Maryland | 6712 | Being Applied For | ||
(State or Other Jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
Incorporation or Organization) | Classification Code Number) | Identification Number) |
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company þ |
Title of each class of | Amount to be | Proposed maximum | Proposed maximum | Amount of | ||||||||||||||||||
securities to be registered | registered | offering price per share | aggregate offering price | registration fee | ||||||||||||||||||
Common Stock, $0.01 par value per share
|
6,528,380 shares | $ | 10.00 | $ | 65,283,800 | (1) | $ | 4,655 | (3) | |||||||||||||
Participation Interests
|
437,706 interests | (2) | ||||||||||||||||||||
(1) | Estimated solely for the purpose of calculating the registration fee. | |
(2) | The securities of Atlantic Coast Financial Corporation to be purchased by the Atlantic Coast Bank 401(k) Plan are included in the amount shown for common stock. However, pursuant to Rule 457(h) of the Securities Act of 1933, as amended, no separate fee is required for the participation interests. Pursuant to such rule, the amount being registered has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such plan. | |
(3) | Pursuant to Rule 457(p), filing fee to be paid is offset by $9,543 previously paid by Atlantic Coast Financial Corporation on June 28, 2007 under Registration Statement No. 333-144149. No shares were sold pursuant to the previously referenced Registration Statement. |
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Table of Contents
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Atlantic Coast Financial Corporation is offering participants
of the Atlantic Coast Bank Employees Savings & Profit Sharing
Plan and Trust (the Plan) the opportunity to purchase common
stock of Atlantic Coast Financial Corporation through the
purchase of stock units. The stock units represent indirect
ownership of Atlantic Coast Financial Corporations common
stock. At the stock offering purchase price of $10.00 per
share, the Plan may acquire up to 437,706 shares of Atlantic
Coast Financial Corporation common stock in the stock offering,
based on the fair market value of the Plans assets as of March
31, 2010.
Only employees of Atlantic Coast Bank may become participants
in the Plan and only participants may purchase stock units
through the Plan. Your investment in stock units in connection
with the stock offering is subject to the purchase priorities
listed below.
Information with regard to the Plan is contained in this
prospectus supplement and information with regard to the
financial condition, results of operations and business of
Atlantic Coast Financial Corporation is contained in the
accompanying prospectus. The address of the principal
executive office of Atlantic Coast Financial Corporation and
Atlantic Coast Bank is 505 Haines Avenue, Waycross, Georgia
31501.
All questions about this prospectus supplement should be
addressed to Christi Stone, Vice President Human Resources,
Atlantic Coast Bank, 930 N. University Blvd, Jacksonville, FL
32211; telephone number (904) 998-5500; or e-mail
StoneC@atlanticcoastbank.net
.
Questions about the common stock being offered or about the
prospectus may be directed to the Stock Information Center at
(______) ____________.
Corporation Stock Fund
In connection with the stock offering, you may elect to
transfer all or part of your account balances in the Plan
(other than from the Atlantic Coast Federal Corporation Stock
Fund) to the Atlantic Coast Financial Corporation Stock Fund,
to be used to purchase stock units representing an ownership
interest in the common stock of Atlantic Coast Financial
Corporation issued in the stock offering. The Atlantic Coast
Financial Corporation Stock Fund is a new fund in the Plan
established to hold shares of common stock of Atlantic Coast
Financial Corporation. It is different from the Atlantic Coast
Federal Corporation Stock Fund, which presently holds shares of
Atlantic Coast Federal Corporation, the mid-tier holding
company of Atlantic
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Coast Bank that will be eliminated in the
reorganization of Atlantic Coast Federal, MHC into Atlantic
Coast Financial Corporation, the newly formed stock holding
company of Atlantic Coast Bank. At the close of the
reorganization and offering, shares of Atlantic Coast Federal
Corporation held in the Atlantic Coast Federal Corporation
Stock Fund will be exchanged for shares of Atlantic Coast
Financial Corporation pursuant to the exchange ratio (discussed
in greater detail in the accompanying prospectus) and the
Atlantic Coast Federal Corporation Stock Fund will be merged
into and become part of the Atlantic Coast Financial
Corporation Stock Fund.
(1)
Depositors of Atlantic Coast Bank with $50 or more as of
March 31, 2009, get first priority.
(2)
Atlantic Coast Banks tax-qualified plans, including the
employee stock ownership plan and the 401(k) plan, get second
priority.
(3)
Depositors of Atlantic Coast Bank with $50 or more on
deposit as of ____________, 2010, get third priority.
(4)
Depositors of Atlantic Coast Bank as of _________, 2010,
get fourth priority.
Community Offering:
(5)
Natural persons residing in the Georgia counties of
Chatham, Coffee and Ware and the Florida counties of Clay,
Duval, Flagler, Nassau and St. Johns get fifth priority.
(6)
Public stockholders of Atlantic Coast Federal Corporation
as of ____________, 2010 get sixth priority.
(7)
Other members of the general public get seventh priority.
Table of Contents
If you fall into subscription offering categories (1), (3) or
(4), you have subscription rights to purchase stock units
representing an ownership interest in shares of Atlantic Coast
Financial Corporation common stock in the subscription offering
and you may use funds in the Plan to pay for the stock units.
You may also be able to purchase stock units representing an
ownership interest in shares of Atlantic Coast Financial
Corporation common stock in the subscription offering even
though you are ineligible to purchase through subscription
offering categories (1), (3) or (4) through subscription
offering category (2), reserved for its tax-qualified employee
plans.
and
Oversubscriptions
The trustee of the Plan will purchase common stock of Atlantic
Coast Financial Corporation in the stock offering in accordance
with your directions. Once you make your election, the amount
that you elect to transfer from your existing investment
options for the purchase of stock units in connection with the
stock offering will be sold from your existing investment
options and transferred to the Atlantic Coast Financial
Corporation Stock Fund and held in a money market account,
pending the formal closing of the stock offering several weeks
later. After the end of the stock offering period, we will
determine whether all or any portion of your order will be
filled (if the offering is oversubscribed you may not receive
any or all of your order, depending on your purchase priority,
as described above). The amount that can be used toward your
order will be applied to the purchase of common stock of
Atlantic Coast Financial Corporation and will be denominated in
stock units in the Plan.
In the event the offering is oversubscribed, i.e., there are
more orders for common stock of Atlantic Coast Financial
Corporation than shares available for sale in the offering, and
the trustee is unable to use the full amount allocated by you
to purchase ownership interests in common stock of Atlantic
Coast Financial Corporation sold in the offering, the amount
that cannot be invested in common stock of Atlantic Coast
Financial Corporation, and any interest earned on such amount,
will be reinvested in the existing funds of the Plan, in
accordance with your then existing investment election (in
proportion to your investment direction for future
contributions). The prospectus describes the allocation
procedures in the event of an oversubscription. If you choose
not to direct the investment of your account balances towards
the purchase of any stock units in connection with the
offering, your account balances will remain in the investment
funds of the Plan as previously directed by you.
The Atlantic Coast Financial
Corporation Stock Fund will invest
in the common stock of Atlantic
Coast Financial Corporation. In
addition, the Atlantic Coast
Financial Corporation Stock Fund
will maintain a cash component for
liquidity purposes. Liquidity is
required in order to facilitate
daily transactions such as
investment
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transfers or
distributions from the Atlantic
Coast Financial Corporation Stock
Fund. For purchases in the
offering, there will be no cash
component. A stock unit will be
valued at $10.00. After the
offering, stock units will consist
of a percentage interest in both the
common stock of Atlantic Coast
Financial Corporation and cash held
in the Atlantic Coast Financial
Corporation Stock Fund. Unit values
(similar to the stocks share price)
and the number of units (similar to
number of shares) are used to
communicate the dollar value of a
participants account. Following
the stock offering, each day the
stock unit value of the Atlantic
Coast Financial Corporation Stock
Fund will be determined by dividing
the total market value of the fund
at the end of the day by the total
number of units held in the fund by
all participants as of the previous
days end. The change in stock unit
value reflects the days change in
stock price, any cash dividends
accrued and the interest earned on
the cash component of the fund, less
any investment management fees. The
market value and stock unit holdings
of your account in the Atlantic
Coast Financial Corporation Stock
Fund is reported to you on your
quarterly statements.
As of March 31, 2010, the market
value of the assets of the Plan was
approximately $4,377,062, all of
which is eligible to purchase or
acquire common stock of Atlantic
Coast Financial Corporation in the
offering. The Plan administrator
informed each participant of the
value of his or her account balance
under the Plan as of March 31, 2010.
In connection with the stock
offering, the Plan will permit you
to direct the trustee to transfer
all or part of the funds which
represent your current beneficial
interest in the assets of the Plan
(other than amounts invested in the
Atlantic Coast Federal Corporation
Stock Fund) to the Atlantic Coast
Financial Corporation Stock Fund.
You may not transfer amounts that
you have invested in the Atlantic
Coast Federal Corporation Stock Fund
into the Atlantic Coast Financial
Corporation Stock Fund. This
exchange will take place
automatically. The shares of common
stock of Atlantic Coast Federal
Corporation currently held by the
Plan will be exchanged for Atlantic
Coast Financial Corporation common
stock pursuant to the exchange
ratio. The trustee of the Plan will
subscribe for Atlantic Coast
Financial Corporation common stock
offered for sale in connection with
the stock offering, in accordance
with each participants direction.
In order to purchase stock units
through the Plan, you must purchase
stock units representing an
ownership interest in common stock
of Atlantic Coast Financial
Corporation in at least 25 shares in
the offering through the Plan at the
$10.00 purchase price (e.g., a $250
initial investment). The prospectus
also describes maximum purchase
limits for investors in the stock
offering.
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Enclosed is a Special Investment
Election Form on which you can elect
to purchase stock units in the
Atlantic Coast Financial Corporation
Stock Fund in connection with the
stock offering. Please note the
following stipulations concerning
this election:
You can elect to transfer
all or a portion of your current
account (other than amounts you have
invested in the Atlantic Coast
Federal Corporation Stock Fund) to
the Atlantic Coast Financial
Corporation Stock Fund.
Your election is subject to
a minimum purchase of 25 stock
units, which equals $250.
Your election, plus any
order you placed outside the Plan,
are together subject to a maximum
purchase of [_________] shares,
which equals [$____________.]
The election period to
purchase stock units in the offering
through the Plan opens _________,
2010 and closes at ___:00 p.m.,
Eastern Time, on _________,
_______________, 2010.
During the stock offering
period, you will continue to have
the ability to transfer amounts that
are not directed to purchase stock
units in the Atlantic Coast
Financial Corporation Stock Fund
among all other investment funds.
However, you will not be permitted
to change the investment amounts
that you designated to be
transferred to the Atlantic Coast
Financial Corporation Stock Fund on
your Special Investment Election
Form.
The amount you elect to
transfer to the Atlantic Coast
Financial Corporation Stock Fund
will be held separately until the
offering closes. Therefore, this
money is not available for
distributions, loans, or withdrawals
until the transaction is completed,
which is expected to be several
weeks after the closing of the
subscription offering period.
If you wish to use all or part of
your account balance in the Plan to
purchase common stock of Atlantic
Coast Financial Corporation issued
in the stock offering, you should
indicate that decision on the
Special Investment Election Form.
If you do not wish to make an
election, you should check Box E in
Section D of the Special Investment
Election Form and return the form to
Christi Stone, Vice President Human
Resources, at
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Atlantic Coast Bank, 930 N. University Blvd,
Jacksonville, FL 32211, to be
received no later than ___:00 p.m.,
Eastern Time, on __________________,
__________________, 2010. You may return
your Special Investment Election
Form by hand delivery, inter-office
mail or by mailing it to Christi
Stone at the above address in the
enclosed self-addressed envelope, so
long as it is received by the
specified time.
If you wish to purchase stock units
representing an ownership interest
in common stock of Atlantic Coast
Financial Corporation with all or
part of your Plan account balance,
you must return your Special
Investment Election Form to Christi
Stone, Vice President Human
Resources, at Atlantic Coast Bank,
930 N. University Blvd,
Jacksonville, FL 32211, to be
received no later than ___:00 p.m.,
Eastern Time, on _________,
____________, 2010.
Once you make an election to transfer amounts to the
Atlantic Coast Financial Corporation Stock Fund in connection with the stock offering, you may not
change your election
.
Your election is irrevocable. You will, however, continue to have the
ability to transfer amounts not directed towards the purchase of stock units among all of the other
investment funds on a daily basis. You may also continue to transfer funds into and out of the
Atlantic Coast Federal Corporation Stock Fund which will purchase shares of Atlantic Coast Federal
Corporation in the open market (but not in the offering) or sell the shares in your account until
the closing of the offering. After the formal closing of the stock offering, Atlantic Coast
Federal Corporation common stock will stop trading and Atlantic Coast Financial Corporation common
stock will trade on the open market.
You will be able to purchase stock units representing an
ownership interest in stock
after
the offering through your investment in the Atlantic
Coast Financial Corporation Stock Fund. You may direct that your future contributions or your
account balance in the Plan be transferred to the Atlantic Coast Financial Corporation Stock Fund.
After the offering, to the extent that shares are available, the trustee of the Plan will acquire
common stock of Atlantic Coast Financial Corporation at your election in open market transactions
at the prevailing price. Special restrictions may apply to transfers directed to and from the
Atlantic Coast Financial Corporation Stock Fund by the participants who are subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the
purchase and sale of securities by officers, directors and principal shareholders of Atlantic Coast
Financial Corporation. In addition, if you are an officer of Atlantic Coast Bank that is
restricted by the Office of Thrift Supervision from selling shares acquired in the stock
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offering
for one year, the stock units that you purchased in the stock offering will not be tradable for one
year. However, any stock units that you held in the Atlantic Coast Federal Corporation Stock Fund
prior to the stock offering are freely tradable and not subject to this one-year trading
restriction.
The Plan provides that you may direct the trustee as to how to vote
any shares of Atlantic Coast Financial Corporation common stock held by the Atlantic Coast
Financial Corporation Stock Fund, and the interest in such shares that is credited to your account.
If the trustee does not receive your voting instructions, the Plan administrator will exercise
these rights as it determines in its discretion and will direct the trustee accordingly. All
voting instructions will be kept confidential.
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F-31
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F-41
F-42
F-43
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F-45
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F-49
F-50
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F-52
F-53
F-54
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F-56
F-57
F-58
F-59
F-60
F-61
F-62
F-63
F-64
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38
II-1
II-2
II-3
II-4
II-5
II-6
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Table of Contents
Completed
Vested
Years of Employment
Percentage
0
%
20
%
40
%
60
%
80
%
100
%
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1.
Target Retirement 2015 Fund
2.
Target Retirement 2025 Fund
3.
Target Retirement 2035 Fund
4.
Target Retirement 2045 Fund
5.
Income Plus Asset Allocation Fund
6.
Growth & Income Asset Allocation Fund
7.
Growth Asset Allocation Fund
8.
Stable Value Fund
9.
Short Term Investment Fund (Money Market)
10.
Long Treasury Index Fund (Government Bond)
11.
Aggregate Bond Index Fund
12.
S&P 500 Stock Fund
13.
S&P Value Stock Fund
14.
S&P Growth Stock Fund
15.
S&P MidCap Stock Fund
16.
Russell 2000 Stock Fund
17.
Nasdaq 100 Stock Fund
18.
US REIT Index Fund
19.
International Stock Fund
20.
Atlantic Coast Bank Certificate of Deposit Fund
21.
Personal Choice Retirement Account
22.
Atlantic Coast Federal Corporation Stock Fund
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Performance Return as of March 31, 2010
Trail
Trail
Trail
Monthly
Year-to-
Last 12
3 Yr
5 Yr
10 Yr
Stock Funds
Returns
Date
Months
Annuald
Annuald
Annuald
3.52
%
3.22
%
30.78
%
-0.71
%
n/a
n/a
4.55
%
3.93
%
39.07
%
-2.06
%
n/a
n/a
5.47
%
4.38
%
46.65
%
-3.23
%
n/a
n/a
5.65
%
4.46
%
47.40
%
-2.95
%
n/a
n/a
1.41
%
2.43
%
17.22
%
3.22
%
4.56
%
3.99
%
3.34
%
3.46
%
30.40
%
0.23
%
3.82
%
2.28
%
5.27
%
4.44
%
44.71
%
-3.23
%
2.71
%
-0.19
%
0.19
%
0.54
%
2.10
%
2.75
%
3.18
%
3.99
%
(money mkt)
(5)
0.00
%
-0.04
%
-0.03
%
1.95
%
2.81
%
2.68
%
(govt bond)
(5)
-1.94
%
0.80
%
-7.63
%
5.46
%
4.79
%
6.46
%
-0.18
%
1.62
%
7.16
%
5.66
%
4.87
%
5.70
%
5.97
%
5.24
%
48.97
%
-4.67
%
1.35
%
-1.19
%
6.31
%
6.91
%
53.64
%
-8.00
%
0.38
%
0.85
%
5.67
%
3.63
%
45.43
%
-1.08
%
2.42
%
-3.31
%
7.05
%
8.92
%
63.10
%
-1.40
%
4.57
%
5.46
%
8.07
%
8.68
%
61.91
%
-4.33
%
2.89
%
3.21
%
7.65
%
5.25
%
58.45
%
3.21
%
5.37
%
-8.12
%
10.09
%
9.51
%
108.85
%
-12.60
%
2.43
%
n/a
6.23
%
0.69
%
53.80
%
-7.35
%
3.28
%
0.43
%
0.10
%
0.30
%
1.00
%
n/a
3.10
%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
51.4
%
60.4
%
-13.10
%
n/a
-32.40
%
n/a
Table of Contents
(1)
Prior to September 30, 1999, this Fund was limited to no more than 25% exposure to Japan.
(2)
The Asset Allocation Funds and the International Stock Fund were first offered July 2, 1997.
Returns prior to inception are simulated using the returns of market indices for, or actual
funds of, the Funds investment components, and are net of fees.
(3)
The Nasdaq 100 Stock Fund was first offered on May 1, 2002, while BGIs underlying Nasdaq 100
Fund was initially offered on August 7, 2000. Returns shown for periods prior to May 1, 2002
are based on returns of the then-existing BGI funds (when available), and on the
(hypothetical) returns of the Nasdaq 100 index for periods prior to the inception date of the
BGI fund. All returns are net of fees.
(4)
The Russell 2000, S&P Growth and S&P Value Stock Funds were first offered on January 4, 2000.
Returns prior to January 4, 2000 are hypothetical and are based on the returns of the
then-existing BGI funds, and are net of fees. Effective December 16, 2005 the S&P 500/Barra
Growth and S&P 500/Barra Value indexes were reconstituted as the S&P 500/Citigroup Growth and
S&P 500/Citigroup Value Indexes. Additional information can be found at
www.styleindices.standardandpoors.com.
(5)
The S&P MidCap, S&P 500, Long Treasury Index, and Short Term Investment Funds were first
offered on June 17, 1997. Results prior to that date are hypothetical, based on previous
investment returns of the then-existing BGI funds, and are net of fees.
(6)
The US REIT Index Fund was first offered on January 1, 2005. Returns shown for periods prior
to that date are hypothetical and are based on the returns of the then-existing BGI fund for
the MSCI US REIT index, and are net of fees.
(7)
The Stable Value Fund is a separately managed account; historical return data represents its
actual performance.
(8)
The Asset Allocation Funds are designed investment vehicles utilizing various asset classes
represented by index funds and, under BGI management, were managed on an exclusive basis.
Only hypothetical results are available from January 1, 1992 to July 2, 1997 (the inception
date of the Asset Allocation Funds). Note that SSgA changed certain allocations and
underlying indexes (see fund descriptions for information on same).
(9)
The Aggregate Bond Index Fund became available effective April 30, 2006. Results prior to
that date are based on historical investment returns of the then-existing SSGA fund, and are
net of PSI fees which would have been levied.
(10)
The Target Retirement Funds first became available effective August 1, 2007. Results prior
to that date are based on historical investment returns of the then-existing SSGA fund, and
are net of PSI fees which would have been levied.
(11)
This fund is self-directed brokerage account administered through Charles Schwab and Company,
Inc. As a result, there is no historical data availability.
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maintains a small cash component for liquidity purposes. Liquidity is required in order to
facilitate daily transactions such as investment transfers or distributions from the fund. An
appropriate cash liquidity level is established as a percentage of the entire investment fund and
is based on the plans provisions, estimated activity levels, and maturity of Certificates held in
the fund.
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Minimum
Midpoint
Maximum
Adjusted Maximum
2,040,000
2,400,000
2,760,000
3,174,000
$
20,400,000
$
24,000,000
$
27,600,000
$
31,740,000
1,650,000
1,650,000
1,650,000
1,650,000
$
16,500,000
$
16,500,000
$
16,500,000
$
16,500,000
$
1,159,000
$
1,159,000
$
1,159,000
$
1,159,000
$
1,119,340
$
1,275,400
$
1,431,460
$
1,610,929
$
605,000
$
605,000
$
605,000
$
605,000
$
34,016,660
$
37,460,600
$
40,904,540
$
44,865,071
$
9.22
$
9.25
$
9.28
$
9.30
(1)
The amounts shown assume that 25.0%
of the shares are sold in the subscription and community
offerings and the remaining 75.0% are sold in a syndicated
community offering. The amounts shown include: (i) selling
commissions payable by us to Stifel, Nicolaus &
Company, Incorporated in connection with the subscription
offering equal to 1.0% of the aggregate dollar amount of common
stock sold in the subscription offering and community offering
(net of insider purchases and shares purchased by our employee
stock ownership plan), or approximately $56,654, at the adjusted
maximum of the offering range; (ii) fees and selling
commissions payable by us to Stifel, Nicolaus &
Company, Incorporated and any other broker-dealers participating
in the syndicated offering equal to 5.5% of the aggregate dollar
amount of common stock sold in the syndicated community
offering, or approximately $1,309,275 at the adjusted maximum of
the offering; and (iii) other expenses of the offerings
payable to Stifel, Nicolaus & Company, Incorporated as
selling agent estimated to be $245,000. See Pro Forma
Data and The Conversion and Offering
Plan of Distribution; Selling Agent Compensation for
information regarding compensation to be received by Stifel,
Nicolaus & Company, Incorporated and the other
broker-dealers that may participate in the syndicated community
offering, including the assumptions regarding the number of
shares that may be sold in the subscription and community
offerings and the syndicated community offering used to
determine the estimated offering expenses. If all shares of
common stock are sold in the syndicated community offering, the
maximum selling agent commissions and expenses would be
$1.4 million, $1.6 million, $1.8 million and
$2.0 million at the minimum, midpoint, maximum, and
adjusted maximum levels of the offering, respectively.
(2)
The amounts shown assume that
550,000 shares are sold in the supplemental offering to
investors who have participated in any credit facility with us
and the remaining 1,100,000 shares are sold in the
supplemental offering to other investors. The amounts shown
include: (i) selling commissions payable by us to Stifel,
Nicolaus & Company, Incorporated in connection with
the supplemental offering equal to 1.0% of the aggregate dollar
amount of common stock sold to investors who have participated
in any credit facility with us, or approximately $55,000; and
(ii) selling commissions payable by us to Stifel,
Nicolaus & Company, Incorporated in the supplemental
offering equal to 5.0% of the aggregate dollar amount of common
stock sold to other investors, or approximately $550,000. See
Pro Forma Data and The Supplemental
Offering Placement Agent Compensation; Plan of
Distribution for information regarding compensation to be
received by Stifel, Nicolaus & Company, Incorporated.
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1
21
37
39
40
42
42
44
46
48
57
98
98
129
139
140
164
166
167
194
196
203
207
209
209
210
210
210
F-1
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Continuing our proactive approach to reducing non-performing assets by aggressive
resolution and disposition initiatives through:
Aggressive charge-off policy;
Loan work out programs;
Enhanced collection practices;
Non-performing asset sales;
Credit Risk Management;
Increasing revenue through an expansion of our mortgage banking strategy and an
increased emphasis on commercial lending to small businesses;
Growing our core deposit base; and
Expanding through acquisition opportunities.
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increase our capital position;
eliminate some of the uncertainties associated with proposed financial regulatory
reform by the United States Congress, which may result in changes to or elimination of
our primary bank regulator and holding company regulator as well as changes in
regulations applicable to us, including, but not limited to, capital requirements,
treatment of waived dividends by the mutual holding company, payment of dividends and
conversion to full stock form;
support internal growth through increased lending in the communities we serve;
enable us to enhance existing products and services to meet the needs of our market;
improve the liquidity of our shares of common stock and enhance stockholder returns
through more flexible capital management strategies; and
support acquisitions of financial institutions as opportunities arise, although we
do not currently have any agreements to acquire a financial institution or other
entity.
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Conversion and the Supplemental Offerings
Minimum
Midpoint
Maximum
Adjusted Maximum
42.63
%
44.95
%
46.84
%
48.62
%
22.89
%
24.14
%
25.15
%
26.11
%
34.48
%
30.91
%
28.00
%
25.27
%
100.00
%
100.00
%
100.00
%
100.00
%
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Ticker
Company Name
Symbol
Exchange
Headquarters
Total Assets
(in millions)
FDEF
NASDAQ
Defiance, OH
$
2,059
BFIN
NASDAQ
Burr Ridge, IL
1,559
MFSF
NASDAQ
Munice, IN
1,487
ABBC
NASDAQ
Jenkintown, PA
1,267
CITZ
NASDAQ
Munster, IN
1,092
LEGC
NASDAQ
Pittsfield, MA
946
FPTB
NASDAQ
Chula Vista, CA
904
RVSB
NASDAQ
Vancouver, WA
838
FSBI
NASDAQ
Pittsburgh, PA
708
JFBI
NASDAQ
Morristown, TN
663
Price-to-book
Price-to-tangible
value ratio
book value ratio
66.72
%
66.80
%
62.55
%
62.62
%
58.64
%
58.70
%
54.45
%
54.51
%
54.18
%
61.61
%
50.78
%
56.98
%
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Completed Closing Dates between January 1, 2009 and May 28, 2010
Percentage Price Appreciation (Depreciation)
From Initial Trading Date
Conversion
Through May 28,
Company Name and
Ticker Symbol
Date
Exchange
One Day
One Week
One Month
2010
4/5/10
Nasdaq
5.5
%
6.5
%
4.1
%
0.5
%
12/21/09
Nasdaq
7.5
%
12.3
%
13.1
%
38.8
%
12/18/09
Nasdaq
13.5
%
13.0
%
14.0
%
16.3
%
8.8
%
10.6
%
10.4
%
18.5
%
7.5
%
12.3
%
13.1
%
16.3
%
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Equivalent
New
Total Shares
Value of
Equivalent
Shares to
Shares of Atlantic Coast
of Common
Shares
Pro Forma
be
Shares to be Sold in
Financial Corporation to be
Stock to be
Based Upon
Book Value
Received
The Conversion
Issued for Shares of Atlantic
Issued in
Conversion
Per
for 100
Offering
Coast Federal Corporation
Conversion
Exchange
Offering
Exchanged
Existing
Amount
Percent
Amount
Percent
Offering
Ratio
Price (1)
Share
Shares
2,040,000
65.1
%
1,095,443
34.9
%
3,135,443
0.2337
$
2.34
$
3.52
23
2,400,000
65.1
1,288,756
34.9
3,688,756
0.2750
2.75
3.87
27
2,760,000
65.1
1,482,070
34.9
4,242,070
0.3162
3.16
4.20
31
3,174,000
65.1
1,704,380
34.9
4,878,380
0.3636
3.64
4.56
36
(1)
Represents the value of shares of Atlantic Coast Financial Corporation common stock to be
received in connection with the conversion by a holder of one share of Atlantic Coast Federal
Corporation, pursuant to the exchange ratio, based upon the $10.00 per share purchase price.
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(i)
First, to depositors with accounts at Atlantic Coast Bank with aggregate
balances of at least $50 at the close of business on March 31, 2009.
(ii)
Second, to our tax-qualified employee benefit plans (including Atlantic Coast
Banks employee stock ownership plan and 401(k) plan), which will receive, without
payment therefor, nontransferable subscription rights to purchase in the aggregate up
to 10% of the shares of common stock sold in the conversion offering. We expect our
employee stock ownership plan to purchase 4% of the shares of common stock sold in the
conversion offering.
(iii)
Third, to depositors with accounts at Atlantic Coast Bank with aggregate
balances of at least $50 at the close of business on [Supplemental Record Date].
(iv)
Fourth, to depositors of Atlantic Coast Bank at the close of business on
[Member Record Date].
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your spouse or relatives of you or your spouse living in your house;
most companies, trusts or other entities in which you are a trustee, have a
substantial beneficial interest or hold a senior position; or
other persons who may be your associates or persons acting in concert with you.
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(i)
personal check, bank check or money order made payable directly to Atlantic
Coast Financial Corporation; or
(ii)
authorizing us to withdraw funds from the types of Atlantic Coast Bank deposit
accounts designated on the stock order form.
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The plan of conversion and reorganization is approved by at least
a majority of
votes eligible
to be cast by members of Atlantic Coast Federal, MHC (depositors of
Atlantic Coast Bank) as of [Member Record Date];
The plan of conversion and reorganization is approved by at least
two-thirds of the
outstanding
shares of common stock of Atlantic Coast Federal Corporation as of
[Stockholder Record Date], including shares held by Atlantic Coast Federal, MHC;
The plan of conversion and reorganization is approved by at least
a majority of the
outstanding
shares of common stock of Atlantic Coast Federal Corporation as of
[Stockholder Record Date], excluding those shares held by Atlantic Coast Federal, MHC;
We sell at least the minimum number of shares of common stock offered in the
conversion offering; and
We receive the final approval of the Office of Thrift Supervision to complete the
conversion offering.
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(i)
increase the purchase and ownership limitations; and/or
(ii)
seek regulatory approval to extend the conversion offering beyond [Extension
date #1], so long as we resolicit subscriptions that we have previously received in the
conversion offering; and/or
(iii)
increase the purchase of shares by the employee stock ownership plan.
terminate the conversion offering and promptly return all funds;
set a new conversion offering range; and/or
take such other actions as may be permitted by the Office of Thrift
Supervision and the Securities and Exchange Commission.
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Value of Grants (In
Number of Shares to be Granted or Purchased
Dilution
Thousands (1)
At
Resulting
At
Maximum
As a
From
At
Adjusted
At
as adjusted
Percentage
Issuance of
Minimum
Maximum
Minimum of
of
of Common
Shares for
of
of
Conversion
Conversion
Stock to be
Stock-Based
Conversion
Conversion
Offering
Offering
Sold in the
Benefit Plans
Offering
Offering
Range
Range
Conversion
(2)
Range
Range
81,600
126,960
4.0
%
N/A
(3)
$
816,000
$
1,269,600
81,600
126,960
4.0
1.91
%
816,000
1,269,600
204,000
317,400
10.0
4.64
%
589,560
917,286
367,200
571,320
18.0
%
6.37
%
$
2,221,560
$
3,456,486
(1)
The actual value of restricted stock awards will be determined based on their fair value as
of the date grants are made. For purposes of this table, fair value for stock awards is
assumed to be the same as the offering price of $10.00 per share. The fair value of stock
options has been estimated at $2.89 per option using the Black-Scholes option pricing model,
adjusted for the exchange ratio, with the following assumptions: a grant-date share price and
option exercise price of $10.00; an expected option life of 6 years; a dividend yield of 0%; a
risk-free rate of return of 2.42%; and a volatility rate of 23.90% based on an index of
publicly traded thrift institutions. The actual value of option grants will be determined by
the grant-date fair value of the options, which will depend on a number of factors, including
the valuation assumptions used in the option pricing model ultimately adopted.
(2)
Reflects dilution based on all shares outstanding, including shares issued in the
supplemental offering.
(3)
No dilution is reflected for the employee stock ownership plan because such shares are
assumed to be purchased in the conversion.
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Percentage of
Shares
Outstanding
Shares at
After the
Maximum
Estimated
Conversion and
of Conversion
Value of
Supplemental
Existing and New Stock Benefit Plans
Participants
Offering Range
Shares
Offering
Employees
147,197
(2)
$
1,471,974
2.50
%
110,400
1,104,000
1.87
257,597
$
2,575,974
4.37
%
Directors, Officers and Employees
90,158
(3)
$
901,583
(4)
1.53
%
110,400
1,104,000
(4)
1.87
200,558
$
2,005,583
3.40
%
Directors, Officers and Employees
225,396
(5)
$
651,393
3.83
%
276,000
797,640
(6)
4.68
501,396
$
1,449,033
8.51
%
959,552
$
6,030,591
16.28
%
(1)
The number of shares indicated has been adjusted for the 0.3162 exchange ratio at the
maximum of the conversion offering range.
(2)
As of March 31, 2010, 147,197 of these shares, or 465,520 shares prior to adjustment for the
exchange, have been allocated.
(3)
As of March 31, 2010, all of these shares, or 285,131 shares prior to adjustment for the
exchange, have been awarded, and 71,904 shares, or 227,403 shares prior to adjustment for the
exchange, have vested.
(4)
The value of restricted stock awards is determined based on their fair value as of the date
grants are made. For purposes of this table, the fair value of awards under the new
stock-based benefit plan is assumed to be the same as the offering price of $10.00 per share.
(5)
As of March 31, 2010, options to purchase 203,004 of these shares, or 642,013 shares prior to
adjustment for the exchange, have been awarded, and options to purchase 72,271 of these
shares, or 228,864 shares prior to adjustment for the exchange, remain available for future
grants.
(6)
The weighted-average fair value of stock options has been estimated at $2.89 per option,
adjusted for the exchange ratio, using the Black-Scholes option pricing model. The fair value
of stock options uses the Black-Scholes option pricing model with the following assumptions:
exercise price, $10.00; trading price on date of grant, $10.00; dividend yield, 0%; expected
life, six years; expected volatility, 23.90%; and risk-free rate of return, 2.42%. The actual
value of option grants will be determined by the grant-date fair value of the options, which
will depend on a number of factors, including the valuation assumptions used in the option
pricing model ultimately adopted.
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Commercial Real Estate and Commercial Business Loans.
Repayment is
dependent on income being generated by the rental property or business in amounts
sufficient to cover operating expenses and debt service. This risk has been
exacerbated by the extended recession in commercial real estate and commercial land
values, particularly in our markets.
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Commercial and Multi-Family Construction Loans.
Repayment is dependent
upon the completion of the project and income being generated by the rental property or
business in amounts sufficient to cover operating expenses and debt service.
Single Family Construction Loans.
Repayment is dependent upon the
successful completion of the project and the ability of the contractor or builder to
repay the loan from the sale of the property or obtaining permanent financing.
Multi-Family Real Estate Loans.
Repayment is dependent on income being
generated by the rental property in amounts sufficient to cover operating expenses and
debt service.
Consumer Loans.
Consumer loans (such as automobile and manufactured home
loans) are collateralized, if at all, with assets that may not provide an adequate
source of repayment of the loan due to depreciation, damage or loss.
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interest income earned on interest-earning assets, such as loans and
securities; and
interest expense paid on interest-bearing liabilities, such as deposits
and borrowings.
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Office of Thrift Supervision regulations
.
Office of Thrift Supervision regulations
prohibit, for three years following the completion of a conversion, the direct or
indirect acquisition of more than 10% of any class of equity security of a savings
institution regulated by the Office of Thrift Supervision without the prior approval of
the Office of Thrift Supervision.
Articles of Incorporation of Atlantic Coast Financial Corporation and statutory
provisions.
Provisions of the articles of incorporation and bylaws of Atlantic Coast
Financial Corporation and Maryland law may make it more difficult and expensive to
pursue a takeover attempt that management opposes, even if the takeover is favored by a
majority of our stockholders. These provisions also would make it more difficult to
remove our current board of directors or management, or to elect new directors.
Specifically, under our articles of incorporation, directors will be divided into three
classes, and directors may only be removed for cause by the holders of a majority of
our outstanding common stock entitled to vote on the matter. In addition, under
Maryland law, any person who acquires more than 10% of the common stock of Atlantic
Coast Financial Corporation without the prior approval of its board of directors would
be prohibited from engaging in any type of business combination with Atlantic Coast
Financial Corporation for a five-year period. Any business combination after the
five-year prohibition would be subject to super-majority stockholder approval or
minimum price requirements. Additional provisions include limitations on voting rights
of beneficial owners of more than 10% of our common stock, the election of directors to
staggered terms of three years and not permitting cumulative voting in the election of
directors. Our articles of incorporation and bylaws provide that special meetings of
stockholders can be called by our president, a majority of the whole board of
directors, or by stockholders entitled to cast a majority of all votes entitled to vote
at the meeting. Our articles of incorporation provide that at least 80% of the total
votes eligible to be voted are required to approve certain amendments to the articles
of incorporation, as described in Comparison of Stockholders Rights For Existing
Stockholders of Atlantic Coast Federal CorporationAmendment of Governing
Instruments. Our articles of incorporation permit our board of directors to evaluate
all relevant factors in exercising its business judgment with respect to transactions
that could result in a change in control. Our bylaws also contain provisions regarding
the timing and content of stockholder proposals and nominations and qualification for
service on the board of directors.
Charter of Atlantic Coast Bank.
The charter of Atlantic Coast Bank will provide
that for a period of five years from the closing of the conversion offering, no person
other than Atlantic Coast Financial Corporation may offer directly or indirectly to
acquire the beneficial ownership of more than 10% of any class of equity security of
Atlantic Coast Bank. This provision does not apply to any tax-qualified employee
benefit plan we establish, as well as other acquisitions specified in the charter. In
addition, during this five-year period, all shares owned over the 10% limit may not be
voted on any matter submitted to stockholders for a vote.
Stock options and restricted stock
.
We have previously granted to key employees and
directors stock options and shares of restricted stock that will require payments to
these
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persons in the event of a change in control of Atlantic Coast Financial Corporation.
We currently expect to issue additional stock options and shares of restricted
stock following the conversion with similar terms. These payments may have the
effect of increasing the costs of acquiring Atlantic Coast Financial Corporation,
thereby discouraging future takeover attempts.
Significant ownership by our directors, executive officers and stock benefit plans.
Following the offerings, our directors, executive officers and stock benefit plans are
expected to beneficially own in the aggregate approximately ___% of our shares of
common stock to be outstanding based upon sales of shares at the minimum of the
conversion offering range. The significant ownership percentage could make it more
difficult to obtain the required vote for a takeover or merger that management opposes.
Significant ownership by certain stockholders.
We may have one or more stockholders
with at least a 5% ownership interest following completion of the offerings. These
stockholders could take a position adverse to management or other stockholder interests
making it more difficult to obtain a vote that management recommends.
Employment agreements
.
Atlantic Coast Federal Corporation has employment agreements
with certain of its executive officers that will remain in effect following the
conversion offering. These agreements may have the effect of increasing the costs of
acquiring Atlantic Coast Financial Corporation, thereby discouraging future takeover
attempts.
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OF ATLANTIC COAST FEDERAL CORPORATION AND SUBSIDIARY
At
March 31,
At December 31,
2010
2009
2008
2007
2006
2005
(unaudited)
(In Thousands)
$
914,021
$
905,561
$
996,089
$
931,026
$
843,079
$
744,116
37,961
37,144
34,058
29,310
41,057
37,959
204,217
177,938
147,474
134,216
99,231
71,965
599,858
614,371
741,879
703,513
639,517
580,441
10,023
10,023
9,996
9,293
7,948
7,074
584,692
555,444
624,606
582,730
573,052
516,321
174,918
194,894
184,850
173,000
144,000
129,000
56,371
56,541
83,960
89,806
91,087
92,917
Three Months Ended
March 31,
Years Ended December 31,
2010
2009
2009
2008
2007
2006
2005
(unaudited)
(Dollars in Thousands, except per share amounts)
$
11,202
$
12,826
$
48,718
$
55,259
$
55,509
$
46,407
$
37,254
5,567
7,252
26,935
32,009
33,123
24,747
17,139
5,635
5,574
21,783
23,250
22,386
21,660
20,115
3,722
5,812
24,873
13,948
2,616
475
2,121
1,913
(238
)
(3,090
)
9,302
19,770
21,185
17,994
1,077
1,540
4,165
10,949
7,173
8,006
7,896
5,749
6,020
24,300
26,329
25,698
21,680
19,575
(2,759
)
(4,718
)
(23,225
)
(6,078
)
1,245
7,511
6,315
(1,657
)
6,110
(3,233
)
130
2,382
1,290
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
$
5,129
$
5,025
$
(0.21
)
$
(0.23
)
$
(2.24
)
$
(0.22
)
$
0.08
$
0.38
$
0.36
$
(0.21
)
$
(0.23
)
$
(2.24
)
$
(0.22
)
$
0.08
$
0.38
$
0.36
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At or For the
Three Months Ended
March 31,
At or For the Years Ended December 31,
2010
2009
2009
2008
2007
2006
2005
(Unaudited)
(1.22
)%
(1.21
)%
(3.01
)%
(0.29
)%
0.12
%
0.66
%
0.71
%
(19.13
)%
(14.83
)%
(38.40
)%
(3.22
)%
1.22
%
5.48
%
5.07
%
2.50
%
2.10
%
2.14
%
2.21
%
2.23
%
2.55
%
2.62
%
2.64
%
2.35
%
2.37
%
2.53
%
2.67
%
2.99
%
3.06
%
85.65
%
84.62
%
93.65
%
76.99
%
86.94
%
73.08
%
69.88
%
2.54
%
2.39
%
2.34
%
2.61
%
2.85
%
2.78
%
2.78
%
105.49
%
108.15
%
107.92
%
109.06
%
110.96
%
113.01
%
116.92
%
%
(4.35
)%
(0.9
)%
(213.6
)%
712.5
%
110.53
%
72.22
%
4.31
%
3.80
%
4.44
%
2.90
%
1.03
%
0.40
%
0.39
%
5.61
%
4.84
%
5.64
%
3.43
%
1.11
%
0.48
%
0.45
%
38.70
%
41.03
%
39.29
%
41.50
%
82.69
%
154.21
%
175.36
%
2.17
%
1.99
%
2.22
%
1.43
%
0.92
%
0.73
%
0.78
%
2.69
%
1.07
%
3.11
%
1.35
%
0.13
%
0.06
%
0.27
%
11.30
%
11.30
%
11.40
%
11.60
%
12.10
%
13.80
%
15.90
%
10.00
%
10.10
%
10.20
%
10.80
%
11.20
%
13.10
%
15.00
%
5.80
%
6.60
%
6.10
%
7.50
%
7.70
%
9.30
%
10.00
%
6.36
%
8.19
%
7.83
%
9.03
%
10.23
%
12.00
%
14.07
%
11
12
11
12
13
13
12
10,995
13,700
11,094
14,126
14,101
14,679
15,151
41,150
45,912
39,282
46,148
48,334
49,896
51,738
(1)
The three months ended March 31, 2010 and the year ended December 31, 2009 income tax
expenses reflect the establishment of a 100% valuation allowance for our deferred tax asset.
The 2005 income tax expenses included a benefit of $895,000 for the elimination of a
tax-related contingent liability for the same amount. The tax-related contingent liability
was established by us in 2000 upon becoming a taxable entity and reflected the tax effect of
the bad debt deduction taken by us in 2000 and 2001 calendar tax years. We believed the
filing position was supportable based upon a reasonable interpretation of the federal income
tax laws and the underlying regulations. However, due to the lack of prior rulings on similar
fact patterns, it was unknown whether the accounting method would be sustained upon audit by
either the federal or state tax authorities. The applicable statute of limitations expired
with respect to the 2001 tax year on September 15, 2005, making the contingent liability
unnecessary.
(2)
Ratios for the three months ended March 31, 2010 and 2009 are annualized.
(3)
The dividend payout ratio represents dividends declared per share divided by net income per
share. The following table sets forth aggregate cash dividends paid per period, which is
calculated by multiplying the dividend declared per share by the number of shares outstanding
as of the applicable record date:
For the Three Months
Ended March 31,
For the Years Ended December 31,
2010
2009
2009
2008
2007
2006
2005
(In Thousands)
$
$
45
$
89
$
2,136
$
2,644
$
2,048
$
1,384
524
$
$
45
$
89
$
2,136
$
2,644
$
2,048
$
1,908
Atlantic Coast Federal Corporation ceased paying a quarterly cash dividend in September 2009.
Payments listed above exclude cash dividends waived by Atlantic Coast Federal, MHC of $87,000
during the three-month period ended March 31, 2009, $175,000, $4.1million, $5.0 million, $3.7
million and $1.7 million during the years ended December 31, 2009, 2008, 2007, 2006 and 2005,
respectively. Atlantic Coast Federal, MHC began waiving dividends in May 2005 and, as of March
31, 2010, had waived dividends totaling $14.7 million.
(4)
The average interest rate spread represents the difference between the weighted-average yield
on interest-earning assets and the weighted- average cost of interest-bearing liabilities for
the period.
(5)
The net interest margin represents net interest income as a percent of average
interest-earning assets for the period.
(6)
The efficiency ratio represents non-interest expense divided by the sum of net interest income
and non-interest income.
Table of Contents
statements of our goals, intentions and expectations;
statements regarding our business plans, prospects, growth and operating strategies;
statements regarding the asset quality of our loan and investment portfolios; and
estimates of our risks and future costs and benefits.
general economic conditions, either nationally or in our market areas, that are
worse than expected;
competition among depository and other financial institutions;
inflation and changes in the interest rate environment that reduce our margins or
reduce the fair value of financial instruments;
adverse changes in the securities markets;
changes in laws or government regulations or policies affecting financial
institutions, including changes in our primary regulator, in regulatory fees and
capital requirements;
our ability to enter new markets successfully and capitalize on growth
opportunities;
our ability to successfully integrate acquired entities, if any;
changes in consumer spending, borrowing and savings habits;
changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the Financial Accounting Standards Board the Securities and
Exchange Commission and the Public Company Accounting Oversight Board;
changes in our organization, compensation and benefit plans; and
changes in the financial condition or future prospects of issuers of securities that
we own.
Table of Contents
Based Upon the Sale at $10.00 Per Share of
2,040,000 Shares
2,400,000 Shares
2,760,000 Shares
3,174,000 Shares (1)
Percent of
Percent of
Percent of
Percent of
Net
Net
Net
Net
Amount
Proceeds
Amount
Proceeds
Amount
Proceeds
Amount
Proceeds
(Dollars in thousands)
$
20,400
$
24,000
$
27,600
$
31,740
16,500
16,500
16,500
16,500
(2,278
)
(2,434
)
(2,590
)
(2,770
)
(605
)
(605
)
(605
)
(605
)
$
34,017
100.0
%
$
37,461
100.0
%
$
40,905
100.0
%
$
44,865
100.0
%
$
17,009
50.0
%
$
18,731
50.0
%
$
20,453
50.0
%
$
22,433
50.0
%
$
816
2.4
%
$
960
2.6
%
$
1,104
2.7
%
$
1,270
2.8
%
$
5,000
14.7
%
$
5,000
13.3
%
$
5,000
12.2
%
$
5,000
11.1
%
$
11,193
32.9
%
$
12,771
34.1
%
$
14,349
35.1
%
$
16,163
36.0
%
(1)
As adjusted to give effect to an increase in the number of shares, which could occur due to a
15% increase in the conversion offering range to reflect demand for the shares or changes in
market conditions following the commencement of the conversion offering.
(2)
Reflects the issuance of 1,650,000 shares at $10.00 per share in the supplemental offering.
to invest in securities;
Table of Contents
to finance the acquisition of financial institutions or other financial service
companies as opportunities arise, particularly in northeastern Florida or southeastern
Georgia, although we do not currently have any agreements or understandings regarding
any specific acquisition transaction and it is impossible to determine when, if ever,
such opportunities may arise;
to repurchase shares of our common stock for, among other things, the funding of our
stock-based incentive plan; and
for other general corporate purposes.
to fund new loans, including one- to four-family residential mortgage loans, small
business commercial loans, owner-occupied commercial real estate loans and consumer
loans;
to expand its retail banking franchise by acquiring new branches or by acquiring
other financial institutions or other financial services companies as opportunities
arise particularly in northeastern Florida or southeastern Georgia, although we do not
currently have any agreements or understandings regarding any specific acquisition
transaction and it is impossible to determine when, if ever, such opportunities may
arise;
to enhance existing products and services and to support the development of new
products and services;
to invest in mortgage-backed securities and collateralized mortgage obligations, and
debt securities issued by the U.S. Government, U.S. Government agencies or U.S.
Government sponsored enterprises; and
for other general corporate purposes.
Table of Contents
Table of Contents
Dividends Paid per
High
Low
share
$
$
$
2.77
1.18
$
2.17
$
1.25
$
2.33
1.74
3.25
1.87
0.01
4.97
1.75
0.01
$
7.89
$
3.40
$
0.09
8.47
4.69
0.11
9.93
7.30
0.12
12.19
8.10
0.15
Table of Contents
Atlantic Coast Bank
Pro Forma After
Historical at March 31,
Supplemental Issuance at
2010
March 31, 2010
Pro Forma at March 31, 2010, Based Upon the Sale in the Offering of (1)
2,040,000 Shares
2,400,000 Shares
2,760,000 Shares
3,174,000 Shares (2)
Percent of
Percent of
Percent of
Percent of
Percent of
Percent of
Amount
Assets (3)
Amount
Assets
Amount
Assets (3)(4)
Amount
Assets (3)(4)
Amount
Assets (3)(4)
Amount
Assets (3)(4)
(Dollars in thousands)
$
55,599
6.09
%
$
71,494
7.76
%
$
78,060
8.39
%
$
79,494
8.53
%
$
80,928
8.67
%
$
82,577
8.82
%
$
53,065
5.83
%
$
68,960
7.51
%
$
75,526
8.14
%
$
76,960
8.28
%
$
78,394
8.42
%
$
80,043
8.58
%
36,433
4.00
36,751
4.00
37,113
4.00
37,182
4.00
37,251
4.00
37,330
4.00
$
16,632
3.51
%
$
32,209
3.51
%
$
38,413
4.14
%
$
39,778
4.28
%
$
41,143
4.42
%
$
42,713
4.58
%
$
53,065
10.04
%
$
68,960
13.00
%
$
75,526
14.19
%
$
76,960
14.45
%
$
78,394
14.71
%
$
80,043
15.01
%
21,148
4.00
21,148
4.00
21,284
4.00
21,298
4.00
21,312
4.00
21,328
4.00
$
31,917
9.00
%
$
47,812
9.00
%
$
54,242
10.19
%
$
55,662
10.45
%
$
57,082
10.71
%
$
58,715
11.01
%
$
59,691
11.29
%
$
67,639
12.75
%
$
74,205
13.95
%
$
75,639
14.21
%
$
77,073
14.47
%
$
78,721
14.76
%
42,297
8.00
42,424
8.00
42,569
8.00
42,596
8.00
42,624
8.00
42,655
8.00
$
17,394
4.75
%
$
25,215
4.75
%
$
31,636
5.95
%
$
33,042
6.21
%
$
34,449
6.47
%
$
36,066
6.76
%
$
7,948
$
9,061
$
10,783
$
12,505
$
14,485
62
62
62
62
(816
)
(960
)
(1,104
)
(1,270
)
(816
)
(960
)
(1,104
)
(1,270
)
(925
)
(925
)
(925
)
(925
)
$
7,948
$
6,566
$
8,000
$
9,434
$
11,083
(1)
Pro forma capital levels assume that the employee stock ownership plan purchases 4% of the
shares of common stock sold in the conversion offering with funds we lend. Pro forma
generally accepted accounting principles and regulatory capital have been reduced by the
amount required to fund this plan. See Management for a discussion of the employee stock
ownership plan.
(2)
As adjusted to give effect to an increase in the number of shares which could occur due to a
15% increase in the conversion offering range to reflect demand for the shares or changes in
market conditions following the commencement of the conversion offering.
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(3)
Tangible and core capital levels are shown as a percentage of total adjusted assets.
Risk-based capital levels are shown as a percentage of risk-weighted assets.
(4)
Reflects the issuance of 1,650,000 shares in the supplemental offering at $10.00 per share.
(5)
The current Office of Thrift Supervision core capital requirement for financial institutions
is 3% of total adjusted assets for financial institutions that receive the highest supervisory
rating for safety and soundness and a 4% to 5% core capital ratio requirement for all other
financial institutions.
(6)
Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20%
risk weighting.
(7)
For a description of the Supplemental Retirement Agreements, please see
ManagementExecutive CompensationBenefit PlansSupplemental Retirement Agreements.
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Atlantic Coast
Pro Forma
Federal
After
Pro Forma at March 31, 2010
Corporation
Supplemental
Based upon the Sale in the Offering at $10.00 per Share of
Historical at
Offering at
2,040,000
2,400,000
2,760,000
3,174,000
March 31, 2010
March 31, 2010
Shares
Shares
Shares
Shares (1)
(Dollars in thousands)
$
584,692
$
584,692
$
584,692
$
584,692
$
584,692
$
584,692
267,718
267,718
267,718
267,718
267,718
267,718
$
852,410
$
852,410
$
852,410
$
852,410
$
852,410
$
852,410
148
148
48
53
59
65
61,418
77,313
95,535
98,974
102,412
106,366
62
62
62
62
14,018
14,018
14,018
14,018
14,018
14,018
(925
)
(925
)
(925
)
(925
)
2,483
2,483
2,483
2,483
2,483
2,483
(19,950
)
(19,950
)
(19,950
)
(19,950
)
(19,950
)
(19,950
)
(1,746
)
(1,746
)
(2,562
)
(2,706
)
(2,850
)
(3,016
)
(816
)
(960
)
(1,104
)
(1,270
)
$
56,371
$
72,266
$
87,893
$
91,049
$
94,205
$
97,833
2,040,000
2,400,000
2,760,000
3,174,000
1,650,000
1,650,000
1,650,000
1,650,000
1,650,000
1,095,443
1,288,756
1,482,070
1,704,380
13,415,709
4,785,443
5,338,756
5,892,070
6,528,380
6.17
%
7.77
%
9.14
%
9.44
%
9.73
%
10.07
%
(1)
As adjusted to give effect to an increase in the number of shares of common stock that could
occur due to a 15% increase in the conversion offering range to reflect demand for shares or
changes in market conditions following the commencement of the subscription and community
offerings.
(2)
Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock
in the conversion offering. These withdrawals would reduce pro forma deposits and assets by
the amount of the withdrawals.
(3)
Atlantic Coast Federal Corporation currently has 2,000,000 authorized shares of preferred
stock and 18,000,000 authorized shares of common stock, par value $0.01 per share. On a pro
forma basis, common stock and additional paid-in capital have been revised to reflect the
number of shares of Atlantic Coast Financial Corporation common stock to be outstanding.
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(4)
No effect has been given to the issuance of additional shares of Atlantic Coast
Financial Corporation common stock pursuant to the exercise of options under one or more
stock-based benefit plans. If the plans are implemented within the first year after the
closing of the conversion offering, an amount up to 10% of the shares of Atlantic Coast
Financial Corporation common stock sold in the conversion offering will be reserved for
issuance upon the exercise of options under the plans. No effect has been given to the
exercise of options currently outstanding. See Management.
(5)
The retained earnings of Atlantic Coast Bank will be substantially restricted after the
conversion. See The Conversion OfferingLiquidation Rights and Supervision and
RegulationFederal Banking Regulation.
(6)
For a description of the Supplemental Retirement Agreements, please see
ManagementExecutive CompensationBenefit PlansSupplemental Retirement Agreements.
(7)
Assumes that 4% of the shares sold in the conversion offering will be acquired by the
employee stock ownership plan financed by a loan from Atlantic Coast Financial
Corporation. The loan will be repaid principally from Atlantic Coast Banks contributions
to the employee stock ownership plan. Since Atlantic Coast Financial Corporation will
finance the employee stock ownership plan debt, this debt will be eliminated through
consolidation and no liability will be reflected on Atlantic Coast Financial Corporations
consolidated financial statements. Accordingly, the amount of shares of common stock
acquired by the employee stock ownership plan is shown in this table as a reduction of
total stockholders equity.
(8)
Assumes a number of shares of common stock equal to 4% of the shares of common stock to
be sold in the conversion offering will be purchased for grant by one or more stock-based
benefit plans. If the stock-based benefit plans are adopted within 12 months following
the conversion offering, the amount reserved for restricted stock awards would be reduced
by amounts purchased in the conversion offering by our 401(k) plan using its purchase
priority in the conversion offering. The funds to be used by the plan to purchase the
shares will be provided by the 401(k) plan. The dollar amount of common stock to be
purchased is based on the $10.00 per share subscription price in the conversion offering
and represents unearned compensation. This amount does not reflect possible increases or
decreases in the value of common stock relative to the subscription price in the
conversion offering. As Atlantic Coast Financial Corporation accrues compensation expense
to reflect the vesting of shares pursuant to the plan, the credit to capital will be
offset by a charge to operations. Implementation of the plan will require stockholder
approval.
Table of Contents
(i)
100,000 shares of common stock will be purchased by our executive officers and
directors, and their associates;
(ii)
25% of the shares sold in the conversion offering will be sold in the
subscription and community offering, with the remaining shares to be sold in the
syndicated community offering;
(iii)
our employee stock ownership plan will purchase 4% of the shares of common
stock sold in the conversion offering, with a loan from Atlantic Coast Financial
Corporation. The loan will be repaid in substantially equal payments of principal and
interest (at an adjustable rate equal to the prime rate, as published in the
Wall
Street Journal,
on the closing date of the offerings) over a period of 20 years.
Interest income that we earn on the loan will offset the interest paid by Atlantic
Coast Bank;
(iv)
Stifel, Nicolaus & Company, Incorporated will receive a fee equal to 1.0% of
the dollar amount of shares of common stock sold in the subscription and community
offerings and 5.5% of the dollar amount of shares sold in the syndicated offering;
(v)
Stifel, Nicolaus & Company, Incorporated will receive a fee equal to 5.0% of
the dollar amount of $16.5 million of common stock sold to investors in the
supplemental offering, except for sales of common stock to lenders to Atlantic Coast
Federal Corporation (assumed to be $5.5 million of common stock) who at the time of
closing have participated in any credit facility with us which fee will be reduced to
1.0%. No fee will be paid with respect to shares of common stock purchased by our
qualified and non-qualified employee stock benefit plans, or stock purchased by our
officers, directors and employees, and their immediate families;
(vi)
a Supplemental Retirement Plan liability for certain executive officers and
directors of $925,000 that vests upon completion of the conversion offering; and
(vii)
total expenses of the conversion offering, other than the fees and expenses to
be paid to Stifel, Nicolaus & Company, Incorporated, will be $1.4 million.
Table of Contents
each of the mortgage-backed securities rate and the U.S Treasury Note can be
determined and/or estimated from third-party sources;
we believe that 15-year fixed-rate mortgage-backed securities are not subject to
credit losses due to their issuance by a U.S. Government-sponsored enterprise (in this
case Freddie Mac) and the financing agreements established by the U.S. Department of
Treasury to support the securities; and
we believe that U.S. Treasury securities are not subject to credit losses due to a
U.S. Government guarantee of payment of principal and interest.
Table of Contents
withdrawals from deposit accounts for the purpose of purchasing shares of common
stock in the conversion offering;
our results of operations after the stock offerings; or
changes in the market price of the shares of common stock after the stock offerings.
Table of Contents
At or for the Three Months Ended March 31, 2010
Based upon the Sale at $10.00 Per Share of
2,040,000
2,400,000
2,760,000
3,174,000
Shares
Shares
Shares
Shares (1)
(Dollars in thousands, except per share amounts)
$
20,400
$
24,000
$
27,600
$
31,740
10,954
12,888
14,821
17,044
16,500
16,500
16,500
16,500
$
47,854
$
53,388
$
58,921
$
65,284
$
20,400
$
24,000
$
27,600
$
31,740
(2,278
)
(2,434
)
(2,590
)
(2,770
)
18,122
21,566
25,010
28,970
16,500
16,500
16,500
16,500
(605
)
(605
)
(605
)
(605
)
15,895
15,895
15,895
15,895
34,017
37,461
40,905
44,865
(816
)
(960
)
(1,104
)
(1,270
)
(816
)
(960
)
(1,104
)
(1,270
)
62
62
62
62
$
32,447
$
35,603
$
38,759
$
42,387
$
(2,634
)
$
(2,634
)
$
(2,634
)
$
(2,634
)
130
155
180
208
(10
)
(12
)
(14
)
(16
)
(41
)
(48
)
(55
)
(63
)
(29
)
(35
)
(40
)
(46
)
$
(2,584
)
(2,574
)
$
(2,563
)
$
(2,551
)
$
(0.56
)
$
(0.50
)
$
(0.43
)
$
(0.41
)
0.03
0.03
0.03
0.03
(0.01
)
(0.01
)
(0.01
)
(0.01
)
(0.01
)
(0.01
)
(0.01
)
(0.01
)
$
(0.55
)
$
(0.49
)
$
(0.44
)
$
(0.40
)
NM
NM
NM
NM
4,704,863
5,243,956
5,783,049
6,403,006
$
72,266
$
72,266
$
72,266
$
72,266
18,122
21,566
25,010
28,970
(925
)
(925
)
(925
)
(925
)
62
62
62
62
(816
)
(960
)
(1,104
)
(1,270
)
(816
)
(960
)
(1,104
)
(1,270
)
$
87,893
$
91,049
$
94,205
$
97,833
$
(106
)
$
(106
)
$
(106
)
$
(106
)
$
87,787
$
90,943
$
94,099
$
97,727
$
15.10
$
13.53
$
12.27
$
11.07
3.79
4.04
4.24
4.44
(0.19
)
(0.17
)
(0.16
)
(0.15
)
0.01
0.01
0.01
0.01
(0.17
)
(0.18
)
(0.19
)
(0.19
)
(0.17
)
(0.18
)
(0.19
)
(0.19
)
$
18.37
$
17.05
$
15.98
$
14.99
(0.02
)
(0.02
)
(0.02
)
(0.02
)
$
18.35
$
17.03
$
15.96
$
14.97
Table of Contents
At or for the Three Months Ended March 31, 2010
Based upon the Sale at $10.00 Per Share of
2,040,000
2,400,000
2,760,000
3,174,000
Shares
Shares
Shares
Shares (1)
(Dollars in thousands, except per share amounts)
54.44
%
58.65
%
62.58
%
66.71
%
54.50
%
58.72
%
62.66
%
66.80
%
4,785,443
5,338,756
5,892,070
6,528,380
(1)
As adjusted to give effect to an increase in the number of shares that could occur
due to a 15% increase in the conversion offering range to reflect demand for the shares or
changes in market conditions following the commencement of the conversion offering.
(2)
Historical Income Adjusted for
Supplemental Offering
Three Months Ended
At March 31, 2010
(Dollars in thousands)
$
(2,759
)
125
$
(2,634
)
(1)
Based on net proceeds from supplemental offering of $15,895,000 reflecting
gross proceeds of $16,500,000 net of $605,000 of offering expenses.
(2)
Based on a reinvestment rate of 3.15% consistent with the use of proceeds in
the conversion offering.
(3)
Assumes that 4% of shares of common stock sold in the subscription and community
offerings will be purchased by the employee stock ownership plan. For purposes of this
table, the funds used to acquire these shares are assumed to have been borrowed by the
employee stock ownership plan from Atlantic Coast Financial Corporation. Atlantic Coast
Bank intends to make annual contributions to the employee stock ownership plan in an
amount at least equal to the required principal and interest payments on the debt.
Atlantic Coast Banks total annual payments on the employee stock ownership plan debt are
based upon 20 equal annual installments of principal and interest. Financial Accounting
Standards Board Accounting Standards Codification 718-40, Employers Accounting for
Employer Stock Ownership Plans (ASC 718-40) requires that an employer record
compensation expense in an amount equal to the fair value of the shares committed to be
released to employees. The pro forma adjustments assume that the employee stock ownership
plan shares are allocated in equal annual installments based on the number of loan
repayment installments assumed to be paid by Atlantic Coast Bank, the fair value of the
common stock remains equal to the subscription price and the employee stock ownership plan
expense does not reflect a federal and state combined income tax rate due to our net
deferred tax asset. The unallocated employee stock ownership plan shares are reflected as
a reduction of stockholders equity. No reinvestment is assumed on proceeds contributed
to fund the employee stock ownership plan. The pro forma net income further assumes that
1,020, 1,200, 1,380 and 1,587 shares were committed to be released during the three months
ended March 31, 2010 at the minimum, midpoint, maximum, and adjusted maximum of the
conversion offering range, respectively, and in accordance with ASC 718-40, only the
employee stock ownership plan shares committed to be released during the period were
considered outstanding for purposes of net income per share calculations.
(4)
If approved by Atlantic Coast Financial Corporations stockholders, one or more
stock-based benefit plans may purchase an aggregate number of shares of common stock equal
to 4% of the shares to be sold in the subscription and community offerings (or a greater
number of shares if the plan is implemented more than one year after completion of the
conversion). Stockholder approval of the plans, and purchases by the plans may not occur
earlier than six months after the completion of the conversion. The shares may be acquired
directly from Atlantic Coast Financial Corporation or through open market purchases.
Shares in the stock-based benefit plan are assumed to vest over a period of five years.
The funds to be used to purchase the shares will be provided by Atlantic Coast Financial
Corporation. The table assumes that (i) the stock-based benefit plan acquires the shares
through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to
the plan is amortized as an expense during the three months ended March 31, 2010, and
(iii) the plan expense reflects no combined federal and state tax rate due to our net
deferred tax asset. Assuming stockholder approval of the stock-based benefit plans and
that shares of common stock (equal to 4% of the shares sold in the conversion offering)
are awarded through the use of authorized but unissued shares of common stock,
stockholders would have their ownership and voting interests diluted by approximately
1.77% at the midpoint of the conversion offering range.
Table of Contents
(5)
If approved by Atlantic Coast Financial Corporations stockholders, one or more
stock-based benefit plans may grant options to acquire an aggregate number of shares of
common stock equal to 10% of the shares to be sold in the subscription and community
offerings (or possibly a greater number of shares if the plan is implemented more than one
year after completion of the conversion). Stockholder approval of the plans may not occur
earlier than six months after the completion of the conversion. In calculating the pro
forma effect of the stock-based benefit plans, it is assumed that the exercise price of
the stock options and the trading price of the common stock at the date of grant were
$10.00 per share, the estimated grant-date fair value determined using the Black-Scholes
option pricing model was $2.89 for each option, the aggregate grant-date fair value of the
stock options was amortized to expense on a straight-line basis over a five-year vesting
period of the options. The actual expense will be determined by the grant-date fair value
of the options, which will depend on a number of factors, including the valuation
assumptions used in the option pricing model ultimately adopted. Under the above
assumptions, the adoption of the stock-based benefit plans will result in no additional
shares under the treasury stock method for purposes of calculating earnings per share.
There can be no assurance that the actual exercise price of the stock options will be
equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise
of options is obtained from the issuance of authorized but unissued shares, our net income
per share and stockholders equity per share would decrease. The issuance of authorized
but unissued shares of common stock pursuant to the exercise of options under such plan
would dilute stockholders ownership and voting interests by approximately 4.30% at the
midpoint of the conversion offering range.
(6)
Per share figures include publicly held shares of Atlantic Coast Federal
Corporation common stock that will be exchanged for shares of Atlantic Coast Financial
Corporation common stock in the conversion. See The Conversion OfferingShare Exchange
Ratio for Current Stockholders. Net income per share computations are determined by
taking the number of shares assumed to be sold in the offerings and the number of new
shares assumed to be issued in exchange for publicly held shares and, in accordance with
ASC 718-40, subtracting the employee stock ownership plan shares which have not been
committed for release during the respective periods. See note 2. The number of shares of
common stock actually sold and the corresponding number of exchange shares may be more or
less than the assumed amounts. Pro forma net income per share has been annualized for
purposes of calculating the offering price to pro forma net earnings per share.
(7)
The retained earnings of Atlantic Coast Bank will be substantially restricted
after the conversion. See Our Dividend Policy, The Conversion OfferingLiquidation
Rights and Supervision and RegulationFederal Banking RegulationCapital
Distributions.
(8)
Historical Equity Adjusted for
Supplemental Offering
March 31, 2010
(Dollars in thousands)
$
56,371
16,500
(55
)
(550
)
$
72,266
(1)
Reflects 1% fee on 550,000 shares of stock sold to loan participants.
(2)
Reflects 5% fee paid on 1.1 million shares of stock sold to selected investors.
(9)
Per share figures include publicly held shares of Atlantic Coast Federal
Corporation common stock that will be exchanged for shares of Atlantic Coast Financial
Corporation common stock in the conversion. Stockholders equity per share calculations
are based upon the sum of (i) the number of subscription shares assumed to be sold in the
conversion offering and (ii) shares to be issued in exchange for publicly held shares at
the minimum, midpoint, maximum and adjusted maximum of the conversion offering range,
respectively. The exchange shares reflect an exchange ratio of 0.2337, 0.2750, 0.3162 and
0.3636 at the minimum, midpoint, maximum and adjusted maximum of the conversion offering
range, respectively. The number of shares actually sold and the corresponding number of
exchange shares may be more or less than the assumed amounts.
Table of Contents
At or for the Year Ended December 31, 2009
Based upon the Sale at $10.00 Per Share of
2,040,000
2,400,000
2,760,000
3,174,000
Shares
Shares
Shares
Shares (1)
(Dollars in thousands, except per share amounts)
$
20,400
$
24,000
$
27,600
$
31,740
10,954
12,888
14,821
17,044
16,500
16,500
16,500
16,500
$
47,854
$
53,388
$
58,921
$
65,284
$
20,400
$
24,000
$
27,600
$
31,740
(2,278
)
(2,434
)
(2,590
)
(2,770
)
18,122
21,566
25,010
28,970
16,500
16,500
16,500
16,500
(605
)
(605
)
(605
)
(605
)
15,895
15,895
15,895
15,895
34,017
37,461
40,905
44,865
(816
)
(960
)
(1,104
)
(1,270
)
(816
)
(960
)
(1,104
)
(1,270
)
62
62
62
62
$
32,447
$
35,603
$
38,759
$
42,387
$
(28,834
)
$
(28,834
)
$
(28,834
)
$
(28,834
)
521
621
720
835
2
2
2
2
(41
)
(48
)
(55
)
(63
)
(163
)
(192
)
(221
)
(254
)
(118
)
(139
)
(160
)
(183
)
$
(28,633
)
(28,590
)
$
(28,548
)
$
(28,497
)
$
(6.12
)
$
(5.49
)
$
(4.98
)
$
(4.50
)
0.11
0.12
0.12
0.13
(0.01
)
(0.01
)
(0.01
)
(0.01
)
(0.03
)
(0.04
)
(0.04
)
(0.04
)
(0.03
)
(0.03
)
(0.03
)
(0.03
)
$
(6.08
)
$
(5.49
)
$
(4.94
)
$
(4.45
)
NM
NM
NM
NM
4,707,923
5,247,556
5,785,349
6,405,652
$
72,436
$
72,436
$
72,436
$
72,436
18,122
21,566
25,010
28,970
(925
)
(925
)
(925
)
(925
)
62
62
62
62
(816
)
(960
)
(1,104
)
(1,270
)
(816
)
(960
)
(1,104
)
(1,270
)
$
88,063
$
91,219
$
94,375
$
98,003
$
(106
)
$
(106
)
$
(106
)
$
(106
)
$
87,957
$
91,113
$
94,269
$
97,897
$
15.13
$
13.57
$
12.29
$
11.10
3.79
4.04
4.25
4.44
(0.19
)
(0.17
)
(0.16
)
(0.14
)
0.01
0.01
0.01
0.01
(0.17
)
(0.18
)
(0.19
)
(0.19
)
(0.17
)
(0.18
)
(0.19
)
(0.19
)
$
18.41
$
17.09
$
16.01
$
15.01
(0.02
)
(0.02
)
(0.02
)
(0.02
)
Table of Contents
At or for the Year Ended December 31, 2009
Based upon the Sale at $10.00 Per Share of
2,040,000
2,400,000
2,760,000
3,174,000
Shares
Shares
Shares
Shares (1)
(Dollars in thousands, except per share amounts)
$
18.38
$
17.07
$
16.00
$
14.99
54.35
%
58.51
%
62.46
%
66.62
%
54.41
%
58.58
%
62.50
%
66.71
%
4,785,443
5,338,756
5,892,070
6,528,380
(1)
As adjusted to give effect to an increase in the number of shares that could occur due to a
15% increase in the conversion offering range to reflect demand for the shares or changes in
market conditions following the commencement of the conversion offering.
(2)
Historical Income Adjusted for
Supplemental Offering
Twelve Months Ended
December 31, 2009
(Dollars in thousands)
$
(29,335
)
501
$
(28,834
)
(1)
Based on net proceeds from supplemental offering of $15,895,000 reflecting
gross proceeds of $16,500,000 net of $605,000 of offering expenses.
(2)
Based on a reinvestment rate of 3.15% consistent with the use of proceeds in
the conversion offering.
(3)
Assumes that 4% of shares of common stock sold in the subscription and community offerings
will be purchased by the employee stock ownership plan. For purposes of this table, the funds
used to acquire these shares are assumed to have been borrowed by the employee stock ownership
plan from Atlantic Coast Financial Corporation. Atlantic Coast Bank intends to make annual
contributions to the employee stock ownership plan in an amount at least equal to the required
principal and interest payments on the debt. Atlantic Coast Banks total annual payments on
the employee stock ownership plan debt are based upon 20 equal annual installments of
principal and interest. Financial Accounting Standards Board Accounting Standards
Codification Topic 718-40, Employers Accounting for Employer Stock Ownership Plans (ASC
718-40) requires that an employer record compensation expense in an amount equal to the fair
value of the shares committed to be released to employees. The pro forma adjustments assume
that the employee stock ownership plan shares are allocated in equal annual installments based
on the number of loan repayment installments assumed to be paid by Atlantic Coast Bank, the
fair value of the common stock remains equal to the subscription price and the employee stock
ownership plan expense does not reflect a federal and state combined income tax rate due to
our net deferred tax asset. The unallocated employee stock ownership plan shares are
reflected as a reduction of stockholders equity. No reinvestment is assumed on proceeds
contributed to fund the employee stock ownership plan. The pro forma net income further
assumes that 4,080, 4,800, 5,520 and 6,348 shares were committed to be released during the
year ended December 31, 2009 at the minimum, midpoint, maximum, and adjusted maximum of the
conversion offering range, respectively, and in accordance with ASC 718-40, only the employee
stock ownership plan shares committed to be released during the period were considered
outstanding for purposes of net income per share calculations.
(4)
If approved by Atlantic Coast Financial Corporations stockholders, one or more stock-based
benefit plans may purchase an aggregate number of shares of common stock equal to 4% of the
shares to be sold in the subscription and community offerings (or a greater number of shares
if the plan is implemented more than one year after completion of the conversion). Stockholder
approval of the plans, and purchases by the plans may not occur earlier than six months after
the completion of the conversion. The shares may be acquired directly from Atlantic Coast
Financial Corporation or through open market purchases. Shares in the stock-based benefit plan
are assumed to vest over a period of five years. The funds to be used to purchase the shares
will be provided by Atlantic Coast Financial Corporation. The table assumes that (i) the
stock-based benefit plan acquires the shares through open market purchases at $10.00 per
share, (ii) 20% of the amount contributed to the plan is amortized as an expense during the
year ended December 31, 2009, and (iii) the plan expense reflects no combined federal and
state tax rate due to our net deferred tax asset. Assuming stockholder approval of the
stock-based benefit plans and that shares of common stock (equal to 4% of the shares sold in
the conversion offering) are awarded through the use of authorized but unissued shares of
common stock, stockholders would have their ownership and voting interests diluted by
approximately 1.77% at the midpoint of the conversion offering range.
Table of Contents
(5)
If approved by Atlantic Coast Financial Corporations stockholders, one or more stock-based
benefit plans may grant options to acquire an aggregate number of shares of common stock equal
to 10% of the shares to be sold in the subscription and community offerings (or possibly a
greater number of shares if the plan is implemented more than one year after completion of the
conversion). Stockholder approval of the plans may not occur earlier than six months after the
completion of the conversion. In calculating the pro forma effect of the stock-based benefit
plans, it is assumed that the exercise price of the stock options and the trading price of the
common stock at the date of grant were $10.00 per share, the estimated grant-date fair value
determined using the Black-Scholes option pricing model was $2.89 for each option, the
aggregate grant-date fair value of the stock options was amortized to expense on a
straight-line basis over a five-year vesting period of the options. The actual expense will
be determined by the grant-date fair value of the options, which will depend on a number of
factors, including the valuation assumptions used in the option pricing model ultimately
adopted. Under the above assumptions, the adoption of the stock-based benefit plans will
result in no additional shares under the treasury stock method for purposes of calculating
earnings per share. There can be no assurance that the actual exercise price of the stock
options will be equal to the $10.00 price per share. If a portion of the shares to satisfy
the exercise of options is obtained from the issuance of authorized but unissued shares, our
net income per share and stockholders equity per share would decrease. The issuance of
authorized but unissued shares of common stock pursuant to the exercise of options under such
plan would dilute stockholders ownership and voting interests by approximately 4.30% at the
midpoint of the conversion offering range.
(6)
Per share figures include publicly held shares of Atlantic Coast Federal Corporation common
stock that will be exchanged for shares of Atlantic Coast Financial Corporation common stock
in the conversion. See The Conversion OfferingShare Exchange Ratio for Current
Stockholders. Net income per share computations are determined by taking the number of
shares assumed to be sold in the offerings and the number of new shares assumed to be issued
in exchange for publicly held shares and, in accordance with ASC 718-40, subtracting the
employee stock ownership plan shares which have not been committed for release during the
respective periods. See note 2. The number of shares of common stock actually sold and the
corresponding number of exchange shares may be more or less than the assumed amounts. Pro
forma net income per share has been annualized for purposes of calculating the offering price
to pro forma net earnings per share.
(7)
The retained earnings of Atlantic Coast Bank will be substantially restricted after the
conversion. See Our Dividend Policy, The Conversion OfferingLiquidation Rights and
Supervision and RegulationFederal Banking RegulationCapital Distributions.
(8)
Historical Equity Adjusted for
Supplemental Offering
At December 31, 2009
(Dollars in thousands)
$
56,541
16,500
(55
)
(550
)
$
72,436
(1)
Reflects 1% fee on 550,000 shares of stock sold to loan participants.
(2)
Reflects 5% private placement fee paid on 1.1 million shares of stock sold to selected
investors.
(9)
Per share figures include publicly held shares of Atlantic Coast Federal Corporation common
stock that will be exchanged for shares of Atlantic Coast Financial Corporation common stock
in the conversion. Stockholders equity per share calculations are based upon the sum of (i)
the number of subscription shares assumed to be sold in the conversion offering and (ii)
shares to be issued in exchange for publicly held shares at the minimum, midpoint, maximum and
adjusted maximum of the conversion offering range, respectively. The exchange shares reflect
an exchange ratio of 0.2337, 0.2750, 0.3162 and 0.3636 at the minimum, midpoint, maximum and
adjusted maximum of the conversion offering range, respectively. The number of shares actually
sold and the corresponding number of exchange shares may be more or less than the assumed
amounts.
Table of Contents
AND RESULTS OF OPERATIONS
Table of Contents
Aggressive charge-off policy.
Beginning in 2009, management began to implement an
aggressive charge-off strategy in one- to four-family residential mortgage loans by
taking partial or full charge-offs in the period that such loans became non-accruing.
Loan work out programs.
We remain committed to working with responsible borrowers
to renegotiate residential loan terms. We had $20.1 million in troubled debt
restructurings at March 31, 2010, as compared to $8.7 million at December 31, 2008.
Only $3.4 million of our troubled debt restructurings at March 31, 2010 were
non-performing in accordance with their revised terms. Troubled debt restructurings
provide us cost savings from the expense of foreclosure proceedings and the holding and
disposition expenses of selling foreclosed property and increase interest income.
Enhanced collection practices
. In 2009, due to the elevated delinquency of one- to
four-family residential loans and the increasing complexity of workout for these types
of loans, we engaged the services of a national third party servicer for certain loans.
One- to four-family residential mortgage loans, and any associated home equity loan
that become 60 days past due are assigned to the third party servicer for collection.
We also assign other one- to four-family residential mortgage loans to the third party
servicer irrespective of delinquency status if we feel the loan may have collection
risk. At March 31, 2010, the outstanding balance of loans assigned to the third party
servicer was $46.9 million.
Non-performing asset sales.
In order to reduce the expenses of the foreclosure
process and selling of foreclosed property, we have sold certain non-performing loans
through national loan sales of distressed assets. Since 2008, we have sold $8.6 million
of loans through distressed asset sales and anticipate increased sales in 2010. We also
have accepted short sales of residential property by borrowers where such properties
are sold at a loss and the proceeds of such sales are paid to us.
Credit risk management.
We also are enhancing our credit administration by
improving internal risk management processes. In 2010, we established an independent
risk committee of our board of directors to evaluate and monitor system, market and
credit risk.
Mortgage banking strategy.
We intend to regularly sell originated, conforming
residential loans, both fixed rate and adjustable rate, including the related
servicing, to select financial institutions in the secondary market for increased fee
income. We believe legislative changes in the near term create an opportunity to expand
this business by hiring local mortgage bankers and leveraging their already existing
origination platforms. In the latter part of 2009, we also began a program for
warehouse type lending where we financed mortgages originated by third parties and held
a lien position for a short duration (usually less than 16 days) while earning interest
until a sale is completed to an investor. We expect to continue this practice in the
future.
Table of Contents
Commercial lending strategy.
We also plan to increase commercial business lending
and owner occupied commercial real estate lending with an emphasis towards small
businesses. We intend to participate in government programs relating to commercial
business loans such as the United States Small Business Administration and the United
States Department of Agriculture. Our focus on owner occupied commercial real estate
loans will be to professional service providers. We intend to target principal
balances of up to $1.5 million in our commercial business and owner occupied commercial
real estate lending, while not originating or purchasing higher risk loans such as
commercial real estate development projects, multi-family loans and land loans. At
March 31, 2010, we had $77.6 million in commercial real estate loans, or 12.8% of our
gross loan portfolio, and $17.7 million in commercial business loans, or 2.9% of our
gross loan portfolio.
(i)
the employee stock ownership plan will acquire 126,960 shares of common stock
with a $1.3 million loan that is expected to be repaid over 20 years, resulting in an
annual pre-tax expense of approximately $63,000 (assuming that the shares of common
stock maintain a value of $10.00 per share); and
(ii)
a new stock-based benefit plan would award a number of shares equal to 4% of
the shares sold in the conversion offering, or 126,960 shares, to eligible
participants, and such awards would be expensed as the awards vest. Assuming all
shares are awarded under the plan at a price of $10.00 per share, and that the awards
vest over five years, the corresponding annual pre-tax expense associated with shares
awarded under the plan would be approximately $254,000; and
Table of Contents
(iii)
a new stock-based benefit plan would award options to purchase a number of
shares equal to 10% of the shares sold in the conversion offering, or 317,400 shares,
to eligible participants, and such options would be expensed as the options vest.
Assuming all options are awarded under the stock-based benefit plan at a price of
$10.00 per share, and that the options vest over five years, the corresponding annual
pre-tax expense associated with options awarded under the stock-based benefit plan
would be approximately $183,000 (assuming a grant-date fair value of $2.89 per option,
using the Black-Scholes option valuation methodology).
Table of Contents
2010
2009
2008
(In Millions)
$
3.7
$
5.8
$
1.6
N/A
6.2
3.9
N/A
6.6
3.7
N/A
6.3
4.7
$
3.7
$
24.9
$
13.9
Table of Contents
Table of Contents
March 31,
December 31,
Increase (decrease)
2010
2009
Dollars
Percentage
(Dollars in Thousands)
$
37,961
$
37,144
$
817
2.2
%
204,217
177,938
26,279
14.8
613,166
628,181
(15,015
)
(2.4
)
(13,308
)
(13,810
)
502
(3.6
)
599,858
614,371
(14,513
)
(2.4
)
5,253
8,990
(3,737
)
(41.6
)
66,732
67,118
(386
)
(0.6
)
$
914,021
$
905,561
$
8,460
0.9
%
$
35,370
$
34,988
$
382
1.1
%
79,052
79,192
(140
)
(0.2
)
168,059
160,784
7,275
4.5
302,211
280,480
21,731
7.7
584,692
555,444
29,248
5.3
172,718
182,694
(9,976
)
(5.5
)
92,800
92,800
2,200
12,200
(10,000
)
(82.0
)
5,240
5,882
(642
)
(10.9
)
857,650
849,020
8,630
1.0
56,371
56,541
(170
)
(0.3
)
$
914,021
$
905,561
$
8,460
0.9
%
Table of Contents
At March 31, 2010
Other-than-
Number of
Temporary
Amortized Cost
Fair Value
Securities
Impairment
(Dollars in Thousands)
$
5,832
$
5,200
7
$
4,542
14,955
15,839
11
$
20,787
$
21,039
18
$
4,542
Table of Contents
Florida
Georgia
Other States
Total
(Dollars in Thousands)
$
192,461
$
65,363
$
41,490
$
299,314
45,755
44,396
1,493
91,644
1,956
1,336
3,293
$
240,172
$
111,095
$
42,983
$
394,250
March 31,
December 31,
2010
2009
(Dollars in Thousands)
$
12,309
$
12,343
3,890
3,895
9,676
9,638
4,988
4,988
404
404
2,467
2,973
656
909
34,390
35,150
5,035
5,028
$
39,425
$
40,178
$
20,086
$
22,660
$
38,697
$
44,392
5.61
%
5.64
%
3.76
%
3.85
%
4.31
%
4.44
%
(1)
Consists of land and multi-family loans.
Table of Contents
Comparison of Loan Loss Allowance to Non-Performing
Loans
At March 31, 2010
Amount of
Percent of Loan
General and
Loss Allowance to
Non-Performing
Specific Loan
Non-Performing
Loans
Loss Allowance
Loans
(Dollars in Thousands)
$
12,309
$
2,791
22.67
%
3,890
763
19.61
%
9,676
1,342
13.87
%
7
4,988
3,315
66.46
%
404
110
27.23
%
2,467
2,150
87.15
%
656
2,585
394.05
%
245
$
34,390
$
13,308
38.70
%
(1)
Consists of land and multi-family loans.
Table of Contents
March 31,
March 31,
2010
2009
(Dollars in Thousands)
$
13,810
$
10,598
1,880
561
115
228
518
32
50
706
836
437
336
698
288
4,354
2,331
54
124
1
15
4
109
71
97
130
345
4,224
1,986
3,722
5,812
$
13,308
$
14,424
(1)
Consists of land and multi-family loans.
At March 31, 2010
At December 31, 2009
Balance
Specific Allowance
Balance
Specific Allowance
(Dollars in thousands)
$
6,886
$
574
$
5,711
$
377
15,228
4,514
16,021
4,830
2,977
128
2,722
110
13,606
81
19,938
81
$
38,697
$
5,296
$
44,392
$
5,398
Table of Contents
Table of Contents
Table of Contents
At December 31
Increase (decrease)
2009
2008
Dollars
Percentage
(Dollars in Thousands)
$
37,144
$
34,058
$
3,086
9.1
%
177,938
147,474
30,464
20.7
628,181
752,477
(124,296
)
(16.5
)
(13,810
)
(10,598
)
(3,212
)
30.3
614,371
741,879
(127,508
)
(17.2
)
8,990
736
8,254
1,121.5
67,118
71,942
(4,824
)
(6.7
)
$
905,561
$
996,089
$
(90,528
)
(9.1
)%
$
34,988
$
33,192
$
1,796
5.4
%
79,192
67,714
11,478
17.0
160,784
164,388
(3,604
)
(2.2
)
280,480
359,312
(78,832
)
(21.9
)
555,444
624,606
(69,162
)
(11.1
)
182,694
184,850
(2,156
)
(1.2
)
92,800
92,800
12,200
12,200
5,882
9,873
(3,991
)
(40.4
)
849,020
912,129
(63,109
)
(6.9
)
56,541
83,960
(27,419
)
(32.7
)
$
905,561
$
996,089
$
(90,528
)
(9.1
)%
Table of Contents
At December 31, 2009
Other-than-
Temporary
Amortized Cost
Fair Value
Number of Securities
Impairment
(Dollars in Thousands)
$
6,174
$
4,942
7
$
4,467
15,942
15,551
11
$
22,116
$
20,493
18
$
4,467
Table of Contents
As of December 31,
Increase (Decrease)
Percent of
Percent of
2009
total loans
2008
total loans
Dollars
Percentage
(Dollars in Thousands)
$
306,968
49.3
%
$
370,783
49.9
%
$
(63,815
)
(17.2
)%
77,403
12.4
84,134
11.3
(6,731
)
(8.0
)%
37,591
6.0
43,901
5.9
(6,310
)
(14.4
)%
$
421,962
67.7
%
$
498,818
67.1
%
$
(76,856
)
(15.4
)%
$
4,189
0.7
%
$
8,974
1.2
%
$
(4,785
)
(53.3
)%
8,022
1.3
10,883
1.5
(2,861
)
(26.3
)%
3,148
0.5
5,008
0.7
(1,860
)
(37.1
)%
$
15,359
2.5
%
$
24,865
3.3
%
$
(9,506
)
(38.2
)%
$
93,929
15.1
%
$
107,525
14.5
%
$
(13,596
)
(12.6
)%
73,870
11.9
87,162
11.7
(13,292
)
(15.2
)%
17,848
2.9
25,273
3.4
(7,425
)
(29.4
)%
$
185,647
29.8
%
$
219,960
29.6
%
$
(34,313
)
(15.6
)%
$
622,968
100.0
%
$
743,643
100.0
%
$
(120,675
)
(16.2
)%
(13,810
)
(10,598
)
(3,212
)
(30.3
)%
5,122
8,662
(3,540
)
(40.0
)%
91
172
(81
)
(47.1
)%
$
614,371
$
741,879
$
(127,508
)
(17.2
)%
(1)
Consists of land and multi-family loans.
Table of Contents
Florida
Georgia
Other States
Total
(Dollars in Thousands)
$
210,667
$
58,664
$
37,637
$
306,968
46,421
45,782
1,726
93,929
2,703
1,486
4,189
$
259,791
$
105,933
$
39,363
$
405,087
At December 31,
2009
2008
(Dollars in Thousands)
$
10,598
$
6,482
8,350
3,514
3,822
3,393
3,605
777
50
336
4,715
1,392
1,408
1,232
590
345
22,540
10,989
252
25
550
18
45
240
3
351
533
18
1
879
1,157
21,661
9,832
24,873
13,948
$
13,810
$
10,598
3.11
%
1.35
%
60.61
%
125.89
%
39.29
%
41.50
%
2.22
%
1.43
%
(1)
Consists of land and multi-family loans.
Table of Contents
At December 31,
2009
2008
(Dollars in Thousands)
$
12,343
$
10,319
3,895
5,126
9,638
2,941
86
4,988
3,169
404
1,812
2,973
1,525
909
387
170
35,150
25,535
5,028
3,332
$
40,178
$
28,867
$
22,660
$
8,666
$
44,392
$
26,138
5.64
%
3.43
%
3.85
%
2.56
%
4.44
%
2.90
%
(1)
Consists of land and multi-family loans.
Table of Contents
Comparison of Loan Loss Allowance to Non-Performing
Loans at December 31, 2009
Percent of Loan
Loss Allowance to
Non-Performing
Amount of Loan
Non-Performing
Loans
Loss Allowance
Loans
(Dollars in Thousands)
$
12,343
$
3,446
27.92
%
3,895
575
14.76
%
9,638
1,305
13.54
%
47
4,988
3,322
66.60
%
404
110
27.23
%
2,973
2,240
75.34
%
909
2,447
269.20
%
318
$
35,150
$
13,810
$
39.29
%
(1)
Consists of land and multi-family loans.
Table of Contents
At December 31, 2009
At December 31, 2008
Specific
Specific
Balance
Allowance
Balance
Allowance
(Dollars in thousands)
$
5,711
$
377
$
4,666
$
1,737
16,021
4,830
11,492
1,788
2,722
110
19,938
81
8,666
$
44,392
$
5,398
$
24,824
$
3,525
Table of Contents
Table of Contents
At March
For the three months ended March 31,
31, 2010
2010
2009
Average
Average
Average
Average
Average
Yield/Cost
Balance
Interest
Yield/Cost
(1)
Balance
Interest
Yield/Cost
(1)
(Dollars in Thousands)
6.16
%
$
628,452
$
9,190
5.85
%
$
742,157
$
10,823
5.83
%
3.72
%
190,779
1,965
4.12
%
161,518
1,983
4.91
%
0.40
%
33,398
47
0.56
%
45,139
20
0.18
%
5.10
%
852,629
11,202
5.26
%
948,814
12,826
5.41
%
53,997
59,132
$
906,626
$
1,007,946
0.65
%
$
38,503
54
0.56
%
$
33,709
32
0.38
%
1.83
%
78,089
345
1.77
%
70,840
363
2.05
%
1.23
%
125,981
411
1.30
%
136,404
727
2.13
%
2.64
%
296,121
2,010
2.72
%
350,610
3,435
3.92
%
4.92
%
92,800
1,148
4.95
%
92,800
983
4.24
%
3.60
%
174,259
1,554
3.57
%
192,944
1,712
3.55
%
8.00
%
2,533
45
7.11
%
%
2.62
%
808,286
5,567
2.75
%
877,307
7,252
3.31
%
40,664
48,090
848,950
925,397
57,676
82,549
$
906,626
$
1,007,946
$
5,635
$
5,574
2.48
%
2.51
%
2.10
%
$
44,343
$
71,507
2.62
%
2.64
%
2.35
%
105.49
%
108.15
%
(1)
Yields and costs for the three months ended March 31, 2010 and 2009 are annualized.
(2)
Calculated net of deferred loan fees. Not full tax equivalents, as the numbers would not
change materially form those presented in the table.
(3)
Calculated based on carrying value. Not full tax equivalents, as the numbers would not
change materially from those presented in the table.
Table of Contents
(4)
Includes Federal Home Loan Bank stock at cost and term deposits with other financial
institutions.
(5)
Net interest spread represents the difference between the yield on average interest-earning
assets and the cost of average interest-bearing liabilities.
(6)
Net earning assets represents total interest-earning assets less total interest-bearing
liabilities.
(7)
Net interest margin represents net interest income divided by average total interest-earning
assets.
Table of Contents
For the years ended December 31,
2009
2008
2007
Average
Average
Average
Average
Average
Average
Balance
Interest
Yield/ Cost
Balance
Interest
Yield/ Cost
Balance
Interest
Yield/ Cost
(Dollars in Thousands)
$
700,359
$
40,726
5.82
%
730,245
$
46,385
6.35
%
$
668,150
$
46,331
6.93
%
171,205
7,849
4.58
%
$
147,855
7,866
5.32
%
126,809
6,822
5.38
%
48,106
143
0.30
%
42,323
1,008
2.38
%
44,607
2,356
5.28
%
919,670
48,718
5.30
%
920,423
55,259
6.00
%
839,566
55,509
6.61
%
55,473
57,578
54,085
$
975,143
$
978,001
$
893,651
$
34,496
132
0.38
%
$
35,132
132
0.38
%
$
40,333
157
0.39
%
75,513
1,434
1.90
%
58,709
1,438
2.45
%
50,092
1,481
2.96
%
140,090
2,363
1.69
%
132,313
4,036
3.05
%
155,863
7,012
4.50
%
328,773
11,992
3.65
%
336,982
15,048
4.47
%
303,102
15,145
5.00
%
180,316
6,787
3.75
%
191,055
7,575
3.96
%
148,184
6,653
4.49
%
191
10
5.24
%
%
%
92,800
4,237
4.57
%
89,793
3,780
4.21
%
59,063
2,675
4.53
%
852,179
26,935
3.16
%
843,984
32,009
3.79
%
756,637
33,123
4.38
%
46,577
45,704
45,563
898,756
889,688
802,200
76,387
88,313
91,451
$
975,143
$
978,001
$
893,651
$
21,783
$
23,250
$
22,386
2.14
%
2.21
%
2.23
%
$
67,491
$
76,439
$
82,929
2.37
%
2.53
%
2.67
%
107.92
%
109.06
%
110.96
%
(1)
Calculated net of deferred loan fees and loss reserve. Nonaccrual loans
included as loans carrying a zero yield.
(2)
Calculated based on carrying value. Not full tax equivalents, as the
number would not change materially from those presented in the table.
(3)
Includes Federal Home Loan Bank stock at cost and term deposits with other
financial institutions.
(4)
Net interest spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing
liabilities.
(5)
Net earning assets represents total interest-earning assets less total
interest-bearing liabilities.
(6)
Net interest margin represents net interest income divided by average total
interest-earning assets.
Table of Contents
Three Months Ended March 31,
Years Ended December 31,
Years Ended December 31,
2010 vs. 2009
2009 vs. 2008
2008 v. 2007
Increase (Decrease)
Total
Increase (Decrease)
Total
Increase (Decrease)
Total
Due to
Increase
Due to
Increase
Due to
Increase
Volume
Rate
(Decrease)
Volume
Rate
(Decrease)
Volume
Rate
(Decrease)
(Dollars in Thousands)
$
(1,663
)
$
30
$
(1,633
)
$
(1,846
)
$
(3,813
)
$
(5,659
)
$
4,116
$
(4,062
)
$
54
329
(347
)
(18
)
1,151
(1,168
)
(17
)
1,120
(76
)
1,044
(6
)
33
27
121
(986
)
(865
)
(115
)
(1,233
)
(1,348
)
(1,340
)
(284
)
(1,624
)
(574
)
(5,967
)
(6,541
)
5,121
(5,371
)
(250
)
5
17
22
(2
)
3
1
(20
)
(6
)
(26
)
36
(54
)
(18
)
360
(364
)
(4
)
233
(277
)
(44
)
(52
)
(264
)
(316
)
225
(1,899
)
(1,674
)
(951
)
(2,025
)
(2,976
)
(479
)
(946
)
(1,425
)
(359
)
(2,697
)
(3,056
)
1,601
(1,696
)
(95
)
165
165
129
328
457
1,305
(201
)
1,104
(167
)
9
(158
)
(413
)
(395
)
(808
)
1,765
(842
)
923
45
45
10
10
(612
)
(1,073
)
(1,685
)
(50
)
(5,024
)
(5,074
)
3,933
(5,047
)
(1,114
)
$
(728
)
$
789
$
61
$
(524
)
$
(943
)
$
(1,467
)
$
1,188
$
(324
)
$
864
Table of Contents
Table of Contents
At March 31,
Increase (decrease)
2010
2009
Dollars
Percentage
(Dollars in Thousands)
$
856
$
992
$
(136
)
(13.7
)%
104
185
(81
)
(43.8
)
(273
)
(273
)
96
(96
)
(100.0
)
(75
)
(174
)
99
(56.9
)
222
215
7
3.3
178
175
3
1.7
65
51
14
27.5
$
1,077
$
1,540
$
(463
)
(30.1
)%
At March 31,
Increase (decrease)
2010
2009
Dollars
Percentage
(Dollars in Thousands)
$
2,570
$
2,575
$
(5
)
(0.2
)%
554
621
(67
)
(10.8
)
449
336
113
33.6
92
705
(613
)
(87.0
)
255
260
(5
)
(1.9
)
359
425
(66
)
(15.5
)
393
204
189
92.6
1,077
894
183
20.5
$
5,749
$
6,020
$
(271
)
(4.5
)%
Table of Contents
Table of Contents
Table of Contents
At December 31,
Increase (decrease)
2009
2008
Dollars
Percentage
(Dollars in Thousands)
$
4,245
$
4,871
$
(626
)
(12.9
)%
708
118
590
500.0
(1,317
)
(1,317
)
383
650
(267
)
(41.1
)
(4,471
)
(4,471
)
4
4
(4,467
)
(4,467
)
916
886
30
3.4
632
984
(352
)
(35.8
)
2,634
(2,634
)
(100.0
)
3,065
806
2,259
280.3
$
4,165
$
10,949
$
(6,784
)
(62.0
)%
Table of Contents
At December 31,
Increase (decrease)
2009
2008
Dollars
Percentage
(Dollars in Thousands)
$
10,381
$
12,890
$
(2,509
)
(19.5
)%
(2,684
)
851
(3,535
)
(415.4
)
2,548
2,652
(104
)
(3.9
)
1,839
493
1,346
273.0
1,488
815
673
82.6
1,030
1,023
7
0.7
1,913
1,889
24
1.3
1,193
508
685
134.8
2,811
2,811
3,781
5,208
(1,427
)
(27.4
)
$
24,300
$
26,329
$
(2,029
)
(7.7
)%
Table of Contents
Table of Contents
At December 31,
Increase (decrease)
2008
2007
Dollars
Percentage
(Dollars in Thousands)
$
4,871
$
5,251
$
(380
)
(7.2
)%
118
34
84
247.1
650
(46
)
696
(1,513.0
)
886
897
(11
)
(1.2
)
984
861
123
14.3
2,634
2,634
100.0
806
176
630
358.0
$
10,949
$
7,173
$
3,776
52.6
At December 31,
Increase (decrease)
2008
2007
Dollars
Percentage
(Dollars in Thousands)
$
12,890
$
11,760
$
1,130
9.6
%
851
631
220
34.9
2,652
2,383
269
11.3
493
457
36
7.9
815
247
568
230.0
1,023
1,136
(113
)
(9.9
)
1,889
4,066
(2,177
)
(53.5
)
508
301
207
68.8
5,208
4,717
491
10.4
$
26,329
$
25,698
$
631
2.5
%
Table of Contents
Table of Contents
December 31, 2009
Less Than
1 Through
4 Through
More Than
1 Year
3 Years
5 Years
5 Years
Total
(Dollars in Thousands)
$
25,000
$
23,000
$
30,000
$
105,000
$
183,000
293
501
324
532
1,650
25,293
23,501
30,324
105,532
184,650
6,025
61,499
67,524
92,800
92,800
$
118,093
$
23,501
30,324
$
105,532
$
344,974
(1)
These items do not have fixed maturities.
Table of Contents
To Be Well Capitalized
For Capital
Under Prompt Corrective
Actual
Adequacy Purposes
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in Thousands)
$
59,691
11.3
%
$
42,297
8.0
%
$
52,871
10.0
%
$
53,065
10.0
%
$
21,148
4.0
%
$
31,722
6.0
%
$
53,065
5.8
%
$
36,433
4.0
%
$
45,541
5.0
%
Table of Contents
Economic Value of Equity and Duration of Assets and
Liabilities at March 31, 2010
Change in Interest Rate
Decrease
Increase
Increase
Increase
1%
1%
2%
3%
(Dollars in thousands)
4.82
5.44
5.64
5.76
1.48
1.51
1.53
1.56
3.34
3.93
4.11
4.20
$
(187
)
(5,070
)
$
(16,578
)
$
(29,645
)
(0.30
)%
(8.01
)%
(26.19
)%
(46.83
)%
(1)
Expressed as number of years before asset/liability re-prices to achieve stated rate of
interest rate increase.
(2)
Represents the cumulative five year pre-tax impact on our equity due to increased or
(decreased) net interest margin.
Table of Contents
Table of Contents
At March 31, 2010
NPV as a Percentage of
Net Interest Income
Present Value of Assets
(3)
Increase (Decrease) in
Change in
Increase
Estimated
Estimated Net Interest
Interest Rates
Estimated
Estimated (Decrease) in NPV
(Decrease)
Net Interest
Income
(basis points)
(1)
NPV
(2)
Amount
Percent
NPV Ratio
(4)
(basis points)
Income
Amount
Percent
(Dollars in thousands)
$
33,665
$
(29,645
)
(46.8
)%
3.80
%
(291
)
$
22,565
$
(1,833
)
(7.51
)%
46,732
(16,578
)
(26.2
)%
5.16
%
(155
)
23,806
(592
)
(2.43
)%
58,240
(5,070
)
(8.0
)%
6.28
%
(43
)
24,102
(296
)
(1.21
)%
63,310
6.71
%
24,398
63,123
(187
)
(0.3
)%
6.62
%
(9
)
24,285
(113
)
(0.46
)%
(1)
Assumes an instantaneous uniform change in interest rates at all maturities.
(2)
NPV is the discounted present value of expected cash flows from assets, liabilities and
off-balance sheet contracts.
(3)
Present value of assets represents the discounted present value of incoming cash flows on
interest-earning assets.
(4)
NPV Ratio represents NPV divided by the present value of assets.
Table of Contents
Table of Contents
Table of Contents
AND ATLANTIC COAST BANK
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
At March 31,
At December 31,
2010
2009
2008
2007
2006
2005
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
(Dollars in Thousands)
$
299,314
49.24
%
$
306,968
49.28
%
$
370,783
49.86
%
$
377,956
53.51
%
$
334,000
52.14
%
$
324,681
55.88
%
77,584
12.76
77,403
12.42
84,134
11.31
74,748
10.58
60,912
9.51
59,074
10.16
35,999
5.92
37,591
6.03
43,901
5.91
40,698
5.76
34,446
5.38
20,302
3.49
412,897
67.92
421,962
67.73
498,818
67.08
493,402
69.85
429,358
67.03
404,057
69.53
3,293
0.54
4,189
0.67
8,974
1.21
13,448
1.90
32,467
5.07
24,243
4.17
7,521
1.24
8,022
1.29
10,883
1.46
11,129
1.58
2,862
0.45
2,577
0.44
2,871
0.47
3,148
0.51
5,008
0.67
5,329
0.75
2,103
0.33
13,685
2.25
15,359
2.47
$
24,865
3.34
29,906
4.23
37,432
5.85
$
26,820
4.61
91,644
15.08
93,929
15.08
107,525
14.46
98,410
13.93
91,062
14.22
79,016
13.60
71,961
11.84
73,870
11.86
87,162
11.72
64,673
9.16
63,630
9.93
62,846
10.81
17,667
2.91
17,848
2.86
25,273
3.40
20,009
2.83
19,044
2.97
8,430
1.45
181,272
29.83
185,647
29.80
219,960
29.58
183,092
25.92
173,736
27.12
150,292
25.86
$
607,854
100.00
%
$
622,968
100.00
%
$
743,643
100.00
%
$
706,400
100.00
%
$
640,526
100.00
%
$
581,169
100.00
%
5,231
5,122
8,662
3,256
3,348
3,164
81
91
172
339
348
695
(13,308
)
(13,810
)
(10,598
)
(6,482
)
(4,705
)
(4,587
)
$
599,858
$
614,371
$
741,879
$
703,513
$
639,517
$
580,441
(1)
Consists of land and multi-family loans.
Table of Contents
One- to Four-Family
One- to Four-Family
Commercial
Real Estate
Commercial Real Estate
Other Real Estate
(1)
Construction
(2)
Construction
(2)
Weighted
Weighted
Weighted
Weighted
Weighted
Average
Average
Average
Average
Average
Amount
Rate
Amount
Rate
Amount
Rate
Amount
Rate
Amount
Rate
(Dollars in Thousands)
$
1,808
5.23
%
$
9,510
5.34
%
$
17,423
4.30
%
$
%
$
7,217
4.78
%
996
6.82
20,416
6.39
5,336
6.54
698
5.75
18,341
6.75
1,915
7.10
21,922
5.31
14,353
6.60
4,021
7.22
805
6.50
25,451
6.31
13,919
6.84
5,855
6.22
256,093
5.94
864
5.97
3,041
5.79
4,189
6.54
$
306,968
$
77,403
$
37,591
$
4,189
$
8,022
Acquisition &
Development
Home Equity
Consumer
Commercial Business
Total
Weighted
Weighted
Weighted
Weighted
Weighted
Average
Average
Average
Average
Average
Amount
Rate
Amount
Rate
Amount
Rate
Amount
Rate
Amount
Rate
(Dollars in Thousands)
$
3,148
3.83
%
$
364
7.39
%
$
3,021
7.88
%
$
8,782
4.62
%
$
51,273
4.85
%
3,653
7.74
19,292
10.99
1,329
7.01
51,022
8.27
2,744
6.47
12,715
11.18
3,099
7.01
39,512
8.18
6,026
7.16
4,526
8.58
4,624
7.12
56,277
6.40
25,693
6.89
24,454
8.48
95,372
7.09
55,449
5.52
9,862
8.14
14
6.00
329,512
5.91
$
3,148
$
93,929
$
73,870
$
17,848
$
622,968
(1)
Consists of land and multi-family loans.
(2)
Construction loans include notes that cover both the construction period and the permanent
financing, and therefore, the schedule shows maturities for periods greater than one year.
Table of Contents
Due After December 31, 2010
Fixed Rate
Adjustable Rate
Total
(Dollars in Thousands)
$
143,324
$
161,837
$
305,161
37,086
30,807
67,893
13,550
6,619
20,169
193,960
199,263
393,223
$
3,369
$
820
$
4,189
805
805
4,174
820
4,994
$
30,995
$
62,633
$
93,628
70,286
1,883
72,169
7,955
1,111
9,066
109,236
65,627
174,863
$
307,370
$
265,710
$
573,080
(1)
Land and multi-family loans.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Loans Delinquent For
60-89 Days
90 Days and Over
Total
Number
Amount
Number
Amount
Number
Amount
(Dollars in Thousands)
8
$
2,006
74
$
12,309
82
$
14,315
4
3,890
4
3,890
7
1,148
41
10,080
48
11,228
1
4,988
1
4,988
6
578
28
2,467
34
3,045
28
389
52
656
80
1,045
1
15
1
15
50
$
4,136
200
$
34,390
250
$
38,526
16
$
2,700
76
$
11,288
92
$
13,988
2
797
2
3,097
4
3,894
8
979
37
9,063
45
10,042
1
4,988
1
4,988
6
281
29
2,913
35
3,194
41
411
67
887
108
1,298
73
$
5,168
212
$
32,236
285
$
37,404
10
1,848
36
8,599
46
10,447
4
7,185
4
7,185
1
35
13
1,188
14
1,223
2
258
2
258
2
4,289
2
4,289
12
837
16
840
28
1,677
34
249
41
387
75
636
1
170
1
170
57
$
2,969
115
$
22,916
172
$
25,885
Table of Contents
Loans Delinquent For
60-89 Days
90 Days and Over
Total
Number
Amount
Number
Amount
Number
Amount
(Dollars in Thousands)
11
3,105
11
2,291
22
5,396
1
175
2
783
3
958
2
135
5
310
7
445
1
1,527
1
880
2
2,407
3
229
11
774
14
1,003
41
272
62
268
103
540
87
772
87
772
59
$
5,443
179
$
6,078
238
$
11,521
3
$
421
4
$
325
7
$
746
2
430
2
430
1
16
1
104
2
120
1
196
3
551
4
747
2
376
2
280
4
656
36
203
88
445
124
648
88
915
88
915
43
$
1,212
188
$
3,050
231
$
4,262
3
$
241
5
$
571
8
$
812
1
202
4
238
5
440
1
109
1
109
3
661
3
661
1
35
1
35
50
216
121
597
171
813
1
156
87
784
88
940
59
$
1,585
218
$
2,225
277
$
3,810
(1)
Consists of land and multi-family loans.
Table of Contents
At March 31,
At December 31,
2010
2009
2008
2007
2006
2005
(Dollars in Thousands)
$
10,366
$
11,115
$
9,542
$
2,312
$
325
$
697
2,433
2,638
5,126
280
430
238
9,676
9,638
2,941
1,073
104
109
86
551
4,988
4,988
3,169
2,407
404
404
1,812
2,467
2,973
1,525
774
280
35
656
882
387
221
445
597
170
772
915
940
$
30,990
$
32,638
$
24,758
$
7,839
$
3,050
$
2,616
$
1,943
$
1,228
$
777
$
$
$
1,457
1,257
27
3,400
2,512
777
$
34,390
$
35,150
$
25,535
$
7,839
$
3,050
$
2,616
$
1,018
$
1,000
$
513
$
325
$
247
$
310
2,386
2,403
1,849
39
1,619
1,562
10
76
12
63
960
1,325
5,035
5,028
3,332
1,726
286
310
$
39,425
$
40,178
$
28,867
$
9,565
$
3,336
$
2,926
$
20,086
$
22,660
$
8,666
$
$
$
$
16,686
$
20,148
$
7,889
$
$
$
$
38,697
$
44,392
$
24,872
$
17,472
$
7,046
$
2,004
5.61
%
5.64
%
3.43
%
1.11
%
0.48
%
0.45
%
3.76
%
3.85
%
2.56
%
0.84
%
0.36
%
0.39
%
4.31
%
4.44
%
2.90
%
1.03
%
0.40
%
0.39
%
(1)
Consists of land and multi-family loans.
Table of Contents
Florida
Georgia
Other States
Total
(Dollars in Thousands)
$
9,545
$
1,399
$
1,365
$
12,309
3,890
3,890
9,278
398
9,676
4,988
4,988
404
404
2,187
267
13
2,467
41
149
466
646
$
30,333
$
2,213
$
1,844
$
34,390
(1)
Consists of land and multi-family loans.
Table of Contents
Table of Contents
At March 31,
At December 31,
2010
2009
2008
(Dollars in thousands)
$
42,088
$
47,065
$
33,248
1,729
1,797
459
$
$
$
$
43,817
$
48,862
$
33,707
Table of Contents
Table of Contents
At or For the
Three Months Ended
March 31,
At or For the Year Ended December 31,
2010
2009
2009
2008
2007
2006
2005
(Dollars in Thousands)
$
13,810
$
10,598
$
10,598
$
6,482
$
4,705
$
4,587
$
3,956
1,880
561
8,350
3,514
133
107
192
115
228
3,822
3,393
605
518
32
3,605
777
41
50
50
336
275
706
836
4,715
1,392
550
14
160
437
336
1,408
1,232
1,819
1,094
1,249
698
288
590
345
135
120
4,354
2,331
22,540
10,989
2,953
1,215
2,326
54
124
252
25
5
54
40
550
893
83
51
1
15
18
45
4
109
240
3
71
18
1
71
97
351
533
1,145
703
732
18
1
12
130
345
879
1,157
2,114
858
836
4,224
1,986
21,661
9,832
839
357
1,490
3,722
5,812
24,873
13,948
2,616
475
2,121
$
13,308
$
14,424
$
13,810
$
10,598
$
6,482
$
4,705
$
4,587
2.69
%
1.07
%
3.11
%
1.35
%
0.13
%
0.06
%
0.27
%
11.74
%
6.45
%
60.61
%
125.89
%
24.71
%
11.36
%
43.41
%
38.70
%
41.03
%
39.29
%
41.50
%
82.69
%
154.21
%
175.36
%
2.17
%
1.99
%
2.22
%
1.43
%
0.92
%
0.73
%
0.78
%
(1)
Consists of land and multi-family loans.
(2)
Total loans are net of deferred fees and costs and purchase premiums or discounts.
(3)
Ratios at or for the three months ended March 31, 2010 and 2009 are annualized.
Table of Contents
At December 31,
At March 31, 2010
2009
2008
Percent of
Percent of
Percent of
Loans in Each
Loans in Each
Loans in Each
Allowance for
Category to
Allowance for
Category to
Allowance for
Category to
Loan Losses
Total Loans
Loan Losses
Total Loans
Loan Losses
Total Loans
(Dollars in Thousands)
$
2,791
49.21
%
$
3,446
49.28
%
$
2,805
49.87
%
763
12.65
575
12.42
1,458
11.31
1,342
5.87
1,305
6.03
1,061
5.90
7
0.49
47
0.67
98
1.21
3,315
1.23
3,322
1.29
116
1.46
110
0.47
110
0.51
1,737
0.67
2,150
14.95
2,240
15.08
2,301
14.46
2,585
12.24
2,447
11.86
628
11.72
245
2.89
318
2.86
394
3.40
$
13,308
100.00
%
$
13,810
100.00
%
$
10,598
100.00
%
At December 31,
2007
2006
2005
Percent of
Percent of
Percent of
Loans in Each
Loans in Each
Loans in Each
Allowance for
Category to
Allowance for
Category to
Allowance for
Category to
Loan Losses
Total Loans
Loan Losses
Total Loans
Loan Losses
Total Loans
(Dollars in Thousands)
$
1,609
53.51
%
$
771
52.14
%
$
672
55.88
%
583
10.58
660
9.51
1,041
10.16
883
5.76
212
5.38
117
3.49
399
1.90
323
5.07
185
4.17
571
1.58
63
0.45
26
0.44
0.75
0.33
1,295
13.93
745
14.22
497
13.60
691
9.16
1,327
9.93
1,581
10.81
451
2.83
604
2.97
468
1.45
$
6,482
100.00
%
$
4,705
100.00
%
$
4,587
100.00
%
(1)
Consists of land and multi-family loans.
Table of Contents
Table of Contents
Table of Contents
At December 31,
At March 31, 2010
2009
2008
2007
Carrying
Percent of
Carrying
Percent of
Carrying
Percent of
Carrying
Percent of
Value
Total
Value
Total
Value
Total
Value
Total
(Dollars in Thousands)
$
28,082
13.75
%
$
15,752
8.85
%
$
14,200
9.63
%
$
11,510
8.58
%
851
0.42
844
0.47
2,513
1.70
8,684
6.47
49,660
24.32
38,410
21.59
37,948
25.73
33,282
24.81
104,585
51.21
102,439
57.57
76,076
51.59
62,349
46.49
21,039
10.30
20,493
11.52
16,737
11.35
18,308
13.65
$
204,217
100.00
%
$
177,938
100.00
%
$
147,474
100.00
%
$
134,133
100.00
%
Table of Contents
More than One Year
More than Five Years
One Year or Less
through Five Years
through Ten Years
More than Ten Years
Total Securities
Weighted
Weighted
Weighted
Weighted
Weighted
Amortized
Average
Amortized
Average
Amortized
Average
Amortized
Average
Amortized
Average
Cost
Yield
Cost
Yield
Cost
Yield
Cost
Yield
Cost
Fair Value
Yield
(Dollars in Thousands)
$
%
$
%
$
%
$
27,998
3.68
%
$
27,998
$
28,082
3.68
%
947
4.18
947
851
4.18
1,506
4.00
1,964
5.06
45,071
5.05
48,541
49,660
5.02
8,411
5.70
95,051
4.78
103,462
104,585
4.85
1,200
4.75
19,587
5.24
20,787
21,039
5.21
$
%
$
1,506
4.00
%
$
11,575
5.49
%
$
188,654
4.73
%
$
201,735
$
204,217
4.76
%
Table of Contents
For the Three Months Ended
March 31, 2010
For the year ended December 31, 2009
Weighted
Weighted
Average
Average
Average
Average
Balance
Percent
Rate
Balance
Percent
Rate
(Dollars in Thousands)
$
35,305
6.15
%
%
$
36,974
6.00
%
%
38,503
6.71
0.56
34,496
5.60
0.38
78,089
13.60
1.77
75,513
12.26
1.90
125,981
21.95
1.30
140,090
22.75
1.69
277,878
48.41
1.16
287,073
46.61
1.37
296,121
51.59
2.72
328,773
53.39
3.65
$
573,999
100.00
%
1.96
%
$
615,846
100.00
%
2.59
%
Table of Contents
For the year ended December 31
2008
2007
Weighted
Weighted
Average
Average
Average
Average
Balance
Percent
Rate
Balance
Percent
Rate
(Dollars in Thousands)
$
38,574
6.41
%
%
$
38,441
6.54
%
%
35,132
5.84
0.38
40,333
6.86
0.39
58,709
9.76
2.45
50,092
8.52
2.96
132,313
21.99
3.05
155,863
26.51
4.50
264,728
44.00
2.12
284,729
48.44
3.03
336,982
56.00
3.96
303,102
51.56
5.00
$
601,710
100.00
%
3.43
%
$
587,831
100.00
%
4.04
%
At
March 31, 2010
(In Thousands)
$
11,103
19,053
72,524
44,333
10,924
$
157,937
At March 31,
At December 31,
2010
2009
2008
2007
(In Thousands)
$
122,814
$
84,666
$
223
$
427
75,650
73,447
3,475
29,172
25,708
73,028
6,861
63,922
82,801
184,122
90,873
10,653
13,858
96,664
218,344
1,800
149
$
302,211
$
280,480
$
359,312
$
316,654
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At March 31, 2010
Period to Maturity
Less Than or
More Than
More Than
Equal to
One to
Two to
More Than
Percent of
One Year
Two Years
Three Years
Three Years
Total
Total
(Dollars in thousands)
$
119,539
$
3,275
$
$
$
122,814
40.64
%
23,993
38,229
12,774
654
75,650
25.03
8,509
5,867
2,459
12,337
29,172
9.65
48,280
7,374
1,555
6,713
63,922
21.15
2,973
3,466
2,880
1,334
10,653
3.53
$
203,294
$
58,211
$
19,668
$
21,038
$
302,211
100.00
%
At or For the Three Months
Ended March 31,
At or For the Year Ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
172,718
$
177,623
$
182,694
$
184,850
$
173,000
$
174,259
$
192,944
$
180,316
$
191,055
$
148,184
$
172,718
$
204,858
$
204,858
$
207,592
$
173,000
3.57
%
3.55
%
3.75
%
3.97
%
4.49
%
3.54
%
3.89
%
3.45
%
4.05
%
4.23
%
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At or For the Three Months
Ended March 31,
At or For the Year Ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
92,800
$
92,800
$
92,800
$
92,800
$
78,500
$
92,800
$
92,800
$
92,800
$
89,793
$
45,077
$
92,800
$
92,800
$
92,800
$
92,800
$
78,500
4.95
%
4.24
%
4.57
%
4.21
%
4.53
%
5.04
%
4.27
%
4.80
%
4.30
%
4.25
%
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Net Book Value
Location
Owned or Leased
March 31, 2010
(In Thousands)
Owned
$
1,433
Leased
44
Expires April 2012
Owned
119
Waycross, GA 31501
Owned
553
Owned
404
Owned
272
Owned
958
Owned
1,035
Leased
704
Expires January 2018
Owned
1,011
Owned
1,478
Owned
3,775
Owned
2,117
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the total capital distributions for the applicable calendar year exceed the sum of
the savings banks net income for that year to date plus the savings banks retained
net income for the preceding two years;
the savings bank would not be at least adequately capitalized following the
distribution;
the distribution would violate any applicable statute, regulation, agreement or
Office of Thrift Supervision-imposed condition; or
the savings bank is not eligible for expedited treatment of its filings.
the savings bank would be undercapitalized following the distribution;
the proposed capital distribution raises safety and soundness concerns; or
the capital distribution would violate a prohibition contained in any statute,
regulation or agreement.
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well-capitalized (at least 5% leverage capital, 6% Tier 1 risk-based capital and 10%
total risk-based capital);
adequately capitalized (at least 4% leverage capital (3% for savings banks with a
composite examination rating of 1), 4% Tier 1 risk-based capital and 8% total
risk-based capital);
undercapitalized (less than 4% leverage capital (3% for savings banks with a
composite examination rating of 1), 4% Tier 1 risk-based capital or 3% leverage
capital);
significantly undercapitalized (less than 6% total risk-based capital, 3% Tier 1
risk-based capital or 3% leverage capital); or
critically undercapitalized (less than 2% tangible capital).
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Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
Home Mortgage Disclosure Act, requiring financial institutions to provide
information to enable the public and public officials to determine whether a financial
institution is fulfilling its obligation to help meet the housing needs of the
community it serves;
Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed
or other prohibited factors in extending credit;
Fair Credit Reporting Act, governing the use and provision of information to credit
reporting agencies;
Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies;
Truth in Savings Act; and
Rules and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws.
Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with administrative
subpoenas of financial records;
Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern
automatic deposits to and withdrawals from deposit accounts and customers rights and
liabilities arising from the use of automated teller machines and other electronic
banking services;
Check Clearing for the 21
st
Century Act (also known as Check 21), which
gives substitute checks, such as digital check images and copies made from that
image, the same legal standing as the original paper check;
The USA PATRIOT Act, which requires savings banks to, among other things, establish
broadened anti-money laundering compliance programs, and due diligence policies and
controls to ensure the detection and reporting of money laundering. Such required
compliance programs are intended to supplement existing compliance requirements that
also apply to financial institutions under the Bank Secrecy Act and the Office of
Foreign Assets Control regulations; and
The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer
financial information by financial institutions with unaffiliated third parties.
Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering
financial products or services to retail customers to provide such customers with the
financial institutions
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privacy policy and provide such customers the opportunity to opt out of the
sharing of certain personal financial information with unaffiliated third parties.
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Name
Age
Position
58
Executive Chairman of the Board
53
President and Chief Executive Officer
46
Executive Vice President Commercial/Retail Sales
52
Senior Vice President and Chief Financial Officer
39
Senior Vice President and Chief Risk Officer
52
Treasurer
(1)
Executive officer of Atlantic Coast Financial Corporation only.
(2)
Executive officer of Atlantic Coast Financial Corporation and Atlantic Coast Bank.
(3)
Executive officer of Atlantic Coast Bank only.
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Position(s) Held With
Atlantic Coast Federal
Director
Current Term
Name (1)
Corporation
Age
Since
Expires
Executive Chairman of
the Board
58
2010
2011
President and CEO
53
2003
2011
Lead Independent Director
63
1982
2013
Director
52
2001
2013
Director
63
2005
2013
Director
54
2005
2012
Director
49
2003
2012
Director
64
1987
2012
Director
47
2005
2011
(1)
The mailing address for each person listed is 505 Haines Avenue, Waycross, Georgia 31501.
Each of the persons listed as a director, with the exception of Jay S. Sidhu, is also a
director of Atlantic Coast Federal, MHC and Atlantic Coast Bank.
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Summary Compensation Table
Nonqualified
Non-equity
deferred
incentive plan
compensation
All other
Name and Principal
Salary
Bonus
compensation
earnings
compensation
Total
Position
Year
($)
($)
($)
($)
($) (1)
($)
2009
225,000
82,418
307,418
2008
237,500
109,189
346,689
2009
178,217
17,218
195,435
2008
178,822
45,084
223,906
2009
174,432
37,137
211,569
2008
174,432
67,791
242,223
(1)
The amounts in this column reflect the various benefits and payments received by the
applicable named executive officer. A break-down of the various elements of compensation in
this column is set forth in the table provided below for the year ended December 31, 2009.
Insurance
Tax
Premiums
RRP
ESOP
Perquisites
Gross-Ups
Contributions
Paid
Dividends
Allocation
Total
Name
($)(1)
($)
to 401(k) Plan ($)
($)(2)
($)(3)
($)
($)
50,625
4,104
1,454
20,599
248
5,388
82,418
10,495
327
1,028
223
5,145
17,218
10,774
226
591
19,995
163
5,388
37,137
(1)
Perquisites for Messrs. Larison, Insel and Wagers included reimbursement for country club
membership and an automobile allowance. Mr. Larisons perquisites also included an IRA
contribution and a per diem payment for maintaining dual households in Waycross, Georgia and
Jacksonville, Florida which totaled $31,259. No other individual perquisite exceeded $25,000.
(2)
Represents cost of the insurance premiums paid by Atlantic Coast Bank on behalf of Messrs.
Larison and Insel in accordance with their endorsement life insurance agreements as described
in more detail below.
(3)
Represents dividends on unvested restricted stock awards granted under the 2005 Recognition
and Retention Plan.
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Outstanding Equity Awards at Fiscal Year-End December 31, 2009
Option Awards
Stock Awards
Equity
incentive
Equity
plan
incentive
awards:
plan
market or
awards:
payout
Equity incentive
number of
value of
plan
unearned
unearned
Number of
Number of
awards:
Number
shares,
shares,
securities
securities
number of
of shares
Market
units or
units or
underlying
underlying
securities
or units
value of shares
other
other
unexercised
unexercised
underlying
Option
Option
of stock
or units of
rights that
rights that
options
options not
unexercised
exercise
expiration
that have
stock that have
have not
have not
Grant
exercisable
exercisable
earned options
price
date
not vested
not vested
vested
vested
Name
Date
(#)
(#)
(#)
($)
(5)
(#)
($) (6)
(#)
($)
7/1/2005
8,269
(1)
12,486
7/28/2005
24,717
8,000
(2)
13.73
7/28/2015
10/11/2005
16,000
4,000
(3)
13.70
10/11/2015
Thomas B. Wagers,
Sr.
7/1/2005
571
(1)
862
7/28/2005
1,600
400
(2)
13.73
7/28/2015
10/11/2005
1,600
400
(3)
13.70
10/11/2015
12/22/2006
17,535
11,691
(4)
18.32
12/22/2016
6,860
(4)
10,359
7/1/2005
5,418
(1)
8,181
7/28/2005
24,000
6,000
(2)
13.73
7/28/2015
10/11/2005
12,000
3,000
(3)
13.70
10/11/2015
(1)
Awards will fully vest on July 1, 2010.
(2)
Awards will fully vest on July 28, 2010.
(3)
Awards will fully vest on October 11, 2010.
(4)
The stock option awards will vest as follows: 5,845 options will vest on December 22, 2010
and 5,846 options will vest on December 22, 2011. The restricted stock awards will vest as
follows: 3,430 shares will vest on December 22, 2010 and 3,430 shares will vest on December
22, 2011.
(5)
Stock options expire 10 years after the grant date.
(6)
Based on the closing stock price of $1.51 per share of Atlantic Coast Federal Corporation
common stock on December 31, 2009 as reported by the NASDAQ Stock Market.
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Director Compensation
Non-equity
Non-qualified
Fees earned
incentive
deferred
or paid
Stock
Option
plan
compensation
All other
in cash
awards
awards
compensation
earnings
compensation
Total
Name
($)
($)(1)
($)(1)
($)(2)
($)
($)(3)
($)
23,544
412
23,956
23,544
412
23,956
28,500
538
29,038
23,544
412
23,956
24,876
538
25,414
24,876
538
25,414
23,544
538
24,082
(1)
No stock awards or stock option grants were made in 2009. At December 31, 2009, each noted
director had 21,450 option awards. In addition, Messrs. Beeckler, Franklin and Palmer had
1,871 unvested restricted stock awards and the other directors had 2,447 unvested restricted
stock awards.
(2)
Directors earned no incentive compensation under the Director Incentive Plan in 2009.
(3)
This amount represents dividends received on unvested stock awards in 2009. For the year
ended December 31, 2009, no director received perquisites or personal benefits that exceeded
$10,000.
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non-employee directors in the aggregate may not receive more than 30% of the options
and restricted stock awards authorized under the plan;
any one non-employee director may not receive more than 5% of the options and
restricted stock awards authorized under the plan;
any officer or employee may not receive more than 25% of the options and restricted
stock awards authorized under the plan;
any tax-qualified employee stock benefit plans and management stock benefit plans,
in the aggregate, may not hold more than 10% of the shares sold in the conversion
offering, unless Atlantic Coast Bank has tangible capital of 10% or more, in which case
any tax-qualified employee stock benefit plans and management stock benefit plans, may
be increased to up to 12% of the shares sold in the conversion offering;
the options and restricted stock awards may not vest more rapidly than 20% per year,
beginning on the first anniversary of stockholder approval of the plan;
accelerated vesting is not permitted except for death, disability or upon a change
in control of Atlantic Coast Bank or Atlantic Coast Financial Corporation; and
our executive officers or directors must exercise or forfeit their options in the
event that Atlantic Coast Bank becomes critically undercapitalized, is subject to
enforcement action or receives a capital directive.
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81,600 Shares Awarded
96,000 Shares Awarded
110,400 Shares
126,960 Shares
at Minimum of
at Midpoint of
Awarded at Maximum
Awarded at Maximum
Conversion offering
Conversion offering
of Conversion offering
of Conversion offering
Share Price
Range
Range
Range
Range, As Adjusted
(In thousands, except share price information)
$
8.00
$
653
$
768
$
883
$
1,016
10.00
816
960
1,104
1,270
12.00
979
1,152
1,325
1,524
14.00
1,142
1,344
1,546
1,777
317,400 Options at
Grant-Date Fair
204,000 Options at
240,000 Options at
276,000 Options at
Maximum of
Exercise Price
Value Per Option
Minimum of Range
Midpoint of Range
Maximum of Range
Range, As Adjusted
(In thousands, except exercise price and fair value information)
$
8.00
$
2.31
$
471
$
554
$
638
$
733
10.00
2.89
590
694
798
917
12.00
3.47
708
833
958
1,101
14.00
4.05
826
972
1,118
1,285
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Percent of All
Total Shares
Common
Beneficially
Stock
Name of Beneficial Owner
(1)
Owned
(2)
Outstanding
100
*
59,060
(3)
*
91,023
(4)
*
62,904
(5)
*
47,805
(6)
*
51,330
(7)
*
39,392
(8)
*
186,810
(9)
1.4
%
30,377
(10)
*
102,597
(11)
*
66,564
(12)
*
31,332
(13)
*
55,849
(14)
*
825,043
6.1
%
8,728,500
65.1
%
9,553,543
71.2
%
*
Less than 1%.
**
Carl W. Insel, Phillip S. Buddenbohm and Philip S. Hubacher are officers of Atlantic Coast
Bank only. Jay Sidhu is a director and an officer of Atlantic Coast Federal Corporation only.
(1)
The mailing address for each person listed is 505 Haines Avenue, Waycross, Georgia 31501.
(2)
In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person
is deemed to be the beneficial owner for purposes of this table, of any shares of common stock
if such person has shared voting or investment power with respect to such security, or has a
right to acquire beneficial ownership at any time within 60 days from the date as of which
beneficial ownership is being determined. As used herein, voting power is the power to vote
or direct the voting of shares and investment power is the power to dispose or direct the
disposition of shares, and includes all shares held directly as well as by spouses and minor
children, in trust and other indirect ownership, over which shares the named individuals
effectively exercise sole or shared voting or investment power.
(3)
Includes 771 shares of common stock held in Mr. Martins individual retirement account, 1,000
shares owned by Mr. Martins spouse, 2,447 unvested shares of restricted stock, 17,160 shares
that can be acquired pursuant to stock options within 60 days of [Stockholder Record Date] and
14,897 shares of phantom stock.
(4)
Includes 35,748 shares of common stock held in Mr. Sweats individual retirement accounts,
17,803 shares of common stock held in Mr. Sweats spouses individual retirement account,
2,447 unvested shares of restricted stock and 17,160 shares that can be acquired pursuant to
stock options within 60 days of [Stockholder Record Date].
(5)
Includes 1,871 unvested shares of restricted stock and 17,160 shares that can be acquired
pursuant to stock options within 60 days of [Stockholder Record Date].
(6)
Includes 1,871 unvested shares of restricted stock, 17,160 shares that can be acquired
pursuant to stock options within 60 days of [Stockholder Record Date] and 20,292 shares of
phantom stock.
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(7)
Includes 2,447 unvested shares of restricted stock, 31,723 shares of common stock held in
trust and 17,160 shares that can be acquired pursuant to stock options within 60 days of
[Stockholder Record Date].
(8)
Includes 2,447 unvested shares of restricted stock and 17,160 shares that can be acquired
pursuant to stock options within 60 days of [Stockholder Record Date].
(9)
Includes 10,045 shares of common stock held in Mr. Larisons individual retirement accounts,
8,828 shares of common stock held in trust, 28,509 shares of common stock held in Mr.
Larisons 401(k) Plan account, 1,599 shares of common stock held by Mr. Larison as custodian
for his daughter, 8,269 unvested shares of restricted stock, 10,225 shares held in Mr.
Larisons employee stock ownership plan account, 4,020 shares of phantom stock and 40,717
shares that can be acquired pursuant to stock options within 60 days of [Stockholder Record
Date]. Mr. Larison has pledged 74,000 shares of our common stock as security for one loan.
(10)
Includes 100 shares of common stock held by Mr. Palmers children, 1,871 unvested shares of
restricted stock and 17,160 shares that can be acquired pursuant to stock options within 60
days of [Stockholder Record Date].
(11)
Includes 19,154 shares of common stock held in Mr. Insels 401(k) Plan account, 5,418
unvested shares of restricted stock, 7,182 shares held in Mr. Insels employee stock ownership
plan account and 36,000 shares that can be acquired pursuant to stock options within 60 days
of [Stockholder Record Date]. Mr. Insel has pledged 29,800 shares of our common stock as
security for a loan.
(12)
Includes 13,470 shares of common stock held in Mr. Wagers 401(k) Plan account, 7,431
unvested shares of restricted stock, 7,108 shares held in Mr. Wagers employee stock ownership
plan account and 20,735 shares that can be acquired pursuant to stock options within 60 days
of [Stockholder Record Date].
(13)
Includes 1,244 shares of common stock held in Mr. Buddenbohms 401(k) Plan account, 1,996
unvested shares of restricted stock, 11,600 shares that can be acquired pursuant to stock
options within 60 days of [Stockholder Record Date] and 5,099 shares held in Mr. Buddenbohms
employee stock ownership plan account.
(14)
Includes 7,117 shares of common stock held in Mr. Hubachers individual retirement account,
16,752 shares of common stock held in Mr. Hubachers 401(k) Plan account, 799 unvested shares
of restricted stock, 3,579 shares held in Mr. Hubachers employee stock ownership plan account
and 3,200 shares that can be acquired pursuant to stock options within 60 days of [Stockholder
Record Date].
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(i)
the number of exchange shares to be held upon completion of the conversion,
based upon their beneficial ownership of Atlantic Coast Federal Corporation common
stock as of [Stockholder Record Date];
(ii)
the proposed purchases of subscription shares, assuming sufficient shares of
common stock are available to satisfy their subscriptions; and
(iii)
the total shares of common stock to be held upon completion of the conversion.
*
Less than 1%.
(1)
Includes proposed subscriptions, if any, by associates.
(2)
Based on information presented in Beneficial Ownership of Common Stock, and assuming an
exchange ratio of 0.2337 at the minimum of the conversion offering range.
(3)
At the maximum of the conversion offering range, directors and executive officers would own
______ shares, or ______% of our outstanding shares of common stock.
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(i)
Natural persons (including trusts of natural persons) residing in the Georgia
counties of Chatham, Coffee and Ware and the Florida counties of Clay, Duval, Flagler,
Nassau and St. Johns; and
(ii)
Atlantic Coast Federal Corporations public stockholders as of [Stockholder
Record Date].
increase our capital position;
eliminate some of the uncertainties associated with proposed financial regulatory
reform by the United States Congress, which may result in changes to or elimination of
our primary bank regulator and holding company regulator as well as changes in
regulations applicable to us, including, but not limited to, capital requirements,
treatment of waived dividends by the mutual holding company, payment of dividends and
conversion to full stock form;
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support internal growth through increased lending in the communities we serve;
enable us to enhance existing products and services to meet the needs of our market;
improve the liquidity of our shares of common stock and enhance stockholder returns
through more flexible capital management strategies; and
support acquisitions of financial institutions as opportunities arise, although we
do not currently have any agreements to acquire a financial institution or other
entity.
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Equivalent
New
Total Shares
Value of
Equivalent
Shares to
Shares of Atlantic Coast
of Common
Shares
Pro Forma
be
Shares to be Sold in
Financial Corporation to be
Stock to be
Based
Book Value
Received
The Conversion
Issued for Shares of Atlantic
Issued in
Upon
Per
for 100
Offering
Coast Federal Corporation
Conversion
Exchange
Offering
Exchanged
Existing
Amount
Percent
Amount
Percent
Offering
Ratio
Price (1)
Share
Shares
2,040,000
65.1
%
1,095,443
34.9
%
3,135,443
0.2337
$
2.34
$
3.52
23
2,400,000
65.1
1,288,756
34.9
3,688,756
0.2750
2.75
3.87
27
2,760,000
65.1
1,482,070
34.9
4,242,070
0.3162
3.16
4.20
31
3,174,000
65.1
1,704,380
34.9
4,878,380
0.3636
3.64
4.56
36
(1)
Represents the value of shares of Atlantic Coast Financial Corporation common stock to be
received in connection with the conversion by a holder of one share of Atlantic Coast Federal
Corporation, pursuant to the exchange ratio, based upon the $10.00 per share offering price.
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the present results and financial condition of Atlantic Coast Federal Corporation
and the projected results and financial condition of Atlantic Coast Financial
Corporation;
the economic and demographic conditions in Atlantic Coast Federal Corporations
existing market area;
certain historical, financial and other information relating to Atlantic Coast
Federal Corporation;
a comparative evaluation of the operating and financial characteristics of Atlantic
Coast Federal Corporation with those of other similarly situated publicly traded
savings institutions;
the impact of the conversion and offering on Atlantic Coast Federal Corporations
stockholders equity and earnings potential;
the impact of the supplemental offering;
the Supplemental Retirement Plan liability for certain executive officers and
directors a portion of which vests upon completion of the conversion offering;
the proposed dividend policy of Atlantic Coast Financial Corporation; and
the trading market for securities of comparable institutions and general conditions
in the market for such securities.
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Atlantic Coast Federal Corporations financial condition and results of operations;
a comparison of financial performance ratios of Atlantic Coast Federal Corporation
to those of other financial institutions which were financially comparable with respect
to their asset size, capital ratios, recent history of earnings and asset quality
ratios;
market conditions generally and in particular for financial institutions; and
the historical trading price of the publicly held shares of Atlantic Coast Federal
Corporation common stock.
Price-to-book value ratio
Price-to-tangible book value ratio
66.72
%
66.80
%
62.55
%
62.62
%
58.64
%
58.70
%
54.45
%
54.51
%
54.18
%
61.61
%
50.78
%
56.98
%
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(i)
Natural persons (including trusts of natural persons) residing in the Georgia
counties of Chatham, Coffee and Ware and the Florida counties of Clay, Duval, Flagler,
Nassau and St. Johns;
(ii)
Atlantic Coast Federal Corporations public stockholders as of [Stockholder
Record Date]; and
(iii)
Other members of the general public.
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(i)
No person may purchase fewer than 25 shares of common stock;
(ii)
Tax qualified employee benefit plans, including our employee stock ownership
plan and 401(k) plan, may purchase in the aggregate up to 10% of the shares of common
stock issued in the conversion offering, including shares issued in the event of an
increase in the conversion offering range of up to 15%;
(iii)
Except for the employee stock ownership plan, as described above, no person or
entity, together with associates or persons acting in concert with such person or
entity, may purchase more than 5% of common stock sold in all categories of the
conversion offering combined;
(iv)
Current stockholders of Atlantic Coast Federal Corporation are subject to an
ownership limitation. As previously described, current stockholders of Atlantic Coast
Federal Corporation will receive shares of Atlantic Coast Financial Corporation common
stock in exchange for their existing shares of Atlantic Coast Federal Corporation
common stock. The number of shares of common stock that a stockholder may purchase in
the conversion offering, together with associates or persons acting in concert with
such stockholder, when combined with the shares that the stockholder and his or her
associates will receive in exchange for existing Atlantic Coast Federal Corporation
common stock, may not exceed 5% of the shares of common stock of Atlantic Coast
Financial Corporation to be issued and outstanding at the completion of the conversion;
and
(v)
The maximum number of shares of common stock that may be purchased in all
categories of the conversion offering by executive officers and directors of Atlantic
Coast Bank and their associates, in the aggregate, when combined with shares of common
stock issued in
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exchange for existing shares, may not exceed 25% of the total shares issued in the
conversion offering.
(i)
to fill the subscriptions of our tax-qualified employee benefit plans,
including the employee stock ownership plan and our 401(k) plan, for up to 10% of the
total number of shares of common stock issued in the conversion offering;
(ii)
in the event that there is an oversubscription at the Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member levels, to fill unfilled
subscriptions of these subscribers according to their respective priorities; and
(iii)
to fill unfilled subscriptions in the community offering, with preference
given first to natural persons (including trusts of natural persons) residing in
Georgia counties of Chatham, Coffee and Ware and the Florida counties of Clay, Duval,
Flagler, Nassau and St. Johns, then to Atlantic Coast Federal Corporations public
stockholders as of [Stockholder Record Date] and then to members of the general public.
The term associate of a person means:
(i)
any corporation or organization, other than Atlantic Coast Federal Corporation,
Atlantic Coast Bank or a majority-owned subsidiary of Atlantic Coast Bank, of which the
person is a senior officer, partner or 10% beneficial stockholder;
(ii)
any trust or other estate in which the person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity; provided, however,
it does not include any employee stock benefit plan in which the person has a
substantial beneficial interest or serves as trustee or in a similar fiduciary
capacity; and
(iii)
any blood or marriage relative of the person, who either has the same home as
the person or who is a director or officer of Atlantic Coast Federal Corporation or
Atlantic Coast Bank.
(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
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(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.
(i)
acting as our financial advisor for the conversion offering;
(ii)
providing administrative services and managing the Stock Information Center;
(iii)
educating our employees regarding the conversion offering;
(iv)
targeting our sales efforts, including assisting in the preparation of
marketing materials; and
(v)
soliciting orders for shares of common stock in the conversion offering;
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consolidation of deposit and loan accounts and vote calculation;
preparation of information for order forms and proxy cards;
interfacing with our financial printer;
recording stock order information; and
tabulating proxy votes.
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(i)
personal check, bank check or money order, made payable to Atlantic Coast
Financial Corporation; or
(ii)
authorization of withdrawal from the types of Atlantic Coast Bank deposit
accounts described on the stock order form.
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(i)
a small number of persons otherwise eligible to subscribe for shares under the
plan of conversion reside in such state;
(iii)
the issuance of subscription rights or the offer or sale of shares of common
stock to such persons would require us, under the securities laws of such state, to
register as a broker, dealer, salesman or agent or to register or otherwise qualify our
securities for sale in such state; or
(iii)
such registration or qualification would be impracticable for reasons of cost
or otherwise.
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1.
The merger of Atlantic Coast Federal, MHC with and into Atlantic Coast Federal
Corporation will qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code.
2.
The constructive exchange of Eligible Account Holders and Supplemental
Eligible Account Holders liquidation interests in Atlantic Coast Federal, MHC for
liquidation interests in Atlantic Coast Federal Corporation will satisfy the continuity
of interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations.
3.
None of Atlantic Coast Federal, MHC, Atlantic Coast Federal Corporation,
Eligible Account Holders nor Supplemental Eligible Account Holders, will recognize any
gain or loss on the transfer of the assets of Atlantic Coast Federal, MHC to Atlantic
Coast Federal Corporation in constructive exchange for liquidation interests
established in Atlantic Coast Federal Corporation for the benefit of such persons who
remain depositors of Atlantic Coast Bank.
4.
The basis of the assets of Atlantic Coast Federal, MHC and the holding period
of such assets to be received by Atlantic Coast Federal Corporation will be the same as
the basis and holding period of such assets in Atlantic Coast Federal, MHC immediately
before the exchange.
5.
The merger of Atlantic Coast Federal Corporation with and into Atlantic Coast
Financial Corporation will constitute a mere change in identity, form or place of
organization within the meaning of Section 368(a)(1)(F) of the Code and therefore will
qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the
Code. Neither Atlantic Coast Federal Corporation nor Atlantic Coast Financial
Corporation will recognize gain or loss as a result of such merger.
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6.
The basis of the assets of Atlantic Coast Federal Corporation and the holding
period of such assets to be received by Atlantic Coast Financial Corporation will be
the same as the basis and holding period of such assets in Atlantic Coast Federal
Corporation immediately before the exchange.
7.
Current stockholders of Atlantic Coast Federal Corporation will not recognize
any gain or loss upon their exchange of Atlantic Coast Federal Corporation common stock
for Atlantic Coast Financial Corporation common stock.
8.
Eligible Account Holders and Supplemental Eligible Account Holders will not
recognize any gain or loss upon the constructive exchange of their liquidation
interests in Atlantic Coast Federal Corporation for interests in the liquidation
account in Atlantic Coast Financial Corporation.
9.
The constructive exchange of the Eligible Account Holders and Supplemental
Eligible Account Holders liquidation interests in Atlantic Coast Federal Corporation
for interests in the liquidation account established in Atlantic Coast Financial
Corporation will satisfy the continuity of interest requirement of Section 1.368-1(b)
of the Federal Income Tax Regulations.
10.
Each stockholders aggregate basis in shares of Atlantic Coast Financial
Corporation common stock (including fractional share interests) received in the
exchange will be the same as the aggregate basis of Atlantic Coast Federal Corporation
common stock surrendered in the exchange.
11.
Each stockholders holding period in his or her Atlantic Coast Financial
Corporation common stock received in the exchange will include the period during which
the Atlantic Coast Federal Corporation common stock surrendered was held, provided that
the Atlantic Coast Federal Corporation common stock surrendered is a capital asset in
the hands of the stockholder on the date of the exchange.
12.
Cash received by any current stockholder of Atlantic Coast Federal Corporation
in lieu of a fractional share interest in shares of Atlantic Coast Financial
Corporation common stock will be treated as having been received as a distribution in
full payment in exchange for a fractional share interest of Atlantic Coast Financial
Corporation common stock, which such stockholder would otherwise be entitled to
receive. Accordingly, a stockholder will recognize gain or loss equal to the difference
between the cash received and the basis of the fractional share. If the common stock is
held by the stockholder as a capital asset, the gain or loss will be capital gain or
loss.
13.
It is more likely than not that the fair market value of the nontransferable
subscription rights to purchase Atlantic Coast Financial Corporation common stock is
zero. Accordingly, no gain or loss will be recognized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members upon distribution to them of
nontransferable subscription rights to purchase shares of Atlantic Coast Financial
Corporation common stock. Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members will not realize any taxable income as the result of the
exercise by them of the nontransferable subscriptions rights.
14.
It is more likely than not that the fair market value of the benefit provided
by the liquidation account of Atlantic Coast Bank supporting the payment of the
Atlantic Coast
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Financial Corporation liquidation account in the event Atlantic Coast Financial
Corporation lacks sufficient net assets is zero. Accordingly, it is more likely
than not that no gain or loss will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders upon the constructive distribution to them of
such rights in the Atlantic Coast Bank liquidation account as of the effective date
of the merger of Atlantic Coast Federal Corporation with and into Atlantic Coast
Financial Corporation.
15.
It is more likely than not that the basis of the shares of Atlantic Coast
Financial Corporation common stock purchased in the conversion offering by the exercise
of nontransferable subscription rights will be the purchase price. The holding period
of the Atlantic Coast Financial Corporation common stock purchased pursuant to the
exercise of nontransferable subscription rights will commence on the date on which the
right to acquire such stock was exercised.
16.
No gain or loss will be recognized by Atlantic Coast Financial Corporation on
the receipt of money in exchange for Atlantic Coast Financial Corporation common stock
sold in the conversion offering.
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Conversion and the Supplemental Offerings
Minimum
Midpoint
Maximum
Adjusted Maximum
42.63
%
44.95
%
46.84
%
48.62
%
22.89
%
24.14
%
25.15
%
26.11
%
34.48
%
30.91
%
28.00
%
25.27
%
100.00
%
100.00
%
100.00
%
100.00
%
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ATLANTIC COAST FEDERAL CORPORATION
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(i)
it does not involve an interim savings institution;
(ii)
Atlantic Coast Federal Corporations federal stock charter is not changed;
(iii)
each share of Atlantic Coast Federal Corporations stock outstanding
immediately prior to the effective date of the transaction will be an identical
outstanding share or a treasury share of Atlantic Coast Federal Corporation after such
effective date; and
(iv)
either:
(a)
no shares of voting stock of Atlantic Coast Federal Corporation
and no securities convertible into such stock are to be issued or delivered
under the plan of combination; or
(b)
the authorized but unissued shares or the treasury shares of
voting stock of Atlantic Coast Federal Corporation to be issued or delivered
under the plan of combination, plus those initially issuable upon conversion of
any securities to be issued or delivered under such plan, do not exceed 15% of
the total shares of voting stock of Atlantic Coast Federal Corporation
outstanding immediately prior to the effective date of the transaction.
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the economic effect, both immediate and long-term, upon Atlantic Coast Financial
Corporations stockholders, including stockholders, if any, who do not participate in
the transaction;
the social and economic effect on the present and future employees, creditors and
customers of, and others dealing with, Atlantic Coast Financial Corporation and its
subsidiaries and on the communities in which Atlantic Coast Financial Corporation and
its subsidiaries operate or are located;
whether the proposal is acceptable based on the historical, current or projected
future operating results or financial condition of Atlantic Coast Financial
Corporation;
whether a more favorable price could be obtained for Atlantic Coast Financial
Corporations stock or other securities in the future;
the reputation and business practices of the other entity to be involved in the
transaction and its management and affiliates as they would affect the employees of
Atlantic Coast Financial Corporation and its subsidiaries;
the future value of the stock or any other securities of Atlantic Coast Financial
Corporation or the other entity to be involved in the proposed transaction;
any antitrust or other legal and regulatory issues that are raised by the proposal;
the business and historical, current or expected future financial condition or
operating results of the other entity to be involved in the transaction, including, but
not limited to, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the proposed transaction, and other
likely financial obligations of the other entity to be involved in the proposed
transaction; and
the ability of Atlantic Coast Financial Corporation to fulfill its objectives as a
financial institution holding company and on the ability of its subsidiary financial
institution(s) to fulfill the objectives of a federally insured financial institution
under applicable statutes and regulations.
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(i)
The limitation on voting rights of persons who directly or indirectly
beneficially own more than 10% of the outstanding shares of common stock;
(ii)
The division of the board of directors into three staggered classes;
(iii)
The ability of the board of directors to fill vacancies on the board;
(iv)
The requirement that directors may only be removed for cause and by the
affirmative vote of at least a majority of the votes eligible to be cast by
stockholders;
(v)
The ability of the board of directors to amend and repeal the bylaws;
(vi)
The ability of the board of directors to evaluate a variety of factors in
evaluating offers to purchase or otherwise acquire Atlantic Coast Financial
Corporation;
(vii)
The authority of the board of directors to provide for the issuance of
preferred stock;
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(viii)
The validity and effectiveness of any action lawfully authorized by the affirmative
vote of the holders of a majority of the total number of outstanding shares of common
stock;
(ix)
The number of stockholders constituting a quorum or required for stockholder
consent;
(x)
The indemnification of current and former directors and officers, as well as
employees and other agents, by Atlantic Coast Financial Corporation;
(xi)
The limitation of liability of officers and directors to Atlantic Coast
Financial Corporation for money damages;
(xii)
The inability of stockholders to cumulate their votes in the election of
directors;
(xiii)
The advance notice requirements for stockholder proposals and nominations; and
(xiv)
The provision of the articles of incorporation requiring approval of at least
80% of the outstanding voting stock to amend the provisions of the articles of
incorporation provided in (i) through (xiii) of this list.
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(i)
the acquisition would result in a monopoly or substantially lessen competition;
(ii)
the financial condition of the acquiring person might jeopardize the financial
stability of the institution; or
(iii)
the competence, experience or integrity of the acquiring person indicates that
it would not be in the interest of the depositors or the public to permit the
acquisition of control by such person.
FOLLOWING THE CONVERSION
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Page
F-2
F-3
F-4
F-5
F-9
F-11 F-64
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Atlantic Coast Federal Corporation
Waycross, Georgia
Crowe Horwath LLP
March 31, 2010
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CONSOLIDATED BALANCE SHEETS
March 31, 2010 (Unaudited) and December 31, 2009 and 2008
(Dollars in Thousands, Except Share Information)
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CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands, Except Share Information)
Unaudited
March 31,
December 31,
2010
2009
2009
2008
2007
$
9,190
$
10,823
$
40,726
$
46,385
$
46,331
2,012
2,003
7,992
8,874
9,178
11,202
12,826
48,718
55,259
55,509
2,820
4,557
15,921
20,654
23,795
1,554
1,712
6,767
7,575
6,653
1,148
983
4,237
3,780
2,675
45
10
5,567
7,252
26,935
32,009
33,123
5,635
5,574
21,783
23,250
22,386
3,722
5,812
24,873
13,948
2,616
1,913
(238
)
(3,090
)
9,302
19,770
856
992
4,245
4,871
5,251
104
185
708
118
34
(273
)
(1,317
)
96
383
650
(46
)
(700
)
344
(4,471
)
625
(518
)
4
(75
)
(174
)
(4,467
)
222
215
916
886
897
178
175
632
984
861
2,634
65
51
3,065
806
176
1,077
1,540
4,165
10,949
7,173
2,570
2,446
10,381
12,890
11,760
129
(2,684
)
851
631
554
621
2,548
2,652
2,383
449
336
1,839
493
457
92
705
1,488
815
247
255
260
1,030
1,023
1,136
359
425
1,913
1,889
4,066
393
204
1,193
508
301
2,811
1,077
894
3,781
5,208
4,717
5,749
6,020
24,300
26,329
25,698
(2,759
)
(4,718
)
(23,225
)
(6,078
)
1,245
(1,657
)
6,110
(3,233
)
130
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
$
(0.21
)
$
(0.23
)
$
(2.24
)
$
(0.22
)
$
0.08
$
(0.21
)
$
(0.23
)
$
(2.24
)
$
(0.22
)
$
0.08
$
$
0.01
$
0.02
$
0.47
$
0.57
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Three Months Ended March 31, 2010 (Unaudited) and Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands, Except Share Information)
ACCUMULATED
ADDITIONAL
UNEARNED
OTHER
TOTAL
COMMON
PAID IN
ESOP
RETAINED
COMPREHENSIVE
TREASURY
STOCKHOLDERS
STOCK
CAPITAL
SHARES
EARNINGS
INCOME (LOSS)
STOCK
EQUITY
148
57,708
(3,259
)
52,711
(204
)
(16,017
)
91,087
276
466
742
(8
)
65
57
(98
)
207
109
684
684
332
332
49
(49
)
139
(155
)
(16
)
(2,644
)
(2,644
)
(1,968
)
(1,968
)
1,115
1,115
308
308
1,115
308
1,423
$
148
$
59,082
$
(2,793
)
$
51,182
$
104
$
(17,917
)
$
89,806
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Three Months Ended March 31, 2010 (Unaudited) and Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands, Except Share Information)
ACCUMULATED
ADDITIONAL
UNEARNED
OTHER
TOTAL
COMMON
PAID IN
ESOP
RETAINED
COMPREHENSIVE
TREASURY
STOCKHOLDERS
STOCK
CAPITAL
SHARES
EARNINGS
INCOME (LOSS)
STOCK
EQUITY
$
148
$
59,082
$
(2,793
)
$
51,182
$
104
$
(17,917
)
$
89,806
(94
)
465
371
680
680
397
397
(4
)
4
(2,136
)
(2,136
)
(60
)
(60
)
(1,841
)
(1,841
)
(2,845
)
(2,845
)
(412
)
(412
)
(2,845
)
(412
)
(3,257
)
$
148
$
60,061
$
(2,328
)
$
46,201
$
(308
)
$
(19,814
)
$
83,960
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Three Months Ended March 31, 2010 (Unaudited) and Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands, Except Share Information)
ACCUMULATED
ADDITIONAL
UNEARNED
OTHER
TOTAL
COMMON
PAID IN
ESOP
RETAINED
COMPREHENSIVE
TREASURY
STOCKHOLDERS
STOCK
CAPITAL
SHARES
EARNINGS
INCOME (LOSS)
STOCK
EQUITY
$
148
$
60,061
$
(2,328
)
$
46,201
$
(308
)
$
(19,814
)
$
83,960
(236
)
466
230
647
647
314
314
11
(11
)
400
400
(89
)
(89
)
28
(45
)
(17
)
(29
)
(29
)
(29,335
)
(29,335
)
456
456
4
4
(29,335
)
460
(28,875
)
$
148
$
61,225
$
(1,862
)
$
16,777
$
152
$
(19,899
)
$
56,541
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Three Months Ended March 31, 2010 (Unaudited) and Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands, Except Share Information)
ACCUMULATED
ADDITIONAL
UNEARNED
OTHER
TOTAL
COMMON
PAID IN
ESOP
RETAINED
COMPREHENSIVE
TREASURY
STOCKHOLDERS
STOCK
CAPITAL
SHARES
EARNINGS
INCOME (LOSS)
STOCK
EQUITY
$
148
$
61,225
$
(1,862
)
$
16,777
$
152
$
(19,899
)
$
56,541
(64
)
116
52
161
161
79
79
17
(17
)
(34
)
(34
)
(2,759
)
(2,759
)
1,706
1,706
625
625
(2,759
)
2,331
(428
)
$
148
$
61,418
$
(1,746
)
$
14,018
$
2,483
$
(19,950
)
$
56,371
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands)
Unaudited
March 31,
December 31,
2010
2009
2009
2008
2007
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
3,722
5,812
24,873
13,948
2,616
15,482
484
324
(2,684
)
(104
)
(185
)
(708
)
(118
)
(34
)
273
1,317
(17,632
)
(14,292
)
(87,981
)
(11,167
)
(74,419
)
21,480
23,891
80,353
11,189
78,178
92
705
1,488
815
247
(96
)
(383
)
(650
)
46
75
174
4,467
79
10
(669
)
(605
)
130
2,811
52
40
230
371
742
240
240
961
1,077
1,109
602
395
2,159
2,038
1,807
35
130
673
146
(581
)
(177
)
(176
)
(633
)
(984
)
(861
)
548
(2,389
)
(12,652
)
(6,957
)
(2,549
)
(642
)
(9
)
(1,307
)
3,180
915
5,805
11,189
(1,538
)
10,001
8,785
15,256
10,180
53,079
25,661
18,694
18,471
52,917
76,245
14,619
(39,691
)
(51,451
)
(140,523
)
(115,309
)
(67,871
)
(51,423
)
866
16,021
8,781
10,529
79,233
(57,940
)
(17,633
)
(156
)
(191
)
(728
)
(1,728
)
(932
)
852
1,653
718
732
2,653
2,287
401
1,038
(128
)
(27
)
(703
)
(1,345
)
(150
)
1,200
(14,226
)
(11,858
)
63,477
(68,946
)
(104,290
)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands)
Unaudited
March 31,
December 31,
2010
2009
2009
2008
2007
$
29,248
$
9,301
$
(28,169
)
$
41,876
$
9,678
(40,993
)
20,000
65,000
133,000
95,000
12,200
(10,000
)
14,300
49,500
(9,976
)
(27,226
)
(67,156
)
(121,150
)
(66,000
)
400
(34
)
(29
)
(29
)
(1,841
)
(1,968
)
(17
)
(60
)
57
(45
)
(89
)
(2,432
)
(2,509
)
9,238
2,001
(58,853
)
63,693
83,758
817
1,332
3,086
4,748
(11,747
)
37,144
34,058
34,058
29,310
41,057
$
37,961
$
35,390
$
37,144
$
34,058
$
29,310
$
5,641
$
7,276
$
27,058
$
32,070
$
32,839
15
15
(4,518
)
2,063
3,269
$
823
$
785
$
5,836
$
4,704
$
2,089
Table of Contents
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(Dollars in Thousands)
$
27,998
$
87
$
(3
)
$
28,082
947
(96
)
851
48,541
1,246
(127
)
49,660
103,462
1,478
(355
)
104,585
20,787
1,559
(1,307
)
21,039
$
201,735
$
4,370
$
(1,888
)
$
204,217
(Dollars in Thousands)
$
15,998
$
$
(246
)
$
15,752
947
(103
)
844
37,390
1,028
(8
)
38,410
101,236
1,530
(327
)
102,439
22,116
534
(2,157
)
20,493
$
177,687
$
3,092
$
(2,841
)
$
177,938
(Dollars in Thousands)
$
13,864
$
371
$
(35
)
$
14,200
2,664
7
(158
)
2,513
37,339
661
(52
)
37,948
75,852
402
(178
)
76,076
18,288
(1,551
)
16,737
$
148,007
$
1,441
$
(1,974
)
$
147,474
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31, 2010
(Dollars in Thousands)
Amortized
Fair
Cost
Value
$
$
28,945
28,933
48,541
49,660
103,462
104,585
20,787
21,039
$
201,735
$
204,217
December 31, 2009
(Dollars in Thousands)
Amortized
Fair
Cost
Value
$
$
16,945
16,596
37,390
38,410
101,236
102,439
22,116
20,493
$
177,687
$
177,938
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(Dollars in Thousands)
$
2,997
$
(3
)
$
$
$
2,997
$
(3
)
851
(96
)
851
(96
)
17,491
(127
)
17,491
(127
)
42,495
(355
)
42,495
(355
)
8,164
(1,287
)
839
(20
)
9,003
(1,307
)
$
71,998
$
(1,868
)
$
839
$
(20
)
$
72,837
$
(1,888
)
(Dollars in Thousands)
$
15,752
$
(246
)
$
$
$
15,752
$
(246
)
844
(103
)
844
(103
)
7,206
(8
)
7,206
(8
)
34,820
(327
)
34,820
(327
)
7,118
(203
)
9,462
(1,954
)
16,580
(2,157
)
$
64,896
$
(784
)
$
10,306
$
(2,057
)
$
75,202
$
(2,841
)
$
940
$
(35
)
$
$
$
940
$
(35
)
1,015
(33
)
823
(125
)
1,838
(158
)
3,616
(52
)
3,616
(52
)
24,593
(178
)
24,593
(178
)
16,737
(1,551
)
16,737
(1,551
)
$
30,164
$
(298
)
$
17,560
$
(1,676
)
$
47,724
$
(1,974
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
15,256
$
10,180
$
52,917
$
76,245
$
14,619
107
578
928
40
(11
)
(195
)
(278
)
(86
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
2010
2009
(Dollars in Thousands)
$
4,467
$
75
174
$
4,542
$
174
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands)
$
4,467
$
4,467
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
As of December 31,
March 31,
% of total
% of total
% of total
2010
loans
2009
loans
2008
loans
(Dollars In Thousands)
$
299,314
49.2
%
$
306,968
49.3
%
$
370,783
49.9
%
77,584
12.8
%
77,403
12.4
%
84,134
11.3
%
35,999
5.9
%
37,591
6.0
%
43,901
5.9
%
412,897
67.9
%
421,962
67.7
%
498,818
67.1
%
3,293
0.5
%
4,189
0.7
%
8,974
1.2
%
7,521
1.2
%
8,022
1.3
%
10,883
1.5
%
2,871
0.5
%
3,148
0.5
%
5,008
0.7
%
13,685
2.3
%
15,359
2.5
%
24,865
3.3
%
91,644
15.1
%
93,929
15.1
%
107,525
14.5
%
71,961
11.8
%
73,870
11.9
%
87,162
11.7
%
17,667
2.9
%
17,848
2.9
%
25,273
3.4
%
181,272
29.8
%
185,647
29.8
%
219,960
29.6
%
607,854
100
%
622,968
100
%
743,643
100
%
(13,308
)
(13,810
)
(10,598
)
5,231
5,122
8,662
81
91
172
$
599,858
$
614,371
$
741,879
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
13,810
$
10,598
$
10,598
$
6,482
$
4,705
(4,354
)
(2,331
)
(22,540
)
(10,989
)
(2,953
)
130
345
879
1,157
2,114
(4,224
)
(1,986
)
(21,661
)
(9,832
)
(839
)
3,722
5,812
24,873
13,948
2,616
$
13,308
$
14,424
$
13,810
$
10,598
$
6,482
As of
March 31,
As of December 31,
(Dollars in Thousands)
2010
2009
2008
$
19,156
$
27,692
$
19,541
16,700
24,872
$
38,697
$
44,392
$
24,872
$
5,296
$
5,398
$
3,525
$
298
$
2,157
$
1,120
Period ending March 31,
Period ending December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
24,632
$
12,267
$
20,898
$
10,092
$
3,396
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
As of
As of December 31,
March 31, 2010
2009
Dollars in Thousands
$
4,471
$
2,572
424
119
1,879
(33
)
(99
)
$
4,862
$
4,471
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Fair Value Measurements at March 31, 2010 Using:
Quoted
Prices in
Active
Significant
Markets
Other
Significant
for Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Level 1)
(Level 2)
(Level 3)
(Dollars in Thousands)
$
28,082
$
28,082
851
851
49,660
49,660
104,585
104,585
21,039
10,483
10,556
$
(470
)
$
$
(470
)
$
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Fair Value Measurements at December 31, 2009 Using:
Quoted
Prices in
Active
Markets
Significant
for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Level 1)
(Level 2)
(Level 3)
(Dollars in Thousands)
$
15,752
$
15,752
844
844
38,410
38,410
102,439
102,439
20,493
19,141
1,352
$
(520
)
$
$
(520
)
$
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Fair Value Measurements at December 31, 2008 Using:
Quoted
Prices in
Active
Markets
Significant
for
Other
Significant
Identical
Observable
Nobservable
Assets
Inputs
Inputs
(Level 1)
(Level 2)
(Level 3)
(Dollars in Thousands)
$
14,200
$
14,200
2,513
2,513
37,948
37,948
76,076
76,076
16,737
8,693
8,044
$
(618
)
$
$
(618
)
$
Investment
Securities
Available-for-sale
As of
As of
March 31, 2010
December 31, 2009
(Dollars in Thousands)
$
1,352
$
(3,488
)
715
(53
)
(99
)
9,257
4,224
$
10,556
$
1,352
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Fair Value Measurements at March 31, 2010 Using:
Quoted
Prices in
Active
Markets
Significant
for
Other
Significant
Identical
Observable
Unobservable
March 31,
Assets
Inputs
Inputs
2010
(Level 1)
(Level 2)
(Level 3)
(Dollars in Thousands)
$
5,035
$
5,035
29,643
29,643
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Fair Value Measurements at December 31, 2008 Using:
Quoted
Prices in
Active
Markets
Significant
for
Other
Significant
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
2008
(Level 1)
(Level 2)
(Level 3)
(Dollars in Thousands)
$
3,332
$
3,332
13,947
13,947
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
December 31,
2010
2009
2008
(Dollars in Thousands)
$
7,176
$
7,176
$
7,241
12,016
12,016
12,312
9,625
9,316
9,318
152
368
28,817
28,660
29,239
(12,882
)
(12,646
)
(12,677
)
$
15,935
$
16,014
$
16,562
As of
As of December 31,
March 31, 2010
2009
2008
(Dollars in Thousands)
$
$
2,811
$
2,661
150
2,811
$
$
$
2,811
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
As of
As of December 31,
March 31, 2010
2009
2008
Gross
Gross
Gross
Carrying
Accumulated
Carrying
Accumulated
Carrying
Accumulated
Amount
Amortization
Amount
Amortization
Amount
Amortization
$
611
$
(505
)
$
611
$
(498
)
$
611
$
(466
)
(Dollars in Thousands)
$
27
27
27
27
5
As of
As of
March 31, 2010
December 31, 2009
(Dollars in Thousands)
$
146,617
$
189,277
90,287
50,678
39,704
23,705
12,977
9,862
12,626
6,958
$
302,211
$
280,480
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
345
$
363
$
1,434
$
1,438
$
1,482
465
759
2,495
4,168
7,169
2,010
3,435
11,992
15,048
15,144
$
2,820
$
4,557
$
15,921
$
20,654
$
23,795
Period
ended
Periods ended December 31,
March 31, 2010
2009
2008
(Dollars in Thousands)
$
132,718
$
147,694
$
152,600
40,000
35,000
32,250
$
172,718
$
182,694
$
184,850
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
(Dollars in Thousands)
$
15,000
13,000
25,000
10,000
20,000
90,000
$
173,000
(Dollars in Thousands)
$
25,000
13,000
10,000
10,000
20,000
105,000
$
183,000
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31, 2010
2009
2008
(in thousands)
$
92,800
$
92,800
$
89,793
4.95
%
4.57
%
4.45
%
$
92,800
$
92,800
$
92,800
5.04
%
4.80
%
4.30
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31, 2010
December 31, 2009
(Dollars in Thousands)
$
50,000
$
50,000
2.50
%
2.50
%
0.28
%
0.25
%
1.0
1.25
(470
)
(520
)
Liability Interest Rate Swaps
March 31, 2010
December 31, 2009
(Dollars in thousands)
Balance Sheet
Balance Sheet
Location
Fair Value
Location
Fair Value
Accrued expenses and other liabilities
$
(470
)
Accrued expenses and other liabilities
$
(520
)
$
(470
)
$
(520
)
Three Months Ended
March 31, 2010
March 31, 2009
Location of Gain or (Loss)
(Dollars in Thousands)
Recognized in Non-interest
Amount of the Gain or (Loss)
Income
Recognized in Income
Other
$
50
$
(24
)
$
50
$
(24
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Three Months Ended
Years Ended December 31,
March 31, 2010
2009
2008
290,950
279,312
232,760
174,570
186,208
232,760
465,520
465,520
465,520
$
436
$
281
$
908
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Weighted-Average
Grant-Date
Shares
Fair Value
111,394
$
15.46
(49,266
)
13.00
(4,400
)
11.55
57,728
$
17.25
57,728
$
17.25
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Weighted-
Weighted-
Average
Aggregate
Average
Remaining
Intrinsic
Exercise
Contractual
Value
Options
Shares
Price
Term
(in thousands)
559,101
$
13.72
(86,756
)
12.46
472,345
$
13.94
6.0
$
452,106
$
13.94
6.0
$
373,182
$
13.88
5.7
$
472,345
$
13.94
5.8
$
452,249
$
13.94
5.8
$
373,882
$
13.87
5.5
$
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
2009
2008
2007
$
$
$
18,000
57,000
$
$
1.35
$
1.82
For the Three Months Ended March 31,
Years Ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
$
$
$
$
3,025
2
4
10
15
15
(976
)
(1,657
)
(8,064
)
(3,248
)
(2,910
)
(74
)
(177
)
(1,224
)
(484
)
(324
)
976
14,169
72
173
1,219
484
324
$
$
(1,657
)
$
6,110
$
(3,233
)
$
130
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
For the Three Months
Ended March 31,
Years Ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
(939
)
$
(1,604
)
$
(7,896
)
$
(2,066
)
$
423
(74
)
(178
)
(1,282
)
(492
)
(413
)
(3
)
(7
)
(31
)
(49
)
(56
)
(61
)
(60
)
(215
)
(310
)
(293
)
(920
)
94
19
19
75
103
81
976
14,169
72
173
1,219
484
324
10
71
17
(30
)
$
$
(1,657
)
$
6,110
$
(3,233
)
$
130
0.0
%
35.1
%
26.3
%
53.2
%
10.4
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
December 31,
2010
2009
2008
(Dollars in Thousands)
$
5,057
$
5,248
$
4,027
182
93
208
414
446
1,292
118
118
154
7,938
6,630
3,131
224
179
198
1,116
1,128
182
7
268
32
133
133
378
635
654
1,726
1,697
71
71
56
56
32
32
99
$
17,763
$
16,772
$
9,628
(944
)
(93
)
(203
)
(237
)
(446
)
(223
)
(224
)
(239
)
(357
)
(22
)
(51
)
(1,370
)
(576
)
(1,093
)
16,393
16,196
8,535
(14,294
)
(14,169
)
(2,099
)
(2,027
)
(808
)
$
$
$
7,727
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
To Be Well
Capitalized Under
For Capital
Prompt Corrective
Actual
Adequacy Purposes
Action
Amount
Ratio
Amount
Ratio
Amount
Ratio
$
59.7
11.3
%
$
42.3
8.0
%
$
52.9
10.0
%
53.1
10.0
%
21.1
4.0
%
31.7
6.0
%
53.1
5.8
%
36.4
4.0
%
45.5
5.0
%
$
62.6
11.4
%
$
43.8
8.0
%
$
54.7
10.0
%
55.7
10.2
%
21.9
4.0
%
32.8
6.0
%
55.7
6.1
%
36.2
4.0
%
45.3
5.0
%
$
80.3
11.6
%
$
55.3
8.0
%
$
69.1
10.0
%
74.3
10.8
%
27.6
4.0
%
41.5
6.0
%
74.3
7.5
%
39.6
4.0
%
49.5
5.0
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
December 31,
2010
2009
2008
(Dollars in Thousands)
$
55,599
$
56,136
$
77,109
(106
)
(113
)
(2,955
)
(2,428
)
(327
)
125
53,065
55,696
74,279
6,626
6,857
6,046
$
59,691
$
62,553
$
80,325
March 31,
December 31,
2010
2009
2008
(Dollars in Thousands)
$
3,736
$
4,128
$
8,669
52,119
54,089
76,907
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Three months ended March 31,
Years ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands, Except Share Information)
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
13,391,202
13,435,116
13,423,499
13,557,869
13,693,651
(186,208
)
(232,760
)
(232,632
)
(278,930
)
(325,736
)
(57,728
)
(110,817
)
(86,166
)
(144,164
)
(202,571
)
13,147,266
13,091,539
13,104,701
13,134,775
13,165,344
$
(0.21
)
$
(0.23
)
$
(2.24
)
$
(0.22
)
$
0.08
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
13,147,266
13,091,539
13,104,701
13,134,775
13,165,344
51,445
128,719
13,147,266
13,091,539
13,104,701
13,134,775
13,345,508
$
(0.21
)
$
(0.23
)
$
(2.24
)
$
(0.22
)
$
0.08
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
March 31,
December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
1,638
546
1,122
(37
)
440
(96
)
(383
)
(650
)
46
1,638
450
739
(687
)
486
68
(181
)
(283
)
275
(178
)
1,706
269
456
(412
)
308
675
(692
)
4,475
(75
)
(174
)
(4,467
)
25
348
(4
)
625
(518
)
4
2,331
(249
)
460
(412
)
308
$
(428
)
$
(3,310
)
$
(28,875
)
$
(3,257
)
$
1,423
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
As of March 31,
As of December 31,
2010
2009
2008
Carrying
Estimated
Carrying
Estimated
Carrying
Estimated
Amount
Fair Value
Amount
Fair Value
Amount
Fair Value
(Dollars in Thousands)
$
37,961
$
37,961
$
37,144
$
37,144
$
34,058
$
34,058
5,253
5,253
8,990
8,990
736
736
599,858
599,680
614,371
614,229
741,879
733,142
10,023
n/a
10,023
n/a
9,996
n/a
3,225
3,225
3,261
3,261
3,934
3,934
584,692
586,604
555,444
557,094
624,606
627,049
92,800
102,798
92,800
102,537
92,800
106,327
172,718
181,705
182,694
201,227
184,850
216,869
1,244
1,244
1,318
1,318
1,441
1,441
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
CONDENSED BALANCE SHEETS
March 31, 2010 (Unaudited) and December 31, 2009 and 2008
As of March 31,
As of December 31,
2010
2009
2008
(Dollars in Thousands)
$
1,987
$
1,598
$
303
1,743
1,469
4,321
54,273
54,803
77,108
1,999
2,124
2,614
534
712
1,960
$
60,536
$
60,706
$
86,306
$
3,943
$
3,943
$
1,535
222
222
811
56,371
56,541
83,960
$
60,536
$
60,706
$
86,306
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
CONDENSED STATEMENTS OF INCOME (LOSS)
Three months ended March 31, 2010 and 2009 and Years ended December 31, 2009, 2008 and
2007
Three months ended March 31,
Years ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
8
$
75
$
230
$
543
$
530
(129
)
63
(1,158
)
89
(4
)
211
(14
)
136
(2,639
)
(2,972
)
(26,652
)
(2,780
)
2,345
(2,542
)
(2,901
)
(27,498
)
(2,188
)
3,011
217
160
1,837
657
1,896
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
CONDENSED STATEMENTS OF CASH FLOWS
Three Months ended March 31, 2010 and 2009 and Years ended December 31, 2009, 2008 and
2007
Three months ended March 31,
Years ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
$
(2,759
)
$
(3,061
)
$
(29,335
)
$
(2,845
)
$
1,115
(2
)
5
(6
)
10
129
(10
)
1,158
71
43
1,169
1,292
(1,866
)
(418
)
(589
)
156
(339
)
273
240
1,081
1,077
1,125
10,216
2,650
2,972
26,652
2,780
(2,345
)
233
(219
)
259
2,460
7,906
(8,537
)
65
235
593
6,268
983
1,082
4,134
2,161
(3,100
)
2,634
(3,796
)
(6,423
)
125
121
484
418
376
1
(3
)
1,200
190
356
(1,636
)
652
(541
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
CONDENSED STATEMENTS OF CASH FLOWS
Three Months ended March 31, 2010 and 2009 and Years ended December 31, 2009, 2008 and
2007
Three months ended March 31,
Years ended December 31,
2010
2009
2009
2008
2007
(Dollars in Thousands)
208
818
428
2,407
57
(17
)
(60
)
(16
)
(34
)
(29
)
(29
)
(1,841
)
(1,968
)
400
(2,978
)
(45
)
(89
)
(2,432
)
(2,509
)
(34
)
134
2,672
(3,515
)
(6,986
)
389
271
1,295
(403
)
379
1,598
303
303
706
327
$
1,987
$
574
$
1,598
$
303
$
706
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010 and 2009 (Unaudited), Years Ended December 31, 2009, 2008 and 2007
Table of Contents
Atlantic Coast Bank)
par value $0.01 per
share
Table of Contents
PROXY STATEMENT OF ATLANTIC COAST FEDERAL CORPORATION
Table of Contents
Table of Contents
505 Haines Avenue
Waycross, Georgia 31501
(800) 342-2824
1.
The approval of a plan of conversion and reorganization (the Plan) whereby:
(a) Atlantic Coast Federal, MHC and Atlantic Coast Federal Corporation, a Federal
corporation, will convert and reorganize from the mutual holding company structure to
the stock holding company structure; (b) Atlantic Coast Financial Corporation, a
Maryland corporation, will become the new stock holding company of Atlantic Coast Bank;
(c) the outstanding shares of Atlantic Coast Federal Corporation other than those held
by Atlantic Coast Federal, MHC, will be converted into shares of common stock of
Atlantic Coast Financial Corporation; and (d) Atlantic Coast Financial Corporation will
offer shares of its common stock for sale in a subscription offering, community
offering and, possibly, a syndicated community offering;
2.
The approval of the adjournment of the special meeting, if necessary, to
solicit additional proxies in the event that there are not sufficient votes at the time
of the special meeting to approve the plan of conversion and reorganization;
3.
The following informational proposals:
3a.
Approval of a provision in Atlantic Coast Financial Corporations
articles of incorporation requiring a super-majority vote of stockholders to
approve certain amendments to Atlantic Coast Financial Corporations articles of
incorporation;
3b.
Approval of a provision in Atlantic Coast Financial Corporations
articles of incorporation requiring a super-majority vote of stockholders to
approve stockholder-proposed amendments to Atlantic Coast Financial Corporations
bylaws;
3c.
Approval of a provision in Atlantic Coast Financial Corporations
articles of incorporation to limit the voting rights of shares beneficially owned
in excess of 10% of Atlantic Coast Financial Corporations outstanding voting
stock; and
4.
Such other business that may properly come before the meeting.
Table of Contents
BY ORDER OF THE BOARD OF DIRECTORS
Pamela T. Saxon
Corporate Secretary
, 2010
Table of Contents
1
6
11
17
20
21
25
26
27
27
27
28
29
30
31
32
32
33
33
34
35
35
35
36
37
38
38
38
38
38
38
F-1
Table of Contents
FOR STOCKHOLDERS OF ATLANTIC COAST FEDERAL CORPORATION
REGARDING THE PLAN OF CONVERSION AND REORGANIZATION
Q.
WHAT ARE STOCKHOLDERS BEING ASKED TO APPROVE?
A.
Atlantic Coast Federal Corporation stockholders as of _______ __, 2010 are being asked to vote
to approve the plan of conversion pursuant to which Atlantic Coast Federal, MHC will convert
from the mutual to the stock form of organization. As part of the conversion, a Maryland
corporation, Atlantic Coast Financial Corporation, is offering its common stock to eligible
depositors of Atlantic Coast Bank, to Atlantic Coast Banks tax qualified benefit plans, to
stockholders of Atlantic Coast Federal Corporation as of [voting record date] and to the
public. The shares offered represent Atlantic Coast Federal, MHCs current 65.1% ownership
interest in Atlantic Coast Federal Corporation. Voting for approval of the plan of conversion
will also include approval of the exchange ratio and the articles of incorporation and bylaws
of Atlantic Coast Financial Corporation (including the anti-takeover provisions and provisions
limiting stockholder rights).
Your vote is important. Without sufficient votes FOR its
approval, we cannot implement the plan of conversion.
In addition, Atlantic Coast Federal Corporation stockholders are being asked to approve the
adjournment of the special meeting, if necessary, to solicit additional proxies in the event
that there are not sufficient votes at the time of the special meeting to approve the plan
of conversion.
Stockholders also are asked to vote on the following informational proposals with respect to
the articles of incorporation and bylaws of Atlantic Coast Financial Corporation:
Approval of a provision in Atlantic Coast Financial Corporations articles
of incorporation requiring a super-majority vote of stockholders to approve
certain amendments to Atlantic Coast Financial Corporations articles of
incorporation;
Approval of a provision in Atlantic Coast Financial Corporations articles
of incorporation requiring a super-majority vote of stockholders to approve
stockholder-proposed amendments to Atlantic Coast Financial Corporations
bylaws; and
Approval of a provision in Atlantic Coast Financial Corporations articles
of incorporation to limit the voting rights of shares beneficially owned in
excess of 10% of Atlantic Coast Financial Corporations outstanding voting
stock.
The provisions of Atlantic Coast Financial Corporations articles of incorporation that are
included as informational proposals were approved as part of the process in which our Board
of Directors approved the plan of conversion. These proposals are informational in nature
only, because the Office of Thrift Supervisions regulations governing mutual-to-stock
conversions do not provide for votes on matters other than the plan of conversion. While we
are asking you to vote with respect to each of the informational proposals listed above, the
proposed provisions for
Table of Contents
which an informational vote is requested will become effective if stockholders approve the
plan of conversion, regardless of whether stockholders vote to approve any or all of the
informational proposals. The provisions of Atlantic Coast Financial Corporations articles
of incorporation which are summarized above as informational proposals may have the effect
of deterring, or rendering more difficult, attempts by third parties to obtain control of
Atlantic Coast Financial Corporation if such attempts are not approved by the Board of
Directors, or may make the removal of the Board of Directors or management, or the
appointment of new directors, more difficult.
Your vote is important. Without sufficient votes FOR approval of the plan of conversion,
we cannot implement the plan of conversion and the conversion offering.
Q.
WHAT ARE THE REASONS FOR THE CONVERSION AND OFFERINGS?
A.
Our primary reasons for converting and raising additional capital through the conversion
offering and supplemental are to:
increase our capital position;
eliminate some of the uncertainties associated with proposed financial
regulatory reform by the United States Congress which may result in changes to or
elimination of our primary bank regulator and holding company regulator as well as
changes in regulations applicable to us, including, but not limited to, capital
requirements, treatment of waived dividends by the mutual holding company, payment of
dividends and conversion to full stock form;
support internal growth through increased lending in the communities we
serve;
enable us to enhance existing products and services to meet the needs of
our market;
improve the liquidity of our shares of common stock and enhance
stockholder returns through more flexible capital management strategies; and
support acquisitions of financial institutions as opportunities arise,
although we do not currently have any agreements to acquire a financial institution or
other entity.
As a fully converted stock holding company, we will have greater flexibility in structuring
mergers and acquisitions, including the form of consideration that we can use to pay for an
acquisition. Our current mutual holding company structure limits our ability to offer shares of our common stock as consideration in a merger or acquisition since Atlantic Coast
Federal, MHC is required to own a majority of Atlantic Coast Federal Corporations
outstanding shares of common stock. Potential sellers often want stock for at least part of
the purchase price. Our new stock holding company structure will enable us to offer stock
or cash consideration, or a combination of stock and cash, and therefore will enhance our
ability to compete with other bidders when acquisition opportunities arise. We currently
have no arrangements or understandings regarding any specific acquisition.
Q.
WHAT WILL STOCKHOLDERS RECEIVE FOR THEIR EXISTING ATLANTIC COAST FEDERAL CORPORATION SHARES?
Table of Contents
A.
As more fully described in Proposal 1 Approval of the Plan of Conversion and
Reorganization Share Exchange Ratio, depending on the number of shares sold in the
conversion offering, each share of common stock that you own at the time of the completion of
the conversion will be exchanged for between 0.2337 shares at the minimum and 0.3162 shares at
the maximum of the conversion offering range (or 0.3636 at the adjusted maximum of the
conversion offering range) of Atlantic Coast Financial Corporation common stock (cash will be
paid in lieu of any fractional shares). For example, if you own 100 shares of Atlantic Coast
Federal Corporation common stock, and the exchange ratio is 0.2750 (at the midpoint of the
conversion offering range), after the conversion you will receive 27 shares of Atlantic Coast
Financial Corporation common stock and $5.00 in cash, the value of the fractional share, based
on the $10.00 per share purchase price of stock in the conversion offering.
If you own shares of Atlantic Coast Federal Corporation common stock in a brokerage account
in street name, your shares will be automatically exchanged, and you do not need to take
any action to exchange your shares of common stock. If you own shares in the form of
Atlantic Coast Federal Corporation stock certificates after the completion of the conversion
and related offering, our exchange agent will mail to you a transmittal form with
instructions to surrender your stock certificates. New certificates of Atlantic Coast
Financial Corporation common stock will be mailed to you within five business days after the
exchange agent receives properly executed transmittal forms and your Atlantic Coast Federal
Corporation stock certificates.
You should not submit a stock certificate until you receive
a transmittal form.
Q.
WHY WILL THE SHARES THAT I RECEIVE BE BASED ON A PRICE OF $10.00 PER SHARE RATHER THAN THE
TRADING PRICE OF THE COMMON STOCK PRIOR TO COMPLETION OF THE CONVERSION?
A.
The $10.00 per share price was selected primarily because it is a commonly selected per share
price for mutual-to-stock conversion offerings. The amount of common stock Atlantic Coast
Financial Corporation will issue at $10.00 per share in the conversion offering and the
exchange is based on an independent appraisal of the estimated market value of Atlantic Coast
Financial Corporation, assuming the conversion, conversion offering and supplemental offering
are completed. RP Financial, LC., an appraisal firm experienced in appraisal of financial
institutions, has estimated that, as of May 28, 2010, this market value ranged from $47.9
million to $58.9 million, with a midpoint of $53.4 million. Based on this valuation, the
number of shares of common stock of Atlantic Coast Financial Corporation that existing public
stockholders of Atlantic Coast Federal Corporation will receive in exchange for their shares
of Atlantic Coast Federal Corporation common stock will range from 2,040,000 to 2,760,000,
with a midpoint of 2,400,000 shares (with a value of approximately $20.4 million to $27.6
million, with a midpoint of $24.0 million, at $10.00 per share). If market conditions so
warrant, the appraised value can be increased to $65.3 million, the adjusted maximum of the
appraisal, and the number of shares issued in the exchange for existing shares of Atlantic
Coast Federal Corporation can be increased to 3,174,000 (a value of $31.7 million, at $10.00
per share). The number of shares received by the existing public stockholders of Atlantic
Coast Federal Corporation is intended to maintain their existing 34.9% ownership in our
organization (excluding any new shares purchased by them in the conversion offering and their
receipt of cash in lieu of fractional exchange shares and any shares purchased in the
supplemental offering). The independent appraisal is based in part on Atlantic Coast Federal
Corporations financial condition and results of operations, the pro forma impact of the
additional capital raised by the sale of shares of common stock in the offerings, and an
analysis of a peer group of ten publicly traded savings bank and thrift holding companies that
RP Financial, LC. considered comparable to Atlantic Coast Federal Corporation.
Table of Contents
Q.
DOES THE EXCHANGE RATIO DEPEND ON THE TRADING PRICE OF ATLANTIC COAST FEDERAL CORPORATION
COMMON STOCK?
A.
No, the exchange ratio will not be based on the market price of Atlantic Coast Federal
Corporation common stock. Therefore, changes in the price of Atlantic Coast Federal
Corporation common stock between now and the completion of the conversion and related
offerings will not affect the calculation of the exchange ratio.
Q.
WHY DOESNT ATLANTIC COAST FEDERAL CORPORATION WAIT TO CONDUCT THE CONVERSION AND OFFERINGS
UNTIL THE STOCK MARKET IMPROVES SO THAT CURRENT STOCKHOLDERS CAN RECEIVE A HIGHER EXCHANGE
RATIO?
A.
The Board of Directors believes that because the stock holding company form of organization
and the capital raised in the conversion offer important advantages and that it is in the best
interest of our stockholders to complete the conversion and related offerings sooner rather
than later. There is no way to know when market conditions will change, when regulations
governing conversion to stock form will change, or how they might change, or how changes in
market conditions might affect stock prices for financial institutions. The Board of Directors
concluded that it would be better to complete the conversion and offerings now, under existing
Office of Thrift Supervision conversion regulations and under a valuation that offers a fair
exchange ratio to existing stockholders and an attractive price to new investors, rather than
wait an indefinite amount of time for potentially better market conditions.
Q.
SHOULD I SUBMIT MY STOCK CERTIFICATES NOW?
A.
No. If you hold stock certificate(s), instructions for exchanging the certificates will be
sent to you by our exchange agent
after
completion of the conversion. If your shares are held
in street name (
e.g.,
in a brokerage account) rather than in certificate form, the share
exchange will be reflected automatically in your account upon completion of the conversion.
Q.
HOW DO I VOTE?
A.
Mark your vote, sign each proxy card enclosed and return the card(s) to us, in the enclosed
proxy reply envelope.
YOUR VOTE IS IMPORTANT. PLEASE VOTE PROMPTLY.
Q.
IF MY SHARES ARE HELD IN STREET NAME, WILL MY BROKER, BANK OR OTHER NOMINEE AUTOMATICALLY
VOTE ON THE PLAN ON MY BEHALF?
A.
No. Your broker, bank or other nominee will not be able to vote your shares without
instructions from you. You should instruct your broker, bank or other nominee to vote your shares, using the directions that they provide to you.
Q.
WHAT HAPPENS IF I DONT VOTE?
A.
Your vote is very important. Not voting all the proxy card(s) you receive will have the same
effect as voting
against
the plan of conversion.
Without sufficient favorable votes
for
the plan of conversion, we will not proceed with the conversion and related offering.
Q.
WHAT IF I DO NOT GIVE VOTING INSTRUCTIONS TO MY BROKER, BANK OR OTHER NOMINEE?
Table of Contents
A.
Your vote is important. If you do not instruct your broker, bank or other nominee to vote
your shares, the unvoted proxy will have the same effect as a vote
against
the plan of
conversion.
Q.
MAY I PLACE AN ORDER TO PURCHASE SHARES IN THE CONVERSION OFFERING, IN ADDITION TO THE SHARES
THAT I WILL RECEIVE IN THE EXCHANGE?
A.
Yes. If you would like to receive a prospectus and stock order form, you must call our Stock
Information Center at (___) ___-___, Monday through Friday between 9:00 a.m. and 5:00 p.m.,
Eastern time. The Stock Information Center is closed weekends and bank holidays.
Eligible depositors of Atlantic Coast Bank have priority subscription rights allowing them
to purchase common stock in a subscription offering. Shares not purchased in the
subscription offering may be available for sale to the public in a community offering, as
described herein. In the event orders for Atlantic Coast Financial Corporation common stock
in a community offering exceed the number of shares available for sale, shares may be
allocated (to the extent shares remain available) first to cover orders of natural persons
residing in the Georgia counties of Chatham, Coffee and Ware and the Florida counties of
Clay, Duval, Flagler, Nassau and St. Johns; second to cover orders of Atlantic Coast
Federal Corporation stockholders as of [voting record date]; and thereafter to cover orders
of the general public. Stockholders of Atlantic Coast Federal Corporation are subject to an
ownership limitation.
Shares of common stock purchased in the conversion offering by a stockholder and his or her
associates or individuals acting in concert with the stockholder,
plus
any shares a
stockholder and these individuals receive in the exchange for existing shares of Atlantic
Coast Federal Corporation common stock, may not exceed 5% of the total shares of common
stock of Atlantic Coast Financial Corporation to be issued and outstanding after the
completion of the conversion.
Q.
WILL THE CONVERSION HAVE ANY EFFECT ON DEPOSIT AND LOAN ACCOUNTS AT ATLANTIC COAST BANK?
A.
No. The account number, amount, interest rate and withdrawal rights of deposit accounts will
remain unchanged. Deposits will continue to be federally insured by the Federal Deposit
Insurance Corporation up to the legal limit. Loans and rights of borrowers will not be
affected. Depositors will no longer have voting rights in the mutual holding company, which
will cease to exist, after the conversion and related offering. Only stockholders of Atlantic
Coast Financial Corporation will have voting rights after the conversion and related offering.
Table of Contents
1.
The approval of a plan of conversion and reorganization (the Plan) whereby:
(a) Atlantic Coast Federal, MHC and Atlantic Coast Federal Corporation, a Federal
Corporation will convert and reorganize from the mutual holding company structure to
the stock holding company structure; (b) Atlantic Coast Financial Corporation will
become the new stock holding company of Atlantic Coast Bank; (c) the outstanding shares
of Atlantic Coast Federal Corporation other than those held by Atlantic Coast Federal,
MHC, will be converted into shares of common stock of Atlantic Coast Financial
Corporation; and (d) Atlantic Coast Financial Corporation will offer shares of its
common stock for sale in a subscription offering, community offering and, possibly, a
syndicated community offering;
2.
The approval of the adjournment of the special meeting, if necessary, to
solicit additional proxies in the event that there are not sufficient votes at the time
of the special meeting to approve the plan of conversion and reorganization;
3.
The following informational proposals:
3a.
Approval of a provision in Atlantic Coast Financial Corporations
articles of incorporation requiring a super-majority vote of stockholders to
approve certain amendments to Atlantic Coast Financial Corporations articles of
incorporation;
3b
Approval of a provision in Atlantic Coast Financial Corporations
articles of incorporation requiring a super-majority vote of stockholders to
approve stockholder-proposed amendments to Atlantic Coast Financial Corporations
bylaws;
3c.
Approval of a provision in Atlantic Coast Financial Corporations
articles of incorporation to limit the voting rights of shares beneficially owned
in excess of 10% of Atlantic Coast Financial Corporations outstanding voting
stock; and
4.
Such other business that may properly come before the meeting.
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(i)
First, to depositors with accounts at Atlantic Coast Bank with aggregate
balances of at least $50.00 at the close of business on March 31, 2009.
(ii)
Second, to our tax-qualified employee benefit plans, including our employee
stock ownership plan and 401(k) plan, which will receive nontransferable subscription
rights to purchase in the aggregate up to 10.0% of the shares of common stock sold in
the conversion offering. Our employee stock ownership plan currently intends to
purchase up to 4% of the shares of common stock sold in the conversion offering, with
the remaining shares in this purchase priority allocated to our 401(k) plan.
(iii)
Third, to depositors with accounts at Atlantic Coast Bank with aggregate
balances of at least $50.00 at the close of business on [supplemental record date].
(iv)
Fourth, to depositors of Atlantic Coast Bank at the close of business on
[voting record date].
Table of Contents
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ARTICLES OF INCORPORATION AND BYLAWS OF ATLANTIC COAST FINANCIAL CORPORATION
Table of Contents
Table of Contents
the purchase of shares by underwriters in connection with a public offering; or
the purchase of shares by any employee benefit plans of Atlantic Coast Federal
Corporation or any subsidiary.
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OF ATLANTIC COAST FEDERAL CORPORATION AND SUBSIDIARY
Table of Contents
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AND RESULTS OF OPERATIONS
Table of Contents
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STOCKHOLDERS OF ATLANTIC COAST FEDERAL CORPORATION
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Table of Contents
Item 13.
Other Expenses of Issuance and Distribution
Amount (1)
*
$
400,000
*
250,000
*
1,140,400
*
100,000
*
605,000
*
35,000
*
62,500
*
35,000
*
300,000
*
31,184
*
5,000
*
20,500
*
54,816
*
$
3,039,400
*
Estimated
(1)
Fees are estimated at the midpoint of the offering range. Atlantic Coast Financial
Corporation has retained Stifel, Nicolaus & Company, Incorporated to assist in the
sale of common stock on a best efforts basis in the offerings.
Item 14.
Indemnification of Directors and Officers
Table of Contents
Item 15.
Recent Sales of Unregistered Securities
Table of Contents
Item 16.
Exhibits and Financial Statement Schedules:
(a)
List of Exhibits
Engagement Letter between Atlantic Coast Federal, MHC, Atlantic Coast Federal
Corporation, Atlantic Coast Bank and Stifel, Nicolaus & Company, Incorporated
Form of Agency Agreement between Atlantic Coast Financial Corporation and Stifel, Nicolaus &
Company, Incorporated*
Atlantic Coast Federal, MHC Plan of Conversion and Reorganization
Amended and Restated Articles of Incorporation of Atlantic Coast Financial Corporation
Bylaws of Atlantic Coast Financial Corporation
Form of Common Stock Certificate of Atlantic Coast Financial Corporation
Opinion of Luse Gorman Pomerenk & Schick regarding legality of securities being registered
Form of Federal Tax Opinion of Luse Gorman Pomerenk & Schick
Atlantic Coast Federal Corporation Employee Stock Ownership Plan, with amendments
Employment Agreement between Atlantic Coast Bank and Robert J. Larison, Jr. (1)
Employment Agreement between Atlantic Coast Bank and Thomas B. Wagers, Sr. (2)
Employment Agreement between Atlantic Coast Bank and Carl W. Insel (3)
Employment Agreement between Atlantic Coast Federal Corporation and Jay Sidhu*
Non-Compete and Non-Solicitation Agreement between Atlantic Coast Bank and Robert J. Larison, Jr. (4)
Non-Compete and Non-Solicitation Agreement between Atlantic Coast Bank and Thomas B. Wagers, Sr. (5)
Non-Compete and Non-Solicitation Agreement between Atlantic Coast Bank and Carl W. Insel (6)
Fifth Amended and Restated Supplemental Retirement Agreement between Atlantic Coast Bank and
Robert J. Larison, Jr.
Third Amended and Restated Supplemental Retirement Agreement between Atlantic Coast Bank and
Thomas B. Wagers, Sr.
Fourth Amended and Restated Supplemental Retirement Agreement between Atlantic Coast Bank
and Carl W. Insel
Split Dollar Life Insurance Agreement between Atlantic Coast Bank and Robert J. Larison, Jr. (7)
Split Dollar Life Insurance Agreement between Atlantic Coast Bank and Thomas B. Wagers, Sr. (8)
Split Dollar Life Insurance Agreement between Atlantic Coast Bank and Carl W. Insel (9)
Atlantic Coast Federal Corporation 2008 Executive Deferred Compensation Plan (10)
Atlantic Coast Federal Corporation 2005 Stock Option Plan (11)
Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan (12)
Atlantic Coast Federal Corporation Employee Stock Purchase Plan (13)
Atlantic Coast Federal Corporation Director Stock Purchase Plan (14)
Atlantic Coast Federal Corporation Amended and Restated 2005 Director Deferred Fee Plan (15)
Atlantic Coast Federal Corporation Amended and Restated 2007 Director Deferred Compensation
Plan for Equity (16)
Atlantic Coast Bank Director Emeritus Plan (17)
Atlantic Coast Bank 2005 Amended and Restated Director Retirement Plan
Subsidiaries of Registrant
Consent of Luse Gorman Pomerenk & Schick (contained in Opinions included as Exhibits 5 and 8)
Consent of Crowe Horwath LLP
Consent of RP Financial, LC.
Power of Attorney (set forth on signature page)
Appraisal Agreement between Atlantic Coast Federal Corporation and RP Financial, LC.
Business Plan Agreement between Atlantic Coast Federal Corporation and McAuliffe Financial, LLC
Appraisal Report of RP Financial, LC. **
Data Processing Agreement between Atlantic Coast Federal, MHC, Atlantic Coast Federal
Corporation, Atlantic Coast Bank and Stifel, Nicolaus & Company, Incorporated
Table of Contents
Letter of RP Financial, LC. with respect to Subscription Rights
Letter of RP Financial, LC. with respect to Liquidation Rights
Marketing Materials*
Order and Acknowledgment Form*
Form of Proxy Card
*
To be filed supplementally or by amendment.
**
Supporting financial schedules filed in paper format only pursuant to Rule 202 of Regulation
S-T. Available for inspection, during business hours, at the principal offices of the
Securities and Exchange Commission in Washington, D.C.
(1)
Incorporated by reference to Exhibit 10.5 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(2)
Incorporated by reference to Exhibit 10.6 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(3)
Incorporated by reference to Exhibit 10.7 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(4)
Incorporated by reference to Exhibit 10.7 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on December
17, 2009.
(5)
Incorporated by reference to Exhibit 10.9 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(6)
Incorporated by reference to Exhibit 10.10 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(7)
Incorporated by reference to Exhibit 10.1 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on November
9, 2006.
(8)
Incorporated by reference to Exhibit 10.4 the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on January
7, 2010.
(9)
Incorporated by reference to Exhibit 10.3 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on November
9, 2006.
(10)
Incorporated by reference to Exhibit 10.1 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on February
12, 2008.
(11)
Incorporated by reference to Appendix B to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2005.
(12)
Incorporated by reference to Appendix C to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2005.
(13)
Incorporated by reference to Appendix A to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2010.
(14)
Incorporated by reference to Appendix B to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2010.
(15)
Incorporated by reference to Exhibit 10.6 to the Form 10-K Annual Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on March 31,
2009.
(16)
Incorporated by reference to Exhibit 10.15 to the Form 10-K Annual Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on March 31,
2009.
(17)
Incorporated by reference to Exhibit 10.14 to the Form 10-K Annual Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on March 31,
2009.
(b)
Financial Statement Schedules
Table of Contents
Item 17.
Undertakings
Table of Contents
Table of Contents
ATLANTIC COAST FINANCIAL CORPORATION
By:
/s/ Robert J. Larison, Jr.
Robert J. Larison, Jr.
President, Chief Executive Officer and Director
(Duly Authorized Representative)
Signatures
Title
Date
President, Chief Executive
Officer and Director
(Principal Executive Officer)
June 18, 2010
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
June 18, 2010
Executive Chairman of the Board
June 18, 2010
Vice-Chairman of the Board
June 18, 2010
Director
June 18, 2010
Director
June 18, 2010
Director
June 18, 2010
Director
June 18, 2010
Director
June 18, 2010
Director
June 18, 2010
Table of Contents
TO
REGISTRATION STATEMENT
ON
Atlantic Coast Federal Employees Savings and
Profit Sharing Plan And Trust
Table of Contents
Engagement Letter between Atlantic Coast Federal, MHC, Atlantic Coast Federal Corporation,
Atlantic Coast Bank and Stifel, Nicolaus & Company, Incorporated
Form of Agency Agreement between Atlantic Coast Financial Corporation and Stifel, Nicolaus &
Company, Incorporated*
Atlantic Coast Federal, MHC Plan of Conversion and Reorganization
Amended and Restated Articles of Incorporation of Atlantic Coast Financial Corporation
Bylaws of Atlantic Coast Financial Corporation
Form of Common Stock Certificate of Atlantic Coast Financial Corporation
Opinion of Luse Gorman Pomerenk & Schick regarding legality of securities being registered
Form of Federal Tax Opinion of Luse Gorman Pomerenk & Schick
Atlantic Coast Federal Corporation Employee Stock Ownership Plan, with amendments
Employment Agreement between Atlantic Coast Bank and Robert J. Larison, Jr. (1)
Employment Agreement between Atlantic Coast Bank and Thomas B. Wagers, Sr. (2)
Employment Agreement between Atlantic Coast Bank and Carl W. Insel (3)
Employment Agreement between Atlantic Coast Federal Corporation and Jay Sidhu*
Non-Compete and Non-Solicitation Agreement between Atlantic Coast Bank and Robert J. Larison, Jr. (4)
Non-Compete and Non-Solicitation Agreement between Atlantic Coast Bank and Thomas B. Wagers, Sr. (5)
Non-Compete and Non-Solicitation Agreement between Atlantic Coast Bank and Carl W. Insel (6)
Fifth Amended and Restated Supplemental Retirement Agreement between Atlantic Coast Bank and
Robert J. Larison, Jr.
Third Amended and Restated Supplemental Retirement Agreement between Atlantic Coast Bank and
Thomas B. Wagers, Sr.
Fourth Amended and Restated Supplemental Retirement Agreement between Atlantic Coast Bank
and Carl W. Insel
Split Dollar Life Insurance Agreement between Atlantic Coast Bank and Robert J. Larison, Jr. (7)
Split Dollar Life Insurance Agreement between Atlantic Coast Bank and Thomas B. Wagers, Sr. (8)
Split Dollar Life Insurance Agreement between Atlantic Coast Bank and Carl W. Insel (9)
Atlantic Coast Federal Corporation 2008 Executive Deferred Compensation Plan (10)
Atlantic Coast Federal Corporation 2005 Stock Option Plan (11)
Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan (12)
Atlantic Coast Federal Corporation Employee Stock Purchase Plan (13)
Atlantic Coast Federal Corporation Director Stock Purchase Plan (14)
Atlantic Coast Federal Corporation Amended and Restated 2005 Director Deferred Fee Plan (15)
Atlantic Coast Federal Corporation Amended and Restated 2007 Director Deferred Compensation
Plan for Equity (16)
Atlantic Coast Bank Director Emeritus Plan (17)
Atlantic Coast Bank 2005 Amended and Restated Director Retirement Plan
Subsidiaries of Registrant
Consent of Luse Gorman Pomerenk & Schick (contained in Opinions included as Exhibits 5 and 8)
Consent of Crowe Horwath LLP
Consent of RP Financial, LC.
Power of Attorney (set forth on signature page)
Appraisal Agreement between Atlantic Coast Federal Corporation and RP Financial, LC.
Business Plan Agreement between Atlantic Coast Federal Corporation and McAuliffe Financial, LLC
Appraisal Report of RP Financial, LC. **
Data Processing Agreement between Atlantic Coast Federal, MHC, Atlantic Coast Federal
Corporation, Atlantic Coast Bank and Stifel, Nicolaus & Company, Incorporated
Letter of RP Financial, LC. with respect to Subscription Rights
Letter of RP Financial, LC. with respect to Liquidation Rights
Marketing Materials*
Order and Acknowledgment Form*
Table of Contents
Form of Proxy Card
*
To be filed supplementally or by amendment.
**
Supporting financial schedules filed in paper format only pursuant to Rule 202 of Regulation
S-T. Available for inspection, during business hours, at the principal offices of the
Securities and Exchange Commission in Washington, D.C.
(1)
Incorporated by reference to Exhibit 10.5 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(2)
Incorporated by reference to Exhibit 10.6 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(3)
Incorporated by reference to Exhibit 10.7 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(4)
Incorporated by reference to Exhibit 10.7 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on December
17, 2009.
(5)
Incorporated by reference to Exhibit 10.9 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(6)
Incorporated by reference to Exhibit 10.10 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on May 14,
2010.
(7)
Incorporated by reference to Exhibit 10.1 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on November
9, 2006.
(8)
Incorporated by reference to Exhibit 10.4 the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on January
7, 2010.
(9)
Incorporated by reference to Exhibit 10.3 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on November
9, 2006.
(10)
Incorporated by reference to Exhibit 10.1 to the Form 8-K Current Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on February
12, 2008.
(11)
Incorporated by reference to Appendix B to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2005.
(12)
Incorporated by reference to Appendix C to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2005.
(13)
Incorporated by reference to Appendix A to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2010.
(14)
Incorporated by reference to Appendix B to the Definitive Proxy Statement filed by Atlantic
Coast Federal Corporation with the Securities and Exchange Commission on April 7, 2010.
(15)
Incorporated by reference to Exhibit 10.6 to the Form 10-K Annual Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on March 31,
2009.
(16)
Incorporated by reference to Exhibit 10.15 to the Form 10-K Annual Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on March 31,
2009.
(17)
Incorporated by reference to Exhibit 10.14 to the Form 10-K Annual Report of Atlantic Coast
Federal Corporation, originally filed with the Securities and Exchange Commission on March 31,
2009.
Re: Proposed Second Step Conversion and Secondary Placement Advisory, Administrative, Marketing and Placement Services |
a. | Advisory Services Stifel Nicolaus will work with the Company and its counsel to evaluate financial, marketing and regulatory issues. | ||
Our advisory services include: |
| Advice with respect to business planning issues in preparation for a public offering; | ||
| Advice with respect to the choice of charter and form of organization; | ||
| Review and advice with respect to the Plan (e.g. sizes of benefit plan purchases; maximum purchase limits for investors); | ||
| Review and input with respect to the business plan to be prepared in connection with the Conversion and Offering; | ||
| Discussion of the appraisal process and analysis of the appraisal with the Board of Directors and management; | ||
| Participation in drafting the offering disclosure documents and any proxy materials, and assistance in obtaining all requisite regulatory approvals; | ||
| Developing a marketing plan for the subscription and community offerings, considering various sales method options, including direct mail, advertising, community meetings and telephone solicitation; | ||
| Working with the Company to provide specifications and assistance (including recommendations) in selecting certain other professionals that will perform functions in connection with the Conversion and Offering process. Fees and expenses of financial printers, transfer agent and other service providers will be borne by the Company, subject to agreements between the Company and the service providers; |
| Developing a depositor proxy solicitation plan; | ||
| Developing a strategy for the subscription and community offering, including the location of the Stock Information Center (the Center); | ||
| Assist the company in drafting marketing materials including press releases, letters, stock order form, advertisements, and informational brochures. If a community meeting or road show is anticipated, we will help draft the presentation; and | ||
| After consulting with management, determine whether and when to conduct a syndicated community offering through assembling a group of selected broker/dealers (including Stifel Nicolaus) to sell stock remaining after the community offering, on a best-effort basis. Alternatively, consulting with management, as it relates to a firm commitment public underwriting, involving Stifel Nicolaus and other broker/dealers. |
b. | Administrative Services and Stock Information Center Management Stifel Nicolaus will manage substantially all aspects of the Offering and depositor vote processes. The Center centralizes all data and work effort relating to the Offering. | ||
Our administrative services include the following: |
| Providing experienced Stifel Nicolaus FINRA registered representatives to manage and supervise the Center; | ||
| Administering the Center. All substantive investor related matters will be handled by employees of Stifel Nicolaus; | ||
| Training and supervising Center staff assisting with order processing; | ||
| Preparing procedures for processing stock orders and cash, and for handling requests for information; | ||
| Educating the Companys directors, officers and employees about the Offering, their roles and relevant securities laws; | ||
| Educating branch managers and customer-contact employees on the proper response to stock purchase inquiries; | ||
| Preparing daily sales reports for management and ensure funds received balance to such reports; | ||
| Coordinating functions with the printer, transfer agent, stock certificate printer and other professionals; | ||
| Coordinating with the Companys stock exchange and the Depository Trust Company to ensure a smooth closing and orderly stock trading; | ||
| Designing and implementing procedures for facilitating orders within IRA and Keogh accounts; and | ||
| Providing post-offering subscriber assistance and management of the pro-ration process, in the event orders exceed shares available in the Offering. |
c. | Securities Marketing Services Stifel Nicolaus uses various sales techniques including direct mail, advertising, community investor meetings, telephone solicitation, and if necessary, assembling a selling group of broker-dealers for a syndicated community offering. | ||
Our securities marketing services include: |
| The Stifel Nicolaus registered representatives at the Center will seek to manage the sales function and, if applicable, will solicit orders from the prospects described above; | ||
| If applicable, assisting management in developing a list of potential investors who are viewed as priority prospects; | ||
| Responding to investment-related and other questions regarding information in the Offering disclosure documents provided to potential investors; | ||
| If the sales plan calls for community meetings, participating in them; | ||
| Continually advising management on market conditions and the customers/ communitys responsiveness to the Offering; | ||
| In case of a best-efforts syndicated community offering, managing the selling group. We will prepare broker fact sheets and arrange road shows for the purpose of generating interest in the stock and informing the brokerage community of the particulars of the Offering; and | ||
| Coordinating efforts to maximize after-market support and Company sponsorship. |
d. | Sale of Shares in the Secondary Placement . Stifel Nicolaus will perform or cause one or more of its affiliates to perform, and the Company hereby grants Stifel Nicolaus and its affiliates the exclusive right and authority to perform, the following services: |
| Assist the Company with the preparation of materials that include business and financial information about the Company and a description of the proposed financing with the proposed terms and conditions. | ||
| Contact and seek to elicit interest from one or more investors to participate in the Secondary Placement. | ||
| Advise the Company as to the procedures to obtain a favorable Secondary Placement and assist the Company in evaluating and negotiating the terms and conditions of any Commitment (as defined in Section 4). | ||
| Assist the Company in closing the Secondary Placement after a Commitment is procured. |
a. | An advisory and administrative fee of $50,000 in connection with the advisory and administrative services; the administrative and advisory fee shall be payable as follows: $25,000 upon signing this Agreement and $25,000 upon the initial filing of the Registration Statement. | ||
b. | A fee of one percent (1.00%) of the dollar amount of the Common Stock sold in the subscription and direct community offerings. No fee shall be payable pursuant to this subsection in connection with the sale of stock to officers, directors, employees or immediate family of such persons (Insiders) and qualified and non-qualified employee benefit plans of the Company or the Insiders. Immediate family includes spouse, parents, siblings and children who live in the same house as the officer, director, or employee. In no event, however, shall the fee payable pursuant to this subsection be less than $75,000. | ||
c. | For Common Stock sold by a group of selected dealers (including Stifel Nicolaus) pursuant to a syndicated community offering with Stifel Nicolaus as the sole book running manager (the Selling Group), a fee equal to one percent (1.00%) of the aggregate dollar amount of Common Stock sold in the syndicated community offering (Syndicate Management Fee), which fee paid to Stifel Nicolaus, along with the fee payable directly by the Company to Stifel Nicolaus and other selected dealers for their sales shall not exceed five and one half percent (5.50%) of the aggregate dollar amount of Common Stock sold. | ||
Stifel Nicolaus will serve as sole book running manager of the syndicated community offering and be entitled to a minimum 75 percent participation in all aspects of such offering. Subject to the foregoing and in consultation with Stifel Nicolaus, the Company will determine which FINRA member firms will (if any) serve as co-managers of the syndicated community offering or otherwise participate in the Selling Group and the extent of their participation. Stifel Nicolaus will not commence sales of the Common Stock through the Selling Group without the specific prior approval of the Company. | |||
To the extent, Stifel Nicolaus utilizes stand by purchasers in connection with the syndicated community offering, a fee of five and one half percent (5.5%) shall be applicable to such sales. | |||
d. | If, pursuant to a resolicitation of subscribers undertaken by the Company, Stifel Nicolaus is required to provide significant additional services, the additional compensation due will not exceed $50,000. | ||
e. | For Common Stock sold in connection with the Secondary Placement, a contingent placement fee (Placement Fee) equal to five percent (5.0%) on the aggregate amount of |
BY:
|
/s/ Ben Plotkin | |||
|
|
|||
|
Executive Vice President |
BY:
|
/s/ Robert J. Larison, Jr. | |||
|
|
|||
|
President and Chief Executive Officer |
1. |
Introduction
|
1 | ||||||
2. |
Definitions
|
2 | ||||||
3. |
Procedures for conversion
|
8 | ||||||
4. |
Holding company applications and approvals
|
11 | ||||||
5. |
Sale of subscription shares
|
11 | ||||||
6. |
Purchase price and number of subscription shares
|
12 | ||||||
7. |
Retention of conversion proceeds by the holding company
|
13 | ||||||
8. |
Subscription rights of eligible account holders (first priority)
|
13 | ||||||
9. |
Subscription rights of employee plans (second priority)
|
14 | ||||||
10. |
Subscription rights of supplemental eligible account holders (third priority)
|
14 | ||||||
11. |
Subscription rights of other members (fourth priority)
|
15 | ||||||
12. |
Community offering
|
15 | ||||||
13. |
Syndicated community offering and/or firm commitment underwritten offering
|
16 | ||||||
14. |
Limitations on purchases
|
16 | ||||||
15. |
Payment for subscription shares
|
18 | ||||||
16. |
Manner of exercising subscription rights through order forms
|
19 | ||||||
17. |
Undelivered, defective or late order form; insufficient payment
|
20 | ||||||
18. |
Residents of foreign countries and certain states
|
20 | ||||||
19. |
Establishment of liquidation accounts
|
21 | ||||||
20. |
Voting rights of stockholders
|
23 | ||||||
21. |
Restrictions on resale or subsequent disposition
|
23 | ||||||
22. |
Requirements for stock purchases by directors and officers following the
conversion
|
24 | ||||||
23. |
Transfer of deposit accounts
|
24 | ||||||
24. |
Registration and marketing
|
24 | ||||||
25. |
Tax rulings or opinions
|
25 | ||||||
26. |
Stock benefit plans and employment agreements
|
25 | ||||||
27. |
Restrictions on acquisition of bank and holding company
|
26 | ||||||
28. |
Payment of dividends and repurchase of stock
|
27 | ||||||
29. |
Articles of incorporation and bylaws
|
27 | ||||||
30. |
Consummation of conversion and effective date
|
27 | ||||||
31. |
Expenses of conversion
|
28 | ||||||
32. |
Amendment or termination of plan
|
28 | ||||||
33. |
Conditions to conversion
|
28 | ||||||
34. |
Interpretation
|
29 |
Exhibit A
|
Form of Agreement of Merger between Atlantic Coast Federal, MHC and Atlantic Coast Federal Corporation | |
|
||
Exhibit B
|
Form of Agreement of Merger between Atlantic Coast Federal Corporation and Atlantic Coast Financial Corporation |
(i)
2
3
4
5
6
7
8
(1) | The Holding Company will be organized as a first-tier stock subsidiary of the Mid-Tier Holding Company. | ||
(2) | The Mutual Holding Company will merge with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the surviving entity pursuant to the Agreement of Merger attached hereto as Exhibit A, whereby the shares of Mid-Tier Holding Company common stock held by the Mutual Holding Company will be canceled and Members will constructively receive liquidation interests in the Mid-Tier Holding Company in exchange for their ownership interests in the Mutual Holding Company. |
9
(3) | Immediately after the MHC Merger, the Mid-Tier Holding Company will merge with the Holding Company with the Holding Company as the surviving entity pursuant to the Agreement of Merger attached hereto as Exhibit B, whereby the Bank will become the wholly-owned subsidiary of the Holding Company. As part of the Mid-Tier Merger, the liquidation interests in the Mid-Tier Holding Company constructively received by Members as part of the MHC Merger will automatically, without further action on the part of the holders thereof, be exchanged for interests in the Liquidation Account, and each of the Minority Shares shall automatically, without further action on the part of the holders thereof, be converted into and become the right to receive Holding Company Common Stock based upon the Exchange Ratio. | ||
(4) | Immediately after the Mid-Tier Merger, the Holding Company will offer for sale the Holding Company Common Stock in the Offering. | ||
(5) | The Holding Company will contribute at least 50% of the net proceeds of the Offering to the Bank in constructive exchange for additional shares of common stock of the Bank and in exchange for the Bank Liquidation Account. |
10
11
12
13
14
15
16
17
18
19
20
21
22
1. | Any exchange of such shares in connection with a merger or acquisition involving the Bank or the Holding Company, as the case may be, which has been approved by the appropriate federal regulatory agency; and | ||
2. | Any disposition of such shares following the death of the person to whom such shares were initially sold under the terms of the Plan. |
23
1. | Each certificate representing shares restricted by this section shall bear a legend giving notice of the restriction; | ||
2. | Instructions shall be issued to the stock transfer agent for the Holding Company not to recognize or effect any transfer of any certificate or record of ownership of any such shares in violation of the restriction on transfer; and | ||
3. | Any shares of capital stock of the Holding Company issued with respect to a stock dividend, stock split, or otherwise with respect to ownership of outstanding Subscription Shares subject to the restriction on transfer hereunder shall be subject to the same restriction as is applicable to such Subscription Shares. |
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A. | (1) | The charter of the Bank may contain a provision stipulating that no person, except the Holding Company, for a period of five years following the closing date of the Conversion, may directly or indirectly acquire or offer to acquire the beneficial ownership of more than 10% of any class of equity security of the Bank, without the prior written approval of the OTS. In addition, such charter may also provide that for a period of five years following the closing date of the Conversion, shares beneficially owned in violation of the above-described charter provision shall not be entitled to vote and shall not be voted by any person or counted as voting stock in connection with any matter submitted to stockholders for a vote. In addition, special meetings of the stockholders relating to changes in control or amendment of the charter may only be called by the Board of Directors, and shareholders shall not be permitted to cumulate their votes for the election of Directors. | |
(2) | For a period of three years from the date of consummation of the Conversion, no person, other than the Holding Company, shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of the Bank without the prior written consent of the OTS. |
26
(1) | The term person includes an individual, a firm, a corporation or other entity; | ||
(2) | The term offer includes every offer to buy or acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security or interest in a security for value; | ||
(3) | The term acquire includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise; and | ||
(4) | The term security includes non-transferable subscription rights issued pursuant to a plan of conversion as well as a security as defined in 15 U.S.C. § 77b(a)(1). |
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B-4
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(a) | An affiliate of a specified Person shall mean a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. | ||
(b) | Beneficial ownership shall be determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 (or any successor rule or statutory provision), or, if said Rule 13d-3 shall be rescinded and there shall be no successor rule or statutory provision thereto, pursuant to said Rule 13d-3 as in effect on December 31, 2009; provided, however, that a Person shall, in any event, also be deemed the beneficial owner of any Common Stock: |
(1) | that such Person or any of its affiliates beneficially owns, directly or indirectly; or | ||
(2) | that such Person or any of its affiliates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of an agreement, contract, or other arrangement with the Corporation to effect any transaction of the type described in clause (i) or (ii) of the first sentence of Article 9 hereof) or upon the exercise of conversion rights, exchange rights, warrants, or options or otherwise, or (ii) sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such Person nor any such affiliate is otherwise deemed the beneficial owner); or |
3
(3) | that are beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person or any of its affiliates acts as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation; and provided further, however, that (i) no director or officer of the Corporation (or any affiliate of any such director or officer) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Common Stock beneficially owned by any other such director or officer (or any affiliate thereof), and (ii) neither any employee stock ownership or similar plan of the Corporation or any subsidiary of the Corporation nor any trustee with respect thereto (or any affiliate of such trustee) shall, solely by reason of such capacity of such trustee, be deemed, for any purposes hereof, to beneficially own any Common Stock held under any such plan. For purposes of computing the percentage of beneficial ownership of Common Stock of a Person, the outstanding Common Stock shall include shares deemed owned by such Person through application of this subsection but shall not include any other shares of Common Stock that may be issuable by the Corporation pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For all other purposes, the outstanding Common Stock shall include only Common Stock then outstanding and shall not include any Common Stock that may be issuable by the Corporation pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise. |
(c) | A Person shall mean any individual, firm, corporation, or other entity. | ||
(d) | The Board of Directors shall have the power to construe and apply the provisions of this Section D and to make all determinations necessary or desirable to implement such provisions including, but not limited to, matters with respect to (i) the number of shares of Common Stock beneficially owned by any Person, (ii) whether a Person is an affiliate of another, (iii) whether a Person has an agreement, arrangement, or understanding with another as to the matters referred to in the definition of beneficial ownership, (iv) the application of any other definition or operative provision of this Section D to the given facts, or (v) any other matter relating to the applicability or effect of this Section D. |
4
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Class I Directors: | Term to Expire in | |
Robert J. Larison, Jr.
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2011 | |
W. Eric Palmer
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2011 | |
Jay S. Sidhu
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2011 |
Class II Directors : | Term to Expire in | |
Frederick D. Franklin, Jr.
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2012 | |
Robert J. Smith
|
2012 | |
H. Dennis Woods
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2012 |
Class III Directors : | Term to Expire in | |
Charles E. Martin, Jr.
|
2013 | |
Forrest W. Sweat, Jr.
|
2013 | |
Thomas F. Beeckler
|
2013 |
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12
/s/ Robert J. Larison, Jr. | ||||
Robert J. Larison, Jr. | ||||
President and Chief Executive Officer | ||||
Attest:
|
||||
/s/ Pamela T. Saxon | ||||
Pamela T. Saxon | ||||
Secretary | ||||
13
Section 6. | Advance Notice Provisions for Business to be Transacted at Annual Meetings and Elections of Directors |
2
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(i) | To declare dividends from time to time in accordance with law; | ||
(ii) | To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine; | ||
(iii) | To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith; | ||
(iv) | To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being; | ||
(v) | To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents; | ||
(vi) | To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; | ||
(vii) | To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and | ||
(viii) | To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the Corporations business and affairs. |
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No.
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Atlantic Coast Financial Corporation | Shares |
THIS CERTIFIES that | is the owner of |
By
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[SEAL] | By | ||||||||
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PAMELA T. SAXON | ROBERT J. LARISON, JR. | ||||||||
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CORPORATE SECRETARY | PRESIDENT AND CHIEF EXECUTIVE OFFICER |
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TEN COM | - | as tenants in common | UNIF GIFT MIN ACT | - | Custodian | ||||||||||
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(Cust) | (Minor) |
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TEN ENT | - | as tenants by the entireties | |||||||
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Under Uniform Gifts to Minors Act | |||||||||
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JT TEN | - | as joint tenants with right of survivorship and not as | |||||||
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tenants in common | (State) |
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In the presence of
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Signature: | |
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Re: | Atlantic Coast Financial Corporation | ||
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Common Stock, Par Value $0.01 Per Share |
Very truly yours,
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/s/ Luse Gorman Pomerenk & Schick | |
Luse Gorman Pomerenk & Schick, P.C. | |
A Professional Corporation |
(1) | The Mid-Tier Holding Company will organize the Holding Company as a first-tier subsidiary chartered in Maryland. | ||
(2) | The Mutual Holding Company will merge with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the resulting entity (the MHC Merger) whereby the shares of Mid-Tier Holding Company held by the Mutual Holding Company will be cancelled and the members of the Mutual Holding Company will constructively receive liquidation interests in Mid-Tier Holding Company in exchange for their liquidation interests in the Mutual Holding Company. | ||
(3) | Immediately after the MHC Merger, the Mid-Tier Holding Company will merge with and into the Holding Company (the Mid-Tier Merger), with the Holding Company as the resulting entity. As part of the Mid-Tier Merger, the liquidation interests in Mid-Tier Holding Company constructively received by the members of Mutual Holding Company will automatically, without further action on the part of the holders thereof, be exchanged for interests in the Liquidation Account and the Minority Shares will automatically, without further action on the part of the holders thereof, be converted into and become the right to receive Holding Company Common Stock based on the Exchange Ratio. | ||
(4) | Immediately after the Mid-Tier Merger, the Holding Company will offer for sale Holding Company Common Stock in the Offering. | ||
(5) | The Holding Company will contribute at least 50% of the net proceeds of the Offering to the Bank in constructive exchange for common stock of the Bank and the Bank Liquidation Account. |
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Very truly yours, | |
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Luse Gorman Pomerenk & Schick P.C. |
ATTEST:
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/s/ Pamela T. Saxon
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By: | /s/ Forrest W. Sweat, Jr. | ||||
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Secretary
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Authorized Officer |
Page No. | ||||
Section 1. Plan Identity
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1 | |||
1.1 Name
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1 | |||
1.2 Purpose
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1 | |||
1.3 Effective Date
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1 | |||
1.4 Fiscal Period
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1 | |||
1.5 Single Plan for All Employers
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1 | |||
1.6 Interpretation of Provisions
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1 | |||
Section 2. Definitions
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1 | |||
Section 3. Eligibility for Participation
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11 | |||
3.1 Initial Eligibility
|
11 | |||
3.2 Definition of Eligibility Year
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11 | |||
3.3 Terminated Employees
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11 | |||
3.4 Certain Employees Ineligible
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11 | |||
3.5 Participation and Reparticipation
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12 | |||
3.6 Omission of Eligible Employee
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12 | |||
3.7 Inclusion of Ineligible Employee
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12 | |||
Section 4. Contributions and Credits
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12 | |||
4.1 Discretionary Contributions
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12 | |||
4.2 Contributions for Stock Obligations
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13 | |||
4.3 Conditions as to Contributions
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13 | |||
4.4 Rollover Contributions
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14 | |||
Section 5. Limitations on Contributions and Allocations
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14 | |||
5.1 Limitation on Annual Additions
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14 | |||
5.2 Effect of Limitations
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16 | |||
5.3 Limitations as to Certain Participants
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16 | |||
5.4 Erroneous Allocations
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17 | |||
5.5 Dividend Recharacterization
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17 | |||
Section 6. Trust Fund and Its Investment.
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18 | |||
6.1 Creation of Trust Fund
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18 | |||
6.2 Stock Fund and Investment Fund
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18 | |||
6.3 Acquisition of Company Stock
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18 | |||
6.4 Participants Option to Diversify
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19 | |||
Section 7. Voting Rights and Dividends on Company Stock
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20 | |||
7.1 Voting and Tendering of Company Stock
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20 | |||
7.2 Application of Dividends
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21 | |||
Section 8. Adjustments to Accounts
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22 | |||
8.1 ESOP Allocations
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22 | |||
8.2 Charges to Accounts
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23 | |||
8.3 Stock Fund Account
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24 |
Page No. | ||||
8.4 Investment Fund Account
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24 | |||
8.5 Adjustment to Value of Trust Fund
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24 | |||
8.6 Participant Statements
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24 | |||
Section 9. Vesting of Participants Interests
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25 | |||
9.1 Deferred Vesting in Accounts
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25 | |||
9.2 Computation of Vesting Years
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25 | |||
9.3 Full Vesting Upon Certain Events
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26 | |||
9.4 Full Vesting Upon Plan Termination
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27 | |||
9.5 Forfeiture, Repayment, and Restoral
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27 | |||
9.6 Accounting for Forfeitures
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28 | |||
9.7 Vesting and Nonforfeitability
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28 | |||
Section 10. Payment of Benefits
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28 | |||
10.1 Benefits for Participants
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28 | |||
10.2 Time for Distribution
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29 | |||
10.3 Marital Status
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30 | |||
10.4 Delay in Benefit Determination
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30 | |||
10.5 Accounting for Benefit Payments
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30 | |||
10.6 Options to Receive and Sell Company Stock
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30 | |||
10.7 Restrictions on Disposition of Company Stock
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32 | |||
10.8 Continuing Loan Provisions; Creations of Protections and Rights
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32 | |||
10.9 Direct Rollover of Eligible Distribution
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32 | |||
10.10 Waiver of 30-Day Period After Notice of Distribution
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33 | |||
Section 11. Rules Governing Benefit Claims and Review of Appeals
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33 | |||
11.1 Claim for Benefits
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33 | |||
11.2 Notification by Committee
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34 | |||
11.3 Claims Review Procedure
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34 | |||
Section 12. The Committee and its Functions
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34 | |||
12.1 Authority of Committee
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34 | |||
12.2 Identity of Committee
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35 | |||
12.3 Duties of Committee
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35 | |||
12.4 Compliance with ERISA
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36 | |||
12.5 Action by Committee
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36 | |||
12.6 Execution of Documents
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36 | |||
12.7 Adoption of Rules
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36 | |||
12.8 Responsibilities to Participants
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36 | |||
12.9 Alternative Payees in Event of Incapacity
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36 | |||
12.10 Indemnification by Employers
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36 | |||
12.11 Nonparticipation by Interested Member
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37 | |||
Section 13. Adoption, Amendment, or Termination of the Plan
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37 | |||
13.1 Adoption of Plan by Other Employers
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37 | |||
13.2 Plan Adoption Subject to Qualification
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37 | |||
13.3 Right to Amend or Terminate
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37 |
(ii)
Page No. | ||||
Section 14. Miscellaneous Provisions
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38 | |||
14.1 Plan Creates No Employment Rights
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38 | |||
14.2 Nonassignability of Benefits
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38 | |||
14.3 Limit of Employer Liability
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38 | |||
14.4 Treatment of Expenses
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38 | |||
14.5 Number and Gender
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39 | |||
14.6 Nondiversion of Assets
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39 | |||
14.7 Separability of Provisions
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39 | |||
14.8 Service of Process
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39 | |||
14.9 Governing State Law
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39 | |||
14.10 Employer Contributions Conditioned on Deductibility
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39 | |||
14.11 Unclaimed Accounts
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39 | |||
14.12 Qualified Domestic Relations Order
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40 | |||
Section 15. Top-Heavy Provisions
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41 | |||
15.1 Top-Heavy Plan
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41 | |||
15.2 Super Top-Heavy Plan
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41 | |||
15.3 Definitions
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41 | |||
15.4 Top-Heavy Rules of Application
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43 | |||
15.5 Minimum Contributions
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44 | |||
15.7 Top-Heavy Provisions Control in Top-Heavy Plan
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44 |
(iii)
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Vesting | Percentage of | |||
Years | Interest Vested | |||
Fewer than 1
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0 | % | ||
1 year
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20 | % | ||
2 years
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40 | % | ||
3 years
|
60 | % | ||
4 years
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80 | % | ||
5 years
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100 | % |
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ATTEST:
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ATLANTIC COAST FEDERAL CORPORATION | |
|
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/s/ Pamela T. Saxon
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/s/ Robert J. Larison, Jr. | |
|
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Secretary
|
President |
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ATLANTIC COAST FEDERAL CORPORATION | |
|
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August 27, 2009
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/s/ Robert J. Larison, Jr. | |
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Date
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Robert J. Larison, Jr. President and Chief | |
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Executive Officer |
1. | Definitions . In this Agreement, the following words and phrases shall have the following meanings: |
(a) | Administrator shall mean the person or committee appointed by the Board of Directors of the Bank (the Board) to administer this Agreement. If a committee is appointed by the Board, a majority of those persons shall constitute a quorum and the act of the majority of such of persons either at a meeting or by written consent, shall be the act of the Administrator. The Administrator may adopt such rules and procedures, not inconsistent with this Agreement, as it deems necessary or appropriate in order to administer this Agreement. | ||
(b) | Appreciation Benefit shall mean: |
| Second Step Conversion takes place on December 11, 2014 | ||
| Executives benefit as of December 11, 2009 is $28,800 | ||
| Prior Benefit Component of 20,000 shares ($28,800 / $1.44) | ||
| Stock Award Component of 30,000 shares | ||
| Stock Ownership Component of 25,000 shares | ||
| Issue Price of $5 ($6.44-$1.44) |
| Prior Benefit Component = $33,387.09 [the lesser of $100,000 (20,000 x $5) or $33,387.09 (28,800 x 3% per annum for five (5) years)]; plus | ||
| Stock Award Component = $37,500 (30,000 x .25 x $5); plus | ||
| Stock Ownership Component = $93,750 (25,000 x .75 x $5); equals |
| Appreciation Benefit = $164,637.09 |
Vested Percentage | Timing of Vesting | |
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15%
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Upon the expiration date of the Subscription Offering as defined in the Prospectus for the Second-Step Conversion, provided, however, if a Second-Step Conversion does not occur, vesting will not occur. | |
|
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100%
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Upon the Companys operation with positive before-tax income (disregarding any expense recorded by the Company or the Bank for a nonqualified deferred compensation plan sponsored by the Company or the Bank) for two consecutive calendar quarters following the closing of a Second-Step Conversion, provided, however, if a Second-Step Conversion does not occur, vesting will not occur. |
Notwithstanding the foregoing, the Executive will become 100 percent vested in his Appreciation Benefit prior to the schedule provided above in the event one of the following events occurs: death, Disability, Involuntary Termination, the occurrence of a Change in Control or the Administrator in its sole discretion accelerates vesting. Notwithstanding the preceding provisions, if the Executive resigns at the request of, or is removed from service by, the Office of Thrift Supervision, Federal Deposit Insurance Corporation or any other regulatory authority for the Bank, the Executive shall be ineligible to participate and shall forfeit any benefits under this Agreement. | |||
(c) | Benefit Determination Date shall mean any of the following: (1) the Executives Normal Retirement Date; (2) the date the Executive incurs an Involuntary Termination prior to the Executives Normal Retirement Date; (3) the date of the Executives death; (4) the date the Executive incurs a Disability; or (5) the date of a Change in Control. |
2
(d) | Cause shall mean a Separation from Service due to the Executives personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, and willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order. | ||
The basis for determining whether Cause exists shall not be deemed to include any impact on the Companys or the Banks business, properties, assets, liabilities, results of operations, financial condition or business from (1) changes in thrift, banking and similar laws of general applicability or interpretations thereof by courts or governmental authorities, or other changes affecting depository institutions generally, including changes in general economic conditions and changes in prevailing interest and deposit rates, (2) changes in GAAP or regulatory accounting requirements applicable to thrifts, banks and their holding companies generally, or (3) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel in the United States. | |||
A determination of Cause shall require the affirmative vote of a majority of the members of the Board, acting in good faith with respect to such termination, provided, however, that on or after the earliest date on which a change in control as defined in Section 1(e) occurs, such a determination shall require the affirmative vote of at least three fourths of the members of the Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board shall by written notice to the Executive, furnish him a statement of its grounds for proposing to make such determination, during which period the Executive shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board, and to be represented by his legal counsel at such presentations, or to refute the grounds for the proposed determination. | |||
(e) | Change in Control shall mean the following: |
3
(f) | Company Stock shall mean the common stock of the Company. | ||
(g) | Disabled or Disability shall mean the Executive: |
(h) | Fair Market Value shall mean the per share closing price of Company Stock, as reported by the principal exchange or market over which the shares of Company Stock are then listed or regularly traded. |
4
(i) | Involuntary Termination shall mean Separation from Service other than for Cause without the Executives express written consent and voluntary resignation due to a material diminution of or interference with the Executives duties, responsibilities and benefits as Chief Executive Officer of the Bank, including (without limitation) any of the following actions unless consented to in writing by the Executive: (i) a change in the principal workplace of the Executive to a location outside of a 30 mile radius from the Executives principal workplace as of the date hereof; (ii) a material demotion of the Executive; (iii) a material reduction in the number or seniority of other personnel reporting to the Executive or a material reduction in the frequency with which, or on the nature of the matters with respect to which, such personnel are to report to the Executive, other than as part of an institution-wide reduction in staff; (iv) a material adverse change in the Executives salary, perquisites, benefits, contingent benefits or vacation, other than as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Bank; and (v) a material permanent increase in the required hours of work or the workload of the Executive; provided that the Executive has notified the Bank of the existence of such a condition no later than 90 days after the initial existence of such condition and the Bank has at least 30 days to cure such condition. The term Involuntary Termination does not include termination for Cause or termination of employment due to retirement, death, Disability or suspension or temporary or permanent prohibition from participation in the conduct of the Banks affairs under Section 8 of the Federal Deposit Insurance Act. | ||
(j) | Issue Price shall mean the average selling price of a share of Company Stock over the thirty (30) day period immediately preceding the closing of a Second-Step Conversion minus $1.44 (the closing price of Company Stock on December 11, 2009). | ||
(k) | Monthly Benefit shall mean an amount, as of a Benefit Determination Date, equal to the vested Appreciation Benefit divided by 180. For example, if on a Benefit Determination Date the Appreciation Benefit is $450,000, then Executives Monthly Benefit is $2,500 ($450,000 / 180) plus accrued interest. | ||
(l) | Normal Retirement Date shall mean the date the Executive attains age 55 (i.e., February 9, 2012. The Executive may change his Normal Retirement Date provided that he files an election form with the Bank; provided, however, that: (1) the new election will not take effect until at least 12 months after the date the new election is filed; (2) the commencement of installment payments with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been made; and (3) the new election is filed at least 12 months prior to the date of the first scheduled payment under the Plan. | ||
(m) | Prior Benefit Component shall mean a number of shares of Company Stock equal to the Executives benefit under the Agreement as of December 11, 2009, divided by the Fair Market Value of Company Stock on December 11, 2009. For |
5
example, the Executives prior benefit under the terms of the Agreement on December 11, 2009 was $40,000 and the Fair Market Value of Company Stock on December 11, 2009 was $2.00. The Executive is deemed to have, for purposes of the Agreement, 20,000 shares of Company Stock ($40,000/$2.00) in the Prior Benefit Component. |
(n) | Second-Step Conversion shall mean the conversion and reorganization of Atlantic Coast Federal, MHC, the Company and the Bank from a mutual holding company structure to a fully public ownership structure. | ||
(o) | Separation from Service shall mean the date of cessation of the employment relationship (other than an approved leave of absence) between the Executive and the Bank and its affiliates and subsidiaries (including any successor in interest, if applicable), and shall be construed to comply with Code Section 409A and Treasury Regulations Section 1.409A-1(h). | ||
(p) | Specified Employee shall mean a key employee of the Bank within the meaning of Code Section 4l6(i) without regard to paragraph 5 thereof, determined in accordance with Code Section 409A and Treasury Regulations Section 1.409A-1(i). | ||
(q) | Stock Award Component shall mean the number of shares of Company Stock awarded to the Executive under the Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan that are still held by the Executive on December 11, 2009 times 25 percent. For example, on December 11, 2009 the Executive had 100 shares awarded to him under the Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan. For purposes of calculating the Appreciation Benefit, only 25 shares would be counted. | ||
(r) | Stock Ownership Component shall mean the number of shares of Company Stock directly or beneficially owned by the Executive (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, disregarding any beneficial ownership of stock options) as of December 11, 2009 times 75 percent. For example, on December 11, 2009 the Executive directly and beneficially owns 100 shares. For purposes of calculating the Appreciation Benefit, only 75 shares would be counted. |
2. | Payment of Benefits . |
(a) | Normal Benefit . If Monthly Benefits have not already started due to Separation from Service, Disability or Change in Control, the Bank shall pay the Monthly Benefit to Executive starting on the first business day of the month following the Normal Retirement Date and on the first business day of each calendar month thereafter for a total of 180 months (i.e., monthly payments for 15 years), regardless of whether the Executive has experienced a Separation from Service; provided however, that, if the Executive has experienced a Separation from Service, then, to the extent necessary to avoid penalties under Code Section 409A |
6
and the regulations thereunder, such payments shall not commence until the first day of the seventh month following the date of the Executives Separation from Service if the Executive is a Specified Employee on his date of Separation from Service. |
(b) | Death Benefit . If the Executive dies prior to the Normal Retirement Date, Separation from Service, Disability or Change in Control, the Bank shall pay to the beneficiary designated on Exhibit A , the Appreciation Benefit in a lump sum on the first business day of the month following the Executives death. If no beneficiary or beneficiaries have been designated, or if all of the beneficiaries predecease the Executive, the Monthly Benefit will be paid to the Executives estate. | ||
(c) | Disability Benefit . If the Executive becomes Disabled prior to the Normal Retirement Date, death, Separation from Service or Change in Control, the Bank shall pay the Monthly Benefit to him commencing on the first business day of the month following the date on which the Executive becomes Disabled and on the first business day of each calendar month thereafter for a period of 180 months. | ||
(d) | Separation from Service Benefit . In the event the Executive incurs a Separation from Service due to an Involuntary Termination before the Normal Retirement Date, Disability, death or Change in Control, the Bank shall pay the Monthly Benefit to him commencing on the first business day of the month following the Separation from Service and on the first business day of each calendar month thereafter for a period of 180 months. However, if the Executive is a Specified Employee on the date of his Separation from Service, such payments shall not commence until the first day of the seventh month following the date of the Executives Separation from Service. | ||
(e) | Change in Control Benefit . If a Change in Control occurs before the Normal Retirement Date, Separation from Service due to an Involuntary Termination, Disability or death, then, within 30 calendar days after such Change in Control, the Bank shall pay the Executive a lump sum equal to the Appreciation Benefit. | ||
(f) | Funding of Monthly Benefit . The Bank reserves the right to purchase a contract from a life insurance company with a minimum rating of AA from Standard & Poors and Moodys in order to provide all or any portion of the Monthly Benefit described herein. Upon the Banks purchase of such contract and distribution of the contract to Executive or his Beneficiary, the Banks liability to provide the Monthly Benefit hereunder shall cease and such contract shall be the sole source of funds for providing such Monthly Benefit. | ||
(g) | Changes in Company Stock . In the event of any change in Company Stock through stock dividends, split-ups, stock splits or reverse stock splits, recapitalizations, reclassifications, conversions or otherwise, then the Board will make appropriate adjustment or substitution in the aggregate value of the Prior |
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Benefit Component, the Stock Award Component and the Stock Ownership Component. |
3. | Claims . In the event a claim for benefits is wholly or partially denied under this Agreement, the Executive or any other person claiming benefits under this Agreement (a Claimant) shall be given notice in writing within 30 calendar days after the Administrators receipt of the claim. For good cause shown, the Administrator may extend this period for an additional 30 calendar days. Any denial must specifically set forth the reasons for the denial and any additional information necessary to rescind such denial. The Claimant shall have the right to seek a review of the denial by filing a written request with the Administrator within 60 calendar days of receipt of the denial. Such request may be supported by such documentation and evidence deemed relevant by the Claimant. Following receipt of this information, the Administrator shall make a final determination and notify the Claimant in writing within 60 calendar days of the Administrators receipt of the request for review together with the specific reasons for the decision. | |
4. | General Assets and Funding . The amounts payable under this Agreement are payable from the general assets of the Bank and no special fund or arrangement is intended to be established hereby nor shall the Bank be required to earmark, place in trust or otherwise segregate assets with respect to this Agreement or any benefits hereunder. The Administrator reserves the right to determine how the Bank will fund its obligation undertaken by this Agreement. At its discretion, the Administrator may establish one or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Banks creditors. To the extent any benefits provided under the Plan are actually paid from any such trust, the Bank shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Bank. Under no circumstances shall a Participant serve as trustee or co-trustee of any trust established by the Bank pursuant to this Plan. | |
Should the Administrator elect to purchase assets relating to this Agreement, in whole or in part, through the medium of life insurance or annuities, or both, the Bank shall be the owner and beneficiary of each such policy unless otherwise provided by this Agreement. Bank reserves the absolute right, in its sole discretion, to terminate such life insurance or annuities, as well as any other investment program, at any time, in whole or in part unless otherwise provided by this Agreement. Such termination shall in no way affect the Banks obligation to pay the Executive the benefits as provided in this Agreement. At no time shall the Executive be deemed to have any right, title, or interest in or to any specific asset or assets of the Bank, including but not by way of restriction, any insurance or annuity contract and contracts or the proceeds therefrom. | ||
5. | Certain Reductions . Notwithstanding any other provision of this Agreement, if the value and amounts of benefits under this Agreement, together with any other amounts and the value of benefits received or to be received by the Executive in connection with a Change in Control would cause any amount to be nondeductible for federal income tax |
8
purposes by the Bank or the consolidated group of which the Bank is a member pursuant to Section 280G of the Code, then amounts and benefits under this Agreement shall be reduced (not less than zero) to the extent necessary so as to maximize amounts and the value of benefits to the Employee without causing any amount to become nondeductible by Bank pursuant to or by reason of such Section 280G. The Employee shall determine the allocation of such reduction among payments and benefits to the Employee. |
6. | Beneficiary Designations . The Executive shall designate a beneficiary by filing with Bank a written designation of beneficiary on a form substantially similar to the form attached as Exhibit A. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Bank during the Executives lifetime. The Executives beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executives surviving spouse, if any, and if none, to the Executives surviving children and the descendants of any deceased child by right of representation, and if no children or descendants survive, to the Executives estate. | |
If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person, or to a custodian selected by the Bank under the Georgia Uniform Transfers to Minors Act for the benefit of such minor. The Bank may require proof of incompetency, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Bank from all liability with respect to such benefit. | ||
7. | Amendment and Termination . |
(a) | Amendment . This Agreement may be amended at any time by a written instrument signed by the Bank and the Executive. | ||
(b) | Termination . The Bank may at any time partially or completely terminate the Agreement, if, in its judgment, the tax, accounting, or other effects of the continuance of the Agreement, or potential payments thereunder, would not be in the best interests of the Bank. |
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8. | Miscellaneous . |
(a) | Withholding . To the extent amounts payable under this Agreement are determined by the Administrator, in good faith, to be subject to federal, state or local income tax, the Bank may withhold from each such payment an amount necessary to meet the Banks obligation to withhold amounts under the applicable federal, state or local law. |
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(b) | Governing Law . This Agreement shall be construed under the laws of the State of Georgia, except to the extent that federal law applies. | ||
(c) | Future Employment . This Agreement shall not be construed as providing the Executive the right to be continued in the employ of the Bank or its affiliates or subsidiaries. | ||
(d) | No Pledge or Attachment . No benefit which is or may become payable under this Agreement shall be subject to any anticipation, alienation, sale, transfer, pledge, encumbrance or hypothecation or subject to any attachment, levy or similar process and any attempt to effect any such action shall be null and void. | ||
(e) | Successors and Assigns . This Agreement and the obligations of the Bank herein shall be binding upon the successors and assigns of the Bank. This Agreement may not be assigned by the Bank without the prior written consent of the Executive or any other beneficiary receiving payments under this Agreement. | ||
(f) | Participation in Plans . Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of the Executive to participate in and be covered by any pension, profit sharing, group insurance, bonus, incentive, or other employee plans which the Bank or its affiliates or subsidiaries may now or hereafter have. | ||
(g) | Notices . Any notices under this Agreement shall be provided to the Executive at his last address on file with the Administrator and shall be provided to the Administrator in care of President, Atlantic Coast Federal, 505 Haines Avenue, Waycross, Georgia 31501. | ||
(h) | Headings . Headings of sections herein are inserted for convenience of reference. They are not to be considered in the construction of this Agreement. | ||
(i) | Savings Clause . If any provision of this Agreement shall be for any reason invalid or unenforceable, the remaining provisions shall be carried into effect. | ||
(j) | Entire Agreement . This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive be virtue of this Agreement other than as specifically set forth herein. | ||
(k) | Suicide . No benefits shall be payable if the Executive commits suicide within two (2) years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Bank. | ||
(l) | Top Hat Agreement . For purposes of the Internal Revenue Code, the Bank intends this Agreement to be an unfunded, unsecured promise to pay on the part of the Bank. For purposes of ERISA, the Bank intends this Agreement to be an unfunded obligation solely for the benefit of the Executive for the purpose of |
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qualifying this Agreement for the top hat exception under sections 201(2), 301 (a)(3) and 401 (a) of ERISA. |
9. | Arbitration . Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a panel of three arbitrators sitting in a location selected by Executive within fifty (50) miles from the main office of the Bank, in accordance with the rules of the American Arbitration Associations National Rules for the Resolution of Employment Disputes (National Rules) then in effect. One arbitrator shall be selected by Executive, one arbitrator shall be selected by the Bank and the third arbitrator shall be selected by the arbitrators selected by the parties. If the arbitrators are unable to agree within fifteen (15) days upon a third arbitrator, the arbitrator shall be appointed for them from a panel of arbitrators selected in accordance with the National Rules. Judgment may be entered on the arbitrators award in any court having jurisdiction. |
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ATLANTIC COAST BANK
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6/17/2010 | By: | /s/ Charles E. Martin, Jr. | ||
Date | Charles E. Martin, Jr. | |||
EXECUTIVE
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6/17/2010 | /s/ Robert J. Larison, Jr. | |||
Date | Robert J. Larison, Jr. | |||
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1. | Definitions . In this Agreement, the following words and phrases shall have the following meanings: |
(a) | Administrator shall mean the person or committee appointed by the Board of Directors of the Bank (the Board) to administer this Agreement. If a committee is appointed by the Board, a majority of those persons shall constitute a quorum and the act of the majority of such of persons either at a meeting or by written consent, shall be the act of the Administrator. The administrator may adopt such rules and procedures, not inconsistent with this Agreement, as it deems necessary or appropriate in order to administer this Agreement. | ||
(b) | Appreciation Benefit shall mean: |
| Second Step Conversion takes place on December 11, 2014 | ||
| Executives benefit as of December 11, 2009 is $28,800 | ||
| Prior Benefit Component of 20,000 shares ($28,800 / $1.44) | ||
| Stock Award Component of 30,000 shares | ||
| Stock Ownership Component of 25,000 shares | ||
| Issue Price of $5 ($6.44-$1.44) |
| Prior Benefit Component = $33,387.09 [the lesser of $100,000 (20,000 x $5) or $33,387.09 (28,800 x 3% per annum for five (5) years)]; plus | ||
| Stock Award Component = $37,500 (30,000 x .25 x $5); plus | ||
| Stock Ownership Component = $93,750 (25,000 x .75 x $5); equals | ||
| Appreciation Benefit = $164,637.09 |
Vested Percentage | Timing of Vesting | |
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15%
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Upon the expiration date of the Subscription Offering as defined in the Prospectus for the Second-Step Conversion, provided, however, if a Second-Step Conversion does not occur, vesting will not occur. | |
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100%
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Upon the Companys operation with positive before-tax income (disregarding any expense recorded by the Company or the Bank for a nonqualified deferred compensation plan sponsored by the Company or the Bank) for two consecutive calendar quarters following the closing of a Second-Step Conversion, provided, however, if a Second-Step Conversion does not occur, vesting will not occur. |
Notwithstanding the foregoing, the Executive will become 100 percent vested in his Appreciation Benefit prior to the schedule provided above in the event one of the following events occurs: death, Disability, Involuntary Termination, the occurrence of a Change in Control or the Plan Administrator in its sole discretion accelerates vesting. Notwithstanding the preceding provisions, if the Executive resigns at the request of, or is removed from service by, the Office of Thrift Supervision, Federal Deposit Insurance Corporation or any other regulatory authority for the Bank, the Executive shall be ineligible to participate and shall forfeit any benefits under this Agreement. | |||
(c) | Benefit Determination Date shall mean any of the following: (1) the Executives Normal Retirement Date; (2) the date the Executive incurs an Involuntary Termination prior to the Executives Normal Retirement Date; (3) the date of the Executives death; (4) the date the Executive incurs a Disability; or (5) the date of a Change in Control. |
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(d) | Cause shall mean a Separation from Service due to the Executives personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, and willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order. | ||
The basis for determining whether Cause exists shall not be deemed to include any impact on the Companys or the Banks business, properties, assets, liabilities, results of operations, financial condition or business from (1) changes in thrift, banking and similar laws of general applicability or interpretations thereof by courts or governmental authorities, or other changes affecting depository institutions generally, including changes in general economic conditions and changes in prevailing interest and deposit rates, (2) changes in GAAP or regulatory accounting requirements applicable to thrifts, banks and their holding companies generally, or (3) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel in the United States. | |||
A determination of Cause shall require the affirmative vote of a majority of the members of the Board, acting in good faith with respect to such termination, provided, however, that on or after the earliest date on which a change in control as defined in Section 1(e) occurs, such a determination shall require the affirmative vote of at least three fourths of the members of the Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board shall by written notice to the Executive, furnish him a statement of its grounds for proposing to make such determination, during which period the Executive shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board, and to be represented by his legal counsel at such presentations, or to refute the grounds for the proposed determination. | |||
(e) | Change in Control shall mean the following: |
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(f) | Company Stock shall mean the common stock of the Company. | ||
(g) | Disabled or Disability shall mean the Executive: |
(h) | Fair Market Value shall mean the per share closing price of Company Stock, as reported by the principal exchange or market over which the shares of Company Stock are then listed or regularly traded. |
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(i) | Involuntary Termination shall mean Separation from Service other than for Cause without the Executives express written consent and voluntary resignation due to a material diminution of or interference with the Executives duties, responsibilities and benefits as Chief Financial Officer of the Bank, including (without limitation) any of the following actions unless consented to in writing by the Executive: (i) a change in the principal workplace of the Executive to a location outside of a 30 mile radius from the Executives principal workplace as of the date hereof; (ii) a material demotion of the Executive; (iii) a material reduction in the number or seniority of other personnel reporting to the Executive or a material reduction in the frequency with which, or on the nature of the matters with respect to which, such personnel are to report to the Executive, other than as part of an institution-wide reduction in staff; (iv) a material adverse change in the Executives salary, perquisites, benefits, contingent benefits or vacation, other than as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Bank; and (v) a material permanent increase in the required hours of work or the workload of the Executive; provided that the Executive has notified the Bank of the existence of such a condition no later than 90 days after the initial existence of such condition and the Bank has at least 30 days to cure such condition. The term Involuntary Termination does not include termination for Cause or termination of employment due to retirement, death, Disability or suspension or temporary or permanent prohibition from participation in the conduct of the Banks affairs under Section 8 of the Federal Deposit Insurance Act. | ||
(j) | Issue Price shall mean the average selling price of a share of Company Stock over the thirty (30) day period immediately preceding the closing of a Second-Step Conversion minus $1.44 (the closing price of Company Stock on December 11, 2009). | ||
(k) | Monthly Benefit shall mean an amount, as of a Benefit Determination Date, equal to the vested Appreciation Benefit divided by 180. For example, if on a Benefit Determination Date the Appreciation Benefit is $450,000, then Executives Monthly Benefit is $2,500 ($450,000 / 180) plus accrued interest. | ||
(l) | Normal Retirement Date shall mean January 1, 2014. The Executive may change his Normal Retirement Date provided that he files an election form with the Bank; provided, however, that: (1) the new election will not take effect until at least 12 months after the date the new election is filed; (2) the commencement of installment payments with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been made; and (3) the new election is filed at least 12 months prior to the date of the first scheduled payment under the Plan. | ||
(m) | Prior Benefit Component shall mean a number of shares of Company Stock equal to the Executives benefit under the Agreement as of December 11, 2009, divided by the Fair Market Value of Company Stock on December 11, 2009. For example, the Executives prior benefit under the terms of the Agreement on |
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December 11, 2009 was $40,000 and the Fair Market Value of Company Stock on December 11, 2009 was $2.00. The Executive is deemed to have, for purposes of the Agreement, 20,000 shares of Company Stock ($40,000/$2.00) in the Prior Benefit Component. |
(n) | Second-Step Conversion shall mean the conversion and reorganization of Atlantic Coast Federal, MHC, the Company and the Bank from a mutual holding company structure to a fully public ownership structure. | ||
(o) | Separation from Service shall mean the date of cessation of the employment relationship (other than an approved leave of absence) between the Executive and the Bank and its affiliates and subsidiaries (including any successor in interest, if applicable), and shall be construed to comply with Code Section 409A and Treasury Regulations Section 1.409A-1(h). | ||
(p) | Specified Employee shall mean a key employee of the Bank within the meaning of Code Section 4l6(i) without regard to paragraph 5 thereof, determined in accordance with Code Section 409A and Treasury Regulations Section 1.409A-1(i). | ||
(q) | Stock Award Component shall mean the number of shares of Company Stock awarded to the Executive under the Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan that are still held by the Executive on December 11, 2009 times 25 percent. For example, on December 11, 2009 the Executive had 100 shares awarded to him under the Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan. For purposes of calculating the Appreciation Benefit, only 25 shares would be counted. | ||
(r) | Stock Ownership Component shall mean the number of shares of Company Stock directly or beneficially owned by the Executive (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, disregarding any beneficial ownership of stock options) as of December 11, 2009 times 75 percent. For example, on December 11, 2009 the Executive directly and beneficially owns 100 shares. For purposes of calculating the Appreciation Benefit, only 75 shares would be counted. |
2. | Payment of Benefits . |
(a) | Normal Benefit . If Monthly Benefits have not already started due to Separation from Service, Disability or Change in Control, the Bank shall pay the Monthly Benefit to Executive starting on the first business day of the month following the Normal Retirement Date and on the first business day of each calendar month thereafter for a total of 180 months (i.e., monthly payments for 15 years), regardless of whether the Executive has experienced a Separation from Service; provided however, that, if the Executive has experienced a Separation from Service, then, to the extent necessary to avoid penalties under Code Section 409A and the regulations thereunder, such payments shall not commence until the first |
6
day of the seventh month following the date of the Executives Separation from Service if the Executive is a Specified Employee on his date of Separation from Service. |
(b) | Death Benefit . If the Executive dies prior to the Normal Retirement Date, Separation from Service, Disability or Change in Control, the Bank shall pay to the beneficiary designated on Exhibit A , the Appreciation Benefit in a lump sum on the first business day of the month following the Executives death. If no beneficiary or beneficiaries have been designated, or if all of the beneficiaries predecease the Executive, the Monthly Benefit will be paid to the Executives estate. | ||
(c) | Disability Benefit . If the Executive becomes Disabled prior to the Normal Retirement Date, death, Separation from Service or Change in Control, the Bank shall pay the Monthly Benefit to him commencing on the first business day of the month following the date on which the Executive becomes Disabled and on the first business day of each calendar month thereafter for a period of 180 months. | ||
(d) | Separation from Service Benefit . In the event the Executive incurs a Separation from Service due to an Involuntary Termination before the Normal Retirement Date, Disability, death or Change in Control, the Bank shall pay the Monthly Benefit to him commencing on the first business day of the month following the Separation from Service and on the first business day of each calendar month thereafter for a period of 180 months. However, if the Executive is a Specified Employee on the date of his Separation from Service, such payments shall not commence until the first day of the seventh month following the date of the Executives Separation from Service. | ||
(e) | Change in Control Benefit . If a Change in Control occurs before the Normal Retirement Date, Separation from Service due to an Involuntary Termination, Disability or death, then, within 30 calendar days after such Change in Control, the Bank shall pay the Executive a lump sum equal to the Appreciation Benefit. | ||
(f) | Funding of Monthly Benefit . The Bank reserves the right to purchase a contract from a life insurance company with a minimum rating of AA from Standard & Poors and Moodys in order to provide all or any portion of the Monthly Benefit described herein. Upon the Banks purchase of such contract and distribution of the contract to Executive or his Beneficiary, the Banks liability to provide the Monthly Benefit hereunder shall cease and such contract shall be the sole source of funds for providing such Monthly Benefit. | ||
(g) | Changes in Company Stock . In the event of any change in Company Stock through stock dividends, split-ups, stock splits or reverse stock splits, recapitalizations, reclassifications, conversions or otherwise, then the Board will make appropriate adjustment or substitution in the aggregate value of the Prior Benefit Component, the Stock Award Component and the Stock Ownership Component. |
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3. | Required Provisions . |
(a) | The Bank may terminate Executives employment at any time, but any termination by the Bank other than Separation from Service for Cause as defined above shall not prejudice Executives right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after Separation from Service for Cause. | ||
(b) | If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Banks affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(l) [12 USC §1818(g)(I)] of the Federal Deposit Insurance Act (the FDI Act), the Banks obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended. | ||
(c) | If Executive is removed and/or permanently prohibited from participating in the conduct of the Banks affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(l) [12 USC §1818(g)(l)] of the FDI Act, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected. | ||
(d) | If the Bank is in default as defined in Section 3(x)(l) [12 USC §1813(x)(1)] of the FDI Act, all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties. | ||
(e) | All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the Director of the Office of Thrift Supervision (OTS) or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section B(c) [12 USC §1823(c)] of the FDI Act; or (ii) by the Director or his or her designee at the time the Director or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action. | ||
(f) | Notwithstanding anything herein contained to the contrary, any payments to Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDI Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359. |
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4. | Claims . In the event a claim for benefits is wholly or partially denied under this Agreement, the Executive or any other person claiming benefits under this Agreement (a Claimant) shall be given notice in writing within 30 calendar days after the Administrators receipt of the claim. For good cause shown, the Administrator may extend this period for an additional 30 calendar days. Any denial must specifically set forth the reasons for the denial and any additional information necessary to rescind such denial. The Claimant shall have the right to seek a review of the denial by filing a written request with the Administrator within 60 calendar days of receipt of the denial. Such request may be supported by such documentation and evidence deemed relevant by the Claimant. Following receipt of this information, the Administrator shall make a final determination and notify the Claimant in writing within 60 calendar days of the Administrators receipt of the request for review together with the specific reasons for the decision. |
5. | General Assets and Funding . The amounts payable under this Agreement are payable from the general assets of the Bank and no special fund or arrangement is intended to be established hereby nor shall the Bank be required to earmark, place in trust or otherwise segregate assets with respect to this Agreement or any benefits hereunder. The Administrator reserves the right to determine how the Bank will fund its obligation undertaken by this Agreement. At its discretion, the Administrator may establish one or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Banks creditors. To the extent any benefits provided under the Plan are actually paid from any such trust, the Bank shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Bank. Under no circumstances shall a Participant serve as trustee or co-trustee of any trust established by the Bank pursuant to this Plan. | |
Should the Administrator elect to purchase assets relating to this Agreement, in whole or in part, through the medium of life insurance or annuities, or both, the Bank shall be the owner and beneficiary of each such policy unless otherwise provided by this Agreement. Bank reserves the absolute right, in its sole discretion, to terminate such life insurance or annuities, as well as any other investment program, at any time, in whole or in part unless otherwise provided by this Agreement. Such termination shall in no way affect the Banks obligation to pay the Executive the benefits as provided in this Agreement. At no time shall the Executive be deemed to have any right, title, or interest in or to any specific asset or assets of the Bank, including but not by way of restriction, any insurance or annuity contract and contracts or the proceeds therefrom. | ||
6. | Certain Reductions . Notwithstanding any other provision of this Agreement, if the value and amounts of benefits under this Agreement, together with any other amounts and the value of benefits received or to be received by the Executive in connection with a Change in Control would cause any amount to be nondeductible for federal income tax purposes by the Bank or the consolidated group of which the Bank is a member pursuant to Section 280G of the Code, then amounts and benefits under this Agreement shall be reduced (not less than zero) to the extent necessary so as to maximize amounts and the |
9
value of benefits to the Employee without causing any amount to become nondeductible by Bank pursuant to or by reason of such Section 280G. The Employee shall determine the allocation of such reduction among payments and benefits to the Employee. |
7. | Beneficiary Designations . The Executive shall designate a beneficiary by filing with Bank a written designation of beneficiary on a form substantially similar to the form attached as Exhibit A. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Bank during the Executives lifetime. The Executives beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executives surviving spouse, if any, and if none, to the Executives surviving children and the descendants of any deceased child by right of representation, and if no children or descendants survive, to the Executives estate. | |
If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person, or to a custodian selected by the Bank under the Georgia Uniform Transfers to Minors Act for the benefit of such minor. The Bank may require proof of incompetency, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Bank from all liability with respect to such benefit. | ||
8. | Amendment and Termination . |
(a) | Amendment . This Agreement may be amended at any time by a written instrument signed by the Bank and the Executive. | ||
(b) | Termination . The Bank may at any time partially or completely terminate the Agreement, if, in its judgment, the tax, accounting, or other effects of the continuance of the Agreement, or potential payments thereunder, would not be in the best interests of the Bank. |
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9. | Miscellaneous . |
(a) | Withholding . To the extent amounts payable under this Agreement are determined by the Administrator, in good faith, to be subject to federal, state or local income tax, the Bank may withhold from each such payment an amount necessary to meet the Banks obligation to withhold amounts under the applicable federal, state or local law. | ||
(b) | Governing Law . This Agreement shall be construed under the laws of the State of Georgia, except to the extent that federal law applies. |
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(c) | Future Employment . This Agreement shall not be construed as providing the Executive the right to be continued in the employ of the Bank or its affiliates or subsidiaries. | ||
(d) | No Pledge or Attachment . No benefit which is or may become payable under this Agreement shall be subject to any anticipation, alienation, sale, transfer, pledge, encumbrance or hypothecation or subject to any attachment, levy or similar process and any attempt to effect any such action shall be null and void. | ||
(e) | Successors and Assigns . This Agreement and the obligations of the Bank herein shall be binding upon the successors and assigns of the Bank. This Agreement may not be assigned by the Bank without the prior written consent of the Executive or any other beneficiary receiving payments under this Agreement. | ||
(f) | Participation in Plans . Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of the Executive to participate in and be covered by any pension, profit sharing, group insurance, bonus, incentive, or other employee plans which the Bank or its affiliates or subsidiaries may now or hereafter have. | ||
(g) | Notices . Any notices under this Agreement shall be provided to the Executive at his last address on file with the Administrator and shall be provided to the Administrator in care of President, Atlantic Coast Federal, 505 Haines Avenue, Waycross, Georgia 31501. | ||
(h) | Headings . Headings of sections herein are inserted for convenience of reference. They are not to be considered in the construction of this Agreement. | ||
(i) | Savings Clause . If any provision of this Agreement shall be for any reason invalid or unenforceable, the remaining provisions shall be carried into effect. | ||
(j) | Entire Agreement . This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive be virtue of this Agreement other than as specifically set forth herein. | ||
(k) | Suicide . No benefits shall be payable if the Executive commits suicide within two (2) years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Bank. | ||
(l) | Top Hat Agreement . For purposes of the Internal Revenue Code, the Bank intends this Agreement to be an unfunded, unsecured promise to pay on the part of the Bank. For purposes of ERISA, the Bank intends this Agreement to be an unfunded obligation solely for the benefit of the Executive for the purpose of qualifying this Agreement for the top hat exception under sections 201(2), 301 (a)(3) and 401 (a) of ERISA. |
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10. | Arbitration . Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a panel of three arbitrators sitting in a location selected by Executive within fifty (50) miles from the main office of the Bank, in accordance with the rules of the American Arbitration Associations National Rules for the Resolution of Employment Disputes (National Rules) then in effect. One arbitrator shall be selected by Executive, one arbitrator shall be selected by the Bank and the third arbitrator shall be selected by the arbitrators selected by the parties. If the arbitrators are unable to agree within fifteen (15) days upon a third arbitrator, the arbitrator shall be appointed for them from a panel of arbitrators selected in accordance with the National Rules. Judgment may be entered on the arbitrators award in any court having jurisdiction. |
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ATLANTIC COAST BANK
|
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6/17/2010 | By: | /s/ Robert J. Larison, Jr. | ||
Date | Name: | Robert J. Larison, Jr. | ||
Title: | President and Chief Executive Officer | |||
EXECUTIVE
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6/17/2010 | /s/ Thomas B. Wagers, Sr. | |||
Date | Thomas B. Wagers, Sr. | |||
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1. | Definitions . In this Agreement, the following words and phrases shall have the following meanings: |
(a) | Administrator shall mean the person or committee appointed by the Board of Directors of the Bank (the Board) to administer this Agreement. If a committee is appointed by the Board, a majority of those persons shall constitute a quorum and the act of the majority of such of persons either at a meeting or by written consent, shall be the act of the Administrator. The Administrator may adopt such rules and procedures, not inconsistent with this Agreement, as it deems necessary or appropriate in order to administer this Agreement. | ||
(b) | Appreciation Benefit shall mean: |
| Second Step Conversion takes place on December 11, 2014 | ||
| Executives benefit as of December 11, 2009 is $28,800 | ||
| Prior Benefit Component of 20,000 shares ($28,800 / $1.44) | ||
| Stock Award Component of 30,000 shares | ||
| Stock Ownership Component of 25,000 shares | ||
| Issue Price of $5 ($6.44-$1.44) |
| Prior Benefit Component = $33,387.09 [the lesser of $100,000 (20,000 x $5) or $33,387.09 (28,800 x 3% per annum for five (5) years)]; plus | ||
| Stock Award Component = $37,500 (30,000 x .25 x $5); plus | ||
| Stock Ownership Component = $93,750 (25,000 x .75 x $5); equals |
| Appreciation Benefit = $164,637.09 |
Vested Percentage | Timing of Vesting | |
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15%
|
Upon the expiration date of the Subscription Offering as defined in the Prospectus for the Second-Step Conversion, provided, however, if a Second-Step Conversion does not occur, vesting will not occur. | |
|
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100%
|
Upon the Companys operation with positive before-tax income (disregarding any expense recorded by the Company or the Bank for a nonqualified deferred compensation plan sponsored by the Company or the Bank) for two consecutive calendar quarters following the closing of a Second-Step Conversion, provided, however, if a Second-Step Conversion does not occur, vesting will not occur. |
(c) | Benefit Determination Date shall mean any of the following: (1) the Executives Normal Retirement Date; (2) the date the Executive incurs an Involuntary Termination prior to the Executives Normal Retirement Date; (3) the date of the Executives death; (4) the date the Executive incurs a Disability; or (5) the date of a Change in Control. |
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(d) | Cause shall mean a Separation from Service due to the Executives personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, and willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order. | ||
The basis for determining whether Cause exists shall not be deemed to include any impact on the Companys or the Banks business, properties, assets, liabilities, results of operations, financial condition or business from (1) changes in thrift, banking and similar laws of general applicability or interpretations thereof by courts or governmental authorities, or other changes affecting depository institutions generally, including changes in general economic conditions and changes in prevailing interest and deposit rates, (2) changes in GAAP or regulatory accounting requirements applicable to thrifts, banks and their holding companies generally, or (3) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel in the United States. | |||
A determination of Cause shall require the affirmative vote of a majority of the members of the Board, acting in good faith with respect to such termination, provided, however, that on or after the earliest date on which a change in control as defined in Section 1(e) occurs, such a determination shall require the affirmative vote of at least three fourths of the members of the Board acting in good faith and such vote shall not be made prior to the expiration of a 60-day period following the date on which the Board shall by written notice to the Executive, furnish him a statement of its grounds for proposing to make such determination, during which period the Executive shall be afforded a reasonable opportunity to make oral and written presentations to the members of the Board, and to be represented by his legal counsel at such presentations, or to refute the grounds for the proposed determination. | |||
(e) | Change in Control shall mean the following: |
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(f) | Company Stock shall mean the common stock of the Company. | ||
(g) | Disabled or Disability shall mean the Executive: |
(h) | Fair Market Value shall mean the per share closing price of Company Stock, as reported by the principal exchange or market over which the shares of Company Stock are then listed or regularly traded. |
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(i) | Involuntary Termination shall mean Separation from Service other than for Cause without the Executives express written consent and voluntary resignation due to a material diminution of or interference with the Executives duties, responsibilities and benefits as Executive Vice President of the Bank, including (without limitation) any of the following actions unless consented to in writing by the Executive: (i) a change in the principal workplace of the Executive to a location outside of a 30 mile radius from the Executives principal workplace as of the date hereof; (ii) a material demotion of the Executive; (iii) a material reduction in the number or seniority of other personnel reporting to the Executive or a material reduction in the frequency with which, or on the nature of the matters with respect to which, such personnel are to report to the Executive, other than as part of an institution-wide reduction in staff; (iv) a material adverse change in the Executives salary, perquisites, benefits, contingent benefits or vacation, other than as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Bank; and (v) a material permanent increase in the required hours of work or the workload of the Executive; provided that the Executive has notified the Bank of the existence of such a condition no later than 90 days after the initial existence of such condition and the Bank has at least 30 days to cure such condition. The term Involuntary Termination does not include termination for Cause or termination of employment due to retirement, death, Disability or suspension or temporary or permanent prohibition from participation in the conduct of the Banks affairs under Section 8 of the Federal Deposit Insurance Act. | ||
(j) | Issue Price shall mean the average selling price of a share of Company Stock over the thirty (30) day period immediately preceding the closing of a Second-Step Conversion minus $1.44 (the closing price of Company Stock on December 11, 2009). | ||
(k) | Monthly Benefit shall mean an amount, as of a Benefit Determination Date, equal to the vested Appreciation Benefit divided by 180. For example, if on a Benefit Determination Date the Appreciation Benefit is $450,000, then Executives Monthly Benefit is $2,500 ($450,000 / 180) plus accrued interest. | ||
(l) | Normal Retirement Date shall mean the date the Executive attains age 55. The Executive may change his Normal Retirement Date provided that he files an election form with the Bank; provided, however, that: (1) the new election will not take effect until at least 12 months after the date the new election is filed; (2) the commencement of installment payments with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been made; and (3) the new election is filed at least 12 months prior to the date of the first scheduled payment under the Plan. | ||
(m) | Prior Benefit Component shall mean a number of shares of Company Stock equal to the Executives benefit under the Agreement as of December 11, 2009, divided by the Fair Market Value of Company Stock on December 11, 2009. For example, the Executives prior benefit under the terms of the Agreement on |
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December 11, 2009 was $40,000 and the Fair Market Value of Company Stock on December 11, 2009 was $2.00. The Executive is deemed to have, for purposes of the Agreement, 20,000 shares of Company Stock ($40,000/$2.00) in the Prior Benefit Component. |
(n) | Second-Step Conversion shall mean the conversion and reorganization of Atlantic Coast Federal, MHC, the Company and the Bank from a mutual holding company structure to a fully public ownership structure. | ||
(o) | Separation from Service shall mean the date of cessation of the employment relationship (other than an approved leave of absence) between the Executive and the Bank and its affiliates and subsidiaries (including any successor in interest, if applicable), and shall be construed to comply with Code Section 409A and Treasury Regulations Section 1.409A-1(h). | ||
(p) | Specified Employee shall mean a key employee of the Bank within the meaning of Code Section 4l6(i) without regard to paragraph 5 thereof, determined in accordance with Code Section 409A and Treasury Regulations Section 1.409A-1(i). | ||
(q) | Stock Award Component shall mean the number of shares of Company Stock awarded to the Executive under the Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan that are still held by the Executive on December 11, 2009 times 25 percent. For example, on December 11, 2009 the Executive had 100 shares awarded to him under the Atlantic Coast Federal Corporation 2005 Recognition and Retention Plan. For purposes of calculating the Appreciation Benefit, only 25 shares would be counted. | ||
(r) | Stock Ownership Component shall mean the number of shares of Company Stock directly or beneficially owned by the Executive (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, disregarding any beneficial ownership of stock options) as of December 11, 2009 times 75 percent. For example, on December 11, 2009 the Executive directly and beneficially owns 100 shares. For purposes of calculating the Appreciation Benefit, only 75 shares would be counted. |
2. | Payment of Benefits . |
(a) | Normal Benefit . If Monthly Benefits have not already started due to Separation from Service, Disability or Change in Control, the Bank shall pay the Monthly Benefit to Executive starting on the first business day of the month following the Normal Retirement Date and on the first business day of each calendar month thereafter for a total of 180 months (i.e., monthly payments for 15 years), regardless of whether the Executive has experienced a Separation from Service; provided however, that, if the Executive has experienced a Separation from Service, then, to the extent necessary to avoid penalties under Code Section 409A and the regulations thereunder, such payments shall not commence until the first |
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day of the seventh month following the date of the Executives Separation from Service if the Executive is a Specified Employee on his date of Separation from Service. |
(b) | Death Benefit . If the Executive dies prior to the Normal Retirement Date, Separation from Service, Disability or Change in Control, the Bank shall pay to the beneficiary designated on Exhibit A , the Appreciation Benefit in a lump sum on the first business day of the month following the Executives death. If no beneficiary or beneficiaries have been designated, or if all of the beneficiaries predecease the Executive, the Monthly Benefit will be paid to the Executives estate. | ||
(c) | Disability Benefit . If the Executive becomes Disabled prior to the Normal Retirement Date, death, Separation from Service or Change in Control, the Bank shall pay the Monthly Benefit to him commencing on the first business day of the month following the date on which the Executive becomes Disabled and on the first business day of each calendar month thereafter for a period of 180 months. | ||
(d) | Separation from Service Benefit . In the event the Executive incurs a Separation from Service due to an Involuntary Termination before the Normal Retirement Date, Disability, death or Change in Control, the Bank shall pay the Monthly Benefit to him commencing on the first business day of the month following the Separation from Service and on the first business day of each calendar month thereafter for a period of 180 months. However, if the Executive is a Specified Employee on the date of his Separation from Service, such payments shall not commence until the first day of the seventh month following the date of the Executives Separation from Service. | ||
(e) | Change in Control Benefit . If a Change in Control occurs before the Normal Retirement Date, Separation from Service due to an Involuntary Termination, Disability or death, then, within 30 calendar days after such Change in Control, the Bank shall pay the Executive a lump sum equal to the Appreciation Benefit. | ||
(f) | Funding of Monthly Benefit . The Bank reserves the right to purchase a contract from a life insurance company with a minimum rating of AA from Standard & Poors and Moodys in order to provide all or any portion of the Monthly Benefit described herein. Upon the Banks purchase of such contract and distribution of the contract to Executive or his Beneficiary, the Banks liability to provide the Monthly Benefit hereunder shall cease and such contract shall be the sole source of funds for providing such Monthly Benefit. | ||
(g) | Changes in Company Stock . In the event of any change in Company Stock through stock dividends, split-ups, stock splits or reverse stock splits, recapitalizations, reclassifications, conversions or otherwise, then the Board will make appropriate adjustment or substitution in the aggregate value of the Prior Benefit Component, the Stock Award Component and the Stock Ownership Component. |
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3. | Required Provisions . |
(a) | The Bank may terminate Executives employment at any time, but any termination by the Bank other than Separation from Service for Cause as defined above shall not prejudice Executives right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after Separation from Service for Cause. | ||
(b) | If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Banks affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(l) [12 USC §1818(g)(I)] of the Federal Deposit Insurance Act (the FDI Act), the Banks obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended. | ||
(c) | If Executive is removed and/or permanently prohibited from participating in the conduct of the Banks affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(l) [12 USC §1818(g)(l)] of the FDI Act, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected. | ||
(d) | If the Bank is in default as defined in Section 3(x)(l) [12 USC §1813(x)(1)] of the FDI Act, all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties. | ||
(e) | All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the Director of the Office of Thrift Supervision (OTS) or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section B(c) [12 USC §1823(c)] of the FDI Act; or (ii) by the Director or his or her designee at the time the Director or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action. | ||
(f) | Notwithstanding anything herein contained to the contrary, any payments to Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDI Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359. |
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4. | Claims . In the event a claim for benefits is wholly or partially denied under this Agreement, the Executive or any other person claiming benefits under this Agreement (a Claimant) shall be given notice in writing within 30 calendar days after the Administrators receipt of the claim. For good cause shown, the Administrator may extend this period for an additional 30 calendar days. Any denial must specifically set forth the reasons for the denial and any additional information necessary to rescind such denial. The Claimant shall have the right to seek a review of the denial by filing a written request with the Administrator within 60 calendar days of receipt of the denial. Such request may be supported by such documentation and evidence deemed relevant by the Claimant. Following receipt of this information, the Administrator shall make a final determination and notify the Claimant in writing within 60 calendar days of the Administrators receipt of the request for review together with the specific reasons for the decision. |
5. | General Assets and Funding . The amounts payable under this Agreement are payable from the general assets of the Bank and no special fund or arrangement is intended to be established hereby nor shall the Bank be required to earmark, place in trust or otherwise segregate assets with respect to this Agreement or any benefits hereunder. The Administrator reserves the right to determine how the Bank will fund its obligation undertaken by this Agreement. At its discretion, the Administrator may establish one or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Banks creditors. To the extent any benefits provided under the Plan are actually paid from any such trust, the Bank shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Bank. Under no circumstances shall a Participant serve as trustee or co-trustee of any trust established by the Bank pursuant to this Plan. | |
Should the Administrator elect to purchase assets relating to this Agreement, in whole or in part, through the medium of life insurance or annuities, or both, the Bank shall be the owner and beneficiary of each such policy unless otherwise provided by this Agreement. Bank reserves the absolute right, in its sole discretion, to terminate such life insurance or annuities, as well as any other investment program, at any time, in whole or in part unless otherwise provided by this Agreement. Such termination shall in no way affect the Banks obligation to pay the Executive the benefits as provided in this Agreement. At no time shall the Executive be deemed to have any right, title, or interest in or to any specific asset or assets of the Bank, including but not by way of restriction, any insurance or annuity contract and contracts or the proceeds therefrom. | ||
6. | Certain Reductions . Notwithstanding any other provision of this Agreement, if the value and amounts of benefits under this Agreement, together with any other amounts and the value of benefits received or to be received by the Executive in connection with a Change in Control would cause any amount to be nondeductible for federal income tax purposes by the Bank or the consolidated group of which the Bank is a member pursuant to Section 280G of the Code, then amounts and benefits under this Agreement shall be reduced (not less than zero) to the extent necessary so as to maximize amounts and the |
9
value of benefits to the Employee without causing any amount to become nondeductible by Bank pursuant to or by reason of such Section 280G. The Employee shall determine the allocation of such reduction among payments and benefits to the Employee. |
7. | Beneficiary Designations . The Executive shall designate a beneficiary by filing with Bank a written designation of beneficiary on a form substantially similar to the form attached as Exhibit A. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Bank during the Executives lifetime. The Executives beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executives surviving spouse, if any, and if none, to the Executives surviving children and the descendants of any deceased child by right of representation, and if no children or descendants survive, to the Executives estate. | |
If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person, or to a custodian selected by the Bank under the Georgia Uniform Transfers to Minors Act for the benefit of such minor. The Bank may require proof of incompetency, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Bank from all liability with respect to such benefit. | ||
8. | Amendment and Termination . |
(a) | Amendment . This Agreement may be amended at any time by a written instrument signed by the Bank and the Executive. | ||
(b) | Termination . The Bank may at any time partially or completely terminate the Agreement, if, in its judgment, the tax, accounting, or other effects of the continuance of the Agreement, or potential payments thereunder, would not be in the best interests of the Bank. |
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9. | Miscellaneous . |
(a) | Withholding . To the extent amounts payable under this Agreement are determined by the Administrator, in good faith, to be subject to federal, state or local income tax, the Bank may withhold from each such payment an amount necessary to meet the Banks obligation to withhold amounts under the applicable federal, state or local law. | ||
(b) | Governing Law . This Agreement shall be construed under the laws of the State of Georgia, except to the extent that federal law applies. |
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(c) | Future Employment . This Agreement shall not be construed as providing the Executive the right to be continued in the employ of the Bank or its affiliates or subsidiaries. | ||
(d) | No Pledge or Attachment . No benefit which is or may become payable under this Agreement shall be subject to any anticipation, alienation, sale, transfer, pledge, encumbrance or hypothecation or subject to any attachment, levy or similar process and any attempt to effect any such action shall be null and void. | ||
(e) | Successors and Assigns . This Agreement and the obligations of the Bank herein shall be binding upon the successors and assigns of the Bank. This Agreement may not be assigned by the Bank without the prior written consent of the Executive or any other beneficiary receiving payments under this Agreement. | ||
(f) | Participation in Plans . Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of the Executive to participate in and be covered by any pension, profit sharing, group insurance, bonus, incentive, or other employee plans which the Bank or its affiliates or subsidiaries may now or hereafter have. | ||
(g) | Notices . Any notices under this Agreement shall be provided to the Executive at his last address on file with the Administrator and shall be provided to the Administrator in care of President, Atlantic Coast Federal, 505 Haines Avenue, Waycross, Georgia 31501. | ||
(h) | Headings . Headings of sections herein are inserted for convenience of reference. They are not to be considered in the construction of this Agreement. | ||
(i) | Savings Clause . If any provision of this Agreement shall be for any reason invalid or unenforceable, the remaining provisions shall be carried into effect. | ||
(j) | Entire Agreement . This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive be virtue of this Agreement other than as specifically set forth herein. | ||
(k) | Suicide . No benefits shall be payable if the Executive commits suicide within two (2) years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Bank. | ||
(l) | Top Hat Agreement . For purposes of the Internal Revenue Code, the Bank intends this Agreement to be an unfunded, unsecured promise to pay on the part of the Bank. For purposes of ERISA, the Bank intends this Agreement to be an unfunded obligation solely for the benefit of the Executive for the purpose of qualifying this Agreement for the top hat exception under sections 201(2), 301 (a)(3) and 401 (a) of ERISA. |
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10. | Arbitration . Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a panel of three arbitrators sitting in a location selected by Executive within fifty (50) miles from the main office of the Bank, in accordance with the rules of the American Arbitration Associations National Rules for the Resolution of Employment Disputes (National Rules) then in effect. One arbitrator shall be selected by Executive, one arbitrator shall be selected by the Bank and the third arbitrator shall be selected by the arbitrators selected by the parties. If the arbitrators are unable to agree within fifteen (15) days upon a third arbitrator, the arbitrator shall be appointed for them from a panel of arbitrators selected in accordance with the National Rules. Judgment may be entered on the arbitrators award in any court having jurisdiction. |
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ATLANTIC COAST BANK
|
||||
6/17/2010 | By: | /s/ Robert J. Larison, Jr. | ||
Date | Name: | Robert J. Larison, Jr. | ||
Title: | President and Chief Executive Officer | |||
EXECUTIVE
|
||||
6/17/2010 | /s/ Carl W. Insel | |||
Date | Carl W. Insel | |||
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| Second Step Conversion takes place on December 11, 2014 | ||
| Participants benefit as of December 11, 2009 is $28,800 | ||
| Prior Benefit Component of 20,000 shares ($28,800 / $1.44) | ||
| Stock Award Component of 30,000 shares | ||
| Stock Ownership Component of 25,000 shares | ||
| Issue Price of $5 ($6.44-$1.44) |
| Prior Benefit Component = $33,387.09 [the lesser of $100,000 (20,000 x $5) or $33,387.09 (28,800 x 3% per annum for five (5) years)]; plus | ||
| Stock Award Component = $37,500 (30,000 x .25 x $5); plus | ||
| Stock Ownership Component = $93,750 (25,000 x .75 x $5); equals | ||
| Appreciation Benefit = $164,637.09 |
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ATLANTIC COAST BANK
|
||||
6/17/2010 | By: | /s/ Robert J. Larison, Jr. | ||
Date | Robert J. Larison, Jr. President and | |||
Chief Executive Officer |
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Name | State of Incorporation | |
|
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Atlantic Coast Bank
|
Federal (direct) |
/s/ Crowe Horwath LLP | ||||
Crowe Horwath LLP | ||||
Sincerely,
|
||||
/s/ RP Financial, LC. | ||||
RP FINANCIAL, LC. | ||||
Washington Headquarters | ||
Three Ballston Plaza | Telephone: (703) 528-1700 | |
1100 North Glebe Road, Suite 1100 | Fax No.: (703) 528-1788 | |
Arlington, VA 22201 | Toll-Free No.: (866) 723-0594 | |
www.rpfinancial.com | E-Mail: mail@rpfinancial.com |
| $5,000 upon execution of the letter of agreement engaging RP Financials appraisal services; | ||
| $45,000 upon delivery of the completed original appraisal report; and | ||
| $5,000 upon delivery of each subsequent appraisal update report. There will be at least one appraisal update report, to be filed upon completion of the offering. |
Sincerely,
|
||||
/s/ James P. Hennessey | ||||
James P. Hennessey | ||||
Senior Vice President | ||||
Agreed To and Accepted By: |
Robert J. Larison
/s/ Robert J. Larison
President and Chief Executive Officer |
Upon Authorization by the Board of Directors For: |
Atlantic Coast Federal Corporation., subsidiary of
Atlantic Coast Federal, MHC Waycross, Georgia |
Date Executed: | May 7, 2010 |
1. | An Executive Summary prepared in a format that summarizes the content of the plan. This summary will initially be utilized as a draft submission to the regulatory agency in seeking regulatory approval to move forward with the plan of conversion. | ||
2. | A Description of the Companys Business including market niche, corporate structure, a financial analysis of the Companys current condition, a review of strengths and weaknesses and an overview of the Companys expansion plans. | ||
3. | A Marketing Plan that will include a description of product strategy, a market area analysis, a review of the economic forecast and an examination of the competitive environment. | ||
4. | A Management Plan that provides an organizational structure, list of committees and addresses management succession. | ||
5. | A Description of Records, Systems and Controls . | ||
6. | A Financial Management Plan that will address capital needs, earnings, use of conversion proceeds, growth, liquidity needs, interest rate risk, credit risk and a dividend policy. | ||
7. | A description of the Companys plan to Monitor and Revise the Plan as necessary. | ||
8. | Extensive Financial Projections that will include Bank only projections, Holding Company only projections and consolidated projections. |
19457 Olson Avenue, Lake Oswego, OR 97034 | 310 Charles Alexander Court, Alexandria, VA 22301 | |
503-638-9685 | 703-549-2176 |
o | $10,000 upon execution of this letter of agreement; and | ||
o | $25,000 upon delivery of the business plan report. |
19457 Olson Avenue, Lake Oswego, OR 97034 | 310 Charles Alexander Court, Alexandria, VA 22301 | |
503-638-9685 | 703-549-2176 |
19457 Olson Avenue, Lake Oswego, OR 97034 | 310 Charles Alexander Court, Alexandria, VA 22301 | |
503-638-9685 | 703-549-2176 |
Signed
|
Date | |||
/s/ Robert J. Larison, Jr.
|
5/05/10 | |||
|
|
|||
President and Chief Executive Officer
|
19457 Olson Avenue, Lake Oswego, OR 97034 | 310 Charles Alexander Court, Alexandria, VA 22301 | |
503-638-9685 | 703-549-2176 |
Washington Headquarters | ||
Three Ballston Plaza
1100 North Glebe Road, Suite 1100 Arlington, VA 22201 www.rpfinancial.com |
Telephone: (703) 528-1700
Fax No.: (703) 528-1788 Toll-Free No.: (866) 723-0594 E-Mail: mail@rpfinancial.com |
Breakdown of Shares Issued in Second Step Conversion | |||||||||||||||||||||
and Simultaneous Supplementary Offering of Common Stock | |||||||||||||||||||||
Second Step Conversion Characteristics | |||||||||||||||||||||
2nd Step | Exchange Shares | ||||||||||||||||||||
Supplemental | Offering | Issued to the | Exchange | ||||||||||||||||||
Total Shares | Offering | Shares | Public Shareholders | Ratio | |||||||||||||||||
(x) | |||||||||||||||||||||
Shares
|
|||||||||||||||||||||
Super Maximum
|
6,528,380 | 1,650,000 | 3,174,000 | 1,704,380 | 0.3636 | ||||||||||||||||
Maximum
|
5,892,070 | 1,650,000 | 2,760,000 | 1,482,070 | 0.3162 | ||||||||||||||||
Midpoint
|
5,338,756 | 1,650,000 | 2,400,000 | 1,288,756 | 0.2750 | ||||||||||||||||
Minimum
|
4,785,443 | 1,650,000 | 2,040,000 | 1,095,443 | 0.2337 | ||||||||||||||||
|
|||||||||||||||||||||
Distribution of Shares
|
|||||||||||||||||||||
Super Maximum
|
100.00 | % | 25.27 | % | 48.62 | % | 26.11 | % | |||||||||||||
Maximum
|
100.00 | % | 28.00 | % | 46.84 | % | 25.15 | % | |||||||||||||
Midpoint
|
100.00 | % | 30.91 | % | 44.95 | % | 24.14 | % | |||||||||||||
Minimum
|
100.00 | % | 34.48 | % | 42.63 | % | 22.89 | % | |||||||||||||
|
|||||||||||||||||||||
Aggregate Market Value(1) | |||||||||||||||||||||
Super Maximum
|
$ | 65,283,800 | $ | 16,500,000 | $ | 31,740,000 | $ | 17,043,800 | |||||||||||||
Maximum
|
$ | 58,920,700 | $ | 16,500,000 | $ | 27,600,000 | $ | 14,820,700 | |||||||||||||
Midpoint
|
$ | 53,387,560 | $ | 16,500,000 | $ | 24,000,000 | $ | 12,887,560 | |||||||||||||
Minimum
|
$ | 47,854,430 | $ | 16,500,000 | $ | 20,400,000 | $ | 10,954,430 |
(1) | Based on offering price of $10.00 per share. |
Respectfully submitted,
RP ® FINANCIAL, LC. |
||||
James P. Hennessey
Director |
||||
RP ® Financial, LC. | TABLE OF CONTENTS | |
i |
PAGE | ||||
DESCRIPTION | NUMBER | |||
|
||||
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
|
||||
|
||||
Introduction
|
I.1 | |||
Plan of Conversion and Reorganization
|
I.2 | |||
The Supplemental Offering
|
I.3 | |||
Purpose of the Reorganization and Supplemental Offering
|
I.3 | |||
Strategic Overview
|
I.4 | |||
Regulatory Agreement
|
I.7 | |||
Balance Sheet Trends
|
I.8 | |||
Income and Expense Trends
|
I.13 | |||
Interest Rate Risk Management
|
I.19 | |||
Lending Activities and Strategy
|
I.20 | |||
Asset Quality
|
I.24 | |||
Funding Composition and Strategy
|
I.25 | |||
Legal Proceedings
|
I.27 | |||
|
||||
CHAPTER TWO MARKET AREA ANALYSIS
|
||||
|
||||
Introduction
|
II.1 | |||
Market Area Demographics
|
II.8 | |||
Competition
|
II.12 | |||
|
||||
CHAPTER THREE PEER GROUP ANALYSIS
|
||||
|
||||
Peer Group Selection
|
III.1 | |||
Financial Condition
|
III.8 | |||
Income and Expense Components
|
III.12 | |||
Loan Composition
|
III.15 | |||
Credit Risk
|
III.15 | |||
Interest Rate Risk
|
III.17 | |||
Summary
|
III.20 |
RP ® Financial, LC. | TABLE OF CONTENTS | |
ii |
PAGE | ||||
DESCRIPTION | NUMBER | |||
|
||||
CHAPTER FOUR VALUATION ANALYSIS
|
||||
|
||||
Introduction
|
IV.1 | |||
Appraisal Guidelines
|
IV.1 | |||
RP Financial Approach to the Valuation
|
IV.1 | |||
Valuation Analysis
|
IV.2 | |||
1. Financial Condition
|
IV.3 | |||
2. Profitability, Growth and Viability of Earnings
|
IV.4 | |||
3. Asset Growth
|
IV.5 | |||
4. Primary Market Area
|
IV.5 | |||
5. Dividends
|
IV.6 | |||
6. Liquidity of the Shares
|
IV.7 | |||
7. Marketing of the Issue
|
IV.7 | |||
A. The Public Market
|
IV.8 | |||
B. The New Issue Market
|
IV.12 | |||
C. The Acquisition Market
|
IV.13 | |||
D. Trading in ACFCs Stock
|
IV.16 | |||
8. Management
|
IV.17 | |||
9. Effect of Government Regulation and Regulatory Reform
|
IV.17 | |||
Summary of Adjustments
|
IV.18 | |||
Valuation Approaches
|
IV.18 | |||
1. Price-to-Earnings (P/E)
|
IV.20 | |||
2. Price-to-Book (P/B)
|
IV.21 | |||
3. Price-to-Assets (P/A)
|
IV.21 | |||
Comparison to Recent Offerings
|
IV.21 | |||
Valuation Conclusion
|
IV.22 | |||
Establishment of the Exchange Ratio
|
IV.23 |
RP ® Financial, LC. | LIST OF TABLES | |
iii |
TABLE | ||||||||
NUMBER | DESCRIPTION | PAGE | ||||||
|
||||||||
1.1 |
Historical Balance Sheets
|
I.9 | ||||||
1.2 |
Historical Income Statements
|
I.14 | ||||||
|
||||||||
2.1 |
Summary Demographic Data
|
II.9 | ||||||
2.2 |
Major Employers in Ware County and Duval County
|
II.11 | ||||||
2.3 |
Unemployment Trends
|
II.12 | ||||||
2.4 |
Deposit Summary
|
II.14 | ||||||
2.5 |
Competitor Analysis
|
II.15 | ||||||
|
||||||||
3.1 |
Peer Group of Publicly-Traded Thrifts
|
III.3 | ||||||
3.2 |
Balance Sheet Composition and Growth Rates
|
III.9 | ||||||
3.3 |
Income as a % of Average Assets and Yields, Costs, Spreads
|
III.13 | ||||||
3.4 |
Loan Portfolio Composition and Related Information
|
III.16 | ||||||
3.5 |
Credit Risk Measures and Related Information
|
III.18 | ||||||
3.6 |
Interest Rate Risk Measures and Net Interest Income Volatility
|
III.19 | ||||||
|
||||||||
4.1 |
Pricing Characteristics: Recent Conversions Completed
|
IV.14 | ||||||
4.2 |
Market Pricing Comparatives
|
IV.15 | ||||||
4.3 |
Public Market Pricing
|
IV.24 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.1 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.2 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.3 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.4 |
| The Company. The Company is expected to retain up to [50%] of the net conversion proceeds. At present, Company funds, net of the loan to the ESOP, are expected to be invested initially into high quality investment securities with short- to intermediate-term maturities, generally consistent with the current investment mix. A portion of the proceeds may also be utilize to repay a holding company loan which was taken down subsequent to the March 31, 2010, date of financial data in the prospectus. Over time, Company funds are anticipated to be utilized for various corporate purposes, possibly including acquisitions, infusing additional equity into the Bank, repurchases of common stock, and the payment of regular and/or special ash dividends. | ||
| The Bank. The balance of the net offering proceeds will be infused into the Bank. Cash proceeds (i.e., net proceeds less deposits withdrawn to fund stock purchases) infused into the Bank are anticipated to become part of general operating funds, and are expected to initially be invested in short-term investments pending longer term deployment, i.e., funding lending activities, purchasing mortgage backed securities (MBS), general corporate purposes and/or expansion, and diversification. |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.5 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.6 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.7 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.8 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.9 |
12/31/05- | Pro Forma As of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/31/10 | March 31, 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of the Fiscal Year Ended December 31, | Annual | After Supplemental | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | As of March 31, 2010 | Growth Rate | Offering (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Pct | Amount | Pct(1) | ||||||||||||||||||||||||||||||||||||||||||||||
($000) | (%) | ($000) | (%) | ($000) | (%) | ($000) | (%) | ($000) | (%) | ($000) | (%) | (%) | ($000) | (%) | ||||||||||||||||||||||||||||||||||||||||||||||
Total Amount of:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets
|
$ | 744,116 | 100.00 | % | $ | 843,079 | 100.00 | % | $ | 931,026 | 100.00 | % | $ | 996,089 | 100.00 | % | $ | 905,561 | 100.00 | % | $ | 914,021 | 100.00 | % | 4.96 | % | $ | 929,916 | 100.00 | % | ||||||||||||||||||||||||||||||
Cash and Cash Equivalents
|
37,959 | 5.10 | % | 41,057 | 4.87 | % | 29,310 | 3.15 | % | 34,058 | 3.42 | % | 37,144 | 4.10 | % | 37,961 | 4.15 | % | 0.00 | % | 53,856 | 5.79 | % | |||||||||||||||||||||||||||||||||||||
Loans Receivable (net)
|
580,441 | 78.00 | % | 639,517 | 75.85 | % | 703,513 | 75.56 | % | 741,879 | 74.48 | % | 614,371 | 67.84 | % | 599,858 | 65.63 | % | 0.78 | % | 599,858 | 64.51 | % | |||||||||||||||||||||||||||||||||||||
Loans Held for Sale
|
100 | 0.01 | % | 4,365 | 0.52 | % | 640 | 0.07 | % | 736 | 0.07 | % | 8,990 | 0.99 | % | 5,253 | 0.57 | % | 153.98 | % | 5,253 | 0.56 | % | |||||||||||||||||||||||||||||||||||||
Investment Securities AFS
|
71,965 | 9.67 | % | 99,231 | 11.77 | % | 134,216 | 14.42 | % | 147,474 | 14.81 | % | 177,938 | 19.65 | % | 204,217 | 22.34 | % | 27.81 | % | 204,217 | 21.96 | % | |||||||||||||||||||||||||||||||||||||
Other Investments
|
1,800 | 0.24 | % | 1,200 | 0.14 | % | | 0.00 | % | | 0.00 | % | | 0.00 | % | | 0.00 | % | -100.00 | % | | 0.00 | % | |||||||||||||||||||||||||||||||||||||
FHLB Stock
|
7,074 | 0.95 | % | 7,948 | 0.94 | % | 9,293 | 1.00 | % | 9,996 | 1.00 | % | 10,023 | 1.11 | % | 10,023 | 1.10 | % | 8.54 | % | 10,023 | 1.08 | % | |||||||||||||||||||||||||||||||||||||
Intangible Assets
|
2,969 | 0.40 | % | 2,888 | 0.34 | % | 2,844 | 0.31 | % | 2,956 | 0.30 | % | 113 | 0.01 | % | 106 | 0.01 | % | -54.35 | % | 106 | 0.01 | % | |||||||||||||||||||||||||||||||||||||
BOLI
|
20,526 | 2.76 | % | 21,366 | 2.53 | % | 22,227 | 2.39 | % | 22,173 | 2.23 | % | 22,806 | 2.52 | % | 22,983 | 2.51 | % | 2.70 | % | 22,983 | 2.47 | % | |||||||||||||||||||||||||||||||||||||
OREO
|
310 | 0.04 | % | 286 | 0.03 | % | 1,726 | 0.19 | % | 3,332 | 0.33 | % | 5,028 | 0.56 | % | 5,035 | 0.55 | % | 92.69 | % | 5,035 | 0.54 | % | |||||||||||||||||||||||||||||||||||||
Deposits
|
516,321 | 69.39 | % | 573,052 | 67.97 | % | 582,730 | 62.59 | % | 624,606 | 62.71 | % | 555,444 | 61.34 | % | 584,692 | 63.97 | % | 2.97 | % | 584,692 | 62.88 | % | |||||||||||||||||||||||||||||||||||||
Borrowed Funds
|
129,000 | 17.34 | % | 173,000 | 20.52 | % | 251,500 | 27.01 | % | 277,650 | 27.87 | % | 287,694 | 31.77 | % | 267,718 | 29.29 | % | 18.74 | % | 267,718 | 28.79 | % | |||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Equity
|
92,918 | 12.49 | % | 91,087 | 10.80 | % | 89,806 | 9.65 | % | 83,960 | 8.43 | % | 56,541 | 6.24 | % | 56,371 | 6.17 | % | -10.68 | % | 72,266 | 7.77 | % | |||||||||||||||||||||||||||||||||||||
Tangible Equity
|
89,949 | 12.09 | % | 88,199 | 10.46 | % | 86,962 | 9.34 | % | 81,004 | 8.13 | % | 56,428 | 6.23 | % | 56,265 | 6.16 | % | -10.04 | % | 72,160 | 7.76 | % | |||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans/Deposits
|
112.42 | % | 111.60 | % | 120.73 | % | 118.78 | % | 110.61 | % | 102.59 | % | 102.59 | % | ||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Full Service Offices
|
12 | 13 | 13 | 12 | 11 | 11 | 11 |
(1) | Percent of average assets. | |
(2) | Adjusted to include the net proceeds of the Supplemental Offering of $15.895 million. |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.10 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.11 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.12 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.13 |
RP ® Financial, LC. | OVERVIEW AND FINANCIAL ANALYSIS | |
I.14 |
The Supplemental | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance for the | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Twelve Months | Twelve Months | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Fiscal Year Ended December 31, | Ended | Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | March 31, 2010 | March 31, 2010(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | Amount | Pct(1) | |||||||||||||||||||||||||||||||||||||||||||
($000) | (%) | ($000) | (%) | ($000) | (%) | ($000) | (%) | ($000) | (%) | ($000) | (%) | ($000) | (%) | |||||||||||||||||||||||||||||||||||||||||||
Interest Income
|
$ | 37,254 | 5.26 | % | $ | 46,407 | 5.97 | % | $ | 55,509 | 5.97 | % | $ | 55,259 | 5.63 | % | $ | 48,718 | 5.00 | % | $ | 47,094 | 4.96 | % | $ | 47,404 | 4.91 | % | ||||||||||||||||||||||||||||
Interest Expense
|
(17,139 | ) | -2.42 | % | (24,747 | ) | -3.18 | % | (33,123 | ) | -3.56 | % | (32,009 | ) | -3.26 | % | (26,935 | ) | -2.76 | % | (25,250 | ) | -2.66 | % | (25,250 | ) | -2.62 | % | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Interest Income
|
$ | 20,115 | 2.84 | % | $ | 21,660 | 2.79 | % | $ | 22,386 | 2.41 | % | $ | 23,250 | 2.37 | % | $ | 21,783 | 2.24 | % | $ | 21,844 | 2.30 | % | $ | 22,154 | 2.30 | % | ||||||||||||||||||||||||||||
Provision for Loan Losses
|
(2,121 | ) | -0.30 | % | (475 | ) | -0.06 | % | (2,616 | ) | -0.28 | % | (13,948 | ) | -1.42 | % | (24,873 | ) | -2.55 | % | (22,783 | ) | -2.40 | % | (22,783 | ) | -2.36 | % | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Interest Income after Provisions
|
$ | 17,994 | 2.54 | % | $ | 21,185 | 2.73 | % | $ | 19,770 | 2.13 | % | $ | 9,302 | 0.95 | % | ($3,090 | ) | -0.32 | % | ($939 | ) | -0.10 | % | ($629 | ) | -0.07 | % | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Operating Income
|
7,855 | 1.11 | % | 8,101 | 1.04 | % | 7,185 | 0.77 | % | 7,547 | 0.77 | % | 8,858 | 0.91 | % | 8,746 | 0.92 | % | 8,746 | 0.91 | % | |||||||||||||||||||||||||||||||||||
Operating Expense
|
(19,534 | ) | -2.76 | % | (21,680 | ) | -2.79 | % | (25,451 | ) | -2.74 | % | (25,514 | ) | -2.60 | % | (22,685 | ) | -2.33 | % | (23,027 | ) | -2.43 | % | (23,027 | ) | -2.39 | % | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Operating Income
|
$ | 6,315 | 0.89 | % | $ | 7,606 | 0.98 | % | $ | 1,504 | 0.16 | % | $ | (8,665 | ) | -0.88 | % | $ | (16,917 | ) | -1.74 | % | $ | (15,220 | ) | -1.60 | % | $ | (14,910 | ) | -1.55 | % | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Gain (Loss) on Sale of Loans
|
121 | 0.02 | % | 67 | 0.01 | % | 34 | 0.00 | % | 118 | 0.01 | % | (609 | ) | -0.06 | % | (963 | ) | -0.10 | % | (963 | ) | -0.10 | % | ||||||||||||||||||||||||||||||||
Net Gain (Loss) on Sale of Securities
|
(80 | ) | -0.01 | % | (163 | ) | -0.02 | % | (46 | ) | 0.00 | % | 650 | 0.07 | % | 383 | 0.04 | % | 287 | 0.03 | % | 287 | 0.03 | % | ||||||||||||||||||||||||||||||||
Net Gain (Loss) on Repossessed Assets
|
(41 | ) | -0.01 | % | 1 | 0.00 | % | (247 | ) | -0.03 | % | (815 | ) | -0.08 | % | (1,488 | ) | -0.15 | % | (875 | ) | -0.09 | % | (875 | ) | -0.09 | % | |||||||||||||||||||||||||||||
Life Insurance Proceeds in Excess of CSV
|
| 0.00 | % | | 0.00 | % | | 0.00 | % | 2,634 | 0.27 | % | | 0.00 | % | | 0.00 | % | | 0.00 | % | |||||||||||||||||||||||||||||||||||
OTTI Loss on Securities
|
| 0.00 | % | | 0.00 | % | | 0.00 | % | | 0.00 | % | (4,467 | ) | -0.46 | % | (4,368 | ) | -0.46 | % | (4,368 | ) | -0.45 | % | ||||||||||||||||||||||||||||||||
Elimintation of SERP Liability
|
| 0.00 | % | | 0.00 | % | | 0.00 | % | | 0.00 | % | 2,684 | 0.28 | % | 2,684 | 0.28 | % | 2,684 | 0.28 | % | |||||||||||||||||||||||||||||||||||
Goodwill Impairment
|
| 0.00 | % | | 0.00 | % | | 0.00 | % | | 0.00 | % | (2,811 | ) | -0.29 | % | (2,811 | ) | -0.30 | % | (2,811 | ) | -0.29 | % | ||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Non-Operating Income/(Expense)
|
$ | | 0.00 | % | $ | (95 | ) | -0.01 | % | $ | (259 | ) | -0.03 | % | $ | 2,587 | 0.26 | % | $ | (6,308 | ) | -0.65 | % | $ | (6,046 | ) | -0.64 | % | $ | (6,046 | ) | -0.63 | % | |||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Before Tax
|
$ | 6,315 | 0.89 | % | $ | 7,511 | 0.97 | % | $ | 1,245 | 0.13 | % | $ | (6,078 | ) | -0.62 | % | $ | (23,225 | ) | -2.38 | % | $ | (21,266 | ) | -2.24 | % | $ | (20,956 | ) | -2.17 | % | ||||||||||||||||||||||||
Income Taxes
|
(1,290 | ) | -0.18 | % | (2,382 | ) | -0.31 | % | (130 | ) | -0.01 | % | 3,233 | 0.33 | % | (6,110 | ) | -0.63 | % | (7,767 | ) | -0.82 | % | (7,885 | ) | -0.82 | % | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss)
|
$ | 5,025 | 0.71 | % | $ | 5,129 | 0.66 | % | $ | 1,115 | 0.12 | % | $ | (2,845 | ) | -0.29 | % | $ | (29,335 | ) | -3.01 | % | $ | (29,033 | ) | -3.06 | % | $ | (28,841 | ) | -2.99 | % | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Core Net Income
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income
|
$ | 5,025 | 0.71 | % | $ | 5,129 | 0.66 | % | $ | 1,115 | 0.12 | % | $ | (2,845 | ) | -0.29 | % | $ | (29,335 | ) | -3.01 | % | $ | (29,033 | ) | -3.06 | % | $ | (28,841 | ) | -2.99 | % | ||||||||||||||||||||||||
Addback (Deduct): Non-Recurring (Inc)/Exp
|
| 0.00 | % | 95 | 0.01 | % | 259 | 0.03 | % | (2,587 | ) | -0.26 | % | 6,308 | 0.65 | % | 6,046 | 0.64 | % | 6,046 | 0.63 | % | ||||||||||||||||||||||||||||||||||
Tax Effect (1)
|
| 0.00 | % | (36 | ) | 0.00 | % | (98 | ) | -0.01 | % | 983 | 0.10 | % | | 0.00 | % | | 0.00 | % | | 0.00 | % | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Core Net Income
|
$ | 5,025 | 0.71 | % | $ | 5,188 | 0.67 | % | $ | 1,276 | 0.14 | % | $ | (4,449 | ) | -0.45 | % | $ | (23,027 | ) | -2.36 | % | $ | (22,987 | ) | -2.42 | % | $ | (22,795 | ) | -2.36 | % | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Memo:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expense Coverage Ratio (2)
|
102.97 | % | 99.91 | % | 87.96 | % | 91.13 | % | 96.02 | % | 94.86 | % | 96.21 | % | ||||||||||||||||||||||||||||||||||||||||||
Efficiency Ratio (3)
|
69.84 | % | 72.85 | % | 86.07 | % | 82.85 | % | 74.03 | % | 75.28 | % | 74.52 | % | ||||||||||||||||||||||||||||||||||||||||||
Effective Tax Rate
|
20.43 | % | 31.71 | % | 10.44 | % | 53.19 | % | -26.31 | % | -36.52 | % | -37.63 | % |
(1) | Based on an estimated effective tax rate of 38% for fiscal 2005 through 2008 while no tax effect has been assumed for fiscal 2009 and the twelve months ended March 31, 2010. | |
(2) | Net interest income divided by operating expenses. | |
(3) | Operating expenses as a percent of the sum of net interest income and other operating income (excluding non-operating items). | |
(4) | Reflects reinvestments of $15.9 million of net offering proceeds from supplemental offering at a 3.15% reinvestment rate tax effected at a 38% rate. |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.15 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.16 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.17 |
Twelve Months | Twelve Months | |||||||||||||||
Ended | Ended | |||||||||||||||
December 31, 2009 | March 31, 2010 | |||||||||||||||
Amount | Pct(1) | Amount | Pct(1) | |||||||||||||
($000) | (%) | ($000) | (%) | |||||||||||||
Net Non-Operating Expenses
|
||||||||||||||||
Net Gain (Loss) on Sale of Loans
|
(609 | ) | -0.06 | % | (963 | ) | -0.10 | % | ||||||||
Net Gain (Loss) on Sale of Securities
|
383 | 0.04 | % | 287 | 0.03 | % | ||||||||||
Net Gain (Loss) on Repossessed Assets
|
(1,488 | ) | -0.15 | % | (875 | ) | -0.09 | % | ||||||||
OTTI Loss on Securities
|
(4,467 | ) | -0.46 | % | (4,368 | ) | -0.46 | % | ||||||||
Elimintation of SERP Liability
|
2,684 | 0.28 | % | 2,684 | 0.28 | % | ||||||||||
Goodwill Impairment
|
(2,811 | ) | -0.29 | % | (2,811 | ) | -0.30 | % | ||||||||
|
||||||||||||||||
Total Non-Operating Income/(Expense)
|
$ | (6,308 | ) | -0.65 | % | $ | (6,046 | ) | -0.64 | % |
(1) | Percent of average assets. |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.18 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.19 |
| Emphasizing the origination of adjustable rate residential mortgage loans or hybrid ARMS with repricing frequencies of up to five years when market conditions permit (limited in the recent rate environment); | ||
| Utilizing a short-to-intermediate term investment portfolio which more closely matches the duration of funding liabilities; | ||
| Selling a portion of the fixed rate mortgage loans originated based on risk and profitability considerations; | ||
| Promoting transaction accounts and, when appropriate, longer-term CDs; | ||
| Maintaining stable depositor relationships by providing quality service and multiple delivery channels so as to diminish the need to price funds on a highly competitive basis; | ||
| Utilizing longer-term borrowings when such funds are attractively priced relative to deposits and prevailing reinvestment opportunities; | ||
| Utilizing interest rate swap agreements on a limited basis to more finely tune the effective repricing structure of funding liabilities; | ||
| Maintaining a balance of cash or short-term investments; and | ||
| Maintaining an acceptable level of capital which provides a favorable level of interest-earning assets relative to interest-bearing liabilities. | ||
| Limiting investment in fixed assets and other non-earning assets and seeking to resolve existing non-performing assets as quickly as possible; |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.20 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.21 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.22 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.23 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.24 |
| Beginning in 2009, management began to accelerate its charge-offs of one- to four-family residential mortgage loans by taking partial or full charge-offs in the period that such loans became non-accruing. | ||
| The Company has restructured loans through TDRs in circumstances in which it is believed that the borrower can service the loan pursuant to the renegotiated terms providing the Company with savings from the expense of foreclosure proceedings and the holding and disposition expenses of selling foreclosed property. | ||
| In 2009, due to the elevated delinquency of one- to four-family residential loans and the increasing complexity of workout for these types of loans, the Company engaged the services of a national third party servicer for certain loans. One- to four-family |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.25 |
residential mortgage loans, and any associated home equity loan that become 60 days past due are assigned to the third party servicer for collection. ACFC will also assign other one- to four-family residential mortgage loans to the third party servicer irrespective of delinquency status if management believes the loan may have collection risk. At March 31, 2010, the outstanding balance of loans assigned to the third party servicer was $46.9 million. | |||
| In order to reduce the expenses of the foreclosure process and selling of foreclosed property, ACFC has sold certain non-performing loans through national loan sales of distressed assets. The Company has also accepted short sales of residential property by borrowers where such properties are sold at a loss and the proceeds of such sales are paid to ACFC. | ||
| The Company has enhanced the internal risk management processes. In 2010, ACFC established an independent risk committee of the Board of Directors to evaluate and monitor system, market and credit risk. |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.26 |
RP ® Financial, LC. |
OVERVIEW AND FINANCIAL ANALYSIS
I.27 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.1 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.2 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.3 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.4 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.5 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.6 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.7 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.8 |
RP ® Financial, LC. |
MARKET AREA ANALYSIS
II.9 |
Year | Growth Rate | |||||||||||||||||||
2000 | 2009 | 2014 | 2000-2009 | 2009-2014 | ||||||||||||||||
Population (000)
|
||||||||||||||||||||
|
||||||||||||||||||||
United States
|
281,422 | 309,732 | 324,063 | 1.1 | % | 0.9 | % | |||||||||||||
Florida
|
15,982 | 19,022 | 20,473 | 2.0 | % | 1.5 | % | |||||||||||||
Clay County
|
141 | 192 | 220 | 3.5 | % | 2.7 | % | |||||||||||||
Duval County
|
779 | 912 | 979 | 1.8 | % | 1.4 | % | |||||||||||||
St. Johns County
|
123 | 188 | 227 | 4.8 | % | 3.8 | % | |||||||||||||
Georgia
|
8,186 | 9,933 | 10,861 | 2.2 | % | 1.8 | % | |||||||||||||
Chatham County
|
232 | 256 | 268 | 1.1 | % | 0.9 | % | |||||||||||||
Coffee County
|
37 | 41 | 42 | 1.0 | % | 0.5 | % | |||||||||||||
Ware County
|
35 | 36 | 36 | 0.1 | % | 0.1 | % | |||||||||||||
|
||||||||||||||||||||
Households (000)
|
||||||||||||||||||||
|
||||||||||||||||||||
United States
|
105,480 | 116,523 | 122,109 | 1.1 | % | 0.9 | % | |||||||||||||
Florida
|
6,338 | 7,543 | 8,135 | 2.0 | % | 1.5 | % | |||||||||||||
Clay County
|
50 | 70 | 80 | 3.7 | % | 2.8 | % | |||||||||||||
Duval County
|
304 | 364 | 392 | 2.0 | % | 1.5 | % | |||||||||||||
St. Johns County
|
50 | 76 | 91 | 4.8 | % | 3.8 | % | |||||||||||||
Georgia
|
3,006 | 3,648 | 3,994 | 2.2 | % | 1.8 | % | |||||||||||||
Chatham County
|
90 | 100 | 105 | 1.2 | % | 1.1 | % | |||||||||||||
Coffee County
|
13 | 14 | 15 | 0.9 | % | 0.6 | % | |||||||||||||
Ware County
|
13 | 14 | 14 | 0.3 | % | 0.2 | % | |||||||||||||
|
||||||||||||||||||||
Median Household
Income ($)
|
||||||||||||||||||||
|
||||||||||||||||||||
United States
|
$ | 42,164 | $ | 54,719 | $ | 56,938 | 2.9 | % | 0.8 | % | ||||||||||
Florida
|
38,843 | 50,413 | 52,516 | 2.9 | % | 0.8 | % | |||||||||||||
Clay County
|
48,948 | 62,075 | 65,311 | 2.7 | % | 1.0 | % | |||||||||||||
Duval County
|
40,737 | 52,034 | 54,702 | 2.8 | % | 1.0 | % | |||||||||||||
St. Johns County
|
50,102 | 65,697 | 70,229 | 3.1 | % | 1.3 | % | |||||||||||||
Georgia
|
42,686 | 56,761 | 58,593 | 3.2 | % | 0.6 | % | |||||||||||||
Chatham County
|
37,854 | 48,284 | 52,071 | 2.7 | % | 1.5 | % | |||||||||||||
Coffee County
|
30,698 | 36,664 | 38,839 | 2.0 | % | 1.2 | % | |||||||||||||
Ware County
|
28,527 | 34,983 | 36,343 | 2.3 | % | 0.8 | % | |||||||||||||
|
||||||||||||||||||||
Per Capita Income ($)
|
||||||||||||||||||||
|
||||||||||||||||||||
United States
|
$ | 21,587 | $ | 27,277 | $ | 28,494 | 2.6 | % | 0.9 | % | ||||||||||
Florida
|
21,557 | 27,128 | 28,526 | 2.6 | % | 1.0 | % | |||||||||||||
Clay County
|
20,868 | 26,832 | 28,286 | 2.8 | % | 1.1 | % | |||||||||||||
Duval County
|
20,753 | 26,819 | 28,099 | 2.9 | % | 0.9 | % | |||||||||||||
St. Johns County
|
28,674 | 37,763 | 39,994 | 3.1 | % | 1.2 | % | |||||||||||||
Georgia
|
21,154 | 26,980 | 28,427 | 2.7 | % | 1.1 | % | |||||||||||||
Chatham County
|
21,152 | 24,713 | 26,034 | 2.2 | % | 1.0 | % | |||||||||||||
Coffee County
|
15,530 | 17,353 | 18,312 | 1.6 | % | 1.1 | % | |||||||||||||
Ware County
|
14,384 | 17,817 | 18,721 | 3.1 | % | 1.0 | % |
Less Than | $25,000 to | $50,000- | ||||||||||||||
2009 HH Income Dist. (%) | $25,000 | 50,000 | $100,000 | $100,000+ | ||||||||||||
|
||||||||||||||||
United States
|
20.9 | 24.5 | 35.3 | 19.3 | ||||||||||||
Florida
|
21.9 | 27.6 | 33.8 | 16.7 | ||||||||||||
Clay County
|
12.7 | 24.8 | 42.7 | 19.9 | ||||||||||||
Duval County
|
20.0 | 27.8 | 35.5 | 16.7 | ||||||||||||
St. Johns County
|
21.9 | 25.0 | 32.3 | 12.3 | ||||||||||||
Georgia
|
26.0 | 25.8 | 35.5 | 12.8 | ||||||||||||
Chatham County
|
26.0 | 25.8 | 35.5 | 12.8 | ||||||||||||
Coffee County
|
33.2 | 31.9 | 29.0 | 6.0 | ||||||||||||
Ware County
|
36.4 | 30.2 | 27.9 | 5.5 |
RP ® Financial, LC. | MARKET AREA ANALYSIS | |
II.10 |
RP ® Financial, LC. | MARKET AREA ANALYSIS | |
II.11 |
Number of | ||||||
Company | Employees | Product/Service | ||||
|
||||||
Ware County
|
||||||
Satilla Regional Medical Center
|
1,200 | Hospital | ||||
Ware County School System
|
1,100 | Gov./Education | ||||
CSX
|
950 | Rail/Freight Transport. | ||||
Wal-Mart
|
488 | Retail | ||||
Ware State Prison
|
388 | State Prison | ||||
Baptist Village
|
360 | Nursing Home | ||||
Carolina Skiff
|
250 | Boat Manufacturer | ||||
Simmons Company
|
232 | Mattress Manufacturer | ||||
Scotbuilt Homes
|
190 | Manufactured Housing | ||||
Clayton Homes
|
185 | Manufactured Housing | ||||
|
||||||
Duval County
|
||||||
Jacksonville Naval Air Station
|
25,245 | Government/Military | ||||
Duval County Public Schools
|
14,489 | Govt./Education | ||||
Mayport Naval Station
|
12,677 | Government/Military | ||||
City of Jacksonville
|
8,828 | Municipal Govt. | ||||
Baptist Health System
|
8,100 | Health Care-Hospital | ||||
Blue Cross/Blue Shield of FL
|
7,000 | Health Insurer | ||||
CSX
|
5,000 | Railroad Corp. HQ | ||||
Mayo Clinic
|
5,000 | Health Care | ||||
Citi
|
4,600 | Credit Card Company | ||||
Bank of America
|
4,000 | Regional Bank Sys. |
Sources: | Okefenokee Area Development Authority for Ware County and the Northeast Florida Regional Development Partnership for Duval County. |
RP ® Financial, LC. | MARKET AREA ANALYSIS | |
II.12 |
March 2009 | March 2010 | |||||||
Region | Unemployment | Unemployment | ||||||
United States
|
8.6 | % | 9.7 | % | ||||
Georgia
|
9.0 | 10.5 | ||||||
Chatham County
|
7.6 | 8.8 | ||||||
Coffee County
|
11.6 | 17.3 | ||||||
Ware County
|
9.7 | 12.0 | ||||||
Florida
|
9.6 | 12.3 | ||||||
Clay County
|
8.6 | 11.0 | ||||||
Duval County
|
9.4 | 12.4 | ||||||
St. Johns County
|
7.9 | 10.2 |
(1) | Unemployment rates are not seasonally adjusted. | |
Source: | U.S. Bureau of Labor Statistics. |
RP ® Financial, LC. | MARKET AREA ANALYSIS | |
II.13 |
RP
®
Financial, LC.
MARKET AREA ANALYSIS
II.14
Atlantic Coast Federal Corporation
Deposit Summary
(Dollars in Thousands)
As of June 30,
2006
2009
Deposit
Market
Number of
Market
No. of
Growth Rate
Deposits
Share
Branches
Deposits
Share
Branches
2006-2009
$
169,490,000
100.0
%
2,741
$
186,132,000
100.0
%
2,839
3.2
%
162,799,000
96.1
%
2,536
180,648,000
97.1
%
2,694
3.5
%
6,691,000
3.9
%
205
5,484,000
2.9
%
145
-6.4
%
$
4,417,585
100.0
%
88
$
4,882,197
100.0
%
101
3.4
%
4,362,223
98.7
%
85
4,826,925
98.9
%
98
3.4
%
55,362
1.3
%
3
55,272
1.1
%
3
-0.1
%
17,502
0.4
%
1
16,890
0.3
%
1
-1.2
%
$
602,979
100.0
%
16
$
664,934
100.0
%
17
3.3
%
586,494
97.3
%
15
643,830
96.8
%
16
3.2
%
16,485
2.7
%
1
21,104
3.2
%
1
8.6
%
16,485
2.7
%
1
21,104
3.2
%
1
8.6
%
$
655,431
100.0
%
10
$
804,141
100.0
%
12
7.1
%
483,271
73.7
%
8
582,784
72.5
%
10
6.4
%
172,160
26.3
%
2
221,357
27.5
%
2
8.7
%
172,160
26.3
%
2
221,357
27.5
%
2
8.7
%
$
363,416,000
100.0
%
5,310
$
400,979,000
100.0
%
5,820
3.3
%
296,869,000
81.7
%
4,465
355,137,000
88.6
%
5,286
6.2
%
66,547,000
18.3
%
845
45,842,000
11.4
%
534
-11.7
%
$
1,138,867
100.0
%
28
$
1,270,360
100.0
%
32
3.7
%
1,071,754
94.1
%
26
1,208,253
95.1
%
30
4.1
%
67,113
5.9
%
2
62,107
4.9
%
2
-2.6
%
0
0.0
%
0
41,809
3.3
%
1
NA
$
23,200,454
100.0
%
176
$
30,356,688
100.0
%
204
9.4
%
19,285,097
83.1
%
153
24,014,518
79.1
%
184
7.6
%
3,915,357
16.9
%
23
6,342,170
20.9
%
20
17.4
%
293,891
1.3
%
6
264,537
0.9
%
5
-3.4
%
$
2,489,873
100.0
%
60
$
2,786,112
100.0
%
68
3.8
%
2,221,165
89.2
%
52
2,419,770
86.9
%
57
2.9
%
268,708
10.8
%
8
366,342
13.1
%
11
10.9
%
0
0.0
%
0
18,793
0.7
%
1
NA
Source:
FDIC.
RP
®
Financial, LC.
MARKET AREA ANALYSIS
II.15
Atlantic Coast Federal Corporation
Competitor Analysis
2009
2009
2009
Total
Total
Number
Deposits in
Market
2009
2008
of
Market
Share
Rank
Rank
Institution (ST)
Type
Branches
($000)
(%)
1
1
Thrift
2
221,357
33.87
2
2
Bank HC
1
96,010
14.69
3
5
Bank HC
1
75,670
11.58
4
3
Bank
1
68,337
10.46
5
7
Bank
1
68,243
10.44
6
6
Bank
1
46,450
7.11
7
4
Bank
1
43,538
6.66
8
8
Bank HC
2
33,859
5.18
10
653,464
2009
2009
2009
Total
Total
Number
Deposits in
Market
2009
2008
of
Market
Share
Rank
Rank
Institution (ST)
Type
Branches
($000)
(%)
1
1
Bank
24
12,956,347
42.73
2
3
Thrift HC
5
5,752,713
18.97
3
2
Bank
39
4,998,290
16.49
4
4
Bank
23
1,486,145
4.90
5
5
Bank
14
805,595
2.66
6
6
Bank
9
594,470
1.96
7
8
Bank
17
472,693
1.56
8
7
Comml Bank
8
396,818
1.31
9
13
Bank
6
368,374
1.22
10
10
Bank HC
2
315,961
1.04
12
9
Thrift
5
264,537
0.87
199
30,317,940
Note: Market Share is for U.S. Territories only and non-retail branches are not included.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.1
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.2
Screen #1 Florida and Georgia institutions.
There were no
publicly traded thrift institutions eligible for inclusion in the Peer Group as there
were no publicly traded thrifts in based in Florida and the only two publicly traded
thrift institutions based in Georgia were subsidiaries of mutual holding companies
which are inappropriate for the valuation peer group for a thrift undertaking a second
step conversion transaction.
Screen #2.
Thrift institutions with assets between $400 million
and $3.0 billion; Based on the importance that asset size plays in franchise value and
resources of financial institution, market capitalization and liquidity of the stock;
NPA/Assets ratios between 2% and 7.5%;
Asset quality is an
important consideration in investors perception of value in the current environment.
As of March 31, 2010, the Companys ratio of NPAs/assets equaled 4.31% and NPAs
including accruing TDRs equaled 6.33% of assets. Accordingly, in selecting the Peer
Group, we were seeking to select comparable thrifts with similar asset quality ratios
in the aggregate, such that the perceived investment risks and returns were captured in
their respective pricing ratios.
Return on Assets (ROA) ratios less than 0.30%
. Given the
Companys recent operating losses, our Peer Group selection was focused on selecting
comparable public thrifts with weak operating returns or losses. Moreover, we excluded
three thrifts reporting operating losses merely as a result of one-time non-recurring
goodwill impairment charges.
Other Considerations.
We also excluded several institutions
operating in inner city markets (Caver Bancorp of New York and Broadway Financial Corp.
of CA) which also were minority owned and operated as well as a company which had
converted in the last twelve months (Omni-American Bancorp of Texas). Overall, in
selecting the Peer Group, we sought to balance characteristics as regional market,
asset quality and earnings in order to best match the corresponding characteristics for
the Company.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.3
Peer Group of Publicly-Traded Thrifts
May 28, 2010
Operating
Total
Fiscal
Conv.
Stock
Market
Ticker
Financial Institution
Exchange
Primary Market
Strategy(1)
Assets(2)
Offices
Year
Date
Price
Value
($)
($Mil)
FDEF
NASDAQ
Defiance, OH
Thrift
$
2,059
35
12-31
10/95
$
10.83
$
88
BFIN
NASDAQ
Burr Ridge, IL
Thrift
$
1,559
18
12-31
06/05
$
8.53
$
183
MFSF
NASDAQ
Muncie, IN
Thrift
$
1,487
33
12-31
12/99
$
7.66
$
54
ABBC
NASDAQ
Jenkintown, PA
Thrift
$
1,267
20
12-31
06/07
$
8.88
$
185
CITZ
NASDAQ
Munster, IN
Thrift
$
1,092
22
12-31
07/98
$
5.06
$
55
LEGC
NASDAQ
Pittsfield, MA
Thrift
$
946
20
12-31
10/05
$
8.76
$
76
FPTB
NASDAQ
Chula Vista, CA
Thrift
$
904
9
12-31
08/02
$
9.25
$
39
RVSB
NASDAQ
Vancouver, WA
Thrift
$
838
18
03-31
10/97
$
3.00
$
33
FSBI
NASDAQ
Pittsburgh, PA
Thrift
$
708
14
09-30
06/88
$
7.10
$
22
JFBI
NASDAQ
Morristown, TN
Thrift
$
663
12
06-30
07/03
$
4.13
$
28
NOTES: (1)
Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage Banker, R.E.=Real Estate Developer, Div.=Diversified
and Ret.=Retail Banking.
(2)
Most recent quarter end available (E=Estimated and P=Pro Forma).
Source: SNL Financial, LC.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.4
First Defiance Financial Corp., Inc.
First Defiance Financial Corp.
is a savings and loan holding company based in Defiance, Ohio. First Defiance
Financial Corp. conducts operations from 35 retail banking offices in northwestern
Ohio and nearby areas in Michigan and Indiana. First Defiance Financial Corp.s
operating objectives include expansion, diversification within its markets, growth
of its fee based income, and growth internally and through acquisitions of
financial institutions, branches and financial services businesses. First Defiance
Financial Corp. has completed three whole bank acquisitions, several branch
acquisitions and acquisitions of other financial services companies over the last
decade. At March 31, 2010, First Defiance Financial Corp. had total assets of $2.1
billion, deposits of $1.6 billion and a tangible equity-to-assets ratio of 8.4%.
The ratio of NPAs/Assets was 2.59% and was thus favorable relative to the Peer
Group average. For the 12 months ended March 31, 2010, First Defiance Financial
Corp. reported earnings of $5.3 million for a return on average assets of 0.26%.
First Defiance Financial Corp. had a market capitalization of $88 million as of May
28, 2010.
BankFinancial Corp. of IL.
BankFinancial Corp. operates through a
total of 18 offices in the Chicago, Illinois, metropolitan area. BankFinancial
Corp.s asset investment strategy reflects a ratio of loans/assets which is
modestly above the Peer Group average and a loan portfolio composition which is
heavily weighted towards commercial and multi-family mortgage loans. The ratio of
NPAs/Assets falls modestly below the Peer Group average at 4.05% of assets.
Reported earnings are above the Peer Group average and median reflecting in part,
below average level of loan loss provisions. At March 31, 2010, BankFinancial
Corp. had total assets of $1.6 billion, deposits of $1.2 billion and a tangible
equity-to-assets ratio of 15.2%. For the twelve months ended March 31, 2010,
BankFinancial Corp. reported a net loss of $194,000 for a return on average assets
of -0.01%, while core earnings excluded net non-operating items on a tax effected
basis equaled 0.05% of average assets. BankFinancial Corp had a market
capitalization of $183 million at May 28, 2010.
MutualFirst Financial, Inc. of IN. MutualFirst Financial
operates
through 33 offices in northern and central Indiana. MutualFirst Financials
balance sheet structure reflects a balance sheet structure similar to the average
Peer Group company. The loan composition weighted toward residential mortgages and
the Company reported positive operating returns (0.19% ROA) in contrast to the
Companys and the Peer Groups losses on average. The favorable earnings
performance in comparison to the Peer Group may be attributable to its
comparatively lower level of NPAs (2.44% versus 4.28% for the Peer Group on
average). At March 31, 2010, MutualFirst Financial had total assets of $1.5
billion, deposits of $1.1 billion, and a tangible equity-to-assets ratio of 8.4%.
For the twelve months ended March 31, 2010, MutualFirst Financial reported
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.5
earnings of $2.7 million for a return on average assets of 0.19%. MutualFirst
Financial had a market capitalization of $54 million at May 28, 2010.
Abington Bancorp of PA
operates 20 branches in the Philadelphia
metropolitan area. The asset structure reflects a relatively modest proportion of
loans/assets, as Abington Bancorp has sought to leverage its strong capital ratio
following the completion of its second step conversion in June 2007. Abington
Bancorps loan portfolio reflects a high level of construction lending in
comparison to the Peer Group average and NPAs have increased as a result to levels
exceeding the Peer Group average and median. The deteriorating asset quality has
impacted Abington Bancorps earnings as loan loss provisions as a percent of
average assets exceeded the level of any Peer Group company individually and the
Companys ROA was at the lower end of the Peer Group range. At March 31, 2010,
Abington Bancorp had total assets of $1.3 billion, deposits of $877.6 million, a
tangible equity-to-assets ratio of 16.9% and a NPA/Assets ratio equal to 4.73%.
For the twelve months ended March 31, 2010, Abington Bancorp reported net a net
loss equal to $7.7 million for a return on average assets of -0.63%. Abington
Bancorp had a market capitalization of $185 million at May 28, 2010.
CFS Bancorp, Inc. of IN.
CFS Bancorp is a savings and loan holding
company operating 22 banking offices in northern Indian and Illinois. CFS Bancorp
maintains a diversified loan portfolio with levels of commercial mortgage and
non-mortgage loans exceeding the Peer Group average. CFS Bancorp has recently
reported operating losses as NPAs/assets have increased to 7.35% which exceeds the
level of any Peer Group company individually and loan losses have increased as a
result. At March 31, 2010, CFS Bancorp had total assets of $1.3 billion, deposits
of $877.6 million a tangible equity-to-assets ratio of 10.2%. For the twelve
months ended March 31, 2010, CFS Bancorp reported a net loss of $1.3 million for a
net loss of 0.12%. CFS Bancorp had a market capitalization of $55 million at May
28, 2010.
Legacy Bancorp of MA
operates 20 branch offices in western
Massachusetts and eastern New York. The overall balance sheet structure and
composition of the loan portfolio are similar to the Peer Group averages.
Operating losses were comparatively significant (-0.87% ROA) reflecting the impact
of losses on investment securities as well as high loan loss provisions. NPAs are
at the lower end of the Peer Group range equal to 2.06% of assets. At March 31,
2010, Legacy Bancorp had total assets of $946.2 million, deposits of $661.2
million, and a tangible equity-to-assets ratio of 11.5. For the twelve months
ended March 31, 2010, Legacy Bancorp reported a net loss of $8.3 million for a
return on average assets of -0.87%. Legacy Bancorp had a market capitalization of
$76 million at May 28, 2010.
First PacTrust Bancorp of CA
operates through 9 offices in San Diego
and Riverside Counties. Like the Companys markets, First PacTrusts markets have
been significantly impacted by the recessionary economic environment which has
resulted in increased delinquency and foreclosure rates as well as declining real
estate values. First PacTrusts status as a former credit union also enhances its
comparability to the Company. The majority of First PacTrusts loans are for 1-4
family residential loans, but it has also diversified modestly into
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.6
commercial real estate lending. First PacTrusts balance sheet composition is
broadly similar to the Company in terms of loan and deposit concentrations while
recent operating losses reflect the impact of very high levels of loan loss
provisions, as the NPA/Assets ratio has increased to 7.25%, which is at the upper
end of the Peer Group range. At March 31, 2010, First PacTrust had total assets of
$903.8 million, deposits of $691.7 million and a tangible equity-to-assets ratio of
10.9%. For the twelve months ended March 31, 2010, First PacTrust reported net
income equal to $2.5 million for a return on average assets of 0.27%. First
PacTrust had a market capitalization of $39 million at May 28, 2010.
Riverview Bancorp, Inc. of WA
operates through 18 offices in Oregon
and Washington, primarily in the Portland metropolitan area. Riverview Bancorps
assets and liabilities reflect a greater proportion of loans and deposits than the
Peer Group average with a significant proportion of the loan portfolio devoted to
high risk-weight lending including both income producing property loans and
construction and development loans. Like the Companys markets, Riverview
Bancorps markets have been significantly impacted by the recessionary economic
environment which has resulted in increased delinquency and foreclosure rates as
well as declining real estate values. Coupled with the high risk-weight portfolio,
Riverview Bancorp has posted the highest level of loan loss provisions (1.81% of
average assets) of any of the Peer Group institutions reflecting its relatively
high level of NPAs (5.89% of assets versus the Peer Group average of 4.28%). At
March 31, 2010, Riverview Bancorp had total assets of $838.0 million, deposits of
$688.0 million and a tangible equity-to-assets ratio of 7.0%. For the twelve
months ended March 31, 2010, Riverview Bancorp reported a net loss equal to $5.4
million for a return on average assets of -0.62%. Riverview Bancorp had a market
capitalization of $33 million at May 28, 2010.
Fidelity Bancorp, Inc. of PA
operates through a total of 14 branch
offices in the Pittsburgh metropolitan area. The balance sheet reflects a
significant wholesale component with investments and borrowings comprising a larger
proportion of total assets in comparison to the Peer Group average. Fidelity
Bancorp reported a loss over the last twelve months primarily owing to realized and
unrealized losses on investment securities and other than temporary impairment
charges on investment securities. Lending is primarily concentrated in 1-4 family
mortgage loans, both in terms of whole loans and through a significant investment
in MBS, while diversification into commercial mortgage lending is below the Peer
Group average. At March 31, 2010, Fidelity Bancorp had total assets of $708.0
million, deposits of $446.1 million, a tangible equity-to-assets ratio of 6.4% and
an NPA/Assets ratio equal to 2.62%. For the twelve months ended March 31, 2010,
Fidelity Bancorp reported a net loss of $2.6 million for a loss on average assets
of -0.35%. Fidelity Bancorp had a market capitalization of $14 million at May 28,
2010.
Jefferson Bancshares, Inc. of Tennessee.
Jefferson Bancshares, Inc.
(Jefferson Bancshares) is a savings and loan holding company based in Morristown,
Tennessee, which is located in the northeastern portion of the Tennessee.
Jefferson Bancshares recently completed an acquisition transaction on an unassisted
basis but at a nominal purchase price effectively doubling the
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.7
branch structure to a total of 12 offices. As a result, Jefferson Bancshares has
substantially leveraged the capital raised in its second step conversion which was
completed in 2003. The ratio of NPAs/Assets equals 3.82% which falls modestly below
the Peer Group average and the loan portfolio reflects a broad mix of mortgage loans
and comparatively smaller balances of non-mortgage loans. At March 31, 2010,
Jefferson Bancshares had total assets of $663.2 million, deposits of $480.4 million
and a tangible equity-to-assets ratio of 8.4%. For the twelve months ended March
31, 2010, Jefferson Bancshares reported earnings of $1.1 million for a return on
average assets of 0.16%. Jefferson Bancshares had a market capitalization of $28
million at March 31, 2010.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.8
All
Publicly-Traded
Peer Group
$
3,006
$
1,152
$
347
$
76
10.04
%
10.46
%
3.52
%
4.28
%
(0.23
%)
(0.11
%)
(0.77
%)
(0.82
%)
16.60x
N.M.
85.20
%
61.61
%
8.54
%
6.28
%
(1)
Includes all NPAs and 90+ day accruing delinquent loans.
(2)
Based on market prices as of May 28, 2010.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.9
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 2010
Balance Sheet as a Percent of Assets (1)
Balance Sheet Annual Growth Rates
Regulatory Capital
Cash &
MBS &
Borrowed
Subd.
Net
Goodwill
Tng Net
MBS, Cash &
Borrows.
Net
Tng Net
Equivalents
Invest
BOLI
Loans
Deposits
Funds
Debt
Worth
& Intang
Worth
Assets
Investments
Loans
Deposits
&Subdebt
Worth
Worth
Tangible
Core
Reg.Cap.
5.8
%
23.6
%
2.5
%
65.0
%
62.9
%
28.8
%
0.0
%
7.8
%
0.0
%
7.8
%
-8.14
%
17.15
%
-15.48
%
-7.76
%
-1.00
%
-30.28
%
-27.78
%
5.83
%
5.83
%
11.29
%
All Public Companies
5.2
%
20.5
%
1.4
%
67.9
%
71.9
%
15.0
%
0.5
%
11.6
%
0.9
%
10.7
%
4.00
%
12.55
%
1.40
%
9.71
%
-15.74
%
1.82
%
2.29
%
10.62
%
10.48
%
17.29
%
4.1
%
18.1
%
1.4
%
68.8
%
72.3
%
12.9
%
0.0
%
10.2
%
0.1
%
9.5
%
2.49
%
7.98
%
-0.52
%
7.36
%
-13.37
%
1.26
%
1.52
%
9.40
%
9.31
%
14.41
%
State of GA
4.2
%
23.4
%
2.5
%
66.2
%
64.0
%
29.3
%
0.0
%
6.2
%
0.0
%
6.2
%
-8.14
%
17.15
%
-15.48
%
-7.76
%
-1.00
%
-30.28
%
-27.78
%
5.83
%
5.83
%
11.29
%
4.2
%
23.4
%
2.5
%
66.2
%
64.0
%
29.3
%
0.0
%
6.2
%
0.0
%
6.2
%
-8.14
%
17.15
%
-15.48
%
-7.76
%
0.00
%
-30.28
%
-27.78
%
5.83
%
5.83
%
11.29
%
Comparable Group
6.3
%
15.3
%
1.9
%
70.2
%
74.7
%
12.1
%
0.7
%
11.7
%
1.4
%
10.3
%
-0.02
%
30.56
%
-7.02
%
6.26
%
-26.67
%
-0.92
%
0.18
%
10.73
%
10.73
%
14.86
%
5.2
%
11.1
%
1.8
%
68.8
%
76.0
%
12.5
%
0.2
%
11.2
%
0.8
%
9.3
%
0.03
%
21.35
%
-7.91
%
3.68
%
-22.84
%
-0.17
%
0.14
%
9.84
%
9.84
%
13.45
%
Comparable Group
Abington Bancorp, Inc. of PA
5.6
%
27.8
%
3.3
%
59.4
%
69.3
%
12.9
%
0.0
%
16.9
%
0.0
%
16.9
%
5.87
%
13.55
%
0.10
%
20.28
%
-26.93
%
-7.11
%
-7.11
%
13.22
%
13.22
%
21.70
%
BankFinancial Corp. of IL
11.3
%
7.1
%
1.3
%
73.9
%
79.0
%
3.1
%
0.0
%
16.9
%
1.7
%
15.2
%
0.05
%
80.87
%
-10.37
%
6.78
%
-61.21
%
-0.73
%
-0.11
%
15.41
%
15.41
%
21.10
%
CFS Bancorp, Inc. of Munster IN
3.6
%
19.5
%
3.2
%
68.1
%
81.2
%
7.6
%
0.0
%
10.2
%
0.0
%
10.2
%
-1.78
%
-11.62
%
0.36
%
2.69
%
-33.12
%
0.40
%
0.40
%
8.92
%
8.92
%
12.63
%
Fidelity Bancorp, Inc. of PA
4.1
%
36.2
%
0.7
%
55.1
%
63.0
%
28.1
%
1.1
%
6.8
%
0.4
%
6.4
%
-1.72
%
21.35
%
-14.67
%
3.50
%
-11.01
%
-1.38
%
-1.42
%
NA
NA
13.55
%
First Defiance Financial Corp. of OH
7.5
%
8.2
%
1.5
%
75.3
%
77.7
%
8.3
%
1.8
%
11.4
%
3.1
%
8.4
%
2.39
%
26.49
%
-2.13
%
3.85
%
-6.33
%
2.19
%
3.94
%
10.52
%
10.52
%
13.45
%
First PacTrust Bancorp of CA
4.9
%
8.9
%
2.0
%
80.4
%
76.5
%
12.2
%
0.0
%
10.9
%
0.0
%
10.9
%
0.84
%
NM
-8.27
%
9.76
%
-34.09
%
3.28
%
3.28
%
9.33
%
9.33
%
13.51
%
Jefferson Bancshares Inc. of TN
11.7
%
8.6
%
1.0
%
67.7
%
72.4
%
13.8
%
1.1
%
12.1
%
3.7
%
8.4
%
0.01
%
81.77
%
-11.75
%
-0.36
%
-0.21
%
1.47
%
10.39
%
NA
NA
NA
Legacy Bancorp, Inc. of MA
4.1
%
20.9
%
1.7
%
67.7
%
69.9
%
16.5
%
0.0
%
12.7
%
1.2
%
11.5
%
-2.26
%
11.59
%
-7.54
%
2.73
%
-18.74
%
-3.05
%
-2.76
%
7.90
%
7.90
%
12.40
%
MutualFirst Financial Inc. of IN
8.2
%
13.4
%
3.0
%
69.4
%
75.5
%
14.5
%
0.3
%
8.8
%
0.4
%
8.4
%
4.79
%
73.11
%
-6.67
%
10.65
%
-14.39
%
0.63
%
1.87
%
NA
NA
13.28
%
Riverview Bancorp, Inc. of WA
1.6
%
2.1
%
1.8
%
85.1
%
82.1
%
4.2
%
2.7
%
10.1
%
3.1
%
7.0
%
-8.35
%
-22.04
%
-9.21
%
2.68
%
-60.66
%
-4.86
%
-6.70
%
9.84
%
9.84
%
12.11
%
(1)
Includes the impact of the net offering proceeds of the supplemental offering consistent with
the presentation set forth in Table 1.1.
Source:
SNL Financial, LC. and RP
®
Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.10
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.11
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.12
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.13
Income as Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the 12 Months Ended March 31, 2010
Net Interest Income
Other Income
G&A/Other Exp.
Non-Op. Items
Yields, Costs, and Spreads
Loss
NII
Total
MEMO:
MEMO:
Net
Provis.
After
Loan
R.E.
Other
Other
G&A
Goodwill
Net
Extrao.
Yield
Cost
Yld-Cost
Assets/
Effective
Income
Income (1)
Expense
NII
on IEA
Provis.
Fees
Oper.
Income
Income
Expense
Amort.
Gains
Items
On Assets
Of Funds
Spread
FTE Emp.
Tax Rate
-2.99
%
4.91
%
2.62
%
2.30
%
2.36
%
-0.07
%
0.00
%
0.00
%
0.91
%
0.91
%
2.39
%
0.29
%
-0.63
%
0.00
%
5.23
%
3.01
%
2.22
%
$
5,473
0.00
%
All Public Companies
-0.12
%
4.83
%
1.89
%
2.94
%
0.93
%
2.02
%
0.03
%
-0.07
%
0.81
%
0.77
%
2.72
%
0.09
%
-0.04
%
0.03
%
5.15
%
2.17
%
2.98
%
$
6,095
31.64
%
0.25
%
4.86
%
1.83
%
2.98
%
0.48
%
2.29
%
0.00
%
-0.01
%
0.57
%
0.55
%
2.63
%
0.00
%
0.00
%
0.00
%
5.13
%
2.15
%
3.01
%
$
4,858
31.79
%
State of GA
-3.06
%
4.96
%
2.66
%
2.30
%
2.40
%
-0.10
%
0.00
%
-0.24
%
1.45
%
1.21
%
2.42
%
0.30
%
-0.65
%
0.00
%
5.30
%
2.89
%
2.41
%
$
5,749
NM
-3.06
%
4.96
%
2.66
%
2.30
%
2.40
%
-0.10
%
0.00
%
-0.24
%
1.45
%
1.21
%
2.42
%
0.30
%
-0.65
%
0.00
%
5.30
%
2.89
%
2.41
%
$
5,749
0.00
%
Comparable Group
-0.17
%
4.75
%
1.68
%
3.07
%
1.04
%
2.03
%
0.02
%
-0.12
%
0.85
%
0.75
%
2.89
%
0.05
%
-0.16
%
0.00
%
5.16
%
1.92
%
3.24
%
$
5,260
33.10
%
-0.07
%
4.69
%
1.78
%
3.08
%
1.01
%
2.17
%
0.00
%
-0.01
%
0.63
%
0.60
%
2.88
%
0.04
%
-0.07
%
0.00
%
5.17
%
2.06
%
3.24
%
$
4,190
29.39
%
Comparable Group
Abington Bancorp, Inc. of PA
-0.63
%
4.35
%
1.77
%
2.57
%
1.57
%
1.00
%
0.00
%
0.00
%
-0.14
%
-0.14
%
1.88
%
0.00
%
-0.04
%
0.00
%
4.67
%
2.19
%
2.48
%
$
8,227
43.54
%
BankFinancial Corp. of IL
-0.01
%
4.62
%
1.20
%
3.42
%
0.53
%
2.89
%
0.00
%
-0.07
%
0.67
%
0.60
%
3.24
%
0.11
%
-0.10
%
0.00
%
4.99
%
1.46
%
3.53
%
$
4,190
23.91
%
CFS Bancorp, Inc. of Munster IN
-0.12
%
4.59
%
1.12
%
3.47
%
1.25
%
2.22
%
0.07
%
-0.29
%
1.50
%
1.28
%
3.85
%
0.00
%
-0.10
%
0.00
%
5.01
%
1.26
%
3.75
%
$
3,500
55.58
%
Fidelity Bancorp, Inc. of PA
-0.35
%
4.40
%
2.36
%
2.04
%
0.77
%
1.27
%
0.09
%
0.00
%
0.51
%
0.60
%
2.05
%
0.00
%
-0.56
%
0.00
%
4.59
%
2.56
%
2.03
%
$
4,849
49.89
%
First Defiance Financial Corp. of OH
0.26
%
4.90
%
1.53
%
3.36
%
1.35
%
2.02
%
0.00
%
-0.01
%
1.18
%
1.17
%
2.83
%
0.07
%
0.12
%
0.00
%
5.36
%
1.75
%
3.61
%
$
3,723
19.56
%
First PacTrust Bancorp of CA
0.27
%
5.03
%
1.78
%
3.25
%
1.40
%
1.85
%
0.00
%
-0.09
%
0.42
%
0.33
%
1.85
%
0.00
%
-0.08
%
0.00
%
5.31
%
2.01
%
3.30
%
$
9,718
NM
Jefferson Bancshares Inc. of TN
0.16
%
4.70
%
1.88
%
2.82
%
0.54
%
2.28
%
0.09
%
0.00
%
0.44
%
0.53
%
2.59
%
0.09
%
0.18
%
0.00
%
5.33
%
2.15
%
3.19
%
$
4,068
28.74
%
Legacy Bancorp, Inc. of MA
-0.87
%
4.67
%
1.81
%
2.86
%
0.69
%
2.17
%
0.00
%
-0.02
%
0.59
%
0.57
%
2.93
%
0.07
%
-0.90
%
0.00
%
5.02
%
2.10
%
2.92
%
$
5,376
29.39
%
MutualFirst Financial Inc. of IN
0.19
%
4.97
%
2.05
%
2.92
%
0.46
%
2.45
%
0.00
%
0.00
%
0.95
%
0.95
%
2.99
%
0.10
%
-0.05
%
0.00
%
5.47
%
2.29
%
3.18
%
$
3,690
7.81
%
Riverview Bancorp, Inc. of WA
-0.62
%
5.26
%
1.29
%
3.97
%
1.81
%
2.16
%
0.00
%
-0.73
%
2.35
%
1.62
%
4.65
%
0.01
%
-0.06
%
0.00
%
5.89
%
1.45
%
4.44
%
NM
39.48
%
(1)
Adjusted for the reinvestment income generated by the supplemental offering consistent with the
presentation in Table 1.2.
Source:
SNL Financial, LC. and RP
®
Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.14
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.15
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.16
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of March 31, 2010
Portfolio Composition as a Percent of Assets
5+Unit
1-4
Constr.
Comm
Commerc.
RWA/
Serviced
Servicing
Institution
MBS
Family
& Land
RE
Business
Consumer
Assets
For Others
Assets
(%)
(%)
(%)
(%)
(%)
(%)
(%)
($000)
($000)
19.18
%
42.77
%
5.25
%
8.67
%
1.93
%
7.87
%
57.89
%
$
2,520
$
0
12.18
%
35.02
%
5.06
%
22.18
%
4.56
%
2.28
%
65.30
%
$
606,479
$
5,873
10.58
%
35.32
%
3.90
%
21.65
%
3.39
%
0.61
%
65.21
%
$
45,390
$
140
18.98
%
43.08
%
4.52
%
8.76
%
2.12
%
8.76
%
57.84
%
$
2,520
$
0
18.98
%
43.08
%
4.52
%
8.76
%
2.12
%
8.76
%
57.84
%
$
2,520
$
0
8.02
%
31.48
%
6.21
%
24.85
%
7.04
%
1.38
%
74.69
%
$
222,794
$
1,520
7.04
%
27.82
%
4.18
%
24.46
%
5.91
%
0.32
%
76.22
%
$
51,000
$
270
17.04
%
36.53
%
11.66
%
10.20
%
1.67
%
0.02
%
64.07
%
$
4,180
$
31
5.97
%
18.42
%
1.61
%
39.40
%
15.17
%
0.15
%
85.58
%
$
267,110
$
1,474
11.14
%
23.69
%
5.25
%
32.98
%
7.00
%
0.08
%
77.68
%
$
22,410
$
0
12.68
%
31.56
%
2.65
%
14.90
%
4.22
%
0.53
%
56.36
%
$
0
$
0
4.09
%
18.40
%
4.31
%
35.80
%
16.93
%
1.31
%
82.57
%
$
1,265,750
$
9,283
7.26
%
71.99
%
1.30
%
7.66
%
0.06
%
0.18
%
74.88
%
$
0
$
0
3.39
%
24.08
%
8.77
%
25.06
%
9.51
%
1.03
%
77.56
%
$
0
$
0
6.82
%
36.96
%
4.04
%
23.86
%
3.35
%
0.34
%
67.36
%
$
79,590
$
526
11.44
%
39.67
%
3.91
%
12.03
%
4.82
%
9.85
%
73.05
%
$
459,360
$
3,379
0.37
%
13.49
%
18.60
%
46.58
%
7.67
%
0.31
%
87.76
%
$
129,540
$
509
Source:
SNL Financial LC. and RP
®
Financial, LC. calculations. The information provided in this table has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness of such information.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.17
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.18
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of March 31 , 2010 or Most Recent Date Available
NPAs &
Rsrves/
REO/
90+Del/
NPLs/
Rsrves/
Rsrves/
NPAs &
Net Loan
NLCs/
Institution
Assets
Assets
Loans
Loans
NPLs
90+Del
Chargoffs
Loans
(%)
(%)
(%)
(%)
(%)
(%)
($000)
(%)
0.55
%
6.33
%
5.73
%
2.17
%
38.70
%
25.21
%
$
23,899
3.98
%
0.50
%
3.76
%
4.66
%
1.66
%
64.71
%
48.71
%
$
1,470
0.65
%
0.23
%
2.61
%
3.68
%
1.35
%
45.03
%
40.21
%
$
448
0.26
%
0.55
%
6.51
%
8.81
%
2.15
%
24.43
%
22.36
%
$
4,224
2.63
%
0.55
%
6.51
%
8.81
%
2.15
%
24.43
%
22.36
%
$
4,224
2.63
%
0.80
%
4.28
%
4.63
%
1.81
%
44.29
%
34.56
%
$
1,989
1.00
%
0.70
%
3.94
%
4.41
%
1.55
%
33.24
%
28.66
%
$
1,286
0.72
%
1.72
%
4.73
%
3.60
%
1.22
%
33.96
%
15.55
%
$
334
0.17
%
0.44
%
4.05
%
4.62
%
1.50
%
32.40
%
27.72
%
$
1,957
0.66
%
0.97
%
7.35
%
8.94
%
2.67
%
29.86
%
25.42
%
$
769
0.40
%
0.04
%
2.62
%
4.26
%
1.39
%
32.52
%
29.60
%
$
776
0.77
%
0.62
%
2.59
%
2.55
%
2.45
%
96.03
%
73.05
%
$
4,456
1.14
%
1.07
%
7.25
%
7.54
%
1.91
%
25.29
%
21.54
%
$
1,180
0.63
%
0.79
%
3.82
%
4.55
%
1.19
%
26.21
%
21.39
%
$
1,268
1.10
%
0.19
%
2.06
%
2.73
%
1.25
%
45.77
%
41.59
%
$
5,411
3.29
%
0.60
%
2.44
%
2.61
%
1.59
%
60.77
%
45.88
%
$
1,304
0.49
%
1.59
%
5.89
%
4.90
%
2.95
%
60.10
%
43.87
%
$
2,437
1.32
%
Source:
Audited and unaudited financial statements, corporate reports and offering circulars, and RP
®
Financial, LC. calculations. The
information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.19
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of March 31, 2010 or Most Recent Date Available
Balance Sheet Measures
Tang.
Non-Earn.
Quarterly Change in Net Interest Income
Equity/
IEA/
Assets/
Institution
Assets
IBL
Assets
3/31/2010
12/31/2009
9/30/2009
6/30/2009
3/31/2009
12/31/2008
(%)
(%)
(%)
(change in net interest income is annualized in basis points)
7.8
%
102.9
%
5.6
%
14
2
21
-14
8
-21
10.6
%
106.6
%
6.3
%
5
7
8
1
-4
-1
6.2
%
100.6
%
6.2
%
14
2
21
-14
8
-21
10.3
%
105.0
%
8.3
%
-2
-1
5
1
-7
-4
9.3
%
103.7
%
8.3
%
-3
-3
2
0
-7
-5
16.9
%
112.9
%
7.3
%
-4
21
-10
1
-6
-7
15.2
%
112.4
%
7.7
%
-5
-4
10
-1
-15
1
10.2
%
102.6
%
8.9
%
-11
13
7
10
17
-8
6.4
%
103.6
%
4.5
%
-3
-10
-1
-41
-4
26
8.4
%
103.7
%
9.0
%
-12
-4
27
-2
-6
-11
10.9
%
106.2
%
5.8
%
2
-1
0
14
30
-2
8.4
%
100.9
%
12.0
%
14
-17
-7
16
-47
-39
11.5
%
107.2
%
7.4
%
5
-12
4
-3
-21
-3
8.4
%
100.8
%
9.0
%
-3
0
0
-2
-7
21
7.0
%
99.7
%
11.2
%
-1
6
21
19
-7
-19
Source:
SNL Financial LC. and RP
®
Financial, LC. calculations. The information provided in this table has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness of such information.
RP
®
Financial, LC.
PEER GROUP ANALYSIS
III.20
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.1
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.2
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.3
Overall A/L Composition
. The Companys asset composition includes a
lower proportion of loans overall, with residential mortgage loans exceeding the
Peer Group average reflecting both the historical emphasis on residential mortgage
lending and recent retrenchment from high risk-weight lending by ACFC.
Notwithstanding the lower ratio of total loans to assets, the Companys ratio of
interest income to average assets is above the Peer Group average. The Companys
funding base exhibits some differences in relation to the Peer Group as the greater
proportion of borrowings and the Companys Floridas operations and credit union
roots have contributed to its relatively high funding costs. The Companys less
favorable ratio of IEA/IBL will improve on a post-Offering basis, thereby
diminishing or reversing the current disadvantage
Credit Quality
. The Companys ratio of NPAs and 90+ Day Accruing
Delinquencies/Assets exceeded the Peer Group average. At the same time, ACFCs
NPAs had a significant balance of TDRs which were performing pursuant to their
renegotiated terms such that the ratio of NPAs/Assets compared more closely to the
Peer Group average. The Company maintains greater reserve coverage in relation to
total loans but reserve coverage in relation to NPLs is similar. The Companys
NPLs may be subject to further reduction in the future as it seeks to complete a
bulk sale transaction but capital may also diminish as a result in the event there
is a loss on sale.
Balance Sheet Liquidity
. The Company currently maintains a higher level
of cash, investments and MBS and the level of cash and investments will be
bolstered over the near term with the infusion of the offering proceeds from the
Second Step Conversion. The Companys borrowing capacity is considered to be
modestly lower relative to the Peer Groups borrowings capacity, given the
Companys higher level of borrowings.
Equity
. The Company currently operates with a lower equity-to-assets
ratio than the Peer Group. However, following the stock offering, ACFCs pro forma
capital position will be enhanced modestly to levels approaching the Peer Group
average and approximating the Peer Group median based on the current estimated
offering range. The Companys increased pro forma equity will enhance the leverage
capacity relative to the Peer Group while the anticipated reduction in the IBL
ratio will enhance ACFCs comparability to the Peer Group.
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.4
Reported Earnings
. The Company reported significantly higher operating
losses relative to the Peer Group based on an average returns/(losses) on average
assets (ROAA) basis (-2.99% of average assets versus -0.17% for the Peer Group).
Reinvestment of the net conversion proceeds into interest-earning assets will
increase the Companys profitability, after taking into account the additional
expenses related to the new stock benefit plans that will be implemented in
connection with or after the Second-Step Conversion offering.
Core Earnings
. The most significant disparity between the Company and
the Peer Groups earnings composition is with respect to loan loss provisions,
which totaled 2.36% for the Company versus an average of 1.04% for the Peer Group.
Additionally, net non-operating expenses equaled 0.63% for the Company which
exceeded the Peer Group average of 0.16%. Accordingly, the Companys greater
operating loss is primarily attributable to these two factors. Until the level of
NPAs for the Company and the Peer Group has stabilized or starts to diminish, it is
expected that core earnings may continue to be subject to volatility owing to
credit-related factors and other non-operating items.
Interest Rate Risk
. Quarterly changes in the Companys and the Peer
Groups net interest income to average assets ratios indicated the degree of
volatility associated with the Companys net interest margin fell within the range
exhibited by the Peer Group. Other measures of interest rate risk such as the
capital and the IEA/IBL ratio were less favorable for the Company, thereby
indicating that the Company maintained a higher dependence on the yield-cost spread
to sustain net interest income. On a pro forma basis, the Companys capital
position and IEA/IBL ratio will be enhanced by the infusion of stock proceeds and,
thus, diminish the Peer Groups relative advantage in this regard and improve the
Companys interest rate risk exposure position.
Credit Risk
. As noted above, loan loss provisions were a significant
factor contributing to the Companys greater operating losses in comparison to the
Peer Group. Additionally, given the high level of NPAs, both the Company and the
Peer Groups earnings will continue to be subject to credit-related volatility
until the ratio of NPAs/Assets stabilizes and/or diminishes.
Earnings Growth Potential
. Several factors were considered in assessing
earnings growth potential. First, the infusion of stock proceeds will increase the
Companys earnings growth potential with respect to increasing earnings through
leverage. Moreover, to the extent the increased capitalization facilitates the
reduction of NPAs for ACFC (potentially through bulk sale transactions at a loss to
the Company), ACFCs long term earnings potential may be enhanced. Other factors
impacting the Companys earnings growth potential include future reductions in
funding costs as CDs and term borrowings mature and are replaced
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.5
with deposit or borrowed funds at the lower rates prevailing today. Additionally,
the Company has a 100% valuation allowance established for its deferred tax asset
to the extent the Company can reverse the current operating losses to earnings, NOLs
may be available to offset the taxable income until they are exhausted. The
availability of NOLs is potentially subject to future annual usage limitation as a
result of the Second Step Conversion and Supplemental Offering and potentially owing
to future ownership changes.
Return on Equity
. Current operating losses for the Company and the Peer
Group have resulted in a negative ROE, reflecting erosion of their respective
capital bases. The Company is projecting that losses will diminish in the future.
However, the reversal of earnings to positive levels which would result in future
capital increases for both the Company and the Peer Group continues to be highly
dependent on stabilization of asset quality as well as the strength and direction
of the local economy and real estate markets.
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.6
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.7
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.8
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.9
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.10
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.11
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.12
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.13
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.14
Pricing Characteristics and After-Market Trends
Recent Conversions Completed (Last Three Months)
Insider Purchases
Post-IPO Pricing Trends
Pre-Conversion Data
Contribution to
% Off Incl. Fdn.
Pro Forma Data
Closing Price:
Institutional Information
Financial Info.
Asset Quality
Offering Information
Charitable Found.
Benefit Plans
Initial
Pricing Ratios(3)
Financial Charac.
First
After
After
Conver.
Equity/
NPAs/
Res.
Gross
%
% of
Exp./
% of
Recog.
Stk
Mgmt.&
Dividend
Core
Core
Core
IPO
Trading
%
First
%
First
%
Thru
%
Institution
Date
Ticker
Assets
Assets
Assets
Cov.
Proc.
Offered
Mid.
Proc.
Form
Offering
ESOP
Plans
Option
Dirs.
Yield
P/TB
P/E
P/A
ROA
TE/A
ROE
Price
Day
Change
Week(4)
Change
Month(5)
Change
5/28/10
Change
($Mil)
(%)
(%)
(%)
($Mil.)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
(%)(2)
(%)
(%)
(x)
(%)
(%)
(%)
(%)
($)
($)
(%)
($)
(%)
($)
(%)
($)
(%)
4/9/10
HARI-OTCBB
$
156
7.85
%
1.78
%
62
%
$
7.9
100
%
88
%
11.0
%
N.A.
N.A.
8.0
%
4.0
%
10.0
%
6.9
%
0.00
%
43.1
%
NM
4.9
%
-0.4
%
11.3
%
-3.4
%
$
10.00
$
10.00
0.0
%
$
10.00
0.0
%
$
10.00
0.0
%
$
7.85
-21.5
%
$
156
7.85
%
1.78
%
62
%
$
7.9
100
%
88
%
11.0
%
N.A.
N.A.
8.0
%
4.0
%
10.0
%
6.9
%
0.00
%
43.1
%
NM
4.9
%
-0.4
%
11.3
%
-3.4
%
$
10.00
$
10.00
0.0
%
$
10.00
0.00
%
$
10.00
0.00
%
$
7.85
-21.50
%
$
156
7.85
%
1.78
%
62
%
$
7.9
100
%
88
%
11.0
%
N.A.
N.A.
8.0
%
4.0
%
10.0
%
6.9
%
0.00
%
43.1
%
NM
4.9
%
-0.4
%
11.3
%
-3.4
%
$
10.00
$
10.00
0.0
%
$
10.00
0.00
%
$
10.00
0.00
%
$
7.85
-21.50
%
4/5/10
EBMT-NASDAQ
$
306
9.89
%
0.75
%
33
%
$
24.6
60
%
103
%
7.4
%
N.A.
N.A.
8.0
%
4.0
%
10.0
%
1.0
%
0.00
%
81.4
%
12.69
12.5
%
1.0
%
15.4
%
6.4
%
$
10.00
$
10.55
5.5
%
$
10.50
5.0
%
$
10.50
5.0
%
$
10.05
0.5
%
$
306
9.89
%
0.75
%
33
%
$
24.6
60
%
103
%
7.4
%
N.A.
N.A.
8.0
%
4.0
%
10.0
%
1.0
%
0.00
%
81.4
%
12.7x
12.5
%
1.0
%
15.4
%
6.4
%
$
10.00
$
10.55
5.5
%
$
10.50
5.0
%
$
10.50
5.0
%
$
10.05
0.5
%
$
306
9.89
%
0.75
%
33
%
$
24.6
60
%
103
%
7.4
%
N.A.
N.A.
8.0
%
4.0
%
10.0
%
1.0
%
0.00
%
81.4
%
12.7x
12.5
%
1.0
%
15.4
%
6.4
%
$
10.00
$
10.55
5.5
%
$
10.50
5.0
%
$
10.50
5.0
%
$
10.05
0.5
%
Conversions:
$
231
8.87
%
1.27
%
47
%
$
16.3
80
%
95
%
9.2
%
NA
NA
8.0
%
4.0
%
10.0
%
4.0
%
0.00
%
62.2
%
$
12.69
8.7
%
0.3
%
13.3
%
1.5
%
$
10.00
$
10.28
2.8
%
$
10.25
2.5
%
$
10.25
2.5
%
$
8.95
-10.5
%
$
231
8.87
%
1.27
%
47
%
$
16.3
80
%
95
%
9.2
%
NA
NA
8.0
%
4.0
%
10.0
%
4.0
%
0.00
%
62.2
%
$
12.69
8.7
%
0.3
%
13.3
%
1.5
%
$
10.00
$
10.28
2.8
%
$
10.25
2.5
%
$
10.25
2.5
%
$
8.95
-10.5
%
Note:
* Appraisal performed by RP Financial; BOLD=RP Financial did the Conversion Business
Plan. NT Not Traded; NA Not Applicable, Not Available; C/S-Cash/Stock.
(1)
Non-OTS regulated thrift.
(2)
As a percent of MHC offering for MHC transactions.
(3)
Does not take into account the adoption of SOP 93-6.
(4)
Latest price if offering is less than one week old.
(5)
Latest price if offering is more than one week but less than one month old.
(6)
Mutual holding company pro forma data on full conversion basis.
(7)
Simultaneously completed acquisition of another financial institution.
(8)
Simultaneously converted to a commercial bank charter.
(9)
Former credit union.
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.15
Market Pricing Comparatives
Prices As of May 28, 2010
Market
Per Share Data
Capitalization
Core
Book
Dividends(4)
Financial Characteristics(6)
Price/
Market
12 Month
Value/
Pricing Ratios(3)
Amount/
Payout
Total
Equity/
Tang Eq/
NPAs/
Reported
Core
Financial Institution
Share(1)
Value
EPS(2)
Share
P/E
P/B
P/A
P/TB
P/Core
Share
Yield
Ratio(5)
Assets
Assets
Assets
Assets
ROA
ROE
ROA
ROE
($)
($Mil)
($)
($)
(x)
(%)
(%)
(%)
(x)
($)
(%)
(%)
($Mil)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
$
10.29
$
298.47
($0.10
)
$
12.55
18.90x
84.72
%
9.99
%
92.76
%
17.17x
$
0.24
2.03
%
35.47
%
$
2,707
11.28
%
10.53
%
3.76
%
-0.13
%
-0.36
%
-0.15
%
-0.47
%
$
10.05
$
41.03
$
0.79
$
12.29
12.72x
81.77
%
12.58
%
81.77
%
12.72x
$
0.27
2.69
%
34.18
%
$
327
0.00
%
0.00
%
0.77
%
0.99
%
NM
0.98
%
NM
Eagle Bancorp Montanta of MT
$
10.05
$
41.03
$
0.79
$
12.29
12.72x
81.77
%
12.58
%
81.77
%
12.72x
$
0.27
2.69
%
34.18
%
$
326
0.00
%
0.00
%
0.77
%
0.99
%
NM
0.99
%
NM
(1)
Average of High/Low or Bid/Ask price per share.
(2)
EPS (estimate core basis) is based on actual trailing 12 month data, adjusted to omit
non-operating items on a tax-effected basis.
(3)
P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB = Price to tangible
book value; and P/Core = Price to core earnings.
(4)
Indicated 12 month dividend, based on last quarterly dividend declared.
(5)
Indicated 12 month dividend as a percent of trailing 12 month estimated core earnings.
(6)
ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing 12
month common earnings and average common equity and total assets balances.
(7)
Excludes from averages and medians those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source:
SNL Financial, LC. and RP
®
Financial, LC. calculations. The information
provided in this report has been obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.16
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.17
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.18
Key Valuation Parameters:
Valuation Adjustment
No Adjustment
Slight Downward
No Adjustment
Slight Downward
Slight Downward
No Adjustment
Slight Downward
No Adjustment
Slight Downward
P/E Approach
. The P/E approach is generally the best indicator of
long-term value for a stock. However, both the Company and the Peer Group have
experienced either operating losses or weak earnings levels which was a defining criteria for the
Peer Group selection. Accordingly, the earnings approach has been rendered less
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.19
meaningful to the Companys pro forma valuation and we have given comparatively greater
weight to the other valuation approaches.
P/B Approach
. P/B ratios have generally served as a useful
benchmark in the valuation of thrift stocks, particularly in the context of an initial
public offering, as the earnings approach involves assumptions regarding the use of
proceeds. RP Financial considered the P/B approach to be a valuable indicator of pro
forma value, particularly as the earnings approach has been rendered less meaningful to
the Companys valuation in view of ACFC recent operating losses and low earnings or
losses reported by the Peer Group. We have also modified the P/B approach to exclude
the impact of intangible assets (i.e., price/tangible book value or P/TB), in that
the investment community frequently makes this adjustment in its evaluation of this
pricing approach.
P/A Approach
. P/A ratios are generally a less reliable indicator of market
value, as investors typically assign less weight to assets and attribute greater weight
to book value and earnings. Furthermore, this approach as set forth in the regulatory
valuation guidelines does not take into account the amount of stock purchases funded by
deposit withdrawals, thus understating the pro forma P/A ratio. At the same time, the
P/A ratio is an indicator of franchise value, and, can be a valuable indicator of value
when equity and/or earnings are low, which is the case for ACFC.
Trading of ACFC stock
. Converting institutions generally do not have stock
outstanding. ACFC, however, has public shares outstanding due to the mutual holding
company form of ownership. Since ACFC is currently traded on the NASDAQ, it is an
indicator of investor interest in the Companys conversion stock and therefore received
some weight in our valuation. Based on the May 28, 2010, stock price of $2.95 per
share and the 13,415,545 shares of ACFC stock outstanding, the Companys implied market
value of $39.6 million was considered in the valuation process. However, since the
conversion stock will have different characteristics than the Companys shares, and
since pro forma information has not been publicly disseminated to date, the current
trading price of ACFCs stock was somewhat discounted herein but will become more
important towards the closing of the offering.
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.20
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.21
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.22
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.23
Breakdown of Shares Issued in Second Step Conversion
and Simultaneous Supplementary Offering of Common Stock
Second Step Conversion Characteristics
2nd Step
Exchange Shares
Supplemental
Offering
Issued to the
Exchange
Total Shares
Offering
Shares
Public Shareholders
Ratio
(x)
Shares
6,528,380
1,650,000
3,174,000
1,704,380
0.3636
5,892,070
1,650,000
2,760,000
1,482,070
0.3162
5,338,756
1,650,000
2,400,000
1,288,756
0.2750
4,785,443
1,650,000
2,040,000
1,095,443
0.2337
100.00
%
25.27
%
48.62
%
26.11
%
100.00
%
28.00
%
46.84
%
25.15
%
100.00
%
30.91
%
44.95
%
24.14
%
100.00
%
34.48
%
42.63
%
22.89
%
$
65,283,800
$
16,500,000
$
31,740,000
$
17,043,800
$
58,920,700
$
16,500,000
$
27,600,000
$
14,820,700
$
53,387,560
$
16,500,000
$
24,000,000
$
12,887,560
$
47,854,430
$
16,500,000
$
20,400,000
$
10,954,430
(1)
Based on offering price of $10.00 per share.
RP
®
Financial, LC.
VALUATION ANALYSIS
IV.24
Public Market Pricing
Atlantic Coast Federal Corp. Groupand the Comparables
As of May 28, 2010
Market
Per Share Data(2)
Capitalization
Core
Book
Dividends(4)
Financial Characteristics(6)
2nd Step
Price/
Market
12 Month
Value/
Pricing Ratios(3)
Amount/
Payout
Total
Equity/
Tang Eq/
NPAs/
Reported
Core
Exchange
Offering
Share(1)
Value
EPS
Share
P/E
P/B
P/A
P/TB
P/Core
Share
Yield
Ratio(5)
Assets
Assets
Assets
Assets
ROA
ROE
ROA
ROE
Ratio
Amount
($)
($Mil)
($)
($)
(x)
(%)
(%)
(%)
(x)
($)
(%)
(%)
($Mil)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
($Mil)
$
10.00
$
65.28
($4.32
)
$
14.99
NM
66.73
%
6.83
%
66.80
%
NM
$
0.00
0.00
%
0.00
%
$
956
10.23
%
10.22
%
4.96
%
-2.95
%
-28.82
%
-2.43
%
-23.80
%
0.3636
$
31.74
$
10.00
$
58.92
($4.79
)
$
15.99
NM
62.55
%
6.18
%
62.62
%
NM
$
0.00
0.00
%
0.00
%
$
953
9.89
%
9.88
%
4.97
%
-2.96
%
-29.99
%
-2.45
%
-24.77
%
0.3162
$
27.60
$
10.00
$
53.39
($5.30
)
$
17.05
NM
58.64
%
5.62
%
58.70
%
NM
$
0.00
0.00
%
0.00
%
$
950
9.59
%
9.58
%
4.99
%
-2.98
%
-31.07
%
-2.46
%
-25.68
%
0.2750
$
24.00
$
10.00
$
47.85
($5.92
)
$
18.37
NM
54.45
%
5.06
%
54.51
%
NM
$
0.00
0.00
%
0.00
%
$
946
9.29
%
9.28
%
5.01
%
-2.99
%
-32.24
%
-2.47
%
-26.65
%
0.2337
$
20.40
$
10.75
$
346.94
($0.15
)
$
13.90
18.56
x
76.73
%
8.54
%
85.20
%
16.60
x
$
0.26
2.01
%
36.14
%
$
3,006
10.82
%
10.04
%
3.52
%
-0.19
%
-0.44
%
-0.23
%
-0.77
%
$
10.08
$
55.71
$
0.20
$
13.32
16.40
x
76.18
%
6.85
%
80.30
%
15.25
x
$
0.20
1.63
%
0.00
%
$
942
9.31
%
8.68
%
2.44
%
0.17
%
2.04
%
0.11
%
1.67
%
$
7.32
$
76.18
($0.04
)
$
13.73
26.70
x
54.18
%
6.28
%
61.61
%
20.11
x
$
0.12
1.50
%
19.61
%
$
1,152
11.68
%
10.46
%
4.28
%
-0.17
%
-1.89
%
-0.11
%
-0.82
%
$
8.10
$
54.13
($0.01
)
$
12.97
27.08
x
50.78
%
4.31
%
56.98
%
20.11
x
$
0.14
1.65
%
0.00
%
$
1,019
11.17
%
9.45
%
3.94
%
-0.08
%
-0.63
%
-0.01
%
-0.13
%
Abington Bancorp, Inc. of PA
$
8.88
$
185.25
($0.36
)
$
10.28
NM
86.38
%
14.62
%
86.38
%
NM
$
0.20
2.25
%
NM
$
1,267
16.93
%
16.93
%
4.73
%
-0.63
%
-3.48
%
-0.61
%
-3.39
%
BankFinancial Corp. of IL
$
8.53
$
182.68
$
0.04
$
12.31
NM
69.29
%
11.72
%
76.99
%
NM
$
0.28
3.28
%
NM
$
1,559
16.91
%
15.49
%
4.05
%
-0.01
%
-0.08
%
0.05
%
0.32
%
CFS Bancorp, Inc of Munster IN
$
5.06
$
54.75
($0.06
)
$
10.28
NM
49.22
%
5.01
%
49.22
%
NM
$
0.04
0.79
%
NM
$
1,092
10.18
%
10.18
%
7.35
%
-0.12
%
-1.17
%
-0.06
%
-0.58
%
Fidelity Bancorp, Inc. of PA
$
7.10
$
21.63
($0.10
)
$
13.63
NM
52.09
%
3.06
%
55.69
%
NM
$
0.08
1.13
%
NM
$
708
6.82
%
6.47
%
2.62
%
-0.35
%
-6.18
%
-0.04
%
-0.63
%
First Defiance Fin. Corp of OH
$
10.83
$
87.92
$
0.20
$
24.55
27.08
44.11
%
4.27
%
64.50
%
NM
$
0.00
0.00
%
0.00
%
$
2,059
11.45
%
8.65
%
2.59
%
0.26
%
1.39
%
0.08
%
0.70
%
First PacTrust Bancorp of CA
$
9.25
$
39.26
$
0.46
$
18.70
27.21
49.47
%
4.34
%
49.47
%
20.11
x
$
0.20
2.16
%
58.82
%
$
904
10.89
%
10.89
%
7.25
%
0.27
%
1.49
%
0.22
%
2.02
%
Jefferson Bancshares Inc of TN
$
4.13
$
27.60
$
0.04
$
11.98
25.81
34.47
%
4.16
%
49.58
%
NM
$
0.00
0.00
%
0.00
%
$
663
12.07
%
8.72
%
3.82
%
0.16
%
1.34
%
0.04
%
0.33
%
Legacy Bancorp, Inc. of MA
$
8.76
$
76.39
($0.30
)
$
13.80
NM
63.48
%
8.07
%
70.30
%
NM
$
0.20
2.28
%
NM
$
946
12.72
%
11.63
%
2.06
%
-0.87
%
-6.75
%
-0.27
%
-2.13
%
MutualFirst Fin. Inc. of IN
$
7.66
$
53.51
$
0.19
$
14.12
NM
54.25
%
3.60
%
57.46
%
NM
$
0.24
3.13
%
NM
$
1,487
8.76
%
8.42
%
2.44
%
0.19
%
0.70
%
0.09
%
1.02
%
Riverview Bancorp, Inc. of WA
$
3.00
$
32.77
($0.47
)
$
7.68
NM
39.06
%
3.91
%
56.50
%
NM
$
0.00
0.00
%
NM
$
838
10.06
%
7.20
%
5.89
%
-0.62
%
-6.19
%
-0.58
%
-5.82
%
(1)
Average of High/Low or Bid/Ask price per share.
(2)
EPS (estimate core basis) is based on actual trailing 12 month data, adjusted to omit non-operating items on a tax-effected basis, and is shown on a pro forma basis where appropriate.
(3)
P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB = Price to tangible book value; and P/Core = Price to core earnings.
(4)
Indicated 12 month dividend, based on last quarterly dividend declared.
(5)
Indicated 12 month dividend as a percent of trailing 12 month estimated core earnings.
(6)
ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing 12 month common earnings and average common equity and total assets balances.
(7)
Excludes from averages and medians those companies the subject of actual or rumored acquisition activities or unusual operating characteristics.
Source:
SNL Financial, LC. and RP
®
Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.
Corporate reports, offering circulars, and RP Financial, LC. calculations. The information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.
1. | CONVERSION AND OFFERING |
2. | SERVICES TO BE PROVIDED BY STIFEL NICOLAUS |
| Provide the Bank with an account record layout format and consult with the Banks data processing contacts. | ||
| Read, edit, balance and convert the Banks customer account records (the Account Records) that are provided to Stifel Nicolaus. | ||
| Provide customer account totals based on the Account Records, for the Bank to balance to its internal records. | ||
| Identify accounts coded as Bad Address and No Mail and provide to the Bank. | ||
| Identify accounts that are eligible according to the Plan and consolidate like accounts in order to reduce printing costs. | ||
| Allocate votes according to the Plan. | ||
| Household consolidated accounts, where possible, in order to reduce printing/postage costs. | ||
| If the Account Records do not contain a high percentage of phone numbers, contact Telematch service bureau to locate customer phone numbers, with the Banks authorization. | ||
| Provide counsel with a list of aggregate accounts by state. | ||
| Provide the Stock Information Center with Folio Views computer record of customer account, household and vote information. | ||
| Provide financial printer with electronic information to imprint order forms/proxycards with name, address and codes. | ||
| Provide phone records for Stock Information Center personnel to use for customer proxy solicitation. |
| Tabulate proxy votes. | ||
| Record stock order information and, in the event of oversubscription, allocate shares in accordance with the Plan. | ||
| Produce information for unvoted follow-up proxy calls/mailings, in selected vote range. | ||
| Provide the Company with up-to-date subscriber order totals. | ||
| Produce subscriber stock order acknowledgement letters, to be mailed. | ||
| Assign an individual to serve as the Inspector of Elections for the Special Meeting of Members. | ||
| Calculate interest/refund amounts and provide the Bank with records, for check imprinting. | ||
| Supply deposit account withdrawal records to the Bank. |
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| Send transfer agent the new investor files for certificate preparation. | ||
| If requested, produce year end subscriber 1099-INT forms and electronically submit information to IRS. |
3. | RELIANCE ON INFORMATION PROVIDED |
4. | COMPENSATION |
a.) | customer account records provided to us in a format substantially different than our requested format; | ||
b.) | necessity to produce more than four accountholder files (three depositor eligibility dates plus a depositor test date), whether due to eligibility date changes, timetable changes or other circumstances requiring duplicate or additional processing; | ||
c.) | untimely communication by the Company or its agents of material information, or untimely delivery of customer records, resulting in additional time or resources expended by Stifel Nicolaus; | ||
d.) | processing of stock orders resulting from a resolicitation of subscribers by the Company; or | ||
e.) | non-standard services requested by the Company. |
5. | EXPENSES AND REIMBURSEMENT |
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6. | ENTIRE AGREEMENT |
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STIFEL, NICOLAUS & COMPANY, INCORPORATED
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By: | /s/ Ben Plotkin | |||
Ben Plotkin | ||||
Executive Vice President | ||||
ATLANTIC COAST FEDERAL, MHC
ATLANTIC COAST FEDERAL CORPORATION ATLANTIC COAST BANK |
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By: | /s/ Robert J. Larison, Jr. | |||
Robert J. Larison, Jr. | ||||
President and Chief Executive Officer | ||||
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Except as otherwise contemplated by this Agreement, all notices, demands, requests or other communications which may be or are required to be given, served or sent by any party to any other party pursuant to this Agreement, other than in the normal course of conducting the Services, can be by certified or registered mail, personal delivery or transmitted by any standard form of telecommunication with proof of delivery addressed as follows: |
(a) | If to the Agent: |
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Re: |
Plan of Conversion and Reorganization
Atlantic Coast Federal MHC Atlantic Coast Federal Corporation Atlantic Coast Bank |
(1) | the subscription rights will have no ascertainable market value; and, | ||
(2) | the price at which the subscription rights are exercisable will not be more or less than the pro forma market value of the shares upon issuance. |
Washington Headquarters | ||
Three Ballston Plaza | Telephone: (703) 528-1700 | |
1100 North Glebe Road, Suite1100 | Fax No.: (703) 528-1788 | |
Arlington, VA 22201 | Toll-Free No.: (866) 723-0594 | |
www.rpfinancial.com | E-Mail: mail@rpfinancial.com |
Re: |
Plan of Conversion and Reorganization
Atlantic Coast Federal MHC Atlantic Coast Federal Corporation Atlantic Coast Bank |
Washington Headquarters | ||
Three Ballston Plaza | Telephone: (703) 528-1700 | |
1100 North Glebe Road, Suite 1100 | Fax No.: (703) 528-1788 | |
Arlington, VA 22201 | Toll-Free No.: (866) 723-0594 | |
www.rpfinancial.com | E-Mail: mail@rpfinancial.com |
Sincerely,
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/s/ RP Financial, LC. | ||||
RP Financial, LC. | ||||
FOR | AGAINST | ABSTAIN | ||||||||
1. | The approval of a plan of conversion and reorganization pursuant to which: (a) Atlantic Coast Federal, MHC and Atlantic Coast Federal Corporation will convert and reorganize from the mutual holding company structure to the stock holding company structure; (b) Atlantic Coast Financial Corporation, a Maryland corporation, will become the holding company for Atlantic Coast Bank; (c) the outstanding shares of Atlantic Coast Federal Corporation, other than those held by Atlantic Coast Federal, MHC, will be converted into shares of common stock of Atlantic Coast Financial Corporation; and (d) Atlantic Coast Financial Corporation will offer shares of its common stock for sale in a subscription offering, and, if necessary, a community offering and/or syndicated community offering; | o | o | o | ||||||
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2. | The approval of the adjournment of the Special Meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the Special Meeting to approve the plan of conversion and reorganization; | o | o | o | ||||||
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3. | The following informational proposals: | |||||||||
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3a. | Approval of a provision in Atlantic Coast Financial Corporations articles of incorporation requiring a super-majority vote of stockholders to approve certain amendments to Atlantic Coast Financial Corporations articles of incorporation; | o | o | o | |||||
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3b. | Approval of a provision in Atlantic Coast Financial Corporations articles of incorporation requiring a super-majority | o | o | o |
FOR | AGAINST | ABSTAIN | ||||||||
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vote of stockholders to approve stockholder-proposed amendments to Atlantic Coast Financial Corporations bylaws; | |||||||||
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3c. | Approval of a provision in Atlantic Coast Financial Corporations articles of incorporation to limit the voting rights of shares beneficially owned in excess of 10% of Atlantic Coast Financial Corporations outstanding voting stock; and | o | o | o |
Dated:
, 2010
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o Check Box if You Plan to Attend the Special Meeting |
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PRINT NAME OF STOCKHOLDER
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PRINT NAME OF STOCKHOLDER | |
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SIGNATURE OF STOCKHOLDER
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SIGNATURE OF STOCKHOLDER |