As filed with the Securities and Exchange Commission on October 23, 1998
Registration No. 333-56465
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
(INCLUDING EXHIBITS)
PULASKI FINANCIAL CORP.
----------------------------------------------
(Exact name of registrant in its charter)
Delaware 6035 43-1816913
- ------------ --------------- --------------
(State or other jurisdiction (Primary SIC No.) (I.R.S. Employer
of incorporation Identification No.)
or organization)
12300 Olive Boulevard
St. Louis, Missouri
(314) 878-2210
-------------------------------------------------------------------------
(Address and telephone number of principal executive offices and place of
business)
Paul M. Aguggia, Esquire
Aaron M. Kaslow, Esquire
BREYER & AGUGGIA LLP
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
(202) 737-7900
---------------------------------------------------------------
(Name, address and telephone number of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS SUPPLEMENT
PULASKI FINANCIAL CORP.
(PROPOSED HOLDING COMPANY FOR PULASKI BANK)
BETWEEN 1,870,000 AND 2,909,500 SHARES OF COMMON STOCK
This Prospectus Supplement supplements and amends the Prospectus of Pulaski
Financial Corp. dated August 12, 1998, which you should read in conjunction
with this Prospectus Supplement. Capitalized terms used but not defined in this
Prospectus Supplement have the same meaning as they do in the Prospectus.
The purpose of this Prospectus Supplement is to amend the Prospectus to reflect
a decrease in the offering range as a result of current market prices of stocks
of publicly traded financial institutions and the level of subscriptions
received in the Subscription Offering and Direct Community Offering as of
September 18, 1998. In light of the new offering range, Pulaski Financial Corp.
is giving persons who subscribed for common stock in the Subscription Offering
or the Direct Community Offering the opportunity to maintain, increase, decrease
or cancel their orders. SUBSCRIBERS WHO DESIRE TO MAINTAIN OR CHANGE THEIR
ORIGINAL ORDERS MUST SIGN AND RETURN THE SUPPLEMENTAL ORDER FORM TO THE BANK NO
----
LATER THAN 12:00 NOON, CENTRAL TIME, __________, 1998.
IMPORTANT: FAILURE TO RETURN A SUPPLEMENTAL ORDER FORM WILL RESULT IN THE
AUTOMATIC CANCELLATION OF YOUR ORDER AND RETURN OF YOUR SUBSCRIPTION FUNDS
OR TERMINATION OF YOUR WITHDRAWAL AUTHORIZATION.
- --------------------------------------------------------------------------------
OFFERING SUMMARY
Price Per Share: $10.00
Minimum Midpoint Maximum Maximum, as adjusted
----------- ----------- ----------- --------------------
Number of shares: 1,870,000 2,200,000 2,530,000 2,909,500
Gross offering proceeds: $18,700,000 $22,000,000 $25,300,000 $29,095,000
Estimated offering expenses: $ 834,000 $ 858,000 $ 882,000 $ 910,000
Estimated net proceeds: $17,866,000 $21,142,000 $24,418,000 $28,185,000
Estimated net proceeds per share: $ 9.55 $ 9.61 $ 9.65 $ 9.69
The amount of common stock being offered in the conversion is based on an
updated independent appraisal of the market value of Pulaski Bank and Pulaski
Bancshares, M.H.C. after giving effect to the conversion. The independent
appraiser has stated that as of September 25, 1998 the market value of the
converted Pulaski Bank and Pulaski Bancshares, M.H.C. ranged from $25,487,250 to
$34,482,750. Based on this updated valuation and the 73.37% ownership interest
being sold in this offering, the minimum of the new offering range was set at
$18,700,000 and the maximum was set at $25,300,000. Subject to approval of the
Office of Thrift Supervision, an additional 15% above the maximum number of
shares may be sold.
- --------------------------------------------------------------------------------
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
FOR A DISCUSSION OF CERTAIN RISKS THAT YOU SHOULD CONSIDER, SEE "UPDATED RISK
FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS SUPPLEMENT AND "RISK FACTORS"
BEGINNING ON PAGE 10 IN THE PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
For additional information, please contact the Bank's stock information center
at (314) 878-5200.
CHARLES WEBB & COMPANY,
a Division of Keefe, Bruyette & Woods, Inc.
The date of this Prospectus Supplement is ___________, 1998
Throughout this Prospectus Supplement, Pulaski Bank, A Federal Savings Bank is
referred to as the "Bank", Pulaski Bancshares, M.H.C. is referred to as the
"MHC" and Pulaski Financial Corp. is referred to as the "Holding Company."
TABLE OF CONTENTS
Results of Special Meetings ............................ 3
Revised Valuation Range ................................ 3
Extension of Time Period to Complete
the Offering .......................................... 4
Resolicitation Procedures .............................. 5
Updated Risk Factors ................................... 6
Use of Proceeds ........................................ 7
Revised Dividend Policy ................................ 8
Capitalization ......................................... 9
Historical and Pro Forma Regulatory
Capital Compliance .................................... 11
Pro Forma Data ......................................... 12
Effect of the Conversion on the
Bank's Stockholders .................................. 17
Subscriptions by Executive Officers
and Directors ......................................... 18
Where You Can Find Additional
Information ........................................... 19
Index to Quarterly Financial
Information ........................................... 20
2
RESULTS OF SPECIAL MEETINGS
At the Special Meeting of Members of the MHC held on September 28, 1998,
869,157 votes, or approximately 58.8% of the 1,477,796 votes eligible to be
cast, were voted in favor of the adoption of the Plan of Conversion and 48,283
votes, or approximately 3.2% of the total votes eligible to be cast, were voted
against adoption of the Plan of Conversion. Accordingly, the Plan of Conversion
was approved by more than the required majority of the total votes eligible to
be cast at the Special Meeting.
The Bank adjourned its Special Meeting of Stockholders on September 28, 1998
before taking a vote on the adoption of the Plan of Conversion. The Special
Meeting will be reconvened on __________, 1998.
REVISED VALUATION RANGE
The amount of common stock being offered in the conversion is based on an
independent appraisal of the estimated pro forma market value of the Bank and
the MHC after giving effect to the conversion. As described in the Prospectus,
RP Financial, the independent appraiser, estimated that, in its opinion, as of
July 24, 1998, the aggregate pro forma market value of the Bank and the MHC
ranged between $55,608,560 and $75,235,100 ("Estimated Valuation Range"). Based
on this valuation and the approximate 73.37% ownership interest being sold in
this offering, the Board of Directors of the Holding Company and the Bank
established an offering range of $40,800,000 to $55,200,000. At the close of the
Subscription Offering and the Direct Community Offering on September 18, 1998,
the Holding Company had received 1,306 subscriptions for a total of $6.7 million
of common stock, excluding the subscription of the ESOP, which is significantly
below the minimum of the offering range. As described in the Prospectus, OTS
regulations prohibit the consummation of a conversion unless the minimum number
of shares has been sold. See "THE CONVERSION -- Stock Pricing, Exchange Ratio
and Number of Shares to be Issued" in the Prospectus for a discussion of the
appraisal process.
RP Financial has prepared a revised appraisal which estimates that, as of
September 25, 1998, the aggregate pro forma market value of the Bank and the MHC
ranged between $25,487,250 and $34,482,750 ("Revised Estimated Valuation
Range"). The Revised Estimated Valuation Range reflects current stock market
conditions, including the overall decline in the stock market during August and
September and its impact on the market for thrifts and new issues, and the level
of subscriptions in the offering as of September 18, 1998. The decrease in the
valuation was not based on any material change in the earnings, assets or
financial condition of the Bank. The Boards of Directors of the Holding Company
and the Bank reviewed RP Financial's updated appraisal report, including the
methodology and the assumptions used by RP Financial, and determined that the
Revised Estimated Valuation Range was reasonable and adequate.
Based on the Revised Estimated Valuation Range and the approximate 73.37%
ownership interest being sold in this offering, the Boards of Directors of the
Holding Company and the Bank established a new offering range of $18,700,000 to
$25,300,000. Based on the $10.00 per share purchase price, the Holding Company
is offering between 1,870,000 and 2,530,000 shares. The change in the offering
range materially affects pro forma earnings per share and pro forma book value
per share. Updated information on the pro forma consolidated capitalization and
net earnings of the Holding Company after giving effect to the conversion is
provided in this Prospectus Supplement under the headings "PRO FORMA DATA" and
"CAPITALIZATION."
In light of the Revised Estimated Valuation Range and in accordance with OTS
regulations and the terms of the Subscription Offering and Direct Community
Offering as set forth in the Prospectus, the Holding Company and the Bank are
giving all subscribers the opportunity to maintain, increase, decrease or cancel
their original orders by so advising the Holding Company in writing no later
than 12:00 Noon, Central Time, on __________, 1998. See "RESOLICITATION
PROCEDURES."
3
As described in the Prospectus, each share of Bank common stock held by the
Bank's public stockholders will be exchanged for shares of Holding Company
common stock pursuant to an Exchange Ratio that will result in the public
stockholders of the Bank owning in the aggregate approximately 26.63% of the
Holding Company. The final Exchange Ratio will be based on the percentage
ownership interest of the Bank's public stockholders in the Bank and the number
of shares sold in this offering and not on the market value of Bank common
stock. Based on the 2,105,840 shares of Bank common stock outstanding at the
date of this Prospectus Supplement, and assuming a minimum of 1,870,000 and a
maximum of 2,530,000 shares of Holding Company common stock are sold in the
offering, the Exchange Ratio is expected to range from approximately 1.0674 to
1.4442. If 2,909,500 shares of common stock are sold, the Exchange Ratio will
be 1.6608. The final Exchange Ratio will be adjusted if any options to purchase
shares of Bank common stock are exercised after the date of this Prospectus
Supplement and before the consummation of the conversion.
Shares to be Sold Shares to be Exchanged Total Shares
in this for Bank of Common
Offering(1) Common Stock (1) Stock to be Exchange
-------------------------- ----------------------
Amount Percent Amount Percent Outstanding(1) Ratio(1)
------------ ------------ ----------- --------- -------------- --------
Minimum..... 1,870,000 73.37% 678,725 26.63% 2,548,725 1.0674
Midpoint.... 2,200,000 73.37 798,500 26.63 2,998,500 1.2558
Maximum..... 2,530,000 73.37 918,275 26.63 3,448,275 1.4442
15% above
Maximum.... 2,909,500 73.37 1,056,016 26.63 3,965,516 1.6608
- ------------------------
(1) Assumes that outstanding options to purchase 15,592 shares of Bank common
stock are not exercised before consummation of the conversion. If all
options are exercised, the percentages represented by the shares sold in
this offering and the shares issued in exchange for the Bank's common stock
would be 72.89% and 27.11%, respectively, and the Exchange Ratio would be
1.0607, 1.2478, 1.4350, and 1.6503, at the minimum, midpoint, maximum and
15% above the maximum of the Revised Estimated Valuation Range,
respectively.
The updated appraisal report of RP Financial has been filed as an exhibit to
the Holding Company's Registration Statement and the MHC's Application for
Conversion. See "WHERE YOU CAN FIND ADDITIONAL INFORMATION" for information on
how to obtain a copy of the updated appraisal report.
The total number of shares to be issued in the conversion may be increased
or decreased to reflect changes in market and financial conditions prior to the
close of the offering. In the event that the total number of shares sold is
less than 1,870,000 or more than 2,909,500 (15% above the maximum of the Revised
Estimated Valuation Range), for aggregate gross proceeds of less than
$18,700,000 or more than $29,095,000, subscribers will be offered further
opportunity to modify or cancel their subscriptions.
EXTENSION OF TIME PERIOD TO COMPLETE THE OFFERING
OTS regulations provide that the sale of the common stock must be completed
within 45 days following the termination of the subscription period, unless such
period is extended by the OTS. As a result of the need to resolicit all persons
who subscribed for shares in the Subscription Offering and Direct Community
Offering, the Bank and the Holding Company have obtained from the OTS an
extension of time to complete the offering. If the Bank does not complete the
offering by __________, 1998, either the Bank will return all funds with
interest and cancel all withdrawal authorizations or, if the Holding Company and
the Bank obtain a further extension of time to complete the offering, the
Holding Company and the Bank will again give all subscribers the right to
maintain, increase, decrease or cancel their subscriptions.
4
RESOLICITATION PROCEDURES
As required by OTS regulations and the Plan of Conversion adopted by the
Bank and the MHC, the Holding Company is giving all subscribers in the
Subscription Offering and Direct Community Offering the opportunity to maintain
their original orders, to increase or decrease the number of shares subscribed
for or to cancel their original orders. Regardless of your original order, you
may now choose to:
(1) maintain your original order for the number of shares indicated on your
previously submitted stock order form;
(2) increase the number of shares subscribed for, subject to the maximum
purchase limitations;
(3) decrease the number of shares subscribed for, with any excess payment
to be refunded promptly or any excess authorization for withdrawal to
be canceled promptly; or
(4) cancel your order in its entirety, with any payment to be refunded with
interest thereon and any authorization for withdrawal to be canceled
promptly.
To maintain, increase, decrease or cancel your original order as provided
herein, you must return a completed and signed supplemental order form to any
office of the Bank by 12:00 Noon, Central Time, on _________, 1998. Once
received by the Bank, your supplemental order form may not be modified or
rescinded without the consent of the Bank unless the offering is further
extended beyond _________, 1998. IF YOU DO NOT RETURN A COMPLETED SUPPLEMENTAL
ORDER FORM OR IF IT IS RECEIVED BY THE BANK AFTER __________, 1998, YOUR
ORIGINAL ORDER WILL BE CANCELED AUTOMATICALLY AND YOUR FUNDS WILL BE RETURNED
PROMPTLY WITH INTEREST OR YOUR WITHDRAWAL AUTHORIZATION WILL BE TERMINATED.
Subscribers who desire to maintain their orders must return the supplemental
order form marked accordingly. Subscribers who desire to increase their orders
may do so by returning the supplemental order form along with full payment or
with a withdrawal authorization from a deposit account at the Bank for the
amount of additional shares ordered. Subscribers who desire to decrease or
cancel their orders may do so by returning the supplemental order form marked
accordingly, and they will receive a prompt refund with interest, or a reduction
in the amount of their withdrawal authorization, as applicable, for all or part
of their original order.
If an original stock order form contained more than one signature, the
supplemental order form should be signed by all persons who signed the original
stock order form. If all such persons do not sign the supplemental order form,
the Holding Company reserves the right to treat the supplemental order form as
invalid. Please call the stock information center if you have any questions.
Any necessary payment for additional subscribed shares may be made (1) in
cash if delivered in person at the Bank's stock information center, (2) by
check, bank draft or money order, or (3) by authorization of withdrawal from
deposit accounts maintained with the Bank. Interest will continue to be paid on
subscriptions made by cash, check, bank draft or money order at the Bank's
passbook rate of interest from the date the payment is received by the Bank
until the completion or termination of the conversion. If payment is made by
authorization of withdrawal from deposit accounts, the funds authorized to be
withdrawn will continue to accrue interest at the contractual rates until
completion or termination of the conversion but a hold will be placed on such
funds, thereby making them unavailable to the depositor until completion or
termination of the conversion. Appropriate means by which such withdrawals may
be authorized are contained in the supplemental order form.
Persons who have not subscribed for common stock as of the date of this
Prospectus Supplement may also be offered the opportunity to subscribe for
common stock until ________, 1998. Because all subscription rights terminated on
September 13, 1998, any qualifying depositor who submits an order for the first
time during the resolicitation period will be deemed to be a participant in the
Direct Community Offering.
5
The minimum number of shares that you may purchase is 25. The Bank has
established the following additional purchase limitations:
1. No person (including all persons on a joint account) may purchase more
than 40,000 shares in the offering.
2. No person, either alone or together with associates or persons acting
in concert, may purchase shares in an amount that, when combined with
shares received in exchange for Bank common stock, exceeds 95,000
shares.
On September 24, 1998, the Bank's Board of Directors amended the Plan of
Conversion to reduce the overall purchase limitation from 125,000 shares to
95,000 shares. Subscribers whose original orders exceed the new overall purchase
limitation will receive a prompt refund of any excess payment or any excess
authorization for withdrawal will be canceled promptly.
Because OTS policy requires that the maximum purchase limitation include
shares to be received in exchange for shares of Bank common stock, if you own
shares of Bank common stock you may be limited in your ability to subscribe for
and purchase shares in this offering. See "THE CONVERSION--Limitations on
Purchases of Shares of Common Stock" in the Prospectus for further discussion of
the purchase limitations.
The Boards of Directors of the Bank and the MHC may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the shares of common stock sold in the conversion, provided that orders for
shares which exceed 5% of the shares of common stock sold in the conversion may
not exceed, in the aggregate, 10% of the shares sold in the conversion. The
Bank and the MHC do not intend to increase the maximum purchase limitation
unless market conditions are such that an increase in the maximum purchase
limitation is necessary to sell a number of shares in excess of the minimum of
the Revised Estimated Valuation Range. If the Boards of Directors decide to
increase the purchase limitations described above, persons who subscribed for
the maximum number of shares of common stock will be, and other large
subscribers in the discretion of the Holding Company and the Bank may be, given
the opportunity to increase their subscriptions accordingly, subject to the
rights and preferences of any person who has priority subscription rights.
In the event of an oversubscription, shares will be allocated in accordance
with the Plan of Conversion.
UPDATED RISK FACTORS
Before investing in the common stock please carefully consider the matters
discussed below in addition to the risk factors disclosed in the Prospectus.
The common stock is not a savings account or deposit and is not insured by the
FDIC or any other government agency.
RECENT PERFORMANCE OF CONVERSION OFFERINGS
RP Financial indicated that the basis for the Revised Estimated Valuation
Range was the current condition of the stock market and the level of
subscriptions in the offering as of September 18, 1998. Although the Revised
Estimated Valuation Range may make the common stock more attractive to investors
due to the lower number of shares offered and the decrease in the pro forma
price-to-book value ratio, the Holding Company cannot guarantee that if you
purchase shares in the conversion you will be able to sell your shares at or
above the $10.00 purchase price.
6
POSSIBLE VOTING CONTROL BY MANAGEMENT AND EMPLOYEES
The 53,100 shares of common stock expected to be purchased by the Bank's
directors and executive officers and their associates in the conversion,
combined with shares such persons will receive in exchange for their shares of
Bank common stock and the shares expected to be awarded or sold to plan
participants under the ESOP, the 1999 MRDP, the 1999 Option Plan and the 1994
Option Plan, could ultimately result in management and employees and their
associates controlling up to approximately 23.8% of the outstanding shares of
the common stock (assuming the sale of 2,200,000 shares in the conversion and
that the shares issued under the 1999 MRDP, the 1999 Option Plan and the 1994
Option Plan are repurchased treasury shares) and could permit management to
benefit from certain statutory and regulatory provisions, as well as certain
provisions in the Holding Company's Certificate of Incorporation and Bylaws,
that tend to promote the continuity of existing management. If these individuals
were to act as a group or in concert with each other they could have significant
influence over the outcome of any stockholder vote requiring a majority vote and
in the election of directors and could effectively exercise veto power in
matters requiring the approval of stockholders, such as certain business
combinations. Management might thus have the power to authorize actions that
might be viewed as contrary to the best interests of non-affiliated holders of
the common stock and might have veto power over actions that such holders might
deem to be in their best interests. See "SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND
DIRECTORS" and "MANAGEMENT OF THE BANK -- Executive Compensation" and
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY" in the Prospectus.
RISK OF FURTHER DELAY IN CONSUMMATING THE CONVERSION
If the conversion is not completed by _________, 1998 as a result of changes
that lead to a material revision in the Revised Estimated Valuation Range and
the OTS consents to an extension of time to complete the conversion, there would
be another resolicitation offering. OTS regulations permit the OTS to grant one
or more time extensions, none of which shall exceed 90 days. Such extensions
may not go beyond September 28, 2000. In the resolicitation offering, all
subscribers would be mailed another supplement to the Prospectus and given
another opportunity to confirm, modify or cancel their subscriptions. Failure
to confirm affirmatively or modify would be deemed a cancellation and all
subscription funds, together with accrued interest, would be returned to the
subscriber, or if the subscriber authorized payment by withdrawal of funds on
deposit at the Bank, that authorization would terminate. If a subscriber
affirmatively confirms his subscription order during the resolicitation
offering, the Holding Company and the Bank would continue to hold the
subscriber's subscription funds until the expiration of the resolicitation
offering. All subscriptions held by the Holding Company and the Bank when the
resolicitation offering expires would be irrevocable without the consent of the
Holding Company and the Bank until the completion or termination of the
conversion.
USE OF PROCEEDS
The net proceeds from the sale of the common stock offered hereby are
estimated to range from $17.9 million to $24.4 million. If the Revised
Estimated Valuation Range is increased by 15%, net proceeds are estimated to be
$28.2 million. See "PRO FORMA DATA" for the assumptions used to arrive at such
amounts. The Holding Company has received approval from the OTS to contribute
50% of the net proceeds of the offering to the Bank.
7
The following table presents the estimated net proceeds of the offering
based on the number of shares set forth below together with the amount to be
retained by the Holding Company and the amount to be contributed to the Bank.
1,870,000 2,200,000 2,530,000 2,909,500
Shares at Shares at Shares at Shares at
$10.00 $ 10.00 $ 10.00 $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(in thousands)
Gross proceeds................... $18,700 $22,000 $25,300 $29,095
Less expenses.................... 834 858 882 910
------- ---------- ------- -------
Net proceeds..................... $17,866 $ 21,142 $24,418 $28,815
======= ========== ======= =======
Amount to be retained by the
Holding Company................. $ 8,933 $10,571 $12,209 $14,408
Amount to be contributed to the
Bank............................ $ 8,933 $10,571 $12,209 $14,408
In connection with the conversion and the establishment of the ESOP,
the Holding Company intends to loan the ESOP the amount necessary to purchase 8%
of the shares of common stock sold in the conversion. The Holding Company's
loan to fund the ESOP may range from $1,496,000 to $2,024,000 based on the sale
of 149,600 shares to the ESOP (at the minimum of the Revised Estimated Valuation
Range) and 202,400 shares (at the maximum of the Revised Estimated Valuation
Range), respectively, at $10.00 per share. If 15% above the maximum of the
Revised Estimated Valuation Range, or 2,909,500 shares, are sold in the
conversion, the Holding Company's loan to the ESOP would be approximately
$2,327,600 (based on the sale of 232,760 shares to the ESOP). It is
anticipated that the ESOP loan will have a 15-year term with interest payable at
the prime rate as published in The Wall Street Journal on the closing date of
the conversion. The loan will be repaid principally from the Bank's
contributions to the ESOP and from any dividends paid on shares of common stock
held by the ESOP.
REVISED DIVIDEND POLICY
Upon completion of the conversion, the Holding Company's Board of
Directors will have the authority to declare dividends on the common stock,
subject to statutory and regulatory requirements. The Board of Directors of the
Holding Company intends to pay quarterly cash dividends on the common stock at
a rate that would initially result in a payout ratio of approximately 54%. Based
on the pro forma earnings under the Revised Estimated Valuation Range for the
nine months ended June 30, 1998, this would result in a quarterly dividend of
$0.13, $0.115, $0.10 and $0.09 at the minimum, midpoint, maximum and 15%
above the maximum of the Revised Estimated Valuation Range, respectively. The
Holding Company originally intended to achieve economic parity with the
dividends currently paid on the Bank's common stock. However, based on the pro
forma earnings under the Revised Estimated Valuation Range, this would have
resulted in a dividend payout that exceeded earnings. The Board of Directors
determined that such a policy was not prudent and intends to reduce the
dividend to a level that is more appropriate for the Holding Company's
earnings and that is more consistent with peer institutions. The first dividend
payment on the Holding Company's common stock is expected during January 1999.
8
CAPITALIZATION
The following table presents the historical capitalization of the Bank
at June 30, 1998, and the pro forma consolidated capitalization of the Holding
Company after giving effect to the assumptions set forth under "PRO FORMA DATA,"
based on the sale of the number of shares of common stock at the minimum,
midpoint, maximum and maximum, as adjusted, of the Revised Estimated Valuation
Range. The shares that would be issued at the maximum, as adjusted, of the
Revised Estimated Valuation Range would be subject to receipt of OTS approval of
an updated appraisal confirming such valuation. A CHANGE IN THE NUMBER OF
SHARES TO BE ISSUED IN THE CONVERSION MAY MATERIALLY AFFECT PRO FORMA
CONSOLIDATED CAPITALIZATION.
Holding Company
Pro Forma Consolidated Capitalization
Based Upon the Sale of
----------------------------------------
Bank 1,870,000 2,200,000 2,530,000 2,909,500
Capitalization Shares at Shares at Shares at Shares at
as of $10.00 $10.00 $10.00 $10.00
June 30, 1998 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
------------- ------------- ------------ ------------ ------------
(in thousands)
Deposits(3)............................. $156,434 $ 156,434 $ 156,434 $ 156,434 $ 156,434
FHLB advances........................... 1,900 1,900 1,900 1,900 1,900
-------- ---------- ---------- ---------- ----------
Total deposits and borrowed funds....... $158,334 $ 158,334 $ 158,334 $ 158,334 $ 158,334
======== ========== ========== ========== ==========
Stockholders' equity:
Preferred stock:
1,000,000 shares, $.01 par value
per share, authorized; none issued
or outstanding...................... $ -- $ -- $ -- $ -- $ --
Common stock:
25,000,000 shares, $.01 par value
per share, authorized; specified
number of shares assumed to be
issued and outstanding(4)........... 2,106 25 30 34 40
Additional paid-in capital............ 5,256 25,203 28,474 31,746 35,507
Retained earnings(5).................. 17,713 17,927 17,927 17,927 17,927
Less:
Common stock acquired
by ESOP(6)........................ -- (1,496) (1,760) (2,024) (2,328)
Common stock acquired
by 1994 MRDP...................... (87) (87) (87) (87) (87)
Common stock to be acquired
by 1999 MRDP(7)................... -- (748) (880) (1,012) (1,164)
-------- ---------- ---------- ---------- ----------
Total stockholders' equity............. $ 24,988 $ 40,824 $ 43,704 $ 46,584 $ 49,896
======== ========== ========== ========== ==========
(footnotes on following page)
9
- -------------------
(1) Does not reflect the possible increase in the Revised Estimated Valuation
Range to reflect material changes in the financial condition or results of
operations of the Bank or changes in market conditions or general financial,
economic and regulatory conditions, or the issuance of additional shares
under the 1999 Option Plan or 1994 Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
in the event the aggregate number of shares of common stock issued in the
conversion is 15% above the maximum of the Revised Estimated Valuation
Range. See "PRO FORMA DATA" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of common stock are not
reflected. Such withdrawals will reduce pro forma deposits by the amounts
thereof.
(4) The Bank's authorized capital consists solely of 20,000,000 shares of common
stock, par value $1.00 per share, 1,000 shares of which will be issued to
the Holding Company, and 10,000,000 shares of preferred stock, no par value
per share, none of which will be issued in connection with the conversion.
(5) Pro forma retained earnings includes approximately $214,000 of retained
earnings of the MHC at June 30, 1998. Retained earnings are substantially
restricted by applicable regulatory capital requirements. Additionally, the
Bank will be prohibited from paying any dividend that would reduce its
regulatory capital below the amount in the liquidation account, which will
be established for the benefit of the Bank's Eligible Account Holders and
Supplemental Eligible Account Holders at the time of the conversion and
adjusted downward thereafter as such account holders reduce their balances
or cease to be depositors. See "THE CONVERSION -- Effects of Conversion on
Depositors and Borrowers of the Bank -- Liquidation Account" in the
Prospectus.
(6) Assumes that 8% of the common stock sold in the conversion will be acquired
by the ESOP in the conversion with funds borrowed from the Holding Company.
Under GAAP, the amount of common stock to be purchased by the ESOP
represents unearned compensation and is, accordingly, reflected as a
reduction of capital. As shares are released to ESOP participants'
accounts, a corresponding reduction in the charge against capital will
occur. Since the funds are borrowed from the Holding Company, the borrowing
will be eliminated in consolidation and no liability or interest expense
will be reflected in the consolidated financial statements of the Holding
Company. See "MANAGEMENT OF THE BANK -- Benefits -- Employee Stock Ownership
Plan" in the Prospectus.
(7) Assumes the purchase in the open market at $10.00 per share, pursuant to the
proposed 1999 MRDP, of a number of shares equal to 4% of the shares of
common stock issued in the conversion at the minimum, midpoint, maximum and
15% above the maximum of the Revised Estimated Valuation Range. The shares
are reflected as a reduction of stockholders' equity. See "RISK FACTORS --
Possible Dilutive Effect of Benefit Programs" and "MANAGEMENT OF THE BANK --
Benefits -- Management Recognition Plan" in the Prospectus. See also "PRO
FORMA DATA." The 1999 MRDP is subject to stockholder approval at a meeting
following consummation of the conversion.
10
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents the Bank's historical and pro forma capital
position relative to its capital requirements at June 30, 1998. The amount of
capital infused into the Bank for purposes of the following table is 50% of the
net proceeds of the offering. For purpose of the table below, the amount
expected to be borrowed by the ESOP and the cost of the shares expected to be
acquired by the MRDP are deducted from pro forma regulatory capital. For a
discussion of the assumptions underlying the pro forma capital calculations
presented below, see "USE OF PROCEEDS," "CAPITALIZATION" and "PRO FORMA DATA."
The definitions of the terms used in the table are those provided in the capital
regulations issued by the OTS. For a discussion of the capital standards
applicable to the Bank, see "REGULATION -- Federal Regulation of Savings
Associations -- Capital Requirements" in the Prospectus.
PRO FORMA AT JUNE 30, 1998
---------------------------------------
Minimum of Midpoint
Revised Estimated Revised Estimated
Valuation Range Valuation Range
--------------------- ----------------------
1,870,000 Shares 2,200,000 Shares
June 30, 1998 at $10.00 Per Share at $10.00 Per Share
--------------------- --------------------- ----------------------
Percent of Percent of Percent of
Adjusted Adjusted Adjusted
Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1)
------ ----------- ------ ---------- ------ ---------
(Dollars in thousands)
GAAP capital(2)............ $24,988 13.37% $31,891 16.33% $33,133 16.83%
Tangible capital(2)........ $24,922 13.34% $31,825 16.30% $33,067 16.81%
Tangible capital
requirement............... 2,803 1.50 2,929 1.50 2,951 1.50
------- ----- ------- ----- ------- -----
Excess..................... $22,119 11.84% $28,896 14.80% $30,116 15.31%
======= ===== ======= ===== ======= =====
Core capital(2)............ $24,922 13.34% $31,825 16.30% $33,067 16.81%
Core capital requirement(3) 7,474 4.00 7,810 4.00 7,870 4.00
------- ----- ------- ----- ------- -----
Excess..................... $17,448 9.34% $24,015 12.30% $25,197 12.81%
======= ===== ======= ===== ======= =====
Total capital(4)........... $25,650 24.56% $32,553 30.68% $33,795 31.76%
Risk-based
capital requirement....... 8,354 8.00 8,488 8.00 8,512 8.00
------- ----- ------- ----- ------- -----
Excess..................... $17,296 16.56% $24,065 22.68% $25,283 23.76%
======= ===== ======= ===== ======= =====
PRO FORMA AT JUNE 30, 1998
----------------------------------------------------------
Maximum of 15% above Maximum
Revised Estimated of Revised Estimated
Valuation Range Valuation Range
------------------------- -------------------------
2,530,000 Shares 2,909,500 Shares
at $10.00 Per Share at $10.00 Per Share
------------------------- -------------------------
Percent of Percent of
Adjusted Adjusted
Total Total
Amount Assets (1) Amount Assets (1)
------ ---------- ------ ---------
(Dollars in thousands)
GAAP capital(2)............ $34,375 17.33% $35,802 17.90%
Tangible capital(2)........ $34,309 17.30% $35,736 17.87%
Tangible capital
requirement............... 2,974 1.50 3,000 1.50
------- ----- ------- -----
Excess..................... $31,335 15.80% $32,736 16.37%
======= ===== ======= =====
Core capital(2)............ $34,309 17.30% $35,736 17.87%
Core capital requirement(3) 7,930 4.00 8,000 4.00
------- ----- ------- -----
Excess..................... $26,380 13.30% $27,736 13.87%
======= ===== ======= =====
Total capital(4)........... $35,037 32.83% $36,464 34.06%
Risk-based
capital requirement....... 8,537 8.00 8,564 8.00
------- ----- ------- -----
Excess..................... $26,500 24.83% $27,900 26.06%
======= ===== ======= =====
- -------------------------
(1) Tangible capital levels and core capital levels are shown as a percentage
of adjusted total assets. Risk-based capital levels are shown as a
percentage of risk-weighted assets.
(2) Disallowed mortgage servicing assets account for the difference between
GAAP capital and each of tangible capital and core capital.
(3) Represents the core (Tier I) capital necessary to be deemed adequately
capitalized.
(4) Percentage represents total core and supplementary capital divided by total
risk-weighted assets. Assumes net proceeds are invested in assets that
carry a 20% risk-weighting.
11
PRO FORMA DATA
Pursuant to the Plan of Conversion, the amount of common stock being
offered in the conversion is based on an independent appraisal of the estimated
pro forma market value of the Bank and the MHC after giving effect to the
conversion. The Revised Estimated Valuation Range as of September 25, 1998 is
from a minimum of $25.5 million to a maximum of $34.5 million with a midpoint of
$30.0 million. Based on this valuation and the approximate 73.37% ownership
interest being sold in this offering, the Boards of Directors of the Holding
Company and the Bank established an offering range of $18.7 million to $25.3
million, with a midpoint of $22.0 million. At a price per share of $10.00, this
results in a minimum number of shares of 1,870,000, a maximum number of shares
of 2,530,000 and a midpoint number of shares of 2,200,000. The actual net
proceeds from the sale of the common stock cannot be determined until the
conversion is completed. However, net proceeds set forth on the following table
are based upon the following assumptions: (i) Webb will receive fees of
approximately $134,000, $158,000, $182,000 and $210,000 at the minimum,
midpoint, maximum and 15% above the maximum of the Revised Estimated Valuation
Range, respectively (see "THE CONVERSION -- Plan of Distribution and Selling
Commissions" in the Prospectus); (ii) all of the common stock will be sold in
the Subscription and Direct Community Offerings; and (iii) conversion expenses,
excluding the fees paid to Webb, will total approximately $700,000 at each of
the minimum, midpoint, maximum and 15% above the Revised Estimated Valuation
Range. Actual expenses may vary from this estimate, and the fees paid will
depend upon the percentages and total number of shares sold in the Subscription
Offering, Direct Community Offering and Syndicated Community Offering and other
factors.
The following table summarizes the historical net income and retained
income of the Bank and the pro forma consolidated net income and stockholders'
equity of the Holding Company for the periods and at the dates indicated based
on the minimum, midpoint and maximum of the Revised Estimated Valuation Range
and based on a 15% increase in the maximum of the Revised Estimated Valuation
Range. The pro forma consolidated net income of the Bank for the nine months
ended June 30, 1998 and the year ended September 30, 1997 has been calculated as
if the conversion had been consummated at the beginning of each period and the
estimated net proceeds received by the Holding Company and the Bank had been
invested at 5.37% and 5.44% at the beginning of the period, respectively, which
represents the one-year U.S. Treasury Bill yield as of June 30, 1998 and
September 30, 1997. While OTS regulations provide for the use of a yield
representing the arithmetic average of the weighted average yield earned by the
Bank on its interest-earning assets and the rates paid on its deposits, the
Holding Company believes that the U.S. Treasury Bill yield represents a more
realistic yield on the investment of the conversion proceeds. As discussed
under "USE OF PROCEEDS," the Holding Company expects to retain 50% of the net
proceeds of the offering from which it will fund the ESOP loan. A pro forma
after-tax return of 3.38% and 3.43% is used for both the Holding Company and the
Bank for the nine months ended June 30, 1998 and the year ended September 30,
1997, respectively, after giving effect to an incremental combined federal and
state income tax rate of 37.0%. Historical and pro forma per share amounts have
been calculated by dividing historical and pro forma amounts by the number of
shares of common stock indicated in the footnotes to the table. Per share
amounts have been computed as if the common stock had been outstanding at the
beginning of the respective periods, but without any adjustment of per share
historical or pro forma stockholders' equity to reflect the earnings on the
estimated net proceeds.
No effect has been given to: (i) the shares to be reserved for issuance
under the Holding Company's 1999 Stock Option Plan, which is expected to be
voted upon by stockholders at a meeting following consummation of the
conversion; (ii) withdrawals from deposit accounts for the purpose of purchasing
common stock in the conversion; (iii) the issuance of shares from authorized but
unissued shares to the 1999 MRDP, which is expected to be voted upon by
stockholders at a meeting following consummation of the conversion; or (iv) the
establishment of a liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders. See "MANAGEMENT OF THE BANK
- -- Benefits -- Stock Option Plan" and "THE CONVERSION -- Stock Pricing, Exchange
Ratio and Number of Shares to be Issued" in the Prospectus.
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE CONVERSION AT THE DATE ON WHICH THE CONVERSION ACTUALLY
OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE RESULTS OF OPERATIONS.
STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE BETWEEN THE STATED AMOUNTS OF
CONSOLIDATED ASSETS AND
12
LIABILITIES OF THE HOLDING COMPANY COMPUTED IN ACCORDANCE WITH GAAP.
STOCKHOLDERS' EQUITY HAS NOT BEEN INCREASED OR DECREASED TO REFLECT THE
DIFFERENCE BETWEEN THE CARRYING VALUE OF LOANS AND OTHER ASSETS AND MARKET
VALUE. STOCKHOLDERS' EQUITY IS NOT INTENDED TO REPRESENT FAIR MARKET VALUE NOR
DOES IT REPRESENT AMOUNTS THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO
STOCKHOLDERS IN THE EVENT OF LIQUIDATION.
At or For the Nine Months Ended June 30, 1998
----------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Revised Revised Revised Maximum of
Estimated Estimated Estimated Revised
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
----------- ------------ ----------- ---------------
1,870,000 2,200,000 2,530,000 2,909,500(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
---------- ----------- ---------- ---------
(In thousands, except per share amounts)
Gross proceeds...................................... $ 18,700 $ 22,000 $ 25,300 $ 29,095
Less: estimated expenses............................ 834 858 882 910
---------- ---------- ---------- ----------
Estimated net proceeds.............................. 17,866 21,142 24,418 28,185
Less: Common stock acquired by ESOP................. (1,496) (1,760) (2,024) (2,328)
Less: Common stock to be acquired
by 1999 MRDP.................................... (748) (880) (1,012) (1,164)
---------- ---------- ---------- ----------
Net investable proceeds......................... $ 15,622 $ 18,502 $ 21,382 $ 24,694
========== ========== ========== ==========
Consolidated net income:
Historical......................................... $ 1,475 $ 1,475 $ 1,475 $ 1,475
Pro forma income on net proceeds(2)................ 396 469 543 627
Pro forma ESOP adjustments(3)...................... (47) (55) (64) (73)
Pro forma 1999 MRDP adjustments(4)................. (71) (83) (96) (110)
---------- ---------- ---------- ----------
Pro forma net income............................. $ 1,753 $ 1,806 $ 1,858 $ 1,919
========== ========== ========== ==========
Consolidated net income per share (5)(6):
Historical......................................... $ 0.61 $ 0.52 $ 0.45 $ 0.39
Pro forma income on net proceeds................... 0.17 0.17 0.17 0.17
Pro forma ESOP adjustments(3)...................... (0.02) (0.02) (0.02) (0.02)
Pro forma 1999 MRDP adjustments(4)................. (0.03) (0.03) (0.03) (0.03)
---------- ---------- ---------- ----------
Pro forma net income per share(7)................ $ 0.73 $ 0.64 $ 0.57 $ 0.51
========== ========== ========== ==========
Consolidated stockholders' equity (book value):
Historical......................................... $ 25,202 $ 25,202 $ 25,202 $ 25,202
Estimated net proceeds............................. 17,866 21,142 24,418 28,185
Less: Common stock acquired by ESOP................ (1,496) (1,760) (2,024) (2,328)
Less: Common stock to be acquired
by 1999 MRDP(4).................................. (748) (880) (1,012) (1,164)
---------- ---------- ---------- ----------
Pro forma stockholders' equity(8)................ $ 40,824 $ 43,704 $ 46,584 $ 49,896
========== ========== ========== ==========
Consolidated stockholders' equity per share(6)(9):
Historical(6)...................................... $ 9.89 $ 8.40 $ 7.31 $ 6.36
Estimated net proceeds............................. 7.01 7.06 7.08 7.10
Less: Common stock acquired by ESOP................ (0.59) (0.59) (0.59) (0.59)
Less: Common stock to be acquired
by 1999 MRDP(4).................................. (0.29) (0.29) (0.29) (0.29)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share(7)...... $ 16.02 $ 14.58 $ 13.51 $ 12.58
========== ========== ========== ==========
Purchase price as a percentage of pro forma
stockholders' equity per share..................... 62.42% 68.59% 74.02% 79.49%
Purchase price as a multiple of pro forma
net income per share (10).......................... 10.27x 11.72x 13.16x 14.71x
(footnotes on following page)
13
At or For the Year Ended September 30, 1997
---------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Revised Revised Revised Maximum of
Estimated Estimated Estimated Revised
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
----------- ------------ ----------- ---------------
1,870,000 2,200,000 2,530,000 2,909,500(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
---------- ----------- ---------- ---------
(In thousands, except per share amounts)
Gross proceeds...................................... $ 18,700 $ 22,000 $ 25,300 $ 29,095
Less: estimated expenses............................ 834 858 882 910
---------- ---------- ---------- ----------
Estimated net proceeds.............................. 17,866 21,142 24,418 28,185
Less: Common stock acquired by ESOP................. (1,496) (1,760) (2,024) (2,328)
Less: Common stock to be acquired
by 1999 MRDP................................... (748) (880) (1,012) (1,164)
---------- ---------- ---------- ----------
Net investable proceeds........................ $ 15,622 $ 18,502 $ 21,382 $ 24,694
========== ========== ========== ==========
Consolidated net income:
Historical......................................... $ 1,923 $ 1,923 $ 1,923 $ 1,923
Pro forma income on net proceeds(2)................ 535 634 733 846
Pro forma ESOP adjustments(3)...................... (63) (74) (85) (98)
Pro forma 1999 MRDP adjustments(4)................. (94) (111) (128) (147)
---------- ---------- ---------- ----------
Pro forma net income............................. $ 2,301 $ 2,372 $ 2,443 $ 2,524
========== ========== ========== ==========
Consolidated net income per share (5)(6):
Historical......................................... $ 0.80 $ 0.68 $ 0.59 $ 0.51
Pro forma income on net proceeds................... 0.23 0.23 0.23 0.23
Pro forma ESOP adjustments(3)...................... (0.03) (0.03) (0.03) (0.03)
Pro forma 1999 MRDP adjustments(4)................. (0.04) (0.04) (0.04) (0.04)
---------- ---------- ---------- ----------
Pro forma net income per share(7)................ $ 0.96 $ 0.84 $ 0.75 $ 0.67
========== ========== ========== ==========
Consolidated stockholders' equity (book value):
Historical......................................... $ 24,072 $ 24,072 $ 24,072 $ 24,072
Estimated net proceeds............................. 17,866 21,142 24,418 28,185
Less: Common stock acquired by ESOP................ (1,496) (1,760) (2,024) (2,328)
Less: Common stock to be acquired
by 1999 MRDP(4).................................. (748) (880) (1,012) (1,164)
---------- ---------- ---------- ----------
Pro forma stockholders' equity(8)................ $ 39,694 $ 42,574 $ 45,454 $ 48,766
========== ========== ========== ==========
Consolidated stockholders' equity per share(6)(9):
Historical(6)...................................... $ 9.44 $ 8.03 $ 6.98 $ 6.07
Estimated net proceeds............................. 7.01 7.05 7.08 7.11
Less: Common stock acquired by ESOP................ (0.59) (0.59) (0.59) (0.59)
Less: Common stock to be acquired
by 1999 MRDP(4).................................. (0.29) (0.29) (0.29) (0.29)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share(7)...... $ 15.57 $ 14.20 $ 13.18 $ 12.30
========== ========== ========== ==========
Purchase price as a percentage of pro forma
stockholders' equity per share..................... 64.23% 70.42% 75.87% 81.30%
Purchase price as a multiple of pro forma
net income per share............................... 10.42x 11.90x 13.33x 14.93x
_____________________
(1) Gives effect to the sale of an additional 379,500 shares in the conversion,
which may be issued to cover an increase in the pro forma market value of
the Holding Company and the Bank as converted, without the resolicitation
of subscribers or any right of cancellation. The issuance of such
additional shares will be conditioned on a determination by RP Financial
that such issuance is compatible with its determination of the estimated
pro forma market value of the Bank and the MHC as converted. See "THE
CONVERSION -- Stock Pricing, Exchange Ratio and Number of Shares to be
Issued" in the Prospectus.
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing common stock in the conversion. Since funds on
deposit at the Bank may be withdrawn to purchase shares of common stock
(which
14
will reduce deposits by the amount of such purchases), the net amount of
funds available to the Bank for investment following receipt of the net
proceeds of the conversion will be reduced by the amount of such
withdrawals.
(3) It is assumed that 8% of the shares of common stock sold in the offering
will be purchased by the ESOP. The funds used to acquire such shares will
be borrowed by the ESOP (at an interest rate equal to the prime rate as
published in The Wall Street Journal on the closing date of the conversion,
which rate is currently 8.25%) from the net proceeds from the offering
retained by the Holding Company. The amount of this borrowing has been
reflected as a reduction from gross proceeds to determine estimated net
investable proceeds. The Bank intends to make contributions to the ESOP in
amounts at least equal to the principal and interest requirement of the
debt. As the debt is paid down, stockholders' equity will be increased.
The Bank's payment of the ESOP debt is based upon equal installments of
principal over a 15-year period, assuming a combined federal and state
income tax rate of 37.0%. Interest income earned by the Holding Company
on the ESOP debt offsets the interest paid by the Bank on the ESOP loan.
No reinvestment is assumed on proceeds contributed to fund the ESOP.
Applicable accounting practices require that compensation expense for the
ESOP be based upon shares committed to be released and that unallocated
shares be excluded from earnings per share computations. The valuation of
shares committed to be released would be based upon the average market
value of the shares during the year, which, for purposes of this
calculation, was assumed to be equal to the $10.00 per share purchase
price. See "MANAGEMENT OF THE BANK -- Benefits -- Employee Stock Ownership
Plan" in the Prospectus.
(4) In calculating the pro forma effect of the 1999 MRDP, it is assumed that
the required stockholder approval has been received, that the shares were
acquired by the 1999 MRDP at the beginning of the period presented in open
market purchases at the $10.00 per share purchase price, that 20% of the
amount contributed was an amortized expense during such period, and that
the combined federal and state income tax rate is 37.0%. The issuance of
authorized but unissued shares of the common stock instead of open market
purchases would dilute the voting interests of existing stockholders by
approximately 2.8% and pro forma net income per share would be $0.71,
$0.63, $0.56 and $0.50 at the minimum, midpoint, maximum and 15% above the
maximum of the Revised Estimated Valuation Range, respectively, for the
nine months ended June 30, 1998, and $0.94, $0.82, $0.74 and $0.66 at the
minimum, midpoint, maximum and 15% above the maximum of the Revised
Estimated Valuation Range, respectively, for the year ended September 30,
1997, and pro forma stockholders' equity per share would be $15.85, $14.44,
$13.41 and $12.51 at the minimum, midpoint, maximum and 15% above the
maximum of the Revised Estimated Valuation Range, respectively, at June 30,
1998, and $15.42, $14.08, $12.81 and $12.23 at the minimum, midpoint,
maximum and 15% above the maximum of the Revised Estimated Valuation Range,
respectively, at September 30, 1997. Shares issued under the 1999 MRDP
vest 20% per year and for purposes of this table compensation expense is
recognized on a straight-line basis over each vesting period. In the event
the fair market value per share is greater than $10.00 per share on the
date shares are awarded under the 1999 MRDP, total 1999 MRDP expense would
increase. No effect has been given to the shares reserved for issuance
under the proposed 1999 Option Plan.
(5) Per share amounts are based upon shares outstanding of 2,406,605,
2,831,300, 3,255,995 and 3,744,394 at the minimum, midpoint, maximum and
15% above the maximum of the Revised Estimated Valuation Range,
respectively, for the nine months ended June 30, 1998, and 2,409,098,
2,834,233, 3,259,368, and 3,748,273 at the minimum, midpoint, maximum and
15% above the maximum of the Revised Estimated Valuation Range,
respectively, for the year ended September 30, 1997, which includes the
shares of common stock issued in the conversion less the number of shares
assumed to be held by the ESOP not committed to be released within the
first year following the conversion.
(6) Historical per share amounts have been computed as if the shares of common
stock expected to be issued in the conversion had been outstanding at the
beginning of the period or on the date shown, but without any adjustment of
historical net income or historical retained earnings to reflect the
investment of the estimated net proceeds of the sale of shares in the
conversion, the additional ESOP expense or the proposed 1999 MRDP expense,
as described above.
(7) No effect has been given to the issuance of additional shares pursuant to
options to granted pursuant to the 1999 Option Plan or to existing stock
options. If stockholders approve the 1999 Option Plan following the
conversion, the Holding Company will have reserved for issuance under the
1999 Option Plan authorized but unissued shares of common stock
representing an amount of shares equal to 10% of the shares sold in this
offerings. If all of these
15
options were to be exercised utilizing authorized but unissued shares
rather than treasury shares which could be acquired, the voting interests
of existing stockholders would be diluted by approximately 7.0%. Assuming
stockholder approval of the 1999 Option Plan, and that all options under
the 1999 Option Plan were exercised at the end of the period at an exercise
price of $10.00 per share, pro forma net earnings per share would be $0.68,
$0.59, $0.53 and $0.48 at the minimum, midpoint, maximum and 15% above the
maximum of the Revised Estimated Valuation Range, respectively, for the
nine months ended June 30, 1998, and $0.89, $0.78, $0.70 and $0.62 at the
minimum, midpoint, maximum and 15% above the maximum of the Revised
Estimated Valuation Range, respectively, for the year ended September 30,
1997, and pro forma stockholders' equity per share would be $15.61, $14.26,
$13.27 and $12.41 at the minimum, midpoint, maximum and 15% above the
maximum of the Revised Estimated Valuation Range, respectively, at June 30,
1998 and $15.19, $13.91, $12.96 and $12.14 at the minimum, midpoint,
maximum and 15% above the maximum of the Revised Estimated Valuation Range,
respectively, at September 30, 1997. See "MANAGEMENT OF THE SAVINGS BANK -
- Benefits -- Stock Option Plans" and "RISK FACTORS -- Possible Dilutive
Effect of Benefit Programs" in the Prospectus.
(8) "Book value" represents the difference between the stated amounts of the
Bank's assets and liabilities. The amounts shown do not reflect the
liquidation account which will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the
conversion, or the federal income tax consequences of the restoration to
income of the Bank's special bad debt reserves for income tax purposes
which would be required in the unlikely event of liquidation. See "THE
CONVERSION -- Effects of Conversion on Depositors and Borrowers of the
Bank" and "TAXATION" in the Prospectus. The amounts shown for book value
do not represent fair market values or amounts distributable to
stockholders in the unlikely event of liquidation.
(9) Per share amounts are based upon shares outstanding of 2,548,725,
2,998,500, 3,448,275 and 3,965,516 at the minimum, midpoint, maximum and
15% above the maximum of the Revised Estimated Valuation Range,
respectively.
(10) Annualized.
16
EFFECT OF THE CONVERSION ON THE BANK'S STOCKHOLDERS
The following table illustrates the effect of the conversion on the public
stockholders of the Bank by setting forth selected comparative per share data
for the Bank on both an historical and a pro forma equivalent basis giving
effect to the conversion, assuming that at the minimum, midpoint, maximum and
15% above the maximum of the Revised Estimated Valuation Range, one share of
Bank common stock will be exchanged for 1.0674, 1.2558, 1.4442 and 1.6608 shares
of Holding Company common stock, respectively. Pro forma equivalent book value
per share and pro forma equivalent net income per share represent the pro forma
amounts set forth in the tables under "PRO FORMA DATA" above multiplied by the
foregoing Exchange Ratios. Pro forma equivalent dividends per share represent
the intended dividend payment set forth under "REVISED DIVIDEND POLICY" above
multiplied by the foregoing Exchange Ratios. This table should be read in
conjunction with the consolidated financial statements of the Bank, including
the notes thereto, appearing elsewhere in this prospectus. The following
information is not necessarily indicative of the results of operations or the
financial position that would have resulted had the conversion been consummated
at the beginning of the periods indicated.
At or For the At or For the
Nine Months Ended Year Ended
June 30, 1998 September 30, 1997
----------------- ------------------
Book value per share
Historical........................................................ $11.87 $11.39
Pro forma equivalent:
At minimum of Revised Estimated Valuation Range................ 17.10 16.62
At midpoint of Revised Estimated Valuation Range............... 18.31 17.83
At maximum of Revised Estimated Valuation Range................ 19.51 19.03
At 15% above maximum of Revised Estimated Valuation Range...... 20.89 20.43
Basic net income per share
Historical........................................................ $ 0.70 $ 0.92
Pro forma equivalent:
At minimum of Revised Estimated Valuation Range................ 0.78 1.02
At midpoint of Revised Estimated Valuation Range............... 0.80 1.05
At maximum of Revised Estimated Valuation Range................ 0.82 1.08
At 15% above maximum of Revised Estimated Valuation Range...... 0.85 1.11
Dividends per share
Historical........................................................ $0.825 $ 1.03
Pro forma equivalent:
At minimum of Revised Estimated Valuation Range................ 0.42 0.56
At midpoint of Revised Estimated Valuation Range............... 0.43 0.56
At maximum of Revised Estimated Valuation Range................ 0.43 0.58
At 15% above maximum of Revised Estimated Valuation Range...... 0.44 0.59
17
SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth, for each director and executive officer of
the Bank (and their associates) and for all of the directors and executive
officers as a group, (i) shares of Holding Company common stock to be received
in exchange for shares of Bank common stock based upon the number of shares
owned as of June 30, 1998, (ii) proposed purchases of common stock, assuming
shares available to satisfy their subscriptions, and (iii) total shares of
Holding Company common stock to be held upon consummation of the conversion, in
each case assuming that 2,200,000 shares are sold at the midpoint of the Revised
Estimated Valuation Range. No individual has entered into a binding agreement
with respect to such intended purchases and, therefore, actual purchases could
be more or less than indicated below. Directors and executive officers and
their associates may not purchase in excess of 32% of the shares sold in the
conversion. Because OTS policy requires that the maximum purchase limitation
include shares to be received in exchange for shares of Bank common stock,
certain officers and directors of the Bank may be limited in their ability to
purchase shares in this offering.
Number of
Shares Received
in Exchange Proposed Purchase of Total Common Stock
for Bank Common Stock to be Held
-------------------- -----------------------
Common Stock Number Number Percentage
(1)(2) Amount of Shares of Shares of Total
------- -------- --------- --------- ------------
Robert A. Ebel 28,506 $200,000 20,000 48,506 1.62%
Dr. Edward J. Howenstein 31,265 -- -- 31,265 1.04
William A. Donius 3,913 125,000 12,500 16,413 *
Michael J. Donius 4,540 100,000 10,000 14,540 *
E. Douglas Britt 16,175 50,000 5,000 21,175 *
Garland A. Dorn 4,940 25,000 2,500 7,440 *
Thomas F. Hack 12,846 10,000 1,000 13,846 *
Other Officers (4 persons) 24,397 21,000 2,100 26,497 *
------- -------- ------ -------
Total 126,582 $531,000 53,100 179,682 5.99%
======= ======== ====== =======
________________
(*) Less than 1%.
(1) Includes shares of Holding Company common stock received in exchange for
shares of Bank common stock awarded pursuant to the 1994 MRDP that remain
subject to vesting. Excludes shares which may be received upon the exercise
of outstanding stock options granted under the 1994 Option Plan. Based
upon the Exchange Ratio of 1.2558 at the midpoint of the Revised Estimated
Valuation Range, the following persons named in the table would have
options to purchase common stock as follows: Mr. Ebel, 3,767 shares; Mr.
Howenstein, 3,767 shares; Mr. William Donius, 11,553 shares; Mr. Michael
Donius, 8,288 shares; Mr. Britt, 2,260 shares; Mr. Dorn, 1,255 shares;
Mr. Hack, 4,296 shares; and other officers, 14,466 shares.
(2) Does not include stock options that may be granted under the 1999 Option
Plan and shares that may be awarded under 1999 MRDP if such plans are
approved by stockholders. See "MANAGEMENT OF THE BANK -- Benefits" in the
Prospectus.
18
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a post-effective amendment
to its Registration Statement on Form S-1 (File No. 333-56465) with respect to
the shares of common stock offered hereby. This Prospectus Supplement is part
of the Registration Statement. As allowed by the SEC, this Prospectus
Supplement does not contain all the information that you can find in the
Registration Statement or the exhibits to the Registration Statement. You may
read and copy the Registration Statement at the SEC's public reference room in
Washington, D.C. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. The
Registration Statement is also available on the Internet at the SEC's World Wide
Web site at http://www.sec.gov.
The MHC has filed with the OTS a post-effective amendment to its
Application for Approval of Conversion. As allowed by the OTS, this Prospectus
Supplement omits certain information contained in such Application, including
the updated appraisal report. The Application may be inspected, without charge,
at the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552 and at
the office of the Regional Director of the OTS at the OTS Midwest Regional
Office, 122 W. John Carpenter Freeway, Suite 600, Irving, Texas 75039.
You may obtain additional copies of the Prospectus from the Bank's
stock information center at 12300 Olive Boulevard, St. Louis, Missouri or by
calling (314) 878-5200.
INDEX TO QUARTERLY FINANCIAL INFORMATION
Page
----
Financial Statements:
Consolidated Balance Sheets as of
June 30, 1998 and September 30, 1997 (unaudited).................... F-1
Consolidated Statements of Income for the
Three and Nine Months Ended June 30, 1998 and 1997 (unaudited)...... F-2
Consolidated Statements of Stockholders' Equity
Nine Months Ended June 30, 1998 (unaudited)......................... F-3
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 1998 and 1997 (unaudited)................ F-4
Notes to Unaudited Consolidated Financial Statements....................... F-6
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... F-8
19
PULASKI BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND SEPTEMBER 30, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30,
ASSETS 1998 1997
Cash and amounts due from depository institutions $ 2,542,082 $ 1,248,294
Federal funds sold and overnight deposits 15,000,000 5,000,000
-------------- -------------
Total cash and cash equivalents 17,542,082 6,248,294
Investments in debt securities held to maturity (market value, $14,270,406
and $16,071,484, at June 30, 1998 and September 30, 1997, respectively) 14,267,092 16,068,191
Mortgage-backed and related securities held to maturity (market value,
$6,156,137 and $6,647,107 at June 30, 1998 and September 30, 1997,
respectively) 5,880,577 6,361,708
Loans held for sale 14,621,524 14,384,480
Loans receivable, net of allowance for loan losses at June 30, 1998 and
September 30, 1997, respectively of $729,222 and $612,852 128,589,872 130,358,537
Federal Home Loan Bank stock - at cost 1,423,000 1,638,000
Real estate acquired in settlement of loans, net of allowance for losses of
$2,270 and $-0- at June 30, 1998 and September 30, 1997, respectively 12,860
Premises and equipment - net 1,933,326 1,808,809
Accrued interest receivable:
Investment securities 136,322 140,225
Mortgage-backed securities 44,685 49,468
Loans 862,627 925,708
Other 2,521 882
Other assets 1,600,286 1,434,430
-------------- -------------
TOTAL $ 186,916,774 $ 179,418,732
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 156,434,431 $ 148,672,221
Advances from Federal Home Loan Bank of Des Moines 1,900,000 2,200,000
Advance payments by borrowers for taxes and insurance 2,285,859 3,113,093
Accrued interest payable 41,187 262,833
Other liabilities 1,267,131 1,312,695
-------------- -------------
Total liabilities 161,928,608 155,560,842
-------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $1.00 par value per share, 10,000,000 shares, authorized;
none issued or outstanding
Common stock - $1.00 par value per share, 20,000,000 shares, authorized;
2,105,840 and 2,094,800 shares issued and outstanding
at June 30, 1998 and September 30, 1997, respectively 2,105,840 2,094,800
Additional paid-in capital 5,256,888 5,132,238
Unearned management recognition and development plan shares (87,400) (128,800)
Retained earnings, substantially restricted 17,712,838 16,759,652
-------------- -------------
Total stockholders' equity 24,988,166 23,857,890
-------------- -------------
TOTAL $ 186,916,774 $ 179,418,732
============== =============
See accompanying notes to the unaudited consolidated financial statements.
F-1
PULASKI BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------------ -------------------------------
1998 1997 1998 1997
INTEREST INCOME:
Loans $ 2,821,667 $ 2,842,793 $ 8,648,447 $ 8,382,350
Investment securities 211,546 295,563 686,877 825,864
Mortgage-backed and related securities 123,461 139,400 381,237 431,734
Other 242,809 118,002 531,119 385,061
-------------- ------------ -------------- ------------
Total interest income 3,399,483 3,395,758 10,247,680 10,025,009
INTEREST EXPENSE:
Deposits 1,755,447 1,713,356 5,232,193 5,095,072
Advances from Federal Home Loan Bank of Des Moines 30,369 34,616 99,600 125,598
-------------- ------------ -------------- ------------
Total interest expense 1,785,816 1,747,972 5,331,793 5,220,670
-------------- ------------ -------------- ------------
NET INTEREST INCOME 1,613,667 1,647,786 4,915,887 4,804,339
PROVISION FOR LOAN LOSSES 63,538 15,204 133,061 33,685
-------------- ------------ -------------- ------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,550,129 1,632,582 4,782,826 4,770,654
-------------- ------------ ------------- ------------
OTHER INCOME:
Service charges on deposit accounts 48,276 18,384 100,814 55,669
Gains on sales of loans 203,170 114,303 483,908 271,346
Insurance commissions 79,672 37,766 161,953 88,160
Other 80,846 60,480 252,470 208,444
-------------- ------------ ------------- ------------
Total other income 411,964 230,933 999,145 623,619
-------------- ------------ ------------- ------------
OTHER EXPENSES:
Salaries and employee benefits 615,691 618,049 1,794,577 1,891,361
Occupancy and equipment expense 139,426 136,386 416,671 386,607
Federal insurance premiums 24,450 24,390 73,117 118,094
Outside data processing 63,364 61,585 183,022 178,781
Advertising 69,980 7,509 224,898 34,486
Professional services 54,089 41,043 229,988 134,006
Other 200,534 144,712 554,652 463,851
-------------- ------------ ------------- ------------
Total other expenses 1,167,534 1,033,674 3,476,925 3,207,186
-------------- ------------ ------------- ------------
INCOME BEFORE INCOME TAXES 794,559 829,841 2,305,046 2,187,087
INCOME TAXES 295,817 295,644 829,751 758,477
-------------- ------------ ------------- ------------
NET INCOME $ 498,74 $ 534,197 $ 1,475,295 $ 1,428,610
============== ============ ============= ============
BASIC EARNINGS PER SHARE $ 0.24 $ 0.26 $ 0.70 $ 0.68
============== ============ ============= ============
DILUTED EARNINGS PER SHARE $ 0.23 $ 0.25 $ 0.69 $ 0.68
============= ============ ============= ============
See accompanying notes to the unaudited consolidated financial statements.
F-2
PULASKI BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Unearned
Management
Additional Recognition and
Common Paid-In Development Retained
Stock Capital Plan Shares Earnings Total
BALANCE, SEPTEMBER 30, 1997 $ 2,094,800 $ 5,132,238 $ (128,800) $ 16,759,652 $ 23,857,890
First quarter dividends declared
($.275 per share)* (172,398) (172,398)
Second quarter dividends declared
($.275 per share)* (174,856) (174,856)
Third quarter dividends declared
($.275 per share)* (174,855) (174,855)
Stock options exercised 11,040 124,650 135,690
Amortization of management
recognition and development
plan shares 41,400 41,400
Net income 1,475,295 1,475,295
--------------- ----------- ------------- ------------- ------------
BALANCE, JUNE 30, 1998 $ 2,105,840 $ 5,256,888 $ (87,400) $ 17,712,838 $ 24,988,166
=============== =========== ============== ============= ============
* Pulaski Bancshares, M.H.C. ("MHC"), which owns 1,470,000 of the outstanding
shares of common stock in the Bank, waived receipt thereby reducing the actual
dividend payment to the amount shown above.
See accompanying notes to unaudited consolidated financial statements.
F-3
PULASKI BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,475,295 $ 1,428,610
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion:
Premises and equipment 211,148 197,362
Management recognition and development plan stock awards 41,400 41,400
Loan fees, discounts and premiums - net (91,270) (172,654)
Provision for loan losses 133,061 33,685
Provision for losses on real estate acquired in settlement of loans 14,873 14,653
Loss (gains) on sales of real estate acquired in settlement of loans 1,626 (15,908)
Originations of loans for sale to correspondent lenders (91,488,561) (46,977,092)
Proceeds from sales of loans to correspondent lenders 91,735,425 42,387,966
Gains on sales of loans (483,908) (271,346)
Decrease (increase) in accrued interest receivable 68,769 (74,685)
Decrease in accrued interest payable (221,646) (231,755)
Changes in other assets and liabilities (210,062) 162,905
-------------- --------------
Net adjustments (289,145) (4,905,469)
-------------- --------------
Net cash provided by (used in) operating activities 1,186,150 (3,476,859)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 17,010,000 10,000,000
Purchases of investment securities (14,845,219) (12,061,795)
Principal payments received on mortgage-backed and
related securities 482,712 866,650
Loan repayments in excess of originations 1,464,253 3,136,267
Proceeds from sales of real estate acquired in settlement
of loans 83,001 80,436
Net additions to premises and equipment (335,665) (329,057)
-------------- --------------
Net cash provided by investing activities 3,859,082 1,692,501
-------------- --------------
(Continued)
F-4
PULASKI BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
1998 1997
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits $ 7,762,210 $ 2,266,209
Repayment of Federal Home Loan Bank advances (300,000) (800,000)
Decrease in advance payments by borrowers for taxes
and insurance (827,235) (829,508)
Dividends declared on common stock (522,109) (468,000)
Common stock issued under stock option plan 135,690
--------------- --------------
Net cash provided by financing activities 6,248,556 168,701
--------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 11,293,788 (1,615,657)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 6,248,294 9,022,158
--------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 17,542,082 $ 7,406,501
=============== ==============
ADDITIONAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest on deposits $ 5,453,839 $ 5,326,827
Interest on advances from the Federal Home Loan Bank
of Des Moines 99,600 125,598
Income taxes 895,814 166,190
NONCASH INVESTING ACTIVITIES - Real estate acquired
in settlement of loans $ 112,360 $ 4,075
=============== ==============
See accompanying notes to the unaudited consolidated financial statements.
(Concluded)
F-5
PULASKI BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. The preceding unaudited consolidated financial statements include the
accounts of Pulaski Bank, A Federal Savings Bank (the "Bank") and its wholly-
owned subsidiaries, Pulaski Service Corporation and Pulaski Real Estate
Company. All significant intercompany accounts and transactions have been
eliminated.
In the opinion of management, the unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial condition of the Bank as
of June 30, 1998 and September 30, 1997 and the results of its operations for
the three and nine month periods ended June 30, 1998 and 1997. The results
of operations for the three month or nine month period ended June 30, 1998
are not necessarily indicative of the results which may be expected for the
entire fiscal year. These unaudited consolidated financial statements should
be read in conjunction with the audited consolidated financial statements of
the Bank for the year ended September 30, 1997 contained in the Bank's 1997
Annual Report to Stockholders which is filed as an exhibit to the Bank's
Annual Report on Form 10-KSB.
Certain balances reported in 1997 have been reclassified to conform to the
1998 presentation.
2. EARNINGS PER SHARE
EARNINGS PER SHARE - Basic earnings per share are determined by dividing net
income for the period by the weighted average number of common shares.
Diluted earnings per share considers the effects of dilution of earnings
after consideration of the stock options outstanding under the Bank's Stock
Option Plan.
A summary of the weighted average number of shares and weighted average
number of shares and common equivalent shares follows:
Three Months Ended June 30, Nine Months Ended June 30,
---------------------------------- ----------------------------------
1998 1997 1998 1997
Weighted average number of
shares 2,105,840 2,094,000 2,100,286 2,094,000
Common equivalent shares 32,303 17,467 33,064 13,534
------------- ------------ ------------- -----------
Weighted average number of
shares and common
equivalent shares 2,138,143 2,111,467 2,133,350 2,107,534
============= ============ ============= ===========
3. PLAN OF CONVERSION AND STOCK ISSUANCE
On April 15, 1998, the Boards of Directors of Pulaski Bancshares, M.H.C. and
the Bank each adopted a Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan") to convert Pulaski Bancshares, M.H.C. from a
federal mutual holding company to a Delaware corporation to become the
F-6
parent company of the Bank. The new Delaware corporation known as Pulaski
Financial Corp. (`Holding Company") will exchange certain shares of its
common stock for the outstanding common stock of the Bank and will issue and
offer for sale certain additional shares of its common stock. The additional
shares of common stock of the new Delaware corporation will be offered to
eligible account holders of the Bank as of March 31, 1997, who will receive
nontransferable subscription rights to purchase these shares, as well as
certain other persons as provided for in the Plan. The amount and pricing of
the proposed stock offering will be based on an independent appraisal of the
Bank.
In connection with the proposed transaction, an application for conversion
was filed by Pulaski Bancshares, M.H.C. on June 9, 1998 with the Office of
Thrift Supervision (the "OTS") and a registration statement on Form S-1 was
filed on the same date by the Holding Company with the U.S. Securities and
Exchange Commission (the "SEC") with respect to the common stock to be issued
in the reorganization. The application has not yet been approved by the OTS,
and the registration statement has not yet been declared effective. After
receipt of the required regulatory approvals, the Plan will be submitted to
the members of Pulaski Bancshares, M.H.C. for approval by at least a majority
of the votes eligible to be cast at a special meeting and will also be
submitted to Bank's stockholders for approval at a special meeting. The
transaction is expected to be completed during the fourth quarter of fiscal
1998. Costs related to the conversion will be deferred and, upon conversion,
such costs and any additional costs will be charged against the proceeds from
the sale of the stock. As of June 30, 1998, deferred costs relating to the
conversion totaled approximately $208,000. If the conversion is terminated,
these deferred costs will be expensed to operations.
4. PROSPECTIVE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 132, Employers'
Disclosures About Pensions and Other Postretirement Benefits, was issued in
February 1998. This statement standardizes disclosure requirements for
pensions and other postretirement benefits and requires additional disclosure
on changes in benefit obligations and fair values of plan assets in order to
facilitate financial analysis. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997, with earlier application encouraged.
Adoption of this statement is not anticipated to have a significant effect
upon the presentation of the Bank's financial statements.
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
was issued in June 1998. This statement establishes accounting and reporting
standards for derivative instruments and requires that all derivatives be
recognized as either assets or liabilities in the statement of financial
position. Under this standard, all derivative instruments should be measured
at fair value. Although the Bank has no intention of doing so, SFAS 133
allows an entity to transfer at the date of application of this statement any
held-to-maturity securities into the available-for-sale category or the
trading category. An entity would then be able in the future to designate a
security transferred into the available-for-sale category as a hedged item.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999; however, the Bank will early adopt this standard
effective October 1, 1998. Because the Bank does not invest in derivative
instruments or enter into hedging transactions, adoption of this statement is
not anticipated to have a significant effect on the Bank's financial position
or results of operations.
* * * * * *
F-7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Bank. The information contained in this section
should be read in conjunction with the unaudited consolidated financial
statements and accompanying notes thereto.
Certain statements in this quarterly report and throughout Management's
Discussion and Analysis of Financial Condition and Results of Operations are
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve known and unknown risk, uncertainties
and other factors that may cause the Bank's actual results, performance or
achievements to be materially different from the results, performance or
achievements expressed or implied by the forward looking statement. Factors
that impact such forward looking statements include, among others, changes in
general economic conditions, changes in interest rates and competition.
FINANCIAL CONDITION
Total assets at June 30, 1998 were $186.9 million, an increase of $7.5 million
from $179.4 million at September 30, 1997. The increase in total assets is
primarily attributable to an increase in cash and cash equivalents offset by
decreases in loans receivable and investment securities.
Loans held for sale were $14.4 million at September 30, 1997 and increased to
$14.6 million at June 30, 1998. The increase was due to greater volume of
lending due in part to increased refinancing of mortgage loans. Cash
equivalents increased as loan repayments and deposits were invested in overnight
funds. In management's opinion, the current "flat" yield curve (i.e., short-
term rates and long-term rates are relatively equal) does not provide sufficient
incentive to warrant maturity extension of the investment portfolio.
Investments in debt securities decreased from $16.1 million at September 30,
1997 to $14.2 million at June 30, 1998. This decrease was due to maturity of
investments and redemption, prior to maturity, of callable securities that
resulted from the declining interest rates.
Loans receivable decreased from $130.4 million at September 30, 1997 to $128.6
million at June 30, 1998. The decrease of $1.8 million is due to repayment of
loans exceeding originations and reflects the payoff of the Bank's largest loan,
totaling approximately $1.2 million during the nine month period ended June 30,
1998. In the current rate environment, the majority of the Bank's borrowers
preferred fixed rate loans, which are generally originated for sale in the
secondary market rather than retained in the Bank's portfolio.
Total liabilities at June 30, 1998 were $161.9 million, an increase of $6.3
million from $155.6 million at September 30, 1997. Deposits for the same period
increased from $148.7 million to $156.4 million, or $7.7 million. This growth
is as a result of the implementation of the high performance checking program,
which involves frequent direct mail advertisement and gifts for new checking
accounts. The number of new checking and money market accounts has increased
almost 47% since September 30, 1997. The Bank also believes that it has
benefited from the bank mergers and consolidations in the St. Louis market which
finds customers leaving larger institutions and obtaining services from a
smaller, personally oriented financial institution.
F-8
Offsetting the increase in deposits, advances from the Federal Home Loan Bank of
Des Moines decreased $300,000 from $2.2 million at September 30, 1997 to $1.9
million at June 30, 1998. The $300,000 decrease is due to scheduled debt
service payments.
Total stockholders' equity at June 30, 1998 was $25.0 million, an increase of
$1.1 million over $23.9 million at September 30, 1997. The increase is
attributable to net income of $1.5 million offset by dividends declared and paid
to minority stockholders of $522,000. Also during the nine months ended June
30, 1998, stock options were exercised which resulted in capital contributions
totaling approximately $136,000.
NON-PERFORMING ASSETS AND DELINQUENCIES
Loans accounted for on a non-accrual basis amounted to $648,000 at June 30, 1998
as compared to $217,000 at September 30, 1997. The largest non-accrual loan
represents the Bank's interest ($227,000 at June 30, 1998) in a participation
loan in which the borrower has declared bankruptcy. The borrower is paying in
accordance with the terms of the bankruptcy court's ruling, and the interest
rate has been increased to 11.625% during the period of delinquency. Interest
income is only being recognized upon receipt of payment. Substantially all of
the remaining balance of non-accrual loans represents single-family residential
loans. Accruing loans that were contractually past due 90 days or more at June
30, 1998 amounted to $1.1 million of which $252,000 were FHA/VA government-
insured loans. Real estate acquired in settlement of loans, net of allowance
for losses, increased to $13,000 at June 30, 1998 from $-0- at September 30,
1997, and consisted of one single-family residence. The allowance for loan
losses was $729,000 at June 30, 1998, or .51% of total loans.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND
1997:
GENERAL
Net income for the three months ended June 30, 1998 was $499,000, or $0.23 per
share (diluted), compared to $534,000, or $0.25 per share (diluted) for the
three months ended June 30, 1997. The decrease in net income between the
periods was primarily the result of increases in the provision for loan losses
and other expenses, which were partially offset by an increase in other income
due to strong loan sales. Additionally, net income for the nine months ended
June 30, 1998 was $1,475,000, or $0.69 per share (diluted), compared to
$1,429,000, or $0.68 per share (diluted), for the nine months ended June 30,
1997. The increase in net income between the periods was primarily the result
of increases in net interest income and other income, which were partially
offset by increases in the provision for loan losses and other expenses.
INTEREST INCOME
Interest income increased $4,000 for the three months ended June 30, 1998
compared to the three months ended June 30, 1997. The increase resulted
primarily from an increase in interest on overnight deposits of $125,000, offset
by a decrease in interest on investments of $84,000 and a decrease in interest
on loans of $21,000. Interest income increased $223,000 for the nine months
ended June 30, 1998 compared to the nine months ended June 30, 1997. The
increase resulted from an increase in interest on loans of $266,000 and interest
on overnight deposits of $146,000, offset by a decrease in interest on
investments and mortgage-backed securities of $189,000.
F-9
Although interest on loans decreased during the quarter ended June 30, 1998, it
increased by $266,000 for the nine months ended June 30, 1998, compared to the
nine months ended June 30, 1997. The increase in the nine month period resulted
from an increase in the average balance of loans outstanding from $139.3 million
in 1997 to $143.3 million in 1998. The average yield on loans for the nine
month period remained relatively consistent at 8.03% in 1997 and 8.05% in 1998.
In contrast, the average yield on loans decreased to 7.98% for the quarter ended
June 30, 1998 from 8.13% for the same quarter in 1997. The average balance of
loans outstanding increased due to the increased volume of consumer lending. As
part of the Bank's interest rate risk policy, the majority of fixed-rate
mortgage loans are sold with servicing released.
Interest on overnight deposits increased as a result of the increase in average
balance to $17.9 million and $13.0 million for the three and nine months ended
June 30, 1998 from $8.7 million and $9.7 million for the three and nine months
ended June 30, 1997, with the weighted average interest rate increasing from
5.27% in 1997 to 5.44% in 1998. Excess liquidity has been invested in federal
funds because management believes the current "flat" yield curve provides
insufficient incentive for maturity extension.
The decrease in interest income on investment securities resulted from a
decrease in the average balance from $19.7 million and $18.7 million for the
three and nine months ended 1997 to $14.9 million and $15.5 million for the
three and nine months ended 1998 and a consistent average yield on these
investments of 5.9% in 1997 and 1998. The decrease in the average balances is a
reflection of the redemption, prior to maturity, of callable securities and
utilization of maturing securities to fund loan closings. At June 30, 1998, the
Bank's portfolio included $5.3 million of callable securities with a weighted
average rate of 5.97%. Callable securities carry the risk that if called prior
to maturity, the proceeds may be reinvested at lower interest rates or longer
terms.
INTEREST EXPENSE
Interest expense increased $38,000 for the three months ended June 30, 1998
compared to the three months ended June 30, 1997. The increase resulted
primarily from an increase in the average balance of deposits, from $148.6
million for the three months ended June 30, 1997 to $155 million for the three
months ended June 30, 1998 partially offset by a decrease in the weighted
average yield on deposits from 4.61% for the quarter ended June 30, 1997 to
4.53% for the quarter ended June 30, 1998. Interest expense increased $111,000
for the nine months ended June 30, 1998 compared to the nine months ended June
30, 1997. The increase resulted primarily from an increase in the average
balance of deposits, from $148.1 million for the nine months ended June 30, 1997
to $152.7 million for the nine months ended June 30, 1998 partially offset by a
decrease in the weighted average yield on deposits from 4.59% for the nine
months ended June 30, 1997 to 4.57% for the nine months ended June 30, 1998.
The increased deposit volume has resulted from the implementation of the high
performance checking program which involves frequent direct mail advertisement
and gifts for new checking accounts.
Interest on FHLB advances declined $4,000 and $26,000 for the three and nine
months ended June 30, 1998, respectively. These decreases are a result of the
decreased principal balance resulting from scheduled debt service payments.
PROVISION FOR LOAN LOSSES
The provision for loan losses is determined by management as the amount to be
added to the allowance for loan losses after net charge-offs have been deducted
to bring the allowance to a level which is considered adequate to absorb losses
inherent in the loan portfolio. Because management believes it adheres to
strict loan underwriting guidelines focusing on mortgage loans secured by one-
to-four-family residences, the
F-10
Bank's historical loan loss experience has been low. No assurances, however, can
be given as to future loan loss levels.
The provision for loan losses for the three months ended June 30, 1998 and 1997
was $64,000 and $15,000, respectively. The provision for loan losses for the
nine months ended June 30, 1998 and 1997 was $133,000 and $34,000, respectively.
This increase reflects the increase in the Bank's investment in consumer credit
and non-conforming residential real estate loans. Non-conforming residential
real estate loans represent credit issued which does not meet Fannie-Mae lending
guidelines and therefore may not be pooled and securitized with other loans.
Although these type of loans are inherently more subject to default, management
believes that the credit risk is being adequately mitigated by more stringent
collection efforts and additional monitoring activities. Management believes
that the current level of allowance for loan losses is adequate to absorb
estimated losses inherent in the loan portfolio.
OTHER INCOME
Other income increased $181,000 and $376,000 for the three and nine months ended
June 30, 1998 in comparison to the three and nine months ended June 30, 1997.
These fluctuations are primarily due to increases in gains on sales of loans.
Year-to-date gains have increased due to loan volumes being approximately 96%
greater than last year.
In addition, for the three months ended June 30, 1998, service charges on
deposit accounts increased $30,000, commissions on sales of insurance products
increased $42,000, and miscellaneous other income increased $21,000. Such
increases for the nine months ended June 30, 1998, totaled $45,000 for service
charges on deposit accounts, $74,000 for commissions on sales of insurance
products, and $44,000 for miscellaneous other income.
OTHER EXPENSES
Other expenses increased $134,000 and $270,000 to $1.2 million and $3.5 million
for the three and nine months ended June 30, 1998, respectively. Aside from
advertising expenses and professional services, the other classifications of
other expenses remained relatively consistent.
Advertising expense increased $62,000 and $190,000 for the three and nine months
ended June 30, 1998 compared to the three and nine months ended June 30, 1997.
Advertising expense for the nine month period consisted of $20,000 of expense
related to the celebration of the Bank's seventy-fifth anniversary and $146,000
associated with the commencement of the checking account promotion. The
checking account promotion has been designed to last three years. The Bank
projects the first year promotional costs (consisting primarily of marketing
firm fees, postage and direct mailing expenses, etc.) to be approximately
$360,000 (including the costs incurred during the nine months ended June 30,
1998) with similar costs expected in each of the subsequent two years if the
promotion is continued. The goals of the promotion are (i) to increase the
percentage of transaction accounts to total deposits, thereby decreasing the
Bank's cost of funds and (ii) to increase other income through insufficient
funds charges, service charges and fees levied on checking accounts.
Professional services increased $96,000 from $134,000 for the nine months ended
June 30, 1997 to $230,000 for the nine months ended June 30, 1998. This
increase is attributable to certain consultative services provided to Bank
management including fees related to the high performance checking program.
Other
F-11
consulting services included fees for employee benefit consulting as well as
fees for development of a strategic business and management development program.
INCOME TAXES
The provision for income taxes remained consistent for the three months ended
June 30, 1998 in comparison to the three months ended June 30, 1997. The
provision for income taxes increased $71,000 for the nine months ended June 30,
1998 in comparison to the nine months ended June 30, 1997. The increase is
primarily attributable to increased levels of taxable income and a slight
increase in the Bank's effective tax rate.
ASSET AND LIABILITY MANAGEMENT
The Bank uses a net market value methodology as one method to measure its
interest rate risk exposure. This exposure is a measure of the potential
decline in the net portfolio value ("NPV") of the Bank based upon the effect of
an assumed 200 basis point increase or decrease in interest rates. NPV is the
present value of the expected net cash flows from the institution's assets,
liabilities and off-balance sheet contracts. Under OTS regulations, an
institution's "normal" level of interest rate risk in the event of this assumed
change in interest rates is a decrease in the institution's NPV in an amount not
exceeding 2% of the present value of its assets. On July 1, 1994, thrift
institutions with greater than "normal" interest rate exposure were required by
regulation to provide additional capital to meet their risk-based capital
requirement. Subsequently, the OTS indefinitely postponed its implementation of
these regulations. However, if implemented, savings institutions, such as the
Bank, with less than $300,000,000 in assets and risk-based capital in excess of
12% would not be subject to the final regulation. The Bank utilizes this
methodology as one way to monitor its interest rate risk and influence its
pricing strategy. Utilizing this measurement concept, at March 31, 1998, the
latest measurement date, the change in the Bank's net portfolio value as a
percent of the present value of its assets was a negative .7%. On this basis,
the Bank would not be considered as having "greater than normal" interest rate
exposure under OTS regulations.
LIQUIDITY AND CAPITAL RESOURCES
Federal regulations require the Bank to maintain minimum levels of liquid
assets. The required percentage has varied from time to time based upon
economic conditions and savings flows and is currently 4% of net withdrawable
savings deposits (as defined by OTS) and borrowings payable on demand or in one
year or less during the proceeding calendar month. Liquid assets for purposes
of this ratio include cash and cash equivalents and investment securities and
agency-issued collateralized mortgage obligations generally having maturities of
less than five years. The Bank attempts to maintain levels of liquidity in
excess of those required by regulation. Maintaining adequate levels of
liquidity reduces the Bank's balance sheet exposure to interest rate risk. At
June 30, 1998, the Bank's liquidity ratio (liquid assets as a percentage of net
withdrawable savings deposits and short-term borrowings) was 23.52%.
The Bank must also maintain adequate levels of liquidity to ensure the
availability of funds to satisfy loan commitments and deposit withdrawals. At
June 30, 1998, the Bank had outstanding commitments to originate loans of $5.9
million, and commitments to sell loans of $14.5 million. At the same date,
certificates of deposit which are scheduled to mature in one year or less
totaled $67.6 million. Based on prior experience, management believes the
majority of maturing certificates of deposit will remain with the Bank.
F-12
Management believes its ability to generate funds internally will satisfy its
liquidity requirements. If the Bank requires funds beyond its ability to
generate them internally, it has the ability to borrow funds from the FHLB-Des
Moines under a blanket agreement which assigns all investments in FHLB stock as
well as qualifying first mortgage loans equal to 150% of the outstanding
advances as collateral to secure the amounts borrowed. At June 30, 1998, the
Bank had approximately $73.6 million available to it under the above-mentioned
borrowing arrangement. At June 30, 1998, the Bank had $1.9 million in
outstanding advances from the FHLB-Des Moines.
The Bank cannot pay cash dividends in excess of the higher of (1) net income to
date during the calendar year plus one-half of surplus capital over regulatory
capital or amounts which would result in the Bank not maintaining adequate
capital requirements imposed by the OTS or (2) 75% of net income over the most
recent four quarter period. The MHC has received regulatory approval to waive
its right to receive cash dividends declared by the Bank for the quarterly
periods ending September 30, 1997, December 31, 1997, March 31, 1998 and June
30, 1998. Current OTS policy requires the amount of any waived dividends must
be considered as having been paid by the Bank for purposes of evaluating any
future proposed dividend payments.
The Bank is required to maintain specific amounts of capital pursuant to OTS
regulations on minimum capital standards. The OTS' minimum capital standards
generally require the maintenance of regulatory capital sufficient to meet each
of three tests, hereinafter described as the tangible capital requirement, the
core capital requirement and the risk-based requirement. The tangible capital
requirement provides for minimum tangible capital (defined as stockholders'
equity less all intangible assets) equal to 1.5% of adjusted total assets. The
core capital requirement provides for minimum core capital (tangible capital
plus certain forms of supervisory goodwill and other qualifying intangible
assets) equal to 3.0% of adjusted total assets. The risk-based capital
requirements provides for the maintenance of core capital plus a portion of
unallocated loss allowances equal to 8.0% of risk-weighted assets. In computing
risk-weighted assets the Bank multiplies the value of each asset on its balance
sheet by a defined risk-weighting factor (e.g., one- to four-family conventional
residential loans carry a risk-weighted factor of 50%).
At June 30, 1998, the Bank's tangible capital totaled $24.9 million, or 13.33%
of adjusted total assets, which exceeded the minimum 1.5% requirement by $22.1
million, or 11.83%. The Bank's core capital at June 30, 1998 totaled $24.9
million, or 13.33% of adjusted total assets, which was approximately $19.3
million, or 9.33% above the minimum requirement of 4%. The Bank's risk-based
capital at that date totaled $25.7 million, or 24.6% of risk weighted assets,
which is $17.3 million, or 16.6% above the 8% fully phased-in requirement.
EFFECT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related financial data presented
herein have been prepared in accordance with 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 Bank's operations. Unlike most industrial companies, virtually all
the assets and liabilities of a financial institution are monetary in nature.
As a result, interest rates generally have a more significant impact on a
financial institution's performance than do 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.
F-13
YEAR 2000
The year 2000 issue exists because many computer systems and applications use
two-digit date fields to designate a year. As the century date change occurs,
date-sensitive systems may recognize the year 2000 as 1900, or not at all. This
inability to recognize or properly treat the year 2000 may cause systems to
process financial and operational information incorrectly.
All of the material data processing of the Bank that could be affected by this
problem is provided by a third party service bureau. The Bank's service bureau
informed the Bank that it intends to complete its year 2000 adjustments by
October 1998 and to make its systems available for testing in November 1998.
The Bank has developed a year 2000 action plan that sights mission critical
dates and contingency options and created a committee of the Board of Directors
to analyze how the year 2000 will impact its operations and to monitor the
status of its vendors. The Bank will continue to monitor its status as well as
its service providers' status in their efforts to become year 2000 compliant.
The Bank does not believe that the costs associated with its actions and those
of its vendors will be material to the Bank. The Bank's service bureau will
make available certain software that will allow the Bank to test its critical
applications. The Bank's service bureau will make available a test system to
test various applications and the Bank's cost for participation in this
application will be $25,000. Other internal costs are not expected to exceed
$100,000 and will consist primarily of accelerating various hardware and
purchased software upgrades which generally would have been incurred in the
normal course of business. The costs for accomplishing the Bank's plans to
complete the year 2000 modifications and testing processes are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of various resources,
third-party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could differ
from those plans. In the event the Bank's service bureau is unable to fulfill
its contractual obligations to the Bank, it could have a significant adverse
impact on the financial condition and results of operations of the Bank.
F-14
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution*
Legal fees and expenses..................... $225,000
Securities marketing firm legal fees........ 35,000
Securities marketing firm expenses.......... 10,000
EDGAR, printing, copying, postage, mailing.. 157,000
Appraisal/business plan fees and expenses... 45,000
Accounting fees............................. 150,000
Data processing fees and expenses........... 10,000
SEC filing fee.............................. 32,000
OTS filing fee.............................. 8,400
Blue sky legal fees and expenses............ 2,000
Other....................................... 25,600
--------
Total................................. $700,000
========
*Estimated.
In addition to the above expenses, Charles Webb & Company will receive a
fee of 0.80% of the aggregate purchase price of the shares of common stock sold
in the Subscription Offering and the Direct Community Offering, excluding shares
purchased by the ESOP and by officers and directors of the Bank and their
associates. See "THE CONVERSION AND REORGANIZATION -- Plan of Distribution and
Selling Commissions."
Item 14. Indemnification of Officers and Directors
Article XVI of the Certificate of Incorporation of Pulaski Financial Corp.
requires indemnification of directors, officers and employees to the fullest
extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their
capacities:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at
II-1
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
II-2
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Item 15. Recent Sales of Unregistered Securities.
Not Applicable
Item 16. Exhibits and Financial Statement Schedules
The exhibits filed as part of this Registration Statement are as
follows:
(a) List of Exhibits
1.1 - Form of proposed Agency Agreement among Pulaski Financial Corp.,
Pulaski Bank, a Federal Savings Bank, Pulaski Bancshares, M.H.C.
and Charles Webb & Company (a)
1.2 - Engagement Letter with Pulaski Bank, A Federal Savings Bank and
Charles Webb & Company (a)
2 - Amended Plan of Conversion and Agreement and Plan of Reorganization
of Pulaski Bancshares, M.H.C. and Pulaski Bank, A Federal Savings
Bank
3.1 - Certificate of Incorporation of Pulaski Financial Corp. (a)
3.2 - Bylaws of Pulaski Financial Corp. (a)
3.3 - Certificate of Amendment to Certificate of Incorporation of Pulaski
Financial Corp.
4 - Form of Certificate for Common Stock (a)
5 - Opinion of Breyer & Aguggia LLP regarding legality of securities
registered (a)
8.1 - Tax Opinion of Breyer & Aguggia LLP (a)
8.2 - Opinion of RP Financial, LC. as to the value of subscription rights
(a)
10.1 - Proposed Form of Employment Agreement for Executive Officers (a)
10.2 - Proposed Form of Severance Agreement for Senior Officers (a)
10.3 - Pulaski Bank, A Federal Savings Bank 401(k) Plan (a)
II-3
10.4 - Proposed Form of Employee Stock Ownership Plan (a)
21 - Subsidiaries of Pulaski Financial Corp. (a)
23.1 - Consent of Deloitte & Touche LLP
23.2 - Consent of Breyer & Aguggia LLP as to its Tax Opinion (a)
23.3 - Consent of RP Financial, LC.
23.4 - Consent of Breyer & Aguggia LLP (a)
24 - Power of Attorney (a)
99.1 - Order Form (a)
99.2 - Solicitation and Marketing Materials (a)
99.3 - Appraisal Agreement with RP Financial, LC. (a)
99.4 - Updated Appraisal Report of RP Financial, LC. as of July 24, 1998
(a)
99.5 - Proxy Statement for Special Meeting of Members of Pulaski
Bancshares, M.H.C. (a)
99.6 - Proxy Statement for Special Meeting of Stockholders of Pulaski
Bank, A Federal Savings Bank (a)
99.7 - Updated Appraisal Report of RP Financial, LC. as of September 25,
1998 (P)
99.8 - Additional soliciting materials
99.9 - Supplement to Proxy Statement for Special Meeting of Stockholders
of Pulaski Bank, A Federal Savings Bank
_________
(a) Previously filed.
(P) Filed in paper pursuant to a continuing hardship exemption granted under
Rule 202 of Regulation S-T.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered)
II-4
and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time shall be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) The undersigned registrant hereby undertakes to provide the
underwriter at the closing specified in the underwriting agreement, certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable. In the event
that a claim for indemnification against liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amended Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in St. Louis, Missouri
on the 23rd day of October 1998.
PULASKI FINANCIAL CORP.
By: /s/ William A. Donius
---------------------------------------
William A. Donius
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ William A. Donius President, Chief Executive Officer October 23, 1998
- -------------------------------
William A. Donius and Director (Principal Executive Officer)
/s/ Thomas F. Hack Chief Financial Officer, Treasurer October 23, 1998
- -------------------------------
Thomas F. Hack and Director (Principal Financial and
Accounting Officer)
/s/ Michael J. Donius Executive Vice President, October 23, 1998
- -------------------------------
Michael J. Donius Chief Operating Officer and Director
/s/ Robert A. Ebel* Director October 23, 1998
- -------------------------------
Robert A. Ebel
/s/ E. Douglas Britt* Director October 23, 1998
- -------------------------------
E. Douglas Britt
/s/ Garland A. Dorn* Director October 23, 1998
- -------------------------------
Garland A. Dorn
/s/ Dr. Edward J. Howenstein* Director October 23, 1998
- -------------------------------
Dr. Edward J. Howenstein
* By power of attorney dated June 9, 1998.
II-6