Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Check the appropriate box:
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OREGON TRAIL FINANCIAL CORP.
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(Name of Registrant as Specified in Its Charter)
OREGON TRAIL FINANCIAL CORP
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(Name of Person(s) Filing Proxy Statement)
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[Oregon Trail
Financial Corp.
Logo]
NOTICE REGARDING MEETING LOCATION
Oops! An errant push of a computer key caused the city where our annual
meeting will be held to be dropped from our September 5th Notice of Annual
Meeting of Stockholders and our Proxy Statement.
Yes, the meeting will be held in BAKER CITY, Oregon at the Sunridge Inn and
Conference Center at One Sunridge Lane on Friday, September 28, 2001 at 10:00
a.m.
We hope to see you there.
Oregon Trail Financial Corp. September 7, 2001
[Oregon Trail Financial Corp. Letterhead]
September 7, 2001
Dear Shareholder:
Our annual stockholders' meeting on September 28, 2001 at the Sunridge
Inn and Conference Center, One Sunridge Lane, Baker City, Oregon will be the
most important meeting we have had since becoming a public company. This is
because a new shareholder, Joseph Stilwell, an investor from New York, and his
Group want to force the sale of your Company. You may have already received
materials from Mr. Stilwell encouraging you to elect his nominee as a director
of our Company. We believe Mr. Stilwell is wrong. This is NOT the time to
sell the Company.
Our new senior management team, with approval from your Board of
Directors and with the dedicated support of our employees, is implementing
strategic initiatives that have dramatically improved our earnings and are
expected to further enhance shareholder value. With approval from the Office
of Thrift Supervision, our primary regulator, we have recently transferred
over $18 million from our subsidiary bank to Oregon Trail for continued share
repurchases.
John Gentry and John A. Lienkaemper are two of the experienced directors
who have helped lead the Company on this path to success. Let us continue to
bring value to you, our shareholders, by granting us your proxy to re-elect
both Mr. Gentry and Mr. Lienkaemper. Please take a moment right now to
complete, sign, date and return the enclosed GREEN proxy card in the enclosed
envelope.
We urge you to carefully read the enclosed proxy document entitled "FACTS
YOU NEED TO KNOW BEFORE YOU VOTE," which explains why we believe you should
vote for Mr. Gentry and Mr. Lienkaemper.
Sincerely yours,
/s/Stephen R. Whittemore /s/Berniel L. Maughan
Stephen R. Whittemore Berniel L. Maughan
Chairman of the Board President and Chief Executive Officer
[Oregon Trail Financial Corp. Letterhead]
FACTS YOU NEED TO KNOW BEFORE YOU VOTE
Our shareholders have a critical decision to make at this year's annual
meeting. Joseph Stilwell and the Stilwell Group have sent proxy materials to
you that ask for your proxy to elect their candidate to the Board of
Directors. Mr. Stilwell wants to sell the Company and is waging an expensive
and disruptive proxy contest to get his way. We are concerned that Mr.
Stilwell's nominee will only pursue Mr. Stilwell's personal agenda. This
supplemental information is provided by the Board of Directors to help you
decide how to vote.
We are proud of the Company's continuing accomplishments and believe that
shareholder value is increasing and now is NOT the time to sell Oregon Trail.
We urge you to vote for management's nominees
---------------------------------------------
by signing and returning the enclosed GREEN proxy card.
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ACCOMPLISHMENTS
Last year we hired a new President, Berniel L. Maughan, who has 32 years
of banking experience. We also hired a new Chief Financial Officer, Jonathan
McCreary, a certified public accountant with extensive corporate finance and
capital markets experience. In just their first few months at Oregon Trail,
Mr. Maughan and Mr. McCreary have developed with the existing management team
a business plan to improve Company performance and enhance shareholder value.
The Company announced these initiatives on January 19, 2001. Since then, the
Company's financial performance has improved dramatically, as this key
performance data confirms:
Earnings Per Share Increasing
-----------------------------
o Earnings for the quarter ended March 31, 2001 increased 53% to
$849,000, or $0.26 per share, compared to $557,000, or $0.17 per
share, for the same period in fiscal 2000. But for the expenses
caused by Stilwell and his many lawsuits against the Company and/or
its directors, OUR EARNINGS WOULD HAVE INCREASED 71%.
o Earnings continued to improve during the quarter ended June 30,
2001. Earnings increased 78% to $0.32 per share compared to the
first quarter last year, and WOULD HAVE BEEN UP 100% IF THE COMPANY
HAD NOT HAD TO INCUR THE SUBSTANTIAL COSTS OF RESPONDING TO THE
STILWELL GROUP'S LAWSUITS AND PROXY FIGHT.
o As of the end of the quarter ended June 30, 2001, the Company is
projecting earnings as high as $0.41 per share by the quarter ended
March 31, 2002, OR 128% HIGHER THAN EARNINGS WERE FOR THE QUARTER
ENDED MARCH 31, 2001.
Return on Equity Is Increasing
------------------------------
Excluding expenses incurred by the Company in responding to the Stilwell
Group's actions, Oregon Trail's return on average equity for the quarter ended
June 30, 2001 increased 82% over the same quarter last year, to an annualized
rate of 8.46%. This current rate of return on average equity is 173% higher
than for fiscal 2001. The annualized rate of return for all publicly traded
thrift institutions for the same period was 7.87%.
Deposits Are Increasing
-----------------------
Deposits have increased 42% since March 31, 1997, and were up 7% in
fiscal 2001. These gains greatly exceed the deposit growth in our markets and
have significantly increased the value of your company.
Loans Are Increasing
--------------------
Loans have increased 80% since March 31, 1997, and 14% for fiscal 2001.
Commercial and consumer loans now represent 44.5% of total loans, up from
25.9% in 1997.
Stock Price Performance Has Been Strong
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OTFC's stock was issued at $10.00 per share in October 1997. Through
August 31, 2001, our initial investors have achieved an annualized total
return of over 14%. Since our new President joined the Company on May 25,
2000, our stock price has increased over 70%. We believe the superior
performance reflected in our share price increase since May 25, 2000 is a
direct result of the initiatives instituted by our new management team.
Retention of Keefe, Bruyette & Woods, Inc., as Financial Advisors
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Earlier this year, Keefe, Bruyette & Woods, Inc., a prominent investment
banking firm was hired to review and assess Oregon Trail's new business plan,
including accelerated share repurchases, to increase return on equity and
improve shareholder value.
KBW observed that the Company's earnings had improved significantly over
the last two fiscal quarters and that management predicts continued
improvement through the remainder of the fiscal year and beyond. The Board
does not believe it is a good time to sell based, in part, upon KBW stating
that buyers of financial institutions may not give full value to the recent
earnings per share improvements.
2
KBW analyzed the anticipated value to shareholders of (i) continuing the
business plan, without additional shares repurchased, (ii) continuing the
business plan, coupled with significant share repurchases, or (iii) selling
the Company at this time. BASED IN PART ON KBW'S ANALYSIS, AND CONSIDERING
THE ANTICIPATED BENEFITS OF THE BUSINESS PLAN, THE BOARD CONCLUDED THAT THE
BEST ALTERNATIVE AT THIS TIME IS TO CONTINUE THE BUSINESS PLAN WITH
SIGNIFICANT SHARE REPURCHASES.
REPURCHASE OF SHARES
One of the initiatives in the Company's business plan is a share
repurchase program. In late 2000 we submitted a request to the Office of
Thrift Supervision for approval of a dividend from Pioneer Bank to Oregon
Trail that could be used to fund, among other things, a significant share
repurchase program. The request was approved, and as of this date over $18.0
million has been transferred by Pioneer Bank to the Company to fund a share
repurchase plan, Company Dutch auction or modified tender offer, or for other
uses to enhance shareholder value.
THE STILWELL GROUP'S CLAIMS AGAINST THE COMPANY ARE UNFOUNDED
STILWELL GROUP CLAIM: "[W]e believe that the current Board of Directors
has rejected even seriously exploring a sale alternative."
OUR RESPONSE: KBW was hired to evaluate the Company's plans for
increasing shareholder value. Based in part on the investment banker's
analysis and the improvement in earnings generated by the current business
plan, the Board believes that the Company will be worth more in the future and
a sale at this time will not maximize shareholder value.
STILWELL GROUP CLAIM: "[T]he Company has produced a return on average
equity below 5% in every year."
OUR RESPONSE: The Company posted a 7.51% return on average equity for
the quarter ended June 30, 2001. This figure would have been 8.46% but for
the legal fees and other costs the Company incurred to defend itself against
the Stilwell Group.
STILWELL GROUP CLAIM: "We believe that the Company's failure to
repurchase, net of new share issuances, a significant number of shares through
its share repurchase program is another indication that the current Board is
unwilling or unable to take the steps necessary to maximize shareholder
value."
OUR RESPONSE: Although the Company had previously announced plans to
repurchase an additional 10% of its shares on the open market, it was unable
to do so because of its very thin trading volume. Pioneer Bank has
transferred over $18 million to Oregon Trail to enable the Company to
repurchase a significant number of its outstanding shares. Because of the SEC
rules and regulations, any large buyback of shares could likely occur only by
large block purchases or a tender offer to our shareholders.
3
THINGS YOU SHOULD KNOW ABOUT STILWELL'S NOMINEE
Padrick is Beholden to the Stilwell Group.
------------------------------------------
UNLIKE EVERY OTHER DIRECTOR, MR. PADRICK WOULD BE COMPENSATED BY A SINGLE
SHAREHOLDER GROUP. THE STILWELL GROUP HAS ENTERED INTO SPECIAL 18 MONTH
CONTRACTS WITH MR. PADRICK TO GIVE HIM OPTIONS TO BUY APPROXIMATELY $300,000
WORTH OF OREGON TRAIL COMMON STOCK IN EXCHANGE FOR HIS SERVICE ON THE
COMPANY'S BOARD.
Padrick Has a Short-Term Incentive.
-----------------------------------
PADRICK HAS A DIRECT FINANCIAL INTEREST IN SELLING THE COMPANY WITHIN 18
MONTHS BEFORE HIS STOCK OPTIONS EXPIRE, EVEN IF IT WERE IN THE BEST INTEREST
OF OTHER SHAREHOLDERS TO SELL AT A LATER DATE WHEN MAXIMUM VALUE COULD BE
OBTAINED.
A Vote for Padrick Could Cost the Company Up to an Additional $300,000 in
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Legal Fees and Other Expenses.
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If Padrick is elected, "[T]HE GROUP INTENDS TO SEEK REIMBURSEMENT FROM
THE COMPANY FOR THOSE EXPENSES INCURRED BY THE GROUP IN CONNECTION WITH THIS
PROXY SOLICITATION, AS WELL AS ALL EXPENSES INCURRED BY THE GROUP SINCE
[NOVEMBER 17, 2000] IN RELATION TO THE COMPANY (INCLUDING LEGAL EXPENSES
ASSOCIATED WITH THE AFOREMENTIONED LITIGATION [BETWEEN MEMBERS OF THE STILWELL
GROUP AND THE COMPANY OR ITS DIRECTORS].... "ADDITIONALLY, THE STILWELL GROUP
"....DOES NOT INTEND TO SUBMIT THE QUESTION OF SUCH REIMBURSEMENT TO A VOTE OF
THE SHAREHOLDERS."
Defending the existing Stilwell lawsuits against the Company and some of
its directors and protecting the Company from the Stilwell Group's attempt to
force its quick sale has already cost the Company over $400,000 in
professional fees and other expenses.
THE ONLY WAY YOU CAN ENSURE THAT THE COMPANY IS NOT ALSO SADDLED WITH THE
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STILWELL GROUP'S EXPENSES IS TO SAY "NO" TO ITS CANDIDATE BY VOTING FOR
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MANAGEMENT'S NOMINEES.
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4
PROTECT YOUR INVESTMENT - VOTE MANAGEMENT'S GREEN PROXY
The Stilwell Group's threat to your Company is real. Stilwell is asking
you to vote for his handpicked director. The Stilwell Group's shares have
already appreciated over 30% in approximately one year, yet he is not
satisfied. We believe Mr. Stilwell is seeking to build a reputation at the
expense of all other shareholders, Bank customers, employees and community
members.
We hope you are pleased with the tremendous progress the Company has
achieved these last two fiscal quarters since our new management team
announced and implemented its business plan. The plan has been even more
successful than expected. Considering the value being created by increasing
earnings coupled with our aggressive share repurchase plans, your current
Board of Directors unanimously believes that now is NOT the time to sell your
Company.
Please show your support for our current plan by signing, dating and
returning the GREEN proxy card enclosed. If you have already submitted your
proxy to the Stilwell Group, you can change your vote by submitting a proxy to
management now. We urge you to do so.
BE SURE TO READ THE PROXY STATEMENT FROM MANAGEMENT SENT TO YOU A FEW
DAYS AGO. IT HAS IMPORTANT INFORMATION REGARDING THE ANNUAL MEETING AND YOUR
VOTING RIGHTS, AS WELL AS OTHER INFORMATION REQUIRED BY THE SEC.
Board of Directors of Oregon Trail Financial Corp.
/s/John A. Lienkaemper /s/Albert H. Durgan
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John A. Lienkaemper Albert H. Durgan
Director Director
/s/Chuck Rouse /s/John Gentry
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Chuck Rouse John Gentry
Director Director
/s/Edward H. Elms /s/ Stephen R. Whittemore
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Edward H. Elms Stephen R. Whittemore
Director Director
Chairman of the Board
September 7, 2001
Forward-Looking Information
This material contains statements about the Company's future results and
may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements may
be identified by the use of such words as "believe", "may", "expect,"
"planned", "anticipated" and "potential." We have used forward-looking
statements to describe future plans and strategies, including our expectations
of the Company's future financial results. These forward-looking statements
are based on current expectations and the current economic environment.
Management's ability to predict results or the effect of future plans or
strategies is inherently uncertain. Factors which could cause actual results
to differ materially include, but are not limited to, general and local
economic conditions, changes in interest rates, deposit flows, demand for
mortgages and other loans, real estate value, competition, changes in
accounting principles, practices, policies or guidelines, changes in
legislation or regulation, and other economic, competitive, governmental,
regulatory and technological factors effecting operations, pricing, products
and services. Accordingly, these factors should be considered in evaluating
the forward-looking statements, and undue reliance should not be placed on
such statements.
Such forward-looking statements may include projections. Such projections
were not prepared in accordance with published guidelines of the American
Institute of Certified Public Accountants or the SEC regarding projections and
forecasts, nor have such projections been audited, examined or otherwise
reviewed by independent auditors of the Company. In addition, such projections
are based on many estimates and inherently subject to significant economic and
competitive uncertainties and contingencies, many of which are beyond the
control of management of the Company. Accordingly, actual results may be
materially higher or lower than those projected. The inclusion of such
projections herein should not be regarded as a representation by the Company
that the projections will prove to be correct. The Company does not undertake
to update any forward-looking statement that may be made on behalf of the
Company.
REVOCABLE PROXY
OREGON TRAIL FINANCIAL CORP.
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ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 28, 2001
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I hereby appoint Stephen R. Whittemore and Berniel L. Maughan with full
powers of substitution, as my attorneys and proxies to vote all shares of
common stock of Oregon Trail Financial Corp. that I am entitled to vote at the
Annual Meeting of Stockholders, to be held at the Sunridge Inn and Conference
Center, One Sunridge Lane, Baker City, Oregon, on Friday, September 28, 2001
at 10:00 a.m., Pacific Daylight Time, and at any and all adjournments thereof,
with respect to the following.
FOR ALL
FOR WITHHELD EXCEPT
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1. The election as directors of all nominees [ ] [ ] [ ]
listed (except as marked to the contrary
below).
John Gentry
John A. Lienkaemper
INSTRUCTION: To withhold authority to vote
for any individual nominee, mark "For All
Except" and write that nominee's name in the
space provided below.
-------------------------------------------
2. The approval of the appointment of [ ] FOR [ ] AGAINST [ ] ABSTAIN
Deloitte & Touche LLP as independent
auditors for the fiscal year ending
March 31, 2002.
3. In their discretion, upon such other
matters as may properly come before
the meeting.
The Board of Directors recommends a vote "FOR" the above proposals.
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THE NAMED PROXIES WILL VOTE YOUR SHARES AS YOU INSTRUCT, BUT IF YOU DO NOT
SPECIFY HOW YOU WANT TO VOTE YOUR SHARES, THE NAMED PROXIES WILL VOTE YOUR
SHARES FOR THE BOARD OF DIRECTORS' NOMINEES IN THE ELECTION OF DIRECTORS AND
FOR THE APPROVAL OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS. THE NAMED PROXIES WILL VOTE YOUR SHARES IN THEIR BEST JUDGMENT ON
ANY OTHER MATTERS PRESENTED AT THE MEETING. THE NAMED PROXIES VOTING THESE
PROXIES MAY EXERCISE DISCRETIONARY AUTHORITY ONLY AS TO MATTERS UNKNOWN TO THE
COMPANY A REASONABLE TIME BEFORE THE PROXY SOLICITATION. THE BOARD OF
DIRECTORS DOES NOT KNOW OF ANY OTHER MATTERS TO BE PRESENTED AT THE MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the stockholder(s) be present and elect to vote at the Meeting or
at any adjournment thereof and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy revokes all prior proxies given by
the stockholder(s).
The undersigned stockholder acknowledges receipt from the Company prior
to the execution of this proxy of the Notice of Annual Meeting of
Stockholders, a Proxy Statement for the Annual Meeting of Stockholders, and
the 2001 Annual Report to Stockholders.
Dated: , 2001
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PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
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SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on the enclosed card. When signing
as attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, only one signature is required, but
each holder should sign, if possible.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.