As filed with the Securities and Exchange Commission on December 10, 1997
Registration No. 333-__________ and
Registration No. 333-30215
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
REGISTRATION STATEMENT ON FORM S-1 AND
POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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HOPFED BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 6035 61-0229082
(State or other Jurisdiction (Primary Standard industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
2700 Fort Campbell Boulevard
Hopkinsville, Kentucky 42240
(502)885-1171
(Address and telephone number of principal executive offices
and principal place of business)
Bruce Thomas, President
HopFed Bancorp, Inc.
2700 Fort Campbell Boulevard
Hopkinsville, Kentucky 42240
(502)885-1171
(Name, address, and telephone number of agent for service)
Please send copies of all communications to:
Edward B. Crosland, Jr., Esquire
Paul D. Borja, Esquire
Kutak Rock
1101 Connecticut Avenue, N.W., Suite 1000
Washington, D.C. 20036
Phone: (202)828-2400 Fax: (202)828-2488
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securitites being registered on this form are being offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered (1) Offering Price Per Share (1) Aggregate Offering Price (1) Registration Fee (2)
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Common Stock, par value
$.01 per share 4,033,625 (3) $ 10.00 $ 40,336,250 $ 12,181.55 (3)
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(1) Estimated soley for the purpose of calculating the Registration Fee.
(2) Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended.
(3) Includes 3,504,625 shares of Common Stock previously registered on Form S-1
pursuant to Registration Statement No. 333-30215, to which the Registration
Statement constitutes a post-effective amendment and which is being carried
forward pursuant to Rule 429 under the Securities Act of 1933. The Registrant
previously paid an aggregate fee of $12,181.55, of which $10,621 was paid with
respect to Registration Statement No. 333-30215. This Prospectus included
herein is a combined prospectus.
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.
SUPPLEMENT TO PROSPECTUS [LOGO]
DATED OCTOBER 10, 1997
HOPFED BANCORP, INC.
(PROPOSED HOLDING COMPANY FOR
HOPKINSVILLE FEDERAL SAVINGS BANK)
UP TO 3,507,500 SHARES OF THE COMMON STOCK
$10.00 PER SHARE
HopFed Bancorp, Inc. (the "Company") is offering up to 3,507,500 shares,
subject to adjustment, of its common stock, par value $.01 per share (the
"Common Stock"), in connection with the conversion of Hopkinsville Federal
Savings Bank (the "Bank") from a federal mutual savings bank to a federal stock
savings bank and the issuance of the Bank's capital stock to the Company
pursuant to the Plan of Conversion (the "Plan") of the Bank. The conversion of
the Bank, the acquisition of all the outstanding capital stock of the Bank by
the Company and the issuance and sale of the Common Stock are collectively
referred to herein as the "Conversion."
The Company's Prospectus dated October 10, 1997 (the "Prospectus")
initially offered 3,047,500 shares of the Common Stock, subject to adjustment,
at an offering price of $10.00 per share in a subscription offering
("Subscription Offering") and a community offering ("Community Offering"). The
amount of Common Stock offered in the Subscription and Community Offerings was
based on an independent appraisal of the pro forma aggregate market value of the
Common Stock to be issued in the Conversion. The initial Subscription and
Community Offerings terminated on November 18, 1997, except as extended hereby.
Subsequent to termination of the Subscription and Community Offerings, an
updated appraisal was prepared in accordance with the Plan and federal
regulations. Based upon the improvement in the condition of the general stock
market, the results of the Subscription and Community Offerings, the Bank's
September 30, 1997 results of operations and financial condition and current
market pricing for thrift institutions, the updated appraisal reflects an
increase in the pro forma aggregate market value of the Common Stock to be
offered in the Conversion from a range of $22,525,000 to $30,475,000 (the
"Estimated Valuation Range") to a range of $25,925,000 to $35,075,000 (the
"Amended Valuation Range"). The Bank has received approval of such an increase
from the Office of Thrift Supervision ("OTS"). Accordingly, the Company and
the Bank have determined to offer up to 3,507,500 shares of Common Stock,
subject to adjustment, at the original purchase price per share of $10.00 (the
"Purchase Price") in a resolicitation of all subscribers in the Subscription and
Community Offerings (the "Resolicitation").
(continued on following page)
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FOR ANSWERS TO QUESTIONS REGARDING HOW TO INCREASE, DECREASE, CONTINUE OR CANCEL
YOUR ORDER, PLEASE CALL THE STOCK INFORMATION CENTER AT (502) 881-4001.
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER THE DISCUSSIONS UNDER
"RISK FACTORS" IN THE PROSPECTUS AND "ADDITIONAL RISK FACTORS" IN THIS
PROSPECTUS SUPPLEMENT.
------------------------
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, OFFICE OR CORPORATION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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====================================================================================================================================
ESTIMATED NET
PURCHASE PRICE (1) ESTIMATED FEES AND EXPENSES (2) PROCEEDS (3)
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Per Share (4).................................. $ 10.00 $ 0.25 $ 9.75
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Total Minimum.................................. $ 25,925,000 $ 750,000 $ 25,175,000
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Total Midpoint................................. $ 30,500,000 $ 750,000 $ 29,750,000
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Total Maximum.................................. $ 35,075,000 $ 750,000 $ 34,325,000
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Total Maximum, as adjusted (5)................. $ 40,336,250 $ 750,000 $ 39,586,250
===================================================================================================================================
(footnotes on following page)
INVESTMENT BANK SERVICES, INC. FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
The date of this Prospectus Supplement is December __, 1997
In the Resolicitation, each subscriber in the Subscription and
Community Offerings is being given the opportunity to increase, decrease, cancel
or confirm his or her present order by returning a completed Supplemental Stock
Order Form, accompanied by an additional payment or withdrawal authorization, if
applicable, to any office of the Bank. The Resolicitation will terminate at
4:00 p.m., Local Time, on January __, 1998, unless extended with the approval of
the OTS. ALL SUBSCRIBERS WHO DO NOT RETURN THEIR SUPPLEMENTAL STOCK ORDER FORMS
TO THE BANK BEFORE THE EXPIRATION OF THE RESOLICITATION WILL HAVE THEIR ORDERS
CANCELED AND ALL FUNDS PROMPTLY RETURNED WITH INTEREST.
With the exception of the ESOP, which intends to purchase 8% of the
total number of shares of the Common Stock issued in the Conversion, no Eligible
Account Holder, Other Member, Supplemental Eligible Account Holder or Other
Member nor person in the Community Offering may purchase more than $250,000 of
the shares of the Common Stock issued in the Conversion. In addition, no person
(together with associates and persons acting in concert therewith) may purchase
in the aggregate more than $500,000 of the shares of the Common Stock issued in
the Conversion. The maximum overall purchase limitation and the amount
permitted to be subscribed for may be increased or decreased under certain
circumstances in the sole discretion of the Company. The minimum purchase is 25
shares. See "Limitations on Purchases of Common Stock" herein and "The
Conversion -- Limitations on Purchases of Shares" in the Prospectus.
THE RESOLICITATION WILL EXPIRE AT 4:00 P.M., LOCAL TIME, ON JANUARY
__, 1998. An executed Supplemental Stock Order Form, once received by the
Bank, may not be modified, amended or rescinded without the consent of the Bank.
Subscriptions paid by check, cash or money order are being held in a separate
account at the Bank established specifically for this purpose, and interest is
being paid at the Bank's passbook rate from the date of receipt of payment until
the Conversion is completed or terminated. In the case of payments to be made
through withdrawal from deposit accounts at the Bank, all sums authorized for
withdrawal will generally continue to earn interest at the contract rate until
the date of the completion of the Conversion.
--------------------------
(footnotes from preceding table)
(1) The estimated aggregate value of the Common Stock is based on an updated
independent appraisal by National Capital Companies, LLC ("National
Capital") as of November 18, 1997. See "Amended Valuation Range." Based on
such appraisal, the Company has determined to offer up to 3,507,500 shares,
subject to adjustment. The final aggregate value will be determined at the
time of closing of the Conversion and is subject to change due to changing
market conditions and other factors. If a change in the final valuation is
required, an appropriate adjustment will be made in the number of shares
being offered within a range of 2,592,500 shares at the minimum of the
Amended Valuation Range to 3,507,500 shares at the maximum of the Amended
Valuation Range and, with OTS approval, to 4,033,625 shares at approximately
15% above the maximum of the Amended Valuation Range.
(2) Includes estimated printing, postage, legal, accounting and miscellaneous
expenses which will be incurred in connection with the Conversion. Also
includes estimated fees, sales commissions and reimbursable expenses to be
paid to the Agents of $225,000. The actual fees and expenses may vary from
the estimates. See "Pro Forma Data" for the assumptions underlying these
estimates. The Agents may each be deemed to be underwriters, and certain
amounts to be paid to the Agents may be deemed to be underwriting
compensation.
(3) Includes the ESOP's expected purchase of 8% of the shares sold in the
Conversion with funds borrowed from the Company. Does not reflect a
possible purchase after the Conversion by a management recognition plan of a
number of shares equal to up to 4% of the shares to be issued in the
Conversion with funds contributed by the Bank. See "Capitalization" and "Pro
Forma Data."
(4) Based on the midpoint of the Amended Valuation Range. At the minimum,
maximum and 15% above the maximum of the Amended Valuation Range, the
estimated fees and expenses, including underwriting discounts and
commissions, per share are expected to be $0.29, $0.21 and $0.19,
respectively, and the estimated net proceeds per share are expected to be
$9.71, $9.79 and $9.81, respectively.
(5) Gives effect to an increase in the number of shares of up to 15% above the
maximum of the Amended Valuation Range which could occur without a
resolicitation of subscribers or any right of cancellation and which would
be due to an increase in the Amended Valuation Range to reflect changes in
market and financial conditions. See "The Conversion -- Stock Pricing and
Number of Shares to be Issued," in the Prospectus.
2
THIS PROSPECTUS SUPPLEMENT SUPPLEMENTS AND AMENDS THE PROSPECTUS,
WHICH IS INCORPORATED HEREIN BY REFERENCE, AND SHOULD BE READ IN CONJUNCTION
HEREWITH. ANY INFORMATION PRESENTED HEREIN SUPERSEDES ANY INFORMATION PRESENTED
IN THE PROSPECTUS. EXCEPT AS SPECIFICALLY SET FORTH TO THE CONTRARY HEREIN,
CAPITALIZED TERMS USED HEREIN SHALL HAVE THE SAME MEANINGS AS IN THE PROSPECTUS.
SEE "EXTENSION OF TIME PERIOD TO COMPLETE THE CONVERSION" HEREIN FOR INFORMATION
ON HOW A SUBSCRIBER MAY OBTAIN AN ADDITIONAL COPY OF THE PROSPECTUS.
THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS SUPPLEMENT ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR
ANY OTHER GOVERNMENTAL AGENCY.
RESULTS OF THE SPECIAL MEETING OF MEMBERS
AND THE SUBSCRIPTION AND COMMUNITY OFFERINGS
At the Special Meeting of Members of the Bank held on November 19,
1997, 958,650 votes, or 59.2% of the 1,619,832 total votes eligible to be cast,
were voted in favor of the Plan. Accordingly, the Plan was approved by more
than the required majority of the total votes entitled to be cast at the Special
Meeting, and no further vote is necessary to approve the Plan.
The Bank originally offered 3,047,500 shares of Common Stock in the
Subscription and Community Offerings. The Bank received orders in the
Subscription and Community Offerings to purchase approximately 16,287,000 shares
of Common Stock (excluding the ESOP). Eligible Account Holders subscribed for
approximately 15,586,000 shares.
AMENDED VALUATION RANGE
As required by applicable regulations, upon conclusion of the initial
Subscription and Community Offerings, National Capital submitted an updated
appraisal of the pro forma market value of the Common Stock to the Bank and the
OTS. The updated appraisal of National Capital dated November 18, 1997 set
forth an estimated Amended Valuation Range of the Common Stock to be sold in the
Conversion of $25,925,000 at the minimum and $35,075,000 at the maximum, with a
midpoint of $30,500,000, which constitutes a 15.1% increase from the midpoint
of the Estimated Valuation Range established by the appraisal report dated
August 29, 1997, which was set forth in the Prospectus. The increased valuation
set forth in National Capital's updated appraisal was based on the improvement
in the condition of the general stock market, the results of the Subscription
and Community Offerings, the Bank's September 30, 1997 results of operations and
financial condition and current market pricing for thrift institutions. In
determining the reasonableness and adequacy of National Capital's updated
appraisal, the Board of Directors reviewed with National Capital the methodology
and the appropriateness of the assumptions used in the updated appraisal.
Copies of National Capital's appraisal report are available for inspection at
the main office of the Bank and are otherwise publicly available. See
"Additional Information" herein.
Based on the Amended Valuation Range and the $10.00 per share Purchase
Price, the number of shares being offered in the Conversion ranges from
2,592,500 shares to 3,507,500 shares. In the event the Company receives orders
for Common Stock in excess of $35,075,000 million (the maximum of the Amended
Valuation Range), the final valuation may be increased by National Capital to a
maximum of $40,336,250 (the maximum of the Amended Valuation Range, as adjusted
by 15%) and the Company may at that time accept orders for up to 4,033,625
shares of Common Stock without an additional resolicitation of subscribers or
any right of cancellation.
Subscribers should note that the change in the estimated pro forma
market value has an impact on the pro forma data presented in this Prospectus
Supplement when compared to the values presented in the Prospectus. Assuming
consummation of the Conversion at the maximum of the Amended Valuation Range,
pro forma net income per share and stockholders' equity per share at or for the
nine months ended September 30, 1997 would be
3
$0.56 and $13.93, respectively, while the ratio of the offering price to pro
forma net income per share would be 13.4x and the offering price as a percentage
of pro forma stockholders' equity per share would be 71.8%. Assuming 4,033,625
shares of Common Stock are sold in the Conversion, based upon the maximum, as
adjusted, of the Amended Valuation Range, the ratio of the offering price to pro
forma net income per share would be 15.0x and the offering price as a percentage
of pro forma stockholders' equity per share would be 75.4%. See "Additional Risk
Factors -- Possible Adverse Effect of Amended Valuation Range."
THE NUMBER OF SHARES ULTIMATELY SOLD IN THE CONVERSION WITHIN THE
AMENDED VALUATION RANGE WILL DEPEND UPON MARKET DEMAND FOR THE COMMON STOCK AS
WELL AS MARKET AND FINANCIAL CONDITIONS FOLLOWING THE CONCLUSION OF THE
RESOLICITATION, AND WILL AFFECT THE PRICE TO BOOK VALUE RATIO, PRICE TO EARNINGS
RATIO, STOCKHOLDERS' EQUITY PER SHARE AND NET INCOME PER SHARE OF THE COMMON
STOCK. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THE INCREASED VALUATION
REFLECTED IN THE AMENDED VALUATION RANGE MAY RESULT IN LESS FAVORABLE AFTER-
MARKET PRICE PERFORMANCE OF THE COMMON STOCK THAN MIGHT HAVE OCCURRED IF THE
ESTIMATED VALUATION RANGE HAD NOT BEEN INCREASED. SEE "ADDITIONAL RISK
FACTORS," "CAPITALIZATION" AND "PRO FORMA DATA" HEREIN.
In view of the appraisal update, all persons who subscribed for shares
of Common Stock are being offered in the Resolicitation the opportunity to (i)
rescind their subscription, which will result in a return of all of their funds
submitted, plus interest earned, or a cancellation of their withdrawal
authorizations; (ii) continue their order for the same dollar amount of Common
Stock originally subscribed for; (iii) decrease the total dollar amount of their
subscription, which will result in an adjustment of the withdrawal authorization
or a refund of the overpayment, plus interest earned; or (iv) subject to
applicable purchase limitations, increase the total dollar amount of their
subscription, which will require the submission of additional funds or an
increase in the withdrawal authorization. IN ORDER TO CONFIRM YOUR ORDER FOR
SHARES OF COMMON STOCK, YOU MUST COMPLETE AND RETURN THE ENCLOSED SUPPLEMENTAL
STOCK ORDER FORM TO THE BANK, ACCOMPANIED, IF APPLICABLE, BY PAYMENT OR A
WITHDRAWAL AUTHORIZATION, SO THAT IT IS RECEIVED NO LATER THAN 4:00 P.M., LOCAL
TIME, ON JANUARY __, 1998. FAILURE TO RETURN A SUPPLEMENTAL STOCK ORDER FORM
WILL RESULT IN YOUR ORDER BEING RESCINDED, A RETURN OF ALL YOUR FUNDS SUBMITTED,
PLUS INTEREST EARNED, OR A CANCELLATION OF YOUR WITHDRAWAL AUTHORIZATION. As a
result of the Resolicitation, the number of shares of Common Stock set forth
under "Results of the Special Meeting of Members and the Subscription Offering"
herein which were subscribed for may change.
ADDITIONAL RISK FACTORS
Prospective investors should consider carefully the maters presented
below and in the "Risk Factors" section of the Prospectus in addition to the
other information contained herein and in the Prospectus.
The discussion in this Prospectus Supplement contains certain forward-
looking statements that involve risks and uncertainties, such as statements of
the Company's plans, objectives, expectations and intentions. The Company's
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include those discussed
below, as well as those discussed elsewhere herein or in the documents
incorporated by reference herein.
4
POSSIBLE ADVERSE EFFECT OF AMENDED VALUATION RANGE
The increase in the number of shares offered pursuant to the updated
appraisal and Amended Valuation Range will result in a decrease in pro forma
stockholders' equity per share and pro forma net income per share and an
increase in the ratio of the offering price to pro forma stockholders' equity
per share and pro forma net income per share. Assuming consummation of the
Conversion at the maximum of the Amended Valuation Range, pro forma net income
per share and stockholders' equity per share at or for the year ended December
31, 1996 would be $0.25 and $13.38, respectively, compared to $0.26 and $14.09,
respectively, at the maximum of the previous Estimated Valuation Range. At the
maximum of the Amended Valuation Range and at December 31, 1996, the ratio of
the offering price to pro forma stockholders' equity per share and pro forma net
income per share would be 74.7% and 40.0x, respectively, compared to 71.0% and
38.5x, respectively, at the maximum of the previous Estimated Valuation Range.
See "Pro Forma Data" herein and "Pro Forma Data" in the Prospectus.
The increased valuation reflected in the Amended Valuation Range may
have the effect of weakening the market demand for the Common Stock following
the Conversion. There can be no assurance that the market price at which the
shares of Common Stock trade following the Conversion will equal or exceed the
Purchase Price of $10.00 per share. See "Amended Valuation Range" herein.
The additional increase in equity resulting from the Amended Valuation
Range also may further prevent the Company from maintaining a return on equity
at the levels historically maintained by the Bank. See "Risk Factors --
Anticipated Low Return on Equity Following Conversion" in the Prospectus.
BASIS OF UPDATED APPRAISAL
The updated appraisal of National Capital is based upon the
improvement in the condition of the general stock market, the results of the
Subscription and Community Offerings, the Bank's September 30, 1997 results of
operations and financial condition and current market pricing for thrift
institutions. Among other factors, acquisition activity for financial
institutions has generally resulted in higher bank and thrift stock prices as
investors speculate that industry consolidation will continue. No assurance can
be given that such speculative activity and market pricing will continue or, if
they continue, that they will have any significant effect on the market price of
the Common Stock.
POTENTIAL COST OF STOCK BENEFIT PLANS
The Company's adoption of the ESOP, the MRP and the Option Plan as
part of the Conversion will generate significant compensation expenses after the
Conversion that could depress the earnings of the Company for a number of years.
It is anticipated that the ESOP will purchase 8% of the Common Stock
sold in the Conversion with funds borrowed from the Company. The cost of
acquiring the ESOP shares will be $2,074,000, $2,440,000, $2,806,000 and
$3,226,900 at the minimum, midpoint, maximum and 15% above the maximum of the
Amended Valuation Range, respectively, compared to $1,802,000, $2,120,000,
$2,438,000 and $2,803,700 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively. Further, under American
Institute of Certified Public Accountants ("AICPA") Statement of Position
("SOP") 93-6, "Employers' Accounting for Employee Stock Ownership Plans," an
employer is required to record compensation expense in an amount equal to the
fair value of shares committed to be released to employees from an ESOP. If
shares of Common Stock appreciate in value over time, the adoption of SOP 93-6
may increase compensation expense relating to the ESOP to be established in
connection with the Conversion, as compared with prior accounting guidance which
required the recognition of compensation expense based on the cost of shares
acquired by the ESOP. For an example of the effect that SOP 93-6 may have on
the Company's net income, see "Pro Forma Data" herein.
In addition, following the Conversion, and subject to regulatory and
stockholder approval, the Company intends to implement the MRP, under which
employees and directors could be awarded (at no cost to them) an
5
aggregate amount of the Common Stock equal to 4% of the shares issued in the
Conversion. Assuming the sale in the Conversion of the minimum, midpoint,
maximum and 15% above the maximum of the Amended Valuation Range, and assuming
the shares of Common Stock to be awarded under the MRP have a cost equal to the
Purchase Price of $10.00 per share, the reduction to stockholders' equity of
funding the MRP would be $1,037,000, $1,220,000, $1,403,000 and $1,613,450,
respectively, compared to $901,000, $1,060,000, $1,219,000 and $1,401,850,
respectively, under the Estimated Valuation Range. Such amount would be in
addition to the compensation expense that would be incurred by the Company as
the shares of Common Stock awarded under the MRP vest to the recipients. For
further information regarding the MRP, see "Management of the Bank -- Certain
Benefit Plans and Agreements --Management Recognition Plan" in the Prospectus.
EXTENSION OF TIME PERIOD TO COMPLETE THE CONVERSION
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 previously subscribed for shares of Common Stock in the
Subscription and Community Offerings, the Resolicitation will terminate at 4:00
p.m., Local Time, on January __, 1998, unless extended by the Bank and the
Company, with approval of the OTS, if necessary. Any Community Offering or
Syndicated Community Offering must be completed within 45 days after the close
of the Resolicitation , unless extended by the Bank and the Company with the
approval of the OTS, if necessary. As a result of the increase in the Estimated
Valuation Range, all subscribers must confirm their orders for the dollar amount
of shares subscribed for, and also have the right to increase, decrease or
rescind their subscriptions. See "Amended Valuation Range." If the
Subscription and Community Offerings are not completed by February __, 1998,
either all funds received will be returned with interest and withdrawal
authorizations canceled or, if the OTS has granted an extension of such period,
all subscribers will again be given the opportunity to continue their orders for
the dollar amount of shares subscribed for, or to increase, decrease or rescind
their subscriptions at any time prior to 20 days before the end of the extension
period. ANY SUBSCRIBER WHO REQUIRES AN ADDITIONAL COPY OF THE PROSPECTUS
PREVIOUSLY PROVIDED BY THE COMPANY MAY OBTAIN ONE BY CONTACTING THE STOCK
INFORMATION CENTER AT (502) 881-4001. SINCE THE RESOLICITATION ENDS ON JANUARY
__, 1998, ANY SUBSCRIBER WHO DESIRES TO OBTAIN A COPY OF THE PROSPECTUS SHOULD
REQUEST ONE PROMPTLY.
SUBSCRIPTION BY THE ESOP
The Plan provides that the ESOP may subscribe for up to 8% of the
Common Stock to be issued in the Conversion. Based on the Amended Valuation
Range, the ESOP intends to purchase in the Conversion an amount of Common Stock
equal to 8% of the total number of shares of Common Stock issued in the
Conversion, or 207,400 shares and 280,600 shares of Common Stock at the minimum
and maximum of the Amended Valuation Range, respectively (322,690 shares at the
maximum, as adjusted).
LIMITATIONS ON PURCHASES OF COMMON STOCK
Purchases of shares of Common Stock are subject to limitations as set
forth in the Plan. All shares are offered to persons subscribing in the
Subscription Offering, and shares are only offered to persons in the Community
Offering and Syndicated Community Offering, if any, to the extent available
after filling subscriptions in the Subscription Offering.
Within the Subscription Offering, the maximum purchases by subscribers
are limited under the Plan. Eligible Account Holders may only subscribe up to
an amount equal to the greater (i) $250,000, (ii) one-tenth of one percent of
the total offering of shares of Common Stock, or (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total number
of shares of Common Stock to be issued by a fraction of which the numerator is
the amount of the Qualifying Deposit of the Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all Eligible Account
Holders in the Bank in each case on
6
the Eligibility Record Date (i.e., March 31, 1996). Supplemental Eligible
Account Holders may only subscribe up to an amount equal to the greater of (i)
$250,000, (ii) one-tenth of one percent of the total offering of shares of
Common Stock, or (iii) 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares of Common Stock to be
issued by a fraction of which the numerator is the amount of the Qualifying
Deposit of the Supplemental Eligible Account Holder and the denominator is the
total amount of Qualifying Deposits of all Supplemental Eligible Account Holders
in the Bank in each case on the Supplemental Eligibility Record Date (i.e., June
30, 1997). The Plan further provides that no person (together with associates
and persons acting in concert therewith) may purchase in the aggregate more than
$500,000 of the aggregate value of shares of Common Stock in the Conversion.
The Plan provides for certain additional limitations to be placed upon
the purchase of shares by eligible subscribers and others in the Conversion.
Each subscriber must subscribe for a minimum of 25 shares. The ESOP may
purchase up to an aggregate of 10% of the shares of Common Stock to be issued in
the Conversion under OTS regulations but is only expected to purchase 8% of such
shares. No person, including associates (as defined below) of and persons
"acting in concert" (as defined below) with such person (other than the ESOP),
may purchase in the Subscription or Community Offerings more than $500,000, or
50,000 shares, of the Common Stock. Shares purchased by the ESOP and
attributable to a participant thereunder shall not be aggregated with shares
purchased by such participant or any other purchaser of the Common Stock in the
Conversion. Officers and directors and their associates may not purchase, in
the aggregate, more than 31% of the shares to be issued in the Conversion. For
purposes of the Plan, the directors of the Company and the Bank are not deemed
to be associates or a group "acting in concert" solely by reason of their Board
membership.
The term "acting in concert" is defined in the Plan to mean (i)
knowing participation in a joint activity or interdependent conscious parallel
action towards a common goal, whether or not pursuant to an express agreement,
or (ii) a combination or pooling of voting or other interests in the securities
of an issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. The
Company and the Bank may presume that certain persons are acting in concert
based upon, among other things, joint account relationships and the fact that
such persons have filed joint Schedules 13D with the SEC with respect to other
companies. The term "associate" of a person is defined in the Plan to mean: (i)
any corporation or organization (other than the Bank, the Company, or a
majority-owned subsidiary of the Bank or the Company) of which such person is an
officer or partner or is directly or indirectly the beneficial owner of 10% or
more of any equity securities; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as a trustee or in a similar fiduciary capacity, provided, however, such term
shall not include any employee stock benefit plan of the Bank in which such
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity; and (iii) any relative or spouse of such person, or
any relative of such spouse, who either has the same home as such person or who
is a director of the Bank or the Company or any of their subsidiaries. Directors
are not treated as associates solely because of their Board membership.
Relatives who are neither officers nor directors of the Bank or the Company and
who do not reside in the same home are not deemed to be associates or a group
acting in concert solely as a result of their relationships.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Bank's
members, purchase limitations may be increased or decreased at the sole
discretion of the Company and the Bank at any time. If such amount is
increased, subscribers for the maximum amount will be given the opportunity to
increase their subscriptions up to the then applicable limit, subject to the
rights and preferences of any person who has priority Subscription Rights. In
the event that the purchase limitation is decreased after commencement of the
Subscription and Community Offerings, the orders of any person who subscribed
for the maximum number of shares of Common Stock shall be decreased by the
minimum amount necessary so that such person shall be in compliance with the
then maximum number of shares permitted to be subscribed for by such person.
EACH PERSON PURCHASING COMMON STOCK IN THE CONVERSION SHALL BE DEEMED
TO CONFIRM THAT SUCH PURCHASE DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS
UNDER THE PLAN OR OTHERWISE IMPOSED BY LAW, RULE OR REGULATION. IN THE EVENT
THAT SUCH PURCHASE LIMITATIONS ARE VIOLATED BY ANY PERSON (INCLUDING ANY
ASSOCIATE OR GROUP OF PERSONS AFFILIATED OR OTHERWISE ACTING IN CONCERT WITH
SUCH PERSON), THE COMPANY SHALL HAVE THE
7
RIGHT TO PURCHASE FROM SUCH PERSON AT THE AGGREGATE OF THE PURCHASE PRICE ALL
SHARES ACQUIRED BY SUCH PERSON IN EXCESS OF SUCH PURCHASE LIMITATIONS OR, IF
SUCH EXCESS SHARES HAVE BEEN SOLD BY SUCH PERSON, TO RECEIVE THE DIFFERENCE
BETWEEN THE AGGREGATE OF THE PURCHASE PRICE PAID FOR SUCH EXCESS SHARES AND THE
PRICE AT WHICH SUCH EXCESS SHARES WERE SOLD BY SUCH PERSON. THIS RIGHT OF THE
COMPANY TO PURCHASE SUCH EXCESS SHARES OR RECEIVE THE EXCESS PURCHASE PRICE
SHALL BE ASSIGNABLE BY THE COMPANY. IN ADDITION, PERSONS WHO VIOLATE THE
PURCHASE LIMITATIONS MAY BE SUBJECT TO SANCTIONS AND PENALTIES IMPOSED BY THE
OTS.
Stock purchased pursuant to the Conversion will be freely
transferable, except for shares purchased by directors and officers of the Bank
and the Company.
In addition, under guidelines of the NASD, members of the NASD and
their associates are subject to certain restrictions on the transfer of
securities purchased in accordance with subscription rights and to certain
reporting requirements upon purchase of such securities.
Depending upon market conditions, the Boards of Directors of the
Company and the Bank, with the approval of the OTS, may increase or decrease any
of the above purchase limitations. In the event of such an increase or
decrease, no further approval of members of the Bank would be required.
USE OF PROCEEDS
The amount of proceeds from the sale of the Common Stock will depend
upon the total number of shares actually sold in the Conversion and the actual
expenses of the Conversion. As a result, the actual net proceeds from the sale
of the Common Stock cannot be determined until the Conversion is completed.
Based on the sale of $30,500,000 of the Common Stock at the midpoint of the
Amended Valuation Range, the net proceeds from the sale of the Common Stock are
estimated to be approximately $29,750,000. The Company has received regulatory
approval from the OTS to purchase all of the capital stock of the Bank to be
issued in the Conversion in exchange for at least 50% of the net proceeds.
Based on the foregoing assumption and the purchase of 8% of the shares to be
issued in the Conversion by the ESOP, the Bank would receive approximately
$14,875,000 in cash, and the Company would retain approximately $12,435,000 in
cash and $2,440,000 in the form of a note receivable from the ESOP. The ESOP
note receivable will be for an eight-year term and carry a variable interest
rate, which adjusts annually, equal to the prime rate as published in The Wall
--------
Street Journal plus 1%.
- --------------
The proceeds retained by the Company, after funding the ESOP,
initially will be invested in short-term and intermediate-term securities
including cash and cash equivalents and U.S. government and agency obligations.
Such proceeds will be available for a variety of corporate purposes, including
funding the MRP, if implemented, future acquisitions and diversification of
business, additional capital contributions, dividends to stockholders and
future repurchases of the Common Stock to the extent permitted by applicable
regulations. The Company currently has no specific plans, intentions,
arrangements or understandings regarding acquisitions, capital contributions, or
repurchases. Due to the limited nature of the Company's business activities,
the Company believes that the net proceeds retained after the Conversion,
earnings on such proceeds and payments on the ESOP note receivable will be
adequate to meet the Company's financial needs until dividends are paid by the
Bank. However, no assurance can be given that the Company will not have a need
for additional funds in the future. For additional information, see "Regulation
- -- Depository Institution Regulation -- Dividend Restrictions" in the
Prospectus.
The proceeds contributed to the Bank will ultimately become part of
the Bank's general corporate funds to be used for its business activities,
including making loans and investments. Initially it is expected that the
proceeds will be invested in short-term and intermediate-term securities
including cash and cash equivalents and U.S. government and agency obligations.
The additional capital will also provide the Bank with additional liquidity to
improve the Bank's interest rate risk position and "cushion" the effect of a
significant increase in interest rates. The Bank ultimately plans to use such
proceeds primarily to originate loans in the ordinary course of business.
8
Following the six-month anniversary of the completion of the Conversion
(to the extent permitted by the OTS), and based upon then-existing facts and
circumstances, the Company's Board of Directors may determine to repurchase
shares of Common Stock, subject to any applicable statutory and regulatory
requirements. Such facts and circumstances may include, but are not limited to:
(i) market and economic factors such as the price at which the stock is trading
in the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value and/or earnings per share of the
remaining outstanding shares, and an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that the Company and the Bank will be capitalized in excess of all
applicable regulatory requirements after any such repurchases. The payment of
dividends or repurchasing of stock, however, would be prohibited if
stockholders' equity would be reduced below the amount required for the
liquidation account. See "Dividend Policy" and "The Conversion -- Certain
Restrictions on Purchase or Transfer of Shares After the Conversion" in the
Prospectus.
Set forth below are the estimated investable net proceeds from the
Conversion, assuming the sale of the Common Stock at the minimum, midpoint,
maximum and maximum, as adjusted, of the Amended Valuation Range and assuming
that the ESOP purchases 8% of the shares issued in the Conversion and the MRP
purchases 4% of the shares issued in the Conversion.
Minimum of Midpoint of Maximum of Maximum, as adjusted,
2,592,500 shares 3,050,000 shares 3,507,500 shares at of 4,033,625 shares
at $10.00 per share at $10.00 per share $10.00 per share at $10.00 per share
------------------- ------------------- ---------------- -------------------
(In thousands)
Gross offering proceeds............... $ 25,925 $ 30,500 $ 35,075 $ 40,336
Estimated offering expenses........... (750) (750) (750) (750)
--------- --------- --------- ---------
Estimated net offering proceeds..... 25,175 29,750 34,325 39,586
ESOP funded by the Company............ (2,074) (2,440) (2,806) (3,227)
MRP................................... (1,037) (1,220) (1,403) (1,613)
--------- --------- --------- ---------
Estimated investable net proceeds... $ 22,064 $ 26,090 $ 30,116 $ 34,746
========= ========= ========= =========
9
CAPITALIZATION
The following table sets forth information regarding the historical
capitalization, including deposits, of the Bank at September 30, 1997 and the
pro forma capitalization of the Company giving effect to the sale of the Common
Stock at the minimum, midpoint, maximum and 15% above the maximum of the Amended
Valuation Range based upon the assumptions set forth under "Use of Proceeds" and
below. For additional financial information regarding the Bank, see the
Financial Statements and related Notes appearing elsewhere herein and in the
Prospectus. Depending on market and financial conditions, the total number of
shares to be issued in the Conversion may be significantly increased or
decreased above or below the midpoint of the Amended Valuation Range. No
resolicitation of subscribers and other purchasers will be made unless the
aggregate purchase price of the Common Stock sold in the Conversion is below the
minimum of the Amended Valuation Range or is above 15% above the maximum of the
Amended Valuation Range. A CHANGE IN THE NUMBER OF SHARES TO BE ISSUED IN THE
CONVERSION MAY MATERIALLY AFFECT THE COMPANY'S PRO FORMA CAPITALIZATION. SEE
"PRO FORMA DATA" HEREIN AND "THE CONVERSION -- STOCK PRICING AND NUMBER OF
SHARES TO BE ISSUED" IN THE PROSPECTUS.
Pro Forma Consolidated Capitalization of the Company
at September 30, 1997 Based on the Sale of:
----------------------------------------------------------------------------------
Capitalization
of the Bank at
September 30, 2,592,500 shares 3,050,000 shares 3,507,500 shares 4,033,625 shares
1997 at $10.00 per share at $10.00 per share at $10.00 per share at $10.00 per share
--- ------------------- ------------------- ------------------- -------------------
(Dollars in thousands)
Deposits(1)................... $ 180,749 $ 180,749 $ 180,749 $ 180,749 $ 180,749
FHLB advances................. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total deposits and borrowed
funds........................ $ 180,749 $ 180,749 $ 180,749 $ 180,749 $ 180,749
=========== =========== =========== =========== ===========
Capital stock:
Preferred stock, par value
$.01 per share; authorized -
500,000 shares; assumed
outstanding - none.......... -- -- -- -- --
Common Stock, par value
$.01 per share; authorized -
7,500,000 shares; shares to
be outstanding - as shown
(2)(3)...................... -- 26 31 35 40
Paid-in capital(2)(3)........ -- 25,149 29,719 34,290 39,546
Retained earnings(5)......... 15,938 15,938 15,938 15,938 15,938
Unrealized gain on
securities available for
sale........................ 2,794 2,794 2,794 2,794 2,794
Common Stock acquired by
ESOP(4)...................... -- (2,074) (2,440) (2,806) (3,227)
Common Stock acquired by
MRP(3)....................... -- (1,037) (1,220) (1,403) (1,613)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity(6). $ 18,732 $ 40,796 $ 44,822 $ 48,848 $ 53,478
=========== =========== =========== =========== ===========
(Footnotes on following page)
10
- -----------------
(1) Does not reflect withdrawals from savings accounts for the purchase of the
Common Stock in the Conversion; any withdrawals will reduce pro forma
capitalization by the amount of such withdrawals.
(2) Does not reflect additional shares of Common Stock that possibly could be
purchased by participants in the Option Plan, if implemented, under which
directors, executive officers and other employees could be granted options
to purchase an aggregate amount of the Common Stock equal to 10% of the
shares issued in the Conversion (305,000 shares at the midpoint of the
Estimated Valuation Range) at exercise prices equal to the market price of
the Common Stock on the date of grant. Implementation of the Option Plan
will require regulatory and stockholder approval. See "Management of the
Bank -- Certain Benefit Plans and Agreements -- Stock Option and Incentive
Plan" and "Risk Factors -- Possible Dilutive Effect of MRP and Stock
Options" in the Prospectus.
(3) Assumes a number of shares of Common Stock equal to 4% of the Common Stock
to be sold in the Conversion will be purchased by the MRP through open
market purchases. The dollar amount of the Common Stock to be purchased by
the MRP is based on the $10.00 per share Purchase Price in the Conversion,
represents unearned compensation and is reflected as a reduction of capital.
Such amount does not reflect possible increases or decreases in the value of
such stock relative to the Purchase Price in the Conversion. As the Bank
accrues compensation expense to reflect the vesting of such shares pursuant
to the MRP, the charge against capital will be reduced accordingly.
Implementation of the MRP will require regulatory and stockholder approval.
If the shares to fund the MRP are assumed to come from authorized but
unissued shares purchased by the MRP from the Company at the Purchase Price
within the year following the Conversion, at the minimum, midpoint, maximum
and 15% above the maximum of the Amended Valuation Range, the number of
outstanding shares would be 2,696,200 shares, 3,172,000 shares, 3,647,800
shares and 4,194,970 shares, respectively, and total stockholders' equity
would be $41,834,000, $46,043,000, $50,252,000 and $55,092,000,
respectively. If the MRP acquires authorized but unissued shares from the
Company, stockholders' ownership in the Company would be diluted by
approximately 3.85%. See "Management of the Bank -- Certain Benefit Plans
and Agreements -- Management Recognition Plan" and "Risk Factors -- Possible
Dilutive Effect of MRP and Stock Options in the Prospectus and "Pro Forma
Data" herein.
(4) Assumes 8% of the shares of Common Stock to be sold in the Conversion are
purchased by the ESOP, and that the funds used to purchase such shares are
borrowed from the Company out of net proceeds. Although repayment of such
debt will be secured solely by the shares purchased by the ESOP, the Bank or
the Company expects to make discretionary contributions to the ESOP in an
amount at least equal to the principal and interest payments on the ESOP
debt. The approximate amount expected to be borrowed by the ESOP is not
reflected in this table as borrowed funds but is reflected as a reduction of
capital. As the Bank accrues compensation expense to reflect the allocation
of such shares pursuant to the ESOP, the charge against capital will be
reduced accordingly. See "Management of the Bank -- Certain Benefit Plans
and Agreements -- Employee Stock Ownership Plan" in the Prospectus.
(5) The retained earnings of the Bank are substantially restricted. All capital
distributions by the Bank are subject to regulatory restrictions tied to its
regulatory capital level. In addition, after the Conversion, the Bank will
be prohibited from paying any dividend that would reduce its regulatory
capital below the amount in the liquidation account to be provided 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. See "Regulation -- Depository Institution Regulation --
Dividend Restrictions" and "The Conversion -- Effect of Conversion to Stock
Form on Depositors and Borrowers of the Bank -- Liquidation Account" in the
Prospectus.
(6) Pro forma stockholders' equity information is not intended to represent the
fair market value of the Common Stock, the current value of the Bank's
assets or liabilities or the amounts, if any, that would be available for
distribution to stockholders in the event of liquidation. Such pro forma
data may be materially affected by a change in the number of shares to be
sold in the Conversion and by other factors. See "Pro Forma Data" herein.
11
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The table below presents the Bank's historical and pro forma capital
position relative to its various minimum statutory and regulatory capital
requirements at September 30, 1997 at the minimum, midpoint, maximum and
maximum, as adjusted, of the Amended Valuation Range. For a discussion of the
assumptions underlying the pro forma capital calculations presented below, see
"Use of Proceeds," "Capitalization," "Pro Forma Data" and the financial
statements and related notes appearing elsewhere herein. For a detailed
description of the regulatory capital requirements applicable to the Bank, see
"Regulation -- Regulation of the Bank -- Regulatory Capital Requirements" in the
Prospectus.
Pro Forma at September 30, 1997(1)
Assuming Issuance of:
-----------------------------------------------------------------------
Historical at 2,592,500 shares 3,050,000 shares 3,507,500 shares
September 30, 1997 at $10.00 per share at $10.00 per share at $10.00 per share
------------------ ------------------- ------------------- -------------------
Percent of Percent of Percent of Percent of
Amount Assets (2) Amount Assets (2) Amount Assets (2) Amount Assets (2)
------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
Capital and retained
earnings under generally
accepted accounting
principles.............. $ 18,732 9.27% $ 28,209 13.15% $ 29,948 13.81% $ 31,686 14.46%
========= ========== ========= ========== ========= ========== ========= ==========
Tangible capital.......... $ 15,938 7.98% $ 25,415 12.00% $ 27,153 12.68% $ 28,892 13.35%
Tangible capital
requirement............. 2,997 1.50% 3,177 1.50% 3,211 1.50% 3,246 1.50%
--------- ---------- --------- ---------- --------- ---------- --------- ----------
Excess.................. $ 12,941 6.48% $ 22,238 10.50% $ 23,942 11.18% $ 25,646 11.85%
========= ========== ========= ========== ========= ========== ========= ==========
Core capital.............. $ 15,938 7.98% $ 25,415 12.00% $ 27,153 12.68% $ 28,892 13.35%
Core capital
requirement(3).......... 5,994 3.00% 6,354 3.00% 6,423 3.00% 6,491 3.00%
--------- ---------- --------- ---------- --------- ---------- --------- ----------
Excess.................. $ 9,944 4.98% $ 19,061 9.00% $ 20,730 9.68% $ 22,401 10.35%
========= ========== ========= ========== ========= ========== ========= ==========
Risk-based capital........ $ 16,170 21.95% $ 25,642 34.81% $ 27,381 37.17% $ 29,119 39.53%
Risk-based capital
requirement.............. 5,894 8.00% 5,894 8.00% 5,894 8.00% 5,894 8.00%
--------- ---------- --------- ---------- --------- ---------- --------- ----------
Excess................... $ 10,276 13.95% $ 19,748 26.81% $ 21,487 29.17% $ 23,225 31.53%
========= ========== ========= ========== ========= ========== ========= ==========
4,033,625 shares
at $10.00 per share
-------------------
Percent of
Amount Assets (2)
------ ----------
Capital and retained
earnings under generally
accepted accounting
principles.............. $ 33,685 15.19%
========= ==========
Tangible capital.......... $ 30,891 14.11%
Tangible capital
requirement............. 3,285 1.50%
--------- ----------
Excess.................. $ 27,606 12.61%
========= ==========
Core capital.............. $ 30,891 14.11%
Core capital
requirement(3).......... 6,570 3.00%
--------- ----------
Excess.................. $ 24,321 11.11%
========= ==========
Risk-based capital........ $ 31,118 42.24%
Risk-based capital
requirement.............. 5,894 8.00%
--------- ----------
Excess................... $ 25,224 34.24%
========= ==========
12
- ----------------
(1) Assumes that the Company will purchase all of the capital stock of the Bank
to be issued upon Conversion in exchange for at least 50% of the net
Conversion proceeds. Also assumes net proceeds distributed to the Bank are
initially invested in short term U.S. government securities. Further assumes
that 8% of the Common Stock to be sold in the Conversion is acquired by the
ESOP, and that the funds used to acquire such shares are borrowed from the
Company. In accordance with generally accepted accounting principles, the
amount of the Common Stock to be purchased by the ESOP represents unearned
compensation and is reflected in this table as a reduction of capital.
Although repayment of such debt will be secured solely by the Common Stock
purchased by the ESOP, the Bank expects to make discretionary contributions
to the ESOP in an amount at least equal to the principal and interest
payments on the ESOP debt. As the Bank makes contributions to the ESOP for
simultaneous payment in an equal amount on the ESOP debt, there will be a
corresponding reduction in the charge against capital. See "Management of
the Bank --Certain Benefit Plans and Agreements -- Employee Stock Ownership
Plan" in the Prospectus. Also assumes that the MRP will purchase in the open
market Common Stock in an amount equal to 4% of the Common Stock issued in
the Conversion. The implementation of the MRP is subject to regulatory and
stockholder approvals. For purposes of this table, the dollar amount of the
Common Stock to be purchased by the MRP is assumed to be equal to the $10.00
price per share being offered in the Conversion. Such price may increase or
decrease between the date of consummation of the Conversion and the date
that, following receipt of regulatory and stockholder approvals, the shares
are actually purchased by the MRP. The purchase of shares of Common Stock by
the MRP following receipt of such approvals may be from authorized but
unissued shares of Common Stock or in the open market. In accordance with
generally accepted accounting principles, the amount of the Common Stock to
be purchased by the MRP represents unearned compensation and is reflected in
this table as a reduction of capital. As the Bank accrues compensation
expense over the five year period following such purchase in accordance with
generally accepted accounting principles to reflect the vesting of such
shares of Common Stock pursuant to the MRP, there will be a corresponding
reduction in the charge against capital. See "Management of the Bank --
Certain Benefit Plans and Agreements -- Management Recognition Plan" in the
Prospectus.
(2) Based on the Bank's adjusted total assets for the purpose of the tangible
and core capital requirements and risk-weighted assets for the purpose of
the risk-based capital requirement. See "Regulation -- Regulation of the
Bank -- Regulatory Capital" in the Prospectus.
(3) Does not reflect potential increases in the Bank's core capital requirement
to between 4% and 5% of adjusted total assets in the event the OTS amends
its capital requirements to conform to the more stringent leverage ratio
adopted by the Office of the Comptroller of the Currency for national banks
as described in "Regulation" in the Prospectus.
13
PRO FORMA DATA
The following table sets forth the actual and, after giving effect to
the Conversion for the periods and at the dates indicated, pro forma
consolidated income, stockholders' equity and other data of the Bank prior to
the Conversion and of the Company following the Conversion. Unaudited pro forma
consolidated income and related data have been calculated for the nine months
ended September 30, 1997 and the year ended December 31, 1996 as if the Common
Stock had been sold at the beginning of such periods, and the estimated net
proceeds had been invested at 5.18% and 5.22% at the beginning of the respective
periods. The foregoing yields represent the average one-year Treasury bill rate
during such periods. The pro forma after-tax yields for the Company and the Bank
are assumed to be 3.42% and 3.45% for the nine months ended September 30, 1997
and for the year ended December 31, 1996, respectively, based on the effective
tax rate of 34% in each of the respective periods. Unaudited pro forma
consolidated stockholders' equity and related data have been calculated as if
the Common Stock had been sold and was outstanding at the end of the periods,
without any adjustment of historical or pro forma equity to reflect assumed
earnings on estimated net proceeds. Per share amounts have been computed as if
the Common Stock had been outstanding at the beginning of the period or at the
dates shown, but without any adjustment of historical or pro forma stockholders'
equity to reflect the earnings on estimated net proceeds. The pro forma data set
forth below do not reflect withdrawals from deposit accounts to purchase shares
or increases in capital and, in the case of newly issued shares, outstanding
Common Stock upon the exercise of options by participants in the Option Plan,
under which an aggregate amount of the Common Stock equal to 10% of the shares
issued in the Conversion (305,000 shares at the midpoint of the Amended
Valuation Range) are expected to be reserved for issuance to directors,
executive officers and employees upon the exercise of stock options at exercise
prices equal to the market price of the Common Stock on the date of grant. See
"Management of the Bank -- Certain Benefit Plans and Agreements" in the
Prospectus.
The estimated net proceeds to the Company, as set forth in the
following tables, assume the sale of the Common Stock at the minimum, midpoint,
maximum and 15% above the maximum of the Amended Valuation Range. 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 tables
are estimated based upon the following assumptions: (i) 100% of the shares of
Common Stock will be sold in the Conversion as follows: (a) 8% will be sold to
the ESOP and (b) the remaining shares will be sold to others in the Subscription
Offering; and (ii) total Conversion expenses will be approximately $750,000. The
foregoing assumptions regarding estimated purchases in the Subscription and
Community Offerings are based on reasonable market assumptions, market
conditions, consultations between the Bank and the Agents and planned purchases
by the ESOP. Actual expenses may vary from those estimated.
The stockholders' equity and related data presented herein are not
intended to represent the fair market value of the Common Stock, the current
value of assets or liabilities, or the amounts, if any, that would be available
for distribution to stockholders in the event of liquidation. For additional
information regarding the liquidation account, see "The Conversion -- Effect of
Conversion to Stock Form on Depositors and Borrowers of the Bank -- Liquidation
Account" in the Prospectus. The pro forma income and related data derived from
the assumptions set forth above should not be considered indicative of the
actual results of operations of the Bank and the Company for any period. Such
pro forma data may be materially affected by a change in the number of shares to
be issued in the Conversion and other factors. See "The Conversion -- Stock
Pricing and Number of Shares to be Issued" in the Prospectus.
14
At or for the Nine Months Ended September 30, 1997
------------------------------------------------------------------------------------
2,592,500 shares at 3,050,000 shares at 3,507,500 shares at 4,033,625 shares at
$10.00 per share $10.00 per share $10.00 per share $10.00 per share
---------------- ---------------- ---------------- ----------------
(Dollars in thousands, except per share amounts)
Gross offering proceeds......................... $ 25,925 $ 30,500 $ 35,075 $ 40,336
Estimated offering expenses..................... (750) (750) (750) (750)
---------- ---------- ---------- ----------
Estimated net proceeds.......................... 25,175 29,750 34,325 39,586
ESOP funded by the Company...................... (2,074) (2,440) (2,806) (3,227)
MRP............................................. (1,037) (1,220) (1,403) (1,613)
---------- ---------- ---------- ----------
Estimated investable net proceeds............... $ 22,064 $ 26,090 $ 30,116 $ 34,746
========== ========== ========== ==========
Net income:
Historical net income.......................... $ 1,347 $ 1,347 $ 1,347 $ 1,347
Pro forma income on investable net proceeds.... 566 669 772 891
Pro forma ESOP adjustment (1).................. (128) (151) (174) (200)
Pro forma MRP adjustment (2)................... (103) (121) (138) (160)
---------- ---------- ---------- ----------
Pro forma net income.......................... $ 1,682 $ 1,744 $ 1,807 $ 1,878
========== ========== ========== ==========
Net income per share:
Historical net income.......................... $ 0.56 $ 0.48 $ 0.42 $ 0.36
Pro forma income on investable net proceeds.... 0.23 0.23 0.23 0.23
Pro forma ESOP adjustment (1).................. (0.05) (0.05) (0.05) (0.05)
Pro forma MRP adjustment (2)................... (0.04) (0.04) (0.04) (0.04)
---------- ---------- ---------- ----------
Pro forma net income per share................ $ 0.70 $ 0.62 $ 0.56 $ 0.50
========== ========== ========== ==========
Weighted average number of shares outstanding
for earnings per share calculations............ 2,404,544 2,828,875 3,253,206 3,741,187
Stockholders' equity: (3)
Historical...................................... $ 18,732 $ 18,732 $ 18,732 $ 18,732
Estimated net proceeds.......................... 25,175 29,750 34,325 39,586
Common Stock acquired by ESOP (1)............... (2,074) (2,440) (2,806) (3,227)
Common Stock acquired by MRP (2)................ (1,037) (1,220) (1,403) (1,613)
---------- ---------- ---------- ----------
Pro forma stockholders' equity.................. $ 40,796 $ 44,822 $ 48,848 $ 53,478
========== ========== ========== ==========
Stockholders' equity per share: (3)
Historical..................................... $ 7.23 $ 6.14 $ 5.34 $ 4.65
Estimated net proceeds......................... 9.71 9.76 9.79 9.81
Common Stock acquired by ESOP (1)............ (0.80) (0.80) (0.80) (0.80)
Common Stock acquired by MRP (2)............... (0.40) (0.40) (0.40) (0.40)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share....... $ 15.74 $ 14.70 $ 13.93 $ 13.26
========== ========== ========== ==========
Weighted average number of shares outstanding
for stockholders' equity per share
calculations (4)............................... 2,592,500 3,050,000 3,507,500 4,033,625
Offering price as a percentage of pro forma
stockholders' equity per share (5)........... 63.5% 68.0% 71.8% 75.4%
========== ========== ========== ==========
Ratio of offering price to pro forma annualized 10.7x 12.1x 13.4x 15.0x
net income per share........................... ========== ========== ========== ==========
(Footnotes on following page)
15
- -----------
(1) Assumes 8% of the shares to be sold in the Conversion are purchased by the
ESOP under all circumstances, and that the funds used to purchase such
shares are borrowed from the Company. The approximate amount expected to be
borrowed by the ESOP is not reflected as a liability but is reflected as a
reduction of capital. Although repayment of such debt will be secured solely
by the shares purchased by the ESOP, the Bank expects to make discretionary
contributions to the ESOP in an amount at least equal to the principal and
interest payments on the ESOP debt. Pro forma net income has been adjusted
to give effect to such contributions, based upon a fully amortizing debt
with an eight -year term. Because the Company will be providing the ESOP
loan, only principal payments on the ESOP loan are reflected as employee
compensation and benefits expense. For purposes of this table the Purchase
Price of $10.00 was utilized to calculate the ESOP expense. The Bank intends
to record compensation expense related to the ESOP in accordance with
American Institute of Certified Public Accountants ("AICPA") Statement of
Position ("SOP") No. 93-6. As a result, to the extent the value of the
Common Stock appreciates over time, compensation expense related to the ESOP
will increase. SOP 93-6 also changes the earnings per share computations for
leveraged ESOPs to include as outstanding only shares that have been
committed to be released to participants. For purposes of the preceding
table, it was assumed that 9.38% of the ESOP shares purchased in the
Conversion were committed to be released at September 30, 1997. If it is
assumed that 100% of the ESOP shares were committed to be released at
September 30, 1997, the application of SOP 93-6 would result in net income
per share of $0.65, $0.57, $0.52 and $0.47 respectively, and a ratio of
offering price to pro forma annualized net income per share of 11.5 times,
13.2 times, 14.4 times and 16.0 times, respectively, based on the sale of
shares at the minimum, midpoint, maximum and 15% above the maximum of the
Amended Valuation Range. See "Management of the Bank -- Certain Benefit
Plans and Agreements -- Employee Stock Ownership Plan" in the Prospectus.
(2) Assumes a number of shares of Common Stock equal to 4% of the Common Stock
to be sold in the Conversion will be purchased by the MRP in the open market
in the year following the Conversion. The dollar amount of the Common Stock
to be purchased by the MRP is based on the Purchase Price of $10.00 in the
Conversion and represents unearned compensation and is reflected as a
reduction of capital. Such amount does not reflect possible increases or
decreases in the value of such stock relative to the Purchase Price in the
Conversion. As the Bank accrues compensation expense to reflect the vesting
of such shares pursuant to the MRP, the charge against capital will be
reduced accordingly. MRP adjustment is based on MRP expenses for the first
year following the Conversion calculated in accordance with generally
accepted accounting principles. MRP expenses are expected to be lower in
subsequent years. Implementation of the MRP would require stockholder
approval at a meeting of the Company's stockholders to be held within one
year but no earlier than six months after the Conversion. For purposes of
this table, it is assumed that the MRP will be adopted by the Bank's Board
of Directors and approved by the Company's stockholders, and that the MRP
will purchase the shares of Common Stock in the open market within the year
following the Conversion. If the shares to be purchased by the MRP are
assumed to be newly issued shares purchased from the Company by the MRP at
the Purchase Price, at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, the offering price as a percentage
of pro forma stockholders' equity per share would be 64.5%, 68.9%, 72.6% and
76.1%, respectively, and pro forma net income per share would be $0.67,
$0.59, $0.53 and $0.48, respectively. As a result of the MRP, stockholders'
interests will be diluted by approximately 3.85%. See "Management of the
Bank -- Certain Benefit Plans and Agreements -- Management Recognition Plan"
and "Risk Factors -- Possible Dilutive Effect of MRP and Stock Options" in
the Prospectus.
(3) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the Company over its liabilities. The amounts shown
do not reflect the federal income tax consequences of the potential
restoration to income of the bad debt reserves for income tax purposes,
which would be required in the event of liquidation. The amounts shown also
do not reflect the amounts required to be distributed in the event of
liquidation to eligible depositors from the liquidation account which will
be established upon the consummation of the Conversion. Pro forma
stockholders' equity information is not intended to represent the fair
market value of the Common Stock, the current value of the Bank's assets or
liabilities or the amounts, if any, that would be available for distribution
to stockholders in the event of liquidation. Such pro forma data may be
materially affected by a change in the number of shares to be sold in the
Conversion and by other factors.
(4) Assumes that all shares of Common Stock held by the ESOP were committed to
be released.
(5) It is expected that following the consummation of the Conversion the Company
will adopt the Option Plan, which would be subject to stockholder approval,
and that such plan would be considered and voted upon at a meeting of the
Company's stockholders to be held within one year but no earlier than six
months after the Conversion. Upon adoption of the Option Plan, employees and
directors could be granted options to purchase an aggregate amount of the
Common Stock equal to 10% of the shares issued in the Conversion at exercise
prices equal to the market price of the Common Stock on the date of grant.
In the event the shares issued under the Option Plan consist of newly issued
shares of Common Stock and all options available for award under the Option
Plan were awarded, the interests of existing stockholders would be diluted.
At the minimum, midpoint, maximum and 15% above the maximum of the Amended
Valuation Range, if all shares under the Option Plan were newly issued and
the exercise price for the option shares were equal to the Purchase Price in
the Conversion, net income per share would be $0.63, $0.56, $0.50 and $0.45,
respectively, and the stockholders' equity per share would be $15.21,
$14.27, $13.57 and $12.96, respectively. See "Management of the Bank --
Certain Benefit Plans and Agreements -- Stock Option Plan" in the
Prospectus.
16
At or for the Year Ended December 31, 1996
------------------------------------------------------------------------------------
2,592,500 shares at 3,050,000 shares at 3,507,500 shares at 4,033,625 shares at
$10.00 per share $10.00 per share $10.00 per share $10.00 per share
---------------- ---------------- ---------------- ----------------
(Dollars in thousands, except per share amounts)
Gross offering proceeds......................... $ 25,925 $ 30,500 $ 35,075 $ 40,336
Estimated offering expenses..................... (750) (750) (750) (750)
---------- ---------- ---------- ----------
Estimated net proceeds.......................... 25,175 29,750 34,325 39,586
ESOP funded by the Company...................... (2,074) (2,440) (2,806) (3,227)
MRP............................................. (1,037) (1,220) (1,403) (1,613)
---------- ---------- ---------- ----------
Estimated investable net proceeds............... $ 22,064 $ 26,090 $ 30,116 $ 34,746
========== ========== ========== ==========
Net income:
Historical net income (1)...................... $ 195 $ 195 $ 195 $ 195
Pro forma income on investable net
proceeds...................................... 760 898 1,037 1,196
Pro forma ESOP adjustment (2).................. (171) (201) (232) (266)
Pro forma MRP adjustment (3)................... (137) (161) (185) (213)
---------- ---------- ---------- ----------
Pro forma net income.......................... $ 647 $ 731 $ 815 $ 912
========== ========== ========== ==========
Net income per share:
Historical net income (1)...................... $ 0.08 $ 0.07 0.06 $ 0.05
Pro forma income on investable net
proceeds...................................... 0.32 0.32 0.32 0.32
Pro forma ESOP adjustment (2).................. (0.07) (0.07) (0.07) (0.07)
Pro forma MRP adjustment (3)................... (0.06) (0.06) (0.06) (0.06)
---------- ---------- ---------- ----------
Pro forma net income per share................ $ 0.27 $ 0.26 $ 0.25 $ 0.24
========== ========== ========== ==========
Weighted average number of shares outstanding
for earnings per share calculations............ 2,411,025 2,836,500 3,261,975 3,751,271
Stockholders' equity: (4)
Historical..................................... $ 16,824 $ 16,824 $ 16,824 $ 16,824
Estimated net proceeds......................... 25,175 29,750 34,325 39,586
Common Stock acquired by ESOP (2).............. (2,074) (2,440) (2,806) (3,227)
Common Stock acquired by MRP (3)............... (1,037) (1,220) (1,403) (1,613)
---------- ---------- ---------- ----------
Pro forma stockholders' equity................. $ 38,888 $ 42,914 $ 46,940 $ 51,570
========== ========== ========== ==========
Stockholders' equity per share: (4)
Historical..................................... $ 6.49 $ 5.52 $ 4.80 4.17
Estimated net proceeds......................... 9.71 9.75 9.78 9.81
Common Stock acquired by ESOP (2).............. (0.80) (0.80) (0.80) (0.80)
Common Stock acquired by MRP (3)............... (0.40) (0.40) (0.40) (0.40)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share....... $ 15.00 $ 14.07 $ 13.38 $ 12.78
========== ========== ========== ==========
Weighted average number of shares outstanding
for stockholders' equity per share
calculations (5)............................... 2,592,500 3,050,000 3,507,500 4,033,625
Offering price as a percentage of pro forma
stockholders' equity per share (6)........... 66.7% 71.1% 74.7% 78.2%
========== ========== ========== ==========
Ratio of offering price to pro forma net income
per share...................................... 37.0x 38.5x 40.0x 41.7x
========== ========== ========== ==========
(Footnotes on following page)
17
- ---------
(1) Historical net income and historical net income per share include an after-
tax charge of $812,000 taken during the year ended December 31, 1996
representing a one-time special assessment of 65.7 basis points on the
Bank's deposits held as of March 31, 1995 pursuant to legislation enacted to
recapitalize the SAIF. If the one-time special assessment had been excluded,
at the minimum, midpoint, maximum and 15% above the maximum of the Amended
Valuation Range, pro forma net income per share would have been $0.60,
$0.54, $0.50 and $0.46, respectively. See Note 13 of Notes to Financial
Statements in the Prospectus. At the midpoint of the Estimated Valuation
Range, and excluding the effect of the one-time SAIF assessment, the
Company's offering price as a percentage of pro forma stockholders' equity
would have been 69.8%, and its pro forma ratio of offering price to pro
forma net income per share would have been 18.5 times.
(2) Assumes 8% of the shares to be sold in the Conversion are purchased by the
ESOP under all circumstances, and that the funds used to purchase such
shares are borrowed from the Company. The approximate amount expected to be
borrowed by the ESOP is not reflected as a liability but is reflected as a
reduction of capital. Although repayment of such debt will be secured solely
by the shares purchased by the ESOP, the Bank expects to make discretionary
contributions to the ESOP in an amount at least equal to the principal and
interest payments on the ESOP debt. Pro forma net income has been adjusted
to give effect to such contributions, based upon a fully amortizing debt
with an eight-year term. Because the Company will be providing the ESOP
loan, only principal payments on the ESOP loan are reflected as employee
compensation and benefits expense. For purposes of this table the Purchase
Price of $10.00 was utilized to calculate the ESOP expense. The Bank intends
to record compensation expense related to the ESOP in accordance with SOP
No. 93-6. As a result, to the extent the value of the Common Stock
appreciates over time, compensation expense related to the ESOP will
increase. SOP 93-6 also changes the earnings per share computations for
leveraged ESOPs to include as outstanding only shares that have been
committed to be released to participants. For purposes of the preceding
table, it was assumed that 12.5% of the ESOP shares purchased in the
Conversion were committed to be released at December 31, 1996. If it is
assumed that 100% of the ESOP shares were committed to be released at
December 31, 1996, the application of SOP 93-6 would result in net income
per share of $0.25, $0.24, $0.23 and $0.22, respectively, and a ratio of
offering price to pro forma net income per share of 40.0 times, 41.7 times,
43.5 times and 45.5 times, respectively, based on the sale of shares at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range. See "Management of the Bank -- Certain Benefit Plans and
Agreements -- Employee Stock Ownership Plan" in the Prospectus.
(3) Assumes a number of shares of Common Stock equal to 4% of the Common Stock
to be sold in the Conversion will be purchased by the MRP in the open market
in the year following the Conversion. The dollar amount of the Common Stock
to be purchased by the MRP is based on the Purchase Price in the Conversion
and represents unearned compensation and is reflected as a reduction of
capital. Such amount does not reflect possible increases or decreases in the
value of such stock relative to the Purchase Price in the Conversion. As the
Bank accrues compensation expense to reflect the vesting of such shares
pursuant to the MRP, the charge against capital will be reduced accordingly.
MRP adjustment is based on MRP expenses for the first year following the
Conversion calculated in accordance with generally accepted accounting
principles. MRP expenses are expected to be lower in subsequent years.
Implementation of the MRP would require stockholder approval at a meeting of
the Company's stockholders to be held within one year but no earlier than
six months after the Conversion. For purposes of this table, it is assumed
that the MRP will be adopted by the Bank's Board of Directors and approved
by the Company's stockholders, and that the MRP will purchase the shares of
Common Stock in the open market within the year following the Conversion. If
the shares to be purchased by the MRP are assumed to be newly issued shares
purchased from the Company by the MRP at the Purchase Price, at the minimum,
midpoint, maximum and 15% above the maximum of the Amended Valuation Range,
the offering price as a percentage of pro forma stockholders' equity per
share would be 67.5%, 71.9%, 75.5% and 78.9%, respectively, and pro forma
net income per share would be $0.26, $0.25 and $0.24, and $0.23,
respectively. As a result of the MRP, stockholders' interests will be
diluted by approximately 3.85%. See "Management of the Bank -- Certain
Benefit Plans and Agreements -- Management Recognition Plan" and "Risk
Factors -- Possible Dilutive Effect of MRP and Stock Options" in the
Prospectus.
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the Company over its liabilities. The amounts shown
do not reflect the federal income tax consequences of the potential
restoration to income of the bad debt reserves for income tax purposes,
which would be required in the event of liquidation. The amounts shown also
do not reflect the amounts required to be distributed in the event of
liquidation to eligible depositors from the liquidation account which will
be established upon the consummation of the Conversion. Pro forma
stockholders' equity information is not intended to represent the fair
market value of the Common Stock, the current value of the Bank's assets or
liabilities or the amounts, if any, that would be available for distribution
to stockholders in the event of liquidation. Such pro forma data may be
materially affected by a change in the number of shares to be sold in the
Conversion and by other factors.
(5) Assumes that all shares of Common Stock held by the ESOP were committed to
be released.
(6) It is expected that following the consummation of the Conversion the Company
will adopt the Option Plan, which would be subject to stockholder approval,
and that such plan would be considered and voted upon at a meeting of the
Company's stockholders to be held within one year but no earlier than six
months after the Conversion. Upon adoption of the Option Plan, employees and
directors could be granted options to purchase an aggregate amount of the
Common Stock equal to 10% of the shares issued in the Conversion at exercise
prices equal to the market price of the Common Stock on the date of grant.
In the event the shares issued under the Option Plan consist of newly issued
shares of Common Stock and all options available for award under the Option
Plan were awarded, the interests of existing stockholders would be diluted.
At the minimum, midpoint, maximum and 15% above the maximum of the Amended
Valuation Range, if all shares under the Option Plan were newly issued and
the exercise price for the option shares were equal to the Purchase Price in
the Conversion, net income per share would be $0.24, 0.23, $0.22 and $0.21
respectively, and the stockholders' equity per share would be $14.55,
$13.70, $13.08 and $12.53, respectively. See "Management of the Bank --
Certain Benefit Plans and Agreements -- Stock Option Plan" in the
Prospectus.
18
PROPOSED MANAGEMENT PURCHASES
The following table sets forth information, based on orders received
in the Subscription and Community Offerings, regarding the approximate number of
shares of Common Stock intended to be purchased by each of the directors and
officers of the Bank and by all directors and executive officers as a group,
including their associates. For purposes of the following table, it has been
assumed that 3,050,000 shares of Common Stock (i.e., the midpoint of the Amended
Valuation Range) will be sold at $10.00 per share (see " The Conversion-- Stock
Pricing and Number of Shares to be Issued" in the Prospectus) and that
sufficient shares will be available to satisfy subscriptions in all categories.
Aggregate Purchase Price
Name and Position Total Shares Percent of Total of Proposed Purchases
- ------------------------------------------------- ----------------- ------------------- ----------------------------
WD Kelly 50,000 1.64% $ 500,000
Chairman of the Board
Bruce Thomas 50,000 1.64% 500,000
Director, President and Chief Executive
Officer
Peggy R. Noel 50,000 1.64% 500,000
Director, Executive Vice President and
Chief Financial Officer
Boyd M. Clark 50,000 1.64% 500,000
Director and Senior Vice President --
Loan Administration
Clifton H. Cochran 22,500 0.74% 225,000
Director
Drury R. Embry 4,500 0.15% 45,000
Director
Walton G. Ezell 50,000 1.64% 500,000
Director
John Noble Hall, Jr. 20,000 0.66% 200,000
Director
Chester K. Wood 10,000 0.33% 100,000
Director ------- ----- ----------
All directors and executive officers, as a
group (9 persons) and their
associates 307,000 10.08% 3,070,000
ESOP (1) 244,000 8.00% 2,440,000
MRP (2) 122,000 4.00% 1,220,000
------- ----- ----------
Total (3) 673,000 22.08% $6,730,000
======= ===== ==========
(Footnotes on following page)
19
- -------
(1) Consists of shares that could be allocated to participants in the ESOP,
under which executive officers and other employees would be allocated in the
aggregate 8.0% of the Common Stock issued in the Conversion. See
"Management of the Bank -- Certain Benefit Plans and Agreements -- Employee
Stock Ownership Plan" in the Prospectus.
(2) Consists of shares that are expected to be awarded to participants in the
MRP, if implemented, under which directors, executive officers and other
employees would be awarded an aggregate number of shares equal to 4.0% of
the Common Stock sold in the Conversion. The dollar amount of the Common
Stock to be purchased by the MRP is based on the Purchase Price in the
Conversion and does not reflect possible increases or decreases in the value
of such Stock relative to the Purchase Price per share in the Conversion.
Implementation of the MRP would require stockholder approval. See
"Management of the Bank -- Certain Benefit Plans and Agreements --Management
Recognition Plan" in the Prospectus. Such shares could be newly issued
shares or shares purchased in the open market following implementation of
the MRP, in the sole discretion of the Company's Board of Directors. The
percentage shown assumes the shares are purchased in the open market. If all
shares acquired by the MRP are newly issued shares, the percentage of the
outstanding Common Stock owned by the MRP would be 3.85%. Any sale of newly
issued shares to the MRP would be dilutive to existing stockholders. See
"Risk Factors -- Potential Benefits of Conversion to Management" in the
Prospectus.
(3) Does not include shares that possibly would be purchased by participants in
an Option Plan intended to be implemented following the Conversion, under
which directors, executive officers and other employees would be granted
options to purchase an aggregate amount of the Common Stock equal to 10% of
the shares issued in the Conversion at exercise prices equal to the market
price of the Common Stock on the date of grant. Shares issued pursuant to
the exercise of options could be from treasury stock or newly issued shares.
Implementation of the Option Plan would require regulatory and stockholder
approval. See "Management of the Bank -- Certain Benefit Plans and
Agreements -- Stock Option Plan" in the Prospectus.
MARKET FOR THE COMMON STOCK
The Company has never issued capital stock to the public.
Consequently, there is no established market for the Common Stock. The Common
Stock has been approved for quotation on the Nasdaq Stock Market ("Nasdaq")
under the symbol "HFBC." There can be no assurance that an active and liquid
trading market for the Common Stock will develop or that, if developed, will
continue, nor is there any assurance that persons purchasing shares of Common
Stock will be able to sell them at or above the Purchase Price. The development
and maintenance of a liquid public market depends on the existence of willing
buyers and sellers, the presence of which is not within the control of the
Company or the Bank. The number of active buyers and sellers of the Common Stock
at any particular time may be limited. Under such circumstances, investors in
the Common Stock could have difficulty disposing of their shares and therefore
should not view the Common Stock as a short-term investment. Friedman, Billings,
Ramsey & Co. has indicated its intention to act as a market maker in the Common
Stock following consummation of the Conversion, depending on trading volume and
subject to compliance with applicable laws and regulatory requirements.
20
RECENT SELECTED FINANCIAL INFORMATION
AND OTHER DATA
The following summary of selected financial information 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 accompanying Notes
appearing elsewhere in this Prospectus Supplement and in the Prospectus. The
selected financial and other data as of and for the nine months ended September
30, 1997 and 1996 are unaudited and are derived from the Bank's internal
financial statements which, in the opinion of management, contain all
adjustments (consisting only of normal recurring adjustments) which are
necessary for a fair presentation of the results for such periods.
FINANCIAL DATA:
At September 30, 1997 At December 31, 1996
--------------------------- ---------------------------
Total amount of: (Dollars in thousands)
Assets............................... $ 202,009 $ 204,398
Loans receivable, net................ 100,675 95,496
Cash and due from banks.............. 1,012 1,452
Time deposits and
interest-bearing deposits
in FHLB........................ 2,378 2,000
Federal funds sold................... 8,295 500
Securities available for sale........ 14,045 5,125
Securities held to maturity:
FHLB securities................... 50,981 77,962
Mortgage-backed securities........ 20,786 17,984
Deposits............................. 180,749 183,827
FHLB advances........................ -- 1,317
Total equity......................... 18,732 16,824
OPERATING DATA: Nine Months Ended
September 30,
--------------------------------------------------------
1997 1996
---- ----
Interest income....................... $10,011 $ 9,905
Interest expense...................... 6,642 7,473
------- -------
Net interest income before
provision for loan losses........... 3,369 2,432
Provision for loan losses............. 15 --
------- -------
Net interest income................... 3,354 2,432
Non-interest income................... 404 465
Non-interest expense.................. 1,725 3,001(1)
------- -------
Income (loss) before income taxes..... 2,033 (104)
Provision for income taxes............ 686 (43)
------- -------
Net income............................ $ 1,347 $ (61)(1)
======= =======
- --------------------
(1) Includes payment to the SAIF of a one-time deposit insurance special
assessment of $1.2 million ($812,000 net of tax) pursuant to legislation
enacted to recapitalize SAIF. Excluding the effect of the SAIF assessment,
the Bank's net income for the nine months ended September 30, 1996 would
have been $751,000.
21
KEY OPERATING RATIOS:
At or for the Nine Months Ended
September 30, (1)
------------------------------------------------------------
1997 1996
-------------------------- ---------------------------
Performance Ratios:
Return on average assets (net income divided by average
total assets).................................................. 0.88% (0.04)%(2)
Return on average equity (net income divided by
average total equity).......................................... 10.12% (0.50)%(2)
Interest rate spread (combined weighted average interest rate
earned less combined weighted average interest rate cost)...... 1.84% 1.21%
Ratio of average interest-earning assets to average
interest-bearing liabilities................................... 109.59% 107.47%
Ratio of non-interest expense to average total assets........... 1.13% 2.84%
Ratio of net interest income after provision
for loan losses to non-interest expense........................ 194.55% 81.01%
Efficiency ratio (noninterest expense divided by sum of net
interest income plus noninterest income)....................... 45.88% 103.63%
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at end of period........... 0.12% 0.08%
Nonperforming loans to total loans at end of period............. 0.25% 0.17%
Allowance for loan losses to total loans at end of period....... 0.23% 0.12%
Allowance for loan losses to nonperforming loans at
end of period.................................................. 93.93% 71.78%
Provision for loan losses to total loans receivable, net........ 0.01% N/A(3)
Net charge-offs to average loans outstanding.................... N/A(3) 0.006%
CAPITAL RATIOS:
Total equity to total assets at end of period................... 9.27% 7.72%
Average total equity to average assets.......................... 8.74% 7.64%
- --------------
(1) Annualized as appropriate.
(2) Includes the effect of the payment of the Bank in 1996 of a one-time deposit
insurance special assessment of $1.2 million to the SAIF. Excluding the
effect of the SAIF assessment, the Bank's return on average assets would
have been 0.47% and its return on average equity would have been 6.20%.
(3) Ratio is not applicable because the Bank did not have any provision for loan
losses or net charge-offs for this period.
REGULATORY CAPITAL RATIOS: September 30, 1997
----------------------------------
(Dollars in thousands)
Tangible capital.............................................. $15,938 7.98%
Less: Tangible capital requirement.......................... 2,997 1.50
------- -----
Excess....................................................... $12,941 6.48%
======= =====
Core capital.................................................. $15,938 7.98%
Less: Core capital requirement............................... 5,994 3.00
------- -----
Excess....................................................... $ 9,944 4.98%
======= =====
Total risk-based capital...................................... $16,170 21.95%
Less: Risk-based capital requirement......................... 5,894 8.00
------- -----
Excess....................................................... $10,276 13.95%
======= =====
22
HOPKINSVILLE FEDERAL SAVINGS BANK
Statements of Financial Condition
September 30, December 31,
ASSETS 1997 1996
------------- ------------
(Unaudited)
(In thousands)
Cash and due from banks............................... $ 1,012 $ 1,452
Time deposits......................................... 2,000 2,000
Interest-bearing deposits in Federal
Home Loan Bank...................................... 378 0
Federal funds sold.................................... 8,295 500
Investment securities available for sale.............. 14,045 5,125
Investment securities held to maturity
(Estimated market values of $75,099 and
$95,762 at September 30, 1997 and
December 31, 1996, respectively)................... 71,767 95,947
Loans receivable, net................................. 100,675 95,496
Accrued interest receivable........................... 1,032 1,290
Premises and equipment, net........................... 2,418 2,333
Foreclosed real estate................................ -- --
Other assets.......................................... 387 255
-------- --------
Total assets................................ $202,009 $204,398
======== ========
LIABILITIES AND RETAINED EARNINGS
Liabilities:
Deposits............................................ $180,749 $183,827
Deferred Federal income taxes....................... 1,938 1,659
Advances from Federal Home Loan Bank................ 0 1,317
Other liabilities................................... 590 771
-------- --------
Total liabilities 183,277 187,574
-------- --------
Retained earnings:
Retained earnings, substantially restricted......... 15,938 14,591
Net unrealized appreciation on investment
securities available for sale..................... 2,794 2,233
-------- --------
Total retained earnings..................... 18,732 16,824
-------- --------
Total liabilities and retained earnings.. $202,009 $204,398
======== ========
See accompanying Notes to Financial Statements.
23
HOPKINSVILLE FEDERAL SAVINGS BANK
STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- ---------- --------- ----------
(In thousands)
Interest income:
Interest on loans.............................. 1,915 1,766 $ 5,616 $4,988
Interest and dividends on investments.......... 1,270 1,420 3,910 4,351
Time deposit interest income................... 183 155 485 566
------ ------ ------- ------
Total interest income........................ 3,368 3,341 10,011 9,905
------ ------ ------- ------
Interest expense:
Interest on deposits........................... 2,216 2,421 6,633 7,450
Other Funds.................................... 0 0 9 23
------ ------ ------- ------
Total interest expense....................... 2,216 2,421 6,642 7,473
------ ------ ------- ------
Net interest income............................... 1,152 920 3,369 2,432
Provision for loan losses......................... 5 0 15 0
------ ------ ------- ------
Net interest income after provision
for loan losses................................ 1,147 920 3,354 2,432
------ ------ ------- ------
Other income:
Loan and other service fees.................... 122 137 353 422
Other, net..................................... 12 10 51 43
------ ------ ------- ------
Total other income......................... 134 147 404 465
------ ------ ------- ------
Net expenses:
Salaries and benefits.......................... 342 309 1,064 921
Federal insurance premium...................... 29 1,356 92 1,577
Occupancy expense, net......................... 49 48 148 160
Data processing................................ 36 32 85 62
Other operating expenses....................... 106 93 336 281
------ ------ ------- ------
Total other expenses......................... 562 1,838 1,725 3,001
------ ------ ------- ------
Income (loss) before income taxes and cumulative
effect of change in accounting principle.......... 719 (771) 2,033 (104)
Provision for income taxes........................ 242 (265) 686 (43)
------ ------ ------- ------
Net income (loss)................................. $ 477 $ (506) $ 1,347 $ (61)
====== ====== ======= ======
See accompanying Notes to Financial Statements.
24
HOPKINSVILLE FEDERAL SAVINGS BANK
STATEMENTS OF EQUITY
(UNAUDITED)
Net Unrealized
Appreciation On
Retained Available-For-Sale
Earnings Securities Total Equity
--------------- ---------------------- ------------------
(in thousands)
BALANCE, DECEMBER 31, 1995 $ 14,396 $ 1,606 $ 16,002
Net loss (61) -- (61)
Net changes in unrealized
appreciation on available-for-sale
securities, net of taxes of $24 -- 46 46
--------- -------- ---------
BALANCE, SEPTEMBER 30, 1996 $ 14,335 $ 1,652 $ 15,987
========= ======== =========
BALANCE, DECEMBER 31, 1996 $ 14,591 $ 2,233 $ 16,824
Net income 1,347 -- 1,347
Net changes in unrealized
appreciation on available-for-sale
securities, net of taxes of $290 -- 561 561
--------- -------- ---------
BALANCE, SEPTEMBER 30, 1997 $ 15,938 $ 2,794 $ 18,732
========= ======== =========
25
HOPKINSVILLE FEDERAL SAVINGS BANK
Statements of Cash Flows
(UNAUDITED)
For the Nine Months
Ended September 30,
-------------------
1997 1996
-------- ---------
(In thousands)
Cash flows from operating activities:
Net income (loss)........................................... $ 1,347 $ (61)
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income to....................................... (10) 25
Provision for loan losses................................ 15 100
Gain on sale of equipment................................ 0 (8)
Provision for depreciation............................... 75 86
FHLB stock dividend...................................... (88) (80)
Accretion of investment security discounts............... (28) (4)
(Increase) decrease in
Accrued interest receivable.............................. 258 (101)
Other assets............................................. (132) (520)
Increase (decrease) in other liabilities................. (360) 1,460
------- --------
Net cash provided by operating activities................ 1,077 897
------- --------
Cash flows from investing activities:
Net (increase) decrease in time deposits................. 0 5,000
Net (increase) decrease in interest earning deposits
in FHLB........................................... (378) 5,519
Net (increase) decrease in federal funds sold............ (7,795) 5,077
Proceeds from maturities of held-to-maturity securities.. 30,127 41,614
Purchases of held-to-maturity securities................. (5,933) (41,012)
Purchases of available for sale securities............... (7,967) (15)
Net increase in loans.................................... (5,194) (9,799)
Purchases of premises/equipment.......................... (173) (91)
Proceeds from sale of equipment.......................... 13 14
------- --------
Net cash provided by investing activities................ 2,700 6,307
------- --------
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts...................... 542 1,805
Net increase (decrease) in time deposits................. (3,621) (9,107)
Increase (decrease) in advance payments by
borrowers for taxes and insurance...................... 179 237
Net increase (decrease) in other borrowed funds.......... (1,317) 0
------- --------
Net cash used in financing activities.................. (4,217) (7,065)
------- --------
Increase (decrease) in cash and cash equivalents....... (440) 139
Cash and cash equivalents, beginning of period........... 1,452 1,303
------- --------
Cash and cash equivalents, end of period................. $ 1,012 $ 1,442
======= ========
Supplemental disclosures of cash flow information.............
Cash paid for income taxes............................... $ 550 $ 282
======= ========
Cash paid for interest................................... $ 6,903 $ 7,330
======= ========
See accompanying Notes to Financial Statements.
26
HOPKINSVILLE FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Presentation
HopFed Bancorp, Inc. (the "Company") is a Delaware corporation
organized by Hopkinsville Federal Savings Bank (the "Bank") in connection with
the conversion of the Bank from a federally chartered mutual savings bank to a
federally chartered stock savings bank. For purposes of this Prospectus
Supplement the financial statements of the Company have been omitted because as
of September 30, 1997, the Company had not yet issued any stock, had no assets
(other than advance subscription proceeds) and no liabilities, and had not yet
conducted any business other than of an organizational nature. Alternatively,
the unaudited financial statements and the Management's Discussion and Analysis
of Financial Condition and Results of the Operations presented herein are for
the Bank as a predecessor entity to the Company. No pro forma effect has been
given to the sale of the Company's common stock in the Conversion.
The accompanying financial statements are unaudited and were prepared
consistent with instructions to a Quarterly Report on Form 10-Q and therefore,
do not include information or footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. All normal, recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the presentation of the financial statements have been included. The results of
operations for the three and nine months ended September 30, 1997 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1997. These interim financial statements should be read in
conjunction with the Bank's audited financial statements and note disclosures
contained in the Company's Prospectus dated October 10, 1997.
2. LOAN PORTFOLIO COMPOSITION
The following table sets forth the composition of the Bank's loans at
the dates indicated. At September 30, 1997, the Bank had no concentrations of
loans exceeding 10% of total loans other than as described below.
27
At September 30, 1997 At December 31, 1996
----------------------------------------- ----------------------------------------
Amount Percent Amount Percent
------------------ ------------------- ----------------- ------------------
(Dollars in thousands)
Type of Loan:
- ------------
Real estate loans:
One-to-four family residential........ $ 80,461 77.9% $77,318 79.6%
Multi-family residential.............. 1,843 1.8% 1,466 1.5%
Construction.......................... 5,514 5.3% 5,389 5.6%
Non-residential....................... 6,847 6.6% 5,467 5.6%
-------- ---- ------- -----
Total real estate loans.............. 94,665 91.6% 89,640 92.3%
======== ==== ======= =====
Consumer loans:
Secured by deposits................... 3,275 3.2% 3,484 3.6%
Other consumer loans.................. 5,383 5.2% 4,004 4.1%
-------- ---- ------- -----
Total consumer loans................. 8,658 8.4% 7,488 7.7%
======== ==== ======= =====
103,323 100% 97,128 100.0%
==== =====
Less: Loans in process................ 2,416 1,415
Allowance for loan losses........... 232 217
-------- -------
Total................................. $100,675 $95,496
======== =======
3. NON-PERFORMING ASSETS
The following table sets forth information with respect to non-
performing assets identified by the Bank. No loans were recorded as
restructional loans within the meaning of SFAS No. 15 at the dates indicated. In
addition, the Bank had no real estate acquired as a result of foreclosures.
At At
September 30, 1997 December 31, 1996
---------------------------- -----------------------
(Dollars in thousands)
Accruing loans which are
contractually past due 90
days or more:
Residential real estate....................... $ 247 $ 266
Consumer...................................... -- --
-------------- --------------
Total........................................ $ 247 $ 266
-------------- --------------
Total nonperforming
loans....................................... $ 247 $ 266
============== ==============
Percentage of total loans...................... 0.25% 0.28%
============== ==============
At September 30, 1997, the Bank had no loans accounted for on a
nonaccrual basis, no other non-performing assets and no real estate owned.
28
4. ALLOWANCE FOR LOAN LOSSES
The following table sets forth the activity in the Bank's allowance
for loan losses during the periods indicated.
Nine Months Ended Year Ended
September 30, December 31,
--------------------------------- ------------
1997 1996 1996
---- ---- ----
(Dollars in thousands)
Balance at beginning of period........... $ 217 $ 122 $ 122
Loans charged off:
Real estate mortgage:
Residential............................. -- (5) (5)
----- ------ -------
Total charge-offs........................ -- (5) (5)
----- ------ -------
Recoveries............................... -- -- --
----- ------ -------
Net loans charged off.................... -- (5) (5)
----- ------ -------
Provision for loan losses................ 15 -- 100
----- ------ -------
Balance at end of period................. $ 232 $ 117 $ 217
===== ====== =======
Ratio of net charge-offs to average loans
outstanding during the period........... 0% 0.006% 0.0053%
===== ====== =======
5. INVESTMENT SECURITIES
The following table sets forth the carrying value of the Bank's
investment securities at the dates indicated.
At September 30, At December 31,
1997 1996
---------------- ---------------
(In thousands)
Securities available for sale:
FHLB and FHLMC stock........................... $ 6,048 $ 5,110
U.S. government and agency securities.......... 5,002 -
Mortgage-backed securities..................... 2,980 -
Other.......................................... 15 15
Securities held to maturity:
U.S. government and agency
securities.................................... 50,981 77,962
Mortgage-backed securities..................... 20,786 17,984
------- --------
Total investment securities................... $85,812 $101,071
======= ========
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
The Bank's total assets decreased by $2.4 million, from $204.4 million at
December 31, 1996 to $202.0 million at September 30, 1997. Securities held to
maturity declined $24.2 million due to various issues maturing. Of such funds,
$7.8 million was reinvested in Federal funds sold, which increased from $500,000
at December 31, 1996 to $8.3 million at September 30, 1997. In addition, $1.3
million in maturing securities was utilized to repay Federal Home Loan Bank
advances, resulting in no borrowed funds at September 30, 1997.
The decrease in assets was also due to a decrease in assets funded by
deposits as the Bank continued to price its deposits less aggressively in 1997
in an effort to reduce its overall cost of funds. At September 30, 1997
deposits decreased to $180.7 million, from $183.8 million at December 31, 1996,
a net decrease of $3.1 million. Deposits decreased as depositors sought higher
returns than those available on accounts being offered by the Bank. The Bank's
average cost of deposits for the nine months ended September 30, 1997 was 4.90%,
compared to 5.13% for the year ended December 31, 1996. Management intends to
continually evaluate the investment alternatives available to the Bank's
customers, and adjusts the pricing on its deposit products to more actively
manage its funding costs while remaining competitive in its market area.
The Bank's loan portfolio increased by $5.2 million during the nine months
ended September 30, 1997. Net loans totaled $100.7 million and $95.5 million at
September 30, 1997 and December 31, 1996, respectively. The increase in the
loan activity during the nine months ended September 30, 1997 was primarily due
to the Bank's efforts to increase its loan originations using funds currently
held in investment securities. For the nine months ended September 30, 1997,
the Bank's average yield on loans was 7.64%, compared to 7.41% for the year
ended December 31, 1996.
At September 30, 1997, the Bank's investments classified as "held to
maturity" were carried at amortized cost of $71.8 million and had an estimated
fair market value of $75.1 million, and its equity securities classified as
"available for sale" had an estimated fair market value of $14.0 million,
including Federal Home Loan Mortgage Corporation stock with an estimated fair
market value of $4.4 million.
The allowance for loan losses totaled $232,000 at September 30, 1997, an
increase of $15,000 from the allowance of $217,000 at December 31, 1996. At
each September 30, 1997 and December 31, 1997, the ratio of the allowance for
loan losses to loans was 0.23%. Also at September 30, 1997, the Bank's non-
performing loans were $247,000, or 0.25% of total loans, compared to $266,000,
or 0.28% of total loans, at December 31, 1996, and the Bank's ratio of allowance
for loan losses to non-performing loans at September 30, 1997 and December 31,
1996 was 93.93% and 81.58%, respectively. The determination of the allowance
for loan losses is based on management's analysis, performed on a quarterly
basis. Various factors are considered, including the market value of the
underlying collateral, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding loans, historical
loss experience, delinquency trends and prevailing economic conditions.
Although management believes its allowance for loan losses is adequate, there
can be no assurance that additional allowances will not be required or that
losses on loans will not be incurred. The Bank has had minimal losses on loans
in prior years.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996
NET INCOME. The Bank's net income for the nine months ended September 30,
1997 was $1,347,000, compared to a net loss of $(61,000) for the nine months
ended September 30, 1996. The increase in net earnings for the nine months
resulted primarily from an improvement in the Bank's net yield on interest-
earning assets, offset in part by a slight increase in non-interest expense and
income taxes. In addition, in 1996 the Bank paid the Federal Deposit Insurance
Corporation a special assessment of $1.2 million before taxes ($812,000 net of
tax) to recapitalize the Savings Association Insurance Fund.
30
NET INTEREST INCOME. Net interest income for the nine months ended
September 30, 1997 was $3.4 million, compared to $2.4 million for the nine
months ended September 30, 1996. The increase in net interest income for the
nine months ended September 30, 1997 was primarily due to a lower cost of funds
and a higher yield on interest-earning assets. For the nine months ended
September 30, 1997, the Bank's average yield on total interest-earning assets
was 6.74%, compared to 6.40% for the nine months ended September 30, 1996, and
its average cost of interest-bearing liabilities was 4.90% for the nine months
ended September 30, 1997, compared to 5.19% for the nine months ended September
30, 1996. As a result, the Bank's interest rate spread for the nine months ended
September 30, 1997 was 1.84%, compared to 1.21% for the nine months ended
September 30, 1996, and its net yield on interest-earning assets was 2.27% for
the nine months ended September 30, 1997, compared to 1.57% for the nine months
ended September 30, 1996.
INTEREST INCOME. Interest income increased by $100,000, from $9.9 million
to $10.0 million, or by 1.0%, during the nine months ended September 30, 1997
compared to the same period in 1996. This increase primarily resulted from a
continued strategic shift from investment securities to higher-yielding loans.
The average balance of securities held to maturity declined $17.6 million, from
$98.8 million at September 30, 1996 to $81.2 million at September 30, 1997. In
addition, average time deposits and other interest-earning cash deposits
declined $3.0 million, from $14.0 million at September 30, 1996 to $11.0 million
at September 30, 1997. Overall, average total interest-earning assets declined
$8.3 million, or 4.0%, from September 30, 1996 to September 30, 1997. However,
the strategic repositioning of the balance sheet into higher-yielding assets
resulted in an increase in the average yield on interest-earning assets from
6.40% at September 30, 1996 to 6.74% at September 30, 1997. In addition, the
ratio of average interest-earning assets to average interest-bearing liabilities
increased from 107.47% for the nine months ended September 30, 1996 to 109.59%
for the nine months ended September 30, 1997.
INTEREST EXPENSE. Interest expense decreased $831,000, or 11.0%, to $6.6
million for the nine months ended September 30, 1997, compared to $7.5 million
for the same period in 1996. The decrease was attributable to the combined
effect of a lower cost of funds and a $6.7 million decline in the average
balance of interest-bearing liabilities. The average cost of average interest-
bearing deposits declined from 5.19% at September 30, 1996 to 4.90% at September
30, 1997. Over the same period, the average balance of deposits decreased $10.9
million, from $191.3 million at September 30, 1996 to $180.4 million at
September 30, 1997, or 5.7%.
PROVISION FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such evaluation
considers numerous factors including, general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair value of the
underlying collateral and other factors that warrant recognition in providing
for an adequate loan loss allowance. The Bank determined that an additional
$15,000 provision for loan loss was required for the nine months ended September
30, 1997.
NON-INTEREST EXPENSE. There was a $1.3 million decline in total non-
interest expense in the nine months ended September 30, 1997 compared to the
same period in 1996. This was primarily attributable to an approximately $1.5
million decrease in deposit insurance premiums. In addition, most other non-
interest expenses were also slightly higher.
INCOME TAXES. The Bank's effective tax rate for the nine months ended
September 30, 1997 was 33.7%, compared to 41.3% for the same period in 1996.
The increase in income tax expense of $729,000 in the nine month period compared
to the same period in 1996 was due to a significant increase in income and a
year to date loss at the same time last year.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
AND 1996
NET INCOME. The Bank's net income for the three months ended September 30,
1997 was $477,000, compared to a net loss $(506,000) for the three months ended
September 30, 1996. The increase in net earnings for the three months resulted
primarily from an improvement in the Bank's net yield on interest-earning
assets, as well as a significantly lower deposit insurance premium.
31
NET INTEREST INCOME. Net interest income for the three months ended
September 30, 1997 was $1.1 million, compared to $920,000 for the three months
ended September 30, 1996. The increase in net interest income for the three
months ended September 30, 1997 was primarily due to a lower cost of funds and a
higher yield on interest-earning assets. For the three months ended September
30, 1997, the Bank's average yield on total interest-earning assets was 6.83%,
compared to 6.56% for the three months ended September 30, 1996 and its average
cost of interest-bearing liabilities was 4.95% for the three months ended
September 30, 1997, compared to 5.14% for the three months ended September 30,
1996. As a result, the Bank's interest rate spread for the three months ended
September 30, 1997 was 1.88%, compared to 1.42% for the three months ended
September 30, 1996 and its net yield on interest-earning assets was 2.34% for
the three months ended September 30, 1997, compared to 1.81% for the three
months ended September 30, 1996.
INTEREST INCOME. Interest income increased by $27,000, from $3.34 million
to $3.37 million, or by .8%, during the three months ended September 30, 1997
compared to the same period in 1996. This increase primarily resulted from a
continued strategic shift from investment securities to higher-yielding loans.
The average balance of securities held to maturity declined $19.6 million, from
$95.3 million at September 30, 1996, to $75.7 million at September 30, 1997.
Overall, average total interest-earning assets declined $6.7 million, or 3.3%,
from September 30, 1996 to September 30, 1997. However, the strategic
repositioning of the balance sheet into higher-yielding assets resulted in an
increase in the average yield on interest-earning assets from 6.56% at September
30, 1996 to 6.83% at September 30, 1997. In addition, the ratio of average
interest-earning assets to average interest-bearing liabilities increased from
108.14% for the three months ended September 30, 1996 to 110.04% for the three
months ended September 30, 1997.
INTEREST EXPENSE. Interest expense decreased $205,000, or 8.5%, to $2.2
million for the three months ended September 30, 1997, compared to $2.4 million
for the same period in 1996. The decrease was attributable to the combined
effect of a lower cost of funds and a $9.3 million decline in the average
balance of interest-bearing liabilities. The average cost of average interest-
bearing deposits declined from 5.14% at September 30, 1996 to 4.95% at September
30, 1997. Over the same period, the average balance of deposits decreased $9.3
million, from $188.5 million at September 30, 1996 to $179.2 million at
September 30, 1997, or 4.9%.
PROVISION FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such evaluation
considers numerous factors including, general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair value of the
underlying collateral and other factors that warrant recognition in providing
for an adequate loan loss allowance. The Bank determined that an additional
$5,000 provision for loan loss was required for the three months ended September
30, 1997.
NON-INTEREST EXPENSE. There was a $1.3 million decline in total non-
interest expense in the three months ended September 30, 1997 compared to the
same period in 1996. This was primarily attributable to a $1.3 million decrease
in deposit insurance premiums. In addition, most other non-interest expenses
were also slightly higher.
INCOME TAXES. The Bank's effective tax rate for the three months ended
September 30, 1997 was 33.7%, compared to 34.4% for the same period in 1996.
The increase in income tax expense of $506,320 in the three month period
compared to the same period in 1996 was due to a significant increase in income
and a year to date loss at the same time last year.
LIQUIDITY AND CAPITAL RESOURCES. The Bank's principal sources of funds for
operations are deposits from its primary market areas, principal and interest
payments on loans and proceeds from maturing investment securities. The
principal uses of funds by the Bank include the origination of mortgage and
consumer loans and the purchase of investment securities.
The Bank is required by current OTS regulations to maintain specified
liquid assets of at least 5% of its net withdrawable accounts plus short-term
borrowings. Short-term liquid assets (those maturing in one year or less) may
not be less than 1% of the Bank's liquidity base. At September 30, 1997, the
Bank met all regulatory liquidity requirements, and management believes that the
liquidity levels maintained are adequate to meet potential deposit outflows,
loan demand and normal operations.
32
The Bank must satisfy three capital standards, as set by the Office of
Thrift Supervision (the "OTS"). These standards include a ratio of core capital
to adjusted total assets of 3.0%, a tangible capital standard expressed as 1.5%
of total adjusted assets, and a combination of core and "supplementary" capital
equal to 8.0% of risk-weighted assets. The risk-based capital standard currently
addresses only the credit risk inherent in the assets in a thrift's portfolio
and does not address other risks that thrifts face, such as operating, liquidity
and interest rate risks. The OTS recently finalized regulations that add an
interest rate risk component to capital requirements under certain
circumstances. The Bank does not believe that this new regulation will require
additional capital. In addition, the OTS has recently adopted regulations that
impose certain restrictions on savings associations that have a total risk-based
capital ratio that is less than 8.0%, a ratio of Tier 1 capital (or core
capital) to risk-weighted assets of less than 4.0%, or a ratio of Tier 1 capital
to adjusted total assets of less than 4.0% (or 3.0% if the institution has the
highest rating ("1") under the OTS examination rating system).
At September 30, 1997, the Bank exceeded all regulatory capital
requirements. The table below presents certain information relating to the
Bank's capital compliance at September 30, 1997 and December 31, 1996.
At September 30, 1997 At December 31, 1996
---------------------- ---------------------
Amount Percent Amount Percent
---------- --------- --------- ----------
(Dollars in thousands)
Tangible Capital......... $15,938 8.0% $14,591 7.2%
Core Capital............. 15,938 8.0 14,591 7.2
Risk-Based Capital....... 16,170 22.0 14,808 20.3
At September 30, 1997, the Bank had outstanding commitments to originate loans
totaling $1.3 million. Management believes that the Bank's sources of funds are
sufficient to fund all of its outstanding commitments. Certificates of deposits
which are scheduled to mature in one year or less from September 30, 1997
totaled $83.6 million. Management believes that a significant percentage of
such deposits will remain with the Bank.
AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES
The following table sets forth certain information relating to the Bank's
average interest-earning assets and interest-bearing liabilities and reflects
the average yield on assets and average cost of liabilities for the periods and
at the date indicated. Such yields and costs are derived by dividing income or
expense by the average monthly balance of assets or liabilities, respectively,
for the periods presented. Average balances are derived from month-end
balances. Management does not believe that the use of month-end balances
instead of daily balances has caused any material difference in the information
presented.
33
The table also presents information for the periods and at the date
indicated with respect to the difference between the average yield earned on
interest-earning assets and average rate paid on interest-bearing liabilities,
or "interest rate spread," which savings institutions have traditionally used as
an indicator of profitability. Another indicator of an institution's net
interest income is its "net yield on interest-earning assets," which is its net
interest income divided by the average balance of interest-earning assets. Net
interest income is affected by the interest rate spread and by the relative
amounts of interest-earning assets and interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.
Nine Months Ended September 30,
At September 30, --------------------------------------
1997 1997
--------------------------- --------------------------------------
Weighted Average
Average Average Yield/
Balance Yield/Cost Balance Interest Cost(1)
------- ---------- ------- -------- ----
(Dollars in thousands)
Interest-earning assets:
Loans receivable, net................. $100,675 7.76% $ 98,040 $ 5,616 7.64%
Securities available for sale......... 14,045 4.65% 7,582 125 2.20%
Securities held to maturity........... 71,767 6.17% 81,242 3,785 6.21%
Time deposits and other interest-
bearing cash deposits.............. 10,673 5.62% 11,032 485 5.86%
-------- -------- -------
Total interest-earning assets...... 197,160 6.84% 197,896 10,011 6.74%
-------- ------- --------
Non-interest-earning assets............ 4,849 5,094
======== ========
Total assets.......................... $202,009 $202,990
======== ========
Interest-bearing liabilities:
Deposits.............................. $180,749 4.89% $180,357 $ 6,633 4.90%
Borrowings............................ -- -- 216 9 5.56%
-------- -------- -------
Total interest-bearing
liabilities........................ 180,749 4.89% 180,573 6,642 4.90%
-------- ------- --------
Non-interest-bearing liabilities....... 2,528 4,674
-------- --------
Total liabilities.................. 183,277 185,247
Retained earnings...................... 15,938 15,235
Unrealized gain on securities
available for sale.................... $ 2,794 $ 2,508
======== ========
Total liabilities and retained
earnings......................... $202,009 $202,990
======== ========
Net interest income.................... $ 3,369
=======
Interest rate spread................... 1.95% 1.84%
-------- --------
Net yield on interest-earning assets... 2.27%
--------
Ratio of interest-earning assets
interest-bearing liabilities.......... 109.08% 109.59%
======== ========
Nine Months Ended September 30,
--------------------------------------
1996
--------------------------------------
Average
Average Yield/
Balance Interest Cost(1)
------- -------- ----
(Dollars in thousands)
Interest-earning assets:
Loans receivable, net................. $ 89,377 $ 4,988 7.44%
Securities available for sale......... 4,119 111 3.59%
Securities held to maturity........... 98,775 4,240 5.72%
Time deposits and other interest-
bearing cash deposits.............. 13,953 566 5.41%
-------- -------
Total interest-earning assets...... 206,224 9,905 6.40%
------- -------
Non-interest-earning assets............ 5,175
--------
Total assets.......................... $211,399
========
Interest-bearing liabilities:
Deposits.............................. $191,328 $ 7,450 5.19%
Borrowings............................ 557 23 5.51%
-------- -------
Total interest-bearing
liabilities........................ 191,885 7,473 5.19%
------- -------
Non-interest-bearing liabilities....... 3,356
--------
Total liabilities.................. 195,241
Retained earnings...................... 14,529
Unrealized gain on securities
available for sale..................... $ 1,629
--------
Total liabilities and retained
earnings......................... $211,399
--------
Net interest income.................... $ 2,432
-------
Interest rate spread................... 1.21%
-------
Net yield on interest-earning assets... 1.57%
-------
Ratio of interest-earning assets
interest-bearing liabilities.......... 107.47%
=======
34
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest-earning asset and interest-bearing liability,
information is provided on changes attributable to: (i) changes in volume
(changes in volume from year to year multiplied by the average rate for the
prior year) and (ii) change in rate (changes in the average rate from year to
year multiplied by the prior year's volume).
Nine Months Ended Year Ended December 31,
September 30,
------------------------------------------ ------------------------------------------
1997 vs. 1996 1996 vs. 1995
------------------------------------------ ------------------------------------------
Increase Increase
(Decrease) due to (Decrease) due to
-------------------------- --------------------------
Total Total
Increase Increase
Rate Volume (Decrease) Rate Volume (Decrease)
---- ------ ---------- ---- ------ ----------
(In thousands)
Interest-earning assets:
Loans receivable............. $ 145 $ 483 $ 628 $ 284 $ 700 $ 984
Securities available for
sale........................ (79) 93 14 (11) 27 16
Securities held to
maturity.................... 297 (752) (455) 594 666 1,260
Other interest-earning
assets...................... 38 (119) (81) 53 (1,565) (1,512)
----- ----- ----- ------ ------- -------
Total interest-
earning assets............. $ 401 $(295) $ 106 $ 920 $ (172) $ 748
----- ----- ----- ------ ------- -------
Interest-bearing liabilities:
Deposits..................... $(390) $(427) $(817) $ (146) $ (131) $ (277)
Borrowings................... -- (14) (14) -- 25 25
----- ----- ----- ------ ------- -------
Total interest-
bearing liabilities........ $(390) $(441) $(831) $ (146) $ (106) $ (252)
----- ----- ----- ------ ------- -------
Increase (decrease) in net
interest income.............. $ 791 $ 146 $ 937 $1,066 $ (66) $ 1,000
===== ===== ===== ====== ======= =======
Year Ended December 31,
-------------------------------------------
1995 vs. 1994
-------------------------------------------
Increase
(Decrease) due to
--------------------------
Total
Increase
Rate Volume (Decrease)
---- ------ ----------
(In thousands)
Interest-earning assets:
Loans receivable............. $ 33 $ 560 $ 593
Securities available for
sale........................ (1) 27 26
Securities held to
maturity.................... 553 491 1,044
Other interest-earning
assets...................... 650 (275) 375
------ ------ ------
Total interest-
earning assets............. $1,235 $ 803 $2,038
------ ------ ------
Interest-bearing liabilities:
Deposits..................... $1,731 $ 538 $2,269
Borrowings................... -- -- --
------ ------ ------
Total interest-
bearing liabilities........ $1,731 $ 538 $2,269
------ ------ ------
Increase (decrease) in net
interest income.............. $ (496) $ 265 $ (231)
====== ====== ======
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement with respect to
Common Stock offered hereby. This Prospectus Supplement does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies may
be obtained at prescribed rates from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains an
Internet address ("Web site") that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the SEC. The address for this Web site is
"http://www.sec.gov."
The Bank has filed with the OTS an Application for Conversion. This
document omits certain information contained in such application. The
Application for Conversion can 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
OTS Regional Director, Central Regional Office, at 200 West Madison Street,
Suite 1300, Chicago, Illinois 60606.
35
No dealer, salesman or any other person has been authorized to give any
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 information shall not be relied upon as having been authorized by the
Company, the Bank or Investment Bank Services, Inc. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person in any jurisdiction in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful.
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.
---------------
TABLE OF CONTENTS
Page
----
Results of the Special Meeting of Members and the
Subscription and Community Offerings...................... 3
Amended Valuation Range..................................... 3
Additional Risk Factors..................................... 4
Extension of Time Period to Complete
the Conversion............................................ 6
Subscription by the ESOP.................................... 6
Limitations on Purchases of Common Stock.................... 6
Use of Proceeds............................................. 8
Capitalization.............................................. 10
Historical and Pro Forma Regulatory
Capital Compliance........................................ 12
Pro Forma Data.............................................. 14
Proposed Management Purchases............................... 19
Market for the Common Stock................................. 20
Recent Selected Financial Information and Other Data........ 21
Statements of Financial Condition as of September 30, 1997
(unaudited) and December 31, 1996......................... 23
Statements of Income for the Three and Nine Months Ended
September 30, 1997 AND 1996 (unaudited)................... 24
Statements of Equity for the Nine Months Ended
September 30, 1997 AND 1996 (unaudited)................... 25
Statements of Cash Flows for the Nine Months Ended
September 30, 1997 AND 1996 (unaudited)................... 26
Notes to Financial Statements (unaudited)................... 27
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 30
Until _________, 1998 (90 days after the date of this Prospectus
Supplement), all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be 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.
HOPFED BANCORP, INC.
(Proposed Holding Company for Hopkinsville Federal Savings Bank)
(LOGO)
Up to 3,507,500 Shares
COMMON STOCK
---------------------
PROSPECTUS SUPPLEMENT
---------------------
Investment Bank Services, Inc.
Friedman, Billings, Ramsey
& Co., Inc.
December __, 1997
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the sale and
distribution of the securities being registered hereby, including underwriting
discounts and commissions. All such expenses are to be paid by the Registrant.
Underwriting fees and expenses.......... $ 225,000
Legal fees and expenses................. 125,000
Printing, postage and mailing........... 95,000*
Accounting fees and expenses............ 115,000*
Appraisal and business plan fees and
expenses........................... 40,000*
Blue Sky filing fees and expenses
(including legal counsel).......... 10,000*
Filing fees (OTS, SEC and NASD)......... 42,000*
Conversion Agent fees................... 15,000*
Stock certificates...................... 5,000*
Transfer Agent.......................... 10,000*
Other expenses.......................... 68,000*
----------
Total.............................. $ 750,000
==========
- -------------
* Estimated
Item 14. Indemnification of Directors and Officers.
Directors, officers and employees of the Company and/or the Bank may be
entitled to benefit from the indemnification provisions contained in the
Delaware General Corporation Law (the "DGCL"), the Company's Certificate of
Incorporation and federal regulations applicable to the Bank. The general effect
of these provisions is summarized below:
Delaware General Corporation Law
- --------------------------------
Section 145 of the DGCL permits a Delaware corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding of any type (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, may not, of itself, create a presumption that these standards
have not been met.
A Delaware corporation may also indemnify any person who was or is a party
or is threatened to be made a party to any proceeding 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) 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. However, no indemnification may 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 determines upon application that such person is fairly and
reasonably entitled to be indemnified.
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 proceeding
described above, indemnification against expenses (including attorneys' fees)
actually and reasonably incurred by him is mandatory.
Any determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct noted above must be made by a majority of 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 if such a quorum is not
obtainable, or, even if obtainable and a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or by the
stockholders.
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
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.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section is not exclusive.
In addition, a corporation shall have power to purchase and maintain insurance
against any liability of individuals whom the corporation is required to
indemnify.
Article XV of the Certificate of Incorporation of the Company
- -------------------------------------------------------------
In addition to the statutory provision described above, Article XV of the
Company's Certificate of Incorporation also provides for indemnification. With
certain exceptions, the indemnification provided for by Article XV is identical
to the statutory provision. Article XV states explicitly, however, that the
indemnification provided by the Article shall be deemed to be a contract between
the Company and the persons entitled to indemnification thereunder and further
provides the indemnification and advance payment of expenses provided thereunder
continues even after the individual ceases to hold a position with the Company
and inures to the benefit of his or her heirs, executors and administrators.
Federal Regulations Providing for Indemnification of Directors and Officers of
- ------------------------------------------------------------------------------
Hopkinsville Federal Savings Bank
- ---------------------------------
Federal regulations require that Hopkinsville Federal Savings Bank (the
"Bank") indemnify any person against whom an action is brought by reason of that
person's role as a director or officer of the Bank for (i) any judgments
resulting from the action; (ii) reasonable costs and expenses (including
attorney's fees) incurred in connection with the defense or settlement of such
action; and (iii) reasonable costs and expenses (including attorney's fees)
incurred in connection with enforcing the individual's indemnification rights
against the Bank, assuming a final judgment is obtained in his favor.
The mandatory indemnification provided for by federal regulations is limited
to (i) actions where a final judgment on the merits is in favor of the officer
or director and (ii) in the case of a settlement, final judgment against the
director or officer or final judgment not on the merits, except as to where the
director or officer is found negligent or to have committed misconduct in the
performance of his or her duties, where a majority of the Board of Directors of
the Bank determines that the director or officer was acting in good faith within
what he was reasonably entitled to believe was the scope of his or her
employment or authority for a purpose that was in the best interests of the Bank
or its members or stockholders.
In addition, the Bank has a director' and officers' liability policy providing
for insurance against certain liabilities incurred by directors and officers of
the Bank while serving in their capacities as such.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
The following is the list of exhibits filed as part of this Registration
Statement and also serves as the Exhibit Schedule.
Exhibit Number Description
-------------- -----------
* 1.1 Engagement Letter with Investment Bank Services, Inc.
* 1.2 Agency Agreement
* 2 Plan of Conversion of Hopkinsville Federal Savings
Bank
* 3.1 Certificate of Incorporation of HopFed Bancorp, Inc.
* 3.2 Bylaws of HopFed Bancorp, Inc.
* 4 Form of Stock Certificate of HopFed Bancorp, Inc.
5 Opinion of Kutak Rock
* 8.1 Federal Tax Opinion
* 8.2 State Tax Opinion
* 8.3 Opinion of National Capital Companies, LLC, as to the
value of subscription rights for tax purposes
* 10.1 Proposed Employment Agreements by and between
Hopkinsville Federal Savings Bank and Bruce Thomas,
Peggy Noel and Boyd Clark
* 10.2 Proposed Employment Agreements by and between HopFed
Bancorp, Inc. and Bruce Thomas, Peggy Noel and Boyd
Clark
23.1 Consent of Kutak Rock (in opinions filed as Exhibits 5
and 8.1)
23.2 Consent of York, Neel & Co. -- Hopkinsville, LLP
23.3 Consent of National Capital Companies, LLC
24 Power of Attorney (reference is made to the signature
page)
* 99.1 Proposed Stock Order Form and Form of Certification
* 99.2 Proxy Statement for Special Meeting of Members of
Hopkinsville Federal Savings Bank; Form of Proxy
* 99.3 Miscellaneous Solicitation and Marketing Material
* 99.4 Appraisal Report
99.5 Proposed Supplemental Stock Order Form and Form of
Supplemental Certification
99.6 Appraisal Report Update
99.7 Additional Solicitation and Marketing Material
- ----------------
* Previously filed (File No. 333-30215)
Item 17. Undertakings.
(a) 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:
(i) Including any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 ("Securities Act").
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth 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) 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 material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for determining any liability under the Securities Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any
of the securities being registered that remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes to provide to 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant 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 such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Hopkinsville, Commonwealth of Kentucky, on the 10th day of December, 1997.
HOPFED BANCORP, INC.
By /s/ Bruce Thomas
--------------------------------------------
Bruce Thomas
President and Chief Executive Officer
(Duly Authorized Representative)
Each person whose signature appears below hereby appoints Bruce Thomas
his or her true and lawful attorney-in-fact, with power to act with full power
of substitution, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to the Registration Statement and file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents, or their
substitutes, may lawfully cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Bruce Thomas Director, President and December 10, 1997
- ------------------------ Chief Executive Officer
Bruce Thomas (Principle Executive Officer)
/s/ WD Kelley Chairman of the Board December 10, 1997
- ------------------------
WD Kelly
/s/ Peggy R. Noel Director, Vice President, December 10, 1997
- ------------------------ Chief Financial Officer
Peggy R. Noel and Treasurer (Principal
Financial and Accounting Officer)
/s/ Boyd M. Clark Director and Senior Vice December 10, 1997
- ------------------------ President - Loan Administration
Boyd M. Clark
/s/ Clifton H. Cochran Director December 10, 1997
- ------------------------
Clifton H. Cochran
/s/ Drury R. Embry Director December 10, 1997
- ------------------------
Drury R. Embry
/s/ Walton G. Ezell Director December 10, 1997
- ------------------------
Walton G. Ezell
/s/ John Noble Hall, Jr. Director December 10, 1997
- ------------------------
John Noble Hall, Jr.
/s/ Chester K. Wood Director December 10, 1997
- ------------------------
Chester K. Wood