PROSPECTUS SUPPLEMENT
LANDMARK FINANCIAL CORP.
(Proposed Holding Company for Landmark Community Bank)
Up to 132,000 Shares of Common Stock
(Anticipated Maximum)
This prospectus supplement ("Prospectus Supplement") amends
the Prospectus dated August 12, 1997 of Landmark Financial Corp.
(the "Company"), a Delaware corporation, pursuant to which the
Company conducted an offering of up to 132,000 shares of its
common stock, par value $.10 per share (the "Common Stock"), in
connection with the conversion of Landmark Community Bank (the
"Bank"), from a federally chartered mutual savings bank to a
federally chartered stock savings bank, and the issuance of all
of the Bank's outstanding capital stock to the Company pursuant
to the Bank's Plan of Conversion (the "Plan" or "Plan of
Conversion"). Terms which are not defined herein shall have the
same meaning as set forth in the Prospectus. The purpose of this
Prospectus Supplement is to advise prospective purchasers of the
Common Stock of the preliminary results of a recent examination
of the Bank by the OTS, and to provide recent financial data at,
and as of, September 30, 1997. In view of the preliminary
results of the OTS examination, persons who subscribed for Common
Stock prior to the date of the Prospectus Supplement are being
offered the opportunity to maintain, increase or decrease the
amount of Common Stock they desire to purchase, or to cancel
their purchase order. Persons who have not subscribed for shares
of Common Stock are also being offered the opportunity to
subscribe for Common Stock until November 13, 1997. As of
September 16, 1997, the Company received orders for 98,528 shares
of Common Stock or $985,280 in gross proceeds by 95 persons.
(continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK,
CALL THE STOCK INFORMATION CENTER AT
(518) 673-4413.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
BY EACH PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING
ON PAGE 18 OF THE PROSPECTUS AND "RISK FACTORS" HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF
THRIFT SUPERVISION, OR ANY OTHER FEDERAL AGENCY OR ANY STATE
SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, OFFICE OR
OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE BANK
INSURANCE FUND ("BIF"), THE SAVINGS ASSOCIATION INSURANCE FUND
("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
Estimated Underwriting
Purchase Fees and Other Estimated Net
Price Expenses(2) Proceeds(2)
Minimum Per Share $10.00 $1.53 $8.47
Midpoint Per Share $10.00 $1.30 $8.70
Maximum Per Share $10.00 $1.14 $8.86
Maximum Per Share, as adjusted(3) $10.00 $0.99 $9.01
Total Minimum $980,000 $150,000 $830,000
Total Midpoint $1,150,000 $150,000 $1,000,000
Total Maximum $1,320,000 $150,000 $1,170,000
Total Maximum, as adjusted(3) $1,520,000 $150,000 $1,370,000
(footnotes on following page)
COMPANY ADVISOR
TRIDENT FINANCIAL CORPORATION
The date of this Prospectus Supplement is October 24, 1997
SUBSCRIBERS WHO HAVE SUBSCRIBED FOR SHARES OF COMMON STOCK
AND WHO DESIRE TO MAINTAIN OR TO CHANGE THEIR ORIGINAL ORDERS
MUST SIGN AND RETURN THE STOCK ELECTION FORM SO THAT IT IS
RECEIVED NO LATER THAN NOON LOCAL TIME ON NOVEMBER 13, 1997. ALL
NEW ORDERS MUST ALSO BE RECEIVED NO LATER THAN NOON, LOCAL TIME
ON NOVEMBER 13, 1997.
YOUR SUBSCRIPTION ORDER WILL BE FILLED SUBJECT TO PRIORITIES
SET FORTH IN THE PLAN, BASED ON A PURCHASE PRICE OF $10.00 PER
SHARE. FAILURE TO RETURN THE STOCK ELECTION FORM WILL RESULT IN
THE AUTOMATIC CANCELLATION OF YOUR ORIGINAL ORDER AND EITHER (1)
CANCELLATION OF YOUR WITHDRAWAL AUTHORIZATION OR (2) THE PROMPT
RETURN OF YOUR FUNDS WITH INTEREST.
If you wish to submit a new order to purchase shares, simply
complete and return the enclosed GREEN Stock Order Form and the
Certification, together with full payment for all shares of
Common Stock ordered or the appropriate instructions authorizing
withdrawal of such amount from one or more deposit accounts at
the Bank to the Stock Information Center no later than Noon,
local time, on November 13, 1997. In the event that the
Community Offering is extended beyond November 13, 1997,
subscribers will have the right to modify or rescind their
subscriptions and have their subscription funds returned promptly
with interest.
All purchases will be subject to the maximum and minimum
purchase limitations and to certain other terms and conditions
described in the Prospectus. The minimum purchase is 25 shares
or $250. Purchasers who have paid or pay for additional shares
of Common Stock by cash, check, bank draft or money order will
continue to earn interest at the rate of 3.2% per annum until
completion of the Conversion. Payments authorized by withdrawal
from deposit accounts at the Bank will continue to earn interest
at the contractual rate until the Conversion is completed or
terminated; these funds will be otherwise unavailable to the
depositor until such time.
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(1) Determined in accordance with an independent appraisal
prepared by FinPro, Inc. ("FinPro") as of June 19, 1997. The
estimated pro forma market value of the Company and the Bank, as
converted, ranges from $980,000, at the minimum, or more than
$1,320,000, at the maximum, with an adjusted maximum of
$1,520,000 ("Estimated Valuation Range") or between 98,000 and
132,000 shares with an adjusted maximum of 152,000 shares of
Common Stock at the purchase price of $10.00 per share, which is
the amount established by the Board of Directors to be paid for
each share of Common Stock sold in the Offerings ("Purchase
Price"). See "The Conversion-Stock Pricing and Number of Shares
to be Issued." The valuation by FinPro is not intended and must
not be construed as a recommendation of any kind as to the
advisability of voting to approve the Stock Conversion or of
purchasing shares of Common Stock. Moreover, because the
valuation is necessarily based upon estimates of and projections
as to a number of matters (including certain assumptions as to
expense factors affecting the net proceeds from the sale of
Common Stock in the Stock Conversion and as to the net earnings
on such net proceeds), all of which are subject to change from
time to time, no assurance can be given that persons who purchase
such shares in the Stock Conversion will be able to sell such
shares thereafter at or above the Purchase Price.
(2) Consists of the estimated expenses of $150,000, which
includes, among other things, printing, postage, legal,
accounting, appraisal and filing fees. See "Pro Forma Data."
(3) Gives effect to an increase in the number of shares sold
which could occur without a resolicitation of subscribers or any
right of cancellation due to an increase in the Estimated
Valuation Range of up to 15% above the maximum of the Estimated
Valuation Range to reflect changes in market and financial
conditions following commencement of the Offerings or to fill in
part or in whole the order of the ESOP. See "The Conversion-Stock
Pricing and Number of Shares to be Issued."
This Prospectus Supplement supplements and amends the
Prospectus of the Company, dated August 12, 1997 and should be
read in conjunction herewith. Any information presented herein
supersedes that contained in the Prospectus. All persons who
were not previously provided with a copy of the Prospectus will
receive a copy of the Prospectus together with this Prospectus
Supplement. See "Additional Information" for information on how
to obtain an additional copy of the Prospectus.
ADDITIONAL INFORMATION
The Prospectus Supplement updates the "Risk Factors" section
of the Prospectus to disclose the preliminary results of the
Office of Thrift Supervision's ("OTS") examination of the Bank,
as well as to provide recent financial data of the Bank at, and
as of, September 30, 1997. This Prospectus Supplement should be
read in conjunction with the Prospectus dated August 12, 1997,
which contains financial and business information about the Bank
and the Company as well as certain other information. All cross
references herein refer to sections of the Prospectus unless
otherwise indicated.
All persons who were not previously provided with a copy of
the Prospectus will receive a copy of the Prospectus together
with this Prospectus Supplement. Even if you have already
received a Prospectus dated August 12, 1997, another copy of the
Prospectus may be obtained, should you desire one, from the Stock
Information Center, located at 26 Church Street, Canajoharie, New
York 13317, or by calling (518) 673-4413. To ensure that each
purchaser receives a Prospectus and Prospectus Supplement at
least 48 hours prior to November 13, 1997, in accordance with
Rule 15c2-8 under the Securities Exchange Act of 1934, no
Prospectus or Prospectus Supplement will be mailed any later than
five days prior to such date or hand delivered any later than two
days prior to such date. Execution of the Stock Election Form or
Stock Order Form, as applicable, will confirm receipt or delivery
in accordance with Rule 15c2-8.
The Company has filed with the SEC a Prospectus Supplement
under Securities Act Rule 424(c) promulgated under the Securities
Act of 1933, with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the SEC, this
Prospectus Supplement does not contain all the information set
forth in the registration statement. Such information, including
a copy of the appraisal valuation, can be examined without charge
at the public reference facilities of the SEC located at 450
Fifth Street, N.W., Washington, D.C. 20549, and copies of such
material can be obtained from the SEC at prescribed rates. The
SEC maintains a website that contains reports, proxy and
information statements and other information regarding issuers
that file electronically with the SEC. The address of this
website is http://www.sec.gov. The statements contained herein
as to the contents of any contract or other document filed as an
exhibit to the registration statement are, of necessity, brief
descriptions thereof and are not necessarily complete; each such
statement is qualified in its entirety by reference to such
contract or other document.
The Bank has also filed a Prospectus Supplement to its
Application for Conversion with the OTS with respect to the
Common Stock offered hereby. Pursuant to the rules and
regulations of the OTS, this Prospectus Supplement omits certain
information, including the updated appraisal valuation, contained
in that Application. The Application may be examined at the
principal offices of the OTS, 1700 G Street, N.W., Washington,
D.C. 20552 and at the Northeast Regional Office of the OTS, 10
Exchange Place, Jersey City, New Jersey, without charge.
The following information relates to all material changes
from the Prospectus dated August 12, 1997. Other than as
presented below, this Prospectus Supplement is qualified in its
entirety by the more detailed information contained in the
Prospectus.
RISK FACTORS
The following risk factors, in addition to those disclosed
in the Prospectus, should be considered by investors before
deciding whether to purchase the Common Stock described herein.
Preliminary Conclusions of Office of Thrift Supervision
Examination
During August and September 1997, the Office of Thrift
Supervision (the"OTS") conducted its previously scheduled and
routine safety and soundness on-sight examination of the Bank.
During the course of its examination, OTS examiners raised a
number of concerns and noted certain deficiencies in the
maintenance of the Bank's general ledger. As of September 30,
1997, the Bank had unreconciled differences of $6,966, $5,190,
and $1,215 in its conventional mortgage loans, consumer loans and
checking account ledger entries for a total of $13,371 of
unreconciled ledger differences. OTS examiners also raised
additional concerns regarding the Bank's operations, which were
primarily related to the Bank's aggressive growth over the past
year. In particular, the Bank's assets have grown $8.9 million,
or 117.6%, to $16.5 million at September 30, 1997 from $7.6
million at March 31, 1996. The significant asset growth was due
to increases in loans, particularly consumer loans, and an
increase in the level of investment securities purchased by the
Bank. The increase in assets was funded by increased deposits
obtained through an on-line service. During this period, the
Bank also increased its staff to eight persons from five persons.
Lack of Written Policies and Procedures
The OTS found that the Bank did not have adequate policies
or procedures in place in light of its rapid growth both from an
accounting as well as an operational standpoint. In this regard,
the OTS directed the Bank's Board of Directors to adopt detailed
policies and procedures to reflect the new loan and deposit
products being offered to the Bank's customers. The OTS
criticized the Bank's documentation regarding its loan
underwriting and criticized the Bank's use of internal real
estate appraisers. In response to the OTS concerns, the Bank's
Board of Directors has directed management to establish detailed
written policies and procedures which reflect the current loan
and deposit products offered by the Bank. In addition, the Bank
has agreed with the OTS not to originate any new consumer loans
and to limit one-to four-family loan originations to no more than
$200,000 per month. The Bank has also adopted a policy of using
only independent New York State- certified appraisers to conduct
real estate appraisals.
Inadequate Staffing
The OTS also found that the Bank was not adequately staffed
to handle the day to day accounting obligations. The Bank is
actively seeking to remediate this deficiency by hiring a
qualified finance officer with both an accounting degree and
banking experience. In the meantime, the Bank has hired an
outside consultant who previously worked as the Bank's
bookkeeper, to assist in training Bank personnel in the
preparation of the general ledger, as well as other routine
internal accounting procedures. Furthermore, the Bank's outside
independent auditors have agreed to review the Bank's general
ledger on a monthly basis.
Potential Conflict of Interest
From time to time, borrowers of the Bank have obtained title
insurance from Landmark Title Company, although the Bank does not
require borrowers to obtain title insurance from Landmark Title
Company. John Francisco, the Bank's Chairman of the Board, the
attorney who represents the Bank in loan closings and is the sole
owner of Landmark Title Company. As part of Mr. Francisco's
routine duties as a member of the Board of Directors and the
Bank's loan committee, Mr Francisco participated in approving
loans including real estate mortgage loans. The OTS, citing the
appearance of a conflict of interest, criticized Mr. Francisco's
role in approving loans while Landmark Title Company underwrote
title insurance policies to the borrowers. The OTS examiners
stated that Mr. Francisco should have recused himself from voting
on whether to originate mortgage loans. As a result of the OTS'
concerns, Mr. Francisco resigned from the Bank's loan committee,
and has indicated that he will not participate in any decision of
the Board of Directors to approve the origination of mortgage
loans. The dollar amount of the insurance premiums by policy is
established pursuant to New York State law and regulation.
During the six months ended September 30, 1997 and the year ended
March 31, 1997, Landmark Title Company received $10,279 and $509,
respectively in title insurance premiums as a result of mortgage
closings at Landmark Community Bank.
Reduction in Composite Uniform Financial Institution Rating
As a result of the foregoing problems, the OTS has indicated
that it intends to lower the Bank's Composite Uniform Financial
Institution Rating. The OTS has not yet provided the Bank with
its written report of examination. Therefore, there can be no
assurance that the OTS will not have additional criticisms of the
Bank's business or policies. The Bank believes that it has taken
steps to address all OTS comments completely and adequately, and
will be able to address any additional comments which may be
provided by the OTS when it issues its written report.
RECENT FINANCIAL DATA
Set forth below are selected financial and other data of the Bank
at and for the periods indicated. Information at September 30,
1997 and for the six months ended September 30, 1997 is
unaudited. In the opinion of management of the Bank, all
adjustments, consisting only of normal recurring adjustments
necessary for a fair statement of results for or as of the
periods indicated, have been included. The results of operations
and other data for the six month period ended September 30, 1997
are not necessarily indicative of the results of operations for
the full fiscal year. The selected financial and other data does
not purport to be complete and is qualified in its entirety by
reference to the detailed information and Financial Statements
and Notes thereto presented elsewhere in the Prospectus.
At At
September 30, March 31,
1997 1997
(In Thousands)
Selected Financial Condition Data:
Total assets $ 16,427 $ 11,326
Cash and cash equivalents 182 709
Cash, restricted 769 -
Loans receivable, net 13,918 9,392
Trading account securities - 69
Mortgage-backed securities:
Held to maturity 98 257
Investment securities:
Held to maturity 100 200
Available for sale 804 398
Intangible--Conversion costs 188 9
FHLB stock 72 59
Deposits 15,283 10,237
Advances by borrowers for taxes
and insurance 113 107
Retained earnings-substantially restricted 950 956
Retained earnings-unrestricted - -
Six Months Ended
September 30,
1997 1997
(In Thousands)
Selected Operations Data:
Total interest income $ 583 $ 305
Total interest expense (341) (138)
Net interest income 242 167
Provision for loan losses (12) -
Net interest income after provision
for loan losses 230 167
Fees and service charges 23 13
Other non-interest income 10 -
Total non-interest income 33 13
Total non-interest expense (271) (154)
Income (loss) before taxes (8) 26
Income tax (provision) benefit 2 (9)
Net income (loss) $ (6) $ 17
1997 1997
(In Thousands)
Selected Operations Data:
Performance Ratios:
Return on assets (ratio of net income to average
total assets) (2) (0.04)% 0.43%
Return on retained earnings (ratio of net income
to average equity) (2) (0.67)% 3.36%
Interest rate spread information (2):
Average during period 2.72% 3.88%
End of period 2.54% 3.64%
Net interest margin (1) 3.06% 4.37%
Ratio of operating expense to average total
assets (2) 3.59% 3.90%
Ratio of average interest-earning asset to
average interest-bearing liabilities 106.50% 113.98%
Asset Quality Ratios:
Non-performing assets to total assets at end
of period 0.44% -
Allowance for loan losses to non-performing
loans 168.84% -
Allowance for loan losses to loans receivable,
net 0.87% 0.49%
Capital Ratios:
Net worth to total assets at end of period 5.76% 11.58%
Average net worth to average assets 6.43% 12.72%
Other Data:
Number of full-service offices 1 1
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(1) Net interest income divided by average interest-earning assets.
(2) Annualized
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RECENT FINANCIAL DATA
Financial Condition
The Bank's total assets increased by $5.1 million, or 46.1%,
to $16.4 million at September 30, 1997 from $11.3 million at
March 31, 1997. The overall increase in total assets was
composed of a $4.5 million increase in loans receivable, net, to
$13.9 million at September 30, 1997 from $9.4 million at March
31, 1997, as well as an increase in investment securities
available for sale to $804,000 from $398,000. Consumer loans
accounted for approximately 72% of the increase in loans
receivable. The increase in consumer loans is attributable to
the origination of indirect automobile loans, which the Bank
began offering during the past nine months. The increases were
funded by increased deposits, which increased by $5.1 million to
$15.3 million at September 30, 1997 from $10.2 million at March
31, 1997. The increase in deposits is primarily attributable to
deposits obtained through an on-line service. See "Business-
Sources of Funds-Deposits." Other than the increases mentioned
above, the composition of assets did not change significantly for
the six months ended September 30, 1997.
At September 30, 1997, the Bank failed to meet its
regulatory capital requirements with tangible capital of $738,000
(4.5% of adjusted total assets); core capital of $738,000 (4.5%
of adjusted total assets); and risk-based capital of $738,000
(7.0% of risk-weighted assets). Upon completion of the
Conversion, the Bank will exceed all regulatory requirements.
Results of Operations
General. The Bank had a $6,000 loss for the six months
ended September 30, 1997, compared to net income of $17,000 for
the same period in 1996. The decline in net income was primarily
due to an increase in non-interest expense to $271,000 from
$154,000, which was partially offset by an increase in net
interest income to $242,000 from $167,000.
Interest Income. Interest income increased $278,000, or
91.1%, for the six months ended September 30, 1997 compared to
the same period in 1996, primarily due to increased levels of
loans receivable and investment securities.
Interest Expense. Interest expense increased by $203,000 or
147.1%, for the six months ended September 30, 1997 compared to
the same period in 1996, primarily due to the increase in
deposits, which were $15.3 million and $7.5 million at September
30, 1997 and 1996, respectively.
Net Interest Income. Net interest income increased by
$75,000 to $242,000 for the six months ended September 30, 1997,
from $167,000 for the six months ended September 30, 1996.
Provision for Loan Losses. The Bank increased by $12,000
and -0- its provision for loan losses for the six month periods
ended September 30, 1997 and 1996, respectively. Management
concluded that an additional allowance of $12,000 at September
30, 1997 was adequate after reviewing the quality of the Bank's
loan portfolio at September 30, 1997. The Bank anticipates
increasing the loan loss provision if its lending growth
continues for the remainder of the year. The Bank did not
establish a provision for loan losses during the six month period
ended September 30, 1996 following management's review of the
asset quality of the Bank's loan portfolio as well as the
immaterial dollar amount of new loans originated during the six
month period ended September 30, 1996. The Bank's ratio of the
allowance for loan losses to total non-performing loans was
168.84% at September 30, 1997.
Noninterest Income. Noninterest income increased by $20,000
to $33,000 for the six month period ended September 30, 1997,
compared to $13,000 for the six months ended September 30, 1996.
The increase was a result of the Bank having $23,000 in fees and
service charges and $10,000 in other noninterest income.
Noninterest Expense. Noninterest expense, consisting
primarily of employee compensation expense, and equipment
expenses, federal deposit insurance premiums, data processing,
advertising and promotion, and other
miscellaneous items, increased by $117,000 to $271,000 for the
six month period ended September 30, 1997 compared to $154,000
for the six month period ended September 30, 1996. The increase
was primarily attributable to increased staffing at the Bank and
upgrading the Bank's facilities and computer software. It is
expected that noninterest expense will increase as a result of
increased staffing expense and costs associated with being a
public company.
Income Taxes. The Bank had a $2,000 income tax benefit for
the six month period ended September 30, 1997 compared to $9,000
income tax expense for the six month period ended September 30,
1996, as a result of the decline in income before income taxes.
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No person has been authorized to give an
information or to make any representation other
than as contained in this Prospectus in
connection with the offering made hereby, and,
if given or made, such other information or 132,000 Shares
representation must not be relief upon as
having been authorized by the Company or the
Bank. This Prospectus does not constitute
an offer to sell or a solicitation of an
offer to buy any of the securities offered LANDMARK FINANCIAL CORP.
hereby to any person in any jurisdiction
in which such offer or solicitation is not (Holding Company for
authorized or in which the person making such Landmark Community Bank)
offer or solicitation is not qualified to do so,
or to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any
sale hereunder shall under any circumstances
create any implication that there has been no
change in the affairs of the Company or the Bank
since any of the dates as of which information
is furnished herein or since the date hereof.
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TABLE OF CONTENTS
Page
Additional Information.....................3
Risk Factors...............................3
Recent Financial Data......................5
Management's Discussion and Analysis
of Recent Financial Data.................7
Until the later of October 24, 1997, or
25 days after commencement of the offering,
all dealers effecting transactions in the
registered securities, whether or not
participating in this distribution, may be Common Stock
required to deliver a prospectus. This is
in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters
and with respect to their unsold allotments
or subscriptions. ----------------------------
PROSPECTUS SUPPLEMENT
----------------------------
COMPANY ADVISOR
TRIDENT FINANCIAL CORPORATION
October 24, 1997
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