during normal business
hours throughout the period prior to the Closing Date, full access to the books,
records, customer and loan files, contracts, and commitments of Tri-County and
the Subsidiaries, except for documents as to which there exists an
attorney-client privilege or except as otherwise restricted by law. For the
period prior to the Effective Time, Tri-County shall deliver to Platte Valley
such statements, schedules and reports concerning the business, operations and
financial condition of Tri-County and the Subsidiaries as are regularly provided
to their Boards of Directors at such times as they are regularly supplied to
their Boards of Directors. Tri-County shall give notice to Platte Valley of all
board of directors and committee meetings of Tri-County and the Subsidiaries.
Platte Valley shall be entitled, at its expense, to have a representative attend
any such meeting to observe and participate in discussion but not to vote on any
matter.
A-17
b. Conduct of Business. Until the Effective Time or the earlier
termination of this Agreement, and except as contemplated by this Agreement or
disclosed in the Disclosure Schedules or as consented to or otherwise approved
by Platte Valley in writing:
i. the business of Tri-County and the Subsidiaries shall be
conducted only in the ordinary course which, without limitation, shall include
using their best efforts to maintain in force the insurance policies now in
effect, or insurance policies providing substantially the same coverage to the
extent such coverage remains available to Tri-County and the Subsidiaries with
acceptable limitations and at a reasonable cost;
ii. no change shall be made in the articles of incorporation
or bylaws of Tri-County or Tri-County Services and in the charter or bylaws of
Tri-County Bank;
iii. no change shall be made in the number of shares of
capital stock of Tri-County or the Subsidiaries issued and outstanding, nor
shall any option, warrant, call, convertible security, commitment or other right
be granted or made by either Tri-County or the Subsidiaries relating to its
authorized or issued capital stock;
iv. no purchase order, contract or commitment (other than
deposits, loans, loan commitments and investments or the sale of other real
estate owned in the ordinary course of business of Tri-County or the
Subsidiaries) shall be entered into by or on behalf of Tri-County or the
Subsidiaries extending for more than one year or involving payment by Tri-County
and the Subsidiaries of more than $10,000 in any one contract or related series
of contracts or otherwise materially affecting their business;
v. no employment agreement or other agreement shall be entered
into with any employee of Tri-County or the Subsidiaries, no salary or benefits
of any employee of Tri-County or the Subsidiaries shall be increased, no
employee benefit plan shall be modified or amended, and no executive officer or
director bonuses shall be paid;
vi. Tri-County and the Subsidiaries shall use their best
efforts, consistent with conducting their business in accordance with their own
business judgment, to retain their depositors and customers and to preserve
their business in its present form and to preserve the good will of the
depositors, customers and others having business relations with Tri-County and
the Subsidiaries;
vii. Tri-County and the Subsidiaries shall duly comply in all
material respects with all applicable laws, the failure to comply with which
would have a material adverse effect upon their business or financial condition;
viii. no dividends shall be paid, or distributions made, with
respect to Tri-County Stock prior to the Closing, except for the cash dividend
described in Section 2.3 hereof;
ix. no security shall be sold or purchased until after
twenty-four (24) hours' prior written notice of such purchase or sale shall have
been given to Platte Valley's President and Platte Valley's approval or
non-objection of such transactions shall not be unreasonably withheld.
x. the obligations under all employment, severance or other
agreements between Tri-County and the Subsidiaries and their employees related
to the termination of such agreements shall not be in excess of $321,920.00.
A-18
xi. no loans (A) in excess of $150,000, or (B) to any
director, officer or affiliate of Tri-County or either of the Subsidiaries,
shall be approved without twenty-four (24) hours' prior written notice to the
President of Platte Valley and Platte Valley's approval or non-objection of such
transactions shall not be unreasonably withheld.
c. No Solicitation. Tri-County, the Subsidiaries and their officers
and directors will not, and Tri-County shall direct and use its best efforts to
cause its and the Subsidiaries employees, agents and representatives to not,
during the period beginning on the date hereof and ending on the first to occur
of the Effective Time or the termination of this Agreement, (i) sell or arrange
for the sale of any Tri-County or either of the Subsidiaries' capital stock; or
(ii) negotiate, solicit or encourage or authorize any person to solicit from any
third party any proposals relating to the merger or consolidation of Tri-County
or the Subsidiaries, disposition of the business or assets of Tri-County or the
Subsidiaries or the acquisition of the capital stock of Tri-County or the
Subsidiaries; or (iii) except to the extent legally required for the discharge
by the board of directors of its fiduciary duties, make any information
concerning Tri-County or the Subsidiaries available to any person for the
purpose of affecting or causing a merger, consolidation or disposition of
Tri-County or the Subsidiaries or their assets or common stock. If any offer is
received from another party, Tri-County and its officers and directors shall
promptly inform Platte Valley of the terms of that offer and the identity of the
offeror.
d. Information for Applications and Statements. Tri-County shall
furnish to Platte Valley in a timely manner all information concerning
Tri-County and the Subsidiaries required for inclusion in all regulatory
applications to be filed, in any other notices or statements to be made by
Platte Valley to any governmental or regulatory body required to consummate the
Merger.
e. Shareholder Meeting. As soon as practicable, Tri-County shall
take all reasonable action necessary in accordance with applicable law and its
articles of incorporation and bylaws to convene a meeting of shareholders to
vote upon this Agreement and the Merger. Subject to applicable laws, Tri-County
shall use reasonable efforts to solicit from its shareholders proxies in favor
of such adoption and approval and shall take all other reasonable action
necessary or helpful to secure a vote of its shareholders in favor of the
Merger. The proxy statement relating to such meeting shall be approved by Platte
Valley prior to its filing with the Securities and Exchange Commission, and such
approval shall not be unreasonably withheld.
f. Due Diligence. Tri-County shall use its best efforts to
deliver by the Closing Date all opinions, certificates and other documents
required to be delivered by it and to cause all conditions to Closing being
satisfied in a timely manner.
5.2 Covenants of Platte Valley. Platte Valley covenants with Tri-County
as an inducement to Tri-County to enter into this Agreement that:
a. Approvals of Regulatory Authorities. As soon as practicable,
Platte Valley shall file applications with the proper regulatory authorities for
approval of the Merger and the acquisition of Tri-County by Platte Valley and
all related transactions including, but not limited to, the approvals set forth
in Section 3.1(c) of this Agreement, and shall thereafter take all action with
due diligence to obtain the approval of such regulatory authorities. To the
extent permitted by law, all filings, requests for approval or other submissions
for any regulatory approval shall be made available for review by Tri-County
prior to filing.
b. Information for Proxy Statement. Platte Valley shall furnish to
Tri-County in a timely manner any requested information concerning Platte Valley
and its subsidiaries required for inclusion in Tri-County's proxy statement to
be filed with the Securities and Exchange Commission and mailed to Tri-County
shareholders.
A-19
c. Due Diligence. Platte Valley shall use its best efforts to
deliver by the Closing Date all opinions, certificates and other documents
required to be delivered by it and to cause all conditions to Closing being
satisfied in a timely manner.
d. Status Reports. Platte Valley shall advise Tri-County from time
to time regarding Platte Valley's applications for regulatory approval of the
Merger and provide Tri-County with copies of all applications, comments,
correspondence and approvals to or from regulators in connection with the
applications.
e. Directors and Officers Indemnification Insurance Coverage. For a
period of three (3) years after the Effective Time, Platte Valley shall provide
to the persons who served as directors or officers of Tri-County or Tri-County
Bank on or before the Effective Time insurance against liabilities and claims
(and related expenses) made against them resulting from their service as such
prior to the Effective Time, substantially similar in all material respects to
the insurance coverage provided to them in such capacities of the date hereof;
provided, however, if Platte Valley is unable to maintain or obtain the
insurance called for by this Section on commercially reasonable terms, Platte
Valley shall use its best efforts to obtain as much comparable insurance as
available. In lieu of the foregoing, Tri-County shall renew any existing
insurance or purchase any "discovery period" insurance provided for thereunder
at Platte Valley's request and Tri-County's expense.
5.3 Mutual Covenants. Each party covenants to the other party as an
inducement to enter into this Agreement that:
a. Confidentiality. Each party agrees recognizes and acknowledges
that the data and information it shall or may obtain from the other party during
the due diligence review (the "Information") comprise valuable, special and
unique assets of the other party. Each party and its employees, agents and
representatives shall hold in confidence any and all of the Information and
shall not, in whole or in part, disclose the Information to any person or
business for any reason or purpose whatsoever, and shall not make use of any
such Information for any reason or purpose other than to evaluate the proposed
acquisition. These restrictions shall not apply to such Information (A) which is
at the time of disclosure in the public domain other than as a result of
confidential disclosure by the party; (B) which was disclosed by a third party
not subject to any restrictions on disclosure; (C) which is required to be
disclosed by the order of a court or other competent authority or under
applicable law; or (D) with respect to which a party may have given its consent.
Further, each party may disclose the Information to its legal counsel,
accountants and other professional advisors subject to their agreement to
maintain the Information in strict confidence and not to disclose or use the
Information, in whole or in part, other than in the course of advising such
party. In the event a party is requested or required by a court or other
confident authority or under applicable law to disclose the Information, such
party shall give the other party prompt notice of such request or requirement to
enable the party to seek an appropriate protective order, and shall consult and
cooperate with the party in attempting to resist or narrow the scope of such
requests or requirement.
b. Return of Documents. In the event that the Merger is not
consummated, or this Agreement is otherwise terminated, each party shall
promptly return to the other party all such confidential information (and all
copies thereof), without retaining any copies, or to the extent agreed by the
other party, shall destroy information and documents not to be returned,
including all electronic images; and thereafter all such information shall
continue not to be disclosed by each such party and their directors, officers,
employees, agents and advisers to third parties without the written consent of
the other party.
c. Employees. In the event this Agreement is terminated, the parties
hereto further agree that they will not solicit for employment by such party or
any related entities (including but not limited to wholly or partially owned
subsidiaries or affiliates in which any of such party's representatives have a
controlling interest) any of the officers of the other party so long as they are
employed by the other party for a period of two years after termination of the
Agreement without obtaining the prior written consent of the other party. For
the purposes of this Agreement, "solicit for employment" shall not include (i)
referrals made by a placement agency or service or (ii) responses to any
advertisement appearing in a newspaper, magazine or trade publication.
A-20
ARTICLE 6 - MISCELLANEOUS
6.1 Termination. This Agreement may be terminated and the Merger abandoned
(either before or after approvals and authorizations by the shareholders of
Tri-County contemplated hereby and without seeking further shareholder approval)
at any time prior to the Effective Time only in one of the following manners:
a. Mutual Agreement. By mutual written consent of the parties
authorized by their respective Boards of Directors at any time prior to the
Effective Time.
b. Expiration of Time. By written notice from Tri-County to
Platte Valley or from Platte Valley to Tri-County, if the Closing Date shall not
have occurred on or before June 30, 2001.
c. Unsatisfied Conditions. By written notice from Tri-County to
Platte Valley or from Platte Valley to Tri-County, as the case may be, stating
that the party giving such notice elects to terminate this Agreement and abandon
the transaction contemplated hereunder as of a stated date, which shall not be
less than ten business days after the date on which such notice is given,
because the party providing such notice will be unable, on or before June 30,
2001, after having exercised all reasonable efforts and actions, to meet or
satisfy one or more specified conditions precedent to the obligation of the
other party to close under this Agreement, unless the other party waives the
satisfaction of such conditions precedent within such ten-day period.
d. Breach. By written notice from Platte Valley to Tri-County or
from Tri-County to Platte Valley, in the event of a material breach by the other
party hereto of any representation, warranty, covenant or other agreement
contained in this Agreement, which breach is not cured after thirty (30) days'
written notice thereof is given to the party committing such breach by the other
party.
e. Environmental Report. Platte Valley shall have the right, in its
discretion and at its sole expense, to arrange with an environmental consultant
to prepare an environmental report on any property owned or leased by Tri-County
or the Subsidiaries. If such report indicates the presence of Hazardous
Materials on any such property or properties and if the costs for any
remediation indicated by such reports are deemed material by Platte Valley,
Platte Valley shall have the right to terminate this Agreement by written notice
to Tri-County.
f. Review of Tri-County Disclosure Schedules. By Platte Valley
within five (5) business days of receipt by Platte Valley of the Tri-County
Disclosure Schedules.
6.2 Termination; Lack of Survival of Representations and Warranties. In
the event of the termination and abandonment of this Agreement pursuant to
Section 6.1 herein, this Agreement shall become void and have no effect, except
that (i) the provisions of Sections 5.3 (Mutual Covenants) and 6.3 (Expenses and
Damages) of this Agreement shall survive any such termination and abandonment.
Termination shall not relieve the breaching party from liability for an uncured
intentional and willful breach of a representation, warranty, covenant, or
agreement giving rise to such termination.
A-21
6.3 Expenses and Damages.
a. Payment of Own Expenses. Except as provided below and in Section
6.4 herein, each party shall pay its own expenses in connection with the
Agreement and the Merger. Any expenses incurred by any executive officer of
Tri-County for tax planning or employment-related issues shall be considered
personal expenses and not Tri-County corporate expenses. Nothing contained in
this Section 6.3 shall be deemed to preclude either from seeking to recover
damages which it incurs as a result of breach by the other party of this
Agreement or to obtain other legal or equitable relief (including specific
performance).
b. Tri-County Termination. Platte Valley shall pay Tri-County
$150,000 in the event Tri-County terminates this Agreement pursuant to Section
6.1(d).
c. Platte Valley Termination. Tri-County shall pay Platte Valley
$150,000 in the event Platte Valley terminates this Agreement pursuant to
Section 6.1(d).
6.4 Exclusivity.
a. Tri-County agrees that it, or any of its Subsidiaries, shall not
solicit or encourage inquiries or proposals with respect to, or engage in any
negotiations concerning, or provide any confidential information to, or have any
discussions with, any person relating to, any Acquisition Proposal (as defined
in this Section 6.4), and shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties concerning any Acquisition Proposal. Tri-County shall
promptly advise Platte Valley of the receipt of any Acquisition Proposal and the
substance thereof (including the identity of the person making such Acquisition
Proposal). For purposes of this Section 6.4, an "Acquisition Proposal" means any
tender or exchange offer, proposal for a merger, consolidation or other business
combination or similar transaction involving Tri-County or any of its respective
Subsidiaries or any proposal or offer to purchase or acquire in any manner all
or a majority of the voting ownership, beneficial ownership or right to vote
securities in, or a majority of the assets or deposits of Tri-County or any of
its respective Subsidiaries, other than the transaction contemplated by this
Agreement.
b. In the event that Tri-County, during the term of this Agreement
and without having received the written consent of Platte Valley, shall have
determined in accordance with its fiduciary duties to accept any Acquisition
Proposal or to recommend to its shareholders that any Acquisition Proposal be
approved or accepted, then Tri-County so determining or recommending shall be
liable to Platte Valley in the amount of Four Hundred Fifty Thousand Dollars
($450,000) as liquidated damages, the payment of which shall be made at the time
of the acceptance of any Acquisition Proposal. It is acknowledged and understood
by Tri-County that the calculation, ascertainment or quantification of the
amount of monetary damages which would be sustained by Platte Valley to this
Agreement as a result of the acceptance or recommendation of acceptance of any
Acquisition Proposal by the Tri-County is uncertain and problematic and that
Platte Valley would suffer substantial damages to its business and operations
which cannot be measured in monetary terms, and recognizing such, Tri-County
agrees that the foregoing amount of liquidated damages is its reasonable
estimate of the amount of damages which would be sustained by Platte Valley,
during the term of this Agreement and without having received the written
consent of Platte Valley, shall have determined to accept any Acquisition
Proposal or to recommend to its shareholders that any Acquisition Proposal be
approved or accepted.
6.5 Desirable Amendments. Subject to the performance of the respective
fiduciary obligations of each party, if at any time after the date hereof, it
shall appear that any change or changes in the structure of the transactions
contemplated hereby shall be necessary or desirable or comply with applicable
law, or to comply with the requirements of regulatory authorities having
jurisdiction over the transactions so as to enable the transactions contemplated
hereby to be consummated, the parties hereto agree to use their best efforts to
effect such changes in this Agreement and the other documents contemplated
hereby in taking such other actions as may be required to effect such changes,
provided that neither party hereto shall be required to agree to any change in
the amount or form of consideration set forth herein.
A-22
6.6 Survival of Representations, Warranties and Covenants. The respective
representations, warranties, agreements and covenants of the parties in this
Agreement shall survive the Effective Time for a period of two years. Each party
shall be deemed to have relied upon each and every representation and warranty
of the other party, regardless of any investigation heretofore or hereafter made
by or on behalf of such party.
6.7 Benefits of this Agreement. This Agreement and the rights and
obligations of Platte Valley and Tri-County hereunder shall not be assigned by
any party to any third party, except with the prior written consent of the
other. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns. Nothing in
this Agreement, expressed or implied, is intended to confer upon any person,
other than the parties hereto, the shareholders of Tri-County, and their
respective permitted successors and assigns, any rights or remedies under or by
reason of this Agreement and, except as for Sections 2.5 and 6.8 of this
Agreement, there are no third-party beneficiaries of this Agreement.
6.8 Employees and Employee Benefits.
a. All employees of Tri-County shall be evaluated by Platte Valley
for retention or elimination prior to the Effective Time. With the exception of
employees that are parties to employment or severance agreements with Tri-County
or Tri-County Bank, Platte Valley agrees that for a period of twelve (12) months
following the Effective Time, any employee of Tri-County Bank whose employment
is involuntarily terminated by Platte Valley for a reason other than just cause
on or after the Effective Time shall be entitled to receive a severance payment
equal to two weeks of salary in effect as of December 31, 2000, for each year of
service to Tri-County Bank with a maximum of three (3) months.
b. All employees of Tri-County who continue as employees of Platte
Valley after the Merger shall (i) notwithstanding Section 6.8(a), continue their
regular salary in effect on the Closing Date until the earlier to occur of their
termination of employment or December 31, 2001; (ii) receive service credits for
employment at Tri-County prior to the Effective Time for purposes of meeting the
eligibility requirements and vesting requirements for all Platte Valley benefit
programs which such employees shall become eligible to participate in on or
after the Effective Time including, but not limited to, retirement, vacation (as
set forth in Section 6.8(c)), sick leave (as set forth in Section 6.8(d), and
health and disability plans (as set forth in Section 6.9(d); and (iii) receive
in cash all accrued vacation as of December 31, 2000, as set forth in Exhibit J
attached hereto.
c. Platte Valley's vacation time policy is earned in the year prior
to the year in which it is taken. However, transitional vacation advances for
2001 will be given to all Tri-County employees retained based on their service
credits of employment at Tri-County. If any Tri-County employee should terminate
their employment with Platte Valley or be terminated by Platte Valley on or
before December 31, 2001, any vacation taken by employees in 2001 shall be
reimbursed to Platte Valley by employee.
d. Any Tri-County employee who has accrued sick leave available on
December 31, 2000, will be allowed "Banked Days" per Platte Valley's "Banked
Policy" as follows: "any vacation / illness days not taken during the year in
which they were awarded will be banked (up to six days maximum) for use the next
year towards a catastrophic illness, surgery or accident, as outlined in the
Medical Leave of Absence Policy--an absence due to illness, disability, mental
health or chemical dependency, which extends beyond six working days, but not
more than 21 days and is requested in writing, accompanied by an acceptable
physician's statement, and is approved in advance by the supervisor, the
division / department manager and the Corporate Director of Human
Resource--Section V, Page 5.5 and 5.6. Any unused banked days will be cleared
annually on December 31st and a new bank started each year from the previous
year's unused illness/vacation days."
A-23
e. No full-time Tri-County employee or dependant of such employee
shall be subject to any uninsured waiting periods of pre-existing condition
exclusions under any plan of Platte Valley or its subsidiaries, except when (i)
there was more than a 63-day period between the end of the prior coverage and
enrollment for the Platte Valley coverage, during which the individual was not
covered under any creditable coverage; and (ii) the employee or covered person
cannot provide satisfactory evidence of creditable coverage for 12 months prior
to the Closing Date. However, if the employee or covered person has a
pre-existing condition and cannot provide satisfactory evidence of creditable
coverage for the 12 months prior to the Closing Date, such person will be
treated for purposes of coverage under Platte Valley's benefit plan as he would
have been treated under the Tri-County benefit plan.
6.9 Notices. Any notice, request, instruction, legal process, or other
instrument to be given or served hereunder by any party to another, shall be
deemed given or served if in writing and delivered personally or sent by
registered or certified mail, postage prepaid, to the respective party or
parties at the following addresses:
If to Platte Valley: Platte Valley Financial Service Companies, Inc.
Attn: H. Hod Kosman, President
1212 Circle Drive
Scottsbluff, Nebraska 69363-2308
With copies to: Rothgerber Johnson & Lyons LLP
Attn: Karen L. Witt, Esq.
1200 17th Street, Suite 3000
Denver, CO 80202
If to Tri-County: Tri-County Bancorp, Inc.
Attn: Robert L. Savage, President
2201 Main Street
Torrington, Wyoming 82240-2317
With copies to: Gregory A. Gehlmann, Esq.
Manatt, Phelps & Phillips, LLP
1501 M Street, N.W., Suite 700
Washington, DC 20005-1702
and to such other person or address or addresses as either party may designate
to the other by like notice as set forth above.
6.10 Publicity. Tri-County and Platte Valley shall have all publicity,
press releases and other announcements relating to this Agreement, and the
transactions contemplated hereby, reviewed in advance by both Platte Valley and
Tri-County.
6.11 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and thereby supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations, covenants or other agreements between the
parties in connection with the subject matter hereof except as specifically set
forth herein.
A-24
6.12 Waiver or Modification. Any party to this Agreement may, at any time
prior to the Effective Time, by action taken by its Board of Directors or
officers thereunto duly authorized, waive any of the terms or conditions of this
Agreement or agree to an amendment or modification to this Agreement by an
agreement in writing executed in the same manner (but not necessarily by the
same persons) as this Agreement. No amendment, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar), nor shall any waiver constitute a continuing waiver unless so
expressly provided. Tri-County's Board of Directors may authorize the amendment
or supplementation of this Agreement or waiver of any provision hereof or
thereof, either before or after the approval of Tri-County's shareholders (and
without seeking further shareholder approval), so long as such amendment,
supplement or waiver does not result in the reduction of the consideration given
or result in an adverse tax or other effect to Tri-County's shareholders.
6.13 Controlling Law. This Agreement shall be construed in accordance
with the laws of the State of Colorado, except to the extent that federal law is
applicable.
6.14 Counterparts. This Agreement may be executed in any number of copies,
each of which shall be deemed an original, and all of which together shall be
deemed one and the same instrument.
A-25
IN WITNESS WHEREOF, pursuant to authority duly given by the respective
Boards of Directors of Platte Valley, Platte Valley National Bank, Tri-County,
Tri-County Bank and AcqCo, this Agreement has been signed on behalf of said
corporations by their respective Presidents or Vice Presidents and attested by
their respective Secretaries or Assistant Secretaries, all on the date first
written above. The signature of a Secretary or Assistant Secretary is intended
not only as an execution hereof, but also is a certification that such parties'
Board of Directors has duly authorized the execution and delivery of this
Agreement.
PLATTE VALLEY FINANCIAL SERVICE
COMPANIES, INC.
Attest: /s/ James Kozal By: /s/ H. Hod Kosman
------------------------ ----------------------------------
H. Hod Kosman, President and CEO
PLATTE VALLEY NATIONAL BANK,
Torrington, Wyoming
Attest: /s/ James Kozal By: /s/ H. Hod Kosman
------------------------- ----------------------------------
H. Hod Kosman, Chairman
TRI-COUNTY BANCORP, INC.
Attest: /s/ Earl F. Warren By: /s/ Robert L. Savage
------------------------ ----------------------------------
Robert L. Savage, President and CEO
TRI-COUNTY BANK
Attest: /s/ Earl F. Warren By: /s/ Robert L. Savage
------------------------ ----------------------------------
Robert L. Savage, President and CEO
PLATTE VALLEY ACQUISITION COMPANY
(In Organization)
Attest: /s/ James Kozal By: /s/ H. Hod Kosman
------------------------- ----------------------------------
H. Hod Kosman, President and CEO
APPENDIX B
OPINION AND LETTER OF KEEFE, BRUYETTE & WOODS, INC.
KEEFE, BRUYETTE & WOODS, INC.
SPECIALISTS IN FINANCIAL SERVICES
211 Brandenton Ave., Dublin, OH 43017
Phone Fax
(614) 766-8400 (614) 766-8406
January 24, 2001
Board of Directors
Tri-County Bancorp, Inc.
2201 Main Street
Torrington, WY 82240-2317
Dear Gentlemen:
You have requested our opinion as an independent investment banking firm
regarding the fairness, from a financial point of view, to the stockholders of
Tri-County Bancorp, Inc. ("TRIC"), of the consideration to be paid by Platte
Valley Financial Service Companies, Inc. ("PVFS") in the merger (the "Merger")
between TRIC and PVFS. We have not been requested opine as to, and our opinion
does not in any manner address, TRIC's underlying business decision to proceed
with or effect the Merger.
Pursuant to the Acquisition Agreement and Plan of Merger, dated January 24,
2001, by and among TRIC and PVFS (the "Agreement"), at the effective time of the
Merger, PVFS will acquire all of TRIC's issued and outstanding shares of common
stock. PVFS will pay to the shareholders of TRIC $12.60 cash per share (the
"Consideration"). The complete terms of the proposed transaction are described
in the Agreement, and this summary is qualified in its entirety by reference
thereto.
Keefe, Bruyette & Woods, Inc., as part of its investment banking business, is
regularly engaged in the evaluation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, and distributions of
listed and unlisted securities. We are familiar with the market for common
stocks of publicly traded banks, savings institutions and bank and savings
institution holding companies.
In connection with this opinion we reviewed certain financial and other business
data supplied to us by TRIC including (i) the Acquisition Agreement and Plan of
Merger by and among TRIC and PVFS, (ii) Annual Report, Proxy Statement and Form
10-K for the years ended December 31, 1997, 1998 and 1999, (iii) Form 10-Q for
the quarters ended March 31, 2000, June 30, 2000,
B-1
September 30, 2000 and other information we deemed relevant. We discussed with
management and the boards of directors of TRIC and its wholly owned subsidiary,
Tri-County Federal Savings Bank, the current position and prospective outlook
for TRIC. We considered historical quotations and the prices of recorded
transactions in TRIC's common stock over the last three years. We reviewed
financial and stock market data of other savings institutions, particularly in
the Western region of the United States, and the financial and structural terms
of several other recent transactions involving mergers and acquisitions of
savings institutions or proposed changes of control of comparably situated
companies.
For PVFS, we reviewed the financial statements, for the years ended December 31,
1997, 1998, and 1999, and publicly-available information for the nine months
ended September 30, 2000 and certain other information deemed relevant. We also
discussed with management of PVFS, the current position and prospective capital
outlook for PVFS.
For purposes of this opinion we have relied, without independent verification,
on the accuracy and completeness of the material furnished to us by TRIC and
PVFS and the material otherwise made available to us, including information from
published sources, and we have not made any independent effort to verify such
data. With respect to the financial information, including forecasts and asset
valuations we received from TRIC, we assumed (with your consent) that they had
been reasonably prepared reflecting the best currently available estimates and
judgment of TRIC's management. In addition, we have not made or obtained any
independent appraisals or evaluations of the assets or liabilities, and
potential and/or contingent liabilities of TRIC or PVFS. We have further relied
on the assurances of management of TRIC and PVFS that they are not aware of any
facts that would make such information inaccurate or misleading. We express no
opinion on matters of a legal, regulatory, tax or accounting nature or the
ability of the Merger, as set forth in the Agreement, to be consummated.
In rendering our opinion, we have assumed that in the course of obtaining the
necessary approvals for the Merger, no restrictions or conditions will be
imposed that would have a material adverse effect on the contemplated benefits
of the Merger to TRIC or the ability to consummate the Merger. Our opinion is
based on the market, economic and other relevant considerations as they exist
and can be evaluated on the date hereof.
Consistent with the engagement letter with you, we have acted as financial
advisor to TRIC in connection with the Merger and will receive a fee for such
services. In addition, TRIC has agreed to indemnify us for certain liabilities
arising out of our engagement by TRIC in connection with the Merger.
Based upon and subject to the foregoing, as outlined in the foregoing paragraphs
and based on such other matters as we considered relevant, it is our opinion
that as of the date hereof, the consideration to be paid by PVFS in the Merger
is fair, from a financial point of view, to the stockholders of TRIC.
B-2
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent, although this opinion
may be included in its entirety in the proxy statement of TRIC used to solicit
stockholder approval of the Merger. It is understood that this letter is
directed to the Board of Directors of TRIC in its consideration of the
Agreement, and is not intended to be and does not constitute a recommendation to
any stockholder as to how such stockholder should vote with respect to the
Merger.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc.
B-3
APPENDIX C
WYOMING DISSENTERS' RIGHTS
WYOMING BUSINESS CORPORATION ACT: ARTICLE 13. DISSENTERS' RIGHTS
17-16-1301. Definitions.
(a) As used in this article:
(i) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder;
(ii) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving, new, or acquiring
corporation by merger, consolidation, or share exchange of that issuer;
(iii) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under W.S. 17-16-1302 and who exercises that right
when and in the manner required by W.S. 17-16-1320 through 17-16-1328;
(iv) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable;
(v) "Interest" means interest from the closing date of the Merger of
the corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans, or, if
none, at a rate that is fair and equitable under all the circumstances;
(vi) "Record shareholder" means the person in whose names shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation;
(vii) "Shareholder" means the record shareholder or the beneficial
shareholder.
17-16-1302. Right to dissent.
(a) A shareholder is entitled to dissent from, and to obtain payment of
the fair value of his shares in the event of, any of the following
corporate actions:
(i) Consummation of a plan of merger or consolidation to which the
corporation is a party if:
(A) Shareholder approval is required for the merger or the
consolidation by W.S. 17-16-1103 or 17-16-1111 or the articles of
incorporation and the shareholder is entitled to vote on the
merger or consolidation; or
(B) The corporation is a subsidiary that is merged with its
parent under W.S. 17-16-1104.
(ii) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired,
if the shareholder is entitled to vote on the plan;
C-1
(iii) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and
regular course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by
which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one (1) year after the date of
sale;
(iv) An amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because
it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters or abolishes a right in respect of
redemption, including a provision respecting a sinking fund
for the redemption or repurchase, of the shares; (C) Alters or
abolishes a preemptive right of the holder of the shares to
acquire shares or other securities; (D) Excludes or limits the
right of the shares to vote on any matter, or to cumulate
votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or (E)
Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to
be acquired for cash under W.S. 17-16-604.
(v) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to
the shareholder or the corporation.
17-16-1303. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one (1) person and notifies the
corporation in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which he
dissents and his other shares were registered in the names of different
shareholders.
C-2
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(i) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(ii) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
17-16-1320. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under W.S.
17-16-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenters' rights under W.S. 17-16-1302
is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in W.S.
17-16-1322.
17-16-1321. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under W.S.
17-16-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights shall deliver to the
corporation before the vote is taken written notice of his intent to
demand payment for his shares if the proposed action is effectuated and
shall not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under this
article.
17-16-1322. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under W.S.
17-16-1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of W.S.17-16-1321.
(b) The dissenters' notice shall be sent no later than ten (10) days after
the corporate action was taken, and shall:
(i) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
(ii) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received;
(iii) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;
(iv) Set a date by which the corporation shall receive the payment
demand, which date may not be fewer than thirty (30) nor more than sixty
(60) days after the date the notice required by subsection (a) of this
section is delivered; and
(v) Be accompanied by a copy of this article.
17-16-1323. Duty to demand payment.
(a) A shareholder sent a dissenters' notice described in W.S. 17-16-1322
shall demand payment, certify whether he acquired beneficial ownership of
the shares before the date required to be set forth in the dissenters'
notice pursuant to W.S. 17-16-1322(b)(iii), and deposit his certificates
in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) of this section retains all other rights
of a shareholder until these rights are cancelled or modified by the
taking of the proposed corporate action.
C-3
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
17-16-1324. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under W.S.
17-16-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until
these rights are cancelled or modified by the taking of the proposed
corporate action.
17-16-1325. Payment.
(a) Except as provided in W.S. 17-16-1327, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with W.S. 17-16-1323 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment shall be accompanied by:
(i) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(ii) A statement of the corporation's estimate of the fair value of
the shares;
(iii) An explanation of how the interest was calculated;
(iv) A statement of the dissenter's right to demand payment under
W.S. 17-16-1328; and
(v) A copy of this article.
17-16-1326. Failure to take action.
(a) If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a
new dissenters' notice under W.S. 17-16-1322 and repeat the payment demand
procedure.
17-16-1327. After-acquired shares.
(a) A corporation may elect to withhold payment required by W.S.
17-16-1325 from a dissenter unless he was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of
the first announcement to news media or to shareholders of the terms of
the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate
action, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to accept
it in full satisfaction of his demand. The corporation shall send with its
offer a statement of its estimate of the fair value of the shares, an
explanation of how the interest was calculated, and a statement of the
dissenter's right to demand payment under W.S. 17-16-1328.
C-4
17-16-1328. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand
payment of his estimate, less any payment under W.S. 17-16-1325, or reject
the corporation's offer under W.S. 17-16-1327 and demand payment of the
fair value of his shares and interest due, if:
(i) The dissenter believes that the amount paid under W.S.
17-16-1325 or offered under W.S. 17-16-1327 is less than the fair value of
his shares or that the interest due is incorrectly calculated;
(ii) The corporation fails to make payment under W.S. 17-16-1325
within sixty (60) days after the date set for demanding payment; or
(iii) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty (60) days after
the date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under
subsection (a) of this section within thirty (30) days after the
corporation made or offered payment for his shares.
17-16-1330. Court action.
(a) If a demand for payment under W.S. 17-16-1328 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after
receiving the payment demand and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty (60) day period, it shall pay
each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the district court of
the county where a corporation's principal office, or if none in this
state, its registered office, is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of
the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in
an action against their shares and all parties shall be served with a copy
of the petition. Nonresidents may be served by registered or certified
mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court
may appoint one (1) or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the
powers described in the order appointing them, or in the amendment to it.
The dissenters are entitled to the same discovery rights as parties in
other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for:
C-5
(i) The amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or
(ii) The fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under W.S.
17-16-1327.
17-16-1331. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under W.S. 17-16-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
W.S. 17-16-1328.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(i) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply with the
requirements of W.S. 17-16-1320 through 17-16-1328; or
(ii) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be
paid out of the amounts awarded the dissenters who were benefited.
C-6
APPENDIX D
1999 ANNUAL REPORT TO STOCKHOLDERS
[COMPANY LOGO]
Tri-County Bancorp, Inc.
1999 Annual Report
----------------------------------------------------------------
TABLE OF CONTENTS
----------------------------------------------------------------
Selected Financial Data i
----------------------------------------------------------------
Letter to Stockholders ii
----------------------------------------------------------------
Management's Discussion and Analysis 1
----------------------------------------------------------------
Report of Independent Auditors 9
----------------------------------------------------------------
Consolidated Statements of Financial Condition 10
----------------------------------------------------------------
Consolidated Statements of Operations 11
----------------------------------------------------------------
Consolidated Statements of Stockholders' Equity 12
----------------------------------------------------------------
Consolidated Statements of Cash Flows 13
----------------------------------------------------------------
Notes to Consolidated Financial Statements 15
----------------------------------------------------------------
Corporate and Stockholders' Information 31
----------------------------------------------------------------
SELECTED FINANCIAL DATA
At December 31,
1999 1998 1997 1996 1995
-------------------------------------------
(In Thousands)
BALANCE SHEET DATA Total amount of:
Assets $88,516 $81,308 $89,961 $85,888 $65,766
Loans receivable, net 48,980 42,054 40,425 35,265 25,514
Mortgage-backed & investment
securities - Available for
sale 27,239 28,727 36,526 35,140 18,097
Mortgage-backed & investment
securities - Held to 7,238 5,336 7,987 10,320 18,264
maturity
Deposits 51,809 45,974 45,405 48,533 44,583
FHLB advances 25,558 23,799 29,697 23,460 7,000
Stockholders' equity 10,251 10,421 13,827 13,146 13,496
Year Ended December 31,
1999 1998 1997 1996 1995
-------------------------------------------
(In Thousands)
STATEMENT OF OPERATIONS DATA
Interest income $5,923 $6,173 $6,466 $5,494 $4,600
Net interest income 2,505 2,627 2,744 2,468 2,266
Provision for loan losses -- -- -- -- --
Non-interest income 313 291 105 159 171
Non-interest expenses 1,658 1,564 1,623 1,811(1) 1,458
Net income 794 938 901 540(1) 649
At or For Year Ended December 31,
1999 1998 1997 1996 1995
-------------------------------------------
FINANCIAL RATIOS & OTHER DATA
Return on average assets 0.94% 1.09% 1.02% 0.71%(1) 1.04%
Return on average 7.69% 6.72% 6.68% 4.05%(1) 4.96%
stockholders' equity
Average interest rate spread 2.53% 2.39% 2.48% 2.68% 2.69%
Net yield on average earning
assets 3.07% 3.14% 3.19% 3.35% 3.62%
Non-interest expense to
total assets 1.87% 1.92% 1.80% 2.11%(1) 2.22%
Average equity/average total
assets 12.17% 16.03% 15.20% 16.82% 20.47%
Non-performing loans/total
assets 0.00% 0.00% 0.00% 0.04% 0.03%
Dividends/total income 49.27% 50.13% 42.95% 57.83%(1)37.40%
At or For Year Ended December 31,
1999 1998 1997 1996 1995
-------------------------------------------
PER SHARE INFORMATION(2)
Earnings per share - diluted $0.85 $0.78 $.071 $0.41(1) $0.47
Dividends per share 0.44 0.43 0.33 0.25 0.19
Book value per share 11.31 11.86 11.84 10.80 10.53
- ------------------------------
(1)Includes the effect of a one-time special assessment to recapitalize
the SAIF.
(2)Restated to reflect 100% stock dividend paid December 8, 1997
i
To Our Stockholders:
Tri-County Bancorp, Inc. achieved a third year of record earnings in 1999.
Earnings per share on a fully diluted basis were $0.85, which exceeded 1998 by
9.0% or $0.07. The tender offer completed in late 1998 reduced the number of
shares outstanding and provided a positive influence to the excellent earnings
per share performance this year. Additionally, as a result of the tender offer
in 1998 capital was reduced by $4.5 million. The loss of capital reduced the
amount of low cost funds available for investment and contributed to a reduction
in total income of $144,000. Both the increase in earnings per share and the
reduction in the dollar amount of earnings were anticipated.
This year was also significant with a 16.5% increase in the loan portfolio, and
an 8.3% increase in deposits (when reduced by a $2,000,000 short term public
deposit at year end). Securities varied by only a small increase over the
previous year. These changes are consistent with the goals of the Company of
increasing loans and deposits while holding the investment portfolio at or below
its present level.
The Company has made other significant changes this past year. The first is our
entrance into agricultural lending and increased emphasis on commercial business
relationships. Joe Guth, our Executive Vice President, joined our Company in May
and has helped to facilitate this change. Secondly, we are in the process of
opening a new branch in Cheyenne, Wyoming. We will emphasize small business
relationships in the Cheyenne market and expect that this new facility will help
shift the asset mix over a period of time to higher yielding and shorter term
loans. As of the writing of this letter, the new Cheyenne branch is close to
completion, and we expect to have it open in early April. The new branch will
have a negative impact on earnings for a few years until it reaches a break-even
point, however, we have set aggressive goals for the branch and expect success.
The Company announced a repurchase of 5% of outstanding common stock in February
2000. We expect to complete this repurchase program soon and at very favorable
prices.
We thank the Stockholders for their continued support of the Company. Please
contact us with your questions about Tri-County Bancorp, Inc.
Sincerely,
Robert L. Savage Larry C. Goddard
President and Chief Executive Officer Chairman of the Board
ii
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE COMPANY'S BUSINESS
Tri-County Bancorp, Inc. (the "Company") is a unitary savings and loan holding
company which, under existing laws, may engage in various types of business
activities, provided that Tri-County Bank ("the Bank") retains a specified
amount of its assets in housing-related investments. At the present time, since
it does not conduct any active business, the Company does not intend to employ
any persons other than officers, using the support staff from the Bank from time
to time to meet its administrative needs.
The Bank is a federally chartered stock savings bank headquartered in
Torrington, Wyoming with an additional branch office in Wheatland, Wyoming and a
new branch in Cheyenne, Wyoming that is scheduled to open in April 2000. The
Bank was founded in 1935 as a federally chartered savings and loan association
under the name Tri-County Federal Savings and Loan Association. The Bank's
deposits are federally insured by the Savings Association Insurance Fund
("SAIF"). The Bank converted from mutual to stock form in September 1993.
The Bank is primarily engaged in attracting deposits from the general public and
using those funds to originate real estate loans on one-to-four family
residences and, to a lesser extent, consumer loans, agricultural and commercial
real estate loans, and agricultural and commercial business loans. The Bank's
market area is primarily Goshen and Platte Counties, Wyoming and Scottsbluff
County in western Nebraska and will expand into Laramie County, Wyoming when the
Cheyenne branch opens. The Bank offers its customers several types of real
estate loans, including adjustable-rate and fixed-rate mortgage loans and also
originates multi-family and commercial real estate loans, and consumer loans,
including automobile and home equity loans. In addition, the Bank purchases
loans from and participates in loans with other financial and mortgage banking
institutions on a case by case basis. These activities are conducted in Wyoming
and other Rocky Mountain States. The Bank also invests in investment securities
and mortgage-backed securities.
1
CAPITAL STOCK
Since its issuance in September 1993, the Company's common stock has been traded
over-the-counter on the Nasdaq SmallCap MarketSM appearing under the symbol
"TRIC." The following table reflects the stock price as published by the Nasdaq
statistical report.
DIVIDEND
1998 LOW HIGH DECLARED
First Quarter--03/31/98 $13.13 $15.00 $.10
Second Quarter--06/30/98 $12.50 $16.50 $.11
Third Quarter--09/30/98 $11.50 $13.00 $.11
Fourth Quarter--12/31/98 $11.25 $14.00 $.11
1999
First Quarter--03/31/99 $10.50 $14.69 $.11
Second Quarter--06/30/99 $9.81 $13.31 $.11
Third Quarter--09/30/99 $9.00 $13.75 $.11
Fourth Quarter--12/31/99 $8.25 $11.75 $.11
The number of shareholders of record as of December 31, 1999 was approximately
219. This does not reflect the number of persons or entities who held stock in
nominee or "street" name through various brokerage firms. At December 31, 1999
there were 906,234 shares outstanding. The Company completed a tender offer for
stock in December of 1998 whereby 314,125 shares were purchased at a price of
$14.00 per share.
The Company's ability to pay dividends to stockholders is dependent upon the
dividends it receives from the Bank. The Bank may not declare or pay a cash
dividend on any of its stock if the effect thereof would cause the Bank's
regulatory capital to be reduced below (1) the amount required for the
liquidation account established in connection with the Bank's conversion from
mutual to stock form, or (2) the regulatory capital requirements imposed by the
Office of Thrift Supervision ("OTS"), the Bank's chartering authority and
primary federal regulator.
FINANCIAL CONDITION
ASSETS
Total assets of the Bank increased by $7.21 million or 8.86% during the year of
1999. The increase was primarily the result of increases in loans receivable,
securities held to maturity and bank property and equipment which more than
offset decreases in interest earning deposits and securities available for sale.
Interest earning deposits decreased $1.85 million during the period. The
decrease was primarily the result of the funding of loans.
Securities available for sale decreased by $1.49 million during the year ended
December 31, 1999. Securities totaling $3.44 million were sold, principal
payments and prepayments of $5.39 million were received on mortgage-backed
securities, a $1 million agency security was called by the issuer and the market
value of the securities decreased $1.26 million during the period. These
decreases were partially offset by purchases of agency securities totaling $9.5
million.
2
Securities held to maturity increased by $1.9 million. The increase was the
result of the purchase of agency and mortgage-backed securities totaling $4
million which more than offset principal payments and prepayments of $1.59
million on the Bank's portfolio of mortgage-backed securities and the maturity
of a $500,000 agency security.
Loans receivable increased $6.93 million during the twelve months ended December
31, 1999. During this period, the Bank originated or purchased portfolio
residential mortgage loans totaling $10.03 million, non-residential mortgage
loans totaling $4.15 million, consumer loans totaling $3.14 million, and
commercial loans totaling $1.66 million. During the same period, the Bank
received scheduled principal payments and prepayments totaling $15.21 million on
its loan portfolio. Of the total mortgage loans originated or purchased during
the year, $7.13 million were adjustable rate and $7.05 million were fixed rate
loans. Because of a lack of demand for certain types of loans in the Bank's
primary lending area, purchased loans totaled 32% of mortgage lending during the
period. The majority of purchased loans are residential and non-residential real
estate loans in Colorado and Idaho mountain resort communities and
non-residential real estate loans along the front range of Colorado. Purchased
loans are subjected to the same underwriting standards and loan terms as those
originated by the Bank for its portfolio.
Bank property and equipment increased by $1.23 million and was primarily the
result of the purchase of land and the continuing construction of a new branch
bank located in Cheyenne, Wyoming. The parcel of land consists of 4.5 acres of
which 1 acre will be used as the site for the new branch and the remaining 3.5
will be offered for sale or held for future development jointly by the Bank and
an undetermined third party. The total cost of the facility is estimated to be
$1.4 million and the projected opening date is in the second quarter of 2000.
The Bank has sufficient liquid assets to fund the cost of the new facility.
LIABILITIES
Deposit balances increased by $5.84 million or 12.69% from $45.97 million at
December 31, 1998 to $51.81 million at December 31, 1999. The net increase
consisted of a decrease of $0.13 million in savings accounts and increases of
$0.31 million, $1.84 million, and $3.82 million in demand deposits, NOW and time
deposits, respectively.
Advances from the Federal Home Loan Bank ("FHLB") increased $1.76 million during
the year of 1999. The advances are a supplement to the Bank's retail deposits
and were used to fund loan originations and to purchase loans and investment
securities.
Deferred income taxes decreased by $0.38 million during the year and was mainly
the result of the application of SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, which requires unrealized gains and
losses on available for sale securities to be reported, net of deferred income
taxes, as a separate component of stockholders' equity. The market value of
these securities decreased $1.26 million during the period, which resulted in a
decrease in deferred income taxes.
STOCKHOLDERS' EQUITY
Overall, stockholders' equity decreased $0.17 million during the year.
The increase in additional paid-in capital of $211,000 was caused, in part, by
the application of an accounting standard which requires charging current
expense for the fair value of shares of stock committed to be released by the
Bank's Employee Stock Ownership Plan and crediting the difference between the
fair value and the cost of the shares to paid-in capital which resulted in an
increase of $73,000. Also, directors and officers of the Bank exercised stock
options on 28,186 shares, which increased additional paid-in capital by
$138,000.
3
The increase in retained earnings was the result of net earnings totaling
$794,000 which more than offset the decrease in retained earnings caused by the
payments of dividends of $0.44 per share totaling $391,000.
As discussed earlier, SFAS No. 115 requires unrealized gains and losses on
securities classified available for sale to be shown as a separate component of
stockholders' equity in an amount, which is net of deferred income taxes. The
market value of securities classified as available for sale decreased during the
twelve-month period and resulted in a decrease, net of deferred income tax, of
$834,000 in stockholders' equity.
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to average balance
sheets and reflects the average yield on assets and average cost of liabilities
for the periods indicated and the average yields earned and rates paid. Such
yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods presented.
Average balances are derived from month-end balances. Management does not
believe that the use of month-end instead of daily average balances has caused
any material difference in the information presented.
12 Months Ended Dec. 12 Months Ended Dec.
31, 1999 31, 1998
-------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
Interest-earning assets:
Loans receivable $45,919 $3,681 8.02% $42,012 $3,465 8.25%
Securities - Available for
sale 28,656 1,780 6.21% 33,446 2,099 6.28%
Securities - Hold to maturity 5,615 398 7.09% 6,697 504 7.53%
Other interest-earning assets 1,412 64 4.53% 2,331 105 4.50%
----- -- ----- ---
Total interest-earning assets $81,602 $5,923 7.26% $84,486 $6,173 7.31%
------ ------
Non-interest earning assets 2,730 1,665
----- -----
Total Assets $84,332 $86,151
======= =======
Interest-bearing liabilities:
Interest-bearing demand deposits $11,865 $381 3.21% $8,689 $282 3.25%
Savings deposits 4,268 119 2.79% 4,529 125 2.76%
Time deposits 31,011 1,534 4.95% 31,016 1,645 5.30%
Other borrowings 25,088 1,384 5.52% 25,954 1,494 5.76%
------ ----- ------ -----
Total interest-bearing liabilities $72,232 $3,418 4.73% $70,188 $3,546 5.05%
------ ------
Non-interest bearing demand deposits 719 824
Other non-interest bearing
liabilities 1,143 1,264
----- -----
Total liabilities $74,094 $72,276
Retained earnings 10,238 13,875
------ ------
Total liabilities & retained
earnings $84,332 $86,151
======= =======
Net interest income $2,505 $2,627
====== ======
Interest rate spread 2.53% 2.26%
Net yield on interest earning
assets (Margin) 3.07% 3.11%
Ratio of average interest-earning
assets to interest-bearing
liabilities 112.97% 120.37%
4
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in interest
income and interest expense of the Bank for the periods indicated. For each
category of interest-earning asset and interest-bearing liability, information
is provided on changes attributable to (i) changes in volume (changes in average
volume multiplied by old rate); (ii) changes in rates (changes in rate
multiplied by old average volume); (iii) changes in rate/volume (changes in rate
multiplied by the changes in average volume).
12 Months Ended Dec. 31 12 Months Ended Dec. 31
1999 vs. 1998 1998 vs. 1997
-------------------------- --------------------------
Increase (Decrease) Due To Increase (Decrease) Due To
-------------------------- --------------------------
Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net
Interest-earning assets:
Loans receivable 322 (97) (9) 216 352 (28) (4) 320
Securities - Available for sale (356) (173) 210 (319) (356) (173) 52 (477)
Securities - Hold to maturity (81) (29) 4 (106) (173) (9) 2 (180)
Other interest-earning assets (41) 1 (1) (41) 61 (9) (8) 44
--- - -- --- -- -- -- --
Total interest-earning assets (156) (298) 204 (250) (116) (219) 42 (293)
Interest-bearing liabilities:
Savings accounts (88) (144) 214 (18) (88) (49) 1 (136)
Other liabilities (50) (62) 2 (110) (39) (1) 0 (40)
--- --- - ---- --- -- - ---
Total interest-bearing
liabilities (138) (206) 216 (128) (127) (50) 1 ( 176)
Net change in interest income (18) (92) 12 (122) 11 (169) 41 (117)
=== === == ==== == ==== == ====
RESULTS OF OPERATIONS
NET INCOME
Net income decreased $144,000 during the year ended December 31, 1999 when
compared to 1998. Net interest income decreased by $122,000, non-interest income
increased by $23,000 and non-interest expense increased by $94,000.
The provision for income taxes decreased by $49,000.
INTEREST INCOME
Interest income from loans increased $215,000 or 6.22% for the year ended
December 31, 1999. The increase was the result of an increase in the average
balance of loans outstanding of $4.14 million which more than offset a decrease
in yield on the loans from 8.25% to 8.02%.
The decrease of $319,000 in interest and dividends on securities available for
sale was the result of a decrease in the average balance of securities of $4.26
million and a decrease in the average yield on the portfolio from 6.28% to
6.21%. The decrease in yield was the result of the disproportionately greater
principal payments and prepayments on mortgage-backed securities with higher
yields when compared to the overall yield on the portfolio and the purchase of
securities with yields less than the yield on the existing portfolio.
Interest on securities held to maturity decreased $106,000 and was caused
primarily by a decrease in the average balance of the portfolio of $1.08 million
and a decrease in the yield on the portfolio from 7.53% to 7.09%. The decrease
in yield was the result of the disproportionately greater principal payments and
prepayments on mortgage-backed securities with higher yields when compared to
the overall yield on the portfolio.
5
The decrease in income from other interest-earning assets of $41,000 was
primarily caused by a decrease in the average balance of these assets which more
than offset a slight increase in the yield on this asset. This category of
assets consists primarily of interest-earning demand deposits held at FHLB.
INTEREST EXPENSE
Interest expense on deposits decreased $18,000 during 1999 when compared to
1998. This decrease was the result of a decrease in the average cost of deposits
from 4.64% to 4.31%, which offset an increase of $2.91 million in the average
balance of deposits.
The Bank took advantage of a relatively inexpensive source of funding available
through the FHLB to supplement retail deposits and to purchase financial
instruments that yield a slightly higher return than the rate charged on the
advances. The average balance of these borrowings was $866,000 less during 1999
than 1998 and the average cost of the borrowings decreased from 5.76% to 5.52%
which resulted in an decrease of $110,000 in interest expense.
PROVISION FOR LOAN LOSSES
No provision for loan losses was made during the year ended December 31, 1999.
The allowance for loan losses is based on management's evaluation of the risk
inherent in its loan portfolio after giving due consideration to the changes in
general market conditions and in the nature and volume of the Bank's loan
activity. The Bank intends to continue to provide for loan losses based on its
periodic review of the loan portfolio and general market conditions. The
allowance for loan losses amounted to $464,000 at year-end. While the Bank
maintains its allowance for loan losses at a level which it considers adequate
to provide for potential losses, there can be no assurances that further
additions will not be made to the loan loss allowance and that such losses will
not exceed the estimated amounts.
NON-INTEREST INCOME
Total non-interest income increased by $23,000 during 1999 when compared to
1998.
Service charges on deposits increased $16,000 mainly because of an increase in
chargeable events and an increase, in November, in the amount of the
non-sufficient funds charge.
The decrease in the gain on the sale of loans of $22,000 was the result of a
decrease in the dollar amount of loans sold.
The Bank sold available for sale securities in 1999 and recognized a gain of
$4,000 while securities sold in the previous year produced gains of $81,000.
The increase in other income was the result of the disposition of property
acquired in 1992 by way of a foreclosure of an office building. The property was
assigned to the Bank per a deficiency judgement and was subsequently redeemed by
the borrower in 1999 at which time the Bank recognized a gain in the amount of
$97,000.
6
NON-INTEREST EXPENSE
Overall, non-interest expense increased $94,000 during 1999.
Compensation and benefits increased by $48,000 in 1999 and was primarily caused
by the hiring of additional staff. The increase in personnel was necessary to
support the growth of commercial and agricultural lending and the opening of the
new branch in Cheyenne, Wyoming.
Occupancy and equipment expense increased $11,000 and was primarily caused by
increases in utilities, telephone, and building and equipment repairs and
maintenance.
Other expenses increased by $35,000 when compared to the same period of the
previous year. The increase in expenses was mainly caused by increased marketing
expenses regarding the introduction and development of new and existing loan and
deposit products and to inform the Bank's customers of its efforts to become
fully Year 2000 compliant. The Bank also had increases in professional expenses
and supplies.
The Bank has undertaken a project to open a third office in Cheyenne, Wyoming.
Non-interest expense will increase as a result of the staffing and equipping of
this office which is expected to open in April 2000. A reduction in net income
(and possibly losses) compared to prior periods is expected as a result of these
expenses until the new office results in higher overall levels of loan and
deposit activity to offset the additional expenses. The Bank believes that this
expansion should enhance shareholder value and hopes that the decrease in
earnings will not be as great following the end of 2001. This statement of
beliefs concerning the expansion is a forward looking statement. The Private
Securities Litigation Reform Act of 1995 (the "Act") provides protection to
Tri-County in making certain forward looking statements that are accompanied by
the factors that could cause actual results to differ materially from the
forward looking statement. As with any expansion, if the new office or
additional personnel do not ultimately result in increased loan and deposit
activity and increased net income, these expenses would continue to have an
adverse affect on net income past the end of year 2001.
INCOME TAXES
The provision for income taxes decreased by $49,000. The main reason for the
decrease in income taxes was the decrease in income before taxes of $193,000.
YEAR 2000
Like many financial institutions, we rely on computers to conduct our business
and information systems processing. Industry experts were concerned that on
January 1, 2000, some computers might not be able to interpret the new year
properly, causing computer malfunctions. Some banking industry experts remain
concerned that some computers may not be able to property interpret additional
dates in the year 2000. We have operated and evaluated our computer operating
systems since January 1, 2000 and have not identified any errors or experienced
any computer system malfunctions. We will continue to monitor our information
systems to assess whether they are at risk of misinterpreting any future dates
and will develop appropriate contingency plans to prevent any potential system
malfunction or correct any system failures. The Company has not been informed of
any such problem experienced by its vendors or its customers, nor by any of the
municipal agencies that provide services to the Company.
7
Nevertheless, it is too soon to conclude that there will not be any problems
arising from the Year 2000 problem, particularly at some of the Company's
vendors. The Company will continue to monitor its significant vendors of goods
and services with respect to Year 2000 problems they may encounter as those
issues may effect the Company's financial position, results of operations and
cash flows. The Company does not believe at this time that these potential
problems will materially impact the ability of the Company to continue its
operations, however, no assurance can be given that this will be the case.
The expectations of the Company contained in this section on Year 2000 are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve substantial risks and uncertainties
that may cause actual results to differ materially from those indicated by the
forward-looking statements. All forward-looking statements in this section are
based on information available to the Company on the date of this document, and
the Company assumes no obligation to update such forward-looking statements.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements of the Bank and notes thereto, presented elsewhere
herein, have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time and due to inflation. The impact of
inflation is reflected in the increased cost of the Bank's operations.
Unlike most industrial companies, nearly all of the assets and liabilities of
the Bank are monetary. As a result, interest rates have a greater impact on the
Bank's performance than do the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or to the same extent as the
price of goods and service.
8
Board of Directors
Tri-County Bancorp, Inc. and Subsidiaries
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated statements of financial
condition of Tri-County Bancorp, Inc. and Subsidiaries (Tri-County) as
of December 31, 1999 and 1998, and the related consolidated statements
of operations, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility
of Tri-County's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
condition of Tri-County Bancorp, Inc. and Subsidiaries as of December
31, 1999 and 1998, and the consolidated results of their operations and
their cash flows for the years then ended, in conformity with generally
accepted accounting principles.
/s/DALBY, WENDLAND & CO., P.C.
Grand Junction, Colorado
February 4, 2000
9
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
1999 1998
----------- -----------
ASSETS
Cash and due from banks $1,187,935 $ 385,804
Interest-bearing deposits with banks 1,128,404 2,979,241
Securities available for sale, at fair value 27,238,804 28,727,466
Securities held to maturity 7,237,691 5,335,700
Loans held for sale, at market value - 435,721
Loans receivable, net of allowance for loan losses
of $464,453 (1999) and $409,984 (1998) 48,979,883 42,054,222
Accrued interest receivable 642,561 450,017
Bank property and equipment 2,028,288 801,141
Other assets 72,270 138,685
------ -------
Total Assets $88,515,836 $81,307,997
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 997,117 $ 690,177
NOW accounts 7,612,597 5,776,145
Savings accounts 8,611,853 8,737,500
Other time deposits 34,587,587 30,770,264
---------- ----------
Total Deposits 51,809,154 45,974,086
Advances from Federal Home Loan Bank 25,558,367 23,799,117
Accounts payable and accrued expenses 370,245 216,841
Advances by borrowers for taxes and insurance 115,691 110,167
Deferred income taxes 411,587 787,119
------- -------
Total Liabilities 78,265,044 70,887,330
========== ==========
Stockholders' Equity
Preferred stock, $.10 par value, 5,000,000 shares
authorized, none issued - -
Common stock, $.10 par value, 10,000,000 shares
authorized, 1,548,611 (1999) and 1,520,425
(1998) shares issued 154,861 152,043
Additional paid-in capital 7,530,906 7,319,578
Retained earnings - substantially restricted 9,663,761 9,260,742
Unearned compensation relating to Employee Stock
Ownership Plan (224,250) (284,050)
Accumulated other comprehensive income 272,904 1,106,701
Treasury stock - 642,377 (1999) and 641,627
(1998) shares, at cost (7,147,390) (7,134,347)
---------- ----------
Total Stockholders' Equity 10,250,792 10,420,667
---------- ----------
Total Liabilities and Stockholders' Equity $88,515,836 $81,307,997
=========== ===========
See accompanying notes.
10
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
1999 1998
---- ----
INTEREST INCOME
Interest and fees on loans $3,680,585 $3,465,184
Interest and dividends on available for sale securities
Taxable interest 1,633,720 1,957,415
Dividends 147,042 141,048
Interest on held to maturity securities
Taxable interest 387,646 498,712
Nontaxable interest 10,496 5,611
Other interest earning assets 63,677 105,045
------ -------
Total Interest Income 5,923,166 6,173,015
--------- ---------
INTEREST EXPENSE
Deposits 2,034,069 2,052,506
Advances 1,383,889 1,493,513
--------- ---------
Total Interest Expense 3,417,958 3,546,019
--------- ---------
Net Interest Income 2,505,208 2,626,996
PROVISION FOR LOAN LOSSES - -
----- -----
Net Interest Income After Provision for Loan Losses 2,505,208 2,626,996
--------- ---------
NONINTEREST INCOME
Service charges on deposits 134,999 119,371
Gain on sale of loans 42,869 65,085
Gain on sale of investments available for sale 3,696 80,940
Other income 131,646 25,296
------- ------
Total Noninterest Income 313,210 290,692
------- -------
NONINTEREST EXPENSE
Compensation and benefits 960,059 911,667
Occupancy and equipment 329,363 318,803
Federal insurance premiums 27,200 27,921
Other expenses 340,974 305,620
------- -------
Total Noninterest Expense 1,657,596 1,564,011
--------- ---------
Income Before Income Taxes 1,160,822 1,353,677
PROVISION FOR INCOME TAXES 366,440 415,614
------- -------
Net Income $ 794,382 $ 938,063
========= =========
EARNINGS PER SHARE
Basic $ .90 $ .83
======= =======
Diluted $ .85 $ .78
======= =======
See accompanying notes.
11
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1999 and 1998
Accumulated
Other Employee MSBP
Compre- Additional Stock Unearned
Comprehensive Retained hensive Common Paid-In Treasury Ownership Compen-
Total Income Earnings Income(loss) Stock Capital Stock Plan sation
----- ------ -------- ------------ ----- ------- ----- ---- ------
Balance-December 31, 1997 $13,827,184 $8,792,947 $817,476 $149,500 $7,100,600 $(2,645,314) $(343,850) $(44,175)
Comprehensive income
Net earnings 938,063 $ 938,063 938,063 - - - - - -
Unrealized gain on
securities, net of tax
and reclassification
adjustment 289,225 289,225 - 289,225 - - - - -
-------
Comprehensive income $1,227,288
==========
Repayment of ESOP debt 59,800 - - - - - 59,800 -
Allocation of ESOP shares 94,395 - - - 94,395 - - -
Amortization of deferred
compensation 44,175 - - - - - - 44,175
Stock options exercised 127,126 - - 2,543 124,583 - - -
Dividends paid - cash (470,268) (470,268) - - - - - -
Treasury stock purchased (4,489,033) - - - - (4,489,033) - -
--------- ------- ------- ----- ------- --------- ------ ------
Balance-December 31, 1998 10,420,667 9,260,742 1,106,701 152,043 7,319,578 (7,134,347) (284,050) -
Comprehensive income (loss)
Net earnings 794,382 $ 794,382 794,382 - - - - - -
Unrealized (loss) on
securities, net of tax
and reclassification
adjustment (833,797) (833,797) - (833,797) - - - - -
-------
Comprehensive (loss) $ (39,415)
=========
Repayment of ESOP debt 59,800 - - - - - 59,800 -
Allocation of ESOP shares 73,217 - - - 73,217 - - -
Stock options exercised 140,929 - - 2,818 138,111 - - -
Dividends paid - cash (391,363) (391,363) - - - - - -
Treasury stock purchased (13,043) - - - - (13,043) - -
------ ------- ------- ----- ------- ------ ------ ------
Balance-December 31, 1999 $10,250,792 $9,663,761 $272,904 $154,861 $7,530,906 $(7,147,390) $(224,250) $ -
=== ==== =========== ========== ======== ======== ========== =========== ========= ======
See accompanying notes.
12
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
1999 1998
---- ----
OPERATING ACTIVITIES
Net income $ 794,382 $ 938,063
Adjustments to reconcile net income to net cash
provided by operations
Depreciation and amortization 168,596 134,794
Provision for deferred taxes 54,000 (23,000)
Gain on sale of securities available for sale (3,696) (80,940)
Gain on sale of loans (42,869) (65,085)
FHLB stock dividends received (132,800) (128,500)
Unvested forfeitable stock awarded - 44,175
Changes in assets and liabilities
Origination of loans held for sale (3,109,995) (3,862,039)
Proceeds from sale of loans held for sale 3,588,584 3,608,514
Accrued interest receivable (192,544) 205,322
Other assets, net 153,216 556,952
Other liabilities, net 136,320 70,254
------- ------
Net Cash Provided By Operations 1,413,194 1,398,510
--------- ---------
INVESTING ACTIVITIES
Net loan origination and principal repayments on (1,505,741) 4,594,499
loans
Purchase of loans (5,439,723) (6,210,552)
Activity in available for sale securities
Sale proceeds 3,440,721 3,129,251
Maturities, prepayments and calls 6,392,460 18,164,932
Purchases (9,499,420) (12,906,090)
Activity in held to maturity securities
Maturities, prepayments and calls 2,093,251 2,830,392
Purchases (3,998,975) (177,000)
Proceeds from sale of real estate owned - 23,966
Investment in property, equipment and real estate
owned (1,340,639) (29,627)
---------- -------
Net Cash Provided (Used) By Investing Activities $(9,858,066) $9,419,771
----------- ----------
13
FINANCING ACTIVITIES
Net change in noninterest-bearing demand, savings
and NOW deposits $2,017,744 $2,158,365
Net change in time deposits 3,817,324 (1,589,432)
Advances from Federal Home Loan Bank 15,975,000 12,500,000
Repayment of Federal Home Loan Bank advances (14,215,750) (18,397,500)
Net change in advances by borrowers for taxes and
insurance 5,525 8,901
Dividends paid (391,363) (470,268)
Exercise of stock options 140,929 127,126
ESOP payments received 59,800 59,800
Purchase of treasury stock (13,043) (4,489,033)
------- ----------
Net Cash Provided (Used) by Financing Activities 7,396,166 (10,092,041)
--------- -----------
Increase (Decrease) in Cash and Cash Equivalents (1,048,706) 726,240
Cash and cash equivalents - beginning of period 3,365,045 2,638,805
--------- ---------
Cash and cash equivalents - end of period $2,316,339 $3,365,045
========== ==========
Cash and due from banks $1,187,935 $ 385,804
Interest-bearing deposits with banks 1,128,404 2,979,241
--------- ---------
$2,316,339 $3,365,045
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for
Income taxes $ 255,400 $ 438,600
========= =========
Interest expense $3,414,338 $3,565,230
========== ==========
Noncash transactions
Loans transferred to real estate owned $ - $ 23,966
========== =========
See accompanying notes.
14
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Tri-County Bancorp, Inc. (Tri-County) is a bank holding company organized under
Wyoming law in 1993 and headquartered in Torrington, Wyoming. Through its
subsidiaries, Tri-County provides a variety of banking services to customers in
its primary market area of eastern Wyoming.
Basis of Presentation
The consolidated financial statements include the accounts of Tri-County, its
wholly-owned subsidiaries, Tri-County Bank (the Bank) and First Tri-County
Services, Inc. The investment in the subsidiaries is accounted for using the
equity method of accounting. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior period amounts
have been reclassified to conform with the current year's presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect amounts reported in the consolidated financial
statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash
on hand, demand deposits at other financial institutions and overnight deposits.
Securities
Securities that Tri-County has both the positive intent and ability to hold to
maturity are classified as securities held to maturity and are carried at
amortized cost, adjusted for amortization of premium or accretion of discount
using the interest method. Securities that may be sold prior to maturity for
asset/liability management purposes, or that may be sold in response to changes
in interest rates, to changes in prepayment risk, to increase regulatory capital
or other similar factors, are classified as securities available for sale and
carried at fair value with any adjustments to fair value, after tax, reported as
a separate component of stockholders' equity. Declines in the fair value of
individual held to maturity and available for sale securities below their cost,
that are other than temporary, result in write-downs of the individual
securities to their fair value. The related write-downs are included in earnings
as realized losses. Securities purchased for trading purposes are held in the
trading portfolio at fair value, with changes in fair value included in
noninterest income. Tri-County had no trading securities at December 31, 1999 or
1998, or during the years then ended.
Interest and dividends on securities, including the amortization of premiums and
the accretion of discounts, are reported in interest and dividends on securities
using the interest method. Gains and losses on the sale of securities are
recorded on the trade date and are calculated using the specific-identification
method.
15
Federal Home Loan Bank Stock
The Bank, as a member of the Federal Home Loan Bank (FHLB), is required to
maintain an investment in capital stock of the FHLB. No ready market exists for
the FHLB stock, and it has no quoted market value. The stock is carried at cost
and is assumed to have a market value which is equal to cost. The stock is
included in securities available for sale in the accompanying consolidated
financial statement.
Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized in a valuation allowance by a charge to income.
The cost of loans held for sale at December 31, 1998 approximated their
estimated market value.
Servicing
The Bank sells certain loans to the Federal Home Loan Mortgage Corporation
(FHLMC) with servicing retained. Capitalized servicing rights are reported in
other assets and are amortized into noninterest income in proportion to, and
over the period of estimated net servicing revenue. Impairment of mortgage
servicing rights is assessed at each reporting date based on the fair value of
those rights. Fair values are estimated using discounted cash flows based on a
current market interest rate. For purposes of measuring impairment, the rights
are stratified by loan type and interest rate. The amount of impairment
recognized, through a valuation allowance, is the amount by which the
capitalized mortgage servicing rights for a stratum exceed their fair value.
Loans
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off generally are reported at the principal
amount outstanding, net of deferred loan fees, discounts, and the allowance for
loan losses. Interest on loans is calculated by using the simple interest method
on the balance of the principal amount outstanding. Interest income on loans
receivable is accrued as earned based on the principal balance outstanding.
Tri-County discontinues the accrual of interest when the related loan is 90 days
delinquent. Net direct loan origination costs/fees, when material, are deferred
and amortized over the term of the loan as a yield adjustment.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed, for
impaired loans, cash receipts are applied entirely against principal until the
loan has been collected in full, after which time any additional cash receipts
are recognized as interest income. Tri-County had no significant loans
considered impaired or on non-accrual status at December 31, 1999 or 1998.
Allowance for Loan Losses
The allowance for loan losses reflects management's judgment as to the level
considered adequate to absorb potential losses inherent in the loan portfolio.
This judgment is based on a review of individual loans, historical loss
experience, economic conditions, portfolio trends and other factors. Allowances
for impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by provisions
charged to earnings and reduced by charge-offs, net of recoveries. Changes in
the allowance relating to impaired loans are charged or credited to the
provision for loan losses. Because of uncertainties inherent in the estimation
process, management's estimate of credit losses inherent in the loan portfolio
and the related allowance may change in the near term.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets.
16
Impairment of Long-Lived Assets
Loans are considered to be impaired and an impairment loss recognized when
expected future cash flows are less than the asset's carrying value. No assets
were considered impaired at December 31, 1999 or 1998.
Other Real Estate
Other real estate, acquired through partial or total satisfaction of loans, is
included in other assets and carried at the lower of cost or fair value less
estimated costs of disposition. At the date of acquisition, any losses are
charged to the allowance for loan losses. Subsequent write-downs are included in
noninterest expense. Realized losses from disposition of the property and
declines in fair value that are considered permanent are charged to the reserve
for other real estate, as applicable.
Income Taxes
Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Stock Options
SFAS No. 123 (SFAS 123), Accounting for Stock-Based Compensation, allows an
entity to choose to compute compensation expense related to stock options using
a fair value method or continue to use the intrinsic value method. If the
intrinsic value method is chosen, then Tri-County will be required to present
pro forma data for all awards granted in future fiscal years. If the fair value
method is selected, SFAS 123 would be effective.
Tri-County had no stock option transactions that would require the
implementation of SFAS 123 in the years ended December 31, 1999 and 1998. It is
currently anticipated that Tri-County will continue to account for stock-based
compensation plans under the intrinsic value method. Final determination of the
method selected will be done in the year Tri-County has transactions covered by
this accounting pronouncement.
Earnings Per Share
Basic earnings per share represents income available to each share of common
stock outstanding during the reporting period. Diluted earnings per share
represents income available to each share of common stock outstanding during the
reporting period adjusted for the potential issuance of common shares for stock
options.
The calculation of basic and diluted earnings per share for the years ended
December 31 is as follows:
1999 1998
---- ----
Net income $794,382 $ 938,063
======== =========
Average common shares outstanding 885,897 1,127,425
Dilutive effect of stock options 50,303 74,227
------ ------
936,200 1,201,652
======= =========
Earnings per share
Basic $ .90 $ .83
Diluted $ .85 $ .78
17
New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities,
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The effective date of SFAS 133 was deferred until June 15,
2000 with the issuance of SFAS No. 137.
The adoption of SFAS 133 is not expected to have a material effect on
Tri-County's financial statements.
NOTE 2 - SECURITIES
Gross Gross
Amortized Unrealized Unrealized Fair
Securities Available for Sale Cost Gains Losses Value
December 31, 1999
Debt Securities
U.S. Agency securities $13,999,671 $ - $(424,516) $13,575,155
U.S. Agency mortgage-backed securities 10,379,986 24,521 (253,343) 10,151,164
---------- ------ -------- ----------
Total Debt Securities 24,379,657 24,521 (677,859) 23,726,319
---------- ------ -------- ----------
Equity Securities
FHLMC stock 22,871 1,076,415 - 1,099,286
Mutual funds
ARM portfolio 536,085 - (9,586) 526,499
FHLB stock 1,886,700 - - 1,886,700
--------- --------- ------ ---------
Total Equity Securities 2,445,656 1,076,415 (9,586) 3,512,485
--------- --------- ------ ---------
$26,825,313 $1,100,936 $(687,445) $27,238,804
=========== ========== ========= ===========
December 31, 1998
Debt Securities
U.S. Agency securities $5,497,441 $ 104,134 $ - $5,601,575
U.S. Agency mortgage-backed securities 15,803,325 70,322 (5,140) 15,868,507
---------- ------ ------ ----------
Total Debt Securities 21,300,766 174,456 (5,140) 21,470,082
---------- ------- ------ ----------
Equity Securities
FHLMC stock 23,459 1,520,335 - 1,543,794
Mutual funds
ARM portfolio 1,036,085 505 (5,305) 1,031,285
Mortgage securities performance portfolio 2,936,437 - (8,032) 2,928,405
FHLB stock 1,753,900 - - 1,753,900
--------- --------- ----- ---------
Total Equity Securities 5,749,881 1,520,840 (13,337) 7,257,384
--------- --------- ------- ---------
$27,050,647 $1,695,296 $(18,477) $28,727,466
=========== ========== ======== ===========
18
Gross Gross
Amortized Unrealized Unrealized Fair
Securities Held-to-Maturity Cost Gains Losses Value
December 31, 1999
U.S. Agency securities $2,000,000 $ - $(19,690) $1,980,310
State and other political subdivisions 173,278 - - 173,278
U.S. Agency mortgage-backed securities 5,064,413 73,263 (14,155) 5,123,521
--------- ------ ------- ---------
$7,237,691 $ 73,263 $(33,845) $7,277,109
========== ========= ======== ==========
December 31, 1998
U.S. Agency securities $ 501,286 $ 13,089 $ - $ 514,375
State and other politicaL subdivisions 175,949 - - 175,949
U.S. Agency mortgage-backed securities 4,658,465 125,433 - 4,783,898
--------- ------- ---- ---------
$5,335,700 $ 138,522 $ - $5,474,222
========== ========= ==== ==========
The amortized cost and fair value of debt securities at December 31, 1999, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Available for Sale Held to Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Due in one year or less $ - $ - $ - $ -
Due after one year through five years 8,000,000 7,782,125 - -
Due after five years through ten years 5,999,671 5,793,030 173,278 173,278
Due after ten years - - 2,000,000 1,980,310
--------- --------- --------- ---------
13,999,671 13,575,155 2,173,278 2,153,588
Mortgage-backed securities 10,379,986 10,151,164 5,064,413 5,123,521
---------- ---------- --------- ---------
$24,379,657 $23,726,319 $7,237,691 $7,277,109
=========== =========== ========== ==========
Sales of securities available for sale during the years ended December 31
follows:
Proceeds Gross Gains Gross Losses
-------- ----------- ------------
1999 $3,440,721 $33,096 $(29,906)
1998 $3,129,251 $127,048 $(46,108)
Tri-County pledges investments for public deposits held in excess of $100,000
(see Note 5). The carrying and fair values of the pledged investments at
December 31 follows:
Carrying Fair
Value Value
1999 $11,751,071 $11,346,968
1998 $9,769,442 $9,830,029
19
NOTE 3 - LOANS RECEIVABLE
December 31,
1999 1998
---- ----
Real estate - mortgage $34,657,019 $32,403,370
Real estate - commercial 7,070,295 6,141,006
Real estate - agriculture 2,580,403 -
Real estate - construction 564,900 414,250
Commercial 810,791 449,949
Installment loans to individuals 4,033,212 3,310,068
--------- ---------
49,716,620 42,718,643
Less:
Allowance for loan losses (464,453) (409,984)
Unadvanced loan funds (196,639) (176,848)
Deferred loan fees (75,645) (77,589)
------- -------
$48,979,883 $42,054,222
=========== ===========
A summary of the changes in the allowance for loan losses is as follows:
Years Ended December 31,
1999 1998
---- ----
Beginning of the period $409,984 $412,456
Provision for losses - -
Loan charge-offs (16,101) (2,738)
Recoveries 70,570 266
------ ---
$464,453 $409,984
======== ========
Loans serviced for others are not included in the accompanying consolidated
statements of financial condition. The unpaid principal balances of mortgage
loans serviced for others at December 31 were $2,492,400 (1999) and $586,000
(1998). The balance of capitalized rights, net of valuation allowances, included
in other assets at December 31 was $14,599 (1999) and $3,692 (1998).
NOTE 4 - PROPERTY AND EQUIPMENT
December 31,
1999 1998
---- ----
Land $ 791,634 $ 65,776
Building and improvements 1,115,984 1,115,984
Furniture, fixtures and equipment 654,367 614,764
Construction-in-progress 578,677 -
------- ---------
3,140,662 1,796,524
Less accumulated depreciation (1,112,374) (995,383)
---------- --------
$2,028,288 $ 801,141
========== =========
Depreciation expense for the years ended December 31 was $116,991 (1999) and
$115,365 (1998).
20
NOTE 5 - DEPOSITS
At December 31, 1999, scheduled maturities of certificates of deposit were as
follows:
Year
----
2000 $28,340,773
2001 5,078,502
2002 878,238
2003 290,074
-------
$34,587,587
===========
The Federal Deposit Insurance Corporation (FDIC), an agency of the U.S.
Government, insures all depositors up to $100,000 in accordance with the rules
and regulations of the FDIC. Deposits in excess of $100,000 at December 31 were
$8,760,495 (1999) and $5,200,407 (1998) (see Note 2).
NOTE 6 - ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the FHLB at December 31 were $25,558,367 (1999) and $23,799,117
(1998). The following table summarizes the maturities of the FHLB advances:
Year
----
2000 4.71% - 6.08% $7,225,000
2001 5.39% - 6.74% 5,550,000
2002 5.59% 2,000,000
2003 5.10% 1,000,000
2004 4.97% - 5.45% 5,000,000
Thereafter 5.45% - 6.13% 4,783,367
----------
$25,558,367
===========
Pursuant to a blanket pledge agreement with the FHLB, the advances are secured
by the FHLB stock, real estate loans and other securities not otherwise pledged.
NOTE 7 - INCOME TAXES
The provisions for federal income taxes are as follows:
Years ended December 31,
1999 1998
---- ----
Current $312,440 $438,614
Deferred 54,000 (23,000)
------ -------
$366,440 $415,614
======== ========
21
Deferred income taxes and benefits are provided for significant income and
expense items recognized in different years for tax and financial reporting
purposes. Temporary differences which give rise to significant deferred tax
assets (liabilities) follow:
December 31,
1999 1998
---- ----
Joint venture income $ - $ 32,000
Loan origination fees 1,278 4,000
Bad debt reserve 159,722 139,000
Net unrealized loss on available for sale securities 225,394 4,300
Less: valuation allowance - -
------- -------
Total Deferred Assets 386,394 179,300
------- -------
Federal Home Loan Bank stock dividends (412,046) (366,900)
Net unrealized gain on available for sale securities (365,981) (574,482)
Accelerated depreciation (19,954) (25,037)
------- -------
Total Deferred Liabilities (797,981) (966,419)
-------- --------
Net Deferred Liabilities $(411,587) $(787,119)
========= =========
Total income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent in 1999 and 1998 to income before income
taxes as a result of the following:
Years ended December 31,
1999 1998
---- ----
Normal "expected" corporate taxes $392,350 $460,250
Change in tax provision resulting from
Income tax refunds (17,000) (15,500)
Other (8,910) (29,136)
------ -------
$366,440 $415,614
======== ========
Tri-County and its subsidiaries file a consolidated income tax return. Excess of
bad debt reserves for income tax purposes over book provision for the Bank at
December 31, 1999 were approximately $1,453,000. No deferred income tax
liability has been provided for these reserves. If such reserves are used for
purposes other than to absorb the Bank's bad debts, the amount used is subject
to the then current federal corporate tax rates. Tri-County and its subsidiaries
are not subject to state income taxes.
NOTE 8 - RELATED PARTY TRANSACTIONS
Tri-County has had, and may be expected to have in the future, financial
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which they are
principal stockholders (commonly referred to as related parties), all of which
have been made in compliance with federal regulations.
Activity in loans to related parties for the years ended December 31 is as
follows:
1999 1998
---- ----
Balance, beginning of year $159,494 $147,593
New loans 266,112 91,420
Repayments (290,318) (79,519)
-------- -------
Balance, end of year $135,288 $159,494
======== ========
22
Terms and rates of interest on deposit accounts of directors and officers are
substantially the same as those extended to unrelated Tri-County customers. At
December 31 deposits of related parties totaled $299,582 (1999) and
$436,815(1998).
NOTE 9 - EMPLOYEE RETIREMENT PLAN
Tri-County sponsors a 401(k) plan where Tri-County matches up to 3% of the
employees qualifying compensation. Employees may contribute up to 10% of their
qualifying compensation. Tri-County's expense was $19,686 (1999) and $18,489
(1998).
NOTE 10 - STOCK REPURCHASE PLAN
On October 16, 1998, the board of directors of Tri-County authorized a stock
repurchase plan (the Plan). The Plan provided for the purchase of up to $4.5
million (including expenses) of the shares of its common stock, $0.10 par value
for cash. On December 9, 1998, the Plan culminated with the purchase of 314,125
shares at $14 per share. Including expenses, $4,489,033 was recorded in the
accompanying consolidated statement of stockholders' equity as an addition to
Treasury Stock. In 1999, the board of directors authorized stock repurchase on
an individual transaction basis. The Company repurchased 750 shares for $13,043.
NOTE 11 - STOCK BENEFIT PLANS
Stock Option Plan
Tri-County adopted a stock option plan (Option Plan) whereby stock options of
149,500 common shares may be granted to directors and officers of the Bank.
Options granted under the Option Plan may be either options that qualify as
Incentive Stock Options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended, or options that do not qualify. In the event of a change in
control, as defined, all options are immediately exercisable.
On September 28, 1993, qualified stock options were granted for the purchase of
143,522 shares exercisable at the market price at the date of grant of $5 per
share. All options expire ten years from the date of the grant. The options
vested over a 5 year period.
A summary of Tri-County's Option Plan as of December 31 follows:
1999 1998
---- ----
Exercise Exercise
Shares Price Shares Price
------ ------ ------ -----
Outstanding, beginning of the year 118,097 $5.00 143,522 $5.00
Granted - - - -
Exercised (28,186) $5.00 (25,425) $5.00
Canceled - - - -
------ ------
Outstanding, end of the year 89,911 $5.00 118,097 $5.00
====== =======
Options exercisable at the end of the year 89,911 $5.00 118,097 $5.00
Employee Stock Ownership Plan
Tri-County sponsors an employee stock ownership plan (ESOP) that covers
substantially all employees. Tri-County issued stock for a note receivable from
the ESOP, which is unconditionally guaranteed by the Bank. The note is at prime
(determined at the beginning of each quarter), payable quarterly through the
third quarter of 2003 and is included in the accompanying consolidated financial
statements as a reduction in stockholders' equity. At December 31 the balance of
the note was $224,250 (1999) and $284,050 (1998).
23
The ESOP loan payments are provided by the Bank's contributions to the ESOP and
by dividends received on Tri-County's stock held by the ESOP's trustee. Through
the second quarter of 1999, the Bank's ESOP contributions were based on the
note's scheduled principal and interest payments, net of Tri-County cash
dividends received. Beginning with the third quarter of 1999, Tri-County's board
of directors elected to have dividends received by the ESOP allocated directly
to plan participants.
The shares held by the ESOP are released in the proportion each year's principal
payment bears to the total principal payments. Released stock is allocated based
on the ratio of each participating employee's eligible compensation to the total
eligible compensation. Currently, shares are released at 11,960 shares per year.
The Bank's ESOP contributions are recorded as compensation expense and totaled
$117,372 (1999) and $133,524 (1998). Dividends used to satisfy note payments
were $38,419 (1999) and $51,428 (1998). As of December 31 the ESOP held 44,850
(1999) and 56,810 (1998) unallocated shares. The unallocated shares' fair value
at December 31 (based on NASDAQ) was $464,601 (1999) and $704,444 (1998).
Management Stock Bonus Plan
Tri-County and the Bank adopted a management stock bonus plan (MSBP) to enable
the Bank to attract and retain experienced and capable personnel in key
positions of responsibility. A total of 59,800 shares of restricted stock were
awarded on September 28, 1993, the conversion date, in the form of restricted
stock payable over a five-year vesting period, at 20 percent per year, beginning
September 28, 1994. Tri-County recognized compensation expense in the amount of
the fair market value of the common stock at the grant date, prorata over the
years during which the shares were payable. The unvested shares were entitled to
all voting and other stockholder rights, except that the shares, while
restricted, cannot be sold, pledged or otherwise disposed of, and are required
to be held in escrow.
Through December 31, 1997, unamortized deferred compensation related to the MSBP
is deducted from stockholders' equity. As of December 31, 1998, all MSBP shares
were distributed and all deferred compensation expense recognized.
NOTE 12 - REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators. These actions, if undertaken, could have a direct material effect on
the Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, banks must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. Bank's capital amounts and classifications are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require banks to maintain minimum amounts and ratios of total and Tier 1 capital
(as defined in the regulations) to risk-weighted assets (as defined). Management
believes that, as of December 31, 1999, the Bank meets all capital adequacy
requirements to which it is subject.
As of December 31, 1999, the most recent notification from applicable regulatory
agencies categorize the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the Bank
must maintain minimum ratios as set forth in the following table (amounts in
thousands):
24
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
-----------------------------------------------------
Dollars Ratio Dollars Ratio Dollars Ratio
------- ----- ------- ----- ------- -----
December 31, 1999
Total Capital (to risk-weighted assets) $9,164 22.6% $3,250 8.0% $4,063 10.0%
Tier 1 Capital (to risk-weighted assets) $8,216 20.2% $1,625 4.0% $2,438 6.0%
Tier 1 Capital (to adjusted total assets) $8,216 9.4% $3,495 4.0% $4,369 5.0%
December 31, 1998
Total Capital (to risk-weighted assets) $8,717 25.1% $2,783 8.0% $3,479 10.0%
Tier 1 Capital (to risk-weighted assets) $8,307 23.9% $1,392 4.0% $2,087 6.0%
Tier 1 Capital (to adjusted total assets) $8,307 10.4% $3,195 4.0% $3,993 5.0%
NOTE 13 - OFF-BALANCE SHEET ACTIVITIES
In the normal course of business, Tri-County enters into commitments to extend
credit with off-balance-sheet risk to meet the financing needs of its customers.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. As some commitments normally expire without
being drawn upon, the total commitment amount does not necessarily represent
future cash requirements.
Tri-County evaluates each customer's credit worthiness on a case-by-case basis,
using the same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments. The amount and type of collateral
obtained, if deemed necessary by Tri-County upon extension of credit, is based
upon management's credit evaluation. Tri-County's underwriting policies for
mortgage loans generally require a maximum loan-to-value of 80% for owner
occupied residential loans and 75% on non-owner occupied one-to-four family
loans. Owner occupied residential loans in excess of 80% are generally required
to obtain private mortgage insurance.
Tri-County had the following commitments at December 31, 1999:
Loan commitments $1,680,490
Lines of credit $1,677,701
Available overdraft protection $ 193,666
The loan commitments ($299,819 fixed rate and $1,380,671 adjustable rate) are at
interest rates ranging from 6.27% to 8.5%. Tri-County's loan commitments include
commitments to purchase loans in western Colorado ($387,000) as well as
commitments to extend credit to customers in Tri-County's market area.
Tri-County's market area primarily consists of eastern Wyoming. Agriculture and
related support industries are a significant factor in the primary market area's
economy.
25
Tri-County purchases loans in other market areas through mortgage banking
relationships. The majority of the purchased loans are in certain resort areas
of Colorado and Idaho. These loans comprise approximately 43% of the loan
portfolio.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Construction-in-Progress
Tri-County is building a branch office in Cheyenne, Wyoming and anticipates it
will be completed in March 2000. Construction costs through December 31, 1999
are included in the accompanying consolidated statement of financial position
(see Note 4). Subsequent to December 31, 1999, approximately $178,000 in costs
have been incurred in the construction of the building.
Estimated cost to complete the building is $438,700.
Self-Insured Health Plan
The Bank sponsors a self-insured health plan for eligible employees. The Plan
provides for payment by the Bank of health claims up to $3,000 per eligible
employee, with reinsurance coverage for all claims greater than $3,000. An
estimate of claims incurred but not reported and claims reported but not funded
is included in accounts payable at December 31, 1999 and 1998.
Year 2000 Compliance
Tri-County relies upon computers for the daily conduct of its business and for
general data processing. Accordingly, a Year 2000 Contingency Plan (the Plan)
was developed and implemented by the Bank to address year 2000 issues. The
Bank's ability to process data and provide financial services and products was
unaffected by the change to the year 2000. The Plan identified dates beyond
January 1, 2000 as potential problem dates; therefore, the Bank is continuing to
monitor these dates. It is the Bank's assertion that its plan and procedures are
adequate to mitigate any adverse outcomes.
Other
In the normal course of business, Tri-County is involved in various legal
actions arising from its lending and collection activities. In the opinion of
management, the outcome of these legal actions will not significantly affect the
consolidated financial position of Tri-County.
NOTE 15 - STOCKHOLDERS' EQUITY
In 1993, Tri-County was formed when the Bank converted from a mutual to a stock
form of ownership. A "liquidation account" was established that restricts a
portion of net worth for the benefit of deposit accounts at the Bank at the time
of the conversion. Eligible account holders who close their accounts cause a
corresponding reduction in the liquidation account. Except for the repurchase of
stock, payment of dividends and complete liquidation, the existence of the
account does not restrict the use of the Bank's net worth. At December 31, 1999,
the liquidation account was $1,328,247 as compared to $6,432,095 at inception.
Payment of dividends to Tri-County by the Bank are subject to the above
restriction as well as various other regulatory restrictions and approvals.
26
NOTE 16 - COMPREHENSIVE INCOME
Effective January 1, 1998, Tri-County adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial condition. Tri-County's only item of other comprehensive
income is the unrealized gain (loss) on securities available for sale, which is
reported net of tax effect. The following schedule reflects the unrealized
holding gains arising during the years ended December 31, 1999 and 1998:
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
1999
Unrealized holding losses arising during the period $(1,259,632) $ 428,274 $(831,358)
Less reclassification adjustment for gains realized in net earnings (3,696) 1,257 (2,439)
------ ----- ------
Net Unrealized Losses $(1,263,328) $ 429,531 $(833,797)
=========== ========= =========
1998
Unrealized holding gains arising during the period $ 519,159 $(176,514) $342,645
Less reclassification adjustment for gains realized in net earnings (80,940) 27,520 (53,420)
------- ------ -------
Net Unrealized Gains $ 438,219 $(148,994) $289,225
========= ========= ========
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the amount at which a financial instrument could be exchanged in a
current transaction between willing parties, other than in a forced sale or
liquidation, and is best evidenced by a quoted market price, if one exists.
Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and relevant market information.
Where available, quoted market prices are used. In other cases, fair values are
based on estimates using present value or other valuation techniques. These
techniques involve uncertainties and are significantly affected by the
assumptions used and judgments made regarding risk characteristics of various
financial instruments, discount rates, estimates of future cash flows, future
expected loss experience and other factors. Changes in assumptions could
significantly affect these estimates and the resulting fair values. Derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in an immediate sale of the
instrument. Also, because of differences in methodologies and assumptions used
to estimate fair values, Tri-County's fair values should not be compared to
those of other financial institutions.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments.
Accordingly, the aggregate fair value amounts presented do not purport to
represent the underlying market of Tri-County.
The following summary presents the methodologies and assumptions used to
estimate the fair value of Tri-County's financial instruments.
Assets for Which Fair Value Approximates Carrying Value: The fair value of
certain financial assets carried at cost, including cash and due from banks,
deposits with banks, and accrued interest receivable are considered to
approximate their respective carrying values due to their short-term nature and
negligible credit losses. In addition, as discussed in Note 1, Tri-County valued
loans held for sale at fair value.
27
Federal Home Loan Bank Stock: As discussed in Note 1, the stock's fair value
approximates carrying value due to the limited marketability.
Securities: Held to maturity securities are carried at amortized costs.
Available for sale securities are carried at fair value. Fair value of actively
traded securities is determined by the secondary market, while the fair value of
nonactively traded securities is based on independent broker quotations.
Loans: Loans are valued using methodologies suitable for each loan type.
Variable rate loans that reprice frequently and have no significant change in
credit risk, fair value is assumed to approximate carrying amount. Fair value of
other loans is estimated using a discounted cash flow analysis based on interest
rates currently offered for similar loan products.
Liabilities for Which Fair Value Approximates Carrying Value: The fair value of
accounts payable, accrued liabilities and accrued interest payable is considered
to approximate their respective book values due to their short-term nature. By
definition, fair values of deposits with no stated maturities, such as demand
deposits, savings and NOW accounts and money market deposit accounts are equal
to the amounts payable on demand at the reporting date.
Time Deposits: The fair value of time deposits is estimated by discounting cash
flows based on contractual maturities at current interest rates offered for
similar products.
Long-Term Debt: The valuation of long-term debt with floating rates is estimated
to be the same as carrying value. Fair value of long-term debt with fixed rates
is estimated based on quoted market prices for similar issues, or by using
current rates offered to Tri-County for debt of the same remaining maturity.
Unused Commitments and Lines of Credit: Tri-County has reviewed the unfunded
portion of commitments to extend credit as well as lines of credit and available
overdraft protection. The fair value of such financial instruments is considered
to equal the amounts payable on demand at the reporting date.
Following are the estimated fair values of Tri-County's financial instruments:
December 31, 1999 December 31, 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
Financial assets
Assets for which fair value approximates book value $ 2,958,900 $ 2,958,900 $ 4,250,783 $ 4,250,783
Securities $34,476,495 $34,515,913 $34,063,166 $34,201,688
Loans $48,979,883 $48,646,126 $42,054,222 $42,667,077
Financial liabilities
Liabilities for which fair value approximates book value $17,591,812 $17,591,812 $15,420,663 $15,420,663
Time deposits $34,587,587 $34,577,196 $30,770,264 $30,892,273
Long-term debt $25,558,367 $25,034,584 $23,799,117 $23,862,484
Off-balance sheet commitments $ 3,551,857 $ 3,551,857 $ 1,798,800 $ 1,798,800
28
NOTE 18 - PARENT COMPANY FINANCIAL INFORMATION
CONDENSED PARENT COMPANY ONLY
STATEMENTS OF CONDITION
December 31,
1999 1998
---- ----
Assets
Cash $ 249,071 $ 157,539
Investment in subsidiary 8,440,088 8,591,255
Securities available for sale 526,499 530,780
Other assets, net 760,974 32,770
------- ------
Total Assets $9,976,632 $9,312,344
========== ==========
Liabilities and stockholders' equity
Other liabilities $ 5,071 $ 1,879
Stockholders' equity 9,971,561 9,310,465
--------- ---------
Total Liabilities and Stockholders' Equity $9,976,632 $9,312,344
========== ==========
STATEMENTS OF OPERATIONS
Years ended December 31,
1999 1998
---- ----
Revenue
Equity in earnings of subsidiary $ 775,616 $ 917,644
Other income 49,020 57,285
Expense
Operating expenses (47,254) (52,416)
Income tax benefit 17,000 15,550
------ ------
Net Income $794,382 $ 938,063
======== =========
29
STATEMENTS OF CASH FLOWS
Years ended December 31,
1999 1998
---- ----
Operating activities
Net income $ 794,382 $ 938,063
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Earnings of subsidiary (775,616) (917,644)
Amortization of organization expense - 801
(Increase) decrease in other assets and accrued liabilities 2,301 8,386
----- -----
Net Cash Provided (Used) by Operating Activities 21,067 29,606
------ ------
Investing activities
Purchase of property (725,858) -
Dividends received 1,000,000 4,650,000
--------- ---------
Net Cash Provided by Investing Activities 274,142 4,650,000
------- ---------
Financing activities
Dividends paid (391,363) (470,268)
Stock options exercised 140,929 127,126
ESOP payments received 59,800 59,800
Treasury stock purchased (13,043) (4,489,033)
------- ----------
Net Cash Used by Financing Activities (203,677) (4,772,375)
-------- ----------
Net Increase (Decrease) in Cash 91,532 (92,769)
Cash and cash equivalents - beginning of period 157,539 250,308
------- -------
Cash and cash equivalents - end of period $ 249,071 $ 157,539
========= =========
30
DIRECTORS
LARRY C. GODDARD, Chairman
ROBERT L. SAVAGE, President & Chief Executive Officer
CARL F. RUPP, Secretary
LANCE H. GRIGGS
DAVID C. KELLAM
WILLIAM J. RUEB
AUDITORS
DALBY, WENDLAND & CO., P.C.
464 Main Street, P.O. Box 430
Grand Junction, Colorado 81502
LEGAL COUNSEL
JOHN MAIER
110 West 22nd Avenue
Torrington, Wyoming 82240
SPECIAL COUNSEL
MALIZIA SPIDI & FISCH, PC
1301 K Street, N.W., Suite 700 E
Washington, D.C. 20005
REGISTRAR AND STOCK TRANSFER AGENT
Inquiries regarding stock transfer, registration, lost certificates or changes
in name and/or address should be directed to the stock transfer agent and
registrar in writing.
ATTN: Investor Relations
AMERICAN SECURITIES TRANSFER & TRUST, INC.
12039 West Alameda Parkway, Suite Z-2
Lakewood, Colorado 80228
MARKET MAKERS
The following firms are currently market makers in the Company's shares:
Keefe, Bruyette & Woods, Inc. - New York, New York
Spear, Leeds & Kellogg - New York, New York
FORM 10-KSB
A copy of Form 10-KSB for the year ended December 31, 1999, excluding exhibits,
as filed with the Securities and Exchange Commission, will be furnished without
charge to stockholders upon request to the Secretary, Tri-County Bancorp, Inc.,
P.O. Box 1057, Torrington, Wyoming 82240.
ANNUAL MEETING
The annual meeting of stockholders of Tri-County Bancorp, Inc. will be held
at 3:00 p.m. on April 26, 2000 at Tri-County Bank's main office, 2201 Main
Street, Torrington, Wyoming.
31
MAIN OFFICE 2201 Main Street, P.O. Box 1057 Torrington, Wyoming 82240
Telephone - (307) 532-2111
Fax - (307) 532-7631
Email - email@tricobank.com
Web Site - www.tricobank.com
BRANCH OFFICES
957 Maple, P.O. Box 337
Wheatland, Wyoming 82201
Telephone - (307) 322-9215
Fax - (307) 322-4080
421 Vandehei Avenue, P.O. Box 3260
Cheyenne, Wyoming 82003
Telephone - (307) 778-0021
Fax - (307) 778-0022
EXECUTIVE OFFICERS
Robert L. Savage
President & Chief Executive Officer
Joseph P. Guth
Executive Vice President
Earl F. Warren, Jr.
Senior Vice President
Tommy A. Gardner
Vice President & Chief Financial Officer
STAFF
Thomas W. Bass, President & Branch Manager
Roseanne L. Burnett, Vice President & Branch Manager
Jane E. Faber, Assistant Secretary
Richard R. Yates, Vice President
Pamela D. Cundall
Pam J. Heilbrun
Colleen M. Holtzclaw
Nancy A. Martin
Brita F. Mehling
Terri J. Pindell
Cheryl A. Rutt
Becky J. Shaffer
Linda L. Smith
Darlene L. Sorge
Debra K. Stoeger
Lynette K. Strecker
Scott L. Vasko
Mona Kay Williams
32
APPENDIX E
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
----------------------- ------------------
Commission file number 0-22220
---------------------------
TRI-COUNTY BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
WYOMING
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)
83-0304855
- --------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)
2201 MAIN STREET, TORRINGTON, WY 82240
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code (307) 532-2111
-----------------------------
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
The number of shares outstanding of each of the issuer's classes of common stock
as of October 31, 2000.
Class Outstanding
- ------------------------------- ----------------------------------------
$.10 par value common stock 875,494
Transitional Small Business Disclosure Format (check one): Yes No X
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Financial
Condition as of September 30, 2000 and
December 31, 1999 (unaudited).............................3
Condensed Consolidated Statements of Operations
for the Three Months and Nine Months Ended
September 30, 2000 and 1999 (unaudited)...................4
Condensed Consolidated Statements of Stockholder's Equity
for the Nine Months Ended September 30, 2000
and 1999 (unaudited)......................................5
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2000
and 1999 (unaudited)......................................6
Notes to Condensed Consolidated Financial Statements......7
Item 2. Management's Discussion and Analysis or Plan
of Operation..............................................9
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................17
Item 2. Changes in Securities....................................17
Item 3. Default Upon Senior Securities...........................17
Item 4. Submissions of Matters to a Vote of Security Holders.....17
Item 5. Other Information........................................17
Item 6. Exhibits and Reports on Form 8-K.........................17
SIGNATURES........................................................18
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
September 30, December 31,
2000 1999
(unaudited)
---------------------------
ASSETS
Cash and due from banks $ 1,286,004 $ 1,187,935
Interest-bearing deposits with banks 362,774 1,128,404
Securities available for sale, at fair value 26,150,273 27,238,804
Securities held to maturity, market value of
$7,252,142 (2000) and $7,277,109 (1999) 7,201,859 7,237,691
Loans held for sale, at market value 88,227 -
Loans receivable, net of allowance for loan losses of
$464,000 (2000) and $464,453 (1999) 58,766,590 48,979,883
Accrued interest receivable 869,396 642,561
Bank property and equipment 2,712,412 2,028,288
Other assets 91,821 72,270
------ ------
Total Assets $97,529,356 $88,515,836
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 1,461,195 $ 997,117
Savings and NOW deposits 16,486,457 16,224,450
Time deposits 36,493,222 34,587,587
---------- ----------
Total Deposits 54,440,874 51,809,154
Advance from Federal Home Loan Bank 31,712,742 25,558,367
Accounts payable and accrued expenses 349,856 370,245
Advances by borrowers for taxes and insurance 149,707 115,691
Deferred income taxes 588,958 411,587
------- -------
Total Liabilities 87,242,137 78,265,044
---------- ----------
Stockholders' Equity
Preferred stock, $.10 par value, 5,000,000 shares
authorized, none issued - -
Common stock, 10,000,000 share of $.10 par value
authorized, 1,561,345 (2000) and
1,548,611 (1999) shares issued 156,135 154,861
Additional paid-in capital 7,636,346 7,530,906
Retained earnings - substantially restricted 9,665,932 9,663,761
Unearned compensation relating to Employee Stock
Ownership Plan (179,400) (224,250)
Accumulated other comprehensive income 560,919 272,904
Treasury stock, 685,851 (2000) and 642,377 (1999)
shares, at cost (7,552,713) (7,147,390)
---------- ----------
Total Stockholders' Equity 10,287,219 10,250,792
---------- ----------
Total Liabilities and Stockholders' Equity $97,529,356 $88,515,836
=========== ===========
See notes to condensed consolidated financial statements.
-3-
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
2000 1999 2000 1999
-------------------------------------------------------------
Interest Income
Loans $1,227,915 $ 933,777 $3,330,965 $2,700,684
Securities available for sale 421,152 450,443 1,275,566 1,333,059
Securities held to maturity 143,640 106,157 436,033 279,708
Other interest earning assets 4,085 6,674 17,219 55,024
----- ----- ------ ------
Total Interest Income 1,796,792 1,497,051 5,059,783 4,368,475
--------- --------- --------- ---------
Interest Expense
Deposits 678,342 507,461 1,870,223 1,493,926
Advances and other borrowings 505,183 363,465 1,327,248 1,017,048
------- ------- --------- ---------
Total Interest Expense 1,183,525 870,926 3,197,471 2,510,974
--------- ------- --------- ---------
Net Interest Income 613,267 626,125 1,862,312 1,857,501
------- ------- --------- ---------
Provision for credit losses - - - -
------- ------- --------- ---------
Net Interest Income After Provision
for Credit Losses 613,267 626,125 1,862,312 1,857,501
------- ------- --------- ---------
Non-interest Income
Gain on sale of loans 3,114 9,060 18,729 35,468
Gain (loss) on sale of
available-for-sale securities - - (6,157) 3,696
Service charges on deposits 42,585 35,560 120,207 97,147
Other, net 16,586 9,557 41,956 22,305
------ ----- ------ ------
Total Non-interest Income 62,285 54,177 174,735 158,616
------ ------ ------- -------
Non-interest Expense
Compensation and benefits 338,341 256,482 950,885 680,057
Occupancy and equipment 110,521 80,080 305,150 245,761
Federal deposit insurance premium 2,665 6,718 7,864 20,183
Other, net 98,252 85,866 331,758 242,490
------ ------ ------- -------
Total Non-interest Expense 549,779 429,146 1,595,657 1,188,491
------- ------- --------- ---------
Earnings Before Income Taxes 125,773 251,156 441,390 827,626
Provision for Income Taxes 47,600 81,940 151,300 275,640
------ ------ ------- -------
Net Earnings $ 78,173 $ 169,216 $ 290,090 $ 551,986
========== ========== ========== ==========
Earnings Per Common Share - Diluted $0.09 $0.20 $0.32 $0.59
===== ===== ===== =====
Cash Dividend Paid Per Common Share $0.11 $0.11 $0.33 $0.33
===== ===== ===== =====
See notes to condensed consolidated financial statements.
-4-
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1999 and 2000
(unaudited)
Employee Accumulated
Additional Stock Other
Common Paid-In Retained Ownership Comprehensive Treasury
Stock Capital Earnings Plan Income Stock Total
----------------------------------------------------------------------------------------
Balance - December 31, 1998 $152,043 $7,319,578 $9,260,742 ($284,050) $1,106,701 ($7,134,347) $10,420,667
Net earnings - - 551,986 - - - 551,986
Other comprehensive income:
Unrealized market adjustments, net of
tax and reclassification adjustment (625,527) (625,527)
----------------------------------------------------------------------------------------
Comprehensive income - - 551,986 - (625,527) - (73,541)
----------------------------------------------------------------------------------------
Repayment of ESOP debt - - - 44,850 - - 44,850
Allocation of ESOP shares - 60,033 - - - - 60,033
Dividends paid - cash - - (291,677) - - - (291,677)
Stock options exercised 1,297 63,553 - - - - 64,850
Treasury stock purchased - - - - - (13,043) (13,043)
-------- ---------- ---------- --------- -------- ----------- -----------
Balance - September 30, 1999 $153,340 $7,443,164 $9,521,051 ($239,200) $481,174 ($7,147,390) $10,212,139
======== ========== ========== ========= ======== =========== ===========
Balance - December 31, 1999 $154,861 $7,530,906 $9,663,761 ($224,250) $272,904 ($7,147,390) $10,250,792
Net earnings - - 290,090 - - - 290,090
Other comprehensive income:
Unrealized market adjustments, net of
tax and reclassification adjustment 288,015 288,015
----------------------------------------------------------------------------------------
Comprehensive income - - 290,090 - 288,015 - 578,105
----------------------------------------------------------------------------------------
Repayment of ESOP debt - - - 44,850 - - 44,850
Allocation of ESOP shares - 43,044 - - - - 43,044
Dividends paid - cash - - (287,918) - - - (287,918)
Stock options exercised 1,272 62,397 - - - - 63,669
Treasury stock purchased - - - - - (405,323) (405,323)
-------- ---------- ---------- --------- -------- -------- --------
Balance - September 30, 2000 $156,133 $7,636,347 $9,665,933 ($179,400) $560,919 ($7,552,713) $10,287,219
======== ========== ========== ========= ======== =========== ===========
See notes to condensed consolidated financial statements.
-5-
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
2000 1999
-------------------------
Operating Activities
Net Income $290,090 $551,986
Adjustments to reconcile net income to net cash provided
(used) by operations
Depreciation and amortization 101,415 115,787
Provision for deferred taxes 29,000 29,998
Loss (Gain) on sale of securities available for sale 6,157 (3,696)
Gain on sale of loans (10,509) (24,567)
FHLB stock dividend received (93,100) (99,000)
Changes in assets and liabilities
Origination of loans held for sale (838,966) (2,767,195)
Proceeds from sale of loans held for sale 761,248 2,668,196
Accrued interest receiveable (226,836) (202,373)
Other assets, net (76,536) 132,926
Other liabilities, net 79,637 30,153
------ ------
Net Cash Provided (Used) by Operations $21,600 $432,215
------- --------
Investing Activities
Net loan originations and principal repayments on loans $(629,527) $(642,301)
Purchase of loans (9,157,178) (4,297,922)
Activity in available for sale securities
Sales proceeds 320,000 3,440,720
Maturities, prepayments and calls 1,284,940 5,845,007
Purchases - (9,499,419)
Activity in hold to maturity securities
Maturities, prepayments and calls 1,030,424 1,167,112
Purchases (995,000) (2,998,975)
Investment in property and equipment (778,211) (989,712)
-------- --------
Net Cash Provided (Used) by Investing Activities $(8,924,552) $(7,975,490)
----------- -----------
Financing Activities
Net increase (decrease) in deposits $2,631,720 $1,817,045
Net increase (decrease) in advances from borrowers for
taxes and insurance 34,016 44,388
FHLB borrowings 29,715,000 10,200,000
Repayment of FHLB advance (23,560,625) (6,035,625)
Payments received from ESOP 44,850 44,850
Exercise of stock options 63,670 64,850
Treasury stock purchased (405,323) (13,043)
Cash dividends paid (287,917) (291,678)
-------- --------
Net Cash Provided (Used) by Financing Activities $8,235,391 $5,830,787
---------- ----------
Increase (Decrease) in Cash and Cash Equivalents $(667,561) $(1,712,488)
Cash and cash equivalents - beginning of period $2,316,339 $3,365,044
---------- ---------
Cash and cash equivalents - end of period $1,648,778 $1,652,556
========== ==========
Cash and due from banks $1,286,004 $1,242,346
Interest-bearing deposits with banks 362,774 410,210
------- -------
$1,648,778 $1,652,556
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest expense $3,277,156 $2,507,359
========== ==========
Income taxes $238,900 $255,400
======== ========
See notes to consolidated condensed financial statements.
-6-
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the accounts
of Tri-County Bancorp, Inc. (the "Company"), Tri-County Bank (formerly
Tri-County Federal Savings Bank) (the "Bank") and First Tri-County Services,
Inc. All significant intercompany balances and transactions have been eliminated
in consolidation.
The accompanying unaudited condensed consolidated financial statements were
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions for Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all information and disclosures
required by generally accepted accounting principles for complete financial
statements. The accompanying consolidated financial statements do not purport to
contain all the necessary financial disclosures required by generally accepted
accounting principles that might otherwise be necessary in the circumstances and
should be read together with the 1999 consolidated financial statements and
notes thereto of Tri-County Bancorp, Inc. and Subsidiaries included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
However, all normal recurring adjustments have been made which, in the opinion
of Management, are necessary to the fair presentation of the financial
statements.
The results of operations for the nine-month period ended September 30, 2000 are
not necessarily indicative of the results which may be expected for the year
ending December 31, 2000 or any other period.
See Notes 2 and 3.
NOTE 2 - EARNINGS PER SHARE
In February 1997, the FASB issued Statement No. 128, Earnings Per Share (SFAS
128). SFAS 128 replaced the calculation of primary and fully diluted earnings
per share (EPS) with basic and diluted EPS. Unlike primary EPS, basic EPS
excludes any dilutive effects of options, warrants, and convertible securities.
Diluted EPS is very similar to fully diluted EPS. All EPS amounts presented have
been restated, as applicable, to conform with the new requirements.
NOTE 3 - INVESTMENTS
Effective January 1, 1994, the Company adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. In accordance with SFAS No.
115, the Company classified its investment securities and mortgage-backed
securities as either "held to maturity," "available for sale," or "trading."
Management has determined that all applicable securities are either "held to
maturity" or "available for sale."
Investment and mortgage-backed securities designated as held to maturity are
stated at cost adjusted for amortization of the related premiums and accretion
of discounts, computed using the level yield method. The Company has the
positive intent and ability to hold these securities to maturity.
Investment and mortgage-backed securities designated as available for sale are
stated at estimated market value. Unrealized gains and losses are aggregated and
reported as a separate component of equity capital, net of deferred taxes. These
securities are acquired with the intent to hold them to maturity, but they are
available for disposal in the event of unforeseen liquidity needs.
-7-
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial statement and
(b) display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of a
statement of financial condition. The Company's only item of other comprehensive
income is the unrealized gain (loss) on securities available for sale, which is
reported net of tax effect. The following schedule reflects the unrealized
holding gains arising during the periods ended September 30, 2000 and 1999.
Before-Tax Tax Benefit Net-of-Tax
Amount or (Expense) Amount
---------- ------------ ----------
For the Nine Months ended September 30, 1999
Accumulated Comprehensive Income - Dec. 31, 1998 $1,676,820 ($570,119) $1,106,701
Unrealized hold gains (losses) arising during the period (951,465) 323,499 (627,966)
Gain (Loss) reclassification adjustment for gains
(losses) realized in net earnings 3,696 (1,257) 2,439
----- ------ -----
Accumulated Comprehensive Income - September 30, 1999 $729,051 ($247,877) $481,174
======== ========= ========
For the Nine Months ended September 30, 2000
Accumulated Comprehensive Income - Dec. 31, 1999 $413,491 ($140,587) $272,904
Unrealized hold gains (losses) arising during the period 442,543 (150,464) 292,079
Gain (Loss) reclassification adjustment for for gains
(losses) realized in net earnings (6,157) 2,093 (4,064)
------ ----- ------
Accumulated Comprehensive Income - September 30, 2000 $849,877 ($288,958) $560,919
======== ========= ========
On June 15, 1998, the financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133, effective for fiscal years beginning after June 15, 2000, establishes a new
model for accounting for derivatives and hedging activities. Upon the
Statement's initial application, all derivative instruments are required to be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. FASB also issued SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
SFAS No. 138 will be adopted concurrently with SFAS No. 133 on January 1, 2001.
Company management does not expect the adoption of SFAS No 133 and 138 to have a
material impact on the financial statements.
-8-
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis or Plan of Operation
GENERAL
Tri-County Bancorp, Inc. (the "Company") was incorporated on June 15, 1993, and
is the holding company of Tri-County Bank (the "Bank"). On September 28, 1993,
the Bank completed its conversion from a mutual savings and loan association to
a stock form of ownership at which time the Company issued 747,500 shares of
Common Stock and utilized a portion of the proceeds to acquire all of the issued
shares of the Bank.
The Company is headquartered in Torrington, Wyoming and its principal business
currently consists of the operation of its wholly owned subsidiary, Tri-County
Bank. The Bank's primary business is attracting retail deposits from the general
public and investing those deposits and other borrowed funds in various loan
products, including mortgage-backed and mortgage-related securities, federal
agency securities and other investment securities.
The Company's results of operations are dependent primarily on its net interest
income, which is the difference between the interest earned on its assets,
primarily its loans and securities portfolios, and its cost of funds, which
consists of the interest paid on its deposits and borrowings. The Company's net
income also is affected by its provision for loan losses as well as non-interest
income, compensation and benefits, occupancy expenses, Federal deposit insurance
premiums, other non-interest expenses, and income tax expense. Other
non-interest expenses consist of real estate lending operations, legal expenses,
accounting services and other miscellaneous costs. The earnings of the Company
are significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities.
CHANGES IN FINANCIAL CONDITION
ASSETS
Total assets of the Bank increased by $9.01 million or 10.18% during the first
nine months of 2000. The increase was primarily the result of increases in loans
receivable and bank property and equipment which more than offset decreases in
interest earning deposits and securities available for sale.
Securities available for sale decreased by $1.09 million during the nine months
ended September 30, 2000. The Bank redeemed shares in a mutual fund totaling
$326,000 and principal payments and prepayments of $1.28 million were received
on mortgage-backed securities which more than offset an increase of $436,000 in
the market value of the portfolio.
Securities held to maturity decreased by $36,000 during the first nine months of
2000. The decrease was the result of the receipt of principal payments and
prepayments of $1.03 million on the Bank's portfolio of mortgage-backed
securities, which more than offset the purchase of an agency security totaling
$995,000.
Loans receivable increased $9.79 million or 19.98% during the nine months ended
September 30, 2000. During this period the Bank originated or purchased
portfolio residential mortgage loans totaling $12.57 million, non-residential
mortgage loans totaling $1.72 million, consumer loans totaling $3.41 million,
and commercial loans totaling $3.87 million. During the same period the Bank
received scheduled principal payments and prepayments totaling $11.54 million on
its loan portfolio. Of the total mortgage loans originated or purchased during
the year, $9.58 million were adjustable rate and $4.71 million were fixed rate
loans. Because of a lack of demand for certain types of loans in the Bank's
primary lending area, purchased loans totaled 41% of total lending during the
period. The majority of purchased loans are residential and non-residential real
estate loans in Colorado and Idaho mountain resort communities and
non-residential real estate loans along the front range of Colorado. Purchased
loans are subjected to the same underwriting standards and loan terms as those
originated by the Bank for its portfolio.
-9-
Bank property and equipment increased by $684,000 and was primarily the result
of the completion of a new branch bank located in Cheyenne, Wyoming. The total
cost of the facility was $1.35 million and the opening date was April 3, 2000.
LIABILITIES
Total liabilities of the Bank increased $8.98 million or 11.47% during the first
nine months of 2000. Increases of $2.63 and $6.15 million in deposits and
Federal Home Loan Bank advances primarily caused the increase, respectively.
Deposit balances increased by $2.63 million or 5.08% from $51.81 million at
December 31, 1999 to $54.44 million at September 30, 2000. The increase
consisted of increases of $464,000, $262,000, and $1.91 million in demand
deposits, savings and NOW deposits, and time deposits, respectively.
Advances from the Federal Home Loan Bank ("FHLB") increased $6.15 million during
the first nine months of 2000. The advances are a supplement to the Bank's
retail deposits and were primarily used to fund loan originations and purchases.
Deferred income taxes increased by $177,000 during the year and was mainly the
result of the application of SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities, which requires unrealized gains and losses on
available for sale securities to be reported, net of deferred income taxes, as a
separate component of stockholders' equity. The market value of these securities
increased $436,000 during the period, which resulted in an increase in deferred
income taxes.
STOCKHOLDERS' EQUITY
Overall, stockholders' equity increased $36,000 during the first nine months of
2000.
The increase in additional paid-in capital of $105,000 was caused, in part, by
the application of an accounting standard which requires charging current
expense for the fair value of shares of stock committed to be released by the
Bank's Employee Stock Ownership Plan and crediting the difference between the
fair value and the cost of the shares to paid-in capital which resulted in an
increase of $43,000. Also, directors and officers of the Bank exercised options
on 12,734 shares of common stock, which increased additional paid-in capital by
$62,000.
The increase in retained earnings was the result of net earnings totaling
$290,000 which offset the decrease in retained earnings caused by the payments
of dividends of $0.33 per share totaling $288,000.
As discussed earlier, SFAS No. 115 requires unrealized gains and losses on
securities classified available for sale to be shown as a separate component of
stockholders' equity in an amount, which is net of deferred income taxes. The
market value of securities classified as available for sale increased during the
first nine months of 2000 and resulted in an increase, net of deferred income
tax, of $288,000 in stockholder's equity.
The increase in treasury stock of $405,000 was the result of the repurchase of
43,474 shares during the first nine months of 2000 at an average price of $9.323
per share.
-10-
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2000 AND SEPTEMBER 30, 1999
NET INCOME
Net income decreased $91,000 during the quarter ended September 30, 2000 when
compared to 1999. Net interest income decreased by $13,000, non-interest income
increased by $8,000 and non-interest expense increased by $121,000. The
provision for income taxes decreased by $34,000.
INTEREST INCOME
Interest income from loans increased $294,000 or 31.50% for the quarter ended
September 30, 2000. The increase was the result of an increase in the average
balance of loans outstanding of $12.02 million and an increase in the yield from
7.92% to 8.30%.
The decrease of $29,000 in interest and dividends on securities available for
sale was the result of a decrease in the average balance of securities of $2.68
million, which more than offset an increase in the average yield on the
portfolio from 6.33% to 6.54%. The increase in yield was primarily the result of
an increase in yield on mortgage-backed securities with adjustable interest
rates held in the portfolio.
Interest on securities held to maturity increased $37,000 and was caused
primarily by an increase in the average balance of the portfolio of $966,000 and
an increase in the yield on the portfolio from 6.74% to 7.93%. The increase in
yield was primarily the result of the purchase of securities with yields greater
than the yield on the existing portfolio and an increase in yield on
mortgage-backed securities with adjustable interest rates held in the portfolio.
The decrease in income from other interest-earning assets of $3,000 was
primarily caused by a decrease in the average balance of these assets that more
than offset an increase in the yield on these assets. This category of assets
consists primarily of interest-earning demand deposits held at FHLB.
INTEREST EXPENSE
Interest expense on deposits increased $171,000 during the third quarter of 2000
when compared to the third quarter of 1999. This increase was the result of an
increase in the average cost of deposits from 4.33% to 5.10% and an increase of
$6.33 million in the average balance of deposits.
The Bank took advantage of a relatively inexpensive source of funding available
through the FHLB to supplement retail deposits. The average balance of these
borrowings was $4.85 million greater during the third quarter of 2000 than in
1999 and the average cost of the borrowings increased from 5.47% to 6.44%, which
resulted in an increase of $142,000 in interest expense.
PROVISION FOR LOAN LOSSES
No provision for loan losses was made during the quarter ended September 30,
2000. The allowance for loan losses is based on Management's evaluation of the
risk inherent in its loan portfolio after giving due consideration to the
changes in general market conditions and in the nature and volume of the Bank's
loan activity. The Bank intends to continue to provide for loan losses based on
its periodic review of the loan portfolio and general market conditions. The
allowance for loan losses amounted to $464,000 at quarter-end. While the Bank
maintains its allowance for loan losses at a level, which it considers adequate
to provide for potential losses, there can be no assurances that further
additions will not be made to the loss allowance and that such losses will not
exceed the estimated amounts.
-11-
NON-INTEREST INCOME
Total non-interest income increased by $8,000 during the three-month period
ended September 30, 2000 when compared to the same period of 1999.
The decrease in the gain on sale of loans of $6,000 was the result of a decrease
in the dollar amount of loans sold.
Service charges on deposits increased $7,000 mainly because of an increase in
chargeable events and an increase in November of 1999 in the amount of the
Non-Sufficient Funds ("NSF") charge.
The increase in other income of $7,000 was the result of increases in loan
servicing fees, Automated Teller Machine surcharges, and the sale of collectible
coins and credit life and disability insurance.
NON-INTEREST EXPENSE
Overall, non-interest expense increased $121,000 during the quarter ended
September 30, 2000.
Compensation and benefits increased by $82,000 in 2000 and was primarily caused
by the hiring of additional personnel to staff the Bank's new branch in
Cheyenne.
Occupancy and equipment expense increased by $30,000 during the period and was
primarily caused by the increases in depreciation and data processing charges
related to the opening of the Bank's new branch in Cheyenne.
Other expenses increased by $12,000 when compared to the same period of the
previous year. The increase in expenses was mainly caused by increased marketing
expenses, additional travel expenses and the purchase of miscellaneous supplies
in connection with the opening of the Bank's Cheyenne branch.
As previously mentioned, the Bank opened a third office in Cheyenne, Wyoming.
The additional office is expected to enhance the long-term growth of the Company
but is expected to increase overhead expenses significantly for the near future.
As with any start-up, this office cannot be expected to produce a profit until a
deposit base sufficient to support the operation can be generated.
INCOME TAXES
The provision for income taxes decreased by $34,000. The main reason for the
decrease in income taxes was the decrease in income before taxes.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2000 AND SEPTEMBER 30, 1999
NET INCOME
Net income decreased $262,000 during the nine months ended September 30, 2000
when compared to the first nine months of 1999. Net interest income increased by
$5,000, non-interest income increased by $16,000 and non-interest expense
increased by $407,000. The provision for income taxes decreased by $124,000.
-12-
INTEREST INCOME
Interest income from loans increased $630,000 or 23.34% for the nine months
ended September 30, 2000. The increase was the result of an increase in the
average balance of loans outstanding of $9.77 million and an increase in yield
from 8.01% to 8.11%.
The decrease of $57,000 in interest and dividends on securities available for
sale was the result of a decrease in the average balance of securities of $3.06
million, which more than offset an increase in the average yield on the
portfolio from 6.10% to 6.55%. The increase in yield was primarily the result of
an increase in yield on mortgage-backed securities with adjustable interest
rates held in the portfolio.
Interest on securities held to maturity increased $156,000 and was caused
primarily by an increase in the average balance of the portfolio of $2.18
million and an increase in the yield on the portfolio from 7.15% to 7.86%. The
increase in yield was primarily the result of the purchase of securities with
yields greater than the yield on the existing portfolio and an increase in yield
on mortgage-backed securities with adjustable interest rates held in the
portfolio.
The decrease in income from other interest-earning assets of $39,000 was
primarily caused by a decrease in the average balance of these assets that more
than offset an increase in the yield on these assets. This category of assets
consists primarily of interest-earning demand deposits held at FHLB.
INTEREST EXPENSE
Interest expense on deposits increased $376,000 during the first nine months of
2000 when compared to the same period of 1999. This increase was the result of
an increase in the average cost of deposits from 4.29% to 4.79% and an increase
of $5.61 million in the average balance of deposits.
The Bank took advantage of a relatively inexpensive source of funding available
through the FHLB to supplement retail deposits. The average balance of these
borrowings was $4.02 million greater during the first nine months of 2000 than
in 1999 and the average cost of the borrowings increased from 5.47% to 6.14%,
which resulted in an increase of $310,000 in interest expense.
PROVISION FOR LOAN LOSSES
No provision for loan losses was made during the nine-month period ended
September 30, 2000. The allowance for loan losses is based on Management's
evaluation of the risk inherent in its loan portfolio after giving due
consideration to the changes in general market conditions and in the nature and
volume of the Bank's loan activity. The Bank intends to continue to provide for
loan losses based on its periodic review of the loan portfolio and general
market conditions. The allowance for loan losses amounted to $464,000 at
September 30, 2000. While the Bank maintains its allowance for loan losses at a
level, which it considers adequate to provide for potential losses, there can be
no assurances that further additions will not be made to the loss allowance and
that such losses will not exceed the estimated amounts.
NON-INTEREST INCOME
Total non-interest income increased by $16,000 during the nine-month period
ended September 30, 2000 when compared to 1999.
The decrease in the gain on sale of loans of $17,000 was the result of a
decrease in the dollar amount of loans sold.
-13-
The Bank sold available for sale securities in the previous year and recognized
a gain of $4,000 while securities sold in the current year produced a loss of
$6,000.
Service charges on deposits increased $23,000 mainly because of an increase in
chargeable events and an increase, in November of 1999, in the amount of the NSF
charge.
The increase in other income of $20,000 was the result of increases in loan
servicing and document preparation fees, Automated Teller Machine surcharges,
and the sale of collectible coins and credit life and disability insurance.
NON-INTEREST EXPENSE
Overall, non-interest expense increased $407,000 during the nine-month period
ended September 30, 2000.
Compensation and benefits increased by $271,000 in 2000 and was primarily caused
by the hiring of additional personnel to staff the Bank's new branch in Cheyenne
and to enable the Bank to originate commercial and agricultural loans.
Occupancy and equipment expense increased by $59,000 during the period and was
primarily caused by the increases in depreciation, data processing charges,
utilities and taxes related to the opening of the Bank's new branch in Cheyenne.
Other expenses increased by $89,000 when compared to the same period of the
previous year. The increase in expenses was mainly caused by increased marketing
expenses, additional travel expenses and the purchase of miscellaneous supplies
in connection with the opening of the Bank's Cheyenne branch.
As previously mentioned, the Bank opened a third office in Cheyenne, Wyoming.
The additional office is expected to enhance the long-term growth of the Company
but is expected to increase overhead expenses significantly for the near future.
As with any start-up, this office cannot be expected to produce a profit until a
deposit base sufficient to support the operation can be generated.
INCOME TAXES
The provision for income taxes decreased by $124,000. The main reason for the
decrease in income taxes was the decrease in income before taxes of $386,000.
YEAR 2000
Like many financial institutions, we rely on computers to conduct our business
and information systems processing. Industry experts were concerned that on
January 1, 2000, some computers might not be able to interpret the new year
properly, causing computer malfunctions. Some banking industry experts remain
concerned that some computers may not be able to property interpret additional
dates in the year 2000. We have operated and evaluated our computer operating
systems since January 1, 2000 and have not identified any errors or experienced
any computer system malfunctions. We will continue to monitor our information
systems to assess whether they are at risk of misinterpreting any future dates
and will develop appropriate contingency plans to prevent any potential system
malfunction or correct any system failures. The Company has not been informed of
any such problem experienced by its vendors or its customers, nor by any of the
municipal agencies that provide services to the Company.
-14-
Nevertheless, it is too soon to conclude that there will not be any problems
arising from the Year 2000 problem, particularly at some of the Company's
vendors. The Company will continue to monitor its significant vendors of goods
and services with respect to Year 2000 problems they may encounter as those
issues may effect the Company's financial position, results of operations and
cash flows. The Company does not believe at this time that these potential
problems will materially impact the ability of the Company to continue its
operations, however, no assurance can be given that this will be the case.
The expectations of the Company contained in this section on Year 2000 are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve substantial risks and uncertainties
that may cause actual results to differ materially from those indicated by the
forward-looking statements. All forward-looking statements in this section are
based on information available to the Company on the date of this document, and
the Company assumes no obligation to update such forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed securities, FHLB advances, sales and maturities of
investments and funds provided from operations. While scheduled loan
amortization and maturing investment securities are a relatively predictable
source of funds, deposit flow and loan prepayments are greatly influenced by
market interest rates, economic conditions and competition. The Bank manages the
pricing of its deposits to maintain a steady deposit balance. In addition, the
Bank invests its excess funds in short-term time deposits that provide liquidity
to meet lending requirements. Interest-bearing deposits at September 30, 2000
amounted to $362,774. The Bank's liquidity, represented by cash and cash
equivalents, is a product of its operating, investing and financing activities.
These activities are summarized as follows:
9 Months Ended September
30,
(in thousands)
-----------------------
2000 1999
Cash and cash equivalents at beginning of year $2,316 $3,365
------ ------
OPERATING ACTIVITIES:
Net Income $290 $552
Adjustments to reconcile net income to
net cash provided by operation activities (268) (120)
---- ----
Net cash provided (used) by operating activities $22 $432
Net cash used by investing activities (8,925) (7,975)
Net cash provided by financing activities 8,235 5,831
----- ------
Net increase (decrease) in cash and cash equivalents $(668) $(1,712)
----- -------
Cash and cash equivalents at end of period $1,649 $1,653
====== ======
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as Federal funds and interest-bearing deposits. If the Bank requires funds
beyond its ability to generate them internally, borrowing agreements exist with
the FHLB, which provides an additional source of funds.
The Bank anticipates it will have sufficient funds available to meet its current
loan commitments. At September 30, 2000, the Bank had outstanding commitments of
$1,839,789. Certificates of deposit scheduled to mature in one year or less at
September 30, 2000 totaled $31,999,163. Based on past experience, Management
believes that a substantial portion of such deposits will remain with the Bank.
-15-
The following table sets forth the Bank's capital position at September 30,
2000, as compared to the minimum regulatory requirements:
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------------------------------------
Dollars Ratio Dollars Ratio Dollars Ratio
September 30, 2000
Total Equity Capital (to risk-weighted assets) $9,159 18.4% $3,968 8.0% $4,960 10.0%
Tier 1 Capital (to risk-weighted assets) $8,596 17.3% $1,984 4.0% $2,976 6.0%
Tier 1 Capital (to adjusted total assets) $8,596 8.9% $3,868 4.0% $4,835 5.0%
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with generally
accepted accounting principles ("GAAP"), which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of the
Company's operations. Unlike most industrial companies, nearly all the assets
and liabilities of the Company are financial. As a result, interest rates have a
greater impact on the Company's performance than do the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
-16-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor the Bank was engaged in any legal proceeding of a
material nature at September 30, 2000. From time to time, the Bank is a
party to legal proceedings in the ordinary course of business wherein it
enforces its security interest in loans.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable.
Item 5. Other Information
The Company's Chief Financial Officer, Tommy A. Gardner has resigned,
effective January 2, 2001 to pursue other interests. Mr. Gardner has been
with the Bank since 1979 and played an important role when the Bank
converted from a mutual savings and loan to a public company in 1993. Mr.
Gardner's resignation was voluntary and therefore, according to his
employment agreement, no separation package will be charged to operations.
The Company has commenced a search for a chief financial officer. Until the
position is filled, other members of the Bank's senior management team will
assume the position's responsibilities.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 11: Statement regarding computation of earnings per share.
Exhibit 27: FDS (in electronic filing only)
(b) Reports on Form 8-K
Not Applicable
-17-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
Date: November 10, 2000 /s/ Robert L. Savage
-------------------------
President and Chief Executive Officer
Date: November 10, 2000 /s/ Tommy A. Gardner
-------------------------
Vice President and Chief Financial Officer
-18-
EXHIBIT 11
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Nine Months Ended
September 30,
2000 1999
--------- ---------
EARNINGS PER SHARE
Net earnings available for common shares and
common stock equivalent shares deemed to have a dilutive effect $290,090 $551,980
======== ========
Basic earnings per share $0.33 $0.63
===== =====
Diluted earnings per share $0.32 $0.59
===== =====
Shares used in basic earnings per share computation
Weighted average common shares outstanding 876,492 881,005
======= =======
Shares used in diluted earnings per share computation
Weighted average common shares outstanding 914,941 941,549
Additional potentially dilutive effect of stock options 38,449 60,544
------- -------
876,492 881,005
======= =======