Community First Bancshares, Inc. (Form: S-1, Received: 12/12/2016 12:26:02)

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ (Do not check if a smaller reporting company)

Smaller reporting company

As filed with the Securities and Exchange Commission on December 12, 2016

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Community First Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Federal

6035

Being applied for

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

3175 Highway 278

Covington, Georgia 30014

(770) 786-7088

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Johnny S. Smith

President and Chief Executive Officer

3175 Highway 278

Covington, Georgia 30014

(770) 786-7088

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Eric Luse, Esq.

Ned Quint, Esq.

Luse Gorman, PC

5335 Wisconsin Avenue, N.W., Suite 780

Washington, D.C. 20015

(202) 274-2000

Raymond Tiernan, Esq.

Ross Bevan, Esq.

Silver, Freedman, Taff & Tiernan LLP

3299 K Street, N.W., Suite 100

Washington, DC 20007

(202) 295-4500

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☒

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

CALCULATION OF REGISTRATION FEE



Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per share ⁽¹⁾	Proposed maximum aggregate offering price ⁽¹⁾	Amount of registration fee
Common Stock, $0.01 par value per share	3,102,585	$10.00	$31,025,850	$3,596

(1)	Estimated solely for purposes of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

PROSPECTUS

[Logo of Community First Bancshares, Inc.]

(Proposed Holding Company for Newton Federal Bank)

Up to 2,697,900 Shares of Common Stock

(Subject to increase to up to 3,102,585 shares)

Community First Bancshares, Inc. is offering up to 2,697,900 shares of its common stock for sale at $10.00 per share on a best efforts basis in connection with the reorganization of Newton Federal Bank into the mutual holding company form of ownership. There is no established market for our common stock. We expect that our common stock will be traded on the on the Nasdaq Capital Market under the symbol “CFBI” upon conclusion of the stock offering. We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

The shares being offered represent 46% of the shares of common stock of Community First Bancshares, Inc. that will be outstanding following the offering. After the offering, 54% of our outstanding common stock will be owned by Community First Bancshares, MHC, our federally chartered mutual holding company. These percentages will not be affected by the number of shares we sell in the offering. We must sell a minimum of 1,994,100 shares in order to complete the offering. We may sell up to 3,102,585 shares to reflect demand for the shares or changes in market conditions following the commencement of the offering, without resoliciting subscribers.

We are offering the shares of common stock in a “subscription offering” to eligible depositors and borrowers of Newton Federal Bank and to our tax-qualified employee benefit plans. Depositors who had accounts with aggregate balances of at least $50 at the close of business on September 30, 2015 will have first priority to purchase shares of common stock of Community First Bancshares, Inc. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering.” To the extent any shares offered for sale are not purchased in the subscription or community offerings, they may be sold in a “syndicated community offering” to be managed by BSP Securities, LLC.

The minimum number of shares of common stock you may order is 25 shares. The maximum number of shares of common stock that can be ordered by any person in the offering, or persons exercising subscription rights through a single deposit account, is 30,000 shares, and no person together with an associate or group of persons acting in concert may purchase more than 40,000 shares.

The offering is scheduled to expire at [expiration time], Eastern Time on [expiration date]. We may extend the expiration date without notice to you, until [extension date], or such later date as the Board of Governors of the Federal Reserve System may approve, which may not be beyond [final extension date]. Once submitted, orders are irrevocable unless the offering is terminated or extended beyond [extension date], or the number of shares of common stock to be sold is increased to more than 3,102,585 shares or decreased to less than 1,994,100 shares. If the offering is extended beyond [extension date], all subscribers will be notified and given an opportunity to confirm, cancel or change their orders. If you do not respond to this notice, we will promptly return your funds with interest or cancel your deposit account withdrawal authorization. If the number of shares to be sold in the offering is increased to more than 3,102,585 shares or decreased to less than 1,994,100 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest. Funds submitted for the purchase of shares in the offering will be held in a segregated account at Newton Federal Bank and will earn interest at [interest rate]% per annum until completion or termination of the offering.

BSP Securities, LLC will use its best efforts to assist us in selling our common stock, but is not obligated to purchase any of the common stock that is being offered for sale. In addition, officers and directors may participate in the solicitation of offers to purchase common stock in reliance upon Rule 3a4-1 under the Securities Exchange Act of 1934, as amended. Subscribers will not pay any commissions to purchase shares of common stock in the offering.

This investment involves a degree of risk, including the possible loss of principal. Please read the

“ Risk Factors ” beginning on page 19.

OFFERING SUMMARY

Price: $10.00 per share


	Minimum		Midpoint		Maximum		Adjusted Maximum
Number of shares		1,994,100		2,346,000		2,697,900		3,102,585
Gross offering proceeds	$	19,941,000	$	23,460,000	$	26,979,000	$	31,025,850
Estimated offering expenses, excluding selling agent fees and expenses	$	975,000	$	975,000	$	975,000	$	975,000
Estimated selling agent fees and expenses (1)	$	287,417	$	319,608	$	351,799	$	388,819
Estimated net proceeds (1).	$	18,678,583	$	22,165,392	$	25,652,201	$	29,662,031
Estimated net proceeds per share (1)	$	9.37	$	9.45	$	9.51	$	9.56

(1)

The figures shown assume that all shares are sold in the subscription and the community offering, and include reimbursable expenses and stock information center fees. See “The Reorganization and Offering—Plan of Distribution and Marketing Arrangements” for a discussion of BSP Securities, LLC’s compensation for this offering and the compensation to be received by BSP Securities, LLC and the other broker-dealers who may participate in a syndicated community offering. If all shares of common stock were sold in the syndicated community offering, the maximum selling agent fees and expenses would be $996,000, $1.2 million, $1.3 million and $1.6 million at the minimum, midpoint, maximum and adjusted maximum levels of the offering, respectively.

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. None of the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

BSP SECURITIES, LLC

For assistance, please contact the Stock Information Center at [stock center number].

The date of this prospectus is [prospectus date].

[Map of Newton Federal Bank market area appears on

inside front cover]

TABLE OF CONTENTS


SUMMARY			1
RISK FACTORS			19
SELECTED FINANCIAL AND OTHER DATA			32
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			34
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING			36
OUR POLICY REGARDING DIVIDENDS			37
MARKET FOR THE COMMON STOCK			39
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE			40
CAPITALIZATION			41
PRO FORMA DATA			43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NEWTON FEDERAL BANK			47
BUSINESS OF COMMUNITY FIRST BANCSHARES, INC.			61
BUSINESS OF COMMUNITY FIRST BANCSHARES, MHC			62
BUSINESS OF NEWTON FEDERAL BANK			62
TAXATION			80
REGULATION AND SUPERVISION			81
MANAGEMENT			91
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS			99
THE REORGANIZATION AND OFFERING			100
RESTRICTIONS ON THE ACQUISITION OF COMMUNITY FIRST BANCSHARES, INC. AND NEWTON FEDERAL BANK			120
DESCRIPTION OF CAPITAL STOCK OF COMMUNITY FIRST BANCSHARES, INC.			123
TRANSFER AGENT AND REGISTRAR			124
LEGAL AND TAX MATTERS			125
EXPERTS			125
WHERE YOU CAN FIND MORE INFORMATION			125
REGISTRATION REQUIREMENTS			126
INDEX TO FINANCIAL STATEMENTS OF NEWTON FEDERAL BANK			F-1

SUMMARY

The following summary explains material information regarding the reorganization, the offering of common stock by Community First Bancshares, Inc. and the business of Newton Federal Bank. The summary may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including the financial statements and the notes to the financial statements of Newton Federal Bank. In certain circumstances, where appropriate, the terms “we, “us” and “our” refer collectively to Community First Bancshares, MHC, Community First Bancshares, Inc. and Newton Federal Bank or to any of those entities, depending on the context.

The Companies

Community First Bancshares, MHC

Upon completion of the reorganization and the offering, Community First Bancshares, MHC will become the federally chartered mutual holding company of Community First Bancshares, Inc. Community First Bancshares, MHC is not currently an operating company and has not engaged in any business to date. Community First Bancshares, MHC will be formed upon completion of the reorganization. As a mutual holding company, Community First Bancshares, MHC will be a non-stock company that will have as its members all holders of the deposit accounts at Newton Federal Bank, and borrowers of Newton Federal Bank as of January 19, 1984 whose borrowings remain outstanding. As a mutual holding company, Community First Bancshares, MHC is required by law to own a majority of the voting stock of Community First Bancshares, Inc.

Community First Bancshares, Inc.

Community First Bancshares, Inc. will be chartered under federal law and will own 100% of the common stock of Newton Federal Bank following the reorganization and offering. This offering is being made by Community First Bancshares, Inc. Community First Bancshares, Inc. is not currently an operating company and will be formed upon completion of the reorganization. Our executive office will be located at 3175 Highway 278, Covington, Georgia 30014, and our telephone number will be (770) 786-7088.

Upon completion of the offering, public stockholders will own a minority of Community First Bancshares, Inc.’s common stock and will not be able to exercise voting control over most matters put to a vote of stockholders. In addition, as a “controlled corporation” following the offering, Community First Bancshares, Inc. will be exempt from certain corporate governance requirements, including that a majority of our board of directors be independent under applicable standards, and that executive compensation and director nominations be overseen by independent directors. However, at the present time, a majority of our directors would be considered independent under applicable corporate governance listing standards.

Newton Federal Bank

Newton Federal Bank is a federally chartered savings association headquartered in Covington, Georgia. Newton Federal Bank was originally chartered in 1928 as a Georgia-chartered mutual building and loan association under the name Newton County Building and Loan Association. In 1947, we converted to a federal charter and changed our name to “Newton Federal Savings and Loan Association.” In 2004 we changed our name to “Newton Federal Bank.”

We conduct our business from our main office, two branch offices and a loan production office. All of our banking offices are located in Covington, Georgia, which is located in Newton County, southeast of Atlanta, Georgia. Our loan production office is located in Bogart, Georgia, which is in the Athens, Georgia market in Oconee County. Our primary market area currently consists of Newton County, Georgia and the contiguous counties.

At September 30, 2016, we had total assets of $232.8 million, total deposits of $181.7 million and retained earnings of $45.1 million. We had net income of $1.2 million for the fiscal year ended September 30, 2016.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, and, to a lesser extent, commercial real estate loans, commercial and industrial loans, construction and land loans and consumer loans. Subject to market conditions, we expect to increase our focus on originating commercial real estate loans, commercial and industrial loans, and construction loans in an effort to diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. We also invest in securities, which have historically consisted primarily of mortgage-backed securities issued by U.S. government sponsored enterprises and Federal Home Loan Bank stock. We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts. We have not used borrowings in recent years to fund our operations.

Newton Federal Bank is subject to comprehensive regulation and examination by its primary federal regulator, the Office of the Comptroller of the Currency.

Our executive office is located at 3175 Highway 278, Covington, Georgia 30014, and our telephone number at this address is (770) 786-7088. Our website address is www.newtonfederal.com . Information on our website is not and should not be considered a part of this prospectus.

Our Reorganization into a Mutual Holding Company and the Offering

We do not have stockholders in our current mutual form of ownership. Our depositors and borrowers as of January 19, 1984 whose borrowings remain outstanding currently have the right to vote on certain matters pertaining to Newton Federal Bank, such as the election of directors and the proposed mutual holding company reorganization. The mutual holding company reorganization is a series of transactions by which we will reorganize our corporate structure from our current status as a mutual savings association to the mutual holding company form of ownership. The reorganization will be conducted pursuant to a plan of reorganization and stock issuance plan, which we refer to as the plan of reorganization. Following the reorganization, Newton Federal Bank will become a federal stock savings bank subsidiary of Community First Bancshares, Inc., and Community First Bancshares, Inc. will be a majority-owned subsidiary of Community First Bancshares, MHC. After the reorganization, our depositors and certain borrowers will become members of Community First Bancshares, MHC, and will continue to have the same voting rights in Community First Bancshares, MHC as they had in Newton Federal Bank prior to the reorganization.

In connection with the reorganization, we are offering shares of common stock of Community First Bancshares, Inc. for sale in the offering. All investors will pay the same price per share in the offering. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual holding company reorganizations and stock offerings. See “—Terms of the Offering.”

The primary reasons for our decision to reorganize into a mutual holding company and conduct the offering are to establish an organizational structure that will enable us to:

•

increase our capital to support future growth and profitability, although we currently have capital well in excess of all applicable regulatory requirements;

•

compete more effectively in the financial services marketplace;

•

offer our depositors, employees, management and directors an equity ownership interest in Newton Federal Bank, and thereby an economic interest in our future success;

•

attract and retain qualified personnel by establishing stock-based benefit plans; and

•

increase our flexibility to structure and finance the expansion of our operations, including potential acquisitions of other financial institutions and establishing de novo branches.

The reorganization and the capital raised in the offering are expected to provide us with additional capital to support new loans and higher lending limits, support the growth of our banking franchise, provide an additional cushion against unforeseen risks and expand our asset and deposit base. The reorganization and offering also will allow us to establish stock benefit plans for management and other employees that we believe will permit us to attract and retain qualified personnel.

Unlike a standard mutual-to-stock conversion transaction in which all of the common stock of the holding company of the converting savings association is sold to the public, only a minority of the stock is sold to the public in a mutual holding company reorganization. In a mutual holding company structure, federal law and regulations require that a majority of the outstanding common stock of Community First Bancshares, Inc. must be held by our mutual holding company. Consequently, the shares that we are permitted to sell in the offering represent a minority of the shares of Community First Bancshares, Inc. that will be outstanding upon the closing of the reorganization. As a result, a mutual holding company offering raises less than half the capital that would be raised in a standard conversion offering. Based on these restrictions and an evaluation of our capital needs, our board of directors has decided that 46% of our outstanding shares of common stock will be offered for sale in the offering, and 54% of our shares will be retained by Community First Bancshares, MHC. Our board of directors has determined that offering 46% of our outstanding shares of common stock for sale in the offering will enable management to effectively invest the capital raised in the offering. See “—Possible Conversion of Community First Bancshares, MHC to Stock Form.”

The following chart shows our corporate structure following the reorganization and offering:

LOGO

Business Strategy

Our goal is to provide long-term value to our stockholders, customers, employees and the communities we serve by executing a safe and sound business strategy that produces increasing earnings. We believe there is a significant opportunity for a community-focused bank to provide a full range of financial services to commercial and retail customers in our market area, and the increased capital we will have after the completion of the offering will enable us to compete more effectively with other financial institutions.

Our current business strategy consists of the following:

•

production office in Bogart, Georgia (in the Athens, Georgia market area) in 2016, added a commercial loan officer, and enhanced our credit function and our sales culture. Commercial real estate loans increased $4.6 million, or 18.6%, to $29.2 million at September 30, 2016 from $24.6 million at September 30, 2015, commercial and industrial loans increased $1.9 million, or 13.2%, to $16.2 million at September 30, 2016 from $14.3 million at September 30, 2015, and construction and land loans increased $11.1 million to $13.3 million at September 30, 2016 from $2.3 million at September 30, 2015. We may also expand our commercial lending activities through participation in government-sponsored loan programs, such as the Small Business Administration (“SBA”) and the U.S. Department of Agriculture, as a way to generate government-guaranteed loans with the opportunity to sell the guaranteed portion of the loan at a premium and retain the non-guaranteed portion as well as the servicing rights. The capital we are raising in the offering will support an increase in our lending limits, which will enable us to originate larger loans to new and existing customers.

•

Continue to increase core deposits, with an emphasis on low cost commercial demand deposits, and add non-core funding opportunities . We seek core deposits to provide a stable source of funds to support loan growth, at costs consistent with improving our interest rate spread and margin. Core deposits also help us maintain loan-to-deposit ratios at levels consistent with regulatory expectations. We consider our core deposits to include passbook savings accounts, negotiable orders of withdrawal (NOW) accounts, other savings deposits and checking accounts. As part of our focus on commercial loan growth, our lenders are expected to source business checking accounts from our borrowers. In prior years, we allowed higher-cost certificates of deposit to run off at maturity to improve our deposit mix and reduce our cost of funds. As a result of these efforts, core deposits increased to $96.2 million, or 52.9% of our total deposits at September 30, 2016, from $80.4 million, or 45.5% of our total deposits at September 30, 2015. However, we will also explore adding non-core funding sources, such as QwickRate (online deposits) and brokered deposits, and may use borrowings, as needed, to fund future loan growth and our operations.

•

Manage credit risk to maintain a low level of nonperforming assets . We believe strong asset quality is a key to our long-term financial success. Our strategy for credit risk management focuses on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring. Our non-performing assets to total assets ratio was 1.39% at September 30, 2016 and 1.37% at September 30, 2015, compared to 8.25% at September 30, 2012. The majority of our non-performing assets have related to one- to four-family residential real estate loans, as our residential borrowers experienced difficulties repaying their loans during the past recession. We intend to increase our investment in our credit review function, both in personnel as well as ancillary systems, in order to be able to evaluate more complex loans and better manage credit risk, which will also support our intended loan growth.

•

Grow organically and through opportunistic bank or branch acquisitions . We expect to consider both organic growth as well as acquisition opportunities that we believe would enhance the value of our franchise and yield potential financial benefits for our stockholders. Although we believe opportunities exist to increase our market share in our historical markets, we expect to continue to expand into nearby markets, primarily Clarke and Oconee Counties, Georgia, as well as contiguous counties. We will consider expanding our branch network and adding additional loan production offices. The capital we are raising in the offering will also provide us the opportunity to acquire smaller institutions located in our market area, and will help fund improvements in our operating facilities, credit reporting and customer delivery services in order to enhance our competitiveness.

•

Expand our employee base to support future growth . The additional capital we will raise in the offering will provide us with the ability to expand our employee base to support increased lending, deposit activities and enhanced information technology. The potential to offer equity awards in the future following the offering will also allow us to be more competitive when hiring experienced banking personnel.

A full description of our products and services can be found under “Business of Newton Federal Bank.”

Terms of the Offering

We are offering between 1,994,100 and 2,697,900 shares of common stock of Community First Bancshares, Inc. to eligible depositors and borrowers, our tax-qualified employee benefit plans and to the public to the extent shares remain available. The amount of capital we are raising in the offering is based on an appraisal of the pro forma market value of Community First Bancshares, Inc. We may increase the maximum number of shares that we sell in the offering by up to 15%, to 3,102,585 shares, as a result of demand for the shares of common stock in the offering or changes in market conditions, including those for financial institutions stocks. Subscription priorities have been established for the allocation of common stock to the extent the subscription offering is oversubscribed. See “The Reorganization and Offering—Offering of Common Stock—Subscription Rights” for a description of allocation procedures in the event of an oversubscription.

Unless the pro forma market value of Community First Bancshares, Inc. decreases below $43.4 million or increases above $67.4 million, or the offering is extended beyond [extension date], you will not have the opportunity to change or cancel your stock order. The offering price of the shares of common stock is $10.00 per share. All investors will pay the same $10.00 purchase price per share. Investors will not be charged a commission to purchase shares of common stock. BSP Securities, LLC, our financial advisor in connection with the reorganization and offering, will use its best efforts to assist us in selling our shares of common stock, but BSP Securities, LLC is not obligated to purchase any shares in the offering.

Persons Who May Order Stock in the Offering

We are offering the shares of common stock of Community First Bancshares, Inc. in a “subscription offering” in the following descending order of priority:

(1)

depositors who had accounts at Newton Federal Bank with aggregate balances of at least $50 at the close of business on September 30, 2015;

(2)

the tax-qualified employee benefit plans of Newton Federal Bank (including our employee stock ownership plan);

(3)

depositors who had accounts at Newton Federal Bank with aggregate balances of at least $50 at the close of business on [supplemental eligibility record date]; and

(4)

other depositors of Newton Federal Bank at the close of business on [other record date] and borrowers from Newton Federal Bank as of January 19, 1984 who maintained such borrowings as of the close of business on [other record date].

Any shares of our common stock that remain unsold in the subscription offering will be offered for sale in a community offering that may commence concurrently with, during or promptly after, the subscription offering. The community offering must be completed within 45 days of the end of the subscription offering, unless extended with Federal Reserve Board approval. Natural persons (including trusts of natural persons) residing in the Georgia Counties of Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale and Walton will have a purchase preference in any community offering. Shares also may be offered to the general public. We also may offer shares of common stock not purchased in the subscription offering or the community offering through a syndicate of brokers in what is referred to as a syndicated community offering managed by BSP Securities, LLC. We have the right to accept or reject, in our sole discretion, any orders received in the community offering or the syndicated community offering.

To ensure proper allocation of stock, each eligible account holder must list on his or her stock order form all deposit accounts in which he or she had an ownership interest at September 30, 2015, [supplemental eligibility record date] or [other record date], as applicable, or any loan account as of January 19, 1984 that remained outstanding at [other record date]. Failure to list an account or providing incorrect information could result in the loss of all or part of a subscriber’s stock allocation. We will attempt to identify your ownership in all accounts, but cannot guarantee we will identify all accounts in which you had an ownership interest. Our interpretations of the terms and conditions of the stock issuance plan and of the acceptability of the order forms will be final.

If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares of common stock will be allocated first to categories in the subscription offering in accordance with our plan of reorganization. A detailed description of share allocation procedures can be found in the section entitled “The Reorganization and Offering—Offering of Common Stock.”

How We Determined the Offering Range and the $10.00 Price Per Share

Our decision to offer between 1,994,100 shares and 2,697,900 shares, which is our offering range, is based on an independent appraisal of our pro forma market value prepared by RP Financial, LC., a firm experienced in appraisals of financial institutions. RP Financial, LC. is of the opinion that as of November 25, 2016, and assuming we sell a minority of our shares in the stock offering, the estimated pro forma market value of the common stock of Community First Bancshares, Inc. was $51.0 million. Based on applicable regulations, this market value forms the midpoint of a valuation range with a minimum of $43.4 million and a maximum of $58.7 million.

Our board of directors determined that the common stock should be sold at $10.00 per share and that 46% of the shares of Community First Bancshares, Inc. common stock should be offered for sale in the offering and 54% should be held by Community First Bancshares, MHC. Therefore, based on the valuation range, the number of shares of Community First Bancshares, Inc. common stock that will be sold in the offering will range from 1,994,100 shares to 2,697,900 shares. If demand for the shares or market conditions warrant, our appraised value can be increased by up to 15%, which would result in an appraised value of $67.4 million and an offering of 3,102,585 shares of common stock.

The appraisal is based in part on our financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of 10 publicly traded savings and loan holding companies that RP Financial, LC. considers comparable to Community First Bancshares, Inc. on a pro forma basis. The appraisal peer group consists of the following companies, all of which are traded on the Nasdaq Stock Market. Total assets are as of September 30, 2016.


Company Name	Ticker Symbol	Headquarters	Total Assets
			(In millions)
IF Bancorp, Inc.	IROQ	Watseka, IL	$	589
Prudential Bancorp, Inc.	PBIP	Philadelphia, PA		559
United Community Bancorp	UCBA	Lawrenceburg, IN		528
Poage Bankshares, Inc.	PBSK	Ashland, KY		449
Anchor Bancorp	ANCB	Lacey, WA		436
MSB Financial Corp.	MSBF	Millington, NJ		433
Wolverine Bancorp, Inc.	WBKC	Midland, MI		369
Jacksonville Bancorp, Inc.	JXSB	Jacksonville, IL		331
Melrose Bancorp, Inc.	MELR	Melrose, MA		267
Equitable Financial Corp.	EQFN	Grand Island, NE		228

The independent appraisal will be updated before we complete the reorganization and offering. If the pro forma market value of the common stock at that time is either below $43.4 million or above $67.4 million, then Community First Bancshares, Inc., after consulting with the Federal Reserve Board, may terminate the plan of reorganization and return all funds promptly with interest; extend or hold a new subscription or community offering, or both; establish a new offering range and commence a resolicitation of subscribers; or take such other actions as may be permitted by the Federal Reserve Board and the Securities and Exchange Commission. If we resolicit subscribers in this instance, then all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest.

Two measures investors use to analyze an issuer’s stock are the ratio of the offering price to the issuer’s book value and the ratio of the offering price to the issuer’s annual net income. RP Financial, LC. considered these ratios, among other factors, in preparing its independent appraisal. Book value is the same as total equity, and represents the difference between the issuer’s assets and liabilities. We had no intangible assets at September 30, 2016. Therefore, ratios that are presented related to book value are the same ratios that would be presented related to tangible book value.

The following table presents a summary of selected pricing ratios for the peer group companies and for us on a non-fully converted basis (i.e. the table assumes that 46% of our outstanding shares of common stock is sold in the offering, as opposed to 100% of our outstanding shares of common stock). These figures are from the RP Financial, LC. appraisal report. Compared to the average pricing ratios of the peer group, and based upon the information in the following table, our pro forma pricing ratios at the midpoint of the offering range indicated a premium of 161.3% on a non-fully converted price-to-earnings basis and a discount of 20.0% on a non-fully converted price-to-book value basis.


	Non-Fully Converted Pro Forma Price-to-Earnings Multiple (1)		Non-Fully Converted Pro Forma Price-to-Book Value Ratio (1)
Community First Bancshares, Inc.
Adjusted Maximum		69.65x		95.43	%
Maximum		59.13x		87.30	%
Midpoint		50.38x		79.50	%
Minimum		41.97x		70.94	%
Valuation of peer group companies as of November 25, 2016
Averages		19.28x		99.32	%
Medians		17.92x		98.00	%

(1)	Information is based upon actual earnings for the 12 months ended September 30, 2016. These ratios are different from the ratios in “Pro Forma Data.”

The following table presents a summary of selected pricing ratios for the peer group companies, with such ratios adjusted to their fully converted equivalent basis, and the resulting pricing ratios for Community First Bancshares, Inc. on a fully converted equivalent basis. Compared to the average fully converted pricing ratios of the peer group, Community First Bancshares, Inc.’s pro forma fully converted pricing ratios at the midpoint of the offering range indicated a premium of 196.2% on a fully converted price-to-earnings basis and a discount of 41.9% on a fully converted price-to-book value basis.


	Fully Converted Pro Forma Price-to-Earnings Multiple		Fully Converted Pro Forma Price-to-Book Value Ratio
Community First Bancshares, Inc.
Adjusted Maximum		83.22x		65.66	%
Maximum		68.62x		61.69	%
Midpoint		57.10x		57.67	%
Minimum		46.54x		53.02	%
Valuation of peer group companies as of November 25, 2016
Averages		19.28x		99.32	%
Medians		17.92x		98.00	%

The pro forma fully converted calculations for Community First Bancshares, Inc. include the following assumptions:

•

8% of the shares sold in a full conversion offering would be purchased by an employee stock ownership plan, with the expense to be amortized over 25 years;

•

4% of the shares sold in a full conversion offering would be purchased by a stock-based benefit plan, with the expense to be amortized over five years;

•

Options equal to 10% of the shares sold in a full conversion offering would be granted under a stock-based benefit plan, with option expense of $2.34 per option, and with the expense to be amortized over five years; and

•

stock offering expenses would equal 3.04% of the stock offering amount at the midpoint of the offering range.

The independent appraisal does not indicate market value. Do not assume or expect that Community First Bancshares, Inc.’s valuation as indicated above means that the common stock will trade at or above the $10.00 purchase price after the reorganization and offering. Furthermore, the pricing ratios presented in the appraisal were used by RP Financial, LC. to estimate our pro forma appraised value for regulatory purposes and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see “The Reorganization and Offering—How We Determined the Stock Pricing and the Number of Shares to be Issued.”

How We Intend to Use the Proceeds from the Offering

We intend to invest at least 50% of the net proceeds from the stock offering in Newton Federal Bank, fund the loan to our employee stock ownership plan to finance its purchase of shares of common stock in the stock offering, contribute $100,000 to Community First Bancshares, MHC as its initial capitlization, and retain the remainder of the net proceeds from the offering at Community First Bancshares, Inc. Therefore, assuming we sell 2,697,900 shares of common stock at the maximum of the offering range, and we have net proceeds of $25.7 million, we intend to invest $12.8 million in Newton Federal Bank, loan $2.3 million to our employee stock ownership plan to fund its purchase of an amount of the common stock equal to up to 3.92% of our outstanding shares (including shares issued to Community First Bancshares, MHC), contribute $100,000 to Community First Bancshares, MHC and retain the remaining $10.4 million of the net proceeds at Community First Bancshares, Inc.

Community First Bancshares, Inc. expects to initially invest the net proceeds of the offering in securities issued by the U.S. government and its agencies or government sponsored enterprises, and as otherwise permitted under our investment policy. Community First Bancshares, Inc. may use a portion of the net proceeds to repurchase shares of our common stock in the future, although we are generally not permitted to do so during the first year following our reorganization, and may use a portion of the net proceeds to finance the possible acquisition of other financial institutions or other financial service businesses. We may also use the net proceeds for other general corporate purposes. Newton Federal Bank generally intends to use the proceeds it receives to originate loans. It may also purchase securities as permitted under our investment policy, expand its banking franchise internally through de novo branching or establishing loan production offices, or expand through acquisitions of other financial institutions, branch offices, or other financial service businesses. Newton Federal Bank may also use the proceeds it receives to support new loan, deposit or other financial products and services, and for general corporate purposes.

Neither Newton Federal Bank nor Community First Bancshares, Inc. has any plans or agreements for any specific acquisition transactions at this time. See “How We Intend to Use the Proceeds from the Offering.”

Limits on the Amount of Common Stock You May Purchase

The minimum purchase is 25 shares of common stock. Generally, no individual, or individuals through a single account held jointly, may purchase more than $300,000 of common stock. If any of the following persons purchase shares of common stock, their purchases when combined with your purchases cannot exceed $400,000 of common stock:

•

Any person who is related by blood or marriage to you and who either lives in your home or who is a director or officer of Newton Federal Bank;

•

Companies or other entities in which you are an officer or partner or have a 10% or greater beneficial ownership interest; and

•

Trusts or other estates in which you have a substantial beneficial interest or as to which you serve as a trustee or in another fiduciary capacity.

Persons having the same address and persons exercising subscription rights through qualifying accounts registered to the same address will be subject to this overall purchase limitation. We have the right to determine, in our sole discretion, whether prospective purchasers are associates or acting in concert.

We may, in our sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase the maximum purchase limitation to 9.9% of the number of shares sold in the offering, provided that the total number of shares purchased by persons, their associates and those persons with whom they are acting in concert, to the extent such purchases exceed 5% of the shares sold in the offering, shall not exceed, in the aggregate, 10% of the total number of the shares sold in the offering.

Subject to regulatory approval, we may increase or decrease the purchase limitations in the offering at any time. A detailed discussion of the limitations on purchases of common stock by an individual and persons acting in concert is set forth under the caption “The Reorganization and the Offering—Offering of Common Stock—Limitations on Purchase of Shares.”

We expect that the employee stock ownership plan will purchase 3.92% of our outstanding shares (including shares issued to Community First Bancshares, MHC). Subject to the approval of the Federal Reserve Board, the employee stock ownership plan may purchase some or all of these shares in the open market following the completion of the offering. Our employee stock ownership plan purchases will range from 169,932 shares to 264,394 shares of common stock, respectively, at the minimum and adjusted maximum of the offering range.

How You May Purchase Shares of Common Stock in the Subscription and Community Offering

In the subscription offering and the community offering you may pay for your shares only by:

•

personal check, bank check or money order payable to Community First Bancshares, Inc. (cash and third party checks will not be accepted); or

•

authorizing us to withdraw available funds (without any early withdrawal penalty) from your deposit account(s) maintained with Newton Federal Bank, other than checking accounts or retirement accounts, including individual retirement accounts (IRAs).

Newton Federal Bank is not permitted to knowingly lend funds for the purpose of purchasing shares of common stock in the offering. You may not pay by wire transfer, use a check drawn on a Newton Federal Bank line of credit, or use a third-party check to pay for shares of common stock. Please do not submit cash.

You can subscribe for shares of common stock in the offering by delivering a signed and completed original stock order form, together with full payment, before the expiration date of the subscription offering. You may submit your stock order form in one of three ways: by mail, using the reply envelope provided; by overnight courier to the address indicated on the stock order form; or by bringing your stock order form and payment to our Stock Information Center, which is located at Newton Federal Bank’s main office located at 3175 Highway 278, Covington, Georgia. The Stock Information Center will be open Monday through Friday, between 10:00 a.m. and 4:00 p.m., Eastern Time. The Stock Information Center will not be open on bank holidays. Once submitted, your order is irrevocable. We will not to accept incomplete stock order forms, unsigned stock order forms, or copies or facsimiles of stock order forms. For orders paid for by check or money order, the funds must be available in the account. Funds received prior to the completion of the offering will be held in a segregated account at Newton Federal Bank. Subscription funds will earn interest at [interest rate]% per annum, which is our current passbook savings rate. If the offering is terminated, we will promptly return your subscription funds with interest.

On the stock order form, you may not designate withdrawal from Newton Federal Bank accounts with check-writing privileges; instead, please submit a check. If you request that we directly withdraw the funds from an account with check writing privileges, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will immediately withdraw the amount from your checking account. You may not authorize direct withdrawal from a Newton Federal Bank IRA or other retirement account. See “—Using Retirement Account Funds to Purchase Shares of Common Stock in the Subscription and Community Offerings.”

Withdrawals from certificates of deposit accounts at Newton Federal Bank for the purpose of purchasing common stock in the offering may be made without incurring an early withdrawal penalty. All funds authorized for withdrawal from deposit accounts with Newton Federal Bank must be in the deposit accounts at the time the stock order form is received; no credit to purchase shares will be given for future interest to be earned on the funds in your deposit account or submitted for payment for the shares. However, funds will not be withdrawn from the accounts until the offering is completed and will continue to earn interest at the applicable deposit account rate until the completion of the offering. A hold will be placed on those funds when your stock order is received, making the designated funds unavailable to you. If a withdrawal results in a certificate of deposit account with a balance less than the applicable minimum balance requirement, the certificate of deposit will be canceled at the time of withdrawal without penalty, and the remaining balance will earn interest at [interest rate]% per annum thereafter, until such funds are withdrawn. After we receive an order, the order cannot be revoked or changed.

By signing the stock order form, you are acknowledging receipt of this prospectus and that the shares of our common stock are not deposits or savings accounts that are federally insured or otherwise guaranteed by Newton Federal Bank, the Federal Deposit Insurance Corporation or any other government agency.

Using Retirement Account Funds to Purchase Shares of Common Stock in the Subscription and Community Offerings

You may be able to subscribe for shares of common stock using funds in your IRA, or other retirement account. If you wish to use some or all of the funds in your IRA or other retirement account held at Newton Federal Bank, the applicable funds must be transferred to a self-directed account maintained by an independent custodian or trustee, such as a brokerage firm, before you place your stock order. If you do not have such an account, you will need to establish one. A one-time and/or annual administrative fee may be payable to the independent custodian or trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the [expiration date] offering deadline, for assistance with purchases using funds in your IRA or other retirement account held at Newton Federal Bank or elsewhere. Whether you may use such funds for the purchase of shares in the stock offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

For a complete description of how to use IRA funds to purchase shares in the stock offering, see “The Reorganization and Offering—Procedure for Purchasing Shares—Using Retirement Account Funds.”

You May Not Sell or Transfer Your Subscription Rights

Applicable regulations prohibit you from selling, giving, or otherwise transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the shares of common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe has sold or given away his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights. On the stock order form, you cannot add the names of others for joint stock registration unless they are also named on the qualifying deposit or loan account, and you cannot delete names of others except in the case of certain orders placed through an IRA, Keogh, 401(k) or similar plan, and except in the event of the death of a named eligible depositor. In addition, the stock order form requires that you list all deposit or loan accounts, giving all names on each account and the account number at the applicable eligibility record date. Your failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, if there is an oversubscription. Eligible depositors or borrowers who enter into agreements to allow ineligible investors to participate in the subscription offering may be violating federal and state law and may be subject to civil enforcement actions or criminal prosecution.

Deadline for Orders of Common Stock

The deadline for submitting orders to purchase shares of the common stock in the subscription and community offerings is [expiration time], Eastern Time, on [expiration date], unless we extend this deadline. If you wish to purchase shares of common stock, your properly completed and signed original stock order form, together with full payment for the shares, must be received (not postmarked) by this time. Orders received after [expiration time], Eastern Time, on [expiration date] will be rejected unless the offering is extended.

Although we will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at [expiration time], Eastern Time, on [expiration date], whether or not we have been able to locate each person entitled to subscription rights.

See “The Reorganization and Offering—Procedure for Purchasing Shares—Expiration Date” for a complete description of the deadline for purchasing shares in the stock offering.

Once Submitted, Your Stock Purchase Order May Not Be Revoked Except Under Certain Circumstances

Funds that you use to purchase shares of our common stock in the offering will be held in a segregated account until the termination or completion of the offering, including any extension of the expiration date. Because completion of the reorganization and offering is subject to the receipt of all required regulatory approvals, including an update of the independent appraisal, among other factors, there may be one or more delays in the completion of the reorganization. Any orders that you submit to purchase shares of our common stock in the offering are irrevocable, and you will not have access to subscription funds unless the offering is terminated, or extended beyond [extension date], or the number of shares to be sold in the offering is increased to more than 3,102,585 shares or decreased to fewer than 1,994,100 shares.

Termination of the Offering

The subscription offering will expire at [expiration time], Eastern Time, on [expiration date]. We expect that the community offering, if one is conducted, would expire at the same time. We may extend this expiration date without notice to you until [extension date], or such later date as the applicable regulators may approve. If the subscription offering and/or community offerings are extended beyond [extension date], we will be required to resolicit subscriptions before proceeding with the offering. In such event, all subscribers will be afforded the opportunity to confirm, cancel or change their orders. If you choose to cancel your order or you do not respond to the resolicitation notice, your funds will be promptly returned to you with interest and deposit account withdrawal authorizations will be cancelled. All further extensions, in the aggregate, may not last beyond [final extension date], which is two years after the special meeting of members of Newton Federal Bank to be held on [meeting date] to vote on the plan of reorganization.

Steps We May Take If We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 1,994,100 shares of common stock, we may take several steps in order to sell the minimum number of shares of common stock in the offering range. Specifically, we may (a) increase the purchase limitations, (b) seek regulatory approval to extend the offering beyond the [extension date] expiration date, and/or (c) reduce the valuation and offering range, provided that any such extension or reduction will require us to resolicit subscriptions received in the offering and provide subscribers with the opportunity to increase, decrease or cancel their subscriptions. If the offering is extended beyond [extension date], subscribers will have the right to confirm, cancel or change their orders. If the number of shares to be sold in the offering is increased to more than 3,102,585 shares or decreased to less than 1,994,100 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest.

Market for the Common Stock

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be traded on the on the Nasdaq Capital Market under the symbol “CFBI” upon conclusion of the stock offering. See “Market for the Common Stock.”

Our Dividend Policy

We intend to pay cash dividends to our stockholders, beginning no earlier than the first calendar quarter of 2018. However, no decision has been made with respect to the amount of any dividend payments. The payment and amount of any dividend payments will be subject to statutory and regulatory limitations, and will depend upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; our other uses of funds for the long-term value of stockholders; tax considerations; the Federal Reserve Board’s current regulations restricting the waiver of dividends by mutual holding companies; and general economic conditions. See “Our Policy Regarding Dividends” for additional information regarding our dividend policy.

Possible Change in the Offering Range

RP Financial, LC. will update its appraisal before we complete the offering. If, as a result of demand for the shares or changes in market conditions, RP Financial, LC. determines that our pro forma market value has increased, we may sell up to 3,102,585 shares in the offering without further notice to you. If our pro forma market value at that time is either below $43.4 million or above $67.4 million, then, after consulting with the Federal Reserve Board, we may:

•

terminate the stock offering, cancel deposit account withdrawal authorizations and promptly return all funds received in the offering with interest at [interest rate]% per annum;

•

set a new offering range; or

•

take such other actions as may be permitted by the Federal Reserve Board, the Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission.

If we set a new offering range, we will promptly return funds, with interest at [interest rate]% per annum for funds received in the offering, cancel deposit account withdrawal authorizations and commence a resolicitation. In connection with the resolicitation, we will notify subscribers of their right to place a new stock order for a specified period of time.

Possible Termination of the Offering

We may terminate the offering at any time prior to the special meeting of members of Newton Federal Bank that is being called to vote on the reorganization and offering, and at any time after member approval with applicable regulatory approval. If we terminate the offering, we will promptly return your funds, with interest at [interest rate]% per annum, and we will cancel deposit account withdrawal authorizations.

Our Officers, Directors and Employees Will Receive Additional Benefits and Compensation After the Reorganization and Offering

In connection with the reorganization, we are establishing an employee stock ownership plan, and, subject to stockholder approval, we intend to implement one or more stock-based benefits plan that will provide for grants of stock options and restricted stock.

Employee Stock Ownership Plan . The board of directors of Newton Federal Bank has adopted an employee stock ownership plan, which will award shares of our common stock to eligible employees primarily based on their compensation. Our board of directors will, at the completion of the offering, ratify the loan to the employee stock ownership plan and the issuance of the common stock to the employee stock ownership plan. It is expected that our employee stock ownership plan will purchase an amount of shares equal to 3.92% of our outstanding shares (including shares issued to Community First Bancshares, MHC).

Stock-Based Benefit Plans . In addition to shares purchased by the employee stock ownership plan, we intend to adopt one or more stock-based benefit plans, which are designed to attract and retain qualified personnel in key positions and provide directors, officers and key employees with an ownership interest in Community First Bancshares, Inc., which will be an incentive to contribute to our success, and reward key employees for their performance. The number of options granted and shares of restricted common stock awarded under stock-based benefit plans may not exceed 4.90% and 1.96%, respectively, of our total outstanding shares, including shares issued to Community First Bancshares, MHC, provided that if Newton Federal Bank’s tangible capital at the time of adoption of the stock-based benefit plan is less than 10% of its assets, then the amount of shares of restricted common stock may not exceed 1.47% of our outstanding shares. The number of options granted or shares of restricted common stock awarded under stock-based benefit plans, when aggregated with any subsequently adopted stock-based benefit plans (exclusive of any shares held by any employee stock ownership plan), may not exceed 25% of the shares of common stock held by persons other than Community First Bancshares, MHC. Under applicable regulations, the exercise price of options granted within one year of the completion of the offering must be equal to the then fair market value of the common stock on the date the options are granted.

Stock-based benefit plans will not be established sooner than six months after the stock offering, and if adopted within one year after the stock offering, the plans must be approved by a majority of the votes eligible to be cast by our stockholders, as well as a majority of the votes eligible to be cast by our stockholders other than Community First Bancshares, MHC. If stock-based benefit plans are established more than one year after the stock offering, they must be approved by a majority of votes cast by our stockholders, as well as a majority of votes cast by our stockholders other than Community First Bancshares, MHC. The following additional restrictions would apply to our stock-based benefit plans only if such plans are adopted within one year after the stock offering:

•

non-employee directors in the aggregate may not receive more than 30% of the options and shares of restricted common stock authorized under the plans;

•

no non-employee director may receive more than 5% of the options and shares of restricted common stock authorized under the plans;

•

no officer or employee may receive more than 25% of the options and shares of restricted common stock authorized under the plans;

•

options and shares of restricted common stock may not vest more rapidly than 20% per year, beginning on the first anniversary of stockholder approval of the plans; and

•

accelerated vesting is not permitted except for death, disability or upon a change in control of Newton Federal Bank or Community First Bancshares, Inc.

We have not determined whether we will present stock-based benefit plans for stockholder approval prior to or more than 12 months after the completion of the stock offering. In the event federal regulators change their regulations or policies regarding stock-based benefit plans, including any regulations or policies restricting the size of awards and vesting of benefits as described above, the restrictions described above may not be applicable.

We may obtain the shares needed for our stock-based benefit plans by issuing additional shares of common stock from authorized but unissued shares or through stock repurchases.

Equity Plan Expenses. The implementation of an employee stock ownership plan and one or more stock-based benefit plans will increase our future compensation costs, thereby reducing our earnings. For example, we will be required to recognize an expense each year under our employee stock ownership plan equal to the fair market value of the shares committed to be released for that year to the participating employees. Similarly, if we issue restricted stock awards under a stock-based benefit plan, we would be required to recognize an expense as the shares vest equal to their fair market value on the grant date. Finally, if we issue stock options, we would be required to recognize an expense as the options vest, equal to their estimated value on the grant date. See “Risk Factors—Risks Related to the Offering—Our stock-based benefit plans will increase our costs, which will reduce our income” and “Management—Benefits to be Considered Following Completion of the Stock Offering.”

Benefits to Management. The following table summarizes the stock benefits that our officers, directors and employees may receive following the reorganization and offering, at the adjusted maximum of the offering range and assuming that our employee stock ownership plan purchases 3.92% of our outstanding shares (including shares issued to Community First Bancshares, MHC) and that we implement one or more stock-based benefit plans granting options to purchase 4.90% of the total shares of common stock of Community First Bancshares, Inc. issued in connection with the reorganization (including shares issued to Community First Bancshares, MHC) and awarding shares of restricted common stock equal to 1.96% of the total shares of common stock of Community First Bancshares, Inc. issued in connection with the reorganization (including shares issued to Community First Bancshares, MHC).


Plan	Individuals Eligible to Receive Awards	Percent of Outstanding Shares			Value of Benefits Based on Adjusted Maximum of Offering Range
Employee stock ownership plan	All employees		3.92	%	$	2,644
Stock awards	Directors, officers and employees		1.96			1,322
Stock options	Directors, officers and employees		4.90			773	(1)

Total			10.78	%	$	4,739

(1)

The fair value of stock options has been estimated at $2.34 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; no dividend yield; expected option life of 10 years; risk free interest rate of 1.60%; and a volatility rate of 12.81% based on an index of publicly traded thrift institutions.

The actual value of the shares of restricted common stock awarded under the stock-based benefit plan would be based on the price of Community First Bancshares, Inc.’s common stock at the time the shares are awarded. The following table presents the total value of all shares of restricted common stock to be available for award and issuance under the stock-based benefit plan, assuming receipt of stockholder approval and that the shares are awarded in a range of market prices from $8.00 per share to $14.00 per share.


Share Price		84,966 Shares Awarded at Minimum of Offering Range		99,960 Shares Awarded at Midpoint of Offering Range		114,954 Shares Awarded at Maximum of Offering Range		132,197 Shares Awarded at Adjusted Maximum of Offering Range
(In thousands, except share price information)
$	8.00	$	680	$	800	$	920	$	1,058
$	10.00	$	850	$	1,000	$	1,150	$	1,322
$	12.00	$	1,020	$	1,200	$	1,379	$	1,586
$	14.00	$	1,190	$	1,399	$	1,609	$	1,851

The grant-date fair value of the options granted under the stock-based benefit plan would be based in part on the price of shares of Community First Bancshares, Inc.’s common stock at the time the options are granted. The value will also depend on the various assumptions utilized in the option pricing model ultimately adopted. The following table presents the total estimated value of the options to be available for grant under the stock-based benefit plan, assuming receipt of stockholder approval, using a Black-Scholes option pricing model, and assuming the market price and exercise price for the stock options are equal and the range of market prices for the shares is $8.00 per share to $14.00 per share. The Black-Scholes option pricing model provides an estimate only of the fair value of the options, and the actual value of the options may differ significantly from the value set forth in this table.


Market/Exercise Price		Grant-Date Fair Value Per Option		212,415 Options at Minimum of Offering Range		249,900 Options at Midpoint of Offering Range		287,385 Options at Maximum of Offering Range		330,493 Options at Adjusted Maximum of Offering Range
(In thousands, except market/exercise price and fair value information)
$	8.00	$	1.87	$	397	$	467	$	537	$	618
$	10.00	$	2.34	$	497	$	585	$	672	$	773
$	12.00	$	2.81	$	597	$	702	$	808	$	929
$	14.00	$	3.28	$	697	$	820	$	943	$	1,084

Restrictions on the Acquisition of Community First Bancshares, Inc. and Newton Federal Bank

Federal regulations, as well as provisions contained in the charter and bylaws of Newton Federal Bank and Community First Bancshares, Inc., restrict the ability of any person, firm or entity to acquire Community First Bancshares, Inc., Newton Federal Bank, or their respective capital stock. These restrictions include the requirement that a potential acquirer of common stock obtain the prior approval of the Federal Reserve Board and/or the Office of the Comptroller of the Currency before acquiring in excess of 10% of the voting stock of Community First Bancshares, Inc. or Newton Federal Bank, as well as a provision in each of Community First Bancshares, Inc.’s and Newton Federal Bank’s respective charters that generally provides that for a period of five years from the closing of the offering, no person, other than Community First Bancshares, MHC, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of Community First Bancshares, Inc. or Newton Federal Bank held by persons other than Community First Bancshares, MHC, and, with respect to Newton Federal Bank, other than Community First Bancshares, Inc., and that any shares acquired in excess of this limit would not be entitled to be voted and would not be counted as voting stock in connection with any matters submitted to the stockholders for a vote.

Because a majority of the shares of outstanding common stock of Community First Bancshares, Inc. must be owned by Community First Bancshares, MHC, any acquisition of Community First Bancshares, Inc. must be approved by Community First Bancshares, MHC. Furthermore, Community First Bancshares, MHC would not be required to pursue or approve a sale of Community First Bancshares, Inc. even if such sale were favored by a majority of Community First Bancshares, Inc.’s public stockholders. Finally, although a mutual holding company may be acquired by a mutual institution or another mutual holding company in what is known as a “remutualization” transaction, current regulatory policy may make such transactions unlikely because of the heightened regulatory

scrutiny given to the structure and pricing of such transactions. Specifically, current regulatory policy views remutualization transactions as raising significant issues concerning disparate treatment of minority stockholders and mutual members of the target entity, and raising issues concerning the effect on the mutual members of the acquiring entity. As a result, a remutualization transaction for Community First Bancshares, Inc. is unlikely unless the applicant can clearly demonstrate that the regulatory concerns are not warranted in the particular case.

Proposed Stock Purchases by Management

Community First Bancshares, Inc.’s directors and executive officers and their associates are expected to purchase, for investment purposes, approximately [insider purchases] shares of common stock in the offering, which represents % of the shares sold to the public and % of the total shares to be outstanding after the offering (including shares owned by Community First Bancshares, MHC), each at the minimum of the offering range, respectively. Like all of our eligible depositor and borrower purchasers, our directors and executive officers and their associates have subscription rights based on their deposits or borrowings and, in the event of an oversubscription, their orders will be subject to the allocation provisions set forth in our plan of reorganization.

The plan of reorganization provides that the aggregate amount of shares acquired in the offering by our directors and executive officers (and their associates) may not exceed 31% of the outstanding shares held by persons other than Community First Bancshares, MHC, except with the approval of federal regulators. We may seek approval from the federal regulators to allow purchases by our directors and executive officers (and their associates) to exceed the 31% limit to the extent needed to enable us to sell the minimum number of shares of common stock in the offering range.

Directors and executive officers will pay the same $10.00 per share price paid by all other persons who purchase shares in the offering. These shares will be counted in determining whether the minimum of the offering range is reached.

Conditions to Completing the Reorganization and Offering

We cannot complete the reorganization and offering unless:

•

we sell at least 1,994,100 shares, the minimum of the offering range;

•

the members of Newton Federal Bank vote to approve the reorganization and offering; and

•

we receive final approval from the Federal Reserve Board to complete the reorganization and offering, as well as any additional required approvals from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

Federal Reserve Board, Office of the Comptroller of the Currency or Federal Deposit Insurance Corporation approval does not constitute a recommendation or endorsement of an investment in our stock.

Possible Conversion of Community First Bancshares, MHC to Stock Form

In the future, Community First Bancshares, MHC may convert from the mutual to capital stock form, in a transaction commonly referred to as a “second-step conversion.” In a second-step conversion, members of Community First Bancshares, MHC would have subscription rights to purchase common stock of Community First Bancshares, Inc. or its successor, and the public stockholders of Community First Bancshares, Inc. would be entitled to exchange their shares of common stock for an equal percentage of shares of the converted Community First Bancshares, MHC. This percentage may be adjusted to reflect any assets owned by Community First Bancshares, MHC.

Our board of directors has no current plans to undertake a second-step conversion transaction. Any second-step conversion transaction would require the approval of holders of a majority of the outstanding shares of Community First Bancshares, Inc. common stock (excluding shares held by Community First Bancshares, MHC) and the approval of the depositor and borrower members of Community First Bancshares, MHC.

Delivery of Prospectus

To ensure that each person receives a prospectus at least 48 hours before the deadline for orders for common stock, we may not mail prospectuses any later than five days prior to such date or hand-deliver prospectuses later than two days prior to that date. Stock order forms may only be delivered if accompanied or preceded by a prospectus. We are not obligated to deliver a prospectus or stock order form by means other than U.S. mail.

We will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights. The subscription offering and all subscription rights will expire at [expiration time], Eastern Time, on [expiration date], whether or not we have been able to locate each person entitled to subscription rights.

Delivery of Shares of Common Stock

All shares of common stock sold will be issued in book entry form. Stock certificates will not be issued. A statement reflecting ownership of shares of common stock issued in the subscription and community offerings will be mailed by our transfer agent to the persons entitled thereto at the registration address noted by them on their stock order forms as soon as practicable following consummation of the stock offering. Shares of common stock sold in the syndicated community offering may be delivered electronically through the services of The Depository Trust Company, subject to any necessary regulatory approval. We expect trading in the stock to begin on the day of completion of the stock offering or the next business day. Until a statement reflecting ownership of shares of common stock is available and delivered to purchasers, purchasers might not be able to sell the shares of common stock that they purchased, even though the common stock will have begun trading. Your ability to sell your shares of common stock before receiving your statement will depend on arrangements you may make with a brokerage firm.

Tax Consequences

Newton Federal Bank and Community First Bancshares, Inc. have received an opinion of counsel, Luse Gorman, PC, regarding the material federal income tax consequences of the reorganization, including an opinion that it is more likely than not that the fair market value of the nontransferable subscription rights to purchase the common stock will be zero and, accordingly, no gain or loss will be recognized by members upon the distribution to them of the nontransferable subscription rights to purchase the common stock and no taxable income will be realized by depositors as a result of the exercise of the nontransferable subscription rights. Newton Federal Bank and Community First Bancshares, Inc. have also received an opinion of Porter Keadle Moore, LLC regarding the material Georgia state tax consequences of the reorganization. As a general matter, the reorganization will not be a taxable transaction for purposes of federal or state income taxes to Newton Federal Bank, Community First Bancshares, Inc. or persons eligible to subscribe in the subscription offering. See the section of this prospectus entitled “Taxation” for additional information regarding taxes.

Emerging Growth Company Status

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we are an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies. See “Risk Factors—Risks Related to the Offering—We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors” and “Regulation and Supervision—Emerging Growth Company Status.”

An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. We have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

How You May Obtain Additional Information Regarding the Reorganization and Offering

If you have any questions regarding the reorganization and offering, please call the Stock Information Center at [stock center number], or visit the Stock Information Center, which is located at 3175 Highway 278, Covington, Georgia. The Stock Information Center will be open Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time. The Stock Information Center will be closed on bank holidays.

RISK FACTORS

You should consider carefully the following risk factors, in addition to all other information in this prospectus,

in evaluating an investment in our common stock.

Risks Related to Our Business

We have increased our commercial real estate, commercial and industrial, and construction and land loans, and intend to continue to increase originations of these types of loans. These loans involve credit risks that could adversely affect our financial condition and results of operations.

At September 30, 2016, commercial real estate loans totaled $29.2 million, or 15.0% of our loan portfolio, commercial and industrial loans totaled $16.2 million, or 8.4% of our loan portfolio, and construction and land loans totaled $13.3 million, or 6.9% of our loan portfolio. Given their larger balances and the complexity of the underlying collateral, commercial real estate and commercial and industrial loans generally have more risk than the one- to four-family residential real estate loans we originate. Because the repayment of commercial real estate and commercial and industrial loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy. A downturn in the real estate market or the local economy could adversely impact the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of nonperforming loans. Further, unlike residential mortgage loans, commercial real estate loans and commercial and industrial loans may be secured by collateral other than real estate, such as inventory and accounts receivable, the value of which may depreciate over time, may be more difficult to appraise and may be more susceptible to fluctuation in value at default. In addition, the physical condition of non-owner occupied properties may be below that of owner occupied properties due to lax property maintenance standards, which have a negative impact on the value of the collateral properties. As our commercial real estate and commercial and industrial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

Our portfolio of loans with a higher risk of loss is increasing and the unseasoned nature of our commercial loan portfolio may result in errors in judging its collectability, which may lead to additional provisions for loan losses or charge-offs, which would hurt our profits.

Our commercial loan portfolio, which includes commercial real estate, commercial and industrial loans and construction and land loans, has increased to $58.7 million, or 30.3% of total loans, at September 30, 2016 from $38.3 million, or 21.3% of total loans, at September 30, 2014. A large portion of our commercial loan portfolio was originated recently. Our limited experience with these borrowers does not provide us with a significant payment history pattern with which to judge future collectability. Further, these loans have not been subjected to unfavorable economic conditions. As a result, it is difficult to predict the future performance of this part of our loan portfolio. These loans may have delinquency or charge-off levels above our historical experience, which could adversely affect our future performance.

A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of nonperforming loans, which could adversely affect our operations, financial condition and earnings.

Local economic conditions have a significant impact on the ability of our borrowers to repay loans and the value of the collateral securing loans. A deterioration in economic conditions could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations:

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demand for our products and services may decline;

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loan delinquencies, problem assets and foreclosures may increase;

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collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and

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the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. Growing our operations could also cause our expenses to increase faster than our revenues.

Our business strategy includes growth in assets, deposits and the scale of our operations. Achieving such growth will require us to attract customers that currently bank at other financial institutions in our market area. Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, competition from other financial institutions in our market area and our ability to manage our growth. Growth opportunities may not be available or we may not be able to manage our growth successfully. If we do not manage our growth effectively, our financial condition and operating results could be negatively affected. Furthermore, there can be considerable costs involved in opening branches and expanding lending capacity that generally require a period of time to generate the necessary revenues to offset their costs, especially in areas in which we do not have an established presence. Accordingly, any such business expansion can be expected to negatively impact our earnings for some period of time until certain economies of scale are reached. Our expenses could be further increased if we encounter delays in the opening of new branches.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.

We maintain an allowance for loan losses, which is established through a provision for loan losses that represents management’s best estimate of probable losses within the existing portfolio of loans. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. In determining the adequacy of the allowance for loan losses, we rely on our experience and our evaluation of economic conditions. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio and adjustment may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Consequently, a problem with one or more loans could require us to significantly increase the level of our provision for loan losses. In addition, federal regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Material additions to the allowance would materially decrease our net income.

We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.

We are dependent upon the services of the members of our senior management team who direct our strategy and operations. Members of our senior management team, or lending personnel who possess expertise in our markets and key business relationships, could be difficult to replace. Our loss of these persons, or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations and our ability to compete in our markets. See “Management.”

A continuation of the historically low interest rate environment and the possibility that we may access higher-cost funds to support our loan growth and operations may adversely affect our net interest income and profitability.

In recent years the Federal Reserve Board’s policy has been to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed securities. Our ability to reduce our interest expense may be limited at current interest rate levels while the average yield on our interest-earning assets may continue to decrease, and our interest expense may increase as we access non-core funding sources or increase deposit rates to fund our operations. A continuation of a low interest rate environment or our increasing our cost of funds may adversely affect our net interest income, which would have an adverse effect on our profitability.

Future changes in interest rates could reduce our profits and asset values.

Net income is the amount by which net interest income and non-interest income exceeds non-interest expense and the provision for loan losses. Net interest income makes up a majority of our income and is based on the difference between:

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the interest income we earn on interest-earning assets, such as loans and securities; and

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the interest expense we pay on interest-bearing liabilities, such as deposits and borrowings.

The rates we earn on our assets and the rates we pay on our liabilities are generally fixed for a contractual period of time. Like many savings institutions, our liabilities generally have shorter contractual maturities than our assets. This imbalance can create significant earnings volatility because market interest rates change over time. In a period of rising interest rates, the interest income we earn on our assets may not increase as rapidly as the interest we pay on our liabilities. In a period of declining interest rates, the interest income we earn on our assets may decrease more rapidly than the interest we pay on our liabilities, as borrowers prepay mortgage loans, and mortgage-backed securities and callable investment securities are called, requiring us to reinvest those cash flows at lower interest rates.

In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A decline in interest rates results in increased prepayments of loans and mortgage-backed and related securities as borrowers refinance their debt to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Furthermore, an inverted interest rate yield curve, where short-term interest rates (which are usually the rates at which financial institutions borrow funds) are higher than long-term interest rates (which are usually the rates at which financial institutions lend funds for fixed-rate loans) can reduce a financial institution’s net interest margin and create financial risk for financial institutions who originate longer-term, fixed rate mortgage loans.

Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Changes in the level of interest rates also may negatively affect the value of our assets and ultimately affect our earnings.

We monitor interest rate risk through the use of simulation models, including estimates of the amounts by which the fair value of our assets and liabilities (our net economic value or “NEV”) and our net interest income would change in the event of a range of assumed changes in market interest rates. As of September 30, 2016, in the event of an instantaneous 200 basis point increase in interest rates, we estimate that we would experience a 12.33% decrease in NEV and a 0.70% decrease in net interest income. For further discussion of how changes in interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of Market Risk.”

Strong competition within our market areas may limit our growth and profitability.

Competition in the banking and financial services industry is intense. In our market area, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms and unregulated or less regulated non-banking entities, operating locally and elsewhere. Many of these competitors have substantially greater resources and higher lending limits than we have and offer certain services that we do not or cannot provide. In addition, some of our competitors offer loans with lower interest rates on more attractive terms than loans we offer. Competition also makes it increasingly difficult and costly to attract and retain qualified employees. Our profitability depends upon our continued ability to successfully compete in our market area. If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected.

The financial services industry could become even more competitive as a result of new legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. For additional information see “Business of Newton Federal Bank—Market Area” and “—Competition.”

Our small size makes it more difficult for us to compete.

Our small asset size makes it more difficult to compete with other financial institutions that are larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. Because our principal source of income is the net interest income we earn on our loans and investments after deducting interest paid on deposits and other sources of funds, our ability to generate the revenues needed to cover our expenses and finance such investments is limited by the size of our loan and investment portfolios. Accordingly, we are not always able to offer new products and services as quickly as our competitors. Our lower earnings may also make it more difficult to offer competitive salaries and benefits. In addition, our smaller customer base may make it difficult to generate meaningful non-interest income from such activities as securities and insurance brokerage. Finally, as a smaller institution, we are disproportionately affected by the continually increasing costs of compliance with new banking and other regulations.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

Newton Federal Bank is subject to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency, and Community First Bancshares, Inc. will be subject to extensive regulation, supervision and examination by the Federal Reserve Board. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the federal deposit insurance fund and the depositors and borrowers of Newton Federal Bank, rather than for our stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firms. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has significantly changed the regulation of banks and savings institutions and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies have been given significant discretion in drafting the implementing rules and regulations, many of which are not in final form. As a result, we cannot at this time predict the full extent to which the Dodd-Frank Act will impact our business, operations or financial condition. However, compliance with the Dodd-Frank Act and its implementing regulations and policies has already resulted in changes to our business and operations, as well as additional costs, and has diverted management’s time from other business activities, all of which have adversely affected our financial condition and results of operations.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations.

Our ability to originate loans could be restricted by recently adopted federal regulations.

The Consumer Financial Protection Bureau has issued a rule intended to clarify how lenders can avoid legal liability under the Dodd-Frank Act, which holds lenders accountable for ensuring a borrower’s ability to repay a mortgage loan. Under the rule, loans that meet the “qualified mortgage” definition will be presumed to have complied with the new ability-to-repay standard. Under the rule, a “qualified mortgage” loan must not contain certain specified features, including:

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excessive upfront points and fees (those exceeding 3% of the total loan amount, less “bona fide discount points” for prime loans);

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interest-only payments;

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negative amortization; and

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terms of longer than 30 years.

Also, to qualify as a “qualified mortgage,” a loan must be made to a borrower whose total monthly debt-to-income ratio does not exceed 43%. Lenders must also verify and document the income and financial resources relied upon to qualify a borrower for the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments.

In addition, the Dodd-Frank Act requires the Consumer Finance Protection Bureau to adopt rules and publish forms that combine certain disclosures that consumers receive in connection with applying for and closing on certain mortgage loans under the Truth in Lending Act and the Real Estate Settlement Procedures Act. The Consumer Financial Protection Bureau has implemented a final rule to implement this requirement, and the final rule was effective in October 2015.

We face significant operational risks because the financial services business involves a high volume of transactions and increased reliance on technology, including risk of loss related to cyber-security breaches.

We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions and to collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others and concerning our own business, operations, plans and strategies. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, systems failures or interruptions, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards or customer attrition due to potential negative publicity. In addition, we outsource some of our data processing to certain third-party providers. If these third-party providers encounter difficulties, including as a result of cyber-attacks or information security breaches, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected.

In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, face regulatory action, civil litigation and/or suffer damage to our reputation.

We have become subject to more stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.

A final capital rule, effective for Newton Federal Bank on January 1, 2015, includes new minimum risk-based capital and leverage ratios and refines the definition of what constitutes “capital” for calculating these ratios. The new minimum capital requirements are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from prior rules); and (iv) a Tier 1 leverage ratio of 4%. The final rule also establishes a “capital conservation buffer” of 2.5%, and, when fully phased in, will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%; (ii) a Tier 1 to risk-based assets capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement is being phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the buffer amount.

We have analyzed the effects of these new capital requirements, and we believe that Newton Federal Bank meets all of these new requirements, including the full 2.5% capital conservation buffer as if it had been fully phased in.

The application of more stringent capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements. Furthermore, the imposition of liquidity requirements in connection with the implementation of the requirements of the Basel Committee on Banking Supervision (“Basel III”) could result in our having to lengthen the term of our funding sources, change our business models or increase our holdings of liquid assets. Specifically, following the completion of the stock offering, Newton Federal Bank’s ability to pay dividends to Community First Bancshares, Inc. will be limited if it does not have the capital conservation buffer required by the new capital rules, which may further limit Community First Bancshares, Inc.’s ability to pay dividends to stockholders. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.”

The cost of additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements will increase our expenses.

As a result of the completion of this offering, we will become a public reporting company. We expect that the obligations of being a public company, including the substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a stand-alone public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”) requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the Securities and Exchange Commission. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and stock price. In addition, we may need to hire additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired. These obligations will increase our operating expenses and could divert our management’s attention from our operations.

Changes in accounting standards could affect reported earnings.

The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively.

Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.

In preparing this prospectus as well as periodic reports we will be required to file under the Securities Exchange Act of 1934, including our consolidated financial statements, our management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses and our determinations with respect to amounts owed for income taxes.

Legal and regulatory proceedings and related matters could adversely affect us.

We have been and may in the future become involved in legal and regulatory proceedings. We consider most of the proceedings to be in the normal course of our business or typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation. There could be substantial cost and management diversion in such litigation and proceedings, and any adverse determination could have a materially adverse effect on our business, brand or image, or our financial condition and results of our operations.

We are subject to environmental liability risk associated with lending activities or properties we own.

A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for

remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected, by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected.

Risks Related to the Offering

The future price of our common stock may be less than the purchase price in the stock offering.

If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the $10.00 purchase price in the offering. In many cases, shares of common stock issued by newly converted savings institutions or mutual holding companies have traded below the initial offering price. The aggregate purchase price of the shares of common stock sold in the offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After the shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, the overall performance of the economy, changes in federal tax laws, new regulations, investor perceptions of Community First Bancshares, Inc. and the outlook for the financial services industry in general. Price fluctuations in our common stock may be unrelated to our operating performance.

The capital we raise in the stock offering may negatively impact our return on equity until we can fully implement our business plan. This could negatively affect the trading price of our shares of common stock.

Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. We expect our return on equity to remain relatively low until we are able to implement our business plan and leverage the additional capital we receive from the stock offering. Although we anticipate increasing net interest income using proceeds of the stock offering, our return on equity will be reduced by the capital raised in the stock offering, higher expenses from the costs of being a public company, and added expenses associated with our employee stock ownership plan and the stock-based benefit plans we intend to adopt. Until we can implement our business plan and increase our net interest income through investment of the proceeds of the offering, we expect our return on equity to remain relatively low compared to our peer group, which may reduce the value of our shares.

There may be a limited trading market in our common stock, which would hinder your ability to sell our common stock and may lower the market price of the stock.

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be quoted on the traded on the on the Nasdaq Capital Market under the symbol “CFBI” upon conclusion of the stock offering, subject to completion of the stock offering and compliance with certain conditions. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. In addition, our public “float,” which is the total number of our outstanding shares less the shares held by our employee stock ownership plan and our directors and executive officers, is likely to be quite limited. As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue. If you purchase shares of common stock, you may not be able to sell them at or above $10.00 per share. Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.

Our stock-based benefit plans will increase our costs, which will reduce our income.

We anticipate that our employee stock ownership plan will purchase an amount of shares of our common stock equal to up to 3.92% of our outstanding shares (including the shares held by Community First Bancshares, MHC), provided that, with approval of the Federal Reserve Board, our employee stock ownership plan may purchase some or all of such shares in the open market following the completion of the offering. If all shares are purchased in the open market at a price of $10.00 per share, the cost of acquiring the shares of common stock for the employee stock ownership plan will be between $1.7 million at the minimum of the offering range and $2.6 million at the adjusted maximum of the offering range. We will record annual employee stock ownership plan expenses in an amount equal to the fair value of shares of common stock committed to be released to employees. If shares of common stock appreciate in value over time, compensation expense relating to the employee stock ownership plan will increase.

We also intend to adopt one or more stock-based benefit plans after the offering, under which participants would be awarded shares of restricted common stock (at no cost to them) and/or options to purchase shares of our common stock. Under federal regulations, we are authorized to grant awards of stock or options under one or more stock-based benefit plans in an amount up to 25% of the shares of common stock held by persons other than Community First Bancshares, MHC. The number of shares of common stock or options granted under any initial stock-based benefit plan may not exceed 4.90% and 1.96%, respectively, of our total outstanding shares, including shares issued to Community First Bancshares, MHC.

The shares of restricted common stock granted under the stock-based benefit plans will be expensed by us over their vesting period based on the fair market value of the shares on the date they are awarded. If the shares of restricted common stock to be granted under the stock-based benefit plans are repurchased in the open market (rather than issued directly from authorized but unissued shares by Community First Bancshares, Inc.) and cost the same as the purchase price in the offering, the reduction to stockholders’ equity due to the plan would be between $850,000 at the minimum of the offering range and $1.3 million at the adjusted maximum of the offering range. To the extent we repurchase shares of common stock in the open market to fund the grants of shares of restricted common stock under the plan, and the price of such shares exceeds the offering price of $10.00 per share, the reduction to stockholders’ equity would exceed the range described above. Conversely, to the extent the price of such shares is below the offering price of $10.00 per share, the reduction to stockholders’ equity would be less than the range described above.

We will generally recognize as an expense in our income statement the grant-date fair value of stock options as such options vest. When we record an expense related to the grant of options using the fair value method, we will incur significant compensation and benefits expense. As discussed in the Management’s Discussion and Analysis section of this prospectus, and based on certain assumptions discussed therein, we estimate this annual expense would be approximately $140,000 on an after-tax basis, assuming we sell 3,102,585 shares in the offering.

The implementation of one or more stock-based benefit plans may dilute your ownership interest.

We intend to adopt one or more stock-based benefit plans following the reorganization and offering. The stock-based benefit plans will be funded through either open market purchases, if permitted, or from the issuance of authorized but unissued shares. Public stockholders would experience a reduction in ownership interest totaling 2.95% in the event newly issued shares are used to fund stock options and stock awards in an amount equal to 4.90% and 1.96%, respectively, of the total shares issued in the reorganization and offering (including shares issued to Community First Bancshares, MHC).

We have broad discretion in using the proceeds of the stock offering. Our failure to effectively deploy the net proceeds of the offering may have an adverse effect on our financial performance and the value of our common stock.

We intend to invest between $9.3 million and $14.8 million of the net proceeds of the offering in Newton Federal Bank. We also expect to use a portion of the net proceeds we retain to fund a loan for the purchase of shares of common stock in the offering by the employee stock ownership plan, and will contribute $100,000 to Community First Bancshares, MHC as a part of our formation of the mutual holding company. We may use the remaining net proceeds to invest in short-term and other investments, repurchase shares of common stock, pay dividends, or for other general corporate purposes. Newton Federal Bank intends to use the net proceeds it receives to fund new loans, enhance existing products and services, invest in securities, expand its banking franchise, or for other general corporate purposes. However, with the exception of the loan to the employee stock ownership plan and the contribution to Community First Bancshares, MHC, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have significant flexibility in determining the amount of the net proceeds we apply to different uses and the timing of such applications. Also, certain of these uses, such as any potential acquisition, paying dividends and repurchasing common stock, may require the approval of or non-objection from the Office of the Comptroller of the Currency or the Federal Reserve Board. We have not established a timetable for investing the net proceeds, and, accordingly, we may not invest the net proceeds at the time that is most beneficial to Community First Bancshares, Inc., Newton Federal Bank or the stockholders. For additional information see “How We Intend To Use The Proceeds From The Offering.”

Persons who purchase stock in the offering will own a minority of Community First Bancshares, Inc.’s common stock and will not be able to exercise voting control over most matters put to a vote of stockholders.

Public stockholders will own a minority of the outstanding shares of Community First Bancshares, Inc.’s common stock. As a result, stockholders other than Community First Bancshares, MHC will not be able to exercise voting control over most matters put to a vote of stockholders. Community First Bancshares, MHC will own a majority of Community First Bancshares, Inc.’s common stock after the offering and, through its board of directors, will be able to exercise voting control over most matters put to a vote of stockholders. The same directors and officers who manage Newton Federal Bank will also manage Community First Bancshares, Inc. and Community First Bancshares, MHC. Our board of directors, officers or Community First Bancshares, MHC may take action that the public stockholders believe to be contrary to their interests. The only matters as to which stockholders other than Community First Bancshares, MHC will be able to exercise voting control currently include any proposal to implement one or more stock-based benefit plans or a “second-step” conversion. In addition, Community First Bancshares, MHC may exercise its voting control to prevent a sale or merger transaction in which stockholders could receive a premium for their shares.

Our stock value may be negatively affected by our mutual holding company structure and federal regulations restricting takeovers.

Community First Bancshares, MHC, as the majority stockholder of Community First Bancshares, Inc., will be able to control the outcome of virtually all matters presented to stockholders for their approval, including a proposal to acquire Community First Bancshares, Inc. Accordingly, Community First Bancshares, MHC may prevent the sale of control or merger of Community First Bancshares, Inc. or its subsidiaries even if such a transaction were favored by a majority of the public stockholders of Community First Bancshares, Inc. The board of directors of Newton Federal Bank has decided to form a mutual holding company rather than undertake a standard conversion to stock form in part because the mutual holding company structure will allow our board of directors to control the future of Community First Bancshares, Inc. and its subsidiaries. Additionally, although federal regulations permit a mutual holding company to be acquired by a mutual institution in a remutualization transaction, such transactions may be unlikely because of the heightened regulatory scrutiny given to such transactions.

For three years following the offering, federal regulations prohibit any person from acquiring or offering to acquire more than 10% of our common stock without the prior written approval of the Federal Reserve Board and/or the Office of the Comptroller of the Currency. Moreover, current Federal Reserve Board and Office of the Comptroller of the Currency policy prohibits the acquisition of a mutual holding company subsidiary by any person or entity other than a mutual holding company or a mutual institution, and restricts the terms of permissible acquisitions. See “Restrictions on the Acquisition of Community First Bancshares, Inc. and Newton Federal Bank” for a discussion of applicable Federal Reserve Board Regulations regarding acquisitions.

The corporate governance provisions in our charter and bylaws may prevent or impede the holders of a minority of our common stock from obtaining representation on our board of directors and may also prevent or impede a change in control.

Provisions in our charter and bylaws may prevent or impede holders of a minority of our common stock from obtaining representation on our board of directors. For example, our board of directors will be divided into three classes with staggered three-year terms. A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur. Second, our charter provides that there will not be cumulative voting by stockholders for the election of our directors, which means that Community First Bancshares, MHC, as the holder of a majority of the shares eligible to be voted at a meeting of stockholders, may elect all of our directors to be elected at that meeting. Also, we have the ability to issue preferred stock with voting rights to third parties who may be friendly to our board of directors.

In addition, a section in each of Community First Bancshares, Inc.’s and Newton Federal Bank’s respective charters will generally provide that, for a period of five years from the closing of the offering, no person, other than Community First Bancshares, MHC, and, with respect to Newton Federal Bank, other than Community First Bancshares, MHC and Community First Bancshares, Inc., may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of Community First Bancshares, Inc. or Newton Federal Bank held by persons other than Community First Bancshares, MHC, and, with respect to Newton Federal Bank, other than Community First Bancshares, Inc., and that any shares acquired in excess of this limit would not be entitled to be voted and would not be counted as voting stock in connection with any matters submitted to the stockholders for a vote.

Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business.

Our management team has limited experience managing a publicly-traded company or complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition into a public company, which will be subject to significant regulatory oversight and reporting obligations under federal securities laws. In particular, these new obligations will require substantial attention from our management and may divert their attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.

You may not receive dividends on our common stock.

Holders of our common stock are only entitled to receive such dividends as our board of directors may declare out of funds legally available for such payments. The declaration and payment of future cash dividends will be subject to, among other things, regulatory restrictions, our then current and projected consolidated operating results, financial condition, tax considerations, future growth plans, general economic conditions, and other factors our board of directors deems relevant. In particular, we will be limited in our ability to pay dividends to our public stockholders only, under the regulations that have been implemented by the Federal Reserve Board following the enactment of the Dodd-Frank Act with regard to dividend waivers by mutual holding companies. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements”; “—Capital Distributions”; and “—Holding Company Regulation—Waivers of Dividends by Community First Bancshares, MHC.”

Community First Bancshares, Inc. will depend primarily upon the proceeds it retains from the offering as well as earnings of Newton Federal Bank to provide funds to pay dividends on our common stock. The payment of dividends by Newton Federal Bank also is subject to certain regulatory restrictions. Federal law generally prohibits a depository institution from making any capital distributions (including payment of a dividend) to its parent holding company if the depository institution would thereafter be or continue to be undercapitalized, and dividends by a depository institution are subject to additional limitations.

As a result, any payment of dividends in the future by Community First Bancshares, Inc. will depend, in large part, on Newton Federal Bank’s ability to satisfy these regulatory restrictions and its earnings, capital requirements, financial condition and other factors.

Under current law, if we declare dividends on our common stock, Community First Bancshares, MHC will be restricted from waiving the receipt of dividends.

Community First Bancshares, Inc.’s board of directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. If Community First Bancshares, Inc. pays dividends to its stockholders, it also will be required to pay dividends to Community First Bancshares, MHC, unless Community First Bancshares, MHC is permitted by the Federal Reserve Board to waive the receipt of dividends. The Federal Reserve Board’s current regulations significantly restrict the ability of newly organized mutual holding companies to waive dividends declared by their subsidiaries. Accordingly, because dividends would likely be required to be paid to Community First Bancshares, MHC along with all other stockholders, the amount of dividends available for all other stockholders will be less than if Community First Bancshares, MHC were to waive the receipt of dividends.

You may not be able to sell your shares of common stock until you have received a statement reflecting ownership of shares, which will affect your ability to take advantage of changes in the stock price immediately following the offering.

A statement reflecting ownership of shares of common stock purchased in the offering may not be delivered for several days after the completion of the offering and the commencement of trading in the common stock. Your ability to sell the shares of common stock before receiving your ownership statement will depend on arrangements you may make with a brokerage firm, and you may not be able to sell your shares of common stock until you have received your ownership statement. As a result, you may not be able to take advantage of fluctuations in the price of the common stock immediately following the offering.

We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

We are an emerging growth company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, reduced disclosure obligations

regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, we also will not be subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors review and attest as to the effectiveness of our internal control over financial reporting. We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

We could remain an “emerging growth company” for up to five years, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

As a result, our stockholders may not have access to certain information they may deem important, and investors may find our common stock less attractive if we choose to rely on these exemptions. This could result in a less active trading market for our common stock and the price of our common stock may be more volatile.

SELECTED FINANCIAL AND OTHER DATA

The summary information presented below at each date or for each of the periods presented is derived in part from the financial statements of Newton Federal Bank. The financial condition data at September 30, 2016 and 2015, and the operating data for the years ended September 30, 2016 and 2015 were derived from the audited financial statements of Newton Federal Bank included elsewhere in this prospectus. The information at and for the years ended September 30, 2014, 2013 and 2012 was derived in part from audited financial statements that are not included in this prospectus. The following information is only a summary, and should be read in conjunction with our financial statements and notes beginning on page F-1 of this prospectus.


	At September 30,
	2016		2015		2014		2013		2012
	(In thousands)
Selected Financial Condition Data:
Total assets	$	232,832	$	226,337	$	227,089	$	222,328	$	229,519
Cash and cash equivalents		25,693		38,494		34,140		29,316		27,823
Securities held to maturity		7,499		7,492		6,986		5,431		7,065
Federal Home Loan Bank stock, at cost		205		202		198		276		862
Loans receivable, net		190,050		169,798		174,132		180,006		183,958
Other real estate owned		—		532		1,129		1,880		4,121
Premises and equipment, net		4,325		4,261		4,338		4,394		4,475
Deposits		181,699		176,687		179,264		183,763		191,389
Borrowings		—		—		—		—		—
Retained earnings		45,081		43,924		42,311		34,058		34,351


	For the Years Ended September 30,
	2016			2015			2014		2013			2012
	(In thousands)
Selected Operating Data:
Interest income	$	11,248		$	11,045		$	11,571	$	11,401		$	12,571
Interest expense		1,415			1,813			2,156		2,700			3,311

Net interest income		9,833			9,232			9,415		8,701			9,260
Provision for loan losses		—			—			—		3,147			9,017

Net interest income after provision for loan losses		9,833			9,232			9,415		5,554			243
Non-interest income		1,185			882			871		876			945
Non-interest expenses		9,164			7,621			6,969		6,723			7,259

Income (loss) before income tax (expense) benefit		1,854			2,493			3,317		(293	)		(6,071	)
Income tax (expense) benefit		(697	)		(879	)		4,935		—			(349	)

Net income (loss)	$	1,157		$	1,614		$	8,252	$	(293	)	$	(6,420	)


	At or For the Years Ended September 30,
	2016			2015			2014			2013			2012
Performance Ratios:
Return (loss) on average assets		0.51	%		0.72	%		3.71	%		(0.13	)%		(2.68	)%
Return (loss) on average equity		2.60	%		3.83	%		23.39	%		(0.88	)%		(15.70	)%
Interest rate spread (1)		4.15	%		4.04	%		4.04	%		3.63	%		3.74	%
Net interest margin (2)		4.39	%		4.32	%		4.32	%		3.93	%		4.06	%
Non-interest expense to average assets		4.00	%		3.41	%		3.14	%		2.96	%		3.03	%
Efficiency ratio (3)		83.17	%		75.35	%		67.75	%		70.20	%		71.13	%
Average interest-earning assets to average interest-bearing liabilities		138.46	%		133.81	%		129.08	%		124.02	%		122.05	%
Average equity to average assets		19.41	%		18.86	%		15.87	%		14.68	%		17.04	%
Capital Ratios:
Average equity to average assets		19.41	%		18.86	%		15.87	%		14.68	%		17.04	%
Total capital to risk weighted assets		32.13	%		36.67	%		33.95	%		29.34	%		28.54	%
Tier 1 capital to risk weighted assets		30.86	%		35.38	%		32.66	%		28.04	%		27.25	%
Common equity tier 1 capital to risk weighted assets		30.86	%		35.38	%		N/A			N/A			N/A
Tier 1 capital to average assets		19.32	%		19.37	%		17.25	%		15.28	%		14.85	%
Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans		2.22	%		3.34	%		3.17	%		3.20	%		3.00	%
Allowance for loan losses as a percentage of non-performing loans		132.87	%		229.18	%		187.39	%		78.44	%		43.90	%
Net (charge-offs) recoveries to average outstanding loans during the year		(0.86	)%		0.09	%		(0.13	)%		(1.56	)%		(4.24	)%
Non-performing loans as a percentage of total loans		1.67	%		1.46	%		1.69	%		4.08	%		6.84	%
Non-performing loans as a percentage of total assets		1.39	%		1.13	%		1.34	%		3.41	%		5.65	%
Total non-performing assets as a percentage of total assets		1.39	%		1.37	%		1.84	%		4.26	%		8.25	%
Other:
Number of offices		3			3			3			3			3
Number of full-time employees		65			63			59			56			55
Number of part-time employees		2			1			1			1			1

(1)	Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(2)	Represents net interest income as a percentage of average interest-earning assets.

(3)	Represents noninterest expense divided by the sum of net interest income and noninterest income.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

•

statements of our goals, intentions and expectations;

•

statements regarding our business plans, prospects, growth and operating strategies;

•

statements regarding the quality of our loan and investment portfolios; and

•

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this prospectus.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•

general economic conditions, either nationally or in our market areas, that are worse than expected;

•

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

•

our ability to access cost-effective funding;

•

fluctuations in real estate values and both residential and commercial real estate market conditions;

•

demand for loans and deposits in our market area;

•

our ability to implement and change our business strategies;

•

competition among depository and other financial institutions;

•

inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

•

adverse changes in the securities or secondary mortgage markets;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;

•

the impact of the Dodd-Frank Act and the implementing regulations;

•

changes in the quality or composition of our loan or investment portfolios;

•

technological changes that may be more difficult or expensive than expected;

•

the inability of third party providers to perform as expected;

•

our ability to manage market risk, credit risk and operational risk in the current economic environment;

•

our ability to enter new markets successfully and capitalize on growth opportunities;

•

our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

•

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 or the Public Company Accounting Oversight Board;

•

our ability to retain key employees;

•

our compensation expense associated with equity allocated or awarded to our employees; and

•

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please see “Risk Factors” beginning on page 19.

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

Although we will not be able to determine the amount of actual net proceeds we will receive from the sale of shares of common stock until the offering is completed, we anticipate that the net proceeds will be between $18.7 million and $25.7 million, or $29.7 million if the offering is increased by 15%, assuming in each case all shares are sold in the subscription offering and the community offering.

Community First Bancshares, Inc. intends to distribute the net proceeds from the offering as follows:


	Based Upon the Sale at $10.00 Per Share of
	1,994,100 Shares at Minimum of Offering Range						2,346,000 Shares at Midpoint of Offering Range						2,697,900 Shares at Maximum of Offering Range						3,102,585 Shares at Adjusted Maximum of Offering Range (1)
	Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds
	(Dollars in thousands)
Offering proceeds	$	19,941					$	23,460					$	26,979					$	31,026
Less: offering expenses		(1,262	)					(1,295	)					(1,327	)					(1,364	)

Net offering proceeds	$	18,679			100.0	%	$	22,165			100.0	%	$	25,652			100.0	%	$	29,662			100.0	%

Less:
Amount contributed to Community First Bancshares, MHC	$	100			0.5	%	$	100			0.5	%	$	100			0.4	%	$	100			0.3	%
Proceeds contributed to Newton Federal Bank	$	9,340			50.0	%	$	11,083			50.0	%	$	12,826			50.0	%	$	14,831			50.0	%
Proceeds used for loan to employee stock ownership plan (2)	$	1,699			9.1	%	$	1,999			9.0	%	$	2,299			9.0	%	$	2,644			8.9	%
Proceeds retained by Community First Bancshares, Inc.	$	7,540			40.4	%	$	8,983			40.5	%	$	10,427			40.6	%	$	12,087			40.7	%

(1)	As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)

The employee stock ownership plan will purchase 3.92% of our outstanding shares (including shares issued to Community First Bancshares, MHC). The loan will be repaid principally through Newton Federal Bank’s contribution to the employee stock ownership plan and dividends payable on common stock held by the employee stock ownership plan over the anticipated 25-year term of the loan. The interest rate for the employee stock ownership plan loan is expected to be equal to the prime rate, as published in The Wall Street Journal , on the closing date of the offering.

The net proceeds may vary because total expenses relating to the reorganization and offering may be more or less than our estimates. For example, our expenses would increase if a syndicated community offering were used to sell shares of common stock not purchased in the subscription offering and the community offering. See “The Reorganization and Offering—Plan of Distribution and Marketing Arrangements” for a discussion of fees to be paid in the event that shares are sold in a syndicated community offering. Payments for shares made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of Newton Federal Bank’s deposits. Newton Federal Bank will receive at least 50% of the net proceeds of the offering.

Use of Proceeds Retained by Community First Bancshares, Inc.

Community First Bancshares, Inc.:

•

intends to initially invest the proceeds that it retains in interest earning deposits and in securities, including securities issued by the U. S. government and its agencies or government sponsored enterprises, mortgage-backed securities, and other securities as permitted by our investment policy. See “Business of Newton Federal Bank—Investment Activities;”

•

may, in the future, use a portion of the proceeds that it retains to pay cash dividends or to repurchase shares of our common stock, although under current federal regulations we may not repurchase shares of our common stock during the first year following the reorganization and offering, except to fund stock-based benefit plans or when extraordinary circumstances exist with prior regulatory approval;

•

may, in the future, use a portion of the proceeds that it retains to finance acquisitions of financial institutions or other financial services businesses, or to expand through de novo branching, although no specific transactions are being considered at this time and no specific expansion is being considered at this time; and

•

expects to use the proceeds that it retains from time to time for other general corporate purposes.

The use of the proceeds may change based on changes in interest rates, equity markets, laws and regulations affecting the financial services industry, our relative position in the financial services industry, the attractiveness of potential acquisitions to expand our operations, and overall market conditions.

Use of Proceeds Received by Newton Federal Bank

Newton Federal Bank:

•

intends to use a portion of the proceeds received to increase our lending capacity by providing us with additional capital to support new loans and higher lending limits;

•

intends to use a portion of the proceeds received to fund new residential mortgage loans, commercial real estate and commercial and industrial loans and, to a lesser extent, other loans, in accordance with our business plan and lending guidelines. See “Business of Newton Federal Bank—Lending Activities;”

•

may use a portion of the proceeds received to support new loan, deposit and other financial products and services if our board of directors determines that such products will help us compete more effectively in our market area or increase our financial performance;

•

may invest a portion of the proceeds received in securities issued by the U. S. government and its agencies or government sponsored enterprises, mortgage-backed securities, and other securities as permitted by our investment policy. See “Business of Newton Federal Bank—Investment Activities;”

•

may, in the future, use a portion of the proceeds received to expand our retail banking franchise, by acquiring other financial institutions, branch offices or other financial services businesses, or establishing new branches or loan production offices, although no specific transactions are being considered at this time; and

•

expects to use the proceeds received from time to time for other general corporate purposes.

OUR POLICY REGARDING DIVIDENDS

The Federal Reserve Board has issued a policy statement providing that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition. Regulatory guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate or earnings retention is inconsistent with its capital needs and overall financial condition. No decision has been made with respect to the payment of dividends. In determining whether to pay a cash dividend and the amount of such cash dividend, the board of directors is expected to take into account a number of factors, including regulatory capital requirements, our financial condition and results of operations, other uses of funds for the long-term value of stockholders, tax considerations, statutory and regulatory limitations and general economic conditions. In addition, Newton Federal Bank’s ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to stockholders. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.” No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Office of the Comptroller of the Currency, may be paid in addition to, or in lieu of, regular cash dividends.

We will file a consolidated federal tax return with Newton Federal Bank. Accordingly, it is anticipated that any cash distributions that we make to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal and state tax purposes. Additionally, pursuant to regulations of the Federal Reserve Board, during the three-year period following the stock offering, we will not take any action to declare an extraordinary dividend to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

Pursuant to our charter, we are authorized to issue preferred stock. If we issue preferred stock, the holders thereof may have a priority over the holders of our shares of common stock with respect to the payment of dividends. For a further discussion concerning the payment of dividends on our shares of common stock, see “Description of Capital Stock of Community First Bancshares, Inc.—Common Stock.” Dividends we can declare and pay will depend, in part, upon receipt of dividends from Newton Federal Bank, because initially we will have no source of income other than dividends from Newton Federal Bank and earnings from the investment of the net proceeds from the sale of shares of common stock retained by Community First Bancshares, Inc. and interest payments received in connection with the loan to the employee stock ownership plan. Regulations of the Federal Reserve Board and the Office of the Comptroller of the Currency impose limitations on “capital distributions” by savings institutions. See “Regulation and Supervision—Federal Banking Regulation—Capital Distributions.”

Any payment of dividends by Newton Federal Bank to us that would be deemed to be drawn out of Newton Federal Bank’s bad debt reserves, if any, would require a payment of taxes at the then-current tax rate by Newton Federal Bank on the amount of earnings deemed to be removed from the reserves for such distribution. Newton Federal Bank does not intend to make any distribution to us that would create such a federal tax liability. See “Taxation.”

If Community First Bancshares, Inc. pays dividends to its stockholders, it will likely pay dividends to Community First Bancshares, MHC. The Federal Reserve Board’s current regulations significantly restrict the ability of newly organized mutual holding companies to waive dividends declared by their subsidiaries. Accordingly, we do not currently anticipate that Community First Bancshares, MHC will waive dividends paid by Community First Bancshares, Inc. See “Risk Factors—Risks Related to the Offering—Under current law, if we declare dividends on our common stock, Community First Bancshares, MHC will be restricted from waiving the receipt of dividends.”

MARKET FOR THE COMMON STOCK

Community First Bancshares, Inc. is a to-be-formed company and has never issued capital stock. Newton Federal Bank, as a mutual institution, has never issued capital stock. Accordingly, there is no established market for our common stock. Community First Bancshares, Inc. expects that its common stock will be traded on the Nasdaq Capital Market under the symbol “CFBI”.

The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share. Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there may be a limited trading market in the common stock. This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.

HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

At September 30, 2016, Newton Federal Bank exceeded all of the applicable regulatory capital requirements and was considered “well capitalized.” The table below sets forth the historical equity capital and regulatory capital of Newton Federal Bank at September 30, 2016, and the pro forma equity capital and regulatory capital of Newton Federal Bank after giving effect to the sale of shares of common stock at $10.00 per share. The table assumes the receipt by Newton Federal Bank of 50% of the net proceeds. See “How We Intend to Use the Proceeds from the Offering.”


						Pro Forma at September 30, 2016, Based Upon the Sale in the Offering of (1)
	Newton Federal Bank Historical at September 30, 2016					1,994,100 Shares						2,346,000 Shares						2,697,900 Shares						3,102,585 Shares (2)
	Amount		Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)
	(Dollars in thousands)
Equity	$	45,081		19.36	%	$	51,872			21.42	%	$	53,165			21.80	%	$	54,458			22.17	%	$	55,946			22.59	%
Tier 1 leverage capital	$	44,801		19.32	%	$	51,592			21.39	%	$	52,885			21.77	%	$	54,178			22.14	%	$	55,666			22.57	%
Tier 1 leverage capital requirement		11,593		5.00			12,060			5.00			12,147			5.00			12,234			5.00			12,334			5.00

Excess	$	33,208		14.32	%	$	39,532			16.39	%	$	40,738			16.77	%	$	41,944			17.14	%	$	43,332			17.57	%

Tier 1 risk-based capital (4)	$	44,801		30.86	%	$	51,592			35.09	%	$	52,885			35.88	%	$	54,178			36.67	%	$	55,666			37.58	%
Tier 1 risk-based requirement		11,614		8.00			11,763			8.00			11,791			8.00			11,819			8.00			11,851			8.00

Excess	$	33,187		22.86	%	$	39,829			27.09	%	$	41,094			27.88	%	$	42,359			28.67	%	$	43,815			29.58	%

Total risk-based capital (4)	$	46,647		32.13	%	$	53,438			36.34	%	$	54,731			37.13	%	$	56,024			37.92	%	$	57,512			38.82	%
Total risk-based requirement		14,517		10.00			14,704			10.00			14,739			10.00			14,774			10.00			14,814			10.00

Excess	$	32,130		22.13	%	$	38,734			26.34	%	$	39,992			27.13	%	$	41,250			27.92	%	$	42,698			28.82	%

Common equity tier 1risk-based capital (4)	$	44,801		30.86	%	$	51,592			35.09	%	$	52,885			35.88	%	$	54,178			36.67	%	$	55,666			37.58	%
Common equity tier 1 risk-based requirement		9,436		6.50			9,558			6.50			9,580			6.50			9,603			6.50			9,629			6.50

Excess	$	35,365		24.36	%	$	42,034			28.59	%	$	43,305			29.38	%	$	44,575			30.17	%	$	46,037			31.08	%

Reconciliation of capital infused into Newton Federal Bank:
Net offering proceeds						$	18,679					$	22,165					$	25,652					$	29,662

Proceeds to Newton Federal Bank						$	9,340					$	11,083					$	12,826					$	14,831
Proceeds to Community First Bancshares, MHC							—						—						—						—
Less: Common stock acquired by employee stock ownership plan							(1,699	)					(1,999	)					(2,299	)					(2,644	)
Less: Common stock acquired by stock-based benefit plans							(850	)					(1,000	)					(1,150	)					(1,322	)

Pro forma increase						$	6,791					$	8,084					$	9,377					$	10,865

(1)

Pro forma capital levels assume that the employee stock ownership plan purchases 3.92% of our total outstanding shares (including shares issued to Community First Bancshares, MHC) with funds we lend and that one or more stock-based benefit plans purchases 1.96% of our total outstanding shares (including shares issued to Community First Bancshares, MHC) for restricted stock awards. Pro forma capital calculated under generally accepted accounting principles (“GAAP”) and regulatory capital have been reduced by the amount required to fund these plans. 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 offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(3)	Tier 1 leverage 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)	Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk weighting.

CAPITALIZATION

The following table presents the historical capitalization of Newton Federal Bank at September 30, 2016, and the pro forma consolidated capitalization of Community First Bancshares, Inc. after giving effect to the offering, based upon the sale of the number of shares of common stock indicated in the table and the other assumptions set forth under “Pro Forma Data.”


	Newton Federal Bank Historical Capitalization at September 30, 2016			Pro Forma Consolidated Capitalization at September 30, 2016 of Community First Bancshares, Inc. Based Upon the Sale for $10.00 Per Share of
				1,994,100 Shares			2,346,000 Shares			2,697,900 Shares			3,102,585 Shares (1)
	(Dollars in thousands)
Deposits (2)	$	181,699		$	181,699		$	181,699		$	181,699		$	181,699
Borrowings		—			—			—			—			—

Total interest-bearing liabilities	$	181,699		$	181,699		$	181,699		$	181,699		$	181,699

Stockholders’ equity:
Preferred Stock, $0.01 par value per share: 1,000,000 shares authorized (post offering); none to be issued	$	—		$	—		$	—		$	—		$	—
Common Stock, $0.01 par value per share:
19,000,000 shares authorized (post offering); shares to be issued as reflected (3)		—			43			51			59			67
Additional paid-in capital (3)		—			18,636			22,114			25,593			29,595
Retained earnings (4)		45,081			45,081			45,081			45,081			45,081
Accumulated other comprehensive income		—			—			—			—			—
Less:
Assets retained by Community First Bancshares, MHC (5)		—			(100	)		(100	)		(100	)		(100	)
Common stock acquired by employee stock ownership plan (6)		—			(1,699	)		(1,999	)		(2,299	)		(2,644	)
Common stock acquired by stock-based benefit plans (7)		—			(850	)		(1,000	)		(1,150	)		(1,322	)

Total stockholders’ equity	$	45,081		$	61,111		$	64,147		$	67,184		$	70,677

Total tangible stockholders’ equity	$	45,081		$	61,111		$	64,147		$	67,184		$	70,677

Pro forma shares outstanding:
Shares offered for sale		—			1,994,100			2,346,000			2,697,900			3,102,585
Shares issued to Community First Bancshares, MHC		—			2,340,900			2,754,000			3,167,100			3,642,165
Total shares outstanding		—			4,335,000			5,100,000			5,865,000			6,744,750
Total stockholders’ equity as a percentage of pro forma total assets		19.36	%		24.56	%		25.47	%		26.35	%		27.35	%

(1)

As adjusted to give effect to a 15% increase in the number of shares of common stock outstanding after the offering, which could occur due to an increase in the maximum of the independent valuation to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)	Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the offering. Such withdrawals would reduce pro forma deposits by the amount of such withdrawals.

(3)

The sum of the par value and additional paid-in capital equals the net offering proceeds. No effect has been given to the issuance of additional shares of common stock pursuant to stock options under one or more stock-based benefit plans that Community First Bancshares, Inc. expects to adopt. The plan of reorganization permits Community First Bancshares, Inc. to adopt one or more stock benefit plans, subject to stockholder approval, in an amount up to 25% of the shares of common stock held by persons other than Community First Bancshares, MHC.

(4)	The retained earnings of Newton Federal Bank will be substantially restricted after the offering. See “Regulation and Supervision—Federal Banking Regulation—Capital Distributions.”

(5)	Pro forma stockholders’ equity reflects a $100,000 initial capitalization of Community First Bancshares, MHC.

(6)

Assumes that 3.92% of the shares of common stock outstanding following the reorganization and offering (including shares issued to Community First Bancshares, MHC) will be purchased by the employee stock ownership plan at a price of $10.00 per share and that the funds used to acquire the employee stock ownership plan shares will be borrowed from Community First Bancshares, Inc. The common stock acquired by the employee stock ownership plan is reflected as a reduction of stockholders’ equity. Newton Federal Bank will provide the funds to repay the employee stock ownership plan loan. See “Management—Benefit Plans and Agreements.”

(footnotes continued on following page)

(continued from previous page)

(7)

Assumes that subsequent to the offering, 1.96% of the shares of common stock issued in the reorganization and offering (including shares of common stock issued to Community First Bancshares, MHC) are purchased by Community First Bancshares, Inc. for stock awards under one or more stock-based benefit plans in the open market. The shares of common stock to be purchased by the stock-based benefit plans are reflected as a reduction of stockholders’ equity. See “Pro Forma Data” and “Management.” The plan of reorganization permits Community First Bancshares, Inc. to adopt one or more stock-based benefit plans that award stock or stock options, in an aggregate amount up to 25% of the shares of common stock held by persons other than Community First Bancshares, MHC. The stock-based benefit plans will not be implemented for at least six months after the reorganization and offering and, if required under applicable regulations, until they have been approved by stockholders.

PRO FORMA DATA

The following tables summarize historical data of Newton Federal Bank and pro forma data of Community First Bancshares, Inc. at and for the year ended September 30, 2016. This information is based on assumptions set forth below and in the table and related footnotes, and should not be used as a basis for projections of market value of the shares of common stock following the conversion.

The net proceeds disclosed in the tables are based upon the following assumptions:

(i)

all of the shares of common stock will be sold in the subscription and community offerings;

(ii)

our employees, directors and their associates will purchase shares of our common stock;

(iii)

our employee stock ownership plan will purchase an amount of shares equal to 3.92% of our outstanding shares, including shares held by Community First Bancshares, MHC, with a loan from Community First Bancshares, Inc. The loan will be repaid in substantially equal principal payments over a period of 25 years. Interest income that we earn on the loan will offset the interest paid by Newton Federal Bank;

(iv)

we will pay BSP Securities, LLC a fee of 1.0% with respect to shares sold in the subscription and community offerings, and we will reimburse BSP Securities, LLC for its reasonable expenses associated with its marketing effort in the subscription and community offerings in an amount not to exceed $10,000 and for attorney’s fees and expenses not to exceed $85,000; and

(v)

total expenses of the offering, other than the fees, commissions and expense reimbursements to be paid to BSP Securities, LLC and other broker-dealers, will be $975,000.

We calculated the pro forma consolidated net income of Community First Bancshares, Inc. for the year as if the shares of common stock had been sold at the beginning of the year and the net proceeds had been invested at 1.14% (0.71% on an after-tax basis), which is equal to the yield on the five-year U.S. Treasury Note as of September 30, 2016. In light of current interest rates, we consider this rate to more accurately reflect the pro forma reinvestment rate than the arithmetic average method, which assumes reinvestment of the net proceeds at a rate equal to the average of the yield on interest-earning assets and the cost of deposits for those periods.

We further believe that the reinvestment rate is factually supportable because:

•

the yield on the U.S. Treasury Note can be determined and/or estimated from third-party sources; 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.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of net income and stockholders’ equity by the indicated number of shares of common stock. For pro calculations, we adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for each period as if the common stock was outstanding at the beginning of the periods, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma tables give effect to the implementation of one or more stock-based benefit plans. We have assumed that the stock-based benefit plans will acquire an amount of common stock equal to 1.96% of our outstanding shares of common stock (including shares issued to Community First Bancshares, MHC) at the same price for which they were sold in the offering. We assume that shares of common stock are granted under the plan

in awards that vest over a five-year period. The plan of reorganization provides that we may grant awards of restricted stock under one or more stock benefit plans in an aggregate amount up to 25% of the shares of common stock held by persons other than Community First Bancshares, MHC. However, any awards of restricted common stock in excess of 1.96% of the outstanding shares, including shares issued to Community First Bancshares, MHC, currently would require prior approval of federal regulators.

We have assumed that the stock-based benefit plans will grant options to acquire common stock equal to 4.90% of our outstanding shares of common stock (including shares of common stock issued to Community First Bancshares, MHC). In preparing the following tables, we also assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $2.34 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model incorporated an estimated volatility rate of 12.81% for the common stock based on an index of publicly traded thrifts, no dividend yield, an expected option life of 10 years and a risk free interest rate of 1.60%. The plan of reorganization provides that we may grant awards of stock options under one or more stock benefit plans in an amount up to 25% of the shares of common stock held by persons other than Community First Bancshares, MHC. However, any awards of options in excess of 4.96% of our outstanding shares, including shares issued to Community First Bancshares, MHC, currently would require prior approval of federal regulators.

As disclosed under “How We Intend to Use the Proceeds from the Offering,” Community First Bancshares, Inc. intends to contribute 50% of the net proceeds from the offering to Newton Federal Bank, will contribute $100,000 to Community First Bancshares, MHC and will retain the remainder of the net proceeds from the offering. Community First Bancshares, Inc. will use a portion of the proceeds it retains for the purpose of making a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.

The pro forma tables do not give effect to:

•

withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the offering;

•

Community First Bancshares, Inc.’s results of operations after the offering;

•

increased fees and expenses that we would pay BSP Securities, LLC and other broker-dealers if we conducted a syndicated offering; or

•

changes in the market price of the shares of common stock after the offering.

The following pro forma information may not represent the financial effects of the offering at the date on which the offering actually occurs and you should not use the tables to indicate future results of operations. Pro forma stockholders’ equity represents the difference between the stated amounts of assets and liabilities of Community First Bancshares, Inc., computed in accordance with U.S. generally accepted accounting principles. We did not increase or decrease stockholders’ equity to reflect the difference between the carrying value of loans and other assets and their market value. Pro forma stockholders’ equity is not intended to represent the fair market value of the common stock, and may be different than the amounts that would be available for distribution to stockholders if we were liquidated. Pro forma stockholders’ equity does not give effect to the impact of tax bad debt reserves in the event we were to be liquidated. We had no intangible assets at September 30, 2016.


	At or For the Year Ended September 30, 2016 Based Upon the Sale at $10.00 Per Share of
	1,994,100 Shares at Minimum of Offering Range			2,346,000 Shares at Midpoint of Offering Range			2,697,900 Shares at Maximum of Offering Range			3,102,585 Shares at Adjusted Maximum of Offering Range (1)
	(Dollars in thousands, except per share amounts)
Gross proceeds of the offering	$	19,941		$	23,460		$	26,979		$	31,026
Market value of shares issued to Community First Bancshares, MHC		23,409			27,540			31,671			36,422

Market value of Community First Bancshares, Inc.	$	43,350		$	51,000		$	58,650		$	67,448

Gross proceeds of the offering	$	19,941		$	23,460		$	26,979		$	31,026
Expenses		(1,262	)		(1,295	)		(1,327	)		(1,364	)

Estimated net proceeds		18,679			22,165			25,652			29,662
Community First Bancshares, MHC capitalization		(100	)		(100	)		(100	)		(100	)
Common stock acquired by employee stock ownership plan (2)		(1,699	)		(1,999	)		(2,299	)		(2,644	)
Common stock acquired by stock-based benefit plans (3)		(850	)		(1,000	)		(1,150	)		(1,322	)

Estimated net proceeds as adjusted	$	16,030		$	19,066		$	22,103		$	25,596

For the year ended September 30, 2016
Consolidated net income:
Historical (4)	$	1,157		$	1,157		$	1,157		$	1,157
Income on adjusted net proceeds		113			135			156			181
Employee stock ownership plan (2)		(42	)		(50	)		(57	)		(66	)
Shares granted under stock-based benefit plans (3)		(105	)		(124	)		(143	)		(164	)
Options granted under stock-based benefit plans (5)		(90	)		(106	)		(122	)		(140	)

Pro forma net income	$	1,033		$	1,012		$	991		$	968

Earnings per share:
Historical	$	0.28		$	0.24		$	0.20		$	0.18
Income on net proceeds		0.03			0.03			0.03			0.03
Employee stock ownership plan (2)		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Shares granted under stock-based benefit plans (3)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Options granted under stock-based benefit plans (5)		(0.02	)		(0.02	)		(0.02	)		(0.02	)

Pro forma earnings per share	$	0.25		$	0.21		$	0.17		$	0.15

Offering price to pro forma earnings per share		40.00	x		47.62	x		58.82	x		66.67	x
Number of shares used in earnings per share calculations		4,171,865			4,908,077			5,644,288			6,490,932
At September 30, 2016
Stockholders’ equity:
Historical (4)	$	45,081		$	45,081		$	45,081		$	45,081
Estimated net proceeds		18,679			22,165			25,652			29,662
Capitalization of Community First Bancshares, MHC		(100	)		(100	)		(100	)		(100	)
Common stock acquired by employee stock ownership plan (2)		(1,699	)		(1,999	)		(2,299	)		(2,644	)
Common stock acquired by stock-based benefit plans (3)		(850	)		(1,000	)		(1,150	)		(1,322	)

Pro forma stockholders’ equity (6)	$	61,111		$	64,147		$	67,184		$	70,677

Pro forma tangible stockholders’ equity	$	61,111		$	64,147		$	67,184		$	70,677

Stockholders’ equity per share:
Historical	$	10.40		$	8.84		$	7.69		$	6.68
Estimated net proceeds		4.31			4.35			4.37			4.40
Capitalization of Community First Bancshares, MHC		(0.02	)		(0.02	)		(0.02	)		(0.01	)
Common stock acquired by employee stock ownership plan (2)		(0.39	)		(0.39	)		(0.39	)		(0.39	)
Common stock acquired by stock-based benefit plans (3)		(0.20	)		(0.20	)		(0.20	)		(0.20	)

Pro forma stockholders’ equity per share (3)(6)	$	14.10		$	12.58		$	11.45		$	10.48

Pro forma tangible stockholders’ equity per share	$	14.10		$	12.58		$	11.45		$	10.48

Offering price as a percentage of pro forma stockholders’ equity per share		70.92	%		79.49	%		87.34	%		95.42	%
Offering price as a percentage of pro forma tangible stockholders’ equity per share		70.92	%		79.49	%		87.34	%		95.42	%
Number of shares outstanding for pro forma equity per share calculations		4,335,000			5,100,000			5,865,000			6,744,750

(footnotes begin on following page)

(1)	As adjusted to give effect to a 15% increase in the number of shares outstanding after the offering, which could occur due to an increase in the maximum of the independent valuation as a result of demand for the shares or changes in market conditions following the commencement of the offering.

(2)

It is assumed that 3.92% of the shares outstanding following the offering will be purchased by the employee stock ownership plan at a price of $10.00 per share. For purposes of this table, the funds used to acquire such shares are assumed to have been borrowed by the employee stock ownership plan from Community First Bancshares, Inc. The amount to be borrowed is reflected as a reduction of stockholders’ equity. Newton Federal Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the principal and interest requirement of the debt. Newton Federal Bank’s total annual payment of the employee stock ownership plan debt is based upon 15 equal annual installments of principal and interest. The pro forma net earnings information makes the following assumptions: (i) Newton Federal Bank’s contribution to the employee stock ownership plan is equivalent to the debt service requirement for the period presented and was made at the end of the period; (ii) the employee stock ownership plan acquires 169,932, 199,920, 229,908 and 264,394 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range; (iii) 6,797, 7,997, 9,196 and 10,576 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range (based on a 25-year loan term), were committed to be released during the year ended September 30, 2016 at an average fair value equal to the price for which the shares are sold in the offering; and (iv) only the employee stock ownership plan shares committed to be released were considered outstanding for purposes of the net earnings per share calculations.

(3)

Gives effect to one or more stock-based benefit plans expected to be adopted following the offering. We have assumed that these plans acquire a number of shares of common stock equal to 1.96% of the shares issued in the reorganization and offering (including shares issued to Community First Bancshares, MHC) either through open market purchases or from authorized but unissued shares of common stock or treasury stock of Community First Bancshares, Inc., if any. Funds used by the stock-based benefit plans to purchase the shares will be contributed to the plan by Community First Bancshares, Inc. In calculating the pro forma effect of the stock-based benefit plans, it is assumed that the shares were acquired by the plan in open market purchases at the beginning of the period presented for a purchase price equal to the price for which the shares are sold in the offering, and that 20% of the amount contributed was an amortized expense (based upon a five-year vesting period) during the year ended September 30, 2016. The actual purchase price of the shares granted under the stock-based benefit plans may not be equal to the subscription price of $10.00 per share. If shares are acquired from the issuance of authorized but unissued shares of common stock of Community First Bancshares, Inc., there would be a dilutive effect of up to 4.09% on the ownership interest of persons who purchase common stock in the offering. The above table shows pro forma net income per share and pro forma stockholders’ equity per share, assuming all the shares to fund the stock-based benefit plans are obtained from authorized but unissued shares.

(4)	Derived from Newton Federal Bank’s audited September 30, 2016 financial statements included elsewhere in this prospectus.

(5)

Gives effect to one or more stock-based benefit plans expected to be adopted following the offering. We have assumed that options will be granted to acquire common stock equal to 4.90% of the shares of common stock issued in the reorganization and offering (including shares of common stock issued to Community First Bancshares, MHC). 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 stock at the date of grant were $10.00 per share, the estimated grant-date fair value pursuant to the application of the Black-Scholes option pricing model was $2.34 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, and that 25% of the amortization expense (the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 38.0%. Under the above assumptions, the adoption of stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. The actual exercise price of the stock options may not be equal to the $10.00 price per share. If a portion of the shares issued to satisfy the exercise of options under stock-based benefit plans are obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share will decrease. This will also have a dilutive effect of up to 9.63% on the ownership interest of persons who purchase common stock in the offering.

(6)	The retained earnings of Newton Federal Bank will continue to be substantially restricted after the offering. See “Regulation and Supervision—Federal Banking Regulation.”

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS OF NEWTON FEDERAL BANK

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the financial statements, which appear beginning on page F-1 of this prospectus. You should read the information in this section in conjunction with the business and financial information regarding Newton Federal Bank provided in this prospectus.

Overview

Total assets increased $6.5 million, or 2.9%, to $232.8 million at September 30, 2016 from $226.3 million at September 30, 2015. The increase was due to an increase in loans. Loans held for investment increased $18.2 million, or 10.4%, to $193.9 million at September 30, 2016 from $175.7 million at September 30, 2015, reflecting increases in all loan categories.

Net income decreased $457,000, or 28.3%, to $1.2 million for the year ended September 30, 2016, compared to $1.6 million for the year ended September 30, 2015. The decrease was due to an increase in non-interest expenses, which increased $1.5 million, or 20.2%, to $9.2 million for the year ended September 30, 2016 from $7.6 million for the year ended September 30, 2015. This was caused primarily by a $1.2 million, or 34.3%, increase in salaries and employee benefits expense, as we established our loan production office in Bogart, Georgia in January 2016, and accrued $244,000 for payments to our former President and Chief Executive Officer, beginning in February 2016, in connection with his retirement.

An increase in interest rates will present us with a challenge in managing our interest rate risk. As a general matter, our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets, which can result in interest expense increasing more rapidly than increases in interest income as interest rates increase. Therefore, increases in interest rates may adversely affect our net interest income and net economic value, which in turn would likely have an adverse effect on our results of operations. As described in “—Management of Market Risk,” we expect that our net interest income and our net economic value would decrease as a result of an instantaneous increase in interest rates. To help manage interest rate risk, we promote core deposit products and we are diversifying our loan portfolio by adding more commercial-related loans. See “—Management of Market Risk” and “Risk Factors—Risks Related to Our Business— Future changes in interest rates could reduce our profits and asset values.”

Business Strategy

Our current business strategy consists of the following:

•

Grow our loan portfolio prudently with a focus on diversifying the portfolio, particularly in commercial real estate, commercial and industrial and construction and land lending . Our principal business activity historically has been the origination of residential mortgage loans for retention in our portfolio, and we intend to retain our presence as a mortgage lender in our market area. As part of our strategy of diversifying our loan portfolio by increasing our commercial real estate loans, commercial and industrial loans and construction and land loans, we opened a loan production office in Bogart, Georgia (in the Athens, Georgia market area) in 2016, added a commercial loan officer, and enhanced our credit function and our sales culture. Commercial real estate loans increased $4.6 million, or 18.6%, to $29.2 million at September 30, 2016 from $24.6

million at September 30, 2015, commercial and industrial loans increased $1.9 million, or 13.2%, to $16.2 million at September 30, 2016 from $14.3 million at September 30, 2015, and construction and land loans increased $11.1 million to $13.3 million at September 30, 2016 from $2.3 million at September 30, 2015. We may also expand our commercial lending activities through participation in government-sponsored loan programs, such as the Small Business Administration (“SBA”) and the U.S. Department of Agriculture, as a way to generate government-guaranteed loans with the opportunity to sell the guaranteed portion of the loan at a premium and retain the non-guaranteed portion as well as the servicing rights. The capital we are raising in the offering will support an increase in our lending limits, which will enable us to originate larger loans to new and existing customers.

•

Manage credit risk to maintain a low level of nonperforming assets. We believe strong asset quality is a key to our long-term financial success. Our strategy for credit risk management focuses on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring. Our non-performing assets to total assets ratio was 1.39% at September 30, 2016 and 1.37% at September 30, 2015, compared to 8.25% at September 30, 2012. The majority of our non-performing assets have related to one- to four-family residential real estate loans, as our residential borrowers experienced difficulties repaying their loans during the past recession. We intend to increase our investment in our credit review function, both in personnel as well as ancillary systems, in order to be able to evaluate more complex loans and better manage credit risk, which will also support our intended loan growth.

•

Grow organically and through opportunistic bank or branch acquisitions. We expect to consider both organic growth as well as acquisition opportunities that we believe would enhance the value of our franchise and yield potential financial benefits for our stockholders. Although we believe opportunities exist to increase our market share in our historical markets, we expect to continue to expand into nearby markets, primarily Clarke and Oconee Counties, Georgia, as well as contiguous counties. We will consider expanding our branch network and adding additional loan production offices. The capital we are raising in the offering will also provide us the opportunity to acquire smaller institutions located in our market area, and will help fund improvements in our operating facilities, credit reporting and customer delivery services in order to enhance our competitiveness.

•

Expand our employee base to support future growth. The additional capital we will raise in the offering will provide us with the ability to expand our employee base to support increased lending, deposit activities and enhanced information technology. The potential to offer equity awards in the future following the offering will also allow us to be more competitive when hiring experienced banking personnel.

Anticipated Increase in Noninterest Expense

Following the completion of the reorganization and stock offering, our noninterest expense is expected to increase because of the increased costs associated with operating as a public company, and the increased compensation expenses associated with the purchase of shares of common stock by our employee stock ownership plan and the possible implementation of one or more stock-based benefit plans, if approved by our stockholders, no earlier than six months after the completion of the reorganization and stock offering. For further information, see “Summary—Our Officers, Directors and Employees Will Receive Additional Benefits and Compensation After the Reorganization and Offering;” “Risk Factors—Risks Related to the Offering—Our stock-based benefit plans will increase our costs, which will reduce our income;” and “Management—Benefits to be Considered Following Completion of the Stock Offering.” See “Risks Factors—Risks Related to Our Business.”

Summary of Significant Accounting Policies

The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be significant accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

The following represent our significant accounting policies:

Allowance for Loan Losses . The allowance for loan losses is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for loan losses. Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance for loan losses. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for loan losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect probable credit losses. Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated loan losses and therefore the appropriateness of the allowance for loan losses could change significantly.

The allocation methodology applied by Newton Federal Bank is designed to assess the appropriateness of the allowance for loan losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic

conditions and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for loan losses is appropriate at September 30, 2016. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require Newton Federal Bank to make additions to the allowance for loan losses based on their judgments of collectability based on information available to them at the time of their examination.

Income Taxes . The assessment of income tax assets and liabilities involves the use of estimates, assumptions, interpretation, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the results of operations and reported earnings.

Newton Federal Bank files a federal and a state income tax return. Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax law rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income tax expense. Valuation allowances are established when it is more likely than not that a portion of the full amount of the deferred tax asset will not be realized. In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Newton Federal Bank may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements. Penalties related to unrecognized tax benefits are classified as income tax expense.

Comparison of Financial Condition at September 30, 2016 and 2015

Total assets increased $6.5 million, or 2.9%, to $232.8 million at September 30, 2016 from $226.3 million at September 30, 2015. The increase was due to an increase in loans, offset by a decrease in cash and cash equivalents, as discussed in more detail below.

Cash and cash equivalents decreased $12.8 million, or 33.3%, to $25.7 million at September 30, 2016 from $38.5 million at September 30, 2015. The decrease resulted from our using excess cash to fund loan originations, partially offset by an increase in deposits.

We had $472,000 of loans held for sale at September 30, 2016 compared to no loans held for sale at September 30, 2015.

Loans held for investment increased $18.2 million, or 10.4%, to $193.9 million at September 30, 2016 from $175.7 million at September 30, 2015, reflecting increases in all loan categories. Construction and land loans increased $11.1 million to $13.3 million at September 30, 2016 from $2.3 million at September 30, 2015, while commercial real estate loans increased $4.6 million, or 18.6%, to $29.2 million at September 30, 2016 from $24.6 million at September 30, 2015, and commercial and industrial loans increased $1.9 million, or 13.2%, to $16.2 million at September 30, 2016 from $14.3 million at September 30, 2015. We have recently increased our focus on commercial lending, including construction lending, and our construction lending has benefitted from the opening of our loan production office in Bogart, Georgia in 2016.

Securities held-to-maturity totaled $7.5 million at each of September 30, 2016 and September 30, 2015. We have invested excess cash in higher-yielding loans instead of lower-yielding securities as we have been able to grow our loan portfolio.

Total deposits increased $5.0 million, or 2.8%, to $181.7 million at September 30, 2016 from $176.7 million at September 30, 2015. The increase was primarily due to increases in interest-bearing checking accounts (a $7.9 million increase, or 34.8%, to $30.7 million at September 30, 2016 from $22.8 million at September 30, 2015) and non-interest bearing checking accounts (a $6.6 million increase, or 43.6%, to $21.7 million at September 30, 2016 from $15.1 million at September 30, 2015). The increase in checking accounts was primarily due to our introducing our Kasasa (rewards) deposit program in November 2014, which promotes free checking accounts with either attractive interest rates or cash-back rewards. These increases were partially offset by a decrease in certificates of deposit, which decreased $10.8 million, or 11.2%, to $85.5 million at September 30, 2016 from $96.3 million at September 30, 2015. In prior years, we allowed higher-rate certificates of deposit to run off at maturity to improve our deposit mix and reduce our cost of funds. In addition, we have been able to fund loan growth from excess cash as well as cash generated from other deposit products.

We had no outstanding borrowings at September 30, 2016 or 2015. We have not needed borrowings to fund our operations in recent years due to a strong cash position and deposit growth during the year ended September 30, 2016.

Total equity capital increased $1.2 million, or 2.6%, to $45.1 million at September 30, 2016 from $43.9 million at September 30, 2015. The growth was due to net income of $1.2 million for the year ended September 30, 2016. We classify all of our securities as held to maturity, resulting in no comprehensive income or loss.

Average Balance Sheets

The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the years indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are monthly average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Loan balances exclude loans held for sale.


	At September 30, 2016			For the Year Ended September 30, 2016
	Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans		5.57	%	$	182,181		$	10,937		6.00	%
Securities		1.09	%		7,496			82		1.09	%
Interest-earning deposits		0.74	%		34,070			219		0.64	%
Federal Home Loan Bank of Atlanta stock		4.64	%		204			10		4.90	%

Total interest-earning assets					223,951			11,248		5.02	%
Non-interest-earning assets					4,980

Total assets				$	228,931

Interest-bearing liabilities:
Passbook savings accounts		0.04	%	$	20,766			8		0.04	%
Interest-bearing checking accounts		0.45	%		27,162			83		0.31	%
Money market checking accounts		0.26	%		22,919			59		0.26	%
Certificates of deposit		1.05	%		90,902			1,265		1.39	%

Total interest-bearing deposits					161,749			1,415		0.87	%

Total interest-bearing liabilities					161,749			1,415		0.87	%

Non-interest-bearing liabilities					22,736
Total liabilities					184,485

Total retained earnings				$	44,446

Total liabilities and retained earnings				$	228,931

Net interest income							$	9,833

Net interest rate spread (1)										4.15	%
Net interest-earning assets (2)				$	62,202

Net interest margin (3)										4.39	%
Average interest-earning assets to interest-bearing liabilities					138.46	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.


	For the Years Ended September 30,
	2015								2014
	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	177,805		$	10,815		6.08	%	$	186,610		$	11,416		6.12	%
Securities		7,781			89		1.14	%		5,957			69		1.16	%
Interest-earning deposits		33,661			132		0.39	%		24,965			77		0.31	%
Federal Home Loan Bank of Atlanta stock		200			9		4.50	%		230			9		3.91	%

Total interest-earning assets		219,447			11,045		5.03	%		217,762			11,571		5.31	%
Non-interest-earning assets		3,947								4,478

Total assets	$	223,394							$	222,240

Interest-bearing liabilities:
Passbook savings accounts	$	19,933			8		0.04	%	$	18,709			7		0.04	%
Interest-bearing checking accounts		20,711			36		0.17	%		16,738			7		0.04	%
Money market checking accounts		22,997			58		0.25	%		23,321			64		0.27	%
Certificates of deposit		100,356			1,711		1.70	%		109,937			2,078		1.89	%

Total interest-bearing deposits		163,997			1,813		1.11	%		168,705			2,156		1.28	%

Total interest-bearing liabilities		163,997			1,813		1.11	%		168,708			2,156		1.28	%

Non-interest-bearing liabilities		17,258								18,261

Total liabilities		181,255								186,966
Total retained earnings		42,139								35,274

Total liabilities and retained earnings	$	223,394							$	222,240

Net interest income				$	9,232							$	9,415

Net interest rate spread (1)							3.93	%							4.04	%
Net interest-earning assets (2)	$	55,450							$	49,057

Net interest margin (3)							4.21	%							4.32	%
Average interest-earning assets to interest-bearing liabilities		133.81	%							129.08	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.


	Year Ended September 30, 2016 vs. 2015									Year Ended September 30, 2015 vs. 2014
	Increase (Decrease) Due to						Total Increase (Decrease)			Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate			Total Increase (Decrease)			Volume			Rate			Total Increase (Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	264		$	(142	)	$	122		$	(536	)	$	(65	)	$	(601	)
Securities		(3	)		(4	)		(7	)		21			(1	)		20
Interest-earning deposits and federal funds		2			85			87			31			24			55
Federal Home Loan Bank of Atlanta stock		—			1			1			(1	)		1			—

Total interest-earning assets		263			(60	)		203			(485	)		(41	)		(526	)

Interest-bearing liabilities:
Passbook savings accounts		—			—			—			—			1			1
Interest-bearing checking accounts		14			33			47			2			27			29
Money market checking accounts		—			1			1			(1	)		(5	)		(6	)
Certificates of deposit		(151	)		(295	)		(446	)		(173	)		(194	)		(367	)

Total deposits		(137	)		(261	)		(398	)		(172	)		(171	)		(343	)
Total interest-bearing liabilities		(137	)		(261	)		(398	)		(172	)		(171	)		(343	)

Change in net interest income	$	400		$	201		$	601		$	(313	)	$	130		$	(183	)

Comparison of Operating Results for the Years Ended September 30, 2016 and 2015

General. Net income decreased $457,000, or 28.3%, to $1.2 million for the year ended September 30, 2016, compared to $1.6 million for the year ended September 30, 2015. The decrease was due to an increase in non-interest expenses, partially offset by increases in net interest income and non-interest income, as described in more detail below.

Interest Income. Interest income increased $203,000, or 1.8%, to $11.2 million for the year ended September 30, 2016 from $11.0 million for the year ended September 30, 2015. The increase was due primarily to a $122,000, or 1.1%, increase in interest income on loans, which is our primary source of interest income. Our average balance of loans increased $4.4 million, or 2.5%, to $182.2 million for the year ended September 30, 2016 from $177.8 million for the year ended September 30, 2015. The increase in average balance resulted from our recent increased focus on commercial lending, including construction lending, and our construction lending has benefitted from the opening of our loan production office in Bogart, Georgia in January 2016. Our average yield on loans decreased eight basis points to 6.00% for the year ended September 30, 2016 from 6.08% for the year ended September 30, 2015, as higher-yielding loans have been repaid or refinanced and replaced with lower-yielding loans in the current interest rate environment.

Interest income on interest-earning deposits increased $87,000, or 65.9%, to $219,000 for the year ended September 30, 2016 from $132,000 for the year ended September 30, 2015. The average rate we earned on interest-earning deposits increased 25 basis points to 0.64% for the year ended September 30, 2016 from 0.39% for the year ended September 30, 2015, reflecting higher market interest rates. Our average balance of interest-earning deposits increased $409,000, or 1.2%, to $34.1 million for the year ended September 30, 2016 from $33.7 million for the year ended September 30, 2015.

Interest Expense. Interest expense decreased $398,000, or 22.0%, to $1.4 million for the year ended September 30, 2016 compared to $1.8 million for the year ended September 30, 2015. The decrease was the result of a decrease in interest expense on deposits, which is currently our sole source of interest expense. Specifically, interest expense on certificates of deposit decreased $446,000, or 26.1%, to $1.3 million for the year ended September 30, 2016 from $1.7 million for the year ended September 30, 2015. This decrease resulted from decreases in both the average balance of certificates of deposit and the average rate we paid on certificates of deposit. The average balance of certificates of deposit decreased $9.5 million, or 9.4%, to $90.9 million for the year ended September 30, 2016 from $100.4 million for the year ended September 30, 2015, and the average rate we paid on certificates of deposit decreased 31 basis points to 1.39% for the year ended September 30, 2016 from 1.70% for the year ended September 30, 2015. In prior years, we allowed higher-rate certificates of deposit to run off at maturity to improve our deposit mix and reduce our cost of funds. In addition, we have been able to fund loan growth from excess cash as well as cash generated from other deposit products.

Interest expense on interest-bearing checking accounts increased $47,000 to $83,000 for the year ended September 30, 2016 from $36,000 for the year ended September 30, 2015. This increase resulted from increases in both the average balance of interest-bearing checking accounts and the average rate we paid on interest-bearing checking accounts. The average balance of interest-bearing checking accounts increased $6.5 million, or 31.1%, to $27.2 million for the year ended September 30, 2016 from $20.7 million for the year ended September 30, 2015, and the average rate we paid on interest-bearing checking accounts increased 14 basis points to 0.31% for the year ended September 30, 2016 from 0.17% for the year ended September 30, 2015, reflecting higher market interest rates. The increase in checking accounts was primarily due to our introducing our Kasasa (rewards) deposit program in November 2014.

Net Interest Income. Net interest income increased $601,000, or 6.5%, to $9.8 million for the year ended September 30, 2016 from $9.2 million for the year ended September 30, 2015, primarily as a result of a higher balance of net interest-earning assets and, to a lesser extent, higher net interest rate spread and net interest margin. Our average net interest-earning assets increased by $6.8 million, or 12.2%, to $62.2 million for the year ended September 30, 2016 from $55.5 million for the year ended September 30, 2015, due primarily to our loan growth, described above. Our net interest rate spread increased by 22 basis points to 4.15% for the year ended September 30, 2016 from 3.93% for the year ended September 30, 2015, and our net interest margin increased by 18 basis points to 4.39% for the year ended September 30, 2016 from 4.21% for the year ended September 30, 2015, reflecting primarily a decrease in our cost of funds.

Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. See “—Summary of Significant Accounting Policies” and “Business of Newton Federal Bank—Allowance for Loan Losses” for additional information.

After an evaluation of these factors, we did not record a provision for loan losses for the years ended September 30, 2016 or 2015. Our allowance for loan losses was $4.3 million at September 30, 2016 compared to $5.9 million at September 30, 2015. The allowance for loan losses to total loans decreased to 2.22% at September 30, 2016 from 3.34% at September 30, 2015, and the allowance for loan losses to non-performing loans decreased to 132.87% at September 30, 2016 from 229.18% at September 30, 2015. We significantly decreased the portion of the allowance for loan losses attributable to one- to four-family residential real estate loans due to a continued decreased loss history related to this portion of the portfolio, as well as recoveries related to this portion of the portfolio exceeding charge-offs, despite an increase in non-accrual one- to four-family residential real estate loans. We increased the portion of the allowance for loan losses attributable to commercial real estate loans due to increased charge-offs and an increase in this portion of the loan portfolio which, in the absence of other factors, would result in an increase in the allowance for loan losses as we apply historical loss ratios to newly originated loans. We modestly increased the portion of the allowance for loan losses attributable to construction and land loans despite an increase in this portion of the loan portfolio, as we have a low loss history with respect to construction and land loans.

To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at September 30, 2016. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, will periodically review our allowance for loan losses and may require us to recognize adjustments to the allowance based on its judgments about the recoverability of our loan balances based upon information available to it at the time of its examination.

Non-interest Income . Non-interest income information is as follows.


	Years Ended September 30,				Change
	2016		2015		Amount		Percent
	(Dollars in thousands)
Service charges on deposit accounts	$	717	$	631	$	86		13.6	%
Other		468		251		217		86.5

Total non-interest income	$	1,185	$	882	$	303		34.3	%

The increase in other non-interest income was primary due to $94,000 in secondary market mortgage fee income for the year ended September 30, 2016, consisting of $58,000 relating to loans we sold during the fiscal year ended September 30, 2016 and $35,000 in broker fees, compared to no such income for the year ended September 30, 2015. We sold $2.3 million of loans during 2016 compared to no such loan sales during 2015.

Non-interest Expenses. Non-interest expenses information is as follows.


	Years Ended September 30,				Change
	2016		2015		Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	4,742	$	3,532	$	1,210			34.3	%
Deferred compensation		218		336		(118	)		(35.1	)
Occupancy		1,091		980		111			11.3
Advertising		207		123		84			68.3
Data processing		633		538		95			17.7
Other real estate owned		65		40		25			62.5
Loss on write down of other real estate owned		73		123		(50	)		(68.5	)
Loss on sale of other real estate owned		34		12		22			183.3
Legal and accounting		426		422		4			0.9
Organizational dues and subscriptions		220		308		(88	)		(28.6	)
Director compensation		176		80		96			120.0
Federal deposit insurance premiums		155		266		(111	)		(41.7	)
Other		1,124		861		263			30.5

Total non-interest income	$	9,164	$	7,621	$	1,543			20.2	%

Salaries and employee benefits expense increased due to our establishing our loan production office in Bogart, Georgia in January 2016, as well as our accruing $244,000 for payments to our former President and Chief Executive Officer, beginning in February 2016, in connection with his retirement. Occupancy expense increased due to our investment in new technology and services, as well as an increase in our amount of fixed assets. Deferred compensation expense decreased due to our freezing new accruals in our directors deferred fee plan and our decreasing the interest rate paid on previously deferred compensation.

Income Tax Expense. We incurred income tax expense of $697,000 and $879,000 for the years ended September 30, 2016 and 2015, respectively, resulting in effective rates of 37.6% and 35.3%, respectively. The decrease in tax expense resulted from a $639,000, or 25.6%, decrease in pre-tax income to $1.9 million for the year ended September 30, 2016 from $2.5 million for the year ended September 30, 2015.

Management of Market Risk

General . Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset/Liability Management Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

•

limiting our reliance on non-core/wholesale funding sources;

•

growing our volume of transaction deposit accounts;

•

diversifying our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or balloon payments; and

•

continuing to price our one- to four-family residential real estate loan products in a way that encourages borrowers to select our balloon loans as opposed to longer term, fixed-rate loans.

By following these strategies, we believe that we are better positioned to react in increased in market interest rates. In addition, beginning in calendar 2017, we intend to introduce adjustable-rate, one- to four-family residential real estate loans, and we expect to increase our investment securities portfolio, with an average maturity of less than 15 years.

We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The table below sets forth, as of September 30, 2016, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.


Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
(Dollars in thousands)
+400	$	10,000		(1.89	)%
+200		10,121		(0.70	)%
Level		10,192		—
-200		9,750		(4.34	)%
-400		9,511		(6.69	)%

(1)	Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at September 30, 2016, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 0.70% decrease in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 4.34% decrease in net interest income. At September 30, 2015, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 1.14% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 5.68% decrease in net interest income.

Net Economic Value . We also compute amounts by which the net present value of our assets and liabilities (net economic value or “NEV”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The table below sets forth, as of September 30, 2016, the calculation of the estimated changes in our NEV that would result from the designated immediate changes in the United States Treasury yield curve.


Change in Interest Rates (basis points) (1)	Estimated NEV (2)								NEV as a Percentage of Present Value of Assets (3)
			Estimated Increase (Decrease) in NEV						NEV Ratio (4)			Increase (Decrease) (basis points)
			Amount			Percent			NEV Ratio (4)			Increase (Decrease) (basis points)
(Dollars in thousands)
+400	$	39,368	$	(11,902	)		(23.21	)%		18.72	%		(289	)
+200		44,947		(6,323	)		(12.33	)%		20.15	%		(146	)
—		51,270		—			—	%		21.61	%		—
-200		51,544		274			0.53	%		21.25	%		(36	)
-400		49,173		(2,371	)		(4.09	)%		20.49	%		(112	)

(1)	Assumes an immediate uniform change in interest rates at all maturities.

(2)	NEV 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)	NEV Ratio represents NEV divided by the present value of assets.

The table above indicates that at September 30, 2016, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 12.33% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 0.53% increase in net economic value. At September 30, 2015, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 12.73% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 1.22% increase in net economic value.

GAP Analysis. In addition, we analyze our interest rate sensitivity by monitoring our interest rate sensitivity “gap.” Our interest rate sensitivity gap is the difference between the amount of our interest-earning assets maturing or repricing within a specific time period and the amount of our interest bearing-liabilities maturing or

repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing during a period exceeds the amount of interest rate sensitive liabilities maturing or repricing during the same period, and a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing during a period exceeds the amount of interest rate sensitive assets maturing or repricing during the same period.

The following table sets forth our interest-earning assets and our interest-bearing liabilities at September 30, 2016, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions. The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at September 30, 2016, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans. Amounts are based on preliminary balance sheet as of September 30, 2016, and may not equal amounts included in our audited financial statements for the year ended September 30, 2016. However, we believe that there would be no material changes in the results of the gap analysis if audited financial results had been utilized.


	Time to Repricing
	Zero to 90 Days			Zero to 180 Days			Zero Days to One Year			Zero Days to Two Years			Zero Days to Five Years			Total
	(Dollars in thousands)
Assets:
Cash and due from banks	$	10,066		$	10,066		$	10,066		$	10,066		$	10,066		$	14,293
Investments		3,185			15,460			19,060			19,060			19,060			19,060
Net loans		22,472			33,527			53,328			83,048			140,258			194,445
Other assets		—			—			—			—			—			5,981

Total	$	35,723		$	59,053		$	82,454		$	112,174		$	169,384		$	233,779

Liabilities:
Non-maturity deposits	$	40,329		$	42,300		$	46,243		$	54,127		$	76,824		$	96,154
Certificates of deposit		11,100			19,742			35,516			44,712			68,355			85,523
Other liabilities		—			—			—			—			—			7,061
Equity capital		—			—			—			—			—			45,041

Total	$	51,429		$	62,042		$	81,759		$	98,839		$	145,180	(1)	$	233,779

Asset/liability gap	$	(15,707	) (1)	$	(2,990	) (1)	$	695		$	13,335		$	24,204	(1)	$	—
Gap/assets ratio		(6.72	)%		(1.28	)%		0.30	%		5.70	%		10.35	%		—	%

(1)	Amounts do not foot due to rounding.

At September 30, 2015, our asset/liability gap from zero days to one year was $383,000, resulting in a gap/assets ratio of 0.17%.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net interest income and NEV tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on net interest income and NEV and will differ from actual results. Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. In the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table.

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Atlanta. At September 30, 2016, we had a $58.0 million line of credit with the Federal Home Loan Bank of Atlanta, and had no borrowings outstanding as of September 30, 2016. In addition, we have a $5.0 million unsecured federal funds line of credit and a $7.5 million unsecured federal funds line of credit. No amount was outstanding on these lines of credit at September 30, 2016.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.9 million and $2.9 million for the years ended September 30, 2016 and 2015, respectively. Net cash provided by (used in) investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on mortgage-backed securities, was $(19.7) million and $4.1 million for the years ended September 30, 2016 and 2015, respectively. Net cash provided by financing activities, consisting of activity in deposit accounts, was $5.0 million and $(2.6) million for the years ended September 30, 2016 and 2015.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At September 30, 2016, we exceeded all of our regulatory capital requirements, and we were categorized as well capitalized at September 30, 2016 and 2015. Management is not aware of any conditions or events since the most recent notification that would change our category. See “Historical and Pro Forma Regulatory Capital Compliance.”

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At September 30, 2016, we had outstanding commitments to originate loans of $19.6 million. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in less than one year from September 30, 2016 totaled $35.5 million. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

During the year ended September 30, 2016, we entered into an agreement to construct an operations center. The new building is expected to be completed during the second calendar quarter of 2017, with an estimated construction price of $2.6 million, as well as additional costs to furnish the building. During the year ended September 30, 2016, we incurred $231,000 of expense for this construction.

Recent Accounting Pronouncements

Please refer to Note 1 to the Financial Statements for the years ended September 30, 2016 and 2015 beginning on page F-1 for a description of recent accounting pronouncements that may affect our financial condition and results of operations.

Impact of Inflation and Changing Price

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

BUSINESS OF COMMUNITY FIRST BANCSHARES, INC.

We have not engaged in any business to date. Upon completion of the reorganization and offering, we will own all of the issued and outstanding common stock of Newton Federal Bank. We intend to retain up to 50% of the net proceeds from the offering. A portion of the net proceeds we retain will be used to make a loan to fund the purchase of shares of our common stock by the Newton Federal Bank employee stock ownership plan. We intend to invest our capital as discussed in “How We Intend to Use the Proceeds from the Offering.”

In the future, Community First Bancshares, Inc., as the holding company of Newton Federal Bank, will be authorized to pursue other business activities permitted by applicable laws and regulations for savings and loan holding companies, which may include the acquisition of banking and financial services companies. We have no plans for any mergers or acquisitions, or other diversification of the activities of Community First Bancshares, Inc. at the present time.

Our cash flow will depend on earnings from the investment of the net proceeds we retain, and any dividends received from Newton Federal Bank. Initially, Community First Bancshares, Inc. will neither own nor lease any property, but will instead use the premises, equipment and furniture of Newton Federal Bank. At the present time, we intend to employ only persons who are officers of Newton Federal Bank to serve as officers of Community First Bancshares, Inc. We will also use the support staff of Newton Federal Bank from time to time. These persons will not be separately compensated by Community First Bancshares, Inc. Community First Bancshares, Inc. may hire additional employees, as appropriate, to the extent it expands its business in the future.

BUSINESS OF COMMUNITY FIRST BANCSHARES, MHC

Community First Bancshares, MHC will be formed as a federal mutual holding company and will at all times own a majority of the outstanding shares of Community First Bancshares, Inc.’s common stock. Persons who had membership rights in Newton Federal Bank as of the date of the reorganization will continue to have membership rights; however, these membership rights will be in Community First Bancshares, MHC.

Community First Bancshares, MHC’s principal assets will be the common stock of Community First Bancshares, Inc. it receives in the reorganization and offering and $100,000 cash in initial capitalization, which will be contributed from the net proceeds of the stock offering. Presently, it is expected that the only business activity of Community First Bancshares, MHC will be to own a majority of Community First Bancshares, Inc.’s common stock. Community First Bancshares, MHC will be authorized, however, to engage in any other business activities that are permissible for mutual holding companies under federal law, including investing in loans and securities.

Community First Bancshares, MHC will neither own nor lease any property, but will instead use the premises, equipment and furniture of Newton Federal Bank. It is anticipated that Community First Bancshares, MHC will employ only persons who are officers of Newton Federal Bank to serve as officers of Community First Bancshares, MHC. Those persons will not be separately compensated by Community First Bancshares, MHC. The initial directors of Community First Bancshares, MHC will consist of the current directors of Newton Federal Bank.

BUSINESS OF NEWTON FEDERAL BANK

General

We conduct our business from our main office, two branch offices and a loan production office. All of our banking offices are located in Covington, Georgia, which is located in Newton County. Our loan production office is located in Bogart, Georgia, which is in the Athens, Georgia market in Oconee County. Our primary market area currently consists of Newton County, Georgia and the contiguous counties.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, and, to a lesser extent, commercial real estate loans, commercial and industrial loans, construction loans and consumer loans. Subject to market conditions, we expect to increase our focus on originating commercial real estate loans, commercial and industrial loans, and construction loans in an effort to diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. We also invest in securities, which have historically consisted primarily of mortgage-backed securities issued by U.S. government sponsored enterprises and Federal Home Loan Bank stock. We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts. We have not used borrowings in recent years to fund our operations.

Our executive office is located at 3175 Highway 278, Covington, Georgia 30014, and our telephone number at this address is (770) 786-7088. Our website address is www.newtonfederal.com . Information on our website should not be considered a part of this prospectus.

Market Area

We conduct our operations from our main office and two branch offices in Covington, Georgia, which are located in Newton County, Georgia, as well as our loan production office located in Bogart, Georgia, which is in Oconee County bordering Clarke County (in the Athens, Georgia market area). Newton County, Georgia represents our primary geographic market area for deposits, while we make loans in Newton County and the contiguous counties.

Covington, Georgia, is located 35 miles east of Atlanta, Georgia and 47 miles south of Athens, Georgia. In Newton County, the manufacturing sector represents approximately 22% of the non-farm, non-government labor force. This is more than double the U.S. and Georgia averages. Other significant employer industries in the county include retail trades, health care and social assistance and food services and accommodations. There are approximately 1,300 businesses operating in Newton County. Newton County’s total population is estimated at 108,000, which grew 7.6% from 2010. The state of Georgia grew 7.1% during that period. Newton County is projected to grow 6.0% between 2017 and 2022, compared to 5.1% for Georgia. The median household income in Newton County was approximately $49,669, which is superior to the Georgia state average of $41,254 but lower than the national median household income of $57,462.

Oconee County’s total population is estimated at 37,000, grew 13% since 2010, and is estimated to grow over 8% by 2022. It has approximately 1,000 businesses, with the largest employers in the retail trade, health care and social assistance, and food service and accommodations industries.

Clarke County has a total population of 126,000, grew 8% since 2010, and is projected to grow another 6% by 2022. It is the home to the University of Georgia. It is also home to nearly 3,000 businesses, with the most significant employee representation in accommodation and food services, health care and social services, retail trade and manufacturing.

The unemployment rates in October 2016 for Newton, Oconee and Clarke Counties were 5.6%, 3.9% and 5.1%, respectively, compared to 5.2% for the State of Georgia and 4.7% for the United States.

We believe that we have developed products and services that will meet the financial needs of our current and future customer base; however, we plan, and believe it is necessary, to expand the range of products and services that we offer to be more competitive in our market area. Marketing strategies focus on the strength of our knowledge of local consumer and small business markets, as well as expanding relationships with current customers and reaching out to develop new, profitable business relationships.

Competition

We face competition within our market area both in making loans and attracting deposits. Our market area has a concentration of financial institutions that include large money center and regional banks, community banks and credit unions. We also face competition from savings institutions, mortgage banking firms, consumer finance companies and credit unions and, with respect to deposits, from money market funds, brokerage firms, mutual funds and insurance companies. As of June 30, 2016 (the most recent date for which data is available), our market share of deposits represented 20.9% of Federal Deposit Insurance Corporation-insured deposits in Newton County, ranking us third in market share of deposits out of eight institutions operating in the county.

Lending Activities

General. Our historical principal lending activity has been originating one- to four-family residential real estate loans and, to a lesser extent, commercial real estate loans, commercial and industrial loans, construction and land loans and consumer loans. To a much lesser extent, we also originate multi-family residential real estate loans and home equity loans and lines of credit. Subject to market conditions, we expect to increase our focus on originating commercial real estate loans, commercial and industrial loans, and construction loans in an effort to diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. Historically, we have not originated significant amounts of loans for sale, but we intend to increase this activity in the future in order to manage the duration and time to repricing of our loan portfolio, and to generate fee income.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated. In addition to the loans included in the table below, at September 30, 2016, we had $472,000 of loans held for sale, $4.2 million of loans in process and $289,000 of deferred loan fees.


	At September 30,
	2016					2015					2014					2013					2012
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Real estate loans:
One- to four-family residential (1)	$	132,899		68.54	%	$	132,480		75.42	%	$	139,977		77.84	%	$	147,396		79.26	%	$	154,959		81.71	%
Commercial (2)		29,162		15.04			24,581		13.99			25,860		14.38			24,862		13.37			27,092		14.29
Construction and land		13,343		6.88			2,261		1.28			817		0.45			1,205		0.65			1,980		1.04
Commercial and industrial loans		16,221		8.37			14,333		8.16			11,639		6.47			11,067		5.95			4,160		2.19
Consumer loans		2,262		1.17			2,017		1.15			1,547		0.86			1,423		0.77			1,461		0.77

		193,887		100.00	%		175,672		100.00	%		179,840		100.00	%		185,953		100.00	%		189,652		100.00	%

Less:
Allowance for losses		4,309					5,874					5,708					5,947					5,694

Total loans	$	189,578				$	169,798				$	174,132				$	180,006				$	183,958

(1)	Includes home equity loans and lines of credit, which totaled $875,000 at September 30, 2016.

(2)	Includes multi-family residential real estate loans, which totaled $806,000 at September 30, 2016.

Contractual Maturities. The following tables set forth the contractual maturities of our total loan portfolio at September 30, 2016. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The tables present contractual maturities and do not reflect repricing or the effect of prepayments. Actual maturities may differ.


September 30, 2016	One- to Four- Family Residential Real Estate		Commercial Real Estate		Construction and Land
	(In thousands)
Amounts due in:
One year or less	$	4,816	$	2,351	$	10,210
More than one to five years		26,742		13,529		2,019
More than five years		101,341		13,282		1,114

Total	$	132,899	$	29,162	$	13,343


September 30, 2016	Commercial and Industrial		Consumer		Total
	(In thousands)
Amounts due in:
One year or less	$	3,446	$	719	$	21,542
More than one to five years		7,556		1,364		51,210
More than five years		5,219		179		121,135

Total	$	16,221	$	2,262	$	193,887

The following table sets forth our fixed and adjustable-rate loans at September 30, 2016 that are contractually due after September 30, 2017.


	Due After September 30, 2017
	Fixed		Adjustable		Total
	(In thousands)
Real estate loans:
One- to four-family residential	$	127,004	$	1,079	$	128,083
Commercial		24,130		2,681		26,811
Construction and land		2,591		542		3,133
Commercial and industrial loans		12,760		15		12,775
Consumer loans		1,522		21		1,543

Total loans	$	168,007	$	4,338	$	172,345

One- to Four-Family Residential Real Estate Lending . The focus of our lending program has historically been the origination of one- to four-family residential real estate loans. At September 30, 2016, we had $132.9 million of loans secured by one- to four-family real estate, representing 68.5% of our total loan portfolio. We currently originate fixed-rate residential mortgage loans, including loans with balloon terms. At September 30, 2016, $25.9 million, or 19.7%, of our one- to four-family residential real estate loans were balloon loans. Beginning in 2017, we intend to introduce adjustable-rate, one- to four-family residential real estate loans.

Our one- to four-family residential real estate loans are generally underwritten to internal guidelines, although we generally follow documentation practices of Fannie Mae guidelines. We generally originate one- to four-family residential real estate loans in amounts up to $150,000, although we will originate loans above this amount. The significant majority of our one- to four-family residential real estate loans are secured by properties located in our primary market area.

We generally limit the loan-to-value ratios of our one- to four-family residential mortgage loans to 89.9% of the purchase price or appraised value, whichever is lower. In addition, we occasionally make one- to four-family residential mortgage loans with loan-to-value ratios in excess of 90% of the purchase price or appraised value, whichever is less, if the borrower obtains private mortgage insurance.

Our one- to four-family residential real estate loans typically have terms of up to 30 years. Our balloon loans generally have terms of five or seven years, but with amortization terms of 30 years. We will originate balloon loans with initial terms of ten years.

We do not offer “interest only” mortgage loans on permanent one- to four-family residential real estate loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We do not currently offer “subprime loans” on one- to four-family residential real estate loans ( i.e. , generally loans to borrowers with credit scores less than 620).

Commercial Real Estate Loans . In recent years, we have sought to increase our commercial real estate loans. Our commercial real estate loans are secured primarily by one- to four-family non-owner occupied investment properties and houses of worship and, to a lesser extent, office buildings, industrial facilities and retail facilities, substantially all located in our primary market area. At September 30, 2016, we had $29.2 million in commercial real estate loans, representing 15.0% of our total loan portfolio. This amount included $805,000 of multi-family residential real estate loans. At September 30, 2016, our commercial real estate loans had an average balance of $309,000.

Most of our commercial real estate loans are balloon loans with a five-year initial term and a 20-year amortization period. The maximum loan-to-value ratio of our commercial real estate loans is generally 80%. All of our commercial real estate loans are subject to our underwriting procedures and guidelines. At September 30, 2016, our largest commercial real estate loan totaled $3.1 million and was secured by an owner-occupied funeral home located in our primary market area. At September 30, 2016, this loan was performing in accordance with its terms.

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). The significant majority of our commercial real estate loans are appraised by outside independent appraisers approved by the board of directors, although we are only required to get independent appraisals on commercial real estate loans in amounts of $500,000 or greater. Personal guarantees are generally obtained from the principals of commercial real estate borrowers.

Commercial and Industrial Loans. We make commercial and industrial loans, primarily in our market area, to a variety of professionals, sole proprietorships and small businesses. These loans are generally secured by business assets, and we may support this collateral with junior liens on real property. At September 30, 2016, commercial and industrial loans were $16.2 million, or 8.4% of our gross loans held for investment. As part of our relationship driven focus, we encourage our commercial borrowers to maintain their primary deposit accounts with us, which enhances our interest rate spread and margin.

Commercial lending products include term loans and revolving lines of credit. Commercial loans and lines of credit are made with either adjustable or fixed rates of interest. Adjustable rates and fixed rates are based on the prime rate as published in The Wall Street Journal , plus a margin. We are focusing our efforts on experienced, growing small- to medium-sized, privately-held companies with solid historical and projected cash flow that operate in our market areas.

When making commercial and industrial loans, we consider the financial statements of the borrower, our lending history with the borrower, the debt service capabilities and global cash flows of the borrower and other guarantors, the projected cash flows of the business and the value of the collateral, accounts receivable, inventory and equipment. Depending on the collateral used to secure the loans, commercial and industrial loans are made in amounts of up to 80% of the value of the collateral securing the loan. All of these loans are secured by assets of the respective borrowers.

Our largest commercial and industrial loan at September 30, 2016 totaled $1.6 million, was originated in 2011 to an insurance agency and is secured by business assets. At September 30, 2016, this loan was performing in accordance with its terms.

Construction and Land Loans . We make construction loans, primarily to individuals for the construction of their primary residences and loans to contractors and builders of single-family homes. We also make a limited amount of land loans to complement our construction lending activities, as such loans are generally secured by lots that will be used for residential development. Land loans also include loans secured by land purchased for investment purposes. At September 30, 2016, our construction loans totaled $13.3 million, representing 6.9% of our total loan portfolio, and included $4.0 million of land loans. At that date, we also had $3.7 million of construction loans in process. At September 30, 2016, $8.8 million of our single-family construction loans were to individuals and $4.5 million were to contractors and builders.

While we may originate loans to contractors and builders whether or not the collateral property underlying the loan is under contract for sale, we consider each project carefully in light of current residential real estate market conditions. We actively monitor the number of unsold homes in our construction loan portfolio and local housing markets to attempt to maintain an appropriate balance between home sales and new loan originations. We generally will limit the maximum number of speculative units (units that are not pre-sold) approved for each builder. We have attempted to diversify the risk associated with speculative construction lending by doing business with experienced small and mid-sized builders within our market area.

We also originate construction loans for commercial development projects, including retail buildings, churches, small industrial, hotels and office buildings. Most of our construction loans are interest-only loans that provide for the payment of interest during the construction phase, which is usually up to 12 months. At the end of the construction phase, the loan may convert to a permanent mortgage loan or the loan may be paid in full. Construction loans generally can be made with a maximum loan-to-value ratio of 80% of the estimated appraised market value upon completion of the project. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser. We also generally require inspections of the property before disbursements of funds during the term of the construction loan.

At September 30, 2016, our largest construction and land loan was for $655,000, all of which was outstanding. This loan was originated in 2016 and is secured by improved residential building lots. This loan was performing according to its terms at September 30, 2016.

Consumer Loans . We offer a limited range of consumer loans, principally to customers residing in our primary market area with other relationships with us and with acceptable credit ratings. Our consumer loans generally consist of loans secured by deposit accounts, loans on new and used automobiles and unsecured personal loans. At September 30, 2016, consumer and other loans were $2.3 million, or 1.2% of gross loans held for investment.

Loan Underwriting Risks

Commercial Real Estate Loans. Loans secured by commercial real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential real estate loans. The primary concern in commercial real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors to provide annual financial statements on commercial real estate loans. In reaching a decision on whether to make a commercial real estate

loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. We have generally required that the properties securing these real estate loans have an aggregate debt service ratio, including the guarantor’s cash flow and the borrower’s other projects, of at least 1.20x. An environmental phase one report is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

If we foreclose on a commercial real estate loan, the marketing and liquidation period to convert the real estate asset to cash can be lengthy with substantial holding costs. In addition, vacancies, deferred maintenance, repairs and market stigma can result in prospective buyers expecting sale price concessions to offset their real or perceived economic losses for the time it takes them to return the property to profitability. Depending on the individual circumstances, initial charge-offs and subsequent losses on commercial real estate loans can be unpredictable and substantial.

Commercial and Industrial Loans. Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business and the collateral securing these loans may fluctuate in value. Our commercial and industrial loans are originated primarily based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral consists of real estate, accounts receivable, inventory or equipment. Credit support provided by the borrower for most of these loans is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value. As a result, the availability of funds for the repayment of commercial and industrial loans may depend substantially on the success of the business itself.

Construction and Land Loans. Our construction loans are based upon estimates of costs and values associated with the completed project. Underwriting is focused on the borrowers’ financial strength, credit history and demonstrated ability to produce a quality product and effectively market and manage their operations.

Construction lending involves additional risks when compared with permanent lending because funds are advanced upon the security of the project, which is of uncertain value prior to its completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. In addition, generally during the term of a construction loan, interest may be funded by the borrower or disbursed from an interest reserve set aside from the construction loan budget. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If the appraised value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss.

Balloon Loans. Although balloon mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they reprice at the end of the term, the ability of the borrower to renew or repay the loan and the marketability of the underlying collateral may be adversely affected if real estate values decline prior to the expiration of the term of the loan or in a rising interest rate environment.

Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, an increased monthly payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying collateral also may be adversely affected in a high interest rate environment.

Consumer Loans. Consumer loans may entail greater risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as motor vehicles. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Originations, Purchases and Sales of Loans

Lending activities are conducted by our salaried loan personnel operating at our main and branch office locations and our loan production office. All loans originated by us are underwritten pursuant to our policies and procedures. We primarily originate fixed-rate loans and balloon loans and, to a lesser extent, adjustable-rate loans. Our ability to originate fixed-rate loans, balloon loans or adjustable-rate loans is dependent upon relative customer demand for such loans, which is affected by current and expected future levels of market interest rates. We originate real estate and other loans through our loan officers, marketing efforts, our customer base, walk-in customers and referrals from real estate brokers, builders and attorneys.

We sometimes purchase whole loans from third parties to supplement our loan production. These loans generally consist of loans to health care professionals and loans secured by manufactured housing. At September 30, 2016, we had $7.1 million of whole loans that we purchased. The majority of our purchased loans are to borrowers who are not located in our primary market area.

In addition, from time to time, we may purchase or sell participation interests in loans. We underwrite our participation interest in the loan that we are purchasing according to our own underwriting criteria and procedures. At September 30, 2016, we had $750,000 of committed funds for loan participation interests that we purchased ($26,000 of which had been funded), and at that date, we had no loans for which we had sold participation interests.

Historically, we have not originated significant amounts of loans for sale, but we intend to increase this activity in the future in order to manage the duration and time to repricing of our loan portfolio, and to generate fee income. We currently sell loans through the LenderSelect Mortgage Group. At September 30, 2016, we held $472,000 of loans for sale, and we sold $2.3 million of loans during the year ended September 30, 2016, all on a servicing-released basis, generating $58,000 in fee income.

Loan Approval Procedures and Authority

Pursuant to federal law, the aggregate amount of loans that Newton Federal Bank is permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of Newton Federal Bank’s unimpaired capital and surplus (25% if the amount in excess of 15% is secured by “readily marketable collateral” or 30% for certain residential development loans). At September 30, 2016, based on the 15% limitation, Newton Federal Bank’s loans-to-one-borrower limit was approximately $6.8 million. On the same date, Newton Federal Bank had no borrowers with outstanding balances in excess of this amount. At September 30, 2016, our largest loan relationship with one borrower was for $3.7 million, which was secured by land, homes that are being constructed and personal guarantees, and the underlying loans were performing in accordance with their terms on that date. Our loan-to-one borrower limitation will increase following the completion of the stock offering due to the additional capital Newton Federal Bank will receive.

Our lending is subject to written underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower, credit histories that we obtain, and property valuations (consistent with our appraisal policy) prepared by outside independent

licensed appraisers approved by our board of directors as well as internal evaluations, where permitted by regulations. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, bank statements and tax returns.

All loan approval amounts are based on the aggregate loans, including total balances of outstanding loans and the proposed loan to the individual borrower and any related entity. Each of our President and Chief Executive Officer, our Chief Credit Officer and our Chief Lending Officer has individual authorization to approve loans up to $500,000. These individuals can combine their authority to approve loans up to $1.0 million. Our Management Loan Committee, which consists of our President and Chief Executive Officer, Chief Credit Officer, Chief Lending Officer, Chief Operations Officer, a Commercial Lending Officer and an outside board member can approve loans up to $2.0 million in the aggregate. Loans in excess of $2.0 million require the approval of our full board of directors.

Generally, we require title insurance or abstracts on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan.

Delinquencies and Asset Quality

Delinquency Procedures. When a loan payment becomes 15 days past due, we contact the customer by mailing a late notice, and loan officers may contact their customers. If a loan payment becomes 30 days past due, we mail an additional late notice and a loan-specific letter written by a collection representative, and we also place telephone calls to the borrower. These loan collection efforts continue until a loan becomes 90 days past due, at which point we would refer the loan for foreclosure proceedings unless management determines that it is in the best interest of Newton Federal Bank to work further with the borrower to arrange a workout plan. The foreclosure process would begin when a loan becomes 120 days delinquent. From time to time we may accept deeds in lieu of foreclosure.

Loans Past Due and Non-Performing Assets . Loans are reviewed on a regular basis. Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. When a loan is determined to be impaired, the measurement of the loan in the allowance for loan losses is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for loan losses, or, if the existing allowance is inadequate, charged to expense of the current period. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

A loan is classified as a troubled debt restructuring if, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession to the borrower that we would not otherwise consider. This usually includes a modification of loan terms, such as a reduction of the interest rate to below market terms, capitalizing past due interest or extending the maturity date and possibly a partial forgiveness of the principal amount due. Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months.

Delinquent Loans . The following tables set forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.


	At September 30,
	2016						2015						2014
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due
	(In thousands)
Real estate loans:
One- to four-family residential	$	32	$	3,382	$	1,955	$	—	$	2,909	$	1,598	$	—	$	3,244	$	1,583
Commercial		—		66		44		—		408		50		—		564		509
Construction and land		—		—		—		—		—		—		—		11		—
Commercial and industrial loans		194		—		—		—		—		33		—		243		—
Consumer loans		20		—		—		—		15		20		—		18		—

Total	$	246	$	3,448	$	1,999	$	—	$	3,332	$	1,701	$	—	$	4,080	$	2,092


	At September 30,
	2013						2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due
	(In thousands)
Real estate loans:
One- to four-family residential	$	4,894	$	958	$	1,118	$	4,833	$	3,193	$	1,961
Commercial		447		—		28		438		1,165		438
Construction and land		109		—		—		435		366		—
Commercial and industrial loans		—		—		30		—		—		435
Consumer loans		—		—		—		17		—		8

Total	$	5,450	$	958	$	1,176	$	5,723	$	4,724	$	2,842

Non-Performing Assets. The following table sets forth information regarding our non-performing assets. Non-accrual loans include non-accruing troubled debt restructurings of $810,000, $1.3 million, $1.4 million, $3.4 million and $4.9 million as of September 30, 2016, 2015, 2014, 2013 and 2012, respectively.


	At September 30,
	2016			2015			2014			2013			2012
	(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One- to four-family residential	$	3,013		$	2,056		$	2,269		$	5,295		$	8,365
Commercial		230			448			777			1,952			3,581
Construction and land		—			—			—			—			581
Commercial and industrial loans		—			33			—			335			434
Consumer loans		—			26			—			—			8

Total non-accrual loans		3,243			2,563			3,046			7,582			12,969

Accruing loans past due 90 days or more		—			—			—			—			—
Real estate owned:
One- to four-family		—			—			822			1,239			4,226
Commercial		—			470			—			64			1,159
Construction and land		—			62			307			577			577
Commercial and industrial loans		—			—			—			—			—
Consumer loans		—			—			—			—			—

Total real estate owned		—			532			1,129			1,880			5,962

Total non-performing assets	$	3,243		$	3,095		$	4,175		$	9,462		$	18,931

Total accruing troubled debt restructured loans	$	5,815		$	4,358		$	4,845		$	3,730		$	2,716
Total non-performing loans to total loans		1.71	%		1.51	%		1.75	%		4.21	%		7.05	%
Total non-performing assets to total assets		1.39	%		1.37	%		1.84	%		4.26	%		8.25	%

Interest income that would have been recorded for the year ended September 30, 2016 had non-accruing loans been current according to their original terms amounted to $401,000. We recognized $288,000 of interest income for these loans for the year ended September 30, 2016. In addition, interest income that would have been recorded for the year ended September 30, 2016 had troubled debt restructurings been current according to their original terms, amounted to $54,000. We recognized no interest income for these loans for the year ended September 30, 2016.

Classified Assets . Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the Office of the Comptroller of the Currency to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses. General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When

an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific loss allowances.

In connection with the filing of our periodic reports with the Office of the Comptroller of the Currency and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations.

On the basis of this review of our assets, our classified and special mention assets at the dates indicated were as follows:


	At September 30,
	2016		2015
	(In thousands)
Substandard assets	$	10,027	$	11,880
Doubtful assets		—		—
Loss assets		—		—

Total classified assets	$	10,027	$	11,880

Special mention assets	$	229	$	2,591

Allowance for Loan Losses

The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb probable credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses. Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.

As an integral part of their examination process, the Office of the Comptroller of the Currency will periodically review our allowance for loan losses. Such agency may require that we recognize additions to the allowance based on their judgment of information available to them at the time of their examination.

The following table sets forth activity in our allowance for loan losses for the years indicated.


	Years Ended September 30,
	2016			2015			2014			2013			2012
	(Dollars in thousands)
Allowance at beginning of year	$	5,874		$	5,708		$	5,947		$	5,694		$	5,032
Provision for loan losses		—			—			—			3,147			9,017
Charge offs:
Real estate loans:
One- to four-family residential		(337	)		(438	)		(1,214	)		(4,073	)		(7,018	)
Commercial		(1,796	)		(20	)		(132	)		(386	)		(1,211	)
Construction and land		—			—			(125	)		(230	)		(519	)
Commercial and industrial loans		—			—			(48	)		(243	)		—
Consumer loans		(12	)		(18	)		(1	)		(38	)		(12	)

Total charge-offs		(2,145	)		(476	)		(1,520	)		(4,970	)		(8,760	)

Recoveries:
Real estate loans:
One- to four-family residential		341			356			970			1,816			401
Commercial		233			130			281			12			—
Construction and land		—			—			23			120			—
Commercial and industrial loans		—			154			7			127			—
Consumer loans		6			2			—			1			4

Total recoveries		580			642			1,281			2,076			405

Net (charge-offs) recoveries		(1,565	)		166			(239	)		(2,984	)		(8,355	)

Allowance at end of year	$	4,309		$	5,874		$	5,708		$	5,947		$	5,694

Allowance to non-performing loans		132.87	%		229.18	%		187.39	%		78.44	%		43.90	%
Allowance to total loans outstanding at the end of the year		2.22	%		3.34	%		3.17	%		3.20	%		3.00	%
Net (charge-offs) recoveries to average loans outstanding during the year		(0.86	)%		0.09	%		(0.13	)%		(1.56	)%		(4.24	)%

Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


	At September 30,
	2016								2015								2014
	Allowance for Loan Losses		Percent of Allowance in Each Category to Total Allocated Allowance			Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Allowance in Each Category to Total Allocated Allowance			Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Allowance in Each Category to Total Allocated Allowance			Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real estate loans:
One- to four-family residential	$	1,882		43.78	%		68.54	%	$	3,486		62.47	%		75.42	%	$	3,424		67.83	%		77.84	%
Commercial		1,595		37.10			15.04			1,238		22.19			13.99			1,034		20.48			14.38
Construction and land		143		3.32			6.88			67		1.20			1.28			55		1.09			0.45
Commercial and industrial loans		643		14.96			8.37			739		13.24			8.16			495		9.81			6.47
Consumer loans		36		0.84			1.17			50		0.90			1.15			40		0.79			0.86

Total allocated allowance		4,299		100.00	%		100.00	%		5,580		100.00	%		100.00	%		5,048		100.00	%		100.00	%

Unallocated		10								294								660

Total	$	4,309							$	5,874							$	5,708


	At September 30,
	2013								2012
	Allowance for Loan Losses		Percent of Allowance in Each Category to Total Allocated Allowance			Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Allowance in Each Category to Total Allocated Allowance			Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real estate loans:
One- to four-family residential	$	4,243		73.57	%		79.26	%	$	4,960		87.11	%		81.71	%
Commercial		1,021		17.70			13.37			619		10.87			14.29
Construction and land		92		1.60			0.65			107		1.88			1.04
Commercial and industrial loans		389		6.75			5.95			2		0.04			2.19
Consumer loans		22		0.38			0.77			6		0.10			0.77

Total allocated allowance		5,767		100.00	%		100.00	%		5,694		100.00	%		100.00	%

Unallocated		180								—

Total	$	5,947							$	5,694

Investment Activities

General . The goals of our investment policy are to provide liquidity, meet pledging requirements, generate a reasonable rate of return, and minimize risk. Subject to loan demand and our interest rate risk analysis, we will increase the balance of our investment securities portfolio when we have excess liquidity. We expect to initially invest a substantial portion of the proceeds of the offering in short-term and other investments, including U.S. government securities.

Our investment policy was adopted by the board of directors and is reviewed annually by the board of directors. All investment decisions are made by our Asset/Liability Management Committee, consisting of our President and Chief Executive Officer, the Chairman of the Board, another member of the board of directors, and other members of senior management. The Chief Financial Officer provides an investment schedule detailing the investment portfolio which is reviewed at least monthly by the board of directors.

Our current investment policy permits, with certain limitations: investments in U.S. Treasury securities; securities issued by the U.S. government and its agencies or government sponsored enterprises including mortgage-backed securities and collateralized mortgage obligations (“CMO”) issued by Fannie Mae, Ginnie Mae and Freddie Mac; corporate and municipal bonds; certificates of deposit in other financial institutions; federal funds and money market funds.

At September 30, 2016, our investment portfolio consisted of securities and obligations issued by U.S. government-sponsored enterprises or the Federal Home Loan Bank of Atlanta. At September 30, 2016, we owned $205,000 of Federal Home Loan Bank of Atlanta stock. As a member of Federal Home Loan Bank of Atlanta, we are required to purchase stock in the Federal Home Loan Bank of Atlanta, which stock is carried at cost and classified as restricted equity securities.

The following table sets forth the amortized cost and estimated fair value of our held-to-maturity securities portfolio at the dates indicated. At the dates indicated, we did not hold any securities as available for sale.


	At September 30,
	2016				2015				2014
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In thousands)
U.S. Government sponsored enterprises	$	7,499	$	7,517	$	7,492	$	7,533	$	6,986	$	6,989

Total	$	7,499	$	7,517	$	7,492	$	7,533	$	6,986	$	6,989

The following table sets forth the amortized cost and estimated fair value of securities of issuers as of September 30, 2016, that exceeded 10% of our total equity as of that date.


	At September 30, 2016
	Amortized Cost		Estimated Fair Value
	(In thousands)
Federal Home Loan Bank bonds	$	5,999	$	6,012

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at September 30, 2016, are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. All of our securities at September 30, 2016, were taxable securities.


	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years				More than Ten Years				Total
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
U.S. Government sponsored enterprises	$	6,499		0.90	%	$	1,000		1.60	%	$	—		—	$	—		—	$	7,499	$	7,517		1.00	%

Total	$	6,499		0.90	%	$	1,000		1.60	%	$	—		—	$	—		—	$	7,499	$	7,517		1.00	%

Sources of Funds

General. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also may use borrowings to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds, but we have not needed to utilize borrowings in recent periods. In addition, we receive funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

Deposits. Our deposits are generated primarily from our primary market area. We offer a selection of deposit accounts, including savings accounts, checking accounts, certificates of deposit and individual retirement accounts. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. We have not accepted brokered deposits in recent periods, although we have the authority to do so.

Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. We rely upon personalized customer service, long-standing relationships with customers, and the favorable image of Newton Federal Bank in the community to attract and retain deposits. We also seek to obtain deposits from our commercial loan customers.

The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, we believe that our deposits are relatively stable. However, the ability to attract and maintain deposits and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions.

The following table sets forth the distribution of total deposits by account type at the dates indicated.


	At September 30,
	2016								2015								2014
	Amount		Percent			Average Rate			Amount		Percent			Average Rate			Amount		Percent			Average Rate
	(Dollars in thousands)
Non-interest bearing checking accounts	$	21,727		11.96	%		—	%	$	15,132		8.56	%		—	%	$	13,276		7.41	%		—	%
Passbook savings accounts		21,180		11.65			0.04	%		19,906		11.27			0.04	%		19,559		10.91			0.04	%
Interest-bearing checking accounts		30,662		16.88			0.31	%		22,750		12.88			0.17	%		16,991		9.48			0.04	%
Money market checking accounts		22,607		12.44			0.26	%		22,587		12.78			0.25	%		23,689		13.21			0.27	%
Certificates of deposit		85,523		47.07			1.39	%		96,312		54.51			1.70	%		105,749		58.99			1.89	%

Total	$	181,699		100.00	%		0.87	%	$	176,687		100.00	%		1.11	%	$	179,264		100.00	%		1.28	%

As of September 30, 2016, the aggregate amount of all our certificates of deposit in amounts greater than or equal to $100,000 was approximately $35.0 million. The following table sets forth the maturity of these certificates as of September 30, 2016.


	At September 30, 2016
	(In thousands)
Maturity Period:
Three months or less	$	5,319
Over three through six months		2,436
Over six through twelve months		6,102
Over twelve months		21,159

Total	$	35,016

Borrowings . As of September 30, 2016, we had a $58.0 million line of credit with the Federal Home Loan Bank of Atlanta. Other than annual testing of the line of credit where we borrow $5.0 million for one day, we did not have any outstanding borrowings during the years ended September 30, 2016, 2015 or 2014.

In addition to the Federal Home Loan Bank of Atlanta line of credit, we have two unsecured federal funds line of credit, in the amounts of $5.0 million and $7.5 million. No amount was outstanding on these lines of credit at September 30, 2016 or during the 2016 fiscal year, except for amounts required for annual testing.

Properties

As of September 30, 2016, the net book value of our office properties was $3.8 million, and the net book value of our furniture, fixtures and equipment was $532,000. The following table sets forth information regarding our offices.


Location	Leased or Owned	Year Acquired or Leased	Net Book Value of Real Property
			(In thousands)
Main Office:
3175 Highway 278	Owned	1974	$	1,169
Covington, Georgia 30014
Other Properties:
Eastside Branch	Owned	2000		1,514
8278 Highway 278
Covington, Georgia 30014
Southside Branch	Building	2006		1,110
Bypass Road & Highway 36	Owned/Land
10131 Carlin Avenue	Leased
Covington, Georgia 30014
Loan Production Office	Leased	2016		N/A
3001 Monroe Highway
Suite 500B
Bogart, Georgia 30622

We believe that current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion.

Legal Proceedings

We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business. At September 30, 2016, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

Expense and Tax Allocation

Newton Federal Bank will enter into an agreement with Community First Bancshares, Inc. and Community First Bancshares, MHC to provide them with certain administrative support services for compensation not less than the fair market value of the services provided. In addition, Newton Federal Bank and Community First Bancshares, Inc. will enter into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability.

Personnel

As of September 30, 2016, we had 65 full-time employees and two part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.

TAXATION

Newton Federal Bank is, and Community First Bancshares, MHC and Community First Bancshares, Inc. will be, subject to federal and state income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal and state taxation is intended only to summarize material income tax matters and is not a comprehensive description of the tax rules applicable to Community First Bancshares, MHC, Community First Bancshares, Inc., and Newton Federal Bank.

Our federal and state tax returns have not been audited for the past five years.

Federal Taxation

Method of Accounting. For federal income tax purposes, Newton Federal Bank currently reports its income and expenses on the accrual method of accounting and uses a tax year ending September 30 for filing its federal income tax returns. Community First Bancshares, Inc. and Newton Federal Bank will file a consolidated federal income tax return. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for income taxes on bad debt reserves by savings institutions. For taxable years beginning after 1995, Newton Federal Bank has been subject to the same bad debt reserve rules as commercial banks. It currently utilizes the specific charge-off method under Section 582(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, less an exemption amount, referred to as “alternative minimum taxable income.” The alternative minimum tax is payable to the extent tax computed this way exceeds tax computed by applying the regular tax rates to regular taxable income. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. After the computation of taxes for the fiscal year ended September 30, 2016, Newton Federal Bank anticipates that it will have approximately $16,000 of minimum tax credit carryforward to utilize in the future. The credit is not subject to expiration.

Net Operating Loss Carryovers. Generally, a financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At September 30, 2016, Newton Federal Bank had no federal net operating loss carryforwards.

Capital Loss Carryovers. A corporation cannot recognize capital losses in excess of capital gains generated. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which carried and is used to offset any capital gains. Any undeducted loss remaining after the five-year carryover period is not deductible. At September 30, 2016, Newton Federal Bank had no capital loss carryovers.

Corporate Dividends. Community First Bancshares, Inc. may generally exclude from its income 100% of dividends received from Newton Federal Bank as a member of the same affiliated group of corporations.

State Taxation

Newton Federal Bank is treated as a financial institution under Georgia state income tax law. The state of Georgia subjects financial institutions to all state and local taxes in the same manner and to the same extent as other business corporations in Georgia. Additionally, depository financial institutions are subject to local business license taxes and a special occupation tax.

Consolidated Group Return. Georgia is not a unitary business state. Affiliated corporations that file a consolidated federal income tax return must file separate income tax returns unless they have prior approval or have been requested to file a consolidated return by the Commissioner of the Georgia Department of Revenue.

Net Operating Loss Carryovers. Generally, Georgia law conforms to federal law and a financial institution may carry back Georgia net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At September 30, 2016, Newton Federal Bank had no Georgia net operating loss carryforwards.

Bank Tax Credit. All financial depositary institutions that conduct business or own property in Georgia are required to file a Georgia Financial Institutions Business Occupation Tax based on Georgia gross receipts. Any local license tax and state occupation tax paid a depository financial institution is credited dollar for dollar against any state corporate income tax liability of such institution for the tax year during which any such tax is paid. Any unused credits may be carried forward for five years. At September 30, 2016, Newton Federal Bank had $380,000 of bank tax credits available for future use.

REGULATION AND SUPERVISION

General

As a federal savings association, Newton Federal Bank is subject to examination, supervision and regulation, primarily by the Office of the Comptroller of the Currency, and, secondarily, by the Federal Deposit Insurance Corporation (“FDIC”) as deposits insurer. Prior to July 21, 2011, the Office of Thrift Supervision was Newton Federal Bank’s primary federal regulator. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which is discussed further below, eliminated the Office of Thrift Supervision and transferred the Office of Thrift Supervision’s functions relating to federal savings associations, including rulemaking authority, to the Office of the Comptroller of the Currency, effective July 21, 2011. The federal system of regulation and supervision establishes a comprehensive framework of activities in which Newton Federal Bank may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund.

Newton Federal Bank is also regulated to a lesser extent by the Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” which governs the reserves to be maintained against deposits and other matters. In addition, Newton Federal Bank is a member of and owns stock in the Federal Home Loan Bank of Atlanta, which is one of the 11 regional banks in the Federal Home Loan Bank System. Newton Federal Bank’s relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a lesser extent, state law, including in matters concerning the ownership of deposit accounts and the form and content of Newton Federal Bank’s loan documents.

As a savings and loan holding company, Community First Bancshares, Inc. will be subject to examination and supervision by, and be required to file certain reports with, the Federal Reserve Board. The Office of Thrift Supervision’s functions relating to savings and loan holding companies were transferred to the Federal Reserve Board on July 21, 2011 pursuant to the Dodd-Frank Act regulatory restructuring. Community First Bancshares, Inc. will also be subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Set forth below are certain material regulatory requirements that are applicable to Newton Federal Bank and Community First Bancshares, Inc. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on Newton Federal Bank and Community First Bancshares, Inc. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on Community First Bancshares, Inc., Newton Federal Bank and their operations.

Dodd-Frank Act

As noted above, the Dodd-Frank Act made significant changes to the regulatory structure for depository institutions and their holding companies. However, the Dodd-Frank Act’s changes go well beyond that and affect the lending, investments and other operations of all depository institutions. The Dodd-Frank Act required the Federal Reserve Board to set minimum capital levels for both bank holding companies and savings and loan holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital for holding companies were restricted to capital instruments that were then currently considered to be Tier 1 capital for insured depository institutions. Subsequent regulations issued by the Federal Reserve Board generally exempted from these requirements bank and savings and loan holding companies of less than $1 billion of consolidated assets. The legislation also established a floor for capital of insured depository institutions that cannot be lower than the standards in effect upon passage, and directed the federal banking regulators to implement new leverage and capital requirements that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as Newton Federal Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets continue to be examined for compliance by their applicable bank regulators. The new legislation also weakened the federal preemption available for national banks and federal savings associations, and gave state attorneys general the ability to enforce applicable federal consumer protection laws.

The Dodd-Frank Act broadened the base for FDIC insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a financial institution. The legislation also permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008. The Dodd-Frank Act increased stockholder influence over boards of directors by requiring publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments. The legislation also directed the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded. Further, the legislation required that originators of securitized loans retain a percentage of the risk for transferred loans, directed the Federal Reserve Board to regulate pricing of certain debit card interchange fees and contained a number of reforms related to mortgage origination.

Many provisions of the Dodd-Frank Act involve delayed effective dates and/or require implementing regulations. The implementation of the legislation is an ongoing process and the impact on operations cannot yet fully be assessed. However, there is a significant likelihood that the Dodd-Frank Act will result in an increased regulatory burden and compliance, operating and interest expense for Newton Federal Bank and Community First Bancshares, Inc.

Federal Banking Regulation

Business Activities. A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and applicable federal regulations. Under these laws and regulations, Newton Federal Bank may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. The Dodd-Frank Act authorized, for the first time, the payment of interest on commercial checking accounts, effective July 21, 2011. Newton Federal Bank may also establish, subject to specified investment limits, service corporation subsidiaries that may engage in certain activities not otherwise permissible for Newton Federal Bank, including real estate investment and securities and insurance brokerage.

Examinations and Assessments. Newton Federal Bank is primarily supervised by the Office of the Comptroller of the Currency. Newton Federal Bank is required to file reports with and is subject to periodic examination by the Office of the Comptroller of the Currency. Newton Federal Bank is required to pay assessments to the Office of the Comptroller of the Currency to fund the agency’s operations.

Capital Requirements. Federal regulations require FDIC-insured depository institutions, including federal savings associations, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.

The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and Total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively. The regulations also establish a minimum required leverage ratio of at least 4% Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus Additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019.

At September 30, 2016, Newton Federal Bank’s capital exceeded all applicable requirements. See “Historical and Pro Forma Regulatory Capital Compliance.”

Loans-to-One Borrower. Generally, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by “readily marketable collateral,” which generally includes certain financial instruments (but not real estate). As of September 30, 2016, Newton Federal Bank was in compliance with the loans-to-one borrower limitations.

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

Prompt Corrective Action Regulations . Under the federal Prompt Corrective Action statute, the Office of the Comptroller of the Currency is required to take supervisory actions against undercapitalized institutions under its jurisdiction, the severity of which depends upon the institution’s level of capital. An institution that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4% is considered to be “undercapitalized.” A savings institution that has total risk-based capital of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be “significantly undercapitalized.” A savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be “critically undercapitalized.”

Generally, the Office of the Comptroller of the Currency is required to appoint a receiver or conservator for a federal savings association that becomes “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the Office of the Comptroller of the Currency within 45 days of the date that a federal savings association is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company of a federal savings association that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5.0% of the savings association’s assets at the time it was deemed to be undercapitalized by the Office of the Comptroller of the Currency or the amount necessary to restore the savings association to adequately capitalized status. This guarantee remains in place until the Office of the Comptroller of the Currency notifies the savings association that it has maintained adequately capitalized status for each of four consecutive calendar quarters. Institutions that are undercapitalized become subject to certain mandatory measures such as restrictions on capital distributions and asset growth. The Office of the Comptroller of the Currency may also take any one of a number of discretionary supervisory actions against undercapitalized federal savings associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.

At September 30, 2016, Newton Federal Bank met the criteria for being considered “well capitalized,” which means that its total risk-based capital ratio exceeded 10%, its Tier 1 risk-based ratio exceeded 8.0%, its common equity Tier 1 ratio exceeded 6.5% and its leverage ratio exceeded 5.0%

Qualified Thrift Lender Test. As a federal savings association, Newton Federal Bank must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, Newton Federal Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of every 12-month period. “Portfolio assets” generally means total assets of a savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings association’s business.

Alternatively, Newton Federal Bank may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code.

A savings association that fails the qualified thrift lender test must operate under specified restrictions set forth in the Home Owners’ Loan Act. The Dodd-Frank Act made noncompliance with the QTL test subject to agency enforcement action for a violation of law. At September 30, 2016, Newton Federal Bank satisfied the QTL test.

Capital Distributions. Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account. A federal savings association must file an application with the Office of the Comptroller of the Currency for approval of a capital distribution if:

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the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus the savings association’s retained net income for the preceding two years;

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the savings association would not be at least adequately capitalized following the distribution;

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the distribution would violate any applicable statute, regulation, agreement or regulatory condition; or

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the savings association is not eligible for expedited treatment of its filings.

Even if an application is not otherwise required, every savings association that is a subsidiary of a savings and loan holding company, such as Newton Federal Bank, must file a notice with the Federal Reserve Board at least 30 days before the board of directors declares a dividend.

An application or notice related to a capital distribution may be disapproved if:

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the federal savings association would be undercapitalized following the distribution;

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the proposed capital distribution raises safety and soundness concerns; or

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the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

In addition, the Federal Deposit Insurance Act provides that an insured depository institution shall not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement. A federal savings association also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form.

Community Reinvestment Act and Fair Lending Laws. All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. In connection with its examination of a federal savings association, the Office of the Comptroller of the Currency is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act. A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of the Comptroller of the Currency, as well as other federal regulatory agencies and the Department of Justice.

The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. Newton Federal Bank received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination.

Transactions with Related Parties. A federal savings association’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with an insured depository institution such as Newton Federal Bank. Community First Bancshares, Inc. will be an affiliate of Newton Federal Bank because of its control of Newton Federal Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

Newton Federal Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions generally require that extensions of credit to insiders:

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be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

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not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Newton Federal Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved by Newton Federal Bank’s board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

Enforcement. The Office of the Comptroller of the Currency has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association. Formal enforcement action by the Office of the Comptroller of the Currency may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution to the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1.0 million per day. The FDIC also has the authority to terminate deposit insurance or recommend to the Office of the Comptroller of the Currency that enforcement action be taken with respect to a particular savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances.

Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC insured financial institutions such as Newton Federal Bank. Deposit accounts in Newton Federal Bank are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts.

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, insured institutions were assigned a risk category based on supervisory evaluations, regulatory capital levels and certain other factors. An institution’s rate depended upon the category to which it is assigned, and certain adjustments specified by FDIC regulations. Institutions deemed less risky pay lower FDIC assessments. The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity.

Effective July 1, 2016, the FDIC adopted changes that eliminated the risk categories. Assessments for most institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years. In conjunction with the Deposit Insurance Fund reserve ratio achieving 1.5%, the assessment range (inclusive of possible adjustments) was reduced for most banks and savings associations to 1.5 basis points to 30 basis points.

In addition to the FDIC assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended September 30, 2016, the annualized FICO assessment was equal to 0.56 basis points of total assets less tangible capital.

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of Newton Federal Bank. Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

Federal Home Loan Bank System. Newton Federal Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Atlanta, Newton Federal Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of September 30, 2016, Newton Federal Bank was in compliance with this requirement. While Newton Federal Bank’s ability to borrow from the Federal Home Loan Bank of Atlanta provides an additional source of liquidity, Newton Federal Bank has historically not used Federal Home Loan Bank advances to fund its operations.

Other Regulations

Interest and other charges collected or contracted for by Newton Federal Bank are subject to state usury laws and federal laws concerning interest rates. Newton Federal Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

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Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

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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;

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Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

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Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

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Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

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Truth in Savings Act; and

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rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of Newton Federal Bank also are subject to the:

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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;

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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;

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Check Clearing for the 21st 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;

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The USA PATRIOT Act, which requires savings associations 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

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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 institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

General . Community First Bancshares, Inc. and Community First Bancshares, MHC will be non-diversified savings and loan holding companies within the meaning of the Home Owners’ Loan Act. As such, Community First Bancshares, Inc. and Community First Bancshares, MHC will be registered with the Federal Reserve Board and be subject to the regulation, examination, supervision and reporting requirements applicable to savings and loan holding companies. In addition, the Federal Reserve Board has enforcement authority over Community First Bancshares, Inc., Community First Bancshares, MHC and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

Permissible Activities. Under present law, the business activities of Community First Bancshares, Inc. and Community First Bancshares, MHC are generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, provided certain conditions are met and financial holding company status is elected, or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to regulatory approval, and certain additional activities authorized by federal regulations. Community First Bancshares, Inc. and Community First Bancshares, MHC have not elected financial holding company status.

Federal law prohibits a savings and loan holding company, including Community First Bancshares, Inc. and Community First Bancshares, MHC, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5.0% of another savings institution or savings and loan holding company, without prior Federal Reserve Board approval. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board considers factors such as the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

The Federal Reserve Board is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

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the approval of interstate supervisory acquisitions by savings and loan holding companies; and

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the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

Capital. Savings and loan holding companies have historically not been subjected to consolidated regulatory capital requirements. The Dodd-Frank Act required the Federal Reserve Board to establish for all bank and savings and loan holding companies minimum consolidated capital requirements that are as stringent as those required for the insured depository subsidiaries. However, pursuant to legislation passed in December 2014, the Federal Reserve Board extended to savings and loan holding companies the applicability of the “Small Bank Holding Company” exception to its consolidated capital requirements and increased the threshold for the exception from $500 million of assets to $1.0 billion, effective May 15, 2015. As a result, savings and loan holding companies with less than $1.0 billion in consolidated assets are generally not subject to the capital requirements unless otherwise advised by the Federal Reserve Board.

Source of Strength. The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has issued regulations requiring that all savings and loan holding companies serve as a source of strength to their subsidiary depository institutions.

Dividends and Stock Repurchases. The Federal Reserve Board has issued a policy statement regarding the payment of dividends by holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition. Separate regulatory guidance provides for prior consultation with Federal Reserve Bank staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a savings and loan holding company to pay dividends may be restricted if a subsidiary savings association becomes undercapitalized. The regulatory guidance also states that a savings and loan holding company should inform Federal Reserve Bank supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the savings and loan holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the ability of Community First Bancshares, Inc. to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

Waivers of Dividends by Community First Bancshares, MHC . Community First Bancshares, Inc. may pay dividends on its common stock to public stockholders. If it does, it is also required to pay dividends to Community First Bancshares, MHC, unless Community First Bancshares, MHC elects to waive the receipt of dividends. Under the Dodd-Frank Act, Community First Bancshares, MHC must receive the approval of the Federal Reserve Board before it may waive the receipt of any dividends from Community First Bancshares, Inc. The Federal Reserve Board has issued an interim final rule providing that it will not object to dividend waivers under certain circumstances, including circumstances where the waiver is not detrimental to the safe and sound operation of the savings association and a majority of the mutual holding company’s members have approved the waiver of dividends by the mutual holding company within the previous twelve months. In addition, for a

“non-grandfathered” mutual holding company such as Community First Bancshares, MHC, each officer or director of Community First Bancshares, Inc. and Newtown Federal Bank, and any tax-qualified stock benefit plan or non-tax-qualified stock benefit plan in which such individual participates that holds any shares of stock to which the waiver would apply, must waive the right to receive any such dividend declared. In addition, any dividends waived by Community First Bancshares, MHC must be considered in determining an appropriate exchange ratio in the event of a conversion of the mutual holding company to stock form.

Acquisition. Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock. Under the Change in Bank Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.

Federal Securities Laws

Community First Bancshares, Inc.’s common stock will be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Community First Bancshares, Inc. will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act (the “JOBS Act”), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” Community First Bancshares, Inc. qualifies as an emerging growth company under the JOBS Act.

An “emerging growth company” may choose not to hold stockholder votes to approve annual executive compensation (more frequently referred to as “say-on-pay” votes) or executive compensation payable in connection with a merger (more frequently referred to as “say-on-golden parachute” votes). An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, Community First Bancshares, Inc. will also not be subject to the auditor attestation requirement or additional executive compensation disclosure so long as it remains a “smaller reporting company” under Securities and Exchange Commission regulations (generally less than $75 million of voting and non-voting equity held by non-affiliates). Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. Community First Bancshares, Inc. has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.0 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).

MANAGEMENT

Our Directors

The board of directors of Community First Bancshares, Inc. will initially consist of six members. Directors will serve three-year staggered terms so that approximately one-third of the directors will be elected at each annual meeting of stockholders. Because Community First Bancshares, MHC will own a majority of our outstanding common stock, we will be a “controlled corporation” within the meaning of the Nasdaq corporate governance guidelines. As a “controlled corporation,” we will be exempt from certain requirements, including that a majority of our board of directors be independent under those standards, and that executive compensation and director nominations be overseen by independent directors. However, at the present time, each of our directors, other than our President and Chief Executive Officer Johnny S. Smith, would be considered independent under the Nasdaq Stock Market corporate governance listing standards. See “—Board Independence” below.

The following table states our directors’ names, their ages as of September 30, 2016, and the calendar years when they began serving as directors of Newton Federal Bank:


Directors	Position	Age	Director Since	Current Term to Expire
Troy B. Brooks	Director	57	2007	2019
William D. Fortson, Jr.	Chairman of the Board	74	1998	2017
Marshall L. Ginn	Director	63	2004	2018
Bob W. Richardson	Director	68	1991	2019
Johnny S. Smith	President, Chief Executive Officer and Director	57	2016	2018
Edward P. Stone	Director	69	2001	2017

The business experience for the past five years of each of our directors is set forth below. The biographies also contain information regarding the person’s experience, qualifications, attributes or skills that caused the board of directors to determine that the person should serve as a director. Unless otherwise indicated, directors have held their positions for the past five years.

Troy B. Brooks is the Chief Financial Officer of Piedmont Newton Hospital, Inc., located in Covington, Georgia, where he has worked since 1986. Previously, Mr. Brooks was Chief Financial Officer at Healthcare Management Corporation in Columbus, Georgia; Chief Financial Officer at Upson Regional Medical Center in Thomaston, Georgia, and Assistant Controller at Humana Shoals Hospital in Sheffield, Alabama. He is a long-time member of the Georgia Chapter of the Healthcare Financial Management Association. Mr. Brooks has served as President of the Covington-Newton County Chamber of Commerce and served on the Executive Committee of that board for eight years. He has served as the Chairman of the Board of the Covington Family YMCA and also served as President of the Rockdale Swim League.

William D. Fortson, Jr. has over 47 years’ experience in the automobile industry, and has been the owner of Ginn Motor Company, located in Covington, Georgia, since 1987. Mr. Fortson has also served as member/manager of Ginn Chrysler, Jeep, Dodge, LLC since 2009. Mr. Fortson has strong marketing, sales, and customer service assessment skills, as well as significant experience in employee development, training, and business management.

Marshall L. Ginn has been a licensed real estate broker since 1996, and is an Associate Broker with RE/MAX Agents Realty, located in Covington, Georgia. Mr. Ginn assists in the purchase and sale of residential, commercial and industrial properties as well as raw land. Prior to joining RE/MAX, Mr. Ginn was co-founder of Medical Services South and founder of ELCO Medical, privately held corporations specializing in the marketing and sale of orthopedic implants and products. He has served as President of the East Metro Board of Realtors and Chairman of the Newton County Chamber of Commerce. Mr. Ginn brings the board of directors a unique perspective of the community in areas of economic development, residential housing and commercial opportunities.

Bob W. Richardson was a licensed pharmacist for 40 years until his retirement in 2010. Mr. Richardson was the owner and manager of People’s Drug Store, located in Covington, Georgia, beginning in 1979. Mr. Richardson is also the co-owner of Taziki’s Mediterranean Cafe, located in Athens, Georgia, which opened in 2014. Mr. Richardson’s experience as a small business owner gives him extensive insight into the customers who live in our market areas and economic developments affecting the communities in which we operate, as well as the challenges facing small businesses in our market area.

Johnny S. Smith has served as the President and Chief Executive Officer of Newton Federal Bank since February 2016, having joined Newton Federal Bank in 1992 as Comptroller. Mr. Smith served as an elected board member of the Newton County School System and is the Chairman of the Board of the Rotary Club of Covington Foundation. Mr. Smith’s positions as President and Chief Executive Officer foster clear accountability, effective decision-making, a clear and direct channel of communication from senior management to the full board of directors, and alignment on corporate strategy.

Edward P. Stone has served as the President and owner of Longleaf Hospice LLC, located in Covington, Georgia and Decatur, Georgia, since 2011, and previously served as the President of Peoples Home Health, located in Pensacola, Florida, beginning in 2008, as well as the President of Peoples Home Medical, located in Covington Georgia, beginning in 2009. He has been involved in the home healthcare industry since 1982. Mr. Stone’s experience gives him extensive insight into the challenges facing senior citizens and families who live in our market areas, as well as into matters related to small businesses and economic developments in our market area.

Executive Officers who are Not Directors

The following sets forth information regarding our executive officers who are not directors. Age information is as of September 30, 2016. The executive officers of Community First Bancshares, Inc. and Newton Federal Bank are elected annually.

Gregory J. Proffitt , age 48, was appointed our Executive Vice President and Chief Operations Officer in February 2016. Mr. Proffitt has been employed with Newton Federal Bank since 2005, serving as Senior Vice President and Chief Operations Officer beginning in November 2013 and as Controller and Compliance Officer. Prior to being employed with Newton Federal Bank, Mr. Proffitt has served in various roles with other companies including SunTrust Bank, The Federal Reserve Bank of Atlanta, John H. Harland Company, The Original Honey Baked Ham Company, Allied Automotive Group, and Blue Cross Blue Shield of Georgia.

Kenneth D. Lumpkin , age 51, is our Executive Vice President and Chief Lending and Marketing Officer, and has served in those positions since February 2016. Mr. Lumpkin previously served as our Vice President and Director of Sales and marketing, and joined Newton Federal Bank as a consultant in June 2014. From December 2012 to June 2014, Mr. Lumpkin was a licensed real estate agent for Progressive Realty LLC, located in Winder, Georgia. Mr. Lumpkin was not employed from June 2011 to December 2012, but previously worked at The Peoples Bank of Winder, Winder, Georgia, from 1998 to 2011, most recently as Executive Vice President and head of production. Prior to joining The Peoples Bank of Winder, Mr. Lumpkin served as Vice President and Commercial Lender at Regions Bank. He began his banking career in 1988 with Bank of America (formerly known as Bank South and Nations Bank).

Tessa M. Nolan , age 31, was named our Senior Vice President and Chief Financial Officer in February 2016, and served as our controller beginning in March 2014. Ms. Nolan joined Newton Federal Bank in August 2005.

Tara T. Williams , age 36, is our Senior Vice President and Chief Credit Officer. Ms. Williams joined Newton Federal Bank in 2014 as a Senior Credit Analyst in 2014, and was named Chief Credit Officer in 2015. Ms. Williams was previously a Business Credit Underwriter at First Citizens Bank, Columbia, South Carolina, where she began working in 2007.

Board Independence

The board of directors has determined that each of our directors, with the exception of President and Chief Executive Officer Johnny S. Smith, is “independent” as defined in the listing standards of the Nasdaq Stock Market. Mr. Smith is not considered independent because he is an executive officer of Newton Federal Bank. In determining the independence of our directors, the board of directors considered relationships between Newton Federal Bank and our directors that are not required to be reported under “—Transactions With Certain Related Persons,” below, consisting of deposit accounts that our directors maintain at Newton Federal Bank. In addition, we utilize the services of RE/MAX Agents Realty for certain real estate transactions, with which Director Marshall L. Ginn is an Associate Broker. We paid RE/MAX Agents Realty commissions of $14,930 for the year ended September 30, 2016.

Transactions With Certain Related Persons

The Sarbanes-Oxley Act of 2002 generally prohibits publicly traded companies from making loans to their executive officers and directors, but it contains a specific exemption from such prohibition for loans made by federally insured financial institutions, such as Newton Federal Bank, to their executive officers and directors in compliance with federal banking regulations. Federal regulations permit executive officers and directors to receive the same terms that are widely available to other employees as long as the director or executive officer is not given preferential treatment compared to the other participating employees. Newton Federal Bank makes loans to its employees through an employee loan program pursuant to which loans are made at a reduced rate. The reduced rate is 0.50% below the interest rate offered to the public. Employees also receive a 50% discount on loan origination fees.

The chart below lists our executive officers who participated in the employee loan program during the years ended September 30, 2016 and 2015, and certain information with respect to their loans. No other directors or executive officers of Newton Federal Bank participated in the employee loan program during the years ended September 30, 2016 or 2015.


Name	Type of Loan	Largest Aggregate Balance 10/01/15 to 9/30/16		Principal Balance 9/30/16		Principal Paid 10/01/15 to 9/30/16		Interest Paid 10/01/15 to 9/30/16		Interest Rate
Gregory J. Proffitt	Home Mortgage	$	285,318	$	278,365	$	6,953	$	9,847		3.49	%
Kenneth D. Lumpkin	Consumer	$	11,744	$	11,744	$	—	$	44		7.00	%
	Home Mortgage	$	395,433	$	389,318	$	6,638	$	17,644		3.49	%
	Consumer	$	3,672	$	—	$	3,672	$	266		9.49	%
Tessa M. Nolan	Home Mortgage	$	169,932	$	163,148	$	6,784	$	6,694		4.00	%
	Consumer	$	24,130	$	23,630	$	500	$	97		6.00	%
	Consumer	$	24,761	$	—	$	24,760	$	1,058		6.00	%


Name	Type of Loan	Largest Aggregate Balance 10/01/14 to 9/30/15		Principal Balance 9/30/15		Principal Paid 10/01/14 to 9/30/15		Interest Paid 10/01/14 to 9/30/15		Interest Rate
Gregory J. Proffitt	Home Mortgage	$	289,636	$	285,318	$	6,784	$	12,452		3.49	%
Kenneth D. Lumpkin	Home Mortgage	$	395,956	$	395,956	$	—	$	1,037		3.49	%
	Consumer	$	5,131	$	3,672	$	1,459	$	226		9.49	%
Tessa M. Nolan	Home Mortgage	$	175,299	$	169,932	$	6,286	$	7,212		4.00	%
	Consumer	$	24,760	$	24,760	$	470	$	79		6.00	%

At the time of termination of employment with Newton Federal Bank, the interest rate will be adjusted to the non-employee interest rate.

These loans neither involve more than the normal risk of collection nor present other unfavorable features. Federal regulations permit executive officers and directors to participate in loan programs that are available to other employees, as long as the director or executive officer is not given preferential treatment compared to other participating employees. Loans made to directors or executive officers, including any modification of such loans, must be approved by a majority of disinterested members of the board of directors. The interest rate on loans to directors and officers is the same as that offered to other employees.

Since October 1, 2014, other than described above, and except for loans to executive officers made in the ordinary course of business that were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Newton Federal Bank and for which management believes neither involve more than the normal risk of collection nor present other unfavorable features, we and our subsidiaries have not had any transaction or series of transactions, or business relationships, nor are any such transactions or relationships proposed, in which the amount involved exceeds $120,000 and in which our directors or executive officers have a direct or indirect material interest.

Meetings and Committees of the Board of Directors

We conduct business through meetings of our board of directors and its committees, including an Audit Committee and a Loan Committee. During the year ended September 30, 2016, the board of directors of Newton Federal Bank met 12 times. It is expected that the board of directors of Community First Bancshares, Inc. will establish a standing audit committee, which will operate under a written charter, which will govern its composition, responsibilities and operations.

Community First Bancshares, Inc.’s Audit Committee will consist of Directors Richardson (Chairman), Fortson and Stone. Compensation and nominating decisions will be made by the full board of directors, as permitted under Nasdaq Stock Market rules for “Controlled Companies.” We will be a Controlled Company because Community First Bancshares, MHC will own a majority of our outstanding shares of common stock.

Corporate Governance Policies and Procedures

In addition to establishing committees of our board of directors, Community First Bancshares, Inc. will adopt several policies to govern the activities of both Community First Bancshares, Inc. and Newton Federal Bank, including corporate governance policies and a code of business conduct and ethics. The corporate governance policies are expected to involve such matters as the following:

•

the composition, responsibilities and operation of our board of directors;

•

the establishment and operation of board committees, including audit, nominating and corporate governance and compensation committees;

•

convening executive sessions of independent directors; and

•

our board of directors’ interaction with management and third parties.

The code of business conduct and ethics, which is expected to apply to all employees and directors, will address conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules and regulations. In addition, the code of business conduct and ethics will be designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations.

Executive Compensation

Summary Compensation Table. The table below summarizes the total compensation paid to or earned by our President and Chief Executive Officer, our two other most highly compensated executive officers for the year ended September 30, 2016, and another individual who served as our President and Chief Executive Officer during the year ended September 30, 2016. Each individual listed in the table below is referred to as a “named executive officer.”


Summary Compensation Table
Name and principal position	Year		Salary ($)(1)		Bonus ($)(2)		All other Compensation ($)(4)		Total ($)
Johnny S. Smith, President and Chief Executive Officer		2016		150,999		2,558		14,700		168,257
Gregory J. Proffitt, Executive Vice President and Chief Operations Officer		2016		137,421		3,080		6,358		146,859
Kenneth D. Lumpkin, Executive Vice President and Chief Lending and Marketing Officer		2016		114,923		2,077		11,492		128,492
George Lazenby, Former President and Chief Executive Officer (4)		2016		63,654		3,672		259,499		326,825

(1)	The current annual base salaries for Messrs. Smith, Proffitt and Lumpkin are $170,000, $140,000, and $130,000, respectively.

(2)	Represents discretionary cash bonuses, which were paid during the year ending September 30, 2016, and includes a $569 ten-year service award for Mr. Proffitt.

(3)	A break-down of the various elements of compensation in this column is set forth in the following table:


All Other Compensation
Name	401(k) Profit Sharing ($)		401(k) Match ($)		Director Fees ($)		Automobile Allowance ($)		Club Dues ($)		Retirement/ Release ($)(a)		Total All Other Compensation ($)
Johnny S. Smith		4,300		2,400		3,500		—		4,500		—		14,700
Gregory J. Proffitt		4,300		1,374		—		—		684		—		6,358
Kenneth D. Lumpkin		3,096		3,448		—		2,800		2,148		—		11,492
George Lazenby		6,489		—		7,000		2,500		—		243,510		259,499

(4)

Mr. Lazenby retired as our President and Chief Executive Officer and as a member of the Board of Directors on January 15, 2016. In connection with his retirement, in exchange for a release of claims, Newton Federal agreed to pay Mr. Lazenby a total of $243,510 in cash, with the last payment made on February 13, 2017.

Benefit Plans and Agreements

401(k) Plan. Newton Federal Bank maintains the Newton Federal Bank 401(k) Profit Sharing Plan, a tax-qualified defined contribution plan for eligible employees (the “401(k) Plan”). The named executive officers are eligible to participate in the 401(k) Plan just like other employees. An employee must complete three months of service to be eligible to participate in the 401(k) Plan.

Under the 401(k) Plan a participant may elect to defer, on a pre-tax basis, the maximum amount as permitted by the Internal Revenue Code. For 2017, the salary deferral contribution limit is $18,000, provided, however, that a participant over age 50 may contribute an additional $6,000 to the 401(k) Plan for a total of $24,000. In addition to salary deferral contributions, Newton Federal Bank may make discretionary matching contributions and discretionary profit sharing contributions to the 401(k) Plan. Newton Federal Bank made both matching and profit sharing contributions to the 401(k) Plan for the plan year ended September 30, 2016. A participant is always 100% vested in his or her salary deferral contributions. Matching and profit sharing contributions vest 100% after three years of participant’s service with Newton Federal Bank. Generally, unless the participant elects otherwise, the participant’s account balance will be distributed as a result of the participant’s termination of employment. Expense recognized in connection with the 401(k) Plan totaled approximately $54,000 for the fiscal year ended September 30, 2016.

Employee Stock Ownership Plan. In connection with the reorganization, we intend to adopt an employee stock ownership plan for eligible employees. The named executive officers are eligible to participate in the employee stock ownership plan just like other employees. Eligible employees will begin participation in the employee stock ownership plan on the later of the effective date of the reorganization or upon the first entry date commencing on or after the eligible employee’s completion of one year of service and attainment of age 21.

The employee stock ownership plan trustee is expected to purchase, on behalf of the employee stock ownership plan, 3.92% of the total number of shares of Community First Bancshares, Inc. common stock outstanding (including shares issued to Community First Bancshares, MHC). We anticipate that the employee stock ownership plan will fund its stock purchase with a loan from Community First Bancshares, Inc. equal to the aggregate purchase price of the common stock. The loan will be repaid principally through Newton Federal Bank’s discretionary contributions to the employee stock ownership plan and any dividends payable on common stock held by the employee stock ownership plan over the anticipated 25-year term of the loan. The interest rate for the employee stock ownership plan loan is expected to equal the prime rate, as published in The Wall Street Journal , on the closing date of the offering. See “Pro Forma Data.”

The trustee will hold the shares purchased by the employee stock ownership plan in an unallocated suspense account, and shares will be released from the suspense account on a pro-rata basis as we repay the loan. The trustee will allocate the shares released among participants on the basis of each participant’s proportional share of compensation relative to all participants. A participant will become 100% vested in his or her account balance after three years of service. Participants who were employed by Newton Federal Bank immediately prior to the offering will receive credit for vesting purposes for years of service prior to adoption of the employee stock ownership plan. Participants also will become fully vested automatically upon normal retirement, death or disability, a change in control, or termination of the employee stock ownership plan. Generally, participants will receive distributions from the employee stock ownership plan upon separation from service in accordance with the terms of the plan document. The employee stock ownership plan reallocates any unvested shares forfeited upon termination of employment among the remaining participants.

The employee stock ownership plan will permit participants to direct the trustee as to how to vote the shares of common stock allocated to their accounts. The trustee will vote unallocated shares and allocated shares for which participants do not timely provide instructions on any matter in the same ratio as those shares for which participants provide timely instructions, subject to fulfillment of the trustee’s fiduciary responsibilities.

Under applicable accounting requirements, Newton Federal Bank will record a compensation expense for the employee stock ownership plan at the fair market value of the shares as they are committed to be released from the unallocated suspense account to participants’ accounts, which may be more or less than the original issue price. The compensation expense resulting from the release of the common stock from the suspense account and allocation to plan participants will result in a corresponding reduction in the earnings of Community First Bancshares, Inc.

The following table sets forth for the year ended September 30, 2016 certain information as to the total remuneration we paid to our directors. Mr. Smith received director fees of $3,500 for the year ended September 30, 2016, which is included in All Other Compensation in the Summary Compensation Table.


Directors Compensation Table For the Year Ended September 30, 2016
Name	Fees earned or paid in cash ($)		All Other Compensation ($)		Total ($)
Troy B. Brooks		23,100		—		23,100
William D. Fortson, Jr.		44,250		—		44,250
Marshall L. Ginn		21,900		—		21,900
Bob W. Richardson		22,300		—		22,300
Edward P. Stone		22,000		—		22,000

Director Fees

Directors earn an annual fee of $21,000, and our chairman receives an additional chairman fee of $21,000 per year. Directors currently receive fees of $150 per meeting for service on the Audit Committee and $100 per meeting for service on the Loan Committee.

Each person who will serve as a director of Community First Bancshares, Inc. will also serve as a director of Newton Federal Bank and will initially earn a monthly fee only in his or her capacity as a board or committee member of Newton Federal Bank. Upon completion of the reorganization, additional director fees may be paid for Community First Bancshares, Inc. director meetings although no such determination has been made at this time.

Directors’ Deferred Compensation Plan

Newton Federal Bank sponsors a deferred compensation plan under which eligible directors were previously able to defer the receipt of compensation that otherwise would have been payable to them for their service as a director. The plan has now been frozen with respect to further deferral contributions and any new participants. However, directors who previously deferred compensation under the plan maintain a benefit under the plan until the deferred compensation is distributed to them in accordance with their previous elections and the terms of the plan. Until their benefits are distributed under the plan, the deferred compensation will be credited with earnings, compounded quarterly, at a rate equal to the average pre-tax return for the immediately preceding ten-year period on shares in the Vanguard Balanced Index Fund Admiral Shares, as published in the fund’s annual report for December 31 of the immediately preceding calendar year.

Benefits to be Considered Following Completion of the Stock Offering

Following the stock offering, we intend to adopt one or more new stock-based benefit plans that will provide for grants of stock options and awards of shares of restricted common stock. In accordance with applicable regulations, we anticipate that the plan will authorize a number of stock options and a number of shares of restricted common stock, not to exceed 4.9% and 1.96%, respectively, of the shares issued in the offering (including shares issued to Community First Bancshares, MHC). These limitations may not apply if the plans are implemented more than one year after the reorganization and offering, subject to any applicable regulatory approvals.

The stock-based benefit plans will not be established sooner than six months after the stock offering and, if adopted within one year after the stock offering, the plans must be approved by a majority of the votes eligible to be cast by our stockholders, as well as a majority of the votes eligible to be cast by our stockholders other than Community First Bancshares, MHC. If stock-based benefit plans are established more than one year after the stock offering, they must be approved by a majority of votes cast by our stockholders, as well as a majority of votes cast by our stockholders other than Community First Bancshares, MHC.

Certain additional restrictions would apply to our stock-based benefit plans if adopted within one year after the stock offering, including:

•

non-employee directors in the aggregate may not receive more than 30% of the options and shares of restricted common stock authorized under the plans;

•

any non-employee director may not receive more than 5% of the options and restricted stock awards authorized under the plans;

•

any officer or employee may not receive more than 25% of the options and restricted stock awards authorized under the plans;

•

the options and shares of restricted common stock may not vest more rapidly than 20% per year, beginning on the first anniversary of stockholder approval of the plans; and

•

accelerated vesting is not permitted except for death, disability or upon a change in control of Community First Bancshares, Inc. or Newton Federal Bank.

We have not yet determined whether we will present stock-based benefit plans for stockholder approval within one year following the completion of the reorganization or whether we will present plans for stockholder approval more than one year after the completion of the reorganization. In the event of changes in applicable regulations or policies regarding stock-based benefit plans, including any regulations or policies restricting the size of awards and vesting of benefits as described above, the restrictions described above may not be applicable.

We may obtain the shares needed for our stock-based benefit plans by issuing additional shares of common stock from authorized but unissued shares or through stock repurchases.

SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding intended common stock subscriptions by each of our directors and executive officers and their associates, and by all directors, officers and their associates as a group. However, there can be no assurance that any such person or group will purchase any specific number of shares of our common stock. In the event the individual maximum purchase limitation is increased, persons subscribing for the maximum amount may increase their purchase order. Directors and officers will purchase shares of common stock at the same $10.00 purchase price per share and on the same terms as other purchasers in the offering. This table excludes shares of common stock to be purchased by the employee stock ownership plan, as well as any stock awards or stock option grants that may be made no earlier than six months after the completion of the offering. Purchases by directors, officers and their associates will be included in determining whether the required minimum number of shares has been subscribed for in the offering. The shares being acquired by the directors, executive officers and their associates are being acquired for investment purposes, and not with a view towards resale. Our directors and executive officers will be subject to the same minimum purchase requirements and purchase limitations as other participants in the offering set forth under “The Reorganization and Offering—Limitations on Purchase of Shares.”

Name and Title

Number of
Shares (1)

Aggregate
Purchase
Price (1)

Percent at
Minimum of
Offering Range (2)

Troy D. Brooks, Director

William D. Fortson, Jr., Chairman of the Board

Marshall L. Ginn, Director

Bob W. Richardson, Director

Johnny S. Smith, President, Chief Executive Officer and Director

Edward P. Stone, Director

Gregory J. Proffitt, Executive Vice President and Chief Operations Officer

Kenneth D. Lumpkin, Executive Vice President and Chief Lending and Marketing Officer

Tessa M. Nolan, Senior Vice President and Chief Financial Officer

Tara T. Williams, Senior Vice President and Chief Credit Officer

All directors and executive officers as a group (10 persons)

[insider
purchases

]

*	Less than 1.0%.

(1)

Includes purchases by the named individual’s spouse and other relatives of the named individual living in the same household. Other than as set forth above, the named individuals are not aware of any other purchases by a person who or entity that would be considered an associate of the named individuals under the plan of reorganization.

(2)	At the adjusted maximum of the offering range, directors and executive officers would own % of our outstanding shares of common stock.

THE REORGANIZATION AND OFFERING

The board of directors of Newton Federal Bank has approved the plan of reorganization. The plan of reorganization must also be approved by Newton Federal Bank’s members. A special meeting of members has been called for this purpose. We have filed an application with respect to the reorganization and stock offering with the Federal Reserve Board, and the approval of the Federal Reserve Board is required before we can consummate the reorganization and stock offering. We also have filed certain applications with respect to the reorganization with the Office of the Comptroller of the Currency and the FDIC. The final approvals of the Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC are required before we can consummate the reorganization and stock offering. Any approval by the Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC does not constitute a recommendation or endorsement of the plan of reorganization.

General

On October 31, 2016, our board of directors unanimously adopted the plan pursuant to which we will reorganize from a federally chartered mutual savings association into a two-tier federal mutual holding company structure. After the reorganization, Community First Bancshares, Inc. will be the mid-tier stock holding company and Community First Bancshares, MHC will be the top-tier mutual holding company. After the offering, subscribers in the offering will own 46% and Community First Bancshares, MHC will own 54% of the outstanding shares of common stock of Community First Bancshares, Inc.

Consummation of the reorganization and stock offering is subject to, among other things, approval of the plan of reorganization by the members of Newton Federal Bank as of the voting record date. A special meeting of members has been called for this purpose, to be held on [meeting date]. The reorganization will be completed as follows, or in any manner approved by regulators that is consistent with the purposes of the plan of reorganization and applicable laws and regulations:

(i)

Newton Federal Bank will organize an interim stock savings association as a wholly owned subsidiary (“Interim Bank”);

(ii)

After Interim Bank receives approval from the FDIC for insurance of accounts and the FDIC has issued it a certificate number, Newton Federal Bank will transfer pursuant to a purchase and assumption agreement all of its assets and liabilities, except $100,000 in cash, to Interim Bank, and Interim Bank will become the stock savings association resulting from the reorganization, including the purchase and assumption transaction pursuant to the plan (the “Stock Bank”);

(iii)

Newton Federal Bank will amend its charter and bylaws to read in the form of a federal mutual holding company to become Community First Bancshares, MHC;

(iv)

Community First Bancshares, MHC will organize Community First Bancshares, Inc. as a wholly-owned subsidiary, and transfer $1,000 to Community First Bancshares, Inc. in exchange for 100 shares of Community First Bancshares, Inc. common stock; and

(v)

Community First Bancshares, MHC will transfer all of the initially issued stock of the Stock Bank to Community First Bancshares, Inc. in exchange for additional shares of Community First Bancshares, Inc. common stock, and the Stock Bank will become a wholly-owned subsidiary of Community First Bancshares, Inc.

Concurrently with the reorganization, Community First Bancshares, Inc. will offer for sale 46% of its common stock representing 46% of the pro forma market value of Community First Bancshares, Inc. and Newton Federal Bank.

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We have mailed to each person eligible to vote at the special meeting a proxy statement containing information concerning the business purposes of the reorganization and the effects of the reorganization on voting rights, liquidation rights, existing savings accounts, deposit insurance, loans and Newton Federal Bank’s business. The proxy statement also describes the manner in which the plan may be amended or terminated. Included with the proxy statement is a proxy card that can be used to vote on the plan.

The following is a summary of the material aspects of the plan of reorganization, the subscription offering, and the community offering. The plan of reorganization should be consulted for a more detailed description of its terms.

Reasons for the Reorganization

The primary purpose of the reorganization is to establish a holding company and to convert Newton Federal Bank to the stock form of ownership in order to compete and expand more effectively in the financial services marketplace. The stock form of ownership is the corporate form used by commercial banks, most major businesses and a large number of savings institutions. The reorganization also will enable customers, employees, management and directors to have an equity ownership interest in our company. Management believes that this will enhance the long-term growth and performance of Newton Federal Bank and Community First Bancshares, Inc. by enabling us to attract and retain qualified employees who have a direct interest in our financial success and that customer ownership may enhance our connection with our customers. The reorganization will permit us to issue and sell capital stock, which is a source of capital not available to mutual savings institutions. The reorganization also will give us greater flexibility to structure and finance the expansion of our operations and increase our capital to support future growth and profitability, including the potential acquisition of other financial institutions, and to diversify into other financial services, to the extent permissible by applicable law and regulation. Although there are no current arrangements, understandings or agreements regarding any such opportunities, we will be in a position after the reorganization, subject to regulatory limitations and our financial condition, to take advantage of any such opportunities that may arise, and to compete more effectively in the financial services marketplace. The reorganization and the capital raised in the offering are expected to increase our lending capacity by providing us with additional capital to support new loans and higher lending limits, support the growth of our banking franchise, provide an additional cushion against unforeseen risk and expand our asset base. Lastly, the reorganization will enable us to better manage our capital by providing broader investment opportunities through the holding company structure and by enabling us to repurchase our common stock as market conditions permit. Although the reorganization and offering will create a stock savings institution and stock holding company, only a minority of the common stock will be offered for sale in the offering. As a result, our mutual form of ownership and its ability to provide community-oriented financial services will be preserved through the mutual holding company structure.

Our board of directors believes that the advantages of the mutual holding company structure outweigh the potential disadvantages of the mutual holding company structure to minority stockholders, including the inability of stockholders other than Community First Bancshares, MHC to own a majority of the common stock of Community First Bancshares, Inc. A majority of our voting stock will be owned by Community First Bancshares, MHC, which will be controlled by its board of directors. While this structure will permit management to focus on our long-term business strategy for growth and capital redeployment without undue pressure from stockholders, it will also serve to perpetuate our existing management and directors. Community First Bancshares, MHC will be able to elect all the members of Community First Bancshares, Inc.’s board of directors, and will be able to control the outcome of all matters presented to our stockholders for resolution by vote. No assurance can be given that Community First Bancshares, MHC will not take action adverse to the interests of stockholders other than Community First Bancshares, MHC. For example, Community First Bancshares, MHC could prevent the sale of control of Community First Bancshares, Inc., or defeat a candidate for the board of directors of Community First Bancshares, Inc. or other proposals put forth by stockholders.

Since we will not be offering all of our common stock for sale in the offering, the reorganization will result in less capital raised in comparison to a standard mutual-to-stock conversion. We are not undertaking a standard mutual-to-stock conversion at this time since we do not believe we could effectively deploy that amount of additional capital on a short-term or near-term basis. The reorganization, however, will allow us to raise additional

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capital in the future because a majority of our common stock will be available for sale in the event of a conversion of Community First Bancshares, MHC to stock form. Our board of directors has determined that offering 46% of our outstanding shares of common stock for sale in the offering allows for an efficient use of net proceeds for Community First Bancshares, Inc. and Newton Federal Bank over the next several years.

The reorganization does not preclude the future conversion of Community First Bancshares, MHC from the mutual to stock form of organization in the future. No assurance can be given when, if ever, Community First Bancshares, MHC will convert to stock form or what conditions the Federal Reserve Board or other regulatory agencies may impose on such a transaction. See “Summary—Possible Conversion of Community First Bancshares, MHC to Stock Form.”

Effects of the Reorganization and Offering on Depositors and Borrowers of Newton Federal Bank

Continuity. While the reorganization is being accomplished, and after its completion, our routine business of accepting deposits and making loans will continue without interruption. Newton Federal Bank will continue to be subject to regulation by the Office of the Comptroller of the Currency and the FDIC. After the reorganization, we will continue to provide services for depositors and borrowers under current policies by our management and staff.

Liquidation Rights . Following the completion of the reorganization, all depositors and borrowers who had liquidation rights with respect to Newton Federal Bank as of the effective date of the reorganization will continue to have such rights solely with respect to Community First Bancshares, MHC so long as they continue to hold their deposit accounts or loans, as applicable, with Newton Federal Bank. In addition, all persons who become depositors of Newton Federal Bank subsequent to the reorganization will have such liquidation rights with respect to Community First Bancshares, MHC.

Deposit Accounts and Loans . Under the plan of reorganization, each depositor of Newton Federal Bank at the time of the reorganization will automatically continue as a depositor after the reorganization, and each such deposit account will remain the same with respect to deposit balance, interest rate and other terms, except to the extent such deposit is reduced by withdrawals to purchase common stock in the offering. All insured deposit accounts of Newton Federal Bank will continue to be federally insured by the FDIC up to the legal maximum limit in the same manner as deposit accounts existing in Newton Federal Bank immediately prior to the reorganization. Furthermore, no loan outstanding will be affected by the reorganization, and the amounts, interest rates, maturity and security for each loan will remain the same as they were prior to the reorganization.

Voting Rights . Following the completion of the reorganization and offering, members of Newton Federal Bank will no longer have voting rights in Newton Federal Bank, but will have voting rights in Community First Bancshares, MHC. Following the completion of the reorganization and offering, voting rights in Community First Bancshares, Inc. will be held exclusively by its stockholders. Each share of outstanding common stock held by a stockholder will entitle the stockholder to one vote on matters considered by Community First Bancshares, Inc. stockholders. Although Community First Bancshares, Inc. will have the power to issue shares of capital stock to persons other than Community First Bancshares, MHC, as long as Community First Bancshares, MHC is in existence, Community First Bancshares, MHC will be required to own a majority of the voting stock of Community First Bancshares, Inc., and consequently will be able to control the outcome of matters put to a vote of stockholders. Community First Bancshares, Inc. must own 100% of the voting stock of Newton Federal Bank.

Offering of Common Stock

Under the plan of reorganization, up to 2,697,900 shares (subject to increase to up to 3,102,585 shares) of Community First Bancshares, Inc. common stock will be offered for sale, subject to certain restrictions described below, through a subscription and community offering.

Subscription Offering . The subscription offering will expire at [expiration time], Eastern Time, on [expiration date], unless otherwise extended by Newton Federal Bank. Regulations require that all shares to be offered in the offering be sold within a period ending not more than 90 days after regulatory approval of the plan of

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reorganization or a longer period as may be approved by the Federal Reserve Board or, despite approval of the plan of reorganization by our members, the reorganization and offering will not be effected. This period expires on [extension date], unless extended with the approval of the Federal Reserve Board. If the offering is not completed by [extension date], all subscribers will have the right to modify or rescind their subscriptions and to have their subscription funds returned promptly with interest. In the event of an extension of this type, all subscribers will be notified in writing of the time period within which subscribers must notify Newton Federal Bank of their intention to maintain, modify or rescind their subscriptions. If the subscriber rescinds or does not respond in any manner to Newton Federal Bank’s notice, the funds submitted will be refunded to the subscriber with interest at [interest rate]% per annum, which is Newton Federal Bank’s current passbook savings rate, and/or the subscriber’s withdrawal authorizations will be terminated. In the event that the offering is not consummated, all funds submitted and not previously refunded pursuant to the subscription and community offering will be promptly refunded to subscribers with interest at [interest rate]% per annum, and all withdrawal authorizations will be terminated.

Subscription Rights . Under the plan of reorganization, nontransferable subscription rights to purchase the shares of common stock have been issued to persons and entities entitled to purchase the shares of common stock in the subscription offering. The amount of shares of common stock that these parties may purchase will depend on the availability of the common stock for purchase under the categories described in the plan of reorganization. Subscription priorities have been established for the allocation of common stock to the extent that the common stock is available. These priorities are as follows:

Category 1: Eligible Account Holders. Subject to the maximum purchase limitations, each depositor with $50.00 or more on deposit at Newton Federal Bank as of the close of business on September 30, 2015 will receive nontransferable subscription rights to subscribe for up to the greater of the following:

•

$300,000 of common stock;

•

one-tenth of one percent of the total offering of common stock; or

•

15 times the product, rounded down to the nearest whole number, obtained by multiplying the total number of shares of common stock to be sold by a fraction, the numerator of which is the amount of the qualifying deposit of the eligible account holder and the denominator is the total amount of qualifying deposits of all eligible account holders.

If the exercise of subscription rights in this category results in an oversubscription, shares of common stock will be allocated among subscribing eligible account holders so as to permit each one, to the extent possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares for which the person has actually subscribed, whichever is less. Thereafter, unallocated shares will be allocated among the remaining subscribing eligible account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to the total amount of qualifying deposits of all remaining eligible account holders whose subscriptions remain unfilled; however, no fractional shares shall be issued. If the amount so allocated exceeds the amount subscribed for by any one or more eligible account holders, the excess shall be reallocated, one or more times as necessary, among those eligible account holders whose subscriptions are still not fully satisfied on the same principle until all available shares have been allocated or all subscriptions satisfied. Subscription rights received by officers and directors in this category based on their increased deposits in Newton Federal Bank in the one-year period preceding September 30, 2015 are subordinated to the subscription rights of other eligible account holders.

To ensure proper allocation of stock, each eligible account holder must list on his or her stock order form all deposit accounts in which he or she had an ownership interest on September 30, 2015. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation.

Category 2: Tax-Qualified Employee Plans. The plan of reorganization provides that tax-qualified employee plans of Newton Federal Bank, such as the employee stock ownership plan and Section 401(k) plan, will receive nontransferable subscription rights to purchase up to 4.90% of the shares of common stock issued and

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outstanding following the completion of the offering. The employee stock ownership plan intends to purchase 3.92% of our outstanding shares (including shares issued to Community First Bancshares, MHC). In the event the number of shares offered in the offering is increased above the maximum of the valuation range, tax-qualified employee plans will have a priority right to purchase any shares exceeding that amount up to 4.90% of the common stock issued and outstanding following the completion of the offering. The employee stock ownership plan may, with Federal Reserve Board approval, purchase some or all of the shares of common stock in the open market or may purchase shares of common stock directly from Community First Bancshares, Inc.

Category 3: Supplemental Eligible Account Holders. To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by eligible account holders and the tax-qualified employee plans, and subject to the maximum purchase limitations, each depositor with $50.00 or more on deposit as of the close of business on [supplemental eligibility record date], will receive nontransferable subscription rights to subscribe for up to the greater of:

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$300,000 of common stock;

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one-tenth of one percent of the total offering of common stock; or

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15 times the product, rounded down to the nearest whole number, obtained by multiplying the total number of shares of common stock to be issued by a fraction, the numerator of which is the amount of qualifying deposits of the supplemental eligible account holder and the denominator is the total amount of qualifying deposits of all supplemental eligible account holders.

If the exercise of subscription rights in this category results in an oversubscription, shares of common stock will be allocated among subscribing supplemental eligible account holders so as to permit each supplemental eligible account holder, to the extent possible, to purchase a number of shares sufficient to make his or her total allocation equal 100 shares or the number of shares for which the person has actually subscribed, whichever is less. Thereafter, unallocated shares will be allocated among subscribing supplemental eligible account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to total qualifying deposits of all subscribing supplemental eligible account holders.

To ensure proper allocation of stock, each supplemental eligible account holder must list on his or her stock order form all deposit accounts in which he or she had an ownership interest on [supplemental eligibility record date]. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation.

Category 4: Other Members. To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by eligible account holders, the tax-qualified employee plans and supplemental eligible account holders, and subject to the maximum purchase limitations, each member of Newton Federal Bank who is not an eligible account holder, supplemental eligible account holder or tax-qualified employee plan, as of the close of business on [other record date], including borrowers from Newton Federal Bank as of January 19, 1984 who maintained such borrowings as of the close of business on [other record date], will receive nontransferable subscription rights to purchase up to $300,000 of common stock.

If there is an oversubscription in this category, the available shares of common stock will be allocated proportionately based on the size of such other member’s orders.

To ensure proper allocation of stock, each other member must list on his or her stock order form all deposit and loan accounts in which he or she had an ownership interest on [other record date]. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation.

Newton Federal Bank and Community First Bancshares, Inc. will make reasonable efforts to comply with the securities laws of all states in the United States in which persons entitled to subscribe for shares of common stock pursuant to the plan of reorganization reside. However, no shares of common stock will be offered or sold

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under the plan of reorganization to any person who resides in a foreign country or resides in a state of the United States in which a small number of persons otherwise eligible to subscribe for shares under the plan of reorganization reside or as to which Newton Federal Bank and Community First Bancshares, Inc. determine that compliance with the securities laws of the state would be impracticable for reasons of cost or otherwise, including, but not limited to, a requirement that Newton Federal Bank or Community First Bancshares, Inc. or any of their officers, directors or employees register, under the securities laws of the state, as a broker, dealer, salesman or agent. No payments will be made in lieu of the granting of subscription rights to any person.

Community Offering . Any shares of common stock which have not been purchased in the subscription offering may be offered by Community First Bancshares, Inc. in a community offering to members of the general public to whom Community First Bancshares, Inc. delivers a copy of this prospectus and a stock order form, with preference given to natural persons (including trusts of natural persons) residing in the Georgia Counties of Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale and Walton. Subject to the maximum purchase limitations, these persons may purchase up to $300,000 of common stock. The community offering, if any, may be undertaken concurrently with, during, or promptly after the subscription offering, and may terminate at any time without notice. Subject to any required regulatory approvals, Community First Bancshares, Inc. will determine in its sole discretion the advisability of a community offering, the commencement and termination dates of any community offering, and the methods of finding potential purchasers in such offering. The opportunity to subscribe for shares of common stock in the community offering category is subject to the right of Community First Bancshares, Inc. and Newton Federal Bank, in their sole discretion, to accept or reject these orders in whole or in part either at the time of receipt of an order or as soon as practicable thereafter.

If we do not have sufficient shares of common stock available to fill the orders of natural persons (including trusts of natural persons) residing in the Georgia Counties of Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale and Walton whose orders are accepted by Newton Federal Bank, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares, or the number of shares subscribed for by such person. Thereafter, unallocated shares will be allocated among natural persons (including trusts of natural persons) residing in the Georgia Counties of Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale and Walton, whose orders remain unsatisfied on an equal number of shares basis per order. If, after allocation of shares to natural persons (including trusts of natural persons) residing in the Georgia Counties of Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale and Walton, we do not have sufficient shares of common stock available to fill the orders of other members of the general public, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares, or the number of shares subscribed for by such person. Thereafter, unallocated shares will be allocated among members of the general public whose orders remain unsatisfied on an equal number of shares basis per order.

Syndicated Community Offering . The plan of reorganization provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by BSP Securities, LLC, acting as our agent. In such capacity, BSP Securities, LLC may form a syndicate of other brokers-dealers who are member firms of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Neither BSP Securities, LLC nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering; however, BSP Securities, LLC has agreed to use its best efforts in the sale of shares in any syndicated community offering. We have not selected any particular broker-dealers to participate in a syndicated community offering and will not do so until prior to the commencement of the syndicated community offering. The syndicated community offering would terminate no later than 45 days after the expiration of the subscription offering, unless extended by us, with approval of the Federal Reserve Board. See “—Community Offering” above for a discussion of rights of subscribers in the event an extension is granted.

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The opportunity to subscribe for shares of common stock in the syndicated community offering is subject to our right to reject orders, in whole or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order.

The price at which shares of common stock are sold in the syndicated community offering will be the same price as in the subscription and community offerings. Subject to the overall purchase limitations, no person by himself or herself may subscribe for or purchase more than $300,000 of common stock.

In the event of a syndicated community offering, it is currently expected that investors would follow the same general procedures applicable to purchasing shares in the subscription and community offerings (the use of stock order forms and the submission of funds directly to Community First Bancshares, Inc. for the payment of the purchase price of the shares ordered) except that payment must be in immediately available funds (bank checks, money orders, deposit account withdrawals from accounts at Newton Federal Bank or wire transfers). See “—Procedure for Purchasing Shares.” “Sweep” arrangements and delivery versus payment settlement will only be used in a syndicated offering to the extent consistent with Rules 10b-9 and 15c2-4 and then-existing guidance and interpretations thereof of the Securities and Exchange Commission regarding the conduct of “min/max” offerings.

If for any reason we cannot effect a syndicated offering of shares of common stock not purchased in the subscription and community offerings, or if there are an insignificant number of shares remaining unsold after such offerings, we will try to make other arrangements for the sale of unsubscribed shares. The Federal Reserve Board and the Financial Industry Regulatory Authority must approve any such arrangements.

Limitations on Purchase of Shares . The plan provides for certain limitations on the purchase of shares of common stock in the offering. These limitations are as follows:

The aggregate amount of outstanding common stock of Community First Bancshares, Inc. owned or controlled by persons other than Community First Bancshares, MHC at the close of the reorganization and offering shall be less than 50% of Community First Bancshares, Inc.’s total outstanding common stock.

The maximum purchase of common stock in the subscription offering by a person or group of persons through a single deposit account is $300,000. No person by himself, with an associate or group of persons acting in concert, may purchase more than $400,000 of the common stock offered in the offering, except that: (i) Community First Bancshares, Inc. may, in its sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase such maximum purchase limitation to 9.9% of the number of shares sold in the offering, provided that the total number of shares purchased by persons, their associates and those persons with which they are acting in concert, to the extent such purchases exceed 5% of the shares sold in the offering, shall not exceed, in the aggregate, 10% (or such higher percentage as may be determined by our board of directors with the approval of federal banking regulators) of the total number of the shares sold in the offering; (ii) the tax-qualified employee plans may purchase up to 10% of the shares offered in the offering; and (iii) for purposes of this paragraph B shares to be held by any tax-qualified employee plan and attributable to a person shall not be aggregated with other shares purchased directly by or otherwise attributable to such person.

The aggregate amount of common stock acquired in the offering, plus all prior stock offerings by Community First Bancshares, Inc., by any non-tax-qualified employee plan or any management person (as defined in the plan) and his or her associates, exclusive of any shares of common stock acquired by such plan or management person and his or her associates in the secondary market, shall not exceed 4.9% of the outstanding shares of common stock of Community First Bancshares, Inc., at the conclusion of the offering. In calculating the number of shares held by any management person and his or her associates under this paragraph, shares held by any tax-qualified employee plan or non-tax-qualified employee plan of Community First Bancshares, Inc., or Newton Federal Bank that are attributable to such person shall not be counted.

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The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by Community First Bancshares, Inc., by any one or more tax-qualified employee plans, or any management person and his or her associates, exclusive of any shares of common stock acquired by such plan or management person and his or her associates in the secondary market, shall not exceed 4.9% of the stockholders’ equity of Community First Bancshares, Inc., at the conclusion of the offering. In calculating the number of shares held by any management person and his or her associates under this paragraph, shares held by any tax-qualified employee plan or non-tax-qualified employee plan of Community First Bancshares, Inc., or Newton Federal Bank that are attributable to such person shall not be counted.

The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by Community First Bancshares, Inc., by any one or more tax-qualified employee plans, exclusive of any shares of common stock acquired by such plans in the secondary market, shall not exceed 4.9% of the outstanding shares of common stock of Community First Bancshares, Inc. at the conclusion of the offering.

The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by Community First Bancshares, Inc., by any one or more tax-qualified employee plans, exclusive of any shares of common stock acquired by such plans in the secondary market, shall not exceed 4.9% of the stockholders’ equity of Community First Bancshares, Inc. at the conclusion of the offering.

The aggregate amount of common stock that may be encompassed under all stock option plans and restricted stock plans of Community First Bancshares, Inc. may not exceed, in the aggregate, 25% of the outstanding shares of common stock of Community First Bancshares, Inc. held by persons other than Community First Bancshares, MHC at the conclusion of the stock offering.

The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by Community First Bancshares, Inc., by all non-tax-qualified employee plans or management persons and their associates, exclusive of any common stock acquired by such plans or management persons and their associates in the secondary market, shall not exceed 33% (or such higher percentage as may be set by our board of directors with the approval of federal banking regulators) of the outstanding shares of common stock held by persons other than Community First Bancshares, MHC at the conclusion of the offering. In calculating the number of shares held by management persons and their associates under this paragraph or paragraph I. below, shares held by any tax-qualified employee plan or non-tax-qualified employee plan that are attributable to such persons shall not be counted.

Notwithstanding any other provision of the plan of reorganization, no person shall be entitled to purchase any common stock to the extent such purchase would be illegal under any federal law or state law or regulation or would violate regulations or policies of FINRA. Community First Bancshares, Inc., and/or its agents may ask for an acceptable legal opinion from any purchaser as to the legality of such purchase and may refuse to honor any purchase order if such opinion is not timely furnished.

The board of directors of Community First Bancshares, Inc., has the right in its sole discretion to reject any order submitted by a person whose representations our board of directors believes to be false or who it otherwise believes, either alone or acting in concert with others, is violating, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan.

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A minimum of 25 shares of common stock must be purchased by each person purchasing shares in the offering to the extent those shares are available; provided, however, that in the event the minimum number of shares of common stock purchased times the price per share exceeds $500, then such minimum purchase requirement shall be reduced to such number of shares which when multiplied by the price per share shall not exceed $500, as determined by our board of directors.

For purposes of the plan of reorganization, the members of our board of directors are not deemed to be acting in concert solely by reason of their board membership. The term “associate” is used above to indicate any of the following relationships with a person:

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any corporation or organization, other than Community First Bancshares, MHC, Community First Bancshares, Inc. or Newton Federal Bank or a majority-owned subsidiary of Community First Bancshares, Inc. or Newton Federal Bank, of which a person is a senior officer or partner, or beneficially owns, directly or indirectly, 10% or more of any class of equity securities of the corporation or organization;

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any trust or other estate, if the person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate except that for the purposes relating to subscriptions in the stock offering and the sale of common stock following the reorganization, a person who has a substantial beneficial interest in any non-tax-qualified employee plan or any tax-qualified employee plan, or who is a trustee or fiduciary of such plan, is not an associate of such plan, and except that for purposes of aggregating total shares that may be held by officers and directors, the term “associate” does not include any tax-qualified employee plan; or

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any person who is related by blood or marriage to such person and (i) who lives in the same house as the person; or (ii) who is a director or senior officer of Community First Bancshares, MHC, Community First Bancshares, Inc. or Newton Federal Bank or a subsidiary thereof.

As used above, the term “acting in concert” means:

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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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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. A person or company that acts in concert with another person or company (“other party”) shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any tax-qualified employee plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated.

Persons or companies who file jointly a Schedule 13D or Schedule 13G with any regulatory agency will be deemed to be acting in concert.

The boards of directors of Community First Bancshares, Inc. and Newton Federal Bank may, in their sole discretion, and without notice or solicitation of other prospective purchasers, increase the maximum purchase limitation to 9.9% of the number of shares sold in the offering provided that the total number of shares purchased by persons, their associates and those persons with which they are acting in concert, to the extent such purchases exceed 5% of the shares sold in the offering, shall not exceed, in the aggregate, 10% (or such higher percentage as

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may be determined by our board of directors with the approval of the federal banking regulators) of the total number of shares sold in the offering. Requests to purchase shares of Community First Bancshares, Inc. common stock under this provision will be allocated by the boards of directors of Community First Bancshares, Inc. and Newton Federal Bank in accordance with the priority rights and allocation procedures set forth above. Depending upon market and financial conditions, and subject to certain regulatory limitations, the boards of directors of Community First Bancshares, Inc. and Newton Federal Bank, with the approval of the federal banking regulators and without further approval of the members, may increase or decrease any of the above purchase limitations at any time. To the extent that shares are available, each subscriber must subscribe for a minimum of 25 shares. In computing the number of shares of common stock to be allocated, all numbers will be rounded down to the next whole number.

Shares of common stock purchased in the offering will be freely transferable except for shares of common stock purchased by executive officers and directors of Newton Federal Bank or Community First Bancshares, Inc. and except as described below. In addition, under FINRA guidelines, members of the FINRA and their associates are subject to certain reporting requirements upon purchase of these securities.

Plan of Distribution and Marketing Arrangements

Offering materials for the offering initially have been distributed to certain persons by mail, with additional copies made available through our Stock Information Center and BSP Securities, LLC.

To assist in the marketing of the common stock, we have retained BSP Securities, LLC, which is a broker-dealer registered with FINRA. BSP Securities, LLC will assist us in the offering as follows:

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consulting as to the marketing implications of the plan of reorganization and stock issuance plan;

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reviewing with our board of directors the financial impact of the offering on us, based upon the independent appraiser’s pro forma market value of the common stock;

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reviewing all offering documents, including the prospectus, stock order forms and related offering materials (we are responsible for the preparation and filing of such documents);

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assisting in the design and implementation of a marketing strategy for the offering;

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assisting us in scheduling and preparing for meetings with potential investors and/or other broker-dealers in connection with the offering;

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assisting us in drafting press releases as required or appropriate in connection with the offering; and

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providing such other general advice and assistance as may be requested to promote the successful completion of the offering.

For its services as financial advisor, BSP Securities, LLC will receive (i) a non-refundable management fee of $25,000, which we have already paid, and (ii) a service fee of 1.0% of the aggregate dollar amount of all shares of common stock sold in the subscription and community offerings. No fee will be paid on any shares purchased by our directors, officers or employees or members of their immediate families (whether directly or through a personal trust), or on shares purchased by any employee benefit plan or trust established for the benefit of our directors, officers and employees. The service fee will be reduced by the management fee.

In the event shares of common stock are sold through a group of broker-dealers in a syndicated community offering, we will pay fees of 5.5% of the aggregate dollar amount of shares of common stock sold in the syndicated community offering to BSP Securities, LLC and any other broker-dealers included in the syndicated community offering. Any such offering will be on a best efforts basis, and BSP Securities, LLC will serve as sole book-running manager in such an offering. All fees payable with respect to a syndicated community offering will be in addition to fees payable with respect to the subscription and community offerings.

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We also will reimburse BSP Securities, LLC for its reasonable expenses associated with its marketing effort in an amount not to exceed $10,000 and for attorney’s fees and expenses not to exceed $85,000. The expenses may be increased in the event we conduct a syndicated community offering. Under such circumstances, BSP Securities, LLC may be reimbursed for total additional reasonable expenses and legal fees and expenses not to exceed $15,000 in the aggregate.

We will indemnify BSP Securities, LLC against liabilities and expenses (including legal fees) incurred in connection with certain claims or litigation arising out of or based upon untrue statements or omissions contained in the offering material for the common stock, including liabilities under the Securities Act of 1933, as amended.

BSP Securities, LLC has not prepared any report or opinion constituting a recommendation or advice to us or to persons who subscribe for stock, nor has it prepared an opinion as to the fairness to us of the purchase price or the terms of the stock to be sold. BSP Securities, LLC expresses no opinion as to the prices at which the shares of common stock to be issued may trade.

Our directors and executive officers may participate in the solicitation of offers to purchase shares of common stock. Other trained employees may participate in the offering in ministerial capacities, providing clerical work in effecting a sales transaction or answering questions of a ministerial nature. Other questions of prospective purchasers will be directed to executive officers or registered representatives. We will rely on Rule 3a4-1 of the Exchange Act, so as to permit officers, directors, and employees to participate in the sale of shares of common stock. No officer, director or employee will be compensated for his participation by the payment of commissions or other remuneration based either directly or indirectly on the transactions in the shares of common stock. BSP Securities, LLC will solicit orders and conduct sales of the common stock of Community First Bancshares, Inc. in states in which our directors and executive officers are not permitted to offer and sell our shares of common stock.

Stock Information Center Management

We have also engaged BSP Securities, LLC to manage our Stock Information Center in connection with the offering. In this role, BSP Securities, LLC will assist us in the offering as follows:

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coordinating vote solicitation and the special meeting of members;

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design stock order forms;

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organize and supervise the Stock Information Center; and

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employee training.

For these services, BSP Securities, LLC will receive a fee of $20,000, $10,000 of which is non-refundable and has already been paid, plus reimbursement of expenses not to exceed $10,000. The fee can be increased by $5,000 in the event of any unusual or additional items or duplication of service required as a result of a material change in applicable regulations or the plan of reorganization, or a material delay or other similar events.

How We Determined the Stock Pricing and the Number of Shares to be Issued

The plan of reorganization and federal regulations require that the aggregate purchase price of the common stock sold in the offering be based on the appraised pro forma market value of the common stock, as determined by an independent valuation. We have retained RP Financial, LC. to prepare an independent valuation appraisal. For its services in preparing the initial valuation RP Financial, LC. will receive a fee of $40,000, and will receive a fee of $7,500 for each appraisal update. RP Financial, LC. will be reimbursed for its expenses up to $4,000.

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We are not affiliated with RP Financial, LC., and neither we nor RP Financial, LC. has an economic interest in, or is held in common with, the other. RP Financial, LC. represents and warrants that it is not aware of any fact or circumstance that would cause it not to be “independent” within the meaning of the reorganization regulations or the applicable regulatory valuation guidelines or otherwise prohibit or restrict in anyway RP Financial, LC. from serving in the role of our independent appraiser.

We have agreed to indemnify RP Financial, LC. and its employees and affiliates against specified losses, including any losses in connection with claims under the federal securities laws, arising out of its services as independent appraiser, except where such liability results from its negligence or bad faith.

The independent valuation appraisal considered the pro forma impact of the offering. Consistent with federal appraisal guidelines, the appraisal applied three primary methodologies: (1) the pro forma price-to-book value approach applied to both reported book value and tangible book value; (2) the pro forma price-to-earnings approach applied to reported and core earnings; and (3) the pro forma price-to-assets approach. The market value ratios applied in the three methodologies were based upon the current market valuations of the peer group companies identified by RP Financial, LC., subject to valuation adjustments applied by RP Financial, LC. to account for differences between us and our peer group. RP Financial, LC. placed the greatest emphasis on the price-to-book value approach in estimating pro forma market value RP Financial, LC. did not consider a pro forma price-to-assets approach to be meaningful in preparing the appraisal, as this approach is more meaningful when a company has low equity or earnings. The price-to-assets approach is less meaningful for a company like us, as we have equity in excess of regulatory capital requirements and positive reported and core earnings.

The independent valuation was prepared by RP Financial, LC. in reliance upon the information contained in this prospectus, including our financial statements. RP Financial, LC. also considered the following factors, among others:

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our present and projected operating results and financial condition;

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the economic and demographic conditions in our existing market area;

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certain historical, financial and other information relating to us;

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a comparative evaluation of our operating and financial characteristics with those of other similarly situated publicly traded savings institutions;

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the impact of the reorganization and the offering on our equity and earnings potential;

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our proposed dividend policy; and

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the trading market for securities of comparable institutions and general conditions in the market for such securities.

The independent valuation is also based on an analysis of a peer group of publicly traded savings and loan holding companies that RP Financial, LC. considered comparable to us under regulatory guidelines applicable to the independent valuation. Under these guidelines, a minimum of ten peer group companies are selected from the universe of all publicly-traded savings institutions with relatively comparable resources, strategies and financial and other operating characteristics. Such companies must also be traded on an exchange (such as Nasdaq or the New York Stock Exchange). The peer group companies selected also consisted of fully-converted stock institutions that were not subject to an actual or rumored acquisition and that had been in fully-converted form for at least one year. In addition, RP Financial, LC. limited the peer group companies to the following two selection criteria: (i) institutions with assets less than $600 million; and (ii) institutions with equity to assets ratios greater than 12.50%.

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In applying each of the valuation methods, RP Financial, LC. considered adjustments to the pro forma market value based on a comparison of us with the peer group. RP Financial, LC. advised the board of board of directors that the valuation conclusion included the following adjustments relative to the peer group:

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a slight downward adjustment was applied for financial condition, which was due primarily to less favorable asset quality ratios and a lower pro forma return on equity in comparison to the peer group measures;

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a moderate downward adjustment was applied for profitability, growth and viability of earnings which took into consideration our lower pro forma return on equity, uncertainty related to future earnings growth given the expanded market area and potential impact of less favorable asset quality ratios on earnings relative to the comparable peer group measures;

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a slight downward adjustment was made for dividends due to the MHC ownership structure and dividend waiver regulations in place for MHCs that impact minority ownership ratios, in comparison to the fully-converted peer group companies; and

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a slight downward adjustment was made for liquidity of the stock due to our lower number of shares to be outstanding and lower market capitalization expected in comparison to the peer group companies.

RP Financial made no adjustments for asset growth, market area, marketing of the issue, management, or effect of government regulations and regulatory reform.

Included in the independent valuation were certain assumptions as to our pro forma earnings after the reorganization that were utilized in determining the appraised value. These assumptions included estimated expenses, an assumed after-tax rate of return on the net offering proceeds and purchases in the open market of 1.96% of the shares common stock to be outstanding by the stock-based benefit plan at the $10.00 purchase price. See “Pro Forma Data” for additional information concerning these assumptions. The use of different assumptions may yield different results.

On the basis of the foregoing, RP Financial, LC. advised us that as of November 25, 2016, the estimated pro forma market value of the common stock, assuming we were selling a minority of our shares in the offering, was $51.0 million. Based on applicable regulations, this forms a midpoint of a valuation range with a minimum of $43.4 million and a maximum of $58.7 million. Our board of directors determined to offer the shares of common stock in the offering at the purchase price of $10.00 per share and that 46% of the shares issued should be held by purchasers in the offering and 54% should be held by Community First Bancshares, MHC. Based on the estimated valuation range and the purchase price of $10.00 per share, the total number of shares of common stock that Community First Bancshares, Inc. will issue will range from 4,335,000 to 5,865,000 shares, with a midpoint of 5,100,000 shares (including in each case shares issued to Community First Bancshares, MHC), and the number of shares sold in the offering will range from 1,994,100 shares to 2,697,900 shares, with a midpoint of 2,346,000 shares.

Our board of directors reviewed the independent valuation and, in particular, considered (i) our financial condition and results of operations for the two years ended September 30, 2016, (ii) financial comparisons to other financial institutions, and (iii) stock market conditions generally and, in particular, for financial institutions. All of these factors are set forth in the independent valuation. Our board of directors also reviewed the methodology and the assumptions used by RP Financial, LC. in preparing the independent valuation. The estimated valuation range may be amended with the approval of the Federal Reserve Board, if necessitated by subsequent developments in our financial condition or market conditions generally.

Following commencement of the subscription offering, the maximum of the estimated valuation range may be increased by up to 15%, to up to $67.4 million and the maximum number of shares that will be outstanding immediately following the offering may be increased up to 15% to up to 6,744,750 shares. Under such circumstances the number of shares sold in the offering will be increased to up to 3,102,585 shares and the number

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of shares held by Community First Bancshares, MHC will be increased to up to 3,642,165 shares. The increase in the valuation range may occur to reflect demand for the shares or changes in market conditions, without the resolicitation of subscribers. The minimum of the estimated valuation range and the minimum of the offering range may not be decreased without a resolicitation of subscribers. The purchase price of $10.00 per share will remain fixed. See “—Offering of Common Stock—Limitations On Purchase of Shares” as to the method of distribution and allocation of additional shares of common stock that may be issued in the event of an increase in the offering range to fill unfilled orders in the subscription and community offerings.

The independent valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. RP Financial, LC. did not independently verify the financial statements and other information provided by Newton Federal Bank, nor did RP Financial, LC. value independently the assets or liabilities of Newton Federal Bank. The independent valuation considers Newton Federal Bank as a going concern and should not be considered as an indication of its liquidation value. Moreover, because the valuation is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons purchasing shares in the offering will thereafter be able to sell such shares at prices at or above the purchase price.

The independent valuation will be updated at the time of the completion of the offering. If the update to the independent valuation at the conclusion of the offering results in an increase in the pro forma market value of the common stock to more than $67.4 million or a decrease in the pro forma market value to less than $43.4 million, then Community First Bancshares, Inc., after consulting with the Federal Reserve Board, may terminate the plan of reorganization and return all funds promptly, with interest on payments made by check, certified or teller’s check, bank draft or money order; extend or hold a new subscription offering, community offering, or both; establish a new offering range and commence a resolicitation of subscribers; or take such other actions as may be permitted by the Federal Reserve Board in order to complete the reorganization and offering. In the event that a resolicitation is commenced due to a change in the independent valuation, all funds will be promptly returned to investors and investors will be given the opportunity to place a new order for a period of time. A resolicitation, if any, following the conclusion of the subscription and community offerings would not exceed 45 days unless further extended by regulators for periods of up to 90 days not to extend beyond 24 months following the special meeting of members, or [final extension date].

An increase in the independent valuation and the number of shares to be issued in the offering would decrease both a subscriber’s ownership interest and Community First Bancshares, Inc.’s pro forma earnings and stockholders’ equity on a per share basis while decreasing pro forma earnings and increasing stockholders’ equity on an aggregate basis. A decrease in the independent valuation and the number of shares of common stock to be issued in the offering would increase both a subscriber’s ownership interest and Community First Bancshares, Inc.’s pro forma earnings and stockholders’ equity on a per share basis while increasing pro forma net income and decreasing stockholders’ equity on an aggregate basis. For a presentation of the effects of such changes, see “Pro Forma Data.”

Copies of the appraisal report of RP Financial, LC. and the detailed memorandum of the appraiser setting forth the method and assumptions for such appraisal are available for inspection at the main office of Newton Federal Bank and the other locations specified under “Where You Can Find More Information.”

No sale of shares of common stock may occur unless, prior to such sale, RP Financial, LC. confirms to Newton Federal Bank and the Federal Reserve Board that, to the best of its knowledge, nothing of a material nature has occurred that, taking into account all relevant factors, would cause RP Financial, LC. to conclude that the independent valuation is incompatible with its estimate of the pro forma market value of the common stock of Community First Bancshares, Inc. at the conclusion of the offering. Any change that would result in an aggregate purchase price that is below the minimum or above the maximum of the estimated valuation range would be subject to regulatory approval. If such confirmation is not received, we may extend the offering; reopen the offering or commence a new offering; establish a new estimated valuation range and commence a resolicitation of all purchasers with the approval of federal regulators; or take such other actions as permitted in order to complete the offering.

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Prospectus Delivery

To ensure that each purchaser in the subscription and community offerings receives a prospectus at least 48 hours before the expiration of the offering in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, we may not mail a prospectus any later than five days prior to the expiration date or hand deliver a prospectus any later than two days prior to that date. We are not obligated to deliver a prospectus or stock order form by means other than U.S. Mail. Execution of a stock order form will confirm receipt of delivery of a prospectus in accordance with Rule 15c2-8. Stock order forms will be distributed only if preceded or accompanied by a prospectus.

In the syndicated community offering, a prospectus and stock order form in electronic format may be made available on Internet sites or through other online services maintained by BSP Securities, LLC or one or more other members of the syndicate, or by their respective affiliates. In those cases, prospective investors may view offering terms online and, depending upon the syndicate member, prospective investors may be allowed to place orders online. The members of the syndicate may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made on the same basis as other allocations.

Other than the prospectus in electronic format, the information on the Internet sites referenced in the preceding paragraph and any information contained in any other Internet site maintained by any member of the syndicate is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or by BSP Securities, LLC or any other member of the syndicate in its capacity as selling agent or syndicate member and should not be relied upon by investors.

Procedure for Purchasing Shares

Expiration Date. The offering will expire at [expiration time], Eastern Time, on [expiration date], unless we extend it for up to 45 days. This extension may be approved by us, in our sole discretion, without further approval or additional notice to subscribers in the offering. Any extension of the subscription and/or community offering beyond [extension date] would require the regulatory approval. If the offering is extended past [extension date], we will resolicit subscribers. You will have the opportunity to confirm, change or cancel your order within a specified period of time. If you do not respond during that period, your stock order will be cancelled and your deposit account withdrawal authorizations will be cancelled or your funds submitted will be returned promptly with interest at [interest rate]% per annum from the date your stock order was processed. No single extension will exceed 90 days. Aggregate extensions may not go beyond [final extension date], which is two years after the special meeting of members. We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal authorizations and promptly return all funds submitted, with interest at [interest rate]% per annum from the date of processing as described above.

We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of reorganization.

Use of Stock Order Forms. In order to purchase shares of common stock, you must complete and sign an original stock order form and remit full payment. We will not be required to accept incomplete stock order forms, unsigned stock order forms, or orders submitted on photocopied or facsimiled stock order forms. All stock order forms must be received , not postmarked, prior to [expiration time], Eastern Time, [expiration date]. We will not accept stock order forms that are not received by that time, are executed defectively or are received without full payment or without appropriate deposit account withdrawal instructions. We are not required to notify subscribers of incomplete or improperly executed stock order forms. We have the right to permit the correction of incomplete or improperly executed stock order forms. We do not represent, however, that we will do so. You may submit your stock order form and payment by mail using the stock order reply envelope provided, by overnight delivery to our Stock Information Center at the indicated address on the stock order form or by hand-delivery to our Stock Information Center, which will be located at Newton Federal Bank’s main office, located at 3175 Highway 278, Covington, Georgia. The Stock Information Center will be open Monday through Friday, between 10:00 a.m. and

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4:00 p.m., Eastern Time. The Stock Information Center will not be open on bank holidays. Once tendered, an order form cannot be modified or revoked unless the offering is terminated or is extended beyond [extension date], or the number of shares of common stock to be sold is increased to more than 3,102,585 shares or decreased to less than 1,994,100 shares. We reserve the absolute right, in our sole discretion, to reject orders received in the community offering, in whole or in part, at the time of receipt or at any time prior to completion of the offering.

If you are ordering shares in the subscription offering, you must represent that you are purchasing shares for your own account and that you have no agreement or understanding with any person for the sale or transfer of the shares. Our interpretation of the terms and conditions of the plan of reorganization and of the acceptability of the order forms will be final.

To ensure that eligible account holders, supplemental eligible account holders, and other members are properly identified as to their stock purchase priorities, such parties must list all deposit and loan accounts on the stock order form giving all names on each deposit and loan account and the account numbers at the applicable eligibility date.

By signing the order form, you will be acknowledging that the common stock is not a deposit or savings account and is not federally insured or otherwise guaranteed by Newton Federal Bank or the federal government, and that you received a copy of this prospectus. However, signing the order form will not result in you waiving your rights under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Payment for Shares. Payment for all shares of common stock will be required to accompany all completed stock order forms for the purchase to be valid. Payment for shares may be made by:

•

personal check, bank check or money order, payable to Community First Bancshares, Inc.; or

•

authorization of withdrawal from Newton Federal Bank deposit account(s), other than checking accounts or individual retirement accounts (“IRAs”).

Appropriate means for designating withdrawals from deposit accounts at Newton Federal Bank are provided in the stock order forms. The funds designated must be available in the account(s) at the time the stock order form is received. A hold will be placed on these funds, making them unavailable to the depositor. Funds authorized for withdrawal will continue to earn interest within the account at the contract rate until the offering is completed, at which time the designated withdrawal will be made. Interest will remain in the account. Interest penalties for early withdrawal applicable to certificate of deposit accounts will not apply to withdrawals authorized for the purchase of shares of common stock; however, if a withdrawal results in a certificate of deposit account with a balance less than the applicable minimum balance requirement, the certificate of deposit will be cancelled at the time of withdrawal without penalty, and the remaining balance will earn interest at the rate of [interest rate]% per annum subsequent to the withdrawal.

In the case of payments made by personal check, these funds must be available in the account(s). Checks and money orders will be immediately cashed and placed in a segregated account at Newton Federal Bank and will earn interest at a rate of [interest rate]% per annum from the date payment is processed until the offering is completed, at which time, a subscriber will be issued a check for interest earned.

Regulations prohibit Newton Federal Bank from knowingly lending funds or extending credit to any person to purchase shares of common stock in the offering. You may not pay by wire transfer. You may not submit cash or use a check drawn on a Newton Federal Bank line of credit. We will not accept third-party checks (a check written by someone other than you) payable to you and endorsed over to Community First Bancshares, Inc. You may not designate on your stock order form a direct withdrawal from a Newton Federal Bank retirement account. See “—Using Retirement Account Funds” for information on using such funds. Additionally, you may not designate on your stock order form a direct withdrawal from Newton Federal Bank deposit accounts with check-writing privileges. Please submit a check instead. If you request direct withdrawal, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will

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immediately withdraw the amount from your checking account(s). Once we receive your executed stock order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by the expiration date, in which event purchasers may be given the opportunity to increase, decrease or rescind their orders for a specified period of time.

We have the right, in our sole discretion, to permit institutional investors to submit irrevocable orders together with the legally binding commitment for payment and to thereafter pay for the shares of common stock for which they subscribe at any time prior to 48 hours before the completion of the offering. This payment may be made by wire transfer.

Our employee stock ownership plan will not be required to pay for any shares purchased in the offering until completion of the stock offering, provided there is a loan commitment from either an unrelated financial institution or Community First Bancshares, Inc. to lend to the employee stock ownership plan the necessary amount to fund the purchase at the time of the expiration of the subscription offering. In addition, if our 401(k) plan purchases shares in the offering, it will not be required to pay for such shares until completion of the stock offering.

Using Retirement Account Funds. If you are interested in using your individual retirement account funds to purchase shares of common stock, you must do so through a self-directed individual retirement account such as a brokerage firm individual retirement account. By regulation, Newton Federal Bank’s individual retirement accounts are not self-directed, so they cannot be invested in shares of our common stock. Therefore, if you wish to use your funds that are currently in a Newton Federal Bank individual retirement account, you may not designate on the stock order form that you wish funds to be withdrawn from the account for the purchase of common stock. The funds you wish to use for the purchase of common stock will have to be transferred to a brokerage account. It may take several weeks to transfer your Newton Federal Bank individual retirement account to an independent trustee, so please allow yourself sufficient time to take this action. There will be no early withdrawal or Internal Revenue Service interest penalties for these transfers. A one-time and/or annual administrative fee may be payable to the independent custodian or trustee. Depositors interested in using funds in an individual retirement account or any other retirement account to purchase shares of common stock should contact our Stock Information Center as soon as possible, preferably at least two weeks prior to the [expiration date] end of the offering period, because processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds.

Delivery of Stock Purchased

Restrictions on Transfer of Subscription Rights and Shares

Federal Reserve Board regulations prohibit any person with subscription rights, specifically the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members, from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the plan of reorganization or the shares of common stock to be issued upon their exercise. These rights may be exercised only by the person to whom they are granted and only for his or her account. Each person exercising

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subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of such shares. The regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase subscription rights or shares of common stock to be issued upon their exercise prior to completion of the offering. On the stock order form, you cannot add the names of others for joint stock registration unless they are also named on the qualifying deposit or loan account, and you cannot delete names of others except in the case of certain orders placed through an IRA, Keogh, 401(k) or similar plan, and except in the event of the death of a named eligible depositor.

We intend to pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights.

Other Restrictions

Notwithstanding any other provision of the plan of reorganization, no person is entitled to purchase any shares of common stock to the extent the purchase would be illegal under any federal or state law or regulation, including state “blue sky” regulations, or would violate regulations or policies of the Financial Industry Regulatory Authority, particularly those regarding free riding and withholding. We may ask for an acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may refuse to honor any stock order if an opinion is not timely furnished. In addition, we are not required to offer shares of common stock to any person who resides in a foreign country or in a state of the United States with respect to which any of the following apply: (a) a small number of persons otherwise eligible to subscribe for shares under the plan of reorganization reside in the state; (b) 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 the state, to register as a broker, dealer, salesman or agent or to register or otherwise qualify our securities for sale in the state; or (c) registration or qualification would be impracticable for reasons of cost or otherwise.

How You Can Obtain Additional Information—Stock Information Center

Our banking personnel may not, by law, assist with investment-related questions about the offering. If you have questions regarding the reorganization or offering, please call our Stock Information Center. The telephone number is [stock center number]. The Stock Information Center is open for telephone calls Monday through Friday, between 10:00 a.m. and 4:00 p.m., Eastern Time. The Stock Information Center will be closed on bank holidays.

Material Income Tax Consequences

Consummation of the reorganization is subject to the prior receipt of an opinion of counsel or tax advisor with respect to federal and state income taxation that the reorganization will not be a taxable transaction to Newton Federal Bank, Community First Bancshares, Inc., Eligible Account Holders, Supplemental Eligible Account Holders and Other Members. Unlike private letter rulings, opinions of counsel or tax advisors are not binding on the Internal Revenue Service or any state taxing authority, and such authorities may disagree with such opinions. In the event of such disagreement, there can be no assurance that Newton Federal Bank or Community First Bancshares, Inc. would prevail in a judicial proceeding.

Newton Federal Bank and Community First Bancshares, Inc. have received an opinion of counsel, Luse Gorman, PC, regarding all of the material federal income tax consequences of the reorganization, which includes the following:

The conversion of Newton Federal Bank to Community First Bancshares, MHC will qualify as a tax-free reorganization under Internal Revenue Code Section 368(a)(1)(F).

The transfer by Newton Federal Bank in mutual form (the “Mutual Bank”) of substantially all of its assets and liabilities to Newton Federal Bank in stock form (the “Stock Bank”) qualifies as an exchange under Internal Revenue Code Section 351 and the Mutual Bank will recognize no gain or loss upon the transfer of substantially all of its assets and liabilities solely in exchange for the voting common stock of the Stock Bank.

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The Mutual Bank’s holding period in the common stock of the Stock Bank received in the reorganization will include the holding period during which the property exchanged was held.

Newton Federal Bank will recognize no income with respect to its bad debt reserve established under Internal Revenue Code Section 593.

The Stock Bank will recognize no gain or loss upon its receipt of property from the Mutual Bank in exchange for its stock.

The Stock Bank’s basis in the property received from the Mutual Bank will be the same as the basis of such property in the hands of the Mutual Bank immediately prior to the reorganization.

The Stock Bank’s holding period for the property received from the Mutual Bank will include the period during which such property was held by the Mutual Bank.

Newton Federal Bank’s members will recognize no gain or loss by reason of the reorganization.

No gain or loss will be recognized by eligible account holders, supplemental eligible account holders or other members of the Mutual Bank on the issuance to them of withdrawable deposit accounts in the Stock Bank plus liquidation rights with respect to Community First Bancshares, MHC, in exchange for their deposit accounts in the Mutual Bank or to the other depositors on the issuance to them of withdrawable deposit accounts.

10.

It is more likely than not that the fair market value of the subscription rights to purchase common stock is zero. Accordingly, no gain or loss will be recognized by eligible account holders, supplemental eligible account holders or other members upon the distribution to them of the nontransferable subscription rights to purchase shares of stock of Community First Bancshares, Inc. Gain realized, if any, by the eligible account holders, supplemental eligible account holders and other members on the distribution to them of nontransferable subscription rights to purchase shares of common stock will be recognized but only in an amount not in excess of the fair market value of such subscription rights. Eligible account holders and supplemental eligible account holders will not realize any taxable income as a result of the exercise by them of the nontransferable subscription rights.

11.

The basis of the deposit accounts in the Stock Bank to be received by the eligible account holders, supplemental eligible account holders and other members of the Mutual Bank will be the same as the basis of their deposit accounts in Mutual Bank surrendered in exchange therefor. The basis of the interests in the liquidation rights in Community First Bancshares, MHC to be received by the eligible account holders, supplemental eligible account holders, and other members of the Mutual Bank shall be zero.

12.

Community First Bancshares, MHC and the persons who purchased common stock of Community First Bancshares, Inc. in the subscription and community offering (“minority stockholders”) will recognize no gain or loss upon the transfer of Stock Bank stock and cash, respectively, to Community First Bancshares, Inc. in exchange for stock in Community First Bancshares, Inc.

13.

Community First Bancshares, Inc. will recognize no gain or loss on its receipt of the Stock Bank stock and cash in exchange for Community First Bancshares, Inc.

14.

Community First Bancshares, MHC’s basis in the Community First Bancshares, Inc. common stock received will be the same as its basis in the Stock Bank stock transferred.

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15.

Community First Bancshares, MHC’s holding period in Community First Bancshares, Inc. common stock received will include the period during which it held the Stock Bank common stock, provided that the property was a capital asset on the date of the exchange.

16.

Community First Bancshares, Inc.’s basis in the Stock Bank stock received from Community First Bancshares, MHC will be the same as the basis of such property in the hands of Community First Bancshares, MHC.

17.

Community First Bancshares, Inc.’s holding period for the Stock Bank stock received from Community First Bancshares, MHC will include the period during which the property was held by Community First Bancshares, MHC.

18.

It is more likely than not that the basis of Community First Bancshares, Inc. common stock to its stockholders will be the purchase price thereof. The holding period of the common stock purchased pursuant to the exercise of subscription rights shall commence on the date on which the right to acquire the stock was exercised.

We believe that that the tax opinions summarized above address all material federal income tax consequences that are generally applicable to Community First Bancshares, Inc., Community First Bancshares, MHC, Newton Federal Bank and persons receiving subscription rights. The tax opinions as to items 10 and 18 above are based on the position that subscription rights to be received by eligible account holders do not have any economic value at the time of distribution or the time the subscription rights are exercised. In this regard, Luse Gorman, PC noted that the subscription rights will be granted at no cost to the recipients, are legally non-transferable and of short duration, and will provide the recipient with the right only to purchase shares of common stock at the same price to be paid by members of the general public in any community offering. The firm also noted that the Internal Revenue Service has not in the past concluded that subscription rights have value. Based on the foregoing, Luse Gorman, PC believes that it is more likely than not that the nontransferable subscription rights to purchase shares of common stock have no value. However, the issue of whether or not the nontransferable subscription rights have value is based on all the facts and circumstances. If the subscription rights granted to eligible account holders are deemed to have an ascertainable value, receipt of these rights could result in taxable gain to those eligible account holders who exercise the subscription rights in an amount equal to the ascertainable value, and we could recognize gain on a distribution. Eligible account holders are encouraged to consult with their own tax advisors as to the tax consequences in the event that subscription rights are deemed to have an ascertainable value.

In the view of RP Financial, LC. (which is acting as independent appraiser of the value of the shares of Community First Bancshares, Inc. common stock in connection with the reorganization), the subscription rights do not have any value for the reasons set forth above. RP Financial, LC.’s view is not binding on the Internal Revenue Service. If the subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are deemed to have an ascertainable value, receipt of these rights could result in taxable gain to those Eligible Account Holders, Supplemental Eligible Account Holders and Other Members who exercise the subscription rights in an amount equal to their value, and Community First Bancshares, Inc. could recognize gain on a distribution. Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are encouraged to consult with their own tax advisors as to the tax consequences in the event that subscription rights are deemed to have an ascertainable value.

The Internal Revenue Service will not issue private letter rulings with respect to the issue of whether nontransferable rights have value. Unlike private letter rulings, an opinion of counsel or the view of an independent appraiser is not binding on the Internal Revenue Service and the Internal Revenue Service could disagree with the conclusions reached therein. Depending on the conclusion or conclusions with which the Internal Revenue Service disagrees, the Internal Revenue Service may take the position that the transaction is taxable to any one or more of Newton Federal Bank, the members of Newton Federal Bank, Community First Bancshares, Inc., Eligible Account Holders, Supplemental Eligible Account Holders and Other Members who exercise their subscription rights. In the event of a disagreement, there can be no assurance that Community First Bancshares, Inc. or Newton Federal Bank would prevail in a judicial or administrative proceeding.

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The federal tax opinion has been filed with the Securities and Exchange Commission as an exhibit to Community First Bancshares, Inc.’s registration statement. An opinion regarding the Georgia state income tax consequences consistent with the federal tax opinion has been issued by Porter Keadle Moore, LLC, tax advisors to Newton Federal Bank and Community First Bancshares, Inc.

Restrictions on Purchase or Transfer of Our Shares after Reorganization

The shares being acquired by the directors, executive officers and their associates are being acquired for investment purposes, and not with a view towards resale. All shares of common stock purchased in the offering by a director or an executive officer of Community First Bancshares, Inc. or Newton Federal Bank generally may not be sold for a period of one year following the closing of the reorganization, except in the event of the death of the director or executive officer. Each certificate for restricted shares will bear a legend giving notice of this restriction on transfer, and instructions will be issued to the effect that any transfer within this time period of any certificate or ownership of the shares other than as provided above is a violation of the restriction. Any shares of common stock issued at a later date as a stock dividend, stock split or otherwise with respect to the restricted stock will be similarly restricted. The directors and executive officers of Community First Bancshares, Inc. also will be restricted by the insider trading rules promulgated pursuant to the Securities Exchange Act of 1934, as amended.

Purchases of shares of our common stock by any of our directors, executive officers and their associates, during the three-year period following the closing of the reorganization may be made only through a broker or dealer registered with the Securities and Exchange Commission, except with the prior written approval of the Federal Reserve Board and the Office of the Comptroller of the Currency. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock, to purchases of our common stock to fund stock options by one or more stock-based benefit plans or to any of our tax-qualified employee stock benefit plans or nontax-qualified employee stock benefit plans, including any stock-based benefit plans.

Federal regulations prohibit Community First Bancshares, Inc. from repurchasing its shares of common stock during the first year following the reorganization unless compelling business reasons exist for such repurchases, or to fund management recognition plans that have been ratified by stockholders (with regulatory approval) or tax-qualified employee stock benefit plans.

RESTRICTIONS ON THE ACQUISITION OF COMMUNITY FIRST BANCSHARES, INC. AND

NEWTON FEDERAL BANK

The principal federal regulatory restrictions which affect the ability of any person, firm or entity to acquire Community First Bancshares, Inc., Newton Federal Bank or their respective capital stock are described below. Also discussed are certain provisions in Community First Bancshares, Inc.’s charter and bylaws that may be deemed to affect the ability of a person, firm or entity to acquire Community First Bancshares, Inc.

Mutual Holding Company Structure

Community First Bancshares, MHC will own a majority of the outstanding common stock of Community First Bancshares, Inc. after the offering and, through its board of directors, will be able to exercise voting control over virtually all matters put to a vote of stockholders. For example, Community First Bancshares, MHC may exercise its voting control to prevent a sale or merger transaction or to defeat a stockholder nominee for election to the board of directors of Community First Bancshares, Inc. It will not be possible for another entity to acquire Community First Bancshares, Inc. without the consent of Community First Bancshares, MHC. Community First Bancshares, MHC, as long as it remains in the mutual form of organization, will control a majority of the voting stock of Community First Bancshares, Inc.

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Federal Law

Under the Change in Bank Control Act, no person may acquire control of a savings and loan holding company unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition.

Control, as defined under federal law, means ownership, control, or holding with power to vote, of 25% or more of any class of voting stock. Federal regulations establish a rebuttable presumption of control upon ownership, control, or holding with power to vote, of 10% or more of a class of voting stock (i) where the company has registered securities under Section 12 of the Securities Exchange Act of 1934 or (ii) no other person will own control or hold the power to vote a greater percentage of that class of voting securities.

The Federal Reserve Board may deny an acquisition of control if it finds, among other things, that:

•

the acquisition would result in a monopoly or substantially lessen competition;

•

the financial condition of the acquiring person might jeopardize the financial stability of the institution;

•

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; or

•

the acquisition would have an adverse effect on the Deposit Insurance Fund.

For a period of three years following completion of the offering, Federal Reserve Board regulations generally prohibit any person from acquiring or making an offer to acquire beneficial ownership of more than 10% of the stock of Community First Bancshares, Inc. or Newton Federal Bank without the Federal Reserve Board’s prior approval.

Charters and Bylaws of Community First Bancshares, Inc. and Newton Federal Bank

The following discussion is a summary of provisions of the charter and bylaws of Community First Bancshares, Inc. and Newton Federal Bank that may be deemed to affect the ability of a person, firm or entity to acquire Community First Bancshares, Inc. The description is necessarily general and qualified by reference to the charter and bylaws.

Classified Board of Directors . The board of directors of Community First Bancshares, Inc. is required by the charter and bylaws to be divided into three staggered classes that are as equal in size as is possible. Each year one class will be elected by stockholders of Community First Bancshares, Inc. for a three-year term. A classified board promotes continuity and stability of management of Community First Bancshares, Inc., but makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur.

Authorized but Unissued Shares of Capital Stock . Following the offering, Community First Bancshares, Inc. will have authorized but unissued shares of preferred stock and common stock. See “Description of Capital Stock of Community First Bancshares, Inc.” Although these shares could be used by the board of directors of Community First Bancshares, Inc. to make it more difficult or to discourage an attempt to obtain control of Community First Bancshares, Inc. through a merger, tender offer, proxy contest or otherwise, it is unlikely that we would use or need to use shares for these purposes since Community First Bancshares, MHC will own a majority of the common stock for so long as we remain in the mutual holding company structure.

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How Shares are Voted . Community First Bancshares, Inc.’s charter provides that there will not be cumulative voting by stockholders for the election of Community First Bancshares, Inc.’s directors. No cumulative voting rights means that Community First Bancshares, MHC, as the holder of a majority of the shares eligible to be voted at a meeting of stockholders, may elect all directors of Community First Bancshares, Inc. to be elected at that meeting. This could prevent minority stockholder representation on Community First Bancshares, Inc.’s board of directors.

Restrictions on Acquisitions of Shares . A section in Community First Bancshares, Inc.’s charter provides that for a period of five years from the closing of the offering, no person, other than Community First Bancshares, MHC, and, with respect to Newton Federal Bank, other than Community First Bancshares, MHC and Community First Bancshares, Inc., may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of Community First Bancshares, Inc. or Newton Federal Bank held by persons other than Community First Bancshares, MHC, and, with respect to Newton Federal Bank, other than Community First Bancshares, Inc., and that any shares acquired in excess of this limit would not be entitled to be voted and would not be counted as voting stock in connection with any matters submitted to the stockholders for a vote.

Procedures for Stockholder Nominations and Proposals for New Business . Community First Bancshares, Inc.’s bylaws provide that any stockholder wanting to make a nomination for the election of directors or a proposal for new business at a meeting of stockholders must send written notice to the Secretary of Community First Bancshares, Inc. at least five days before the date of the annual meeting. Management believes that it is in the best interests of Community First Bancshares, Inc. and its stockholders to provide enough time for management to disclose to stockholders information about a dissident slate of nominations for directors. This advance notice requirement may also give management time to solicit its own proxies in an attempt to defeat any dissident slate of nominations if management thinks it is in the best interest of stockholders generally. Similarly, adequate advance notice of stockholder proposals will give management time to study such proposals and to determine whether to recommend to the stockholders that such proposals be adopted.

Limitations on Calling Special Meetings of Stockholders . Our federal charter provides that special meetings of our stockholders may be called by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of not less than one-tenth of all of our outstanding shares of voting stock.

Purpose and Anti-Takeover Effects of Community First Bancshares, Inc.’s Charter and Bylaws . Our board of directors believes that the provisions described above are prudent and will reduce our vulnerability to takeover attempts and certain other transactions that have not been negotiated with and approved by our board of directors. These provisions also will assist us in the orderly deployment of the offering proceeds into productive assets during the initial period after the stock offering. We believe these provisions are in the best interests of Community First Bancshares, Inc. and its stockholders. Our board of directors believes that it will be in the best position to determine the true value of Community First Bancshares, Inc. and to negotiate more effectively for what may be in the best interests of all our stockholders. Accordingly, our board of directors believes that it is in the best interests of Community First Bancshares, Inc. and all of our stockholders to encourage potential acquirers to negotiate directly with the board of directors and that these provisions will encourage such negotiations and discourage hostile takeover attempts. It is also the view of our board of directors that these provisions should not discourage persons from proposing a merger or other transaction at a price reflective of the true value of Community First Bancshares, Inc. and that is in the best interests of all our stockholders.

Takeover attempts that have not been negotiated with and approved by our board of directors present the risk of a takeover on terms that may be less favorable than might otherwise be available. A transaction that is negotiated and approved by our board of directors, on the other hand, can be carefully planned and undertaken at an opportune time in order to obtain maximum value for our stockholders, with due consideration given to matters such as the management and business of the acquiring corporation.

Although a tender offer or other takeover attempt may be made at a price substantially above the current market price, such offers are sometimes made for less than all of the outstanding shares of a target company. As a result, stockholders may be presented with the alternative of partially liquidating their investment at a time that may be disadvantageous, or retaining their investment in an enterprise that is under different management and whose objectives may not be similar to those of the remaining stockholders.

122

Despite our belief as to the benefits to stockholders of these provisions of Community First Bancshares, Inc.’s charter and bylaws, these provisions also may have the effect of discouraging a future takeover attempt that would not be approved by our board of directors, but pursuant to which stockholders may receive a substantial premium for their shares over then current market prices. As a result, stockholders who might desire to participate in such a transaction may not have any opportunity to do so. Such provisions will also make it more difficult to remove our board of directors and management. We believe, however, that the potential benefits outweigh the possible disadvantages.

Benefit Plans

In addition to the provisions of Community First Bancshares, Inc.’s charter and bylaws described above, benefit plans of Community First Bancshares, Inc. and Newton Federal Bank that may authorize the issuance of equity to its board of directors, officers and employees adopted in connection with the offering contain provisions which also may discourage hostile takeover attempts which the board of directors of Newton Federal Bank might conclude are not in the best interests of Community First Bancshares, Inc. and Newton Federal Bank or Community First Bancshares, Inc.’s stockholders.

DESCRIPTION OF CAPITAL STOCK OF COMMUNITY FIRST BANCSHARES, INC.

General

Community First Bancshares, Inc. is authorized to issue 19,000,000 shares of common stock having a par value of $0.01 per share and 1,000,000 shares of serial preferred stock, par value of $0.01 per share. Each share of Community First Bancshares, Inc.’s common stock will have the same relative rights as, and will be identical in all respects with, each other share of common stock. Upon payment of the purchase price for the common stock in accordance with the plan or reorganization and stock issuance plan, all of the stock will be duly authorized, fully paid and nonassessable. Presented below is a description of the features of Community First Bancshares, Inc.’s capital stock that are deemed material to an investment decision with respect to the offering. The common stock of Community First Bancshares, Inc. will represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the FDIC.

Community First Bancshares, Inc. currently expects that it will have a maximum of up to 6,744,750 shares of common stock outstanding after the offering, of which up to 3,102,585 shares will be held by persons other than Community First Bancshares, MHC. Our board of directors can, without stockholder approval, issue additional shares of common stock, although Community First Bancshares, MHC, so long as it is in existence, must own a majority of Community First Bancshares, Inc.’s outstanding shares of common stock. Community First Bancshares, Inc.’s issuance of additional shares of common stock could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control. Community First Bancshares, Inc. has no present plans to issue additional shares of common stock other than pursuant to the stock benefit plans previously discussed.

Common Stock

Distributions . Community First Bancshares, Inc. can pay dividends if, as and when declared by its board of directors, subject to compliance with limitations which are imposed by law. The holders of common stock of Community First Bancshares, Inc. will be entitled to receive and share equally in such dividends as may be declared by the board of directors of Community First Bancshares, Inc. out of funds legally available therefor. Dividends from Community First Bancshares, Inc. will depend, in large part, upon receipt of dividends from Newton Federal Bank, because Community First Bancshares, Inc. initially will have no source of income other than dividends from Newton Federal Bank, earnings from the investment of proceeds from the sale of shares of common stock, and interest payments with respect to Community First Bancshares, Inc.’s loan to the employee stock ownership plan. Regulations of the Federal Reserve Board and the Office of the Comptroller of the Currency impose limitations on “capital distributions” by savings institutions.

123

If Community First Bancshares, Inc. pays dividends to its stockholders, it would likely pay dividends to Community First Bancshares, MHC, unless Community First Bancshares, MHC is permitted by the Federal Reserve Board to waive the receipt of dividends. The Federal Reserve Board’s current regulations significantly restrict the ability of newly organized mutual holding companies to waive dividends declared by their subsidiaries. Accordingly, because dividends would be required to be paid to Community First Bancshares, MHC along with all other stockholders, the amount of dividends available for all other stockholders would be less than if Community First Bancshares, MHC were permitted to waive the receipt of dividends.

Pursuant to our charter, Community First Bancshares, Inc. is authorized to issue preferred stock. If Community First Bancshares, Inc. issues preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends.

Voting Rights . Upon the effective date of the offering, the holders of common stock of Community First Bancshares, Inc. will possess exclusive voting rights in Community First Bancshares, Inc. Each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. If Community First Bancshares, Inc. issues preferred stock, holders of the preferred stock may also possess voting rights.

Liquidation . In the event of any liquidation, dissolution or winding up of Newton Federal Bank, Community First Bancshares, Inc., as holder of Newton Federal Bank’s capital stock, would be entitled to receive, after payment or provision for payment of all debts and liabilities of Newton Federal Bank, including all deposit accounts and accrued interest thereon, all assets of Newton Federal Bank available for distribution. In the event of liquidation, dissolution or winding up of Community First Bancshares, Inc., the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of Community First Bancshares, Inc. available for distribution. If preferred stock is issued, the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution.

Rights to Buy Additional Shares . Holders of the common stock of Community First Bancshares, Inc. will not be entitled to preemptive rights with respect to any shares which may be issued. Preemptive rights are the priority right to buy additional shares if Community First Bancshares, Inc. issues more shares in the future. The common stock is not subject to redemption.

Preferred Stock

None of the shares of Community First Bancshares, Inc.’s authorized preferred stock will be issued in the offering. Such stock may be issued with such preferences and designations as our board of directors may from time to time determine. Our board of directors can, without stockholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights which could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control. The issuance of preferred stock must be approved by a majority of our independent directors who do not have an interest in the transaction and who have access, at our expense, to legal counsel. Community First Bancshares, Inc. has no present plans to issue preferred stock.

TRANSFER AGENT AND REGISTRAR

, , , will act as the transfer agent and registrar for the common stock.

124

LEGAL AND TAX MATTERS

The legality of the common stock and the federal income tax consequences of the reorganization and offering have been passed upon for Newton Federal Bank and Community First Bancshares, Inc. by the firm of Luse Gorman, PC, Washington, D.C. The Georgia state income tax consequences of the reorganization and offering have been passed upon for Newton Federal Bank and Community First Bancshares, Inc. by Porter Keadle Moore, LLC, Atlanta, Georgia. Luse Gorman, PC and Porter Keadle Moore, LLC have consented to the references in this prospectus to their opinions. Certain legal matters regarding the reorganization and offering will be passed upon for BSP Securities, LLC by Silver, Freedman, Taff & Tiernan LLP, Washington, D.C.

EXPERTS

The financial statements of Newton Federal Bank as of September 30, 2016 and 2015 and for each of the years in the two-year period ended September 30, 2016 have been audited by Porter Keadle Moore, LLC, an independent registered public accounting firm, as stated in their report thereon and included in this Prospectus and Registration Statement in reliance upon such report of such firm as experts in accounting and auditing.

RP Financial, LC. has consented to the publication in this prospectus of the summary of its report to Newton Federal Bank and Community First Bancshares, Inc. setting forth its opinion as to the estimated pro forma market value of the common stock upon the completion of the reorganization and offering and its valuation with respect to subscription rights.

WHERE YOU CAN FIND MORE INFORMATION

Community First Bancshares, Inc. has filed a registration statement with the Securities and Exchange Commission under the Securities Act of 1933, with respect to the common stock offered hereby. As permitted by the rules and regulations of the Securities and Exchange Commission, this prospectus does not contain all the information set forth in the registration statement. This information, including the appraisal report which is an exhibit to the registration statement, can be examined without charge at the Public Reference Room of the Securities and Exchange Commission located at 100 F Street, N.E., Washington, D.C. 20549 and copies of the material can be obtained from the Securities and Exchange Commission at prescribed rates. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The registration statement also is available through the Securities and Exchange Commission’s website on the internet at http://www.sec.gov. The statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are, of necessity, brief descriptions thereof and are not necessarily complete but do contain all material information regarding the documents; each statement is qualified by reference to the contract or document.

Community First Bancshares, Inc. and Newton Federal Bank have filed applications with the Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC with respect to the reorganization and offering. Pursuant to the rules and regulations of the Federal Reserve Board, this prospectus omits certain information contained in such applications. To obtain a copy of non-confidential portions of the applications filed with the Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC, you may contact Kathryn Haney, Applications Manager of the Federal Reserve Bank of Atlanta, at (404) - , the Southern District Office of the Office of the Comptroller of the Currency located at 500 N. Akard Street, Suite 1600, Dallas, Texas 75201, and the Atlanta Regional Office of the FDIC located at One Atlantic Center, Suite 1600, 1201 West Peachtree Street, N.E., Atlanta, Georgia 30309-3449.

A copy of the charter and bylaws of Community First Bancshares, Inc. is available without charge from Newton Federal Bank.

125

REGISTRATION REQUIREMENTS

In connection with the offering, Community First Bancshares, Inc. will register its common stock with the Securities and Exchange Commission under Section 12(b) of the Securities Exchange Act of 1934. Upon this registration, Community First Bancshares, Inc. and the holders of its shares of common stock will become subject to the proxy solicitation rules, reporting requirements and restrictions on stock purchases and sales by directors, officers and greater than 10% stockholders, the annual and periodic reporting and certain other requirements of the Securities Exchange Act of 1934. Under the plan of reorganization, Community First Bancshares, Inc. has undertaken that it will not terminate this registration for a period of at least three years following the reorganization.

126

INDEX TO FINANCIAL STATEMENTS OF

NEWTON FEDERAL BANK


Report of Independent Registered Public Accounting Firm			F-2

Balance Sheets at September 30, 2016 and 2015			F-3

Statements of Income and Retained Earnings for the Years Ended September 30, 2016 and 2015			F-4

Statements of Cash Flows for the Years Ended September 30, 2016 and 2015			F-5

Notes to Financial Statements			F-6

* * *

Separate financial statements for Community First Bancshares, Inc. have not been included in this prospectus because Community First Bancshares, Inc. has not engaged in any significant activities, has no significant assets, and has no contingent liabilities, revenue or expenses.

All financial statement schedules have been omitted as the required information either is not applicable or is included in the financial statements or related notes.

F - 1

LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Newton Federal Bank

Covington, Georgia

We have audited the accompanying balance sheets of Newton Federal Bank (the “Bank”) as of September 30, 2016 and 2015, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Bank is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Newton Federal Bank as of September 30, 2016 and 2015, and the results of its operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

LOGO

Atlanta, Georgia

December 7, 2016

LOGO

F - 2

NEWTON FEDERAL BANK

Balance Sheets

September 30, 2016 and 2015


	2016		2015
	(In thousands)
Assets

Cash and due from banks, including reserve requirement of $882 and $346 in 2016 and 2015, respectively	$	4,272		2,689
Interest-earning deposits in other depository institutions		21,421		35,805

Cash and cash equivalents		25,693		38,494
Investment securities held-to-maturity (estimated fair values of $7,517 and $7,533)		7,499		7,492
FHLB stock		205		202
Loans held for sale		472		—
Loans, net		189,578		169,798
Other real estate owned		—		532
Premises and equipment, net		4,556		4,261
Accrued interest receivable and other assets		4,829		5,558

Total assets	$	232,832		226,337

Liabilities and Capital

Deposits:
Passbook accounts	$	21,180		19,906
Interest bearing checking		30,662		22,750
Market rate checking		22,607		22,587
Non-interest bearing checking		21,727		15,132
Certificate of deposits		85,523		96,312

Total deposits		181,699		176,687
Accrued interest payable and other liabilities		6,052		5,726

Total liabilities		187,751		182,413

Commitments

Capital – retained earnings		45,081		43,924

Total liabilities and capital	$	232,832		226,337

See accompanying notes to financial statements.

F - 3

NEWTON FEDERAL BANK

Statements of Income and Retained Earnings

For the Years Ended September 30, 2016 and 2015


	2016		2015
	(in thousands)
Interest income:
Loans, including fees	$	10,937		10,815
Investment securities, including dividends		92		98
Other		219		132

Total interest income		11,248		11,045

Interest expense:
Deposits		1,415		1,813

Net interest income		9,833		9,232

Non-interest income:
Service charges on deposit accounts		717		631
Other		468		251

Total Non-interest income		1,185		882

Non-interest expenses:
Salaries and employee benefits		4,742		3,532
Deferred compensation		218		336
Occupancy		1,091		980
Advertising		207		123
Data processing		633		538
Other real estate owned		65		40
Loss on write down of other real estate owned		73		123
Loss on sale of other real estate owned		34		12
Legal and accounting		426		422
Organizational dues and subscriptions		220		308
Director compensation		176		80
Federal deposit insurance premiums		155		266
Other		1,124		861

Total Non-interest expenses		9,164		7,621

Income before income taxes		1,854		2,493
Income tax expense		697		879

Net income		1,157		1,614
Retained earnings, beginning of year		43,924		42,310

Retained earnings, end of year	$	45,081		43,924

See accompanying notes to financial statements.

F - 4

NEWTON FEDERAL BANK

Statements of Cash Flows

For the Years Ended September 30, 2016 and 2015


	2016			2015
	(in thousands)
Cash flows from operating activities:
Net income	$	1,157			1,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		310			302
Deferred income tax		694			726
Loss on sale of other real estate owned		34			12
Loss on write down of other real estate owned		73			123
Originations of loans held for sale		(2,743	)		—
Proceeds from sales of loans held for sale		2,271			—
Change in:
Accrued interest receivable and other assets		(196	)		(119	)
Accrued interest payable and other liabilities		326			211

Net cash provided by operating activities		1,926			2,869

Cash flows from investing activities:
Purchase of investment security held-to-maturity		—			(2,000	)
Proceeds from maturities and paydowns of investment securities held-to-maturity		—			1,500
Purchase of other investments		(3	)		(4	)
Net change in loans		(20,137	)		3,617
Purchases of premises and equipment		(381	)		(231	)
Proceeds from the sale of other real estate owned		782			1,180

Net cash (used in) provided by investing activities		(19,739	)		4,062

Cash flows from financing activities, consisting of net change in deposits		5,012			(2,577	)

Net change in cash and cash equivalents		(12,801	)		4,354
Cash and cash equivalents at beginning of period		38,494			34,140

Cash and cash equivalents at end of period	$	25,693			38,494


Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,431			1,841
Cash paid for income taxes	$	5			231

Supplemental disclosures of noncash investing activities:
Other real estate owned acquired through foreclosures	$	524			941
Financed sales of other real estate owned	$	167			224

See accompanying notes to financial statements.

F - 5

NEWTON FEDERAL BANK

Notes to Financial Statements

(1)

Summary of Significant Accounting Policies

Nature of Operations

Newton Federal Bank (the “Bank”) is a federally chartered mutual savings and loan that was regulated by the Office of Thrift Supervision (OTS) until July 2011, when the OTS merged with the Office of the Comptroller of the Currency (OCC) and the OCC became the primary regulator of the Bank. The Bank’s main office is in Covington (Newton County), Georgia, conducting banking activities primarily in Newton and surrounding counties. The main emphasis of the Bank is providing mortgage loans in its primary lending area. It offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, mortgage, commercial and consumer loans, money transfers and a variety of other banking services.

Basis of Presentation

The accounting principles followed by the Bank and the methods of applying these standards and principles conform with accounting principles generally accepted in the United States of America (“GAAP”) and with general practices within the banking industry. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ significantly from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of real estate acquired in connection with or in lieu of foreclosure on loans, and valuation allowances associated with deferred tax assets, the recognition of which are based on future taxable income.

Impaired loans and foreclosed real estate properties are carried at fair value less estimated selling costs, the determination of which requires significant assumptions, estimates and judgments. Fair values for foreclosed real estate properties and impaired loans collateralized by real estate are principally based on independent appraised values. Fair value is defined by GAAP as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. GAAP further defines an orderly transaction as a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets. An orderly transaction is not a forced transaction like a forced liquidation or distressed sale. The Bank’s markets, over the past few years, have experienced a lesser number of transactions in the type of assets which represent the vast majority of the Bank’s impaired loans and foreclosed properties which reflect orderly transactions as so defined. Instead, most transactions in comparable assets have been distressed sales. Accordingly, the determination of fair value in the current environment is difficult and more subjective than it would be in a stable, functional real estate environment. Although management believes its processes for determining the value of these assets are appropriate and allow the Bank to arrive at a fair value under accounting standards, the value of such assets at the time they are revalued or divested may be significantly different from management’s determination of fair value.

Reclassifications

Certain amounts in the 2015 financial statements have been reclassified to conform to the 2016 presentation.

F - 6

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(1)

Summary of Significant Accounting Policies, continued

Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 revises the accounting related to classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value as well as amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this ASU is not expected to have a material effect on the Bank’s financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 82) . ASU 2016-02 provides certain targeted improvements to align lessor accounting with the lessee accounting model. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after January 1, 2019. The adoption of this ASU is not expected to have a material effect on the Bank’s financial position, results of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Adoption of ASU 2016-13 will require financial institutions and other organizations to use forward-looking information to better formulate their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Bank is in the process of determining the effect of ASU 2016-13 on its financial position, results of operations and cash flows.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and interest-earning deposits in other depository institutions.

Investment Securities

The Bank classifies its investment securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities for which the Bank has the ability and intent to hold the security until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale. At September 30, 2016 and 2015, all securities were classified as held-to-maturity.

Held-to-maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums or discounts. Transfers of securities between categories are recorded at fair value at the date of transfer.

Management evaluates investment securities for other-than-temporary impairment on an annual basis. A decline in the market value of any held-to-maturity investment below cost that is deemed other-than-temporary is charged to earnings for the decline in value deemed to be credit related. The decline in value attributed to non-credit related factors is recognized in other comprehensive income and a new cost basis in the security is established.

F - 7

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(1)

Summary of Significant Accounting Policies, continued

Investment Securities, continued

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield. Realized gains and losses for securities classified as held-to-maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold.

FHLB Stock

The Federal Home Loan Bank (“FHLB”) stock is an investment that does not have a readily determinable fair value and is carried at cost.

Loans Held for Sale

Loans held for sale are carried at the lower of aggregate cost or market value. The amount by which cost exceeds market value is accounted for as a valuation allowance. Changes in the valuation allowance are included in the determination of net income of the period in which the change occurs. At September 30, 2016 and 2015, there was no valuation allowance associated with loans held for sale.

Loans, Loan Fees and Interest Income on Loans

Loans are stated at the principal amount outstanding, net of the allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding.

Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is charged to interest income on loans. Generally, payments on nonaccrual loans are applied first to principal. Interest income is recorded after principal has been satisfied and as payments are received.

Loan fees greater than $1,500 net of certain origination costs are deferred and amortized over the lives of the respective loans. All other loan fees are recognized when the loan closes.

A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price, or at the fair value of the collateral of the loan if the loan is collateral dependent. Estimated impairment losses for collateral dependent loans are set up as specific reserves. Interest income on impaired loans is recognized using the cash-basis method of accounting during the time the loans are impaired.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collection of the principal is unlikely. The allowance represents an amount, which in management’s judgment, will be adequate to absorb probable losses on existing loans that may become uncollectible.

Management’s judgment in determining the adequacy of the allowance is based on evaluations of the probability of collection of loans. These evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, current economic conditions that may affect the borrower’s ability to pay, overall portfolio quality, and review of specific problem loans. Management uses an external independent loan reviewer to challenge and corroborate its loan gradings and to provide additional analysis in determining the adequacy of the allowance for loan losses and necessary provisions to the allowance.

F - 8

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(1)

Summary of Significant Accounting Policies, continued

Allowance for Loan Losses, continued

Management believes the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses. Such regulators may require additions to the allowance based on their judgments of information available to them at the time of their examination.

Other Real Estate Owned

Other real estate owned includes real estate acquired through foreclosure. Each other real estate property is initially recorded at its fair value less estimated costs to sell and is subsequently carried at fair value less estimated costs to sell. All foreclosed properties are actively marketed for sale. Fair value is principally based on independent appraisals performed by local credentialed appraisers. Any excess of the carrying value of the related loan over the fair value of the real estate at the date of foreclosure is charged against the allowance for loan losses. Properties in other real estate are re-evaluated annually. Any expense incurred in connection with holding such real estate or resulting from any writedowns in value subsequent to foreclosure is included in noninterest expense. When the other real estate property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings for the period. The cost of maintenance and repairs that do not improve or extend the useful life of the respective asset is charged to earnings as incurred, whereas significant renewals and improvements are capitalized. The range of estimated useful lives for premises and equipment are as follows:


Equipment and furniture			3 – 10 years
Buildings			40 years
Automobile			5 years

Income Taxes

The Bank uses the liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Additionally, this method requires the recognition of future tax benefits, such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Bank’s assets and liabilities results in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realization of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.

F - 9

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(1)

Summary of Significant Accounting Policies, continued

Income Taxes, continued

The Bank currently evaluates income tax positions judged to be uncertain. A loss contingency reserve is accrued if it is probable that the tax position will be challenged, it is probable that the future resolution of the challenge will confirm that a loss has been incurred, and the amount of such loss can be reasonably estimated.

(2)

Investment Securities Held-to-Maturity

Investment securities held-to-maturity at September 30, 2016 and 2015 are as follows: (in thousands)


September 30, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. Government sponsored enterprises	$	7,499		18		—		7,517


September 30, 2015
U.S. Government sponsored enterprises	$	7,492		41		—		7,533

There were no securities in an unrealized loss position as of September 30, 2016 or 2015.

The U.S. government sponsored enterprise securities as of September 30, 2016 are comprised of three debt financing securities issued by government agencies that mature within three years.

There were no sales of securities held-to-maturity during 2016 or 2015.

Securities with a carrying value of approximately $2,250,000 were pledged to secure public deposits at September 30, 2016 and 2015.

(3)

Loans and Allowance for Loan Losses

Major classifications of loans, by collateral code, at September 30, 2016 and 2015 are summarized as follows: (in thousands)


	2016		2015
Commercial (secured by real estate)	$	29,162		24,581
Commercial and industrial		16,221		14,333
Construction, land and acquisition & development		13,343		2,261
Residential mortgage		132,899		132,480
Consumer installment		2,262		2,017

		193,887		175,672
Less allowance for loan losses		4,309		5,874

	$	189,578		169,798

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations located primarily in Newton County and other surrounding Georgia counties. A substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market.

Qualifying loans in the amount of approximately $131,997,000 and $131,237,000 were pledged to secure the line of credit from the FHLB at September 30, 2016 and 2015, respectively.

F - 10

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(3)

Loans and Allowance for Loan Losses, continued

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2016 and 2015: (in thousands)


September 30, 2016	Commercial (Secured by Real Estate)			Commercial and Industrial			Construction, Land and Acquisition & Development		Residential Mortgage			Consumer Installment			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,238			739			67		3,486			50			294			5,874
Provision		1,920			(96	)		76		(1,608	)		(8	)		(284	)		—
Charge-offs		(1,796	)		—			—		(337	)		(12	)		—			(2,145	)
Recoveries		233			—			—		341			6			—			580

Ending balance	$	1,595			643			143		1,882			36			10			4,309

Ending allowance attributable to loans:
Individually evaluated for impairment	$	3			—			—		3			—			—			6
Collectively evaluated for impairment		1,592			643			143		1,879			36			10			4,303

Total ending allowance	$	1,595			643			143		1,882			36			10			4,309

Loans:
Individually evaluated for impairment	$	2,383			—			—		5,995			5			—			8,383
Collectively evaluated for impairment		26,779			16,221			13,343		126,904			2,257			—			185,504

Total loans	$	29,162			16,221			13,343		132,899			2,262			—			193,887


September 30, 2015
Allowance for loan losses:
Beginning balance	$	1,033			495			55		3,424			40			660			5,708
Provision		95			90			12		144			26			(366	)		—
Charge-offs		(20	)		—			—		(438	)		(18	)		—			(476	)
Recoveries		130			154			—		356			2			—			642

Ending balance	$	1,238			739			67		3,486			50			294			5,874

Ending allowance attributable to loans:
Individually evaluated for impairment	$	2			—			—		4			—			—			6
Collectively evaluated for impairment		1,236			739			67		3,482			50			294			5,868

Total ending allowance	$	1,238			739			67		3,486			50			294			5,874

Loans:
Individually evaluated for impairment	$	1,346			—			—		5,025			6			—			6,377
Collectively evaluated for impairment		23,235			14,333			2,261		127,455			2,011			—			169,295

Total loans	$	24,581			14,333			2,261		132,480			2,017			—			175,672

F - 11

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(3)

Loans and Allowance for Loan Losses, continued

The Bank individually evaluates all loans for impairment that are on nonaccrual status or are rated substandard (as described below). Additionally, all troubled debt restructurings are evaluated for impairment. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Interest payments received on impaired loans are applied as a reduction of the outstanding principal balance.

Impaired loans at September 30, 2016 and 2015 were as follows: (in thousands)


September 30, 2016	Recorded Investment		Unpaid Principal Balance		Allocated Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial (secured by real estate)	$	181		2,922		—		289		22
Commercial and industrial		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		5,320		7,587		—		5,523		218
Consumer installment		5		10		—		9		—

	$	5,506		10,519		—		5,821		240

With an allowance recorded:
Commercial (secured by real estate)	$	2,202		2,202		3		2,943		85
Commercial and industrial		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		675		675		3		554		37
Consumer installment		—		—		—		—		—

		2,877		2,877		6		3,497		122

Total impaired loans	$	8,383		13,396		6		9,318		362


September 30, 2015
With no related allowance recorded:
Commercial (secured by real estate)	$	783		2,215		—		920		42
Commercial and industrial		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		4,233		6,472		—		4,271		198
Consumer installment		6		6		—		—		—

	$	5,022		8,693		—		5,191		240

With an allowance recorded:
Commercial (secured by real estate)	$	563		563		2		565		36
Commercial and industrial		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		792		792		4		799		27
Consumer installment		—		—		—		—		—

		1,355		1,355		6		1,364		63

Total impaired loans	$	6,377		10,048		6		6,555		303

F - 12

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(3)

Loans and Allowance for Loan Losses, continued

The following table presents the aging of the recorded investment in past due loans, as well as the recorded investment in nonaccrual loans, as of September 30, 2016 and 2015 by class of loans: (in thousands)


September 30, 2016	30 -59 Days Past Due		60- 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total		Nonaccrual
Commercial (secured by real estate)	$	—		66		44		110		29,052		29,162		230
Commercial and industrial		194		—		—		194		16,027		16,221		—
Construction, land and acquisition & development		—		—		—		—		13,343		13,343		—
Residential mortgage		32		3,382		1,955		5,369		127,530		132,899		3,013
Consumer installment		20		—		—		20		2,242		2,262		—

Total	$	246		3,448		1,999		5,693		188,194		193,887		3,243


September 30, 2015
Commercial (secured by real estate)	$	—		408		50		458		24,123		24,581		448
Commercial and industrial		—		—		33		33		14,300		14,333		33
Construction, land and acquisition & development		—		—		—		—		2,261		2,261		—
Residential mortgage		—		2,909		1,598		4,507		127,973		132,480		2,056
Consumer installment		—		15		20		35		1,982		2,017		26

Total	$	—		3,332		1,701		5,033		170,639		175,672		2,563

There were no loans past due over 90 days and still accruing interest as of September 30, 2016 and 2015.

The table below presents additional information on troubled debt restructurings including the number of loan contracts restructured and the pre- and post-modification recorded investment that have occurred during the years ended September 30, 2016 and 2015. Also included in the table are the number of contracts and the recorded investment for those trouble debt restructurings that have subsequently defaulted during the years ended September 30, 2016 and 2015: (in thousands)


			Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Troubled Debt Restructurings that have Subsequently Defaulted
September 30, 2016	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Recorded Investment
Commercial (secured by real estate)		1		3,057		1,519		—		—

Residential mortgage		2		263		263		1		226

Total		3		3,320		1,782		1		226


September 30, 2015
Residential mortgage		3		465		449		2		721

F - 13

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(3)

Loans and Allowance for Loan Losses, continued

The Bank has allocated an allowance for loan losses of $5,000 and $6,000 to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2016 and 2015. As of September 30, 2016 and 2015, the Bank has not committed to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Bank uses the following definitions for its risk ratings:

Special Mention. Loans have potential weaknesses that may, if not corrected, weaken or inadequately protect the Bank’s credit position at some future date. Weaknesses are generally the result of deviation from prudent lending practices, such as over advances on collateral. Credits in this category should, within a 12 month period, move to Pass if improved or drop to Substandard if poor trends continue.

Substandard. Inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans have a well-defined weakness or weaknesses such as primary source of repayment is gone or severely impaired or cash flow is insufficient to reduce debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans have weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable. The likelihood of a loss on an asset or portion of an asset classified Doubtful is high.

Loss. Loans considered uncollectible and of such little value that the continuance as a Bank asset is not warranted. This does not mean that the loan has no recovery or salvage value, but rather the asset should be charged off even though partial recovery may be possible in the future.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. As of September 30, 2016 and 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (in thousands)


September 30, 2016	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	28,228		—		934		—		29,162
Commercial and industrial		16,221		—		—		—		16,221
Construction, land and acquisition & development		13,343		—		—		—		13,343
Residential mortgage		123,577		229		9,093		—		132,899
Consumer installment		2,262		—		—		—		2,262

Total	$	183,631		229		10,027		—		193,887

F - 14

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(3)

Loans and Allowance for Loan Losses, continued


September 30, 2015	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	20,646		163		3,772		—		24,581
Commercial and industrial		12,046		1,734		553		—		14,333
Construction, land and acquisition & development		2,261		—		—		—		2,261
Residential mortgage		124,274		694		7,512		—		132,480
Consumer installment		1,974		—		43		—		2,017

Total	$	161,201		2,591		11,880		—		175,672

(4)

Other Real Estate Owned

The Bank did not have any other real estate owned as of September 30, 2016. The Bank’s other real estate owned consisted of the following as of September 30, 2015: (in thousands)


	2015
	Number of Properties		Carrying Amount
Land		—	$	—
Construction		2		62
1-4 Family residential		—		—
Commercial		2		470

Total		4	$	532

(5)

Premises and Equipment

Premises and equipment at September 30, 2016 and 2015 are summarized as follows: (in thousands)


	2016		2015
Land	$	935		935
Buildings		5,442		5,360
Equipment and furniture		3,217		2,956
Construction in process		231		—
Automobile		68		30

		9,893		9,281
Less: Accumulated depreciation		5,337		5,020

	$	4,556		4,261

Depreciation expense was approximately $347,000 and $308,000 for the years ended September 30, 2016 and 2015, respectively.

F - 15

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(6)

Deposits

At September 30, 2016, contractual maturities of certificate of deposits are summarized as follows: (in thousands)


2017	$	35,516
2018		9,196
2019		9,096
2020		6,145
2021		8,401
Thereafter		17,169

	$	85,523

The aggregate amounts of certificate of deposits of $250,000 or more were approximately $7,925,000 and $10,531,000 at September 30, 2016 and 2015, respectively.

The following is a summary of interest expense on deposits for the years ended September 30, 2016 and 2015: (in thousands)


	2016		2015
Passbook accounts	$	8		8
Interest bearing checking accounts		83		36
Market rate checking accounts		59		58
Certificate of Deposits		1,265		1,711

	$	1,415		1,813

(7)

Borrowings

At September 30, 2016 and 2015, the Bank had a line of credit totaling $58,000,000 and $34,000,000, respectively, from the FHLB, which is reviewed annually by the FHLB. There were no advances outstanding at September 30, 2016 or 2015.

At September 30, 2016 and 2015, the Bank had an unsecured federal funds line of credit of $5,000,000, for which no amounts were outstanding as of September 30, 2016 or 2015.

(8)

Income Taxes

The components of income tax expense for the years ended September 30, 2016 and 2015 are as follows: (in thousands)


	2016		2015
Current	$	3		77
Deferred		694		(2	)
Utilization of operating loss carryforward		—		844
Change in valuation allowance		—		(40	)

	$	697		879

The difference between income tax expense and the amount computed by applying the statutory federal income tax rate to income before taxes for the years ended September 30, 2016 and 2015 is as follows:


	2016			2015
Pretax income at statutory rate	$	630			848
State income tax, net of federal benefit		68			45
Other		(1	)		26
Change in valuation allowance		—			(40	)

	$	697			879

F - 16

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(8)

Income Taxes, continued

The following summarizes the sources and expected tax consequences of future deductions or income for income tax purposes which comprised the net deferred taxes at September 30, 2016 and 2015: (in thousands)


	2016		2015
Deferred income tax assets:
Allowance for loan losses	$	1,628		2,237
Deferred compensation		1,464		1,431
Write downs on other real estate owned		—		87
Deferred gain on other real estate owned		123		126
Alternative minimum tax credit carryforward		16		74
State tax credits		251		248
Other		104		70

Total deferred income tax assets		3,586		4,273

Deferred income tax liabilities:
FHLB stock dividends		6		6
Other		77		70

Total deferred income tax liabilities		83		76

Net deferred income tax asset	$	3,503		4,197

The future tax consequences of the difference between financial reporting and tax basis of the Bank’s assets and liabilities resulted in a net deferred tax asset. Based upon management’s evaluation of the likelihood that the net deferred tax asset would be realized based upon the current and expected future financial performance of the Bank, the valuation allowance previously provided for was eliminated for the year ended September 30, 2014 and credited to net income, except for $40,000 of the valuation allowance related to certain deferred tax attributes for state tax credits, which was eliminated for the year ended September 30, 2015.

(9)

Retained Earnings

Prior to January 1, 1996, the Bank was permitted under the Internal Revenue Code (the “Code”) a special bad debt deduction related to additions to tax bad debt reserves established for the purpose of absorbing losses. The provisions of the Code permitted the Bank to deduct from taxable income an allowance for bad debts based on the greater of a percentage of taxable income before such deduction or actual loss experience. Retained earnings at September 30, 2016 includes approximately $3,625,000 for which no deferred Federal income tax liability has been recognized. The amounts represent an allocation of income for bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses would create income for tax purposes only, which would be subject to the then current corporate income tax rate.

On August 20, 1996, legislation was passed which eliminated the percentage of taxable income bad debt deduction for thrift institutions for tax years beginning after December 31, 1995. This legislation also requires a thrift to generally recapture the excess of its current tax reserves over its 1987 base year reserves whereas the base year reserves are frozen from taxation. No additional financial statement tax expense resulted from this legislation as the Bank had previously provided deferred taxes on this recaptured amount.

(10)

Benefit Plans

The Bank has a profit sharing plan to provide retirement benefits for all employees. Contributions are paid to a Trust Fund annually by the Bank in an amount determined by the Board of Directors. The expenses for the plan years ended September 30, 2016 and 2015 totaled approximately $118,000 and $104,000, respectively.

F - 17

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(10)

Benefit Plans, continued

In January 2014, the Bank added a 401(k) feature to the profit sharing plan that covers substantially all employees. Under the terms of the feature, the Bank may make matching contributions to the plan and the employees can contribute up to the maximum amounts allowed by IRS guidelines. The contribution expense related to the 401(k) feature totaled $54,000 and $20,000 for the plan years ended September 30, 2016 and 2015, respectively.

The Bank sponsors a deferred compensation plan for directors. Under this plan, participating directors may defer their Board fees and receive the deferred amounts plus interest upon completion of their time as a director or at their election. The cumulative deferred contributions for the directors in the plan and earnings thereon at September 30, 2016 and 2015 totaled approximately $3,856,000 and $3,769,000, respectively. These amounts are included in other liabilities in the accompanying balance sheets. No contributions were made to the plan for the current year’s service as the plan was frozen as of June 30, 2015. Contributions to the plan for 2015 prior to the plan being frozen was approximately $105,000.

(11)

Regulatory Matters

On May 29, 2012, the Bank entered into a formal written agreement (the “Agreement”) with the OCC. The Agreement required the Bank to undertake certain actions within designated time frames, and to operate in compliance with the provisions thereof during its term. The significant actions that were to be undertaken are as follows: implement an effective criticized assets monitoring and management system, implement a written program to improve the Bank’s loan portfolio management, implement a written program to ensure adequate allowance for loan losses, obtain independent written or updated appraisals for all criticized assets and assets with stale appraisals, implement action plans for all other real estate properties, and prepare and ensure adherence to a written three-year business plan. Compliance with the Agreement is monitored by a committee made up of three independent directors of the Bank, of which no more than one is a related party of the Bank. On April 14, 2015, the Agreement was terminated by the OCC.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

In July 2013, the Federal bank regulatory agencies issued a final rule that revises their risk-based capital requirements and the method for calculating components of capital and of computing risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The final rule applies to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more and top-tier savings and loan holding companies. The rule establishes a new common equity Tier 1 minimum capital requirement, increases the minimum capital ratios and assigns a higher risk weight to certain assets based on the risk associated with these assets. The final rule includes transition periods that generally implement the new regulations over a five year period. These changes were being phased in beginning in January 2015. Management continues to evaluate this final rule and its potential impact on the Bank. Preliminary assessments indicate that the Bank will continue to exceed all regulatory capital requirements under the phased in requirements of the new rule.

F - 18

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(11)

Regulatory Matters, continued

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Common Equity Tier 1, Total and Tier I Capital to Risk-Weighted Assets and of Tier I Capital to Average Assets. Management believes, as of September 30, 2016 and 2015, that the Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 2016 and 2015, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum common equity Tier 1 risk-based, total risk-based, Tier I risk-based and Tier I leverage ratios as set forth below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios for September 30, 2016 and 2015 are presented in the table below (in thousands).


	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2016:
Common Equity Tier 1 (to Risk Weighted Assets)	$	44,801		31	%	$	6,533		4.5	%	$	9,436		6.5	%
Total Capital (to Risk Weighted Assets)	$	46,647		32	%	$	11,614		8	%	$	14,517		10	%
Tier I Capital (to Risk Weighted Assets)	$	44,801		31	%	$	8,710		6	%	$	11,614		8	%
Tier I Capital (to Average Assets)	$	44,801		19	%	$	9,274		4	%	$	11,593		5	%

As of September 30, 2015:
Common Equity Tier 1 (to Risk Weighted Assets)	$	43,572		35	%	$	5,542		4.5	%	$	8,005		6.5	%
Total Capital (to Risk Weighted Assets)	$	45,167		37	%	$	9,853		8	%	$	12,316		10	%
Tier I Capital (to Risk Weighted Assets)	$	43,572		36	%	$	7,390		6	%	$	9,853		8	%
Tier I Capital (to Average Assets)	$	43,572		19	%	$	8,997		4	%	$	11,247		5	%

(12)

Related Party Transactions

The Bank conducts transactions with its directors and executive officers, including companies in which they have beneficial interest, in the normal course of business. It is the policy of the Bank that loan transactions with directors and executive officers be made on substantially the same terms as those prevailing at the time for comparable loans to other persons. The following is a summary of activity for related party loans for 2016: (in thousands)


Beginning balance	$	652
Loans advanced		610
Repayments		(349	)

Ending balance	$	913

The aggregate amount of deposits from directors and executive officers and their affiliates amounted to approximately $1,182,000 and $2,243,000 at September 30, 2016 and 2015, respectively.

F - 19

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(13)

Commitments

During 2016, the Bank entered into an agreement to construct a building to serve as the Bank’s operations center. The building is expected to be completed during the second quarter of 2017 for a total construction price of approximately $2,578,000.

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments could include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.

The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

In most cases, the Bank requires collateral or other security to support financial instruments with credit risk.


	Appropriate Contract Amount
	2016		2015
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit (in thousands)	$	19,553		8,294

Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit is based on management’s credit evaluation. Collateral held varies but may include unimproved and improved real estate, certificates of deposit, or personal property.

(14)

Fair Value Measurements and Disclosures

The Bank utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Bank does not currently record any assets at fair value on a recurring basis. From time to time, the Bank may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets. Additionally, the Bank is required to disclose, but not record, the fair value of other financial instruments.

Fair Value Hierarchy

The Bank groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:


Level 1 –		Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 –		Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 –		Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

F - 20

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(14)

Fair Value Measurements and Disclosures, continued

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Cash and Cash Equivalents

The carrying value of cash and cash equivalents is a reasonable estimate of fair value.

Investment Securities Held-to-Maturity

Held-to-maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums and discounts. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds. Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and state, county and municipal bonds. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Other Investments

The carrying value of other investments approximates fair value.

Loans and Loans Held for Sale

The Bank does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and a specific reserve is established within the allowance for loan losses. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with GAAP. The fair value of impaired loans is estimated using one of three methods, including collateral value, market value of similar debt, and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. In accordance with GAAP, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price, the Bank records the impaired loan as nonrecurring Level 2. When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank records the impaired loan as nonrecurring Level 3. For disclosure purposes, the fair value of fixed rate loans which are not considered impaired is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For unimpaired variable rate loans, the carrying amount is a reasonable estimate of fair value for disclosure purposes.

The estimated fair value of loans held for sale, classified within Level 2, is approximated by the carrying value, given the short-term nature of the loans and similarly to what secondary markets are currently offering for portfolios of loans with similar characteristics.

Other Real Estate Owned

Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate. Subsequently, other real estate assets are carried at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price, the Bank records the other real estate as nonrecurring Level 2. When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank records the other real estate asset as nonrecurring Level 3.

F - 21

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(14)

Fair Value Measurements and Disclosures, continued

Deposits

The fair value of passbook accounts, interest bearing checking accounts, non-interest bearing checking accounts and market rate checking accounts is the amount payable on demand at the reporting date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current rates at which comparable certificates would be issued.

Commitments to Extend Credit

Commitments to extend credit are short-term and, therefore, the carrying value and the fair value are considered immaterial for disclosure.

Assets Recorded at Fair Value on a Recurring Basis

As of September 30, 2016 and 2015, there were no assets measured at fair value on a recurring basis.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Bank may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of September 30, 2016 and 2015. (in thousands)


September 30, 2016	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—		—		—		—
Impaired loans		—		—		8,377		8,377

Total assets at fair value	$	—		—		8,377		8,377


September 30, 2015	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—		—		532		532
Impaired loans		—		—		6,371		6,371

Total assets at fair value	$	—		—		6,903		6,903

The carrying amounts and estimated fair values (in thousands) of the Bank’s financial instruments at September 30, 2016 and 2015 are as follows:


	2016				2015
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	25,693		25,693		38,494		38,494
Investment securities held-to-maturity	$	7,499		7,517		7,492		7,533
Other investments	$	205		205		202		202
Loans held for sale	$	472		472		—		—
Loans, net	$	189,578		183,321		169,798		172,855
Financial liabilities:
Deposits	$	181,699		182,016		176,687		178,417

F - 22

NEWTON FEDERAL BANK

Notes to Financial Statements, continued

(14)

Fair Value Measurements and Disclosures, continued

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

(15)

Subsequent Event

On October 31, 2016, the Board of Directors of the Bank adopted a Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan (the “Plan”). The Plan is subject to the approval of the Board of Governors of the Federal Reserve System and must be approved by the affirmative vote of at least a majority of the total votes eligible to be cast by the voting members of the Bank at a special meeting. Pursuant to the Plan, the Bank proposes to reorganize into a mutual holding company form of ownership. The Bank will convert to a stock savings bank and issue all of its outstanding stock to a new holding company, which will be named Community First Bancshares, Inc. Pursuant to the Plan, the new holding company will sell stock to the public, with the total offering value and number of shares of common stock based upon an independent appraiser’s valuation. The stock will be priced at $10.00 per share. In addition, the Bank’s Board of Directors will adopt an employee stock ownership plan (“ESOP”), which will subscribe for up to 3.92% of the common stock of the new holding company to be outstanding upon the completion of the reorganization and stock issuance. Community First Bancshares, Inc. will be organized as a corporation under the laws of the United States and will offer 46% of its common stock to be outstanding to the Bank’s eligible members, the ESOP and certain other persons. Community First Bancshares, MHC will be organized as a mutual holding company under the laws of the United States and will own 54% of the common stock of Community First Bancshares, Inc. to be outstanding upon completion of the reorganization and stock issuance.

The costs of the reorganization and the issuing of the common stock will be deferred and deducted from the sales proceeds of the offering. If the conversion is unsuccessful, all deferred costs will be charged to operations. As of September 30, 2016, no reorganization costs had been incurred.

F - 23

No person has been authorized to give any information or to make any representation other than as contained in this prospectus and, if given or made, such other information or representation must not be relied upon as having been authorized by Community First Bancshares, Inc. or Newton Federal Bank. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of Community First Bancshares, Inc. or Newton Federal Bank since any of the dates as of which information is furnished herein or since the date hereof.

Up to 2,697,900 shares

(Subject to Increase to up to 3,102,585 shares)

Community First Bancshares, Inc.

(Proposed Holding Company for Newton Federal Bank)

COMMON STOCK

par value $0.01 per share

PROSPECTUS

BSP SECURITIES, LLC

[prospectus date]

These securities are not deposits or accounts and are not federally insured or guaranteed.

Until , all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II:

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.

Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable in connection with the sale of shares of common stock being registered.


*	Registrant’s Legal Fees and Expenses	$	425,000
*	Registrant’s Accounting Fees and Expenses		130,000
*	Marketing Agent Fees and Expenses		95,000
*	Stock Center Fees and Expenses		35,000
*	Appraisal Fees and Expenses		51,500
*	Printing, Postage, Mailing and EDGAR Fees		136,500
*	Filing Fees (NASDAQ, FINRA, SEC)		59,500
*	Transfer Agent Fees and Expenses		15,000
*	Business Plan Fees and Expenses		40,000
*	Proxy Solicitor Fees and Expense		10,000
*	Data Conversion Fees and Expense		29,500
*	Other		78,000

*	Total	$	1,105,000

*	Estimated.

Item 14.

Indemnification of Directors and Officers

Provisions in the Registrant’s bylaws provide for indemnification of the Registrant’s directors and officers up to the fullest extent authorized by applicable law and regulations of the FRB. Section 239.40 of Title 12 of the Code of Federal Regulations is described below. Section 239.31 of Title 12 of the Code of Federal Regulations indicates that Section 239.40 apply to subsidiary holding companies, such as Community First Bancshares, Inc.

Generally, federal regulations require indemnity coverage for mutual holding companies and subsidiary holding companies for any person against whom any action is brought or threatened because that person is or was a director or officer of the savings association, for:

(i)

Any amount for which that person becomes liable under a judgment in such action; and

(ii)

Reasonable costs and expenses, including reasonable attorney’s fees, actually paid or incurred by that person in defending or settling such action, or in enforcing his or her rights under this section if he or she attains a favorable judgment in such enforcement action,

provided that indemnification shall be made to such person only if:

(i)

Final judgment on the merits is in his or her favor; or

(ii)

In case of:

Settlement,

Final judgment against him or her, or

Final judgment in his or her favor, other than on the merits, if a majority of the disinterested directors of the mutual holding company determine that he or she was acting in good faith within the scope of his or her employment or authority as he or she could reasonably have perceived it under the circumstances and for a purpose he or she could reasonably have believed under the circumstances was in the best interests of the mutual holding company or its members.

II-1

However, no indemnification shall be made unless the mutual holding company gives the Board at least 60 days’ notice of its intention to make such indemnification. Such notice shall state the facts on which the action arose, the terms of any settlement, and any disposition of the action by a court. Such notice, a copy thereof, and a certified copy of the resolution containing the required determination by the board of directors shall be sent to the appropriate Reserve Bank, who shall promptly acknowledge receipt thereof. The notice period shall run from the date of such receipt. No such indemnification shall be made if the Board advises the mutual holding company in writing, within such notice period, of its objection to the indemnification.

As used in the above paragraph:

(i)

“Action” means any judicial or administrative proceeding, or threatened proceeding, whether civil, criminal, or otherwise, including any appeal or other proceeding for review;

(ii)

“Court” includes, without limitation, any court to which or in which any appeal or any proceeding for review is brought;

(iii)

“Final Judgment” means a judgment, decree, or order which is not appealable or as to which the period for appeal has expired with no appeal taken;

(iv)

“Settlement” includes the entry of a judgment by consent or confession or a plea of guilty or of nolo contendere .

Item 15.

Recent Sales of Unregistered Securities

Not applicable.

Item 16.

Exhibits and Financial Statement Schedules:

The exhibits and financial statement schedules filed as part of this registration statement are as follows:

(a)

List of Exhibits


1.1		Engagement Letters between Newton Federal Bank and BSP Securities, LLC

1.2		Form of Agency Agreement between Newton Federal Bank, Community First Bancshares, Inc., Community First Bancshares, MHC and BSP Securities, LLC*

2		Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan, as amended

3.1		Charter of Community First Bancshares, Inc.

3.2		Bylaws of Community First Bancshares, Inc.

4		Form of Common Stock Certificate of Community First Bancshares, Inc.

5		Opinion of Luse Gorman, PC regarding legality of securities being registered

8.1		Federal Tax Opinion*

8.2		State Tax Opinion*

10.1		Form of Employee Stock Ownership Plan

10.2		Directors Deferred Compensation Plan

10.3		Release and Settlement Agreement

21		Subsidiaries of Community First Bancshares, Inc.

23.1		Consent of Luse Gorman, PC (set forth in Exhibits 5 and 8.1)

23.2		Consent of Porter Keadle Moore, LLC

23.3		Consent of Porter Keadle Moore, LLC with respect to state tax opinion (set forth in Exhibit 8.2)*

23.4		Consent of RP Financial, LC.

24		Power of Attorney (set forth on the signature page to this Registration Statement)

99.1		Engagement Letter with RP Financial, LC. to serve as appraiser

II-2


99.2		Letter of RP Financial, LC. with respect to Subscription Rights

99.3		Appraisal Report of RP Financial, LC.

99.4		Marketing Materials

99.5		Stock Order and Certification Form

*	To be filed by amendment.

(b)

Financial Statement Schedules

No financial statement schedules are filed because the required information is not applicable or is included in the consolidated financial statements or related notes.

Item 17.

Undertakings

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);

II-3

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(5) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(6) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(7) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

(8) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Covington, State of Georgia, on December 9, 2016.


COMMUNITY FIRST BANCSHARES, INC. (In formation)

By:		/s/ Johnny S. Smith
		Johnny S. Smith
		President and Chief Executive Officer
		(Duly Authorized Representative)

POWER OF ATTORNEY

We, the undersigned directors of Community First Bancshares, Inc. (the “Company”), severally constitute and appoint Johnny S. Smith with full power of substitution, our true and lawful attorney and agent, to do any and all things and acts in our names in the capacities indicated below which said Johnny S. Smith may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the Registration Statement on Form S-1 relating to the offering of the Company common stock, including specifically, but not limited to, power and authority to sign for us or any of us in our names in the capacities indicated below the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby approve, ratify and confirm all that said Johnny S. Smith shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


Signatures	Title	Date

/s/ Johnny S. Smith	President, Chief Executive Officer and Director (Principal Executive Officer)	December 9, 2016
Johnny S. Smith
/s/ Tessa M. Nolan	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	December 9, 2016
Tessa M. Nolan

/s/ Troy B. Brooks	Director	December 9, 2016
Troy B. Brooks

/s/ William D. Fortson, Jr.	Director	December 9, 2016
William D. Fortson, Jr.

/s/ Marshall L. Ginn	Director	December 9, 2016
Marshall L. Ginn

/s/ Bob W. Richardson	Director	December 9, 2016
Bob W. Richardson

/s/ Edward P. Stone	Director	December 9, 2016
Edward P. Stone

As filed with the Securities and Exchange Commission on December 12, 2016

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

EXHIBITS

REGISTRATION STATEMENT

FORM S-1

Community First Bancshares, Inc.

Covington, Georgia

EXHIBIT INDEX


1.1		Engagement Letters between Newton Federal Bank and BSP Securities, LLC

1.2		Form of Agency Agreement between Newton Federal Bank, Community First Bancshares, Inc., Community First Bancshares, MHC and BSP Securities, LLC*

2		Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan, as amended

3.1		Charter of Community First Bancshares, Inc.

3.2		Bylaws of Community First Bancshares, Inc.

4		Form of Common Stock Certificate of Community First Bancshares, Inc.

5		Opinion of Luse Gorman, PC regarding legality of securities being registered

8.1		Federal Tax Opinion*

8.2		State Tax Opinion*

10.1		Form of Employee Stock Ownership Plan

10.2		Directors Deferred Compensation Plan

10.3		Release and Settlement Agreement

21		Subsidiaries of Community First Bancshares, Inc.

23.1		Consent of Luse Gorman, PC (set forth in Exhibits 5 and 8.1)

23.2		Consent of Porter Keadle Moore, LLC

23.3		Consent of Porter Keadle Moore, LLC with respect to state tax opinion (set forth in Exhibit 8.2)*

23.4		Consent of RP Financial, LC.

24		Power of Attorney (set forth on the signature page to this Registration Statement)

99.1		Engagement Letter with RP Financial, LC. to serve as appraiser

99.2		Letter of RP Financial, LC. with respect to Subscription Rights

99.3		Appraisal Report of RP Financial, LC.

99.4		Marketing Materials

99.5		Stock Order and Certification Form

*	To be filed by amendment.

Exhibit 1.1

LOGO

October 28, 2016

Boards of Directors

Newton Federal Bank

3175 Highway 278

Covington, GA 30014

Attention:

Mr. Johnny S. Smith

President and Chief Executive Officer

Gentlemen:

BSP Securities, LLC (“BSP”) is pleased to assist Newton Federal Bank (the “Bank”) with the offer and sale of certain shares of the common stock (the “Common Stock”) of a newly formed parent company (“Bancorp”) to the Bank’s eligible account holders in a Subscription Offering and, under certain circumstances, to members of the Bank’s community in a direct Community Offering and to the general public in a Syndicated Community Offering (collectively, the “Offering”), all pursuant to the terms of a Plan of Stock Issuance to be adopted by the Board of Directors of a newly formed Mutual Holding Company (the “MHC”) and the Boards of Directors of Bancorp and the Bank (the “Plan”) in connection with the adoption of a Plan of Reorganization pursuant to which the Bank will reorganize into the mutual holding company form of organization. For purposes of this letter, the MHC, the Bancorp and the Bank are sometimes collectively referred to as the “Company” and their respective boards of directors are sometimes collectively referred to as the “ Boards.” This letter agreement is to confirm the terms and conditions of our engagement (the “Agreement”).

SERVICES

BSP will act as exclusive marketing agent for the Company in the Offering. We will work with the Company and its management, counsel, accountants and other advisors on the Offering and anticipate that our services will include the following, each as may be necessary and as the Company may reasonably request:

Consulting as to the marketing implications of any aspect of the Plan, Including the percentage of Common Stock of Bancorp to be offered in the Offering;

Reviewing with the Boards the financial impact of the Offering on the Company, based upon the independent appraiser’s appraisal of the Common Stock;

Reviewing all offering documents, including the prospectus, stock order forms and related offering materials (it being understood that preparation and filing of such documents will be the responsibility of the Company and its counsel);

Assisting in the design and implementation of a marketing strategy for the Offering;

Assisting Company management in scheduling and preparing for meetings with potential investors and/or other broker-dealers in connection with the Offering;

LOGO

Assisting the Company in drafting press releases as required or appropriate in connection with the Offering; and

Providing such other general advice and assistance as may be requested to promote the successful completion of the Offering.

SUBSCRIPTION AND COMMUNITY OFFERING FEE S

If the Offering is consummated, the Company agrees to pay BSP for its services a fee of one percent (1%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Subscription Offering and Community Offering, excluding Common Stock purchased by or on behalf of (i) any employee benefit plan or trust of the Company established for the benefit of its directors, officers and employees, (ii) any charitable foundation established by the Company (or any shares contributed to such a charitable foundation), and (iii) any director, trustee, officer or employee of the Company or members of their immediate families (whether directly or through a personal trust) (the “Service Fee”). For purposes of this Agreement, the term “Actual Purchase Price” shall mean the price at which the shares of the Common Stock are sold in the Offering.

If (a) BSP’s engagement hereunder is terminated for any of the reasons provided for under the second paragraph of the section of this letter captioned “Definitive Agreement” or (b) the Offering is terminated by the Company, no fees, except for the Management Fee described below, shall be payable by the Company to BSP hereunder; however, the Company shall reimburse BSP for its reasonable out-of-pocket expenses (including legal fees) incurred in connection with its engagement hereunder and for any fees and expenses incurred by BSP on behalf of the Company pursuant to the second paragraph under the section captioned “Costs and Expenses” below.

All fees and expense reimbursements payable to BSP hereunder shall be payable in immediately available funds by wire transfer upon submission of a request for reimbursement by BSP and no later than at the time of the closing of the Offering, or upon the termination of BSP’s engagement hereunder or termination of the Offering, as the case may be. In recognition of the work to date and the long lead times involved in the stock offering process, the Company agrees to pay BSP a one-time, non-refundable management fee in the amount of $25,000, payable upon execution of this Agreement (the “Management Fee”). The Management Fee shall be deemed to have been earned in full when due. The Management Fee will be credited against the Service Fee.

SYNDICATED COMMUNITY OFFERING

If any shares of the Common Stock remain available after the expiration of the Subscription Offering and the Community Offering, at the request of the Company and subject to the continued satisfaction of the conditions set forth in the second paragraph under the caption “Definitive Agreement” below, BSP will seek to sell such Common Stock in a Syndicated Community Offering on a best efforts basis, subject to the terms and conditions to be set forth in a selected dealers agreement, and may, in consultation with the Company, form a syndicate of registered dealers to assist in such efforts. With respect to any shares of the Common Stock sold by BSP or any other FINRA member firm under any selected dealers agreements in a Syndicated Community Offering, the Company agrees to pay a commission not to exceed five and one-half

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percent (5.5%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in such Syndicated Community Offering. BSP will endeavor to distribute the Common Stock among dealers in a fashion that best meets the distribution objectives of the Company and the requirements of the Plan, which may result in limiting the allocation of stock to certain selected dealers. It is understood that this is a best efforts engagement and that in no event shall either BSP or any other broker/dealer be obligated to take or purchase any shares of the Common Stock in the Offering.

COSTS AND EXPENSES

In addition to any fees that may be payable to BSP hereunder and the expenses to be borne by the Company pursuant to the following paragraph, the Company agrees to reimburse BSP, upon request made from time to time, for its reasonable out-of-pocket expenses incurred in connection with its engagement hereunder, regardless of whether the Offering is consummated, including, without limitation, legal fees and expenses, communications, syndication and travel expenses, up to a maximum of $85,000 for legal fees and expenses and $10,000 for all other out-of-pocket expenses for a total of $95,000, which expense cap shall be increased to $110,000 if a Syndicated Community Offering is conducted; provided, however, that BSP shall document such expenses to the reasonable satisfaction of the Company. The provisions of this paragraph are not intended to apply to or in any way impair the indemnification provisions of this Agreement.

As is customary, the Company will beat all other expenses incurred in connection with the Offering, including, without limitation, (i) the cost of obtaining all securities and bank regulatory approvals, including any required FINRA filing fees; (ii) the cost of printing and distributing the offering materials; (iii) the costs of blue sky qualification (including fees and expenses of blue sky counsel) of the shares in the various states, (iv) listing fees, (v) all fees and disbursements of the Company’s counsel, accountants, records management agent, transfer agent and other advisors; and (vi) the establishment and operational expenses for the Stock Information Center (e.g., postage, telephones, supplies, temporary employees, etc.). In the event BSP incurs any such fees and expenses on behalf of the Company, the Company will reimburse BSP for such fees and expenses whether or not an Offering is consummated.

DUE DILIGENCE REVIEW

BSP’s obligation to perform the services contemplated by this Agreement shall be subject to the satisfactory completion of such investigation and inquiries relating to the Company and its trustees, directors, officers, agents and employees, as BSP and its counsel in their sole discretion may deem appropriate under the circumstances. In this regard, the Company agrees that, at its expense, it will make available to BSP all information that BSP requests, and will allow BSP the opportunity to discuss with the management of the Company the financial condition, business and operations of the Company. The Company acknowledges that BSP will rely upon the accuracy and completeness of all information received from the Company and its directors, trustees, officers, employees, agents, independent accountants and counsel.

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BLUE SKY MATTERS

BSP and the Company agree that the Company’s counsel shall serve as counsel with respect to blue sky matters in connection with the Offering. The Company will cause such counsel to prepare a Blue Sky Memorandum related to the Offering including BSP’s participation therein, and shall furnish BSP a copy thereof addressed to BSF or upon which such counsel shall state BSP may rely.

CONFIDENTIALITY

Except as contemplated in connection with the performance of its services under this Agreement, as authorized by the Company or as required by law, regulation or legal process, BSP agrees that it will treat as confidential all material, non-public information relating to the Company obtained in connection with its engagement hereunder (the “Confidential Information”); provided, however , that BSP may disclose such information to its agents and advisors who are assisting or advising BSP in performing its services hereunder and who have agreed to comply with the terms and conditions of this paragraph. As used in this paragraph, the term “Confidential Information” shall not include information which (a) is or becomes generally available to the public other than as a result of a disclosure by BSP in breach of the confidentiality provisions contained herein, (b) was available to BSP on a non-confidential basis prior to its disclosure to BSP by the Company, (c) becomes available to BSP on a non-confidential basis from a person other than the Company who is not otherwise known to BSP to be bound not to disclose such information pursuant to a contractual, legal or fiduciary obligation, or (d) is independently developed by BSP without use of or reference to the Confidential Information disclosed hereunder.

The Company hereby acknowledges and agrees that the financial models and presentations used by BSP in performing its services hereunder have been developed by and are proprietary to BSP and are protected under applicable copyright laws. The Company agrees that it will not reproduce or distribute all or any portion of such models or presentations without the prior written consent of BSP.

INDEMNIFICATION

In connection with BSP’s engagement to advise and assist the Company as provided herein, each of the MHC, the Bank and the Bancorp agrees to Indemnify and hold BSP and its affiliates and their respective partners, directors, officers, employees, agents and controlling persons within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 (BSP and each such person being an “Indemnified Party”) harmless to the fullest extent permitted by law, from and against any and all losses, direct or class action claims, damages, costs and liabilities, joint or several, to which such Indemnified Party may become subject under applicable federal or state law, or otherwise, related to or arising out of the Offering or the engagement of BSP pursuant to, or the performance by BSP of the services contemplated by, this Agreement, and will reimburse any Indemnified Party for all expenses (including reasonable legal fees and expenses and costs of production or response) as they are incurred, including expenses incurred in connection with the investigation, responding, preparation for or defense of any pending or threatened regulatory inquiry, subpoena or discovery response, claim or any action or other proceeding arising therefrom, whether or not in connection with pending or threatened litigation in which Indemnified Party is a party or inquiry of which Indemnified Party is subject; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense which are finally judicially determined to have resulted primarily from BSP’s bad faith, gross negligence, or intentional misconduct.

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If the foregoing indemnification is judicially determined to be unavailable for any reason, then, in lieu of indemnifying such Indemnified Party, the Company agrees to contribute to such losses, claims, damages, costs, liabilities and expenses (a) in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and BSP, on the other hand, of the engagement provided for in this Agreement or (b) if the allocation provided for in clause (a) above is not available, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (a) but also the relative fault of each of the Company and BSP, as well as any other relevant equitable consideration; provided, however, in no event shall BSP’s aggregate contribution to the amount paid or payable exceed the aggregate amount of fees actually received by BSP under this Agreement. For the purposes of this Agreement, the relative benefits to the Company and to BSP of the engagement under this Agreement shall be deemed to be in the same proportion as (a) the total value paid or contemplated to be paid or received or contemplated to be received by the Company or the Company’s members or other stakeholders, as the case may be, in the Offering that are the subject of the engagement hereunder, whether or not any such Offering is consummated, bears to (b) the fees paid or to be paid to BSP under this Agreement.

The Company agrees to notify BSP promptly of the assertion against it or any other person of any claim or the commencement of any action or proceeding relating to any transaction contemplated by this Agreement. The Company will not, without BSP’s prior written consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any claim, action or proceeding in respect of which indemnity may be sought hereunder, whether or not any Indemnified Party is an actual or potential party thereto, unless such settlement, compromise, consent or termination (a) includes an explicit and unconditional release of each Indemnified Party from any liabilities arising out of such claim, action or proceeding and (b) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party.

DEFINITIVE AGREEMENT

BSP and the Company agree that (a) except as set forth in clause (b), the foregoing represents the general intention of the Company and BSP with respect to the services to be provided by BSP in connection with the Offering, which will serve as a basis for BSP commencing activities, and (b) the only legal and binding obligations of the Company and BSP with respect to the Offering shall be (1) the Company’s obligation to pay fees to BSP in exchange for its services performed pursuant to the section captioned “Services,” (2) reimburse costs and expenses pursuant to the section captioned “Costs and Expenses,” (3) those set forth under the captions “Confidentiality” and “Indemnification,” and (4) as set forth in a duty negotiated and executed definitive Agency Agreement to be entered into prior to the commencement of the Offering relating to the services of BSP in connection with the Offering. Such Agency Agreement shall be in form and content satisfactory to BSP and the Company and their respective counsel and shall contain standard indemnification and contribution provisions consistent herewith.

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BSP’s execution of such Agency Agreement shall also be subject to (i) BSP’s satisfaction with its investigation of the Company’s business, financial condition and results of operations, (ii) preparation of offering materials that are satisfactory to BSP and its counsel, (iii) compliance with all relevant legal and regulatory requirements to the reasonable satisfaction of BSP, (iv) agreement that the price established by the independent appraiser is reasonable, and (v) market conditions at the time of the proposed offering, BSP may terminate this Agreement if such Agency Agreement is not entered into prior June 30, 2017.

This letter constitutes the entire agreement between the parties with respect to the subject matter hereof and can be altered only by written consent signed by the parties. This Agreement shall be construed and enforced in accordance with the laws of the State of Georgia, without regard to the conflicts of laws principles thereof,

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to BSP the duplicate copy of this letter enclosed herewith.


Very truly yours,

BSP SECURITIES, LLC

By:		/s/ Robert Lee Burrows
		Robert Lee Burrows, Jr. CEO


Accepted and agreed to as of the date first above written:

NEWTON FEDERAL BANK

By:		/s/ Johnny S. Smith
		Johnny S. Smith President and CEO

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October 28, 2016

Mr. Johnny S. Smith

President and Chief Executive Officer

Newton Federal Bank

3175 Highway 278

Covington, GA 30014

Dear Mr. Smith:

BSP Securities, LLC (“BSP”) is pleased to act as Stock Information Center Manager for Newton Federal Bank (the “Bank”), its proposed parent company (“Bancorp”) and a newly formed mutual holding company (the “MHC”) (collectively, the “Company”) in connection with the offer and sale of certain shares of the common stock of Bancorp to the Bank’s eligible account holders in a Subscription Offering and, under certain circumstances, to members of the Bank’s community in a direct Community Offering and to the general public in a Syndicated Community Offering (collectively, the “Offering”) pursuant to the terms of a Plan of Stock Issuance to be adopted by the Company (the “Plan”) in connection with the adoption of a Plan of Reorganization pursuant to which the Bank will reorganize into the mutual holding company form of organization. This letter agreement is to confirm the terms and conditions of our engagement (the “Agreement”).

SERVICES AND FEES

In our role as Stock Information Center Manager, we anticipate that our services will include the services outlined below, each as may be necessary and as the Company may reasonably request:

Coordinating vote solicitation and the special meeting of members;

Design of the stock order forms;

Organization and supervision of the Stock Information Center; and

Employee training.

For its services hereunder, the Company agrees to pay BSP a fee of $20,000. This fee is based upon the requirements of current regulations and the Plan as currently contemplated. Any unusual or additional items or duplication of service required as a result of a material change in the regulations or the Plan or a material delay or other similar events may result in extra charges that will be covered in a separate agreement if and when they occur and shall not exceed $5,000. The Company will inform BSP within a reasonable period of time of any changes in the Plan that require changes in BSP’s services.

All fees under this Agreement shall be payable in cash, as follows: (a) $10,000 payable upon execution of this Agreement, which shall be non-refundable; and (b) the balance upon the mailing of the offering materials.

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COSTS AND EXPENSES

It is understood that all expenses associated with the operation of the Stock Information Center will be borne by the Company. The Company also agrees to reimburse BSP, upon request made from time to time, for its reasonable out-of-pocket expenses incurred in connection with its engagement hereunder, regardless of whether the Offering is consummated, including, without limitation, travel, lodging, food, telephone, postage, communications and other similar expenses, up to a maximum of $10,000; provided, however, that BSP shall document such expenses to the reasonable satisfaction of the Company. The provisions of this paragraph are not intended to apply to or in any way impair the indemnification provisions of this Agreement.

RELIANCE ON INFORMATION PROVIDED

The Company will provide BSP with such information as BSP may reasonably require to carry out its duties hereunder. The Company recognizes and confirms that BSP (a) will use and rely on such information in performing the services contemplated by this Agreement without having independently verified the same, and (b) does not assume responsibility for the accuracy or completeness of the information.

LIMITATIONS

BSP, as Stock Information Center Manager hereunder, (a) shall have no duties or obligations other than those specifically set forth herein; (b) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any order form or any stock certificates or statements of ownership or the shares represented thereby, and will not be required to and will make no representations as to the validity, value or genuineness of the Offering; (c) shall not be liable to any person or entity, including the Company, by reason of any error of judgment or for any act done by it in good faith, or for any mistake of law or fact in connection with this Agreement and the performance hereof; (d) will not be obliged to take any legal action hereunder which might in its judgment involve any expense or liability, unless it shall have been furnished with reasonable indemnity satisfactory to it (as provided for in the Indemnification section below); and (e) may rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telex, telegram, or other document or security delivered to it and in good faith believed by it to be genuine and to have been signed by the proper party or parties.

Anything in this Agreement to the contrary notwithstanding, in no event shall BSP be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if BSP has been advised of the likelihood of such loss or damage and regardless of the form of action.

INDEMNIFICATION

In connection with BSP’s engagement to advise and assist the Company as provided herein, each of the MHC, the Bank and the Bancorp agrees to indemnify and hold BSP and its affiliates and their respective partners, directors, officers, employees, agents and controlling

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persons within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 (BSP and each such person being an “Indemnified Party”) harmless, to the fullest extent permitted by law, from and against any and all losses, direct or class action claims, damages, costs and liabilities, joint or several, to which such Indemnified Party may become subject under applicable federal or state law, or otherwise, related to or arising out of BSP’s role as Stock Information Center Manager or the Offering or the engagement of BSP pursuant to, or the performance by BSP of the services contemplated by, this Agreement, and will reimburse any Indemnified Party for all expenses (including reasonable legal fees and expenses and costs of production or response) as they are incurred, including expenses incurred in connection with the investigation, responding, preparation for or defense of any pending or threatened regulatory inquiry, subpoena or discovery response, claim or any action or other proceeding arising therefrom, whether or not in connection with pending or threatened litigation in which Indemnified Party is a party or inquiry of which Indemnified Party is subject; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense which are finally judicially determined to have resulted primarily from BSP’s bad faith, gross negligence, or intentional misconduct.

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MISCELLANEOUS

The following addresses shall be sufficient for written notices to each other:


If to you:		Newton Federal Bank
		3175 Highway 278
		Covington, GA 30014
		Attention: Mr. Johnny S. Smith

If to us:		BSP Securities, LLC
		3290 Northside Pkwy NW
		Suite 800
		Atlanta, GA 30327
		Attention: General Counsel

The Agreement and appendix hereto constitute the entire agreement between the parties with respect to the subject matter hereof and can be altered only by written consent signed by the parties. This Agreement is governed by the laws of the State of Georgia.

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to BSP the duplicate copy of this Agreement enclosed herewith.


Very truly yours,

BSP SECURITIES, LLC

By:		/s/ Robert Lee Burrows, Jr.
		Robert Lee Burrows, Jr. CEO


Accepted and agreed to as of the date first above written:

NEWTON FEDERAL BANK

By:		/s/ Johnny S. Smith
		Johnny S. Smith President and CEO

Exhibit 2

NEWTON FEDERAL BANK

PLAN OF REORGANIZATION

FROM A MUTUAL SAVINGS

ASSOCIATION

TO A MUTUAL HOLDING COMPANY

AND STOCK ISSUANCE PLAN

TABLE OF CONTENTS


		Page
1.	Introduction		1
2.	Definitions		2
3.	The Reorganization		8
4.	Conditions to Implementation of the Reorganization		10
5.	Special Meeting of Members		11
6.	Rights of Members of the MHC		11
7.	Conversion of MHC to Stock Form		12
8.	Timing of the Reorganization and Sale of Capital Stock		12
9.	Number of Shares to be Offered		13
10.	Independent Valuation and Purchase Price of Shares		13
11.	Method of Offering Shares and Rights to Purchase Stock		14
12.	Additional Limitations on Purchases of Common Stock		18
13.	Payment for Stock		21
14.	Manner of Exercising Subscription Rights Through Order Forms		21
15.	Undelivered, Defective or Late Order Form; Insufficient Payment		23
16.	Completion of the Stock Offering		23
17.	Market for Common Stock		23
18.	Stock Purchases by Management Persons After the Stock Offering		23
19.	Resales of Stock by Directors and Officers		24
20.	Stock Certificates		24
21.	Restriction on Financing Stock Purchases		24
22.	Stock Benefit Plans		24
23.	Post-Reorganization Filing and Market Making		24
24.	Payment of Dividends and Repurchase of Stock		25
25.	Reorganization and Stock Offering Expenses		25
26.	Employment and Other Severance Agreements		25
27.	Residents of Foreign Countries and Certain States		25
28.	Interpretation		26
29.	Amendment or Termination of the Plan		26

1.	Introduction

This Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan, dated as of October 31, 2016, as amended December 8, 2016 (the “Plan”), provides for the reorganization of Newton Federal Bank (the “Bank”) from a federally-chartered mutual savings association into the mutual holding company structure (the “Reorganization”) under the laws of the United States of America and the regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), and other applicable requirements. The mutual holding company (the “MHC”) will be a mutually-owned federal corporation, and all of the current ownership and voting rights of the Members of the Bank will be transferred to the MHC. As part of the Reorganization and the Plan, the Bank will convert to a federal stock savings bank (the “Stock Bank”), and a stock holding company (the “Holding Company”) will be established as a federal corporation and a majority-owned subsidiary of the MHC at all times so long as the MHC remains in existence. Concurrently with the Reorganization, the Holding Company intends to offer for sale up to 49.9% of its Common Stock in the Stock Offering. The Common Stock will be offered for sale on a priority basis to depositors and the Tax-Qualified Employee Plans of the Bank, with any remaining shares offered for sale to the public in a Community Offering, a Syndicated Community Offering, or a Firm Commitment Underwritten Offering, or a combination thereof. The Reorganization, Stock Offering and issuance of Common Stock will be conducted in accordance with the Federal Reserve’s Regulation MM, 12 C.F.R. Part 239, and other applicable regulatory requirements.

The primary purpose of the Reorganization is to establish a stock holding company, which will enable the Bank to compete more effectively in the financial services marketplace. The Reorganization will permit the Holding Company to issue Capital Stock, which is a source of capital not available to mutual savings associations. Since the Holding Company will not offer all of its Common Stock for sale to depositors and the public in the Stock Offering, the Reorganization will result in less capital raised in comparison to a standard mutual-to-stock conversion. The mutual holding company structure resulting from the Reorganization, however, will also permit the Bank to raise additional capital since a majority of the Holding Company’s common stock (the common stock held by the MHC) will be available for sale in the future. The mutual holding company structure will also provide the Bank with greater flexibility to structure and finance the expansion of its operations, including the potential acquisition of other financial institutions. Lastly, the Reorganization will enable the Bank to better manage its capital by (i) providing broader acquisition and investment opportunities through the holding company structure, (ii) enabling the Holding Company to distribute capital to stockholders in the form of dividends, and (iii) enabling the Holding Company to repurchase its common stock as market conditions warrant. Although the Reorganization and Stock Offering will create a stock savings bank and stock holding company, only a minority of the Common Stock will be offered for sale in the Stock Offering. As a result, the Bank’s mutual form of ownership and its ability to remain an independent community savings bank will be preserved through the mutual holding company structure. The Reorganization is subject to the receipt of all necessary regulatory approvals, including the approval of the Federal Reserve, and must be approved by the affirmative vote of a majority of the total votes eligible to be cast by Members.

2.	Definitions

As used in this Plan, the terms set forth below have the following meanings:

Acting in Concert: The term Acting in Concert means (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. A Person or company which acts in concert with another Person or company (“other party”) shall also be deemed to be Acting in Concert with any Person or company who is also Acting in Concert with that other party, except that any Tax-Qualified Employee Plan will not be deemed to be Acting in Concert with its trustee or a Person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated.

Actual Purchase Price: The price per share, determined as provided in this Plan, at which the Common Stock will be sold in the Stock Offering.

Affiliate: Any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another Person.

Associate: The term “Associate,” when used to indicate a relationship with any Person, means: (i) any corporation or organization (other than the Bank, the Holding Company, the MHC or a majority-owned subsidiary of any thereof) of which such Person is a senior officer or partner, or beneficially owns, directly or indirectly, 10% or more of any class of equity securities of the corporation or organization; (ii) any trust or other estate, if the Person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate except that for the purposes of this Plan relating to subscriptions in the Stock Offering and the sale of Common Stock following the Reorganization, a Person who has a substantial beneficial interest in any Non-Tax-Qualified Employee Plan or any Tax-Qualified Employee Plan, or who is a trustee or fiduciary of such plan, is not an associate of such plan, and except that for purposes of aggregating total shares that may be held by Officers and Directors, the term “Associate” does not include any Tax-Qualified Employee Plan; and (iii) any Person who is related by blood or marriage to such Person and who (A) lives in the same home as such Person or (B) is a director or Officer of the Bank, the Holding Company, the MHC or a subsidiary of the Bank, the Holding Company or the MHC.

Bank: Newton Federal Bank in its pre-Reorganization mutual form or post-Reorganization stock form, as indicated by the context.

Bank Regulators: The Federal Reserve and other bank regulatory agencies, including the OCC and FDIC, as applicable, responsible for reviewing and approving the Reorganization and Stock Offering, including the organization of an interim stock savings association and the Stock Bank, the insurance of deposit accounts, and the transfer of assets and liabilities to the Stock Bank or, alternatively, the organization of one or more interim savings associations and any merger required to effect the Reorganization.

Capital Stock: Any and all authorized stock of the Bank or the Holding Company.

Common Stock: Common stock issuable by the Holding Company in connection with the Reorganization and Stock Offering, including securities convertible into Common Stock, pursuant to its stock charter.

Community: The Georgia counties of Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale and Walton.

Community Offering: The offering to certain members of the general public of any unsubscribed shares in the Subscription Offering. The Community Offering may occur concurrently with any Syndicated Community Offering.

Control: (including the terms “controlling,” “controlled by” and “under common control with”) means the direct or indirect power to direct or exercise a controlling influence over the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise as described in 12 CFR Part 238.

Conversion Transaction: The conversion of the MHC from the mutual to stock form of organization as described more specifically in Section 7 of this Plan, pursuant to applicable federal rules and regulations.

Deposit Account(s): Any withdrawable account, including, without limitation, savings, time, demand, NOW account, money market, certificate and passbook accounts.

Effective Date: The date upon which all necessary approvals have been obtained to complete the Reorganization, and the Reorganization and Stock Offering have been completed.

Eligible Account Holder: Any person holding a Qualifying Deposit on the Eligibility Record Date for purposes of determining subscription rights.

Eligibility Record Date: September 30, 2015, the date for determining who qualifies as an Eligible Account Holder of the Bank.

Employee Plans: The Tax-Qualified and Non-Tax Qualified Employee Plans of the Bank and/or the Company.

ESOP: The Stock Bank’s employee stock ownership plan.

Estimated Valuation Range: The range of the estimated pro forma market value of the total number of shares of Common Stock to be issued by the Holding Company to the MHC and to Minority Stockholders, as determined by the Independent Appraiser prior to the Subscription Offering and as it may be amended from time to time thereafter.

Exchange Act: The Securities Exchange Act of 1934, as amended.

Federal Reserve: The Board of Governors of the Federal Reserve System.

FDIC: The Federal Deposit Insurance Corporation.

Firm Commitment Underwritten Offering: The offering, at the sole discretion of the Holding Company, of shares of Common Stock not subscribed for in the Subscription Offering and any Community Offering or Syndicated Community Offering, to members of the general public through one or more underwriters. A Firm Commitment Underwritten Offering may occur following the Subscription Offering and any Community Offering or Syndicated Community Offering.

HOLA: The Home Owners’ Loan Act, as amended.

Holding Company: The federal corporation created in the Reorganization. The Holding Company will be majority-owned by the MHC and will own 100% of the common stock of the Bank.

Holding Company Application: The Holding Company Application on such form as may be prescribed by the Federal Reserve, which will be filed with the Federal Reserve in connection with the Reorganization and the formation of the MHC and the Holding Company.

Independent Appraiser: The appraiser retained by the Bank to prepare an appraisal of the pro forma market value of the Bank and the Holding Company.

Interim Bank: The interim federal stock savings association that will become the Stock Bank, which will be established by the Bank as a wholly owned subsidiary.

Management Person: Any Officer or director of the Bank or any Affiliate of the Bank, and any person Acting in Concert with any such Officer or director.

Market Maker: A dealer ( i.e ., any person who engages directly or indirectly as agent, broker, or principal in the business of offering, buying, selling or otherwise dealing or trading in securities issued by another person) who, with respect to a particular security, (1) regularly publishes bona fide competitive bid and offer quotations on request, and (2) is ready, willing and able to effect transactions in reasonable quantities at the dealer’s quoted prices with other brokers or dealers.

Member: Any person or entity who qualifies as a member of the Bank pursuant to its charter and bylaws.

MHC: The mutual holding company created in the Reorganization.

Minority Ownership Interest: The shares of the Holding Company’s Common Stock owned by persons other than the MHC, expressed as a percentage of the total shares of Holding Company Common Stock outstanding.

Minority Stock Offering: One or more offerings of less than 50% in the aggregate of the outstanding Common Stock of the Holding Company to persons other than the MHC.

Minority Stockholder: Any owner of the Holding Company’s Common Stock, other than the MHC.

Notice: The Notice of Mutual Holding Company Reorganization to be submitted by the Bank to the Federal Reserve to notify the Federal Reserve of the Reorganization and the Stock Offering.

OCC: The Office of the Comptroller of the Currency.

Offering Range: The aggregate purchase price of the Common Stock to be sold in the Stock Offering based on the Independent Valuation expressed as a range, which may vary within 15% above or 15% below the midpoint of such range, with a possible adjustment by up to 15% above the maximum of such range. The Offering Range will be based on the Estimated Valuation Range, but will represent a Minority Ownership Interest equal to up to 49.9% of the Common Stock.

Officer: An executive officer of the MHC, the Holding Company or the Bank, including the Chief Executive Officer, President, Senior Vice Presidents in charge of principal business functions, Secretary, Treasurer and any other person performing similar policy making functions.

Order Form: Any form (together with any attached cover letter and/or certifications or acknowledgements), sent by the Bank to any Person containing among other things a description of the alternatives available to such Person under the Plan and by which any such Person may make elections regarding purchases of Common Stock in the Subscription and Community Offerings.

Other Member: Any person who is a Member of the Bank at the close of business on the Voting Record Date who is not an Eligible Account Holder or Supplemental Eligible Account Holder, or Tax-Qualified Employee Plan.

Person: An individual, corporation, partnership, association, joint-stock company, limited liability company, trust, unincorporated organization, or a government or political subdivision of a government.

Plan: This Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan.

Qualifying Deposit: The aggregate balance of each Deposit Account of an Eligible Account Holder as of the close of business on the Eligibility Record Date or of a Supplemental Eligible Account Holder as of the close of business on the Supplemental Eligibility Record Date, as the case may be, provided such aggregate balance is not less than $50.

Regulations: The rules and regulations of the Bank Regulators, including the Federal Reserve rules and regulations regarding mutual holding companies and any applicable rules and regulations of the OCC and the FDIC.

Reorganization: The reorganization of the Bank into the mutual holding company structure including the organization of the MHC, the Holding Company and the Stock Bank pursuant to this Plan.

Resident: The terms “resident,” “residence,” “reside,” “resided” or “residing” as used herein with respect to any person shall mean any person who occupies a dwelling within the Bank’s Community, has an intent to remain with the Community for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence within the Community together with an indication that such presence within the Community is something other than merely transitory in nature. To the extent a Person is a corporation or other business entity, the principal place of business or headquarters shall be in the Community. To the extent a Person is a personal benefit plan, the circumstances of the beneficiary shall apply with respect to this definition. In the case of all other benefit plans, the circumstances of the trustee shall be examined for purposes of this definition. The Bank may utilize deposit or loan records or such other evidence provided to it to make a determination as to whether a Person is a resident. In all cases, however, such a determination shall be in the sole discretion of the Bank.

SEC: The Securities and Exchange Commission.

Special Meeting: The Special Meeting of Members called for the purpose of voting on the Plan.

Stock Bank: The federally-chartered stock savings bank resulting from the Reorganization, which will be a wholly owned Subsidiary of the Holding Company.

Stock Offering: The offering of Common Stock of the Holding Company for sale to persons other than the MHC, in a Subscription Offering and, to the extent shares remain available, in a Community Offering, Syndicated Community Offering and/or Firm Commitment Underwritten Offering, as the case may be.

Subscription Offering: The offering of Common Stock of the Holding Company for subscription and purchase pursuant to Section 11 of this Plan.

Subsidiary: A company that is controlled by another company, either directly or indirectly through one or more subsidiaries.

Supplemental Eligible Account Holder: Any Person holding a Qualifying Deposit on the Supplemental Eligibility Record Date, who is not an Eligible Account Holder, a Tax-Qualified Employee Plan or an Officer or director of the Bank.

Supplemental Eligibility Record Date: The date for determining Supplemental Eligible Account Holders, which shall be the last day of the calendar quarter preceding Federal Reserve approval of the Reorganization. The Supplemental Eligibility Record Date will only occur if the Federal Reserve has not approved the Reorganization within 15 months after the Eligibility Record Date.

Syndicated Community Offering: The offering of Common Stock following or contemporaneously with the Community Offering through a syndicate of broker-dealers.

Tax-Qualified Employee Plan: Any defined benefit plan or defined contribution plan (including any employee stock ownership plan, stock bonus plan, profit-sharing plan, or other plan) of the Bank, the Holding Company, the MHC or any of their affiliates, which, with its

related trusts, meets the requirements to be qualified under Section 401 of the Internal Revenue Code. The term “Non-Tax-Qualified Employee Plan” means any stock benefit plan which is not so qualified under Section 401 of the Internal Revenue Code.

Voting Member: Any Person who at the close of business on the Voting Record Date is entitled to vote as a Member of the Bank pursuant to its charter and bylaws.

Voting Record Date: The date established by the Bank for determining which Members are entitled to vote on the Plan.

Voting Stock:

(1)

Voting Stock means common stock or preferred stock, or similar interests if the shares by statute, charter or in any manner, entitle the holder:

(i)

To vote for or to select directors of the Bank or the Holding Company; and

(ii)

To vote on or to direct the conduct of the operations or other significant policies of the Bank or the Holding Company.

(2)

Notwithstanding anything in paragraph (1) above, preferred stock is not “Voting Stock” if:

(i)

Voting rights associated with the preferred stock are limited solely to the type customarily provided by statute with regard to matters that would significantly and adversely affect the rights or preferences of the preferred stock, such as the issuance of additional amounts or classes of senior securities, the modification of the terms of the preferred stock, the dissolution of the Bank, or the payment of dividends by the Bank when preferred dividends are in arrears;

(ii)

The preferred stock represents an essentially passive investment or financing device and does not otherwise provide the holder with Control over the issuer; and

(iii)

The preferred stock does not at the time entitle the holder, by statute, charter, or otherwise, to select or to vote for the selection of directors of the Bank or the Holding Company.

(3)

Notwithstanding anything in paragraphs (1) and (2) above, “Voting Stock” shall be deemed to include preferred stock and other securities that, upon transfer or otherwise, are convertible into Voting Stock or exercisable to acquire Voting Stock where the holder of the stock, convertible security or right to acquire Voting Stock has the preponderant economic risk in the underlying Voting Stock. Securities immediately convertible into Voting Stock at the option of the holder without payment of additional consideration shall be deemed to constitute the Voting Stock into which they are convertible; other convertible securities and rights to acquire Voting Stock shall not be deemed to vest the holder with the

preponderant economic risk in the underlying Voting Stock if the holder has paid less than 50% of the consideration required to directly acquire the Voting Stock and has no other economic interest in the underlying Voting Stock.

3.	The Reorganization

Organization of the Holding Companies and the Bank

As part of the Reorganization, the Bank will amend its charter to become the MHC, and the Holding Company and the Stock Bank will be established as federal corporations. The Reorganization will be effected as follows, or in any other manner approved by the Bank Regulators that is consistent with the purposes of this Plan and applicable laws and regulations:

(i)

the Bank will organize Interim Bank and transfer, all of its assets and liabilities, except up to $100,000 in cash, to Interim Bank, which will become the Stock Bank;

(ii)

the Bank will amend its charter and bylaws to read in the form of a federal mutual holding company and will become the MHC;

(iii)

the MHC will organize the Holding Company as a wholly-owned subsidiary, and transfer $1,000 to the Holding Company in exchange for 100 shares of Common Stock; and

(iv)

the MHC will transfer all of the initially issued stock of the Stock Bank to the Holding Company in exchange for additional shares of Common Stock, and the Stock Bank will become a wholly-owned subsidiary of the Holding Company.

The transfer of assets and liabilities from the Bank to Interim Bank shall not occur until Interim Bank has received FDIC approval for insurance of accounts and the FDIC has issued Interim Bank an insurance certificate number. Contemporaneously with the Reorganization, the Holding Company will offer for sale in the Stock Offering shares of Common Stock representing less than 50% of the pro forma market value of the Holding Company and the Bank.

Upon consummation of the Reorganization, substantially all of the assets and liabilities (including the savings accounts, demand accounts, tax and loan accounts, United States Treasury General Accounts, or United States Treasury Time Deposit Open Accounts, as defined in the Regulations) of the Bank shall become the assets and liabilities of the Stock Bank, which will thereupon become an operating savings bank subsidiary of the Holding Company and of the MHC. The Bank will apply to the Bank Regulators to have the Holding Company receive or retain (as the case may be) up to 50% of the net proceeds of the Stock Offering, or such other amount as may be determined by the Board of Directors. The Stock Bank may distribute additional capital to the Holding Company following the Reorganization, subject to the applicable requirements set forth in the Regulations governing capital distributions.

Upon consummation of the Reorganization, the legal existence of the Bank will not terminate, but the MHC will be a continuation of the Bank, provided that all property of the

Bank, including its right, title, and interest in and to all of its property and assets of every conceivable value or benefit then existing or pertaining to the Bank, or which would inure to the Bank will be transferred to the Stock Bank, except for up to $100,000 in cash. All assets, rights, obligations and liabilities of whatever nature of the Bank that are not expressly retained by the MHC shall be deemed transferred to the Stock Bank. The Stock Bank will have, hold, and enjoy the same in its right and fully and to the same extent as the same was possessed, held, and enjoyed by the Bank. The Stock Bank will continue to have, succeed to, and be responsible for all the assets, rights, liabilities and obligations of the Bank and will maintain its headquarters and operations at the Bank’s present locations.

Effect on Deposit Accounts and Borrowings

Each deposit account in the Bank on the Effective Date will remain a deposit account in the Stock Bank in the same amount and upon the same terms and conditions, and will continue to be federally insured up to the legal maximum by the FDIC in the same manner as the deposit account existed in the Bank immediately prior to the Reorganization. Upon consummation of the Reorganization, all loans and other borrowings from the Bank shall retain the same status with the Stock Bank after the Reorganization as they had with the Bank immediately prior to the Reorganization.

The Bank

Upon completion of the Reorganization the Stock Bank will be authorized to exercise any and all powers, rights and privileges of, and will be subject to all limitations applicable to, capital stock savings associations under federal law. A copy of the proposed charter and bylaws of the Stock Bank is attached hereto as Exhibit A and made a part of this Plan. The Reorganization will not result in any reduction of the amount of retained earnings (other than the assets of the Bank retained by or distributed to the Holding Company or the MHC), undivided profits, and general loss reserves that the Bank had prior to the Reorganization. The retained earnings and general loss reserves will be accounted for by the MHC, the Holding Company and the Stock Bank on a consolidated basis in accordance with generally accepted accounting principles.

The initial members of the Board of Directors of the Stock Bank will be the members of the Board of Directors of the Bank immediately prior to consummation of the Reorganization. The Stock Bank will be wholly owned by the Holding Company. The Holding Company will be wholly owned by its stockholders who will consist of the MHC and the persons who purchase Common Stock in the Stock Offering and any subsequent Minority Stock Offering. Upon the Effective Date of the Reorganization, the voting and membership rights of Members will be transferred to the MHC, subject to the conditions specified below.

The Holding Company

The Holding Company will be authorized to exercise any and all powers, rights and privileges, and will be subject to all limitations applicable to savings and loan holding companies and mutual holding companies under federal law and regulations. The initial members of the Board of Directors of the Holding Company will be the existing members of the Board of Directors of the Bank immediately prior to the consummation of the Reorganization. Thereafter,

the voting stockholders of the Holding Company will elect approximately one-third of the Holding Company’s directors annually. A copy of the proposed charter and bylaws of the Holding Company is attached as Exhibit B and made part of this Plan.

The Holding Company will have the power to issue shares of Capital Stock to persons other than the MHC. However, so long as the MHC is in existence, the MHC will be required to own at least a majority of the Voting Stock of the Holding Company. The Holding Company will be authorized to undertake one or more Minority Stock Offerings of less than 50% in the aggregate of the total outstanding Common Stock of the Holding Company, and the Holding Company intends to offer for sale up to 49.9% of its Common Stock in the Stock Offering.

The Mutual Holding Company

As a mutual corporation, the MHC will have no stockholders. The members of the MHC will have exclusive voting authority as to all matters requiring a vote of members under the charter of the MHC. Persons who have membership rights with respect to the Bank under its existing charter immediately prior to the Reorganization shall continue to have such rights solely with respect to the MHC after the Reorganization so long as such persons remain depositors or borrowers of the Bank after the Reorganization, as applicable. In addition, all persons who become depositors of the Stock Bank following the Reorganization will have membership rights with respect to the MHC. The rights and powers of the MHC will be defined by the MHC’s charter and bylaws (a copy of which is attached to this Plan as Exhibit C and made a part hereof) and by the statutory and regulatory provisions applicable to savings and loan holding companies and mutual holding companies. In particular, the MHC will be subject to the limitations and restrictions imposed on savings and loan holding companies by Section 10(o)(5) of the HOLA.

The initial members of the Board of Directors of the MHC will be the existing members of the Board of Directors of the Bank immediately prior to the consummation of the Reorganization. Thereafter, approximately one-third of the directors of the MHC will be elected annually by the members of the MHC who will consist initially of the Members of the Bank immediately prior to the consummation of the Reorganization and all persons who become depositors of the Bank after the Reorganization.

4.	Conditions to Implementation of the Reorganization

Consummation of the Reorganization is expressly conditioned upon the following:

Approval of the Plan by a majority of the Board of Directors of the Bank.

The filing of the Notice, including the Plan, with the Federal Reserve and either:

(i)

The Federal Reserve has given written notice of its intent not to disapprove the Reorganization; or

(ii)

Sixty days have passed since the Federal Reserve received the Notice and deemed it complete under 12 CFR § 239.10(e) and/or 12 CFR § 238.14(g) of the Federal Reserve regulations, and the Federal Reserve has not given written notice that the Reorganization is disapproved or extended for an additional 30 days the period during which disapproval may be issued.

The filing of a Holding Company Application with the Federal Reserve pursuant to the HOLA for the Holding Company and MHC to become mutual savings and loan holding companies by owning or acquiring 100% of the common stock of the Stock Bank in the case of the Holding Company, and a majority of the Common Stock of the Holding Company in the case of the MHC, and the approval of such Holding Company Application by the Federal Reserve.

Submission of the Plan to the Members for approval pursuant to a proxy statement and form of proxy cleared in advance by the Bank Regulators, and such Plan is approved by a majority of the total votes of the Voting Members eligible to be cast at a meeting held at the call of the directors in accordance with the procedures prescribed by the Bank’s charter and bylaws.

All necessary approvals and non-objections have been obtained from the Bank Regulators in connection with the adoption of the charter and bylaws of the MHC, the Holding Company and the Stock Bank, the issuance of deposit insurance and a certificate number by the FDIC to the Stock Bank and the transfer of assets and liabilities of the Bank to the Stock Bank pursuant to the Plan (or, alternatively, the conversion of the Bank to a stock charter); and all conditions specified or otherwise imposed by the Bank Regulators, in connection with their approvals and/or non-objections, have been satisfied.

5.	Special Meeting of Members

Subsequent to the approval of the Plan by the Bank Regulators, the Special Meeting shall be scheduled in accordance with the Bank’s bylaws. Promptly after receipt of approval and at least 20 days but not more than 45 days prior to the Special Meeting, the Bank shall distribute proxy solicitation materials to all Voting Members. The proxy solicitation materials shall include a proxy statement and other documents authorized for use by the regulatory authorities. A copy of the Plan will be made available to Voting Members upon request. Pursuant to the Regulations, the affirmative vote of not less than a majority of the total votes eligible to be cast by the Voting Members is required for approval of the Plan. Voting may be in person or by proxy. The Bank Regulators shall be notified promptly of the actions of the Voting Members.

6.	Rights of Members of the MHC

Following the Reorganization, all persons who had membership rights with respect to the Bank as of the date of the Reorganization will continue to have such rights solely with respect to the MHC as long as they remain depositors or borrowers of the Bank, as applicable. All existing proxies granted by members of the Bank to the Board of Directors of the Bank shall automatically become proxies granted to the Board of Directors of the MHC. In addition, all persons who become depositors of the Stock Bank subsequent to the Reorganization also will have membership rights with respect to the MHC. In each case, no person who ceases to be the holder of a deposit account with the Stock Bank after the Reorganization shall have any

membership or other rights with respect to the MHC. Borrowers of the Stock Bank who were borrower members of the Bank at the time of Reorganization will have the same membership rights in the MHC as they had in the Bank immediately prior to the Reorganization for so long as their pre-Reorganization borrowings remain outstanding. Borrowers will not receive membership rights in connection with any new borrowings made after the Reorganization.

7.	Conversion of MHC to Stock Form

Following the completion of the Reorganization, the MHC may elect to convert to stock form in accordance with applicable laws. There can be no assurance when, if ever, a Conversion Transaction will occur.

In a Conversion Transaction, it is expected that the MHC would merge with and into the Holding Company with the Holding Company as the resulting entity, followed by the merger of the Holding Company with and into a new stock holding company with the new stock holding company as the resulting entity, and the depositors of the Stock Bank would receive the right to subscribe for shares of common stock of the new stock holding company, which shares would represent the ownership interest of the MHC in the Holding Company immediately prior to the Conversion Transaction. The additional shares of Common stock of the new stock holding company issued in the Conversion Transaction would be sold at their aggregate pro forma market value as determined by an independent appraisal.

Any Conversion Transaction shall be fair and equitable to Minority Stockholders. In any Conversion Transaction, Minority Stockholders will be entitled without additional consideration to maintain the same percentage ownership interest in the new stock holding company after the Conversion Transaction as their percentage ownership interest in the Holding Company immediately prior to the Conversion Transaction ( i.e., the “Minority Ownership Interest”), subject to adjustment, if any, required by the Bank Regulators to reflect assets of the MHC and any dividends waived by the MHC.

At the sole discretion of the Boards of Directors of the MHC and the Holding Company, a Conversion Transaction may be effected in any other manner necessary to qualify the Conversion Transaction as a tax-free reorganization under applicable federal and state tax laws, provided such Conversion Transaction does not diminish the rights and ownership interest of Minority Stockholders other than as set forth in this Plan. If a Conversion Transaction does not occur, the MHC will always own a majority of the Voting Stock of the Holding Company. The Board of Directors of the Bank has no current intention to conduct a Conversion Transaction.

A Conversion Transaction would require the approval of the Federal Reserve and would be presented to a vote of the members of the MHC and the stockholders, including the MHC, of the Holding Company. Federal regulatory policy requires that in any Conversion Transaction the members of the MHC will be accorded the same stock purchase priorities as if the MHC were a mutual savings association converting to stock form.

8.	Timing of the Reorganization and Sale of Capital Stock

The Bank intends to consummate the Reorganization as soon as feasible following the receipt of all approvals referred to in Section 4 of this Plan. Subject to the approval of the Bank

Regulators, the Holding Company intends to commence the Stock Offering concurrently with the proxy solicitation of Members. The Holding Company may close the Stock Offering before the Special Meeting, provided that the offer and sale of the Common Stock shall be conditioned upon approval of the Plan by the Members at the Special Meeting. Subject to Bank Regulator approval, the Bank’s proxy solicitation materials may permit certain Members to return to the Bank by a reasonable date certain a postage paid card or other written communication requesting receipt of the prospectus if the prospectus is not mailed concurrently with the proxy solicitation materials. The Stock Offering shall be conducted in compliance with the Regulations, including 12 CFR § 239.24 and § 239.25 of the Federal Reserve’s Regulation MM and the securities offering regulations of the SEC.

9.	Number of Shares to be Offered

The total number of shares (or range thereof) of Common Stock to be issued and offered for sale pursuant to the Plan shall be determined initially by the Boards of Directors of the Bank and the Holding Company in conjunction with the determination of the Independent Appraiser. The number of shares to be offered may be adjusted prior to completion of the Stock Offering. The total number of shares of Common Stock that may be issued to persons other than the MHC at the close of the Stock Offering must be less than 50% of the issued and outstanding shares of Common Stock of the Holding Company.

10.

Independent Valuation and Purchase Price of Shares

All shares of Common Stock sold in the Stock Offering shall be sold at a uniform price per share. The purchase price and number of shares to be outstanding shall be determined by the Board of Directors of the Holding Company on the basis of the estimated pro forma market value of the Holding Company and the Bank. The aggregate purchase price for the Common Stock will be consistent with the market value of the Holding Company and the Bank. The pro forma market value of the Holding Company and the Bank will be determined for such purposes by the Independent Appraiser.

Prior to the commencement of the Stock Offering, an Estimated Valuation Range will be established, which range may vary within 15% above to 15% below the midpoint of such range, and up to 15% greater than the maximum of such range, as determined by the Board of Directors of the Holding Company at the time of the Stock Offering and consistent with applicable requirements set forth in the Regulations. The Holding Company intends to issue up to 49.9% of its Common Stock in the Stock Offering. The number of shares of Common Stock to be issued and the ownership interest of the MHC may be increased or decreased by the Holding Company, taking into consideration any change in the independent valuation and other factors, at the discretion of the Boards of Directors of the Bank and the Holding Company.

Based upon the independent valuation as updated prior to the commencement of the Stock Offering, the Board of Directors may establish the minimum and maximum percentage of shares of Common Stock that will be offered for sale in the Stock Offering, or it may fix the percentage of shares that will be offered for sale in the Stock Offering. In the event the percentage of the shares offered for sale in the Minority Stock Offering is not fixed in the Stock Offering, the Minority Ownership Interest resulting from the Stock Offering will be determined

as follows: (a) the product of (x) the total number of shares of Common Stock sold by the Holding Company and (y) the purchase price per share, divided by (b) the aggregate pro forma market value of the Bank and the Holding Company upon the closing of the Stock Offering and sale of all the Common Stock.

Notwithstanding the foregoing, no sale of Common Stock may be consummated unless, prior to such consummation, the Independent Appraiser confirms to the Holding Company, the Bank and to the Bank Regulators, that, to the best knowledge of the Independent Appraiser, nothing of a material nature has occurred which, taking into account all relevant factors, would cause the Independent Appraiser to conclude that the aggregate value of the Common Stock sold in the Stock Offering at the Actual Purchase Price is incompatible with its estimate of the aggregate consolidated pro forma market value of the Holding Company and the Bank. If such confirmation is not received, the Holding Company may cancel the Stock Offering, extend the Stock Offering and establish a new price range and/or estimated price range, extend, reopen or hold a new Stock Offering or take such other action as the Bank Regulators may permit.

The estimated market value of the Holding Company and the Bank shall be determined for such purpose by an Independent Appraiser on the basis of such appropriate factors as are not inconsistent with the applicable Regulations. The Common Stock to be issued in the Stock Offering shall be fully paid and nonassessable.

If there is a Community Offering, Syndicated Community Offering or Firm Commitment Underwritten Offering of shares of Common Stock not subscribed for in the Subscription Offering, the price per share at which the Common Stock is sold in such Community Offering, Syndicated Community Offering or Firm Commitment Underwritten Offering shall be the Actual Purchase Price which will be equal to the purchase price per share at which the Common Stock is sold to persons in the Subscription Offering. Shares sold in the Community Offering, Syndicated Community Offering or Firm Commitment Underwritten Offering will be subject to the same limitations as shares sold in the Subscription Offering.

11.

Method of Offering Shares and Rights to Purchase Stock

In descending order of priority, the opportunity to purchase Common Stock shall be given in the Subscription Offering to: (1) Eligible Account Holders; (2) Tax-Qualified Employee Plans; (3) Supplemental Eligible Account Holders; and (4) Other Members, pursuant to priorities established by the Board of Directors. Any shares of Common Stock that are not subscribed for in the Subscription Offering may at the discretion of the Bank and the Holding Company be offered for sale in a Community Offering, a Syndicated Community Offering or a Firm Commitment Underwritten Offering. The minimum purchase by any Person shall be 25 shares. The Holding Company shall determine in its sole discretion whether each prospective purchaser is a Resident, Associate, or Acting in Concert as defined in the Plan, and shall interpret all other provisions of the Plan in its sole discretion. All such determinations are in the sole discretion of the Holding Company, and may be based on whatever evidence the Holding Company chooses to use in making any such determination.

In addition to the priorities set forth below, the Board of Directors of the Bank may establish other priorities for the purchase of Common Stock, subject to the approval of the Bank Regulators. The priorities for the purchase of shares in the Stock Offering are as follows:

Subscription Offering

Priority 1: Eligible Account Holders. Each Eligible Account Holder shall receive non-transferable subscription rights to subscribe for shares of Common Stock offered in the Stock Offering in an amount equal to the greater of $300,000, one-tenth of one percent (0.1%) of the total shares offered in the Stock Offering, or 15 times the product (rounded down to the nearest whole number) obtained by multiplying the total number of shares of Common Stock to be issued in the Stock Offering by a fraction, of which the numerator is the Qualifying Deposit of the Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders, in each case on the Eligibility Record Date and subject to the provisions of Section 12; provided that the Holding Company may, in its sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase such maximum purchase limitation to 5% of the maximum number of shares offered in the Stock Offering or decrease such maximum purchase limitation to 0.1% of the maximum number of shares offered in the Stock Offering, subject to the overall purchase limitations set forth in Section 12. If there are insufficient shares available to satisfy all subscriptions of Eligible Account Holders, shares will be allocated to Eligible Account Holders so as to permit each such subscribing Eligible Account Holder to purchase a number of shares sufficient to make his total allocation equal to the lesser of 100 shares or the number of shares subscribed for. Thereafter, unallocated shares will be allocated pro rata to remaining subscribing Eligible Account Holders whose subscriptions remain unfilled in the same proportion that each such subscriber’s Qualifying Deposit bears to the total amount of Qualifying Deposits of all subscribing Eligible Account Holders whose subscriptions remain unfilled. To ensure proper allocation of stock, each Eligible Account Holder must list on his subscription Order Form all accounts in which he had an ownership interest as of the Eligibility Record Date. Officers, directors, and their Associates may be Eligible Account Holders. However, if an officer, director, or his or her Associate receives subscription rights based on increased deposits in the year before the Eligibility Record Date, subscription rights based upon these increased deposits are subordinate to the subscription rights of other Eligible Account Holders.

Priority 2: Tax-Qualified Employee Plans. The Tax-Qualified Employee Plans shall be given the opportunity to purchase in the aggregate up to 4.9% of the shares issued and outstanding following the completion of the Stock Offering. In the event of an oversubscription in the Stock Offering, subscriptions for shares by the Tax-Qualified Employee Plans may be satisfied, in whole or in part, out of authorized but unissued shares of the Holding Company subject to the maximum purchase limitations applicable to such plans as set forth herein, or may be satisfied, in whole or in part, through open market purchases by the Tax-Qualified Employee Plans subsequent to the closing of the Stock Offering. If the final valuation exceeds the maximum of the Offering Range, up to 4.9% of the Common Stock issued and outstanding following the completion of the Stock Offering may be sold to the Tax-Qualified Employee Plans notwithstanding any oversubscription by Eligible Account Holders.

Priority 3: Supplemental Eligible Account Holders. To the extent there are sufficient shares remaining after satisfaction of subscriptions by Eligible Account Holders, and the Tax-Qualified Employee Plans, each Supplemental Eligible Account Holder shall receive non-transferable subscription rights to subscribe for shares of Common Stock offered in the Stock Offering in an amount equal to the greater of $300,000, one-tenth of one percent (0.1%) of the total shares offered in the Stock Offering, or 15 times the product (rounded down to the nearest whole number) obtained by multiplying the total number of shares of Common Stock to be issued in the Stock Offering by a fraction, of which the numerator is the Qualifying Deposit of the Supplemental Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders, in each case on the Supplemental Eligibility Record Date and subject to the provisions of Section 12; provided that the Bank may, in its sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase such maximum purchase limitation to 5% of the maximum number of shares offered in the Stock Offering or decrease such maximum purchase limitation to 0.1% of the maximum number of shares offered in the Stock Offering, subject to the overall purchase limitations set forth in Section 12. In the event Supplemental Eligible Account Holders subscribe for a number of shares which, when added to the shares subscribed for by Eligible Account Holders and the Tax-Qualified Employee Plans, is in excess of the total shares offered in the Stock Offering, the subscriptions of Supplemental Eligible Account Holders will be allocated among subscribing Supplemental Eligible Account Holders so as to permit each subscribing Supplemental Eligible Account Holder to purchase a number of shares sufficient to make his total allocation equal to the lesser of 100 shares or the number of shares subscribed for. Thereafter, unallocated shares will be allocated to each subscribing Supplemental Eligible Account Holder whose subscription remains unfilled in the same proportion that such subscriber’s Qualifying Deposits on the Supplemental Eligibility Record Date bear to the total amount of Qualifying Deposits of all subscribing Supplemental Eligible Account Holders whose subscriptions remain unfilled. Directors and Officers do not qualify as Eligible Account Holders.

Priority 4: Other Members. To the extent that there are sufficient shares remaining after satisfaction of subscriptions by Eligible Account Holders, the Tax-Qualified Employee Plans and Supplemental Eligible Account Holders, each Other Member shall receive non-transferable subscription rights to subscribe for shares of Common Stock offered in the Stock Offering in an amount equal to $300,000, provided that the Bank may, in its sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase such maximum purchase limitation to 5% of the maximum number of shares offered in the Stock Offering, or decrease such maximum purchase limitation to 0.1% of the maximum number of shares offered in the Stock Offering, subject to the overall purchase limitations set forth in Section 12. In the event Other Members subscribe for a number of shares which, when added to the shares subscribed for by the Eligible Account Holders, Tax-Qualified Employee Plans and Supplemental Eligible Account Holders, is in excess of the total number of shares offered in the Stock Offering, the subscriptions of such Other Members will be allocated among subscribing Other Members on a pro rata basis based on the size of such Other Members’ orders.

Community Offering

Any shares of Common Stock not subscribed for in the Subscription Offering may be offered for sale in a Community Offering. This will involve an offering of all unsubscribed

shares directly to the general public with a preference to those natural persons residing in the Community. The Community Offering, if any, shall be for a period of not more than 45 days unless extended by the Holding Company and the Bank, and shall commence concurrently with, during or promptly after the Subscription Offering. The Holding Company and the Bank may use one or more investment banking firms on a best efforts basis to sell the unsubscribed shares in the Subscription and Community Offering. The Holding Company and the Bank may pay a commission or other fee to such investment banking firm(s) for shares sold by such firm(s) in the Subscription and Community Offering and may also reimburse such firm(s) for expenses incurred in connection with the sale. No Person may purchase more than $300,000 of Common Stock in the Community Offering, subject to the overall purchase limitations set forth in Section 12. In the event orders for Common Stock in the Community Offering exceed the number of shares available for sale, shares will be allocated (to the extent shares remain available) first to cover orders of natural persons residing in the Community, and, thereafter, to the extent any shares remain available, to cover orders of other members of the general public on a basis that will promote a widespread distribution of stock. In the event orders for Common Stock in each of these categories exceed the number of shares available for sale within such category, orders shall first be filled up to a maximum of two percent (2%) of the shares sold in the Stock Offering, and thereafter remaining shares will be allocated on an equal number of shares basis per order.

The Bank and the Holding Company, in their sole discretion, may reject subscriptions, in whole or in part, received from any Person under this Section 11.B.

Syndicated Community Offering or Firm Commitment Underwritten Offering

If feasible, any shares of Common Stock not sold in the Subscription Offering or in the Community Offering, if any, may be offered for sale to the general public by a selling group of broker-dealers in a Syndicated Community Offering, subject to terms, conditions and procedures, including the timing of the offering, as may be determined by the Bank and the Holding Company, subject to the right of the Holding Company, in its sole discretion, to accept or reject in whole or in part all orders in the Syndicated Community Offering. It is expected that the Syndicated Community Offering would commence as soon as practicable after termination of the Subscription Offering and the Community Offering, if any. The Syndicated Community Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended as provided herein. No Person may purchase more than $300,000 of Common Stock in the Syndicated Community Offering, subject to the overall purchase limitations set forth in Section 12.

Alternatively, if feasible, the Board of Directors may determine to offer any shares of Common Stock sold in the Subscription Offering and any Community Offering for sale in a Firm Commitment Underwritten Offering subject to such terms, conditions and procedures as may be determined by the Bank and the Holding Company, subject to the right of the Holding Company, in its sole discretion, to accept or reject in whole or in part any orders in the Firm Commitment Underwritten Offering. Provided the Subscription Offering has begun, the Holding Company may begin the Firm Commitment Underwritten Offering at any time. Any Firm Commitment Underwritten Offering shall be completed within 45 days after the termination of the

Subscription Offering, unless such period is extended as provided herein. No Person may purchase more than $300,000 of Common Stock in the Firm Commitment Underwritten Offering, subject to the overall purchase limitations set forth in Section 12.

If for any reason a Syndicated Community Offering or Firm Commitment Underwritten Offering of shares of Common Stock not sold in the Subscription Offering or any Community Offering cannot be effected and any shares remain unsold after the Subscription Offering and the Community Offering, if any, the Boards of Directors of the Holding Company and the Bank will seek to make other arrangements for the sale of unsubscribed shares aggregating at least the minimum of the Offering Range. Such other arrangements will be subject to the receipt of any required approval of the Bank Regulators.

12.

Additional Limitations on Purchases of Common Stock

Purchases of Common Stock in the Stock Offering will be subject to the following purchase limitations:

The aggregate amount of outstanding Common Stock of the Holding Company owned or controlled by persons other than MHC at the close of the Stock Offering shall be less than 50% of the Holding Company’s total outstanding Common Stock.

The maximum purchase of Common Stock in the Subscription Offering by a Person or group of Persons through a single Deposit Account is $300,000. No Person by himself, with an Associate or group of Persons Acting in Concert, may purchase more than $400,000 of the Common Stock offered in the Stock Offering except that: (i) the Holding Company may, in its sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase such maximum purchase limitation to 9.9% of the number of shares sold in the Stock Offering provided that the total number of shares purchased by Persons, their Associates and those Persons with whom they are Acting in Concert, to the extent such purchases exceed 5% of the shares sold in the Stock Offering, shall not exceed, in the aggregate, 10% (or such higher percentage as may be determined by the Board of Directors with the approval of the Bank Regulators) of the total number of the shares sold in the Offering; (ii) the Tax-Qualified Employee Plans may purchase up to 10% of the shares offered in the Stock Offering; and (iii) for purposes of this subsection 12.B. shares to be held by any Tax-Qualified Employee Plan and attributable to a Person shall not be aggregated with other shares purchased directly by or otherwise attributable to such Person.

Offering. In calculating the number of shares held by any Management Person and his or her Associates under this paragraph, shares held by any Tax-Qualified Employee Plan or Non-Tax-Qualified Employee Plan of the Holding Company or the Bank that are attributable to such Person shall not be counted.

The aggregate amount of Common Stock acquired in the Stock Offering, plus all prior issuances by the Holding Company, by any Non-Tax-Qualified Employee Plan or any Management Person and his or her Associates, exclusive of any Common Stock acquired by such plan or Management Person and his or her Associates in the secondary market, shall not exceed 4.9% of the stockholders’ equity of the Holding Company at the conclusion of the Stock Offering. In calculating the number of shares held by any Management Person and his or her Associates under this paragraph, shares held by any Tax-Qualified Employee Plan or Non-Tax-Qualified Employee Plan of the Holding Company or the Bank that are attributable to such Person shall not be counted.

The aggregate amount of Common Stock acquired in the Stock Offering, plus all prior issuances by the Holding Company, by any one or more Tax-Qualified Employee Plans, exclusive of any shares of Common Stock acquired by such plans in the secondary market, shall not exceed 4.9% of the outstanding shares of Common Stock of the Holding Company at the conclusion of the Stock Offering.

The aggregate amount of Common Stock acquired in the Stock Offering, plus all prior issuances by the Holding Company, by any one or more Tax-Qualified Employee Plans, exclusive of any shares of Common Stock acquired by such plans in the secondary market, shall not exceed 4.9% of the stockholders’ equity of the Holding Company at the conclusion of the Stock Offering

The amount of common stock that may be encompassed under all stock option plans and restricted stock plans of the Holding Company may not exceed, in the aggregate, 25% of the outstanding shares of common stock of the Holding Company held by persons other the MHC at the conclusion of the Stock Offering.

The aggregate amount of Common Stock acquired in the Stock Offering, plus all prior issuances by the Holding Company, by all Non-Tax-Qualified Employee Plans or Management Persons and their Associates, exclusive of any Common Stock acquired by such plans or Management Persons and their Associates in the secondary market, shall not exceed 31% (or such higher percentage as may be set by the Board of Directors with the approval of the Bank Regulators) of the outstanding shares of Common Stock held by persons other than the MHC at the conclusion of the Stock Offering. In calculating the number of shares held by Management Persons and their Associates under this paragraph or paragraph I. below, shares held by any Tax-Qualified Employee Plan or Non-Tax-Qualified Employee Plan that are attributable to such persons shall not be counted.

The aggregate amount of Common Stock acquired in the Stock Offering, plus all prior issuances by the Holding Company, by all Non-Tax-Qualified Employee

Plans or Management Persons and their Associates, exclusive of any Common Stock acquired by such plans or Management Persons and their Associates in the secondary market, shall not exceed 31% of the stockholders’ equity of the Holding Company held by persons other than the MHC at the conclusion of the Stock Offering.

Notwithstanding any other provision of this Plan, no person shall be entitled to purchase any Common Stock to the extent such purchase would be illegal under any federal law or state law or regulation or would violate regulations or policies of the Financial Industry Regulatory Authority, particularly those regarding free riding and withholding. The Holding Company and/or its agents may ask for an acceptable legal opinion from any purchaser as to the legality of such purchase and may refuse to honor any purchase order if such opinion is not timely furnished.

The Board of Directors of the Holding Company has the right in its sole discretion to reject any order submitted by a person whose representations the Board of Directors of the Holding Company believes to be false or who it otherwise believes, either alone or Acting in Concert with others, is violating, circumventing, or intends to violate, evade or circumvent the terms and conditions of this Plan.

A minimum of 25 shares of Common Stock must be purchased by each Person purchasing shares in the Stock Offering to the extent those shares are available; provided, however, that in the event the minimum number of shares of Common Stock purchased times the price per share exceeds $500, then such minimum purchase requirement shall be reduced to such number of shares which when multiplied by the price per share shall not exceed $500, as determined by the Board.

Subscription rights afforded under this Plan and by Bank Regulator requirements are non-transferable. No person may transfer, offer to transfer, or enter into any agreement or understanding to transfer, the legal or beneficial ownership of any subscription rights under this Plan. No person may transfer, offer to transfer or enter into an agreement or understanding to transfer legal or beneficial ownership of any shares of Common Stock except pursuant to this Plan.

EACH PERSON PURCHASING COMMON STOCK IN THE STOCK OFFERING WILL BE DEEMED TO CONFIRM THAT SUCH PURCHASE DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS IN THIS PLAN. ALL QUESTIONS CONCERNING WHETHER ANY PERSONS ARE ASSOCIATES OR A GROUP ACTING IN CONCERT OR WHETHER ANY PURCHASE CONFLICTS WITH THE PURCHASE LIMITATIONS IN THIS PLAN OR OTHERWISE VIOLATES ANY PROVISION OF THIS PLAN SHALL BE DETERMINED BY THE BANK IN ITS SOLE DISCRETION. SUCH DETERMINATION SHALL BE CONCLUSIVE, FINAL AND BINDING ON ALL PERSONS, AND THE BANK MAY TAKE ANY REMEDIAL ACTION INCLUDING, WITHOUT LIMITATION, REJECTING THE PURCHASE OR REFERRING THE MATTER TO THE BANK REGULATORS FOR ACTION, AS THE BANK MAY IN ITS SOLE DISCRETION DEEM APPROPRIATE.

13.

Payment for Stock

All payments for Common Stock subscribed for or ordered in the Stock Offering must be delivered in full to the Bank, together with a properly completed and executed Order Form, or purchase order in the case of the Syndicated Community Offering, on or prior to the expiration date specified on the Order Form or purchase order, as the case may be, unless such date is extended by the Bank; provided, that if the Employee Plans subscribe for shares of Common Stock during the Subscription Offering, such plans may pay for such shares at the Actual Purchase Price upon consummation of the Stock Offering. The Holding Company or the Bank may make scheduled discretionary contributions to the ESOP provided such contributions from the Bank, if any, do not cause the Bank to fail to meet its regulatory capital requirements.

Payment for Common Stock shall be made either by personal check, bank draft or money order, or if a purchaser has a Deposit Account in the Bank, such purchaser may pay for the shares subscribed for by authorizing the Bank to make a withdrawal from the purchaser’s Deposit Account in an amount equal to the purchase price of such shares. Such authorized withdrawal, whether from a savings passbook or certificate account, shall be without penalty as to premature withdrawal. If the authorized withdrawal is from a certificate account, and the remaining balance does not meet the applicable minimum balance requirements, the certificate shall be canceled at the time of withdrawal, without penalty, and the remaining balance will earn interest at the Bank’s passbook rate. Funds for which a withdrawal is authorized will remain in the purchaser’s Deposit Account but may not be used by the purchaser until the Common Stock has been sold or the 45-day period (or such longer period as may be approved by the Bank Regulators) following the Stock Offering has expired, whichever occurs first. Thereafter, the withdrawal will be given effect only to the extent necessary to satisfy the subscription (to the extent it can be filled) at the Actual Purchase Price per share. Interest will continue to be earned on any amounts authorized for withdrawal until such withdrawal is given effect.

Subscription funds received prior to the completion of the Stock Offering will be held in a segregated deposit account at the Bank or, in the Bank’s discretion, at another federally insured depository institution. Interest on subscription funds made by personal check, bank draft or money order will be paid by the Bank at a rate no less than the Bank’s passbook rate. Such interest will be paid from the date payment is received by the Bank until consummation or termination of the Stock Offering. If for any reason the Stock Offering is not consummated, all payments made by subscribers in the Stock Offering will be refunded to them with interest. In case of amounts authorized for withdrawal from Deposit Accounts, refunds will be made by canceling the authorization for withdrawal.

14.

Manner of Exercising Subscription Rights Through Order Forms

As soon as practicable after the prospectus prepared by the Holding Company and the Bank has been declared effective by the SEC, and the Bank Regulators have approved the Reorganization, copies of the prospectus and Order Forms will be distributed to all Eligible Account Holders, Supplemental Eligible Account Holders, Other Members and the Tax-Qualified

Employee Plans at their last known addresses appearing on the records of the Bank for the purpose of subscribing for shares of Common Stock in the Subscription Offering and will be made available for use by those other persons to whom a prospectus is delivered.

Each Order Form will be preceded or accompanied by the prospectus describing the Holding Company, the Bank, the Common Stock and the Subscription and Community Offerings. Each Order Form will contain, among other things, the following:

A specified date by which all Order Forms must be received by the Bank, which date shall be not less than 20, nor more than 45 days, following the date on which the Order Forms are mailed by the Bank, and which date will constitute the termination of the Subscription Offering;

The purchase price per share for shares of Common Stock to be sold in the Subscription and Community Offerings;

A description of the minimum and maximum number of shares of Common Stock that may be subscribed for pursuant to the exercise of Subscription Rights or otherwise purchased in the Community Offering;

Instructions as to how the recipient of the Order Form must indicate thereon the number of shares of Common Stock for which such Person elects to subscribe and the available alternative methods of payment therefor;

An acknowledgment that the recipient of the Order Form has received a final copy of the prospectus prior to execution of the Order Form;

A statement indicating the consequences of failing to properly complete and return the Order Form, including a statement to the effect that all subscription rights are nontransferable, will be void at the end of the Subscription Offering, and can only be exercised by delivering to the Bank within the subscription period such properly completed and executed Order Form, together with a personal check, bank draft or money order in the full amount of the purchase price as specified in the Order Form for the shares of Common Stock for which the recipient elects to subscribe in the Subscription Offering (or by authorizing on the Order Form that the Bank withdraw said amount from the subscriber’s Deposit Account at the Bank); and

A statement to the effect that the executed Order Form, once received by the Bank, may not be modified or amended by the subscriber without the consent of the Bank.

Notwithstanding the above, the Bank and the Holding Company reserve the right in their sole discretion to accept or reject orders received on photocopied or facsimiled Order Forms.

15.

Undelivered, Defective or Late Order Form; Insufficient Payment

In the event Order Forms (a) are not delivered and are returned to the Bank by the United States Postal Service or the Bank is unable to locate the addressee, (b) are not received back by the Bank or are received by the Bank after the expiration date specified thereon, (c) are defectively filled out or executed, (d) are not accompanied by the full required payment for the shares of Common Stock subscribed for (including cases in which Deposit Accounts from which withdrawals are authorized are insufficient to cover the amount of the required payment), or (e) are not mailed pursuant to a “no mail” order placed in effect by the account holder, the subscription rights of the Person to whom such rights have been granted will lapse as though such Person failed to return the completed Order Form within the time period specified thereon; provided, that the Bank may, but will not be required to, waive any immaterial irregularity on any Order Form or require the submission of corrected Order Forms or the remittance of full payment for subscribed shares by such date as the Bank may specify. The interpretation by the Bank of terms and conditions of this Plan and of the Order Forms will be final, subject to the authority of the Bank Regulators.

16.

Completion of the Stock Offering

The Stock Offering will be terminated if not completed within 90 days from the date on which the Plan is approved by the Federal Reserve, unless an extension is approved by the Federal Reserve.

17.

Market for Common Stock

If the Holding Company has more than 100 stockholders of any class of stock upon completion of the Stock Offering, the Holding Company shall use its best efforts to:

(i)

encourage and assist a Market Maker to establish and maintain a market for that class of stock; and

(ii)

list that class of stock on a national or regional securities exchange, or on the Nasdaq quotation system.

18.

Stock Purchases by Management Persons After the Stock Offering

For a period of three years after the Stock Offering, no Management Person or his or her Associates may purchase, without the prior written approval of the Bank Regulators, any Common Stock of the Holding Company, except from a broker-dealer registered with the SEC, except that the foregoing shall not apply to:

Negotiated transactions involving more than 1% of the outstanding stock in the class of stock; or

Purchases of stock made by and held by any Tax-Qualified or Non-Tax Qualified Employee Plan even if such stock is attributable to Management Persons or their Associates.

19.

Resales of Stock by Directors and Officers

Common Stock purchased by Management Persons and their Associates in the Stock Offering may not be resold for a period of at least one year following the date of purchase, except in the case of death of a Management Person or an Associate.

20.

Stock Certificates

Each stock certificate shall bear a legend giving appropriate notice of the restrictions set forth in Section 19 above. Appropriate instructions shall be issued to the Holding Company’s transfer agent with respect to applicable restrictions on transfers of such stock. Any shares of stock issued as a stock dividend, stock split or otherwise with respect to such restricted stock, shall be subject to the same restrictions as apply to the restricted stock.

21.

Restriction on Financing Stock Purchases

The Holding Company and the Bank will not loan funds to any Person to purchase Common Stock in the Stock Offering, and will not knowingly offer or sell any of the Common Stock to any Person whose purchase would be financed by funds loaned to the Person by the Holding Company, the Bank or any Affiliate.

22.

Stock Benefit Plans

A. The Holding Company and the Bank are authorized to adopt Tax-Qualified Employee Plans in connection with the Reorganization, including without limitation, an ESOP. Existing as well as any newly created Tax-Qualified Employee Plans may purchase shares of Common Stock in the Stock Offering, to the extent permitted by the terms of such benefit plans and this Plan.

B. The Holding Company and the Bank are authorized to adopt stock option plans, restricted stock plans and other Non-Tax-Qualified Employee Plans no sooner than six months after the completion of the Reorganization and Stock Offering, provided that such stock plans conform to any applicable requirements of Federal regulations, and the Holding Company intends to implement such stock plans after the completion of the Reorganization and Stock Offering, subject to any necessary stockholder approvals.

23.

Post-Reorganization Filing and Market Making

It is likely that there will be a limited market for the Common Stock sold in the Stock Offering, and purchasers must be prepared to hold the Common Stock for an indefinite period of time. If the Holding Company has more than 35 stockholders of any class of stock upon completion of the Stock Offering, the Holding Company shall register its Common Stock with the SEC pursuant to the Exchange Act, and shall undertake not to deregister such Common Stock for a period of three years thereafter.

24.

Payment of Dividends and Repurchase of Stock

The Holding Company may not declare or pay a cash dividend on its Common Stock if the effect thereof would cause the regulatory capital of the Holding Company to be reduced below any applicable regulatory capital requirement. Otherwise, the Holding Company may declare dividends or make other capital distributions subject to compliance with any applicable Regulations. Following completion of the Stock Offering, the Holding Company may repurchase its Common Stock consistent with Section 239.8(c) of the Federal Reserve’s Regulations relating to stock repurchases, as long as such repurchases do not cause the regulatory capital of the Holding Company to be reduced below any applicable regulatory capital requirement. The MHC may from time to time purchase Common Stock of the Holding Company, subject to compliance with any applicable Regulations. Subject to any notice or approval requirements of the Federal Reserve, including the requirements of 12 C.F.R. § 239.8(d), the MHC may waive its right to receive dividends declared by the Holding Company.

25.

Reorganization and Stock Offering Expenses

In accordance with the regulations of the Federal Reserve, the expenses incurred by the Bank and the Holding Company in effecting the Reorganization and the Stock Offering will be reasonable.

26.

Employment and Other Severance Agreements

Following or contemporaneously with the Reorganization, the Bank and/or the Holding Company may enter into employment and/or severance arrangements with one or more executive officers of the Bank and/or the Holding Company. It is anticipated that any employment contracts entered into by the Bank and/or the Holding Company will be for terms not exceeding three years and that such contracts will provide for annual renewals of the term of the contracts, subject to approval by the Board of Directors. The Bank and/or the Holding Company also may enter into severance arrangements with one or more executive officers, which provide for the payment of severance compensation in the event of a change in control of the Bank and/or the Holding Company. The terms of such employment and severance arrangements have not been determined as of this time, but if implemented, would be described in any prospectus circulated in connection with the Stock Offering and would be subject to and comply with all applicable regulations of the Bank Regulators.

27.

Residents of Foreign Countries and Certain States

The Holding Company will make reasonable efforts to comply with the securities laws of all States in the United States in which Persons entitled to subscribe for shares of Common Stock pursuant to this Plan reside. However, no such Person will be issued subscription rights or be permitted to purchase shares of Common Stock in the Subscription Offering if such Person resides in a foreign country or resides in a state of the United States with respect to which any of the following apply: (A) a small number of Persons otherwise eligible to subscribe for shares under this Plan reside in such state; (B) the issuance of subscription rights or the offer or sale of shares of Common Stock to such Persons would require the Holding Company, under the securities laws of such state, to register as a broker, dealer, salesman or agent or to register or otherwise qualify its securities for sale in such state; or (C) such registration or qualification would be impracticable for reasons of cost or otherwise.

28.

Interpretation

All interpretations of this Plan and application of its provisions to particular circumstances by a majority of the Board of Directors of the Bank shall be final, subject to the authority of the Bank Regulators.

29.

Amendment or Termination of the Plan

If necessary or desirable, the terms of the Plan may be substantially amended by a majority vote of the Board of Directors of the Bank, as a result of comments from the Bank Regulators or otherwise, at any time prior to the solicitation of proxies and submission of the Plan and proxy materials to a vote of the Members. At any time after the solicitation of proxies and submission of the Plan and proxy materials to a vote of the Members, the terms of the Plan that relate to the Reorganization may be amended by a majority vote of the Board of Directors of the Bank only with the concurrence of the Bank Regulators. Terms of the Plan relating to the Stock Offering including, without limitation, Sections 8 through 20, may be amended by a majority vote of the Board of Directors of the Bank as a result of comments from the Bank Regulators or otherwise at any time prior to the approval of the Plan by the Bank Regulators, and at any time thereafter with the concurrence of the Bank Regulators. The Plan may be terminated by a majority vote of the Board of Directors of the Bank at any time prior to the earlier of approval of the Plan by the Bank Regulators and the date of the Special Meeting, and may be terminated by a majority vote of the Board of Directors of the Bank at any time thereafter with the concurrence of the Bank Regulators. In its discretion, the Board of Directors of the Bank may modify or terminate the Plan upon the order of the Bank Regulators without a resolicitation of proxies or another meeting of the Members; however, any material amendment of the terms of the Plan that relate to the Reorganization which occur after the Special Meeting shall require a resolicitation of Members. Failure of the Members to approve the Plan will result in the termination of the Plan.

This Plan shall be terminated if the Reorganization is not completed within 24 months from the date upon which the Members approve the Plan, and may not be extended by the Bank or the Bank Regulators.

EXHIBIT A

Charter and Bylaws of the Bank

NEWTON FEDERAL BANK

FEDERAL STOCK CHARTER

Section 1. Corporate title. The full corporate title of the savings bank is Newton Federal Bank (the “Savings Bank”).

Section 2. Office. The home office shall be located in Covington, Georgia.

Section 3. Duration. The duration of the Savings Bank is perpetual.

Section 4. Purpose and powers . The purpose of the Savings Bank is to pursue any or all of the lawful objectives of a Federal savings bank chartered under section 5 of the Home Owners’ Loan Act and to exercise all of the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of the Comptroller of the Currency (the “OCC”).

Section 5. Capital stock . The total number of shares of all classes of the capital stock that the Savings Bank has the authority to issue is 20,000,000, of which 19,000,000 shares shall be common stock, par value $0.01 per share, and of which 1,000,000 shares shall be serial preferred stock, par value $0.01 per share. The shares may be issued from time to time as authorized by the board of directors without the approval of its shareholders, except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par or stated value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Savings Bank. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted to the Savings Bank), labor, or services actually performed for the Savings Bank, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the board of directors of the Savings Bank, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the retained earnings of the Savings Bank that is transferred to common stock or paid-in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance.

Except for shares issued in the initial organization of the Savings Bank or in connection with the conversion of the Savings Bank from the mutual to the stock form of capitalization, no shares of capital stock (including shares issuable upon conversion, exchange, or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons of the Savings Bank other than as part of a general public offering or as qualifying shares to a director, unless their issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting.

Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share, and there shall be no cumulation of votes for the election of directors; p rovided , that this restriction on voting separately by class or series shall not apply:

(i)

To any provision which would authorize the holders of preferred stock, voting as a class or series, to elect some members of the board of directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock;

(ii)

To any provision which would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Savings Bank with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Savings Bank if the preferred stock is exchanged for securities of such other corporation; p rovided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the OCC or the Federal Deposit Insurance Corporation;

(iii)

To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving savings bank in a merger or consolidation for the Savings Bank, shall not be considered to be such an adverse change.

A description of the different classes and series of the Savings Bank’s capital stock and a statement of the designations, and the relative rights, preferences and limitations of the shares of each class of and series of capital stock are as follows:

A. Common stock. Except as provided in this Section 5 (or in any supplementary sections thereto) the holders of common stock shall exclusively possess all voting power.

Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to payment of dividends, the full amount of dividends and of sinking fund, retirement fund or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends.

In the event of any liquidation, dissolution, or winding up of the Savings Bank, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Savings Bank available for distribution remaining after: (i) payment or provision for payment of the Savings Bank’s debts and liabilities; (ii) distributions or provision for distributions in settlement of its liquidation account; and (iii) distributions or provision for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Savings Bank. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock.

B. Preferred stock. The Savings Bank may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in a supplementary section to the charter. All shares of the same class shall be identical, except as to the following relative rights and preferences, as to which there may be variations between different series:

(a)

The distinctive serial designation and the number of shares constituting such series;

(b)

The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s), the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends;

(c)

The voting powers, full or limited, if any, of shares of such series;

(d)

Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed;

(e)

The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Savings Bank;

(f)

Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund;

(g)

Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Savings Bank and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

(h)

The price or other consideration for which the shares of such series shall be issued; and

(i)

Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock.

Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series.

The board of directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series and, within the limitations set forth in this section and the remainder of this charter, fix and determine the relative rights and preferences of the shares of any series so established.

Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the board of directors, the Savings Bank shall file with the Secretary to the OCC a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof.

Section 6. Preemptive rights. Holders of the capital stock of the Savings Bank shall not be entitled to preemptive rights with respect to any shares of the Savings Bank which may be issued.

Section 7. Directors . The Savings Bank shall be under the direction of a board of directors. The authorized number of directors, as stated in the Savings Bank’s bylaws, shall not be fewer than five nor more than fifteen except when a greater or lesser number is approved by the OCC.

Section 8. Certain Provisions Applicable for Five Years. Notwithstanding anything contained in the Savings Bank’s charter or bylaws to the contrary, for a period of five years from the date of completion of the conversion of the Savings Bank from mutual to stock form, the following provisions shall apply:

A. Beneficial Ownership Limitation. No person shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10 percent of any class of an equity security of the Savings Bank. This limitation shall not apply to a transaction in which the Savings Bank forms a holding company without change in the respective beneficial ownership interests of its stockholders other than pursuant to the exercise of any dissenter and appraisal rights, the purchase of shares by underwriters in connection with a public offering, or the purchase of less than 25 percent of a class of stock by a tax-qualified employee stock benefit plan as defined in §192.25 of the OCC’s regulations.

In the event shares are acquired in violation of this section 8, all shares beneficially owned by any person in excess of 10 percent shall be considered “excess shares” and shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to the stockholders for a vote.

B. Call for Special Meetings. Special meetings of stockholders relating to changes in control of the Savings Bank or amendments to its charter shall be called only upon direction of the board of directors.

For purposes of this section 8, the following definitions apply:

1. The term “person” includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the Savings Bank.

2. The term “offer” includes every offer to buy or otherwise 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.

4. The term “acting in concert” means (a) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (b) 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 arrangements, whether written or otherwise.

Section 9. Amendment of charter. Except as provided in Section 5, no amendment, addition, alteration, change or repeal of this charter shall be made, unless such is proposed by the board of directors of the Savings Bank, approved by the shareholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise required, and approved or preapproved by the OCC.


NEWTON FEDERAL BANK

ATTEST:
		Gregory J. Proffitt
		Corporate Secretary

BY:
		Johnny S. Smith
		President and Chief Executive Officer

OFFICE OF THE COMPTROLLER OF THE CURRENCY

ATTEST:
		Deputy Comptroller for Licensing

BY:
		Comptroller of the Currency

Effective Date:

NEWTON FEDERAL BANK

BYLAWS

Article I - Home Office

The home office of Newton Federal Bank (the “Savings Bank”) shall be at 3175 Highway 278, Covington, Newton County, Georgia 30014.

Article II – Shareholders

Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at the home office of the Savings Bank or at such other convenient place as the board of directors may determine.

Section 2. Annual Meeting. A meeting of the shareholders of the Savings Bank for the election of directors and for the transaction of any other business of the Savings Bank shall be held annually within 150 days after the end of the Savings Bank’s fiscal year on the fourth Thursday of February of each calendar year, if not a legal holiday, and if a legal holiday, then on the next day following which is not a legal holiday, or at such other date and time within such 150-day period as the board of directors may determine.

Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of the Comptroller of the Currency (the “OCC”), may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the Savings Bank entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the Savings Bank addressed to the chairman of the board, the president, or the secretary.

Section 4. Conduct of Meetings. Annual and special meetings shall be conducted in accordance with the most current edition of Robert’s Rules of Order, unless otherwise prescribed by regulations of the OCC or these bylaws or the board of directors adopts another written procedure for the conduct of meetings. The board of directors shall designate, when present, either the chairman of the board or president to preside at such meetings.

Section 5. Notice of Meetings. Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Savings Bank as of the record date prescribed in Section 6 of this Article II with postage prepaid. When any shareholders’ meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.

payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment.

Section 7. Voting Lists. At least 20 days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the Savings Bank shall make a complete list of the shareholders of record entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the Savings Bank and shall be subject to inspection by any shareholder of record or the shareholder’s agent at any time during usual business hours for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder’s agent during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the board of directors may elect to follow the procedures prescribed in § 552.6(d) of the OCC’s regulations as now or hereafter in effect.

Section 8. Quorum. A majority of the outstanding shares of the Savings Bank entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If a quorum is present at a meeting of shareholders and the withdrawal of shareholders results in the presence of less than a quorum, the shareholders present may continue to transact business until adjournment. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter. Directors, however, are elected by a plurality of the votes cast at an election of directors.

Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the shareholder. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the board of directors. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest.

Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the association to the contrary, at any meeting of the shareholders of the Savings Bank any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may by voted by the Savings Bank if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

Neither treasury shares of its own stock held by the Savings Bank nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Savings Bank, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

Section 12. Cumulative Voting. Shareholders may not cumulate their votes for election of directors.

Section 13. Inspectors of Election. In advance of any meeting of shareholders, the board of directors may appoint any person other than nominees for office as inspectors of election to act at such meeting or any adjournment. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting or at the meeting by the chairman of the board or the president.

Unless otherwise prescribed by regulations of the OCC, the duties of such inspectors shall include: determining the number of shares and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders.

Section 14. Nominating Committee. The board of directors shall act as a nominating committee for selecting the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Savings Bank. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Savings Bank at least five days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Savings Bank. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting.

However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon.

Section 15. New Business. Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary of the Savings Bank at least five days before the date of the annual meeting, and all business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting. Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least five days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of the shareholders taking place 30 days or more thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors, and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.

Section 16. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter.

Article III - Board of Directors

Section 1. General Powers. The business and affairs of the association shall be under the direction of its board of directors. The board of directors shall annually elect a chairman of the board from among its members and shall designate, when present, the chairman of the board to preside at its meetings.

Section 2. Number and Term. The board of directors shall consist of eight (8) members, and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually.

Section 3. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of a conference telephone or similar communications device through which all persons participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes.

Section 4. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president, or one-third of the directors. The persons authorized to call special meetings of the board of directors may fix any place, within the Savings Bank’s normal lending territory, as the place for holding any special meeting of the board of directors called by such persons.

Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person for all purposes.

Section 5. Notice. Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally, by electronic mail or by telegram, or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram, or when the Savings Bank receives notice of delivery if electronically transmitted. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice of waiver of notice of such meeting.

Section 6. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 5 of this Article III.

Section 7. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the OCC or by these bylaws.

Section 8. Action Without a Meeting. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.

Section 9. Resignation. Any director may resign at any time by sending a written notice of such resignation to the home office of the Savings Bank addressed to the chairman of the board or the president. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board or the president. More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors.

Section 10. Vacancies. Any vacancy occurring on the board of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the shareholders. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders.

Section 11. Compensation. Directors, as such, may receive a stated salary for their services. By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board of directors. Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the board of directors may determine.

Section 12. Presumption of Assent. A director of the Savings Bank who is present at a meeting of the board of directors at which action on any Savings Bank matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Savings Bank within five days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 13. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.

Section 14. Age Limitations. No person over the age of seventy-five (75) shall be eligible for election, reelection, appointment, or reappointment to the board of the Savings Bank. No director shall serve as such beyond the annual meeting of the Savings Bank immediately following the director becoming 75 years of age. Notwithstanding the preceding two sentences, the age limitation shall be eighty (80) for any director serving on the board of the Savings Bank at the time of the adoption of the Savings Bank’s Plan of Mutual Holding Company Reorganization and Stock Issuance Plan.

Article IV - Executive and Other Committees

Section 1. Appointment. The board of directors, by resolution adopted by a majority of the full board, may designate the chairman of the board and two or more of the other directors to constitute an executive committee. The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the board of directors, or any director, of any responsibility imposed by law or regulation.

Section 2. Authority. The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to: the declaration of dividends; the amendment of the charter or bylaws of the Savings Bank, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the Savings Bank otherwise than in the usual and regular course of its business; a voluntary dissolution of the Savings Bank; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest.

Section 3. Tenure. Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until a successor is designated as a member of the executive committee.

Section 4. Meetings. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day’s notice stating the place, date, and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need to be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

Section 5. Quorum. A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

Section 6. Action Without a Meeting. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee.

Section 7. Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.

Section 8. Resignations and Removal. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the association. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective.

Section 9. Procedure. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting held next after the proceedings shall have occurred.

Section 10. Other Committees. The board of directors may by resolution establish an audit, loan, or other committee composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Savings Bank and may prescribe the duties, constitution, and procedures thereof.

Article V - Officers

Section 1. Positions. The officers of the Savings Bank shall be a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the board of directors. The board of directors may also designate the chairman of the board as an officer. The offices of the secretary and treasurer or comptroller may be held by the same person and a vice president may also be either the secretary or the treasurer or comptroller. The board of directors may designate one or more vice presidents as executive vice president or senior vice president. The board of directors may also elect or authorize the appointment of such other officers as the business of the Savings Bank may require. The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine. In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.

Section 2. Election and Term of Office. The officers of the Savings Bank shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible. Each officer shall hold office until a successor has been duly elected and qualified or until the officer’s death, resignation, or removal in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The board of directors may authorize the Savings Bank to enter into an employment contract with any officer in accordance with regulations of the OCC; but no such contract shall impair the right of the board of directors to remove any officer at any time in accordance with Section 3 of this Article V.

Section 3. Removal. Any officer may be removed by the board of directors whenever in its judgment the best interests of the Savings Bank will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed.

Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the board of directors for the unexpired portion of the term.

Section 5. Remuneration. The remuneration of the officers shall be fixed from time to time by the board of directors.

Article VI - Contracts, Loans, Checks, and Deposits

Section 1. Contracts. To the extent permitted by regulations of the OCC, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the Savings Bank to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Savings Bank. Such authority may be general or confined to specific instances.

Section 2. Loans. No loans shall be contracted on behalf of the Savings Bank and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors. Such authority may be general or confined to specific instances.

Section 3. Checks; Drafts, etc. All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Savings Bank shall be signed by one or more officers, employees or agents of the Savings Bank in such manner as shall from time to time be determined by the board of directors.

Section 4. Deposits. All funds of the Savings Bank not otherwise employed shall be deposited from time to time to the credit of the Savings Bank in any duly authorized depositories as the board of directors may select.

Article VII - Certificates for Shares and Their Transfer

Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Savings Bank shall be in such form as shall be determined by the board of directors and approved by the OCC. Such certificates shall be signed by the chief executive officer or by any other officer of the Savings Bank authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the Savings Bank itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Savings Bank. All certificates surrendered to the Savings Bank for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and canceled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Savings Bank as the board of directors may prescribe.

Section 2. Transfer of Shares. Transfer of shares of capital stock of the Savings Bank shall be made only on its stock transfer books. Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the Savings Bank. Such

transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name shares of capital stock stand on the books of the Savings Bank shall be deemed by the association to be the owner for all purposes.

Article VIII—Fiscal Year

The fiscal year of the Savings Bank shall end on the last day of September of each year. The appointment of accountants shall be subject to annual ratification by the shareholders.

Article IX - Dividends

Subject to the terms of the Savings Bank’s charter and the regulations and orders of the OCC, the board of directors may, from time to time, declare, and the Savings Bank may pay, dividends on its outstanding shares of capital stock.

Article X - Corporate Seal

The board of directors shall provide a Savings Bank seal which shall be two concentric circles between which shall be the name of the Savings Bank. The year of incorporation or an emblem may appear in the center.

Article XI - Amendments

These bylaws may be amended in a manner consistent with regulations of the OCC and shall be effective after: (i) approval of the amendment by a majority vote of the authorized board of directors, or by a majority vote of the votes cast by the shareholders of the Savings Bank at any legal meeting, and (ii) receipt of any applicable regulatory approval. When the Savings Bank fails to meet its quorum requirements, solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws.

ARTICLE XII – Indemnification

The Savings Bank shall indemnify its personnel, including directors, officers and employees, to the fullest extent authorized by applicable law and regulations, as the same exists or may hereafter be amended; provided, any indemnification by the Savings Bank of the Savings Bank’s personnel is subject to any applicable rules or regulations of the federal bank regulators.

ARTICLE XIII – Reliance upon Books, Reports and Records

Each director, each member of any committee designated by the board of directors, and each officer of the Savings Bank shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Savings Bank and upon such information, opinions, reports or statements presented to the Savings Bank by any of its officers or employees, or committees of the board of directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Savings Bank.

EXHIBIT B

Charter and Bylaws of the Holding Company

COMMUNITY FIRST BANCSHARES, INC.

STOCK HOLDING COMPANY CHARTER

Section 1. Corporate title . The full corporate title of the mutual holding company subsidiary holding company is Community First Bancshares, Inc. (the “Company”).

Section 2. Domicile. The domicile of the Company shall be in Newton County, Georgia.

Section 3. Duration. The duration of the Company is perpetual.

Section 4. Purpose and powers. The purpose of the Company is to pursue any or all of the lawful objectives of a federal mutual holding company chartered under Section 10(o) of the Home Owners’ Loan Act, 12 U.S.C. 1467a(o), and to exercise all of the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Board of Governors of the Federal Reserve System (the “FRB”).

Section 5. Capital stock. The total number of shares of all classes of the capital stock that the Company has the authority to issue is 20,000,000, of which 19,000,000 shares shall be common stock, par value $0.01 per share, and of which 1,000,000 shares shall be serial preferred stock, par value $0.01 per share. The shares may be issued from time to time as authorized by the board of directors without the approval of its shareholders, except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par or stated value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Company. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted to the Company), labor, or services actually performed for the Company, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the board of directors of the Company, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the retained earnings of the Company that is transferred to common stock or paid-in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance.

Except for shares issued in the initial organization of the Company, no shares of capital stock (including shares issuable upon conversion, exchange, or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons (except for shares issued to the parent mutual holding company) of the Company other than as part of a general public offering or as qualifying shares to a director, unless the issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting.

Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share, and there shall be no cumulation of votes for the election of directors; provided , that this restriction on voting separately by class or series shall not apply:

(i)

(ii)

To any provision which would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Company with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Company if the preferred stock is exchanged for securities of such other corporation; provided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the FRB or the Federal Deposit Insurance Corporation;

(iii)

To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving company in a merger or consolidation for the Company, shall not be considered to be such an adverse change.

A description of the different classes and series of the Company’s capital stock and a statement of the designations, and the relative rights, preferences and limitations of the shares of each class of and series of capital stock are as follows:

A. Common stock. Except as provided in this Section 5 (or in any supplementary sections thereto) the holders of common stock shall exclusively possess all voting power. Each holder of shares of common stock shall be entitled to one vote for each share held by such holder and there shall be no cumulation of votes for the election of directors.

In the event of any liquidation, dissolution, or winding up of the Company, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Company available for distribution remaining after: (i) payment or provision for payment of the Company’s debts and liabilities; (ii) distributions or provision for distributions in settlement of its liquidation account; and (iii) distributions or provisions for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Company. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock.

B. Preferred stock. The Company may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in a supplementary section to the charter. All shares of the same class shall be identical, except as to the following relative rights and preferences, as to which there may be variations between different series:

(a)

The distinctive serial designation and the number of shares constituting such series;

(b)

(c)

The voting powers, full or limited, if any, of shares of such series;

(d)

Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed;

(e)

The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company;

(f)

(g)

Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Company and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

(h)

The price or other consideration for which the shares of such series shall be issued; and

(i)

Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series.

Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the board of directors, the Company shall file with the appropriate Reserve Bank a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof.

Section 6. Beneficial ownership limitation . No person other than Community First Bancshares, MHC may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10 percent of the outstanding stock of any class of voting stock of the Company held by persons other than Community First Bancshares, MHC. This limitation expires on , 2022 and does not apply to a transaction in which an underwriter purchases stock in connection with a public offering, or the purchase of stock by an employee stock ownership plan or other tax-qualified employee stock benefit plan that is exempt from the approval requirements under the FRB’s Regulations.

In the event a person acquires stock in violation of this Section 6, all stock beneficially owned by such person in excess of 10 percent of the stock held by shareholders other than Community First Bancshares, MHC shall be considered “excess shares” and shall not be counted as stock entitled to vote and shall not be voted by any person or counted as voting stock in connection with any matters submitted to the shareholders for a vote.

For purposes of this section 8, the following definitions apply:

(1) The term “person” includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the subsidiary holding company.

(2) The term “offer” includes every offer to buy or otherwise 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.

(4) The term “acting in concert” means (a) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (b) 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 arrangements, whether written or otherwise.

Section 7. Preemptive rights. Holders of the capital stock of the Company shall not be entitled to preemptive rights with respect to any shares of the Company which may be issued.

Section 8. Directors. The Company shall be under the direction of a board of directors. The authorized number of directors, as stated in the Company’s bylaws, shall not be fewer than five nor more than fifteen except when a greater or lesser number is approved by the FRB, or its delegate.

Section 9. Amendment of charter. Except as provided in Section 5, no amendment, addition, alteration, change or repeal of this charter shall be made, unless such is proposed by the board of directors of the Company, approved by the shareholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise required, and approved or preapproved by the FRB.


COMMUNITY FIRST BANCSHARES, INC.

ATTEST:
		Gregory J. Proffitt
		Corporate Secretary

BY:
		Johnny S. Smith
		President and Chief Executive Officer

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

BY:
		Secretary of Board of Governors of the Federal Reserve System

Effective Date:

COMMUNITY FIRST BANCSHARES, INC.

BYLAWS

Article I—Home Office

The home office of Community First Bancshares, Inc. (the “Company”) shall be at 3175 Highway 278, Covington, Newton County, Georgia 30014.

Article II—Shareholders

Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at the home office of the Company or at such other convenient place as the board of directors may determine.

Section 2. Annual Meeting. A meeting of the shareholders of the Company for the election of directors and for the transaction of any other business of the Company shall be held annually within 150 days after the end of the Company’s fiscal year on the fourth Thursday of February of each calendar year if not a legal holiday, and if a legal holiday, then on the next day following which is not a legal holiday, or at such other date and time within such 150-day period as the board of directors may determine.

Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Board of Governors of the Federal Reserve System (the “FRB”), may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the Company entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the Company addressed to the chairman of the board, the president, or the secretary.

Section 4. Conduct of Meetings. Annual and special meetings shall be conducted in accordance with written procedures established by the board of directors, unless otherwise prescribed by regulations of the FRB or these bylaws. The board of directors shall designate, when present, either the chairman of the board or president to preside at such meetings.

Section 5. Notice of Meetings. Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Company as of the record date prescribed in section 6 of this Article II with postage prepaid. When any shareholders’ meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.

Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of

shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment.

Section 7. Voting Lists. At least 20 days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the Company shall make a complete list of the shareholders of record entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the Company and shall be subject to inspection by any shareholder of record or the shareholder’s agent at any time during usual business hours for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder’s agent during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the board of directors may elect to follow the procedures prescribed in § 239.26(d) of the FRB’s regulations as now or hereafter in effect.

Section 8. Quorum. A majority of the outstanding shares of the Company entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If a quorum is present at a meeting of shareholders and the withdrawal of shareholders results in the presence of less than a quorum, the shareholders present may continue to transact business until adjournment. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter. Directors, however, are elected by a plurality of the votes cast at an election of directors.

Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the Company to the contrary, at any meeting of the shareholders of the Company any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may be voted by the Company if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Neither treasury shares of its own stock held by the Company nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Company, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

Section 12. Cumulative Voting. Shareholders may not cumulate their votes for election of directors.

Section 13. Inspectors of Election. In advance of any meeting of shareholders, the board of directors may appoint any individual other than nominees for office as inspectors of election to act at such meeting or any adjournment. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any individual appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting or at the meeting by the chairman of the board or the president. Unless otherwise prescribed by regulations of the FRB, the duties of such inspectors shall include: determining the number of shares and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders.

Section 14. Nominating Committee. The board of directors shall act as a nominating committee for selecting the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Company. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Company at least five days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Company. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon.

Section 15. New Business. Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary of the Company at least five days before the date of the annual meeting, and all business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting. Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least five days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of the shareholders taking place 30 days or more thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors, and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.

Article III—Board of Directors

Section 1. General Powers. The business and affairs of the Company shall be under the direction of its board of directors. The board of directors shall annually elect a chairman of the board from among its members and shall designate, when present, the chairman of the board to preside at its meetings.

Section 2. Number and Term. The board of directors shall consist of six (6) members, and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually.

Section 3. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of a conference telephone or similar communications device through which all individuals participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes.

Section 4. Director Qualification. Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the Company unless the Company is a wholly owned subsidiary of a holding company.

Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president, or one-third of the directors. The persons authorized to call special meetings of the board of directors may fix any place, within the Company’s normal lending territory, as the place for holding any special meeting of the board of directors called by such persons. Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person for all purposes.

Section 6. Notice. Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram or at least five days prior thereto when

delivered by mail at the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram, or when the Company receives notice of delivery if electronically transmitted. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice of waiver of notice of such meeting.

Section 7. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 5 of this Article III.

Section 8. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the FRB or by these bylaws.

Section 9. Action Without a Meeting. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.

Section 10. Resignation. Any director may resign at any time by sending a written notice of such resignation to the home office of the Company addressed to the chairman of the board or the president. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board or the president. More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors.

Section 11. Vacancies. Any vacancy occurring on the board of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the shareholders. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders.

Section 12. Compensation. Directors, as such, may receive a stated salary for their services. By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board of directors. Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the board of directors may determine.

Section 13. Presumption of Assent. A director of the Company who is present at a meeting of the board of directors at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the individual acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Company within five days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 14. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.

For purposes of this section, removal for cause includes, as defined in 12 C.F.R. Section 163.39, or any successor regulation, “personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, [or a] willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order.”

Section 15. Age Limitations No person over the age of seventy-five (75) shall be eligible for election, reelection, appointment, or reappointment to the board of the Company. No director shall serve as such beyond the annual meeting of the Company immediately following the director becoming 75 years of age. Notwithstanding the preceding two sentences, the age limitation shall be eighty (80) for any director serving on the board of Newton Federal Bank at the time of the adoption of Newton Federal Bank’s Plan of Mutual Holding Company Reorganization and Stock Issuance Plan.

Article IV—Executive and Other Committees

Section 2. Authority. The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to: the declaration of dividends; the amendment of the charter or bylaws of the Company, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the Company otherwise than in the usual and regular course of its business; a voluntary dissolution of the Company; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest.

of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

Section 7. Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.

Section 8. Resignations and Removal. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the Company. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective. No notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

Section 9. Procedure. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure, which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting held next after the proceedings shall have occurred.

Section 10. Other Committees. The board of directors may by resolution establish an audit, loan, or other committee composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Company and may prescribe the duties, constitution, and procedures thereof.

Article V—Officers

Section 1. Positions. The officers of the Company shall be a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the board of directors. The board of directors may also designate the chairman of the board as an officer. The offices of the secretary and treasurer or comptroller may be held by the same individual and a vice president may also be either the secretary or the treasurer or comptroller. The board of directors may designate one or more vice presidents as executive vice president or senior vice president. The board of directors may also elect or authorize the appointment of such other officers as the business of the Company may require. The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine. In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.

Section 2. Election and Term of Office. The officers of the Company shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible.

Each officer shall hold office until a successor has been duly elected and qualified or until the officer’s death, resignation, or removal in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The board of directors may authorize the Company to enter into an employment contract with any officer in accordance with regulations of the FRB; but no such contract shall impair the right of the board of directors to remove any officer at any time in accordance with Section 3 of this Article V.

Section 3. Removal. Any officer may be removed by the board of directors whenever in its judgment the best interests of the Company will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the officer so removed.

Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the board of directors for the unexpired portion of the term.

Section 5. Remuneration. The remuneration of the officers shall be fixed from time to time by the board of directors.

Article VI—Contracts, Loans, Checks, and Deposits

Section 1. Contracts. To the extent permitted by regulations of the FRB, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the Company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Company. Such authority may be general or confined to specific instances.

Section 2. Loans. No loans shall be contracted on behalf of the Company and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors. Such authority may be general or confined to specific instances.

Section 3. Checks; Drafts, etc. All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Company shall be signed by one or more officers, employees or agents of the Company in such manner as shall from time to time be determined by the board of directors.

Section 4. Deposits. All funds of the Company not otherwise employed shall be deposited from time to time to the credit of the Company in any duly authorized depositories as the board of directors may select.

Article VII—Certificates for Shares and Their Transfer

Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Company shall be in such form as shall be determined by the board of directors and approved by the FRB. The Company is also authorized to issue uncertificated shares of capital stock. Such certificates shall be signed by the chief executive officer or by any other officer of the Company authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the Company itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. Upon the issuance of uncertificated shares of capital stock, the Company shall send the shareholder a written statement of the same information required above with respect to stock certificates. The name and address of the person to whom the shares are issued, with the number of shares and date of

issue, shall be entered on the stock transfer books of the Company. All certificates surrendered to the Company for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and canceled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Company as the board of directors may prescribe.

Section 2. Transfer of Shares. Transfer of shares of capital stock of the Company shall be made only on its stock transfer books. Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the Company. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name shares of capital stock stand on the books of the Company shall be deemed by the Company to be the owner for all purposes.

Article VIII—Fiscal Year

The fiscal year of the Company shall end on the last day of September each year. The appointment of accountants shall be subject to annual ratification by the shareholders.

Article IX—Dividends

Subject to the terms of the Company’s charter and the regulations and orders of the FRB, the board of directors may, from time to time, declare, and the Company may pay, dividends on its outstanding shares of capital stock.

Article X—Corporate Seal

The board of directors shall provide a Company seal, which shall be two concentric circles between which shall be the name of the Company. The year of incorporation or an emblem may appear in the center.

Article XI—Amendments

These bylaws may be amended in a manner consistent with regulations of the FRB and shall be effective after: (i) approval of the amendment by a majority vote of the authorized board of directors, or by a majority vote of the votes cast by the shareholders of the Company at any legal meeting, and (ii) receipt of any applicable regulatory approval. When a Company fails to meet its quorum requirements solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws.

ARTICLE XII – Indemnification

The Company shall indemnify its personnel, including directors, officers and employees, to the fullest extent authorized by applicable law and regulations, as the same exists or may hereafter be amended; provided, any indemnification by the Company of the Company’s personnel is subject to any applicable rules or regulations of the FRB.

ARTICLE XIII – Reliance upon Books, Reports and Records

Each director, each member of any committee designated by the board of directors, and each officer of the Company shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Company and upon such information, opinions,

reports or statements presented to the Company by any of its officers or employees, or committees of the board of directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company.

EXHIBIT C

Charter and Bylaws of the MHC

COMMUNITY FIRST BANCSHARES, MHC

FEDERAL MUTUAL HOLDING COMPANY CHARTER

Section 1: Corporate title. The name of the mutual holding company is Community First Bancshares, MHC (the “Mutual Holding Company”).

Section 2: Home Office . The home office of the Mutual Holding Company shall be located in Newton County, Georgia.

Section 3: Duration. The duration of the Mutual Holding Company is perpetual.

Section 4: Purpose and powers. The purpose of the Mutual Holding Company is to pursue any or all of the lawful objectives of a federal mutual savings and loan holding company chartered under section 10(o) of the Home Owners’ Loan Act, 12 U.S.C. 1467a(o), and to exercise all of the express, implied, and incidental powers conferred thereby and all acts amendatory thereof and supplemental thereto, subject to the Constitution and the laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Federal Reserve Board (the “FRB”).

Section 5: Capital. The Mutual Holding Company shall have no capital stock.

Section 6: Members. All holders of the savings, demand, or other authorized accounts of Newton Federal Bank (the “Savings Bank”) are members of the Mutual Holding Company. With respect to all questions requiring action by the members of the Mutual Holding Company, each holder of an account in the Savings Bank shall be permitted to cast one vote for each $100, or fraction thereof, of the withdrawal value of the member’s account. In addition, borrowers from the Savings Bank as of January 19, 1984 shall be entitled to one vote for the period of time during which such borrowings are in existence. No member, however, shall cast more than one thousand votes. All accounts shall be nonassessable.

Section 7. Directors. The Mutual Holding Company shall be under the direction of a board of directors. The authorized number of directors shall not be fewer than five nor more than fifteen, as fixed in the Mutual Holding Company’s bylaws, except that the number of directors may be decreased to a number less than five or increased to a number greater than fifteen with the prior approval of the FRB.

Section 8: Capital, surplus, and distribution of earnings. The Mutual Holding Company shall distribute net earnings to account holders of the Savings Bank on such basis and in accordance with such terms and conditions as may from time to time be authorized by the FRB, provided that the Mutual Holding Company may establish minimum account balance requirements for account holders to be eligible for distributions of earnings.

All holders of accounts of the Savings Bank shall be entitled to equal distribution of the assets of the Mutual Holding Company, pro rata to the value of their accounts in the Savings Bank, in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Mutual Holding Company.

Section 9. Amendment. Adoption of any pre-approved charter amendment shall be effective after such pre-approved amendment has been approved by the members at a legal meeting. Any other amendment, addition, change, or repeal of this charter must be approved by the FRB prior to approval by the members at a legal meeting and shall be effective upon filing with the FRB in accordance with regulatory procedures.


COMMUNITY FIRST BANCSHARES, MHC

ATTEST:
		Gregory J. Proffitt
		Corporate Secretary

BY:
		Johnny S. Smith
		President and Chief Executive Officer

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

BY:
		Secretary of Board of Governors of the Federal Reserve System

Effective Date:

COMMUNITY FIRST BANCSHARES, MHC

BYLAWS

1. Annual meeting of members. The annual meeting of the members of Community First Bancshares, MHC (the “Mutual Holding Company”) for the election of directors and for the transaction of any other business of the Mutual Holding Company shall be held, as designated by the board of directors, at a location within the state that constitutes the principal place of business of the Mutual Holding Company, or at any other convenient place the board of directors may designate, on the fourth Thursday in January of each year, if not a legal holiday, or if a legal holiday then on the next succeeding day not a legal holiday. At each annual meeting, the officers shall make a full report of the financial condition of the Mutual Holding Company and of its progress for the preceding year and shall outline a program for the succeeding year

2. Special meetings of members. Special meetings of the members of the Mutual Holding Company may be called at any time by the president or the board of directors and shall be called by the president, a vice president, or the secretary upon the written request of members of record, holding in the aggregate at least one-tenth of the voting capital of the Mutual Holding Company. Such written request shall state the purpose of the meeting and shall be delivered at the principal place of business of the Mutual Holding Company addressed to the president. For purposes of this section, “voting capital” means FDIC-insured deposits as of the voting record date. Annual and special meetings shall be conducted in accordance with written procedures agreed to by the board of directors.

3. Notice of meeting of members. Notice of each meeting shall be either published once a week for the two successive calendar weeks (in each instance on any day of the week) immediately prior to the week in which such meeting shall convene, in a newspaper printed in the English language and of general circulation in the city or county in which the principal place of business of the Mutual Holding Company is located, or mailed postage prepaid at least 15 days and not more than 45 days prior to the date on which such meeting shall convene, to each of its members of record at the last address appearing on the books of the Mutual Holding Company. Such notice shall state the name of the Mutual Holding Company, the place of the meeting, the date and time when it shall convene, and the matters to be considered. A similar notice shall be posted in a conspicuous place in each of the offices of the Mutual Holding Company during the 14 days immediately preceding the date on which such meeting shall convene. If any member, in person or by authorized attorney, shall waive in writing notice of any meeting of members, notice thereof need not be given to such member. When any meeting is adjourned for 30 days or more, notice of the adjournment and reconvening of the meeting shall be given as in the case of the original meeting.

4. Fixing of record date. For the purpose of determining members entitled to notice of or to vote at any meeting of members or any adjournment thereof, or in order to make a determination of members for any other proper purpose, the board of directors shall fix in advance a record date for any such determination of members. Such date shall be not more than 60 days nor fewer than 10 days prior to the date on which the action, requiring such determination of members, is to be taken. The member entitled to participate in any such action shall be the member of record on the books of the Mutual Holding Company on such record date. The number of votes which each member shall be entitled to cast at any meeting of the members shall be determined from the books of the Mutual Holding Company as of such record date. Any member of such record date who ceases to be a member prior to such meeting shall not be entitled to vote at that meeting. The same determination shall apply to any adjourned meeting.

5. Member quorum. Any number of members present and voting, represented in person or by proxy, at a regular or special meeting of the members shall constitute a quorum. A majority of all votes

cast at any meeting of the members shall determine any question, unless otherwise required by regulation. Directors, however, are elected by a plurality of the votes cast at an election of directors. At any adjourned meeting any business may be transacted which might have been transacted at the meeting as originally called. Members present at a duly constituted meeting may continue to transact business until adjournment.

6. Voting by proxy. Voting at any annual or special meeting of the members may be by proxy pursuant to the rules and regulations of the Board of Governors of the Federal Reserve System (the “FRB”), provided, that no proxies shall be voted at any meeting unless such proxies shall have been placed on file with the secretary of the Mutual Holding Company, for verification, prior to the convening of such meeting. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the member. All proxies with a term greater than eleven months or solicited at the expense of the Mutual Holding Company must run to the board of directors as a whole, or to a committee appointed by a majority of such board. Accounts held by an administrator, executor, guardian, conservator or receiver may be voted in person or by proxy by such person. Accounts held by a trustee may be voted by such trustee either in person or by proxy, in accordance with the terms of the trust agreement, but no trustee shall be entitled to vote accounts without a transfer of such accounts into the trustee name. Accounts held in trust in an IRA or Keogh Account, however, may be voted by the Mutual Holding Company if no other instructions are received. Joint accounts shall be entitled to no more than 1,000 votes, and any owner may cast all the votes unless the Mutual Holding Company has otherwise been notified in writing.

7. Communication between members. Communication between members shall be subject to any applicable rules or regulations of the FRB. No member, however, shall have the right to inspect or copy any portion of any books or records of the Mutual Holding Company containing: (i) a list of depositors in or borrowers from such Mutual Holding Company; (ii) their addresses; (iii) individual deposit or loan balances or records; or (iv) any data from which such information could reasonably be constructed.

8. Number of directors, membership. The number of directors of the Mutual Holding Company shall be six (6). Each director shall be a member of the Mutual Holding Company. The board of directors shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for terms of three (3) years and until their successors are elected and qualified. One class shall be elected annually.

9. Meetings of the board. The board of directors shall meet regularly without notice at the principal place of business of the Mutual Holding Company at least once per fiscal quarter at an hour and date fixed by resolution of the board, provided that the place of meeting may be changed by the directors. Special meetings of the board may be held at any place specified in a notice of such meeting and shall be called by the secretary upon the written request of the chairman or of three directors. All special meetings shall be held upon at least 24 hours written notice to each director unless notice is waived in writing before or after such meeting. Such notice shall state the place, date, time, and purposes of such meeting. A majority of the authorized directors shall constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board. Action may be taken without a meeting if unanimous written consent is obtained for such action. The board may also permit telephonic participation at meetings. The meetings shall be under the direction of a chairman, appointed annually by the board, or in the absence of the chairman, the meetings shall be under the direction of the vice chairman, if any, or the president.

10. Officers, employees, and agents. Annually at the meeting of the board of directors of the Mutual Holding Company following the annual meeting of the members of the Mutual Holding Company, the board shall elect a president, one or more vice presidents, a secretary, and a treasurer or comptroller; provided, that the offices of president and secretary may not be held by the same person and a vice president may also be the treasurer or comptroller. The board may appoint such additional officers, employees, and agents as it may from time to time determine. The term of office of all officers shall be one year or until their respective successors are elected and qualified. Any officer may be removed at any time by the board with or without cause, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed. In the absence of designation from time to time of powers and duties by the board, the officers shall have such powers and duties as generally pertain to their respective offices. Any indemnification by the Mutual Holding Company of the Mutual Holding Company’s personnel is subject to any applicable rules or regulations of the FRB.

11. Vacancies, resignation or removal of directors. Members of the Mutual Holding Company shall elect directors by ballot; provided, that in the event of a vacancy on the board between meetings of members, the board of directors may, by their affirmative vote, fill such vacancy, even if the remaining directors constitute less than a quorum. A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the members. Any director may resign at any time by sending a written notice of such resignation to the Mutual Holding Company delivered to the secretary. Unless otherwise specified therein such resignation shall take effect upon receipt by the secretary. More than three consecutive absences from regular meetings of the board, unless excused by resolution of the board, shall automatically constitute a resignation, effective when such resignation is accepted by the board. At a meeting of members called expressly for that purpose, directors or the entire board may be removed, only with cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors.

12. Powers of the board. The board of directors shall have the power:

(a)

By resolution, to appoint from among its members and remove an executive committee, which committee shall have and may exercise the powers of the board between the meetings of the board, but no such committee shall have the authority of the board to amend the charter or bylaws, adopt a plan of merger, consolidation, dissolution, or provide for the disposition of all or substantially all the property and assets of the Mutual Holding Company. Such committee shall not operate to relieve the board, or any member thereof, of any responsibility imposed by law;

(b)

To appoint and remove by resolution the members of such other committees as may be deemed necessary and prescribe the duties thereof;

(c)

To fix the compensation of directors, officers, and employees; and to remove any officer or employee at any time with or without cause;

(d)

To limit payments on capital which may be accepted; and

(e)

To exercise any and all of the powers of the Mutual Holding Company not expressly reserved by the charter to the members.

13. Execution of instruments, generally. All documents and instruments or writings of any nature shall be signed, executed, verified, acknowledged, and delivered by such officers, agents, or employees of the Mutual Holding Company or any one of them and in such manner as from time to time

may be determined by resolution of the board. All notes, drafts, acceptances, checks, endorsements, and all evidences of indebtedness of the Mutual Holding Company whatsoever shall be signed by such officer or officers or such agent or agents of the Mutual Holding Company and in such manner as the board may from time to time determine. Endorsements for deposit to the credit of the Mutual Holding Company in any of its duly authorized depositories shall be made in such manner as the board may from time to time determine. Proxies to vote with respect to shares or accounts of other mutual holding companies or stock of other corporations owned by, or standing in the name of, the Mutual Holding Company may be executed and delivered from time to time on behalf of the Mutual Holding Company by the president or a vice president and the secretary or an assistant secretary of the Mutual Holding Company or by any other persons so authorized by the board.

14. Nominating committee. The chairman, at least 30 days prior to the date of each annual meeting, shall appoint a nominating committee of three individuals who are members of the Mutual Holding Company. Such committee shall make nominations for directors in writing and deliver to the secretary such written nominations at least 15 days prior to the date of the annual meeting, which nominations shall then be posted in a prominent place in the principal place of business for the 15-day period prior to the date of the annual meeting, except in the case of a nominee substituted as a result of death or other incapacity. Provided such committee is appointed and makes such nominations, no nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by members are made in writing and delivered to the secretary of the Mutual Holding Company at least 10 days prior to the date of the annual meeting, which nominations shall then be posted in a prominent place in the principal place of business for the 10-day period prior to the date of the annual meeting, except in the case of a nominee substituted as a result of death or other incapacity. Ballots bearing the names of all individuals nominated by the nominating committee and by other members prior to the annual meeting shall be provided for use by the members at the annual meeting. If at any time the chairman shall fail to appoint such nominating committee, or the nominating committee shall fail or refuse to act at least 15 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any member and shall be voted upon.

15. New business. Any new business to be taken up at the annual meeting, including any proposal to increase or decrease the number of directors of the Mutual Holding Company, shall be stated in writing and filed with the secretary of the Mutual Holding Company at least 30 days before the date of the annual meeting, and all business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting. Any member may make any other proposal at the annual meeting and the same may be discussed and considered; but unless stated in writing and filed with the secretary 30 days before the meeting, such proposal shall be laid over for action at an adjourned, special, or regular meeting of the members taking place at least 30 days thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of the reports of officers and committees, but in connection with such reports no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.

16. Seal. The seal shall be two concentric circles between which shall be the name of the Mutual Holding Company. The year of incorporation, the word “Incorporated” or an emblem may appear in the center.

17. Amendment. Adoption of any bylaw amendment pursuant to § 239.15 of the FRB’s regulations, as long as consistent with applicable law, rules and regulations, and which adequately addresses the subject and purpose of the stated bylaw section, shall be effective after (i) approval of the amendment by a majority vote of the authorized board, or by a vote of the members of the Mutual

Holding Company at a legal meeting; and (ii) receipt of any applicable regulatory approval. When the Mutual Holding Company fails to meet its quorum requirement solely due to vacancies on the board, the bylaws may be amended by an affirmative vote of a majority of the sitting board.

18. Age limitations. No person over the age of seventy-five (75) shall be eligible for election, reelection, appointment, or reappointment to the board of the Mutual Holding Company. No director shall serve as such beyond the annual meeting of the Mutual Holding Company immediately following the director becoming 75 years of age. Notwithstanding the preceding two sentences, the age limitation shall be eighty (80) for any director serving on the board of Newton Federal Bank at the time of the adoption of Newton Federal Bank’s Plan of Mutual Holding Company Reorganization and Stock Issuance Plan.

Exhibit 3.1

COMMUNITY FIRST BANCSHARES, INC.

STOCK HOLDING COMPANY CHARTER

Section 1. Corporate title . The full corporate title of the mutual holding company subsidiary holding company is Community First Bancshares, Inc. (the “Company”).

Section 2. Domicile. The domicile of the Company shall be in Newton County, Georgia.

Section 3. Duration. The duration of the Company is perpetual.

Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share, and there shall be no cumulation of votes for the election of directors; provided , that this restriction on voting separately by class or series shall not apply:

(i)

(ii)

(iii)

To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving company in a merger or consolidation for the Company, shall not be considered to be such an adverse change.

(a)

The distinctive serial designation and the number of shares constituting such series;

(b)

(c)

The voting powers, full or limited, if any, of shares of such series;

(d)

Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed;

(e)

The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company;

(f)

(g)

(h)

The price or other consideration for which the shares of such series shall be issued; and

(i)

Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series.

For purposes of this section 8, the following definitions apply:

(3) The term “acquire” includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise.

Section 7. Preemptive rights. Holders of the capital stock of the Company shall not be entitled to preemptive rights with respect to any shares of the Company which may be issued.

Section 9. Amendment of charter. Except as provided in Section 5, no amendment, addition, alteration, change or repeal of this charter shall be made, unless such is proposed by the board of directors of the Company, approved by the shareholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise required, and approved or preapproved by the FRB.


COMMUNITY FIRST BANCSHARES, INC.

ATTEST:
		Gregory J. Proffitt
		Corporate Secretary

BY:
		Johnny S. Smith
		President and Chief Executive Officer

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

BY:
		Secretary of Board of Governors of the
		Federal Reserve System

Effective Date:

Exhibit 3.2

COMMUNITY FIRST BANCSHARES, INC.

BYLAWS

Article I—Home Office

The home office of Community First Bancshares, Inc. (the “Company”) shall be at 3175 Highway 278, Covington, Newton County, Georgia 30014.

Article II—Shareholders

Section 5. Notice of Meetings. Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Company as of the record date prescribed in section 6 of this Article II with postage prepaid. When any shareholders’ meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.

Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may be voted by the Company if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Neither treasury shares of its own stock held by the Company nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Company, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

Section 12. Cumulative Voting. Shareholders may not cumulate their votes for election of directors.

Section 14. Nominating Committee. The board of directors shall act as a nominating committee for selecting the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Company. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Company at least five days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Company. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon.

Article III—Board of Directors

Section 3. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of a conference telephone or similar communications device through which all individuals participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes.

Article IV—Executive and Other Committees

Section 2. Authority. The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to: the declaration of dividends; the amendment of the charter or bylaws of the Company, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the Company otherwise than in the usual and regular course of its business; a voluntary dissolution of the Company; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest.

Section 7. Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.

Section 8. Resignations and Removal. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the Company. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective. No notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

Section 10. Other Committees. The board of directors may by resolution establish an audit, loan, or other committee composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Company and may prescribe the duties, constitution, and procedures thereof.

Article V—Officers

Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the board of directors for the unexpired portion of the term.

Section 5. Remuneration. The remuneration of the officers shall be fixed from time to time by the board of directors.

Article VI—Contracts, Loans, Checks, and Deposits

Article VII—Certificates for Shares and Their Transfer

Article VIII—Fiscal Year

The fiscal year of the Company shall end on the last day of September each year. The appointment of accountants shall be subject to annual ratification by the shareholders.

Article IX—Dividends

Article X—Corporate Seal

Article XI—Amendments

ARTICLE XII – Indemnification

ARTICLE XIII – Reliance upon Books, Reports and Records

Exhibit 4

No.

INCORPORATED UNDER THE LAWS OF THE UNITED STATES OF AMERICA

C OMMUNITY F IRST B ANCSHARES , I NC .

Covington, Georgia

FULLY PAID AND NON-ASSESSABLE

PAR VALUE $0.01 PER SHARE

THIS CERTIFIES that

is the owner of

SHARES OF COMMON STOCK OF

C OMMUNITY F IRST B ANCSHARES , I NC .

a federally chartered subsidiary savings and loan holding company

The shares evidenced by this certificate are transferable only on the books of Community First Bancshares, Inc. by the holder hereof, in person or by attorney, upon surrender of this certificate properly endorsed.

The interest in Community First Bancshares, Inc. evidenced by this certificate may not be retired or withdrawn except as provided in the Charter and Bylaws of Community First Bancshares, Inc.

IN WITNESS WHEREOF, Community First Bancshares, Inc. has caused this certificate to be executed by its duly authorized officers and has caused its seal to be hereunto affixed this day of , 2017.


By		By
	GREGORY J. PROFFITT		JOHNNY S. SMITH
	CORPORATE SECRETARY		PRESIDENT AND CHIEF EXECUTIVE OFFICER

The shares of common stock evidenced by this certificate are subject to a limitation contained in the Community First Bancshares, Inc.’s Charter to the effect that, for a period of five years from the date of the reorganization from mutual to stock form of Newton Federal Bank, no person other than Community First Bancshares, MHC shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of any equity security of Community First Bancshares, Inc. This limitation shall not apply to the purchase of shares by underwriters in connection with a public offering or certain purchases of shares by a tax-qualified employee stock benefit plan or a subsidiary of Community First Bancshares, Inc. and any trustee of such a plan or arrangement. In addition, during this five-year period, all shares owned over the 10% limit may not be voted in any matter submitted to stockholders for a vote.

For value received, hereby sells, assigns and transfers unto

PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER

(please print or typewrite name and address including postal zip code of assignee)

Shares of the Common Stock represented by the within Certificate, and does hereby irrevocably constitute and appoint Attorney to transfer the said shares on the books of the within-named corporation with full power of substitution in the premises.

NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.

Exhibit 5

LUSE GORMAN, PC

ATTORNEYS AT LAW

5335 Wisconsin Avenue, NW, Suite 780

Washington, D.C. 20015

Telephone (202) 274-2000

Facsimile (202) 362-2902

www.luselaw.com

WRITER’S DIRECT DIAL NUMBER

(202) 274-2000

December 12, 2016

Board of Directors

Community First Bancshares, Inc.

3175 Highway 278

Covington, Georgia 30014

Re:

Community First Bancshares, Inc.

Common Stock, Par Value $0.01 Per Share

Members of the Board:

You have requested the opinion of this firm as to certain matters in connection with the offer and sale (the “Offering”) of shares of common stock, par value $0.01 per share (“Common Stock”), of Community First Bancshares, Inc. (the “Company”). We have reviewed the Company’s proposed Charter, Registration Statement on Form S-1 (the “Form S-1”), as well as applicable statutes and regulations governing the Company and the offer and sale of the shares of Common Stock.

We are of the opinion that upon the declaration of effectiveness of the Form S-1, the incorporation of the Company and the due adoption by the Board of Directors of the Company (or authorized committee thereof) of a resolution fixing the number of shares of Common Stock to be sold in the Offering, the shares of Common Stock, when issued and sold in the manner described in the Form S-1, will be validly issued, fully paid and non-assessable.

We hereby consent to our firm being referenced under the caption “Legal and Tax Matters” and to the filing of this opinion as an exhibit to the Form S-1.

Very truly yours,

/s/ Luse Gorman, PC

L USE G ORMAN , PC

Exhibit 10.1

FORM OF

NEWTON FEDERAL BANK EMPLOYEE STOCK OWNERSHIP PLAN

Prepared by:

Luse Gorman, PC

NEWTON FEDERAL BANK EMPLOYEE STOCK OWNERSHIP PLAN

TABLE OF CONTENTS


EMPLOYER INFORMATION			1

PLAN INFORMATION			2

SECTION A. GENERAL INFORMATION			2
Plan Name/Effective Date			2
Plan Features			2
ESOP Contributions			2
Compensation			3
Compensation Exclusions			4
Definitions			4

SECTION B. ELIGIBILITY			5
Exclusions			5
Eligibility Service Rules			5
Eligibility for Non-Elective Contributions			6
Eligibility Service Computation Rules			7

SECTION C. CONTRIBUTIONS			8
Non-Elective - Allocation Service			8
Non-Elective - Formula			8
Vesting Service Rules			10
Vesting Schedules			11

SECTION E. DISTRIBUTIONS			12
Normal/Early Retirement			12
Time & Form of Payment			12
Payments on Death			13
Cash Out			14
Required Beginning Date			15

SECTION F. IN-SERVICE WITHDRAWALS			15
Vesting Status			15
Retirement/Hardship/Age			15
Other Withdrawals			16
Conditions/Limitations			17
Loans			17

SECTION G. PLAN OPERATIONS AND TOP-HEAVY			17
Plan Operations			17
Statute of Limitations			20
Top-Heavy			20

SECTION I. MISCELLANEOUS			21

SECTION J. EXECUTION PAGE			22


		1		Copyright © 2002-2016

[Intended for Cycle E2]

ADOPTION AGREEMENT

ESOP

The undersigned adopting employer hereby adopts this Plan. The Plan is intended to qualify as a tax-exempt plan under Code sections 401(a) and 501(a), respectively. The ESOP Accounts of the Plan and the applicable portion of the Trust are also intended to qualify as a tax-exempt employee stock ownership plan and trust under Code section 4975(e)(7). The Plan shall consist of this Adoption Agreement, its related Basic Plan Document #CE2-ESOP and any related Appendix and Addendum to the Adoption Agreement. Unless otherwise indicated, all Section references are to Sections in the Basic Plan Document.

EMPLOYER INFORMATION

NOTE: An amendment is not required to change the responses in items 1-13 below.

1.	Name of adopting employer (Plan Sponsor): Newton Federal Bank

2.	Address: 3175 Highway 278 NW

3.	City: Covington

State: GA

5.	Zip: 30014-2303

6.	Phone number: 770 786-7088

7.	Fax number:

8.	Plan Sponsor EIN: 58-0368410

9.	Plan Sponsor fiscal year end: 9/30

10.

Entity Type

Plan Sponsor entity type:

☒ C Corporation

ii.

☐ S Corporation

iii.

☐ Non Profit Organization

iv.

☐ Partnership

☐ Limited Liability Company

vi.

☐ Limited Liability Partnership

vii.

☐ Sole Proprietorship

viii.

☐ Union

ix.

☐ Government Agency

☐ Other: (must be a legal entity recognized under the Code)

If “Union” (10a.viii) is selected, enter name of the representative of the parties who established or maintain the Plan:

11.

State of organization of Plan Sponsor: GA

12.

Affiliated Service Groups

☐

The Plan Sponsor is a member of an affiliated service group. List all members of the group (other than the Plan Sponsor):

NOTE: Affiliated service group members must adopt the Plan with the approval of the Plan Sponsor to participate.

NOTE: Listing affiliated service group members is for information purposes only and is optional.

13.

Controlled Groups

☒

The Plan Sponsor is a member of a controlled group. List all members of the group (other than the Plan Sponsor): Community First Bancshares, Inc., Community Bancshares, MHC

NOTE: Controlled group members must adopt the Plan with the approval of the Plan Sponsor to participate.

NOTE: Listing controlled group members is for information purposes only and is optional.


		1		Copyright © 2002-2016

SECTION A. GENERAL INFORMATION

PLAN INFORMATION

SECTION A. GENERAL INFORMATION

Plan Name/Effective Date

1.	Plan Number: 002

2.	Plan name:

Newton Federal Bank Employee Stock Ownership Plan

3.	Effective Date

Original effective date of Plan: 10/1/2016

☐ This is a restatement of a previously-adopted plan. Effective date of Plan restatement:

NOTE: The date specified in A.3a for a new plan may not be earlier than the first day of the Plan Year during which the Plan is adopted by the Plan Sponsor.

NOTE: If A.3b is not selected, the Effective Date of the terms of this document shall be the date specified in A.3a. If A.3b is selected, the Effective Date of the restatement shall be the date specified in A.3b. However if the Adoption Agreement states another specific effective date for any Plan provision, when a provision of the Plan states another effective date, such stated specific effective date shall apply as to that provision. The date specified in A.3b for an amended and restated plan may not be earlier than the first day of the Plan Year during which the amended and restated Plan is adopted by the Plan Sponsor.

4.	Plan Year

Plan Year means each 12-consecutive month period ending on September 30 (e.g. December 31)

☐ The Plan has a short Plan Year. The short Plan Year begins and ends

5.	Limitation Year means:

☒ Plan Year

☐ calendar year

☐ tax year of the Plan Sponsor

☐ other:

NOTE: If A.5d is selected, the limitation year must be a consecutive 12-month period. This includes a fiscal year with an annual period varying from 52 to 53 weeks, so long as the fiscal year satisfies the requirements of Code section 441(f).

6.	Frozen Plan

☐

The Plan is frozen as to eligibility and benefits effective

NOTE: If A.6 is selected, no Eligible Employee shall become a Participant, no Participant shall be eligible to further participate in the Plan and no contributions shall accrue as of and after the date specified.

Plan Features

ESOP Contributions

7.	ESOP Accounts

The Non-Elective Contribution Account shall constitute the ESOP Accounts of the Plan for purposes of:

☒ Investing in Employer Stock (Section 1.02.)

☐ Investing in other investments types for diversification (Section 1.02.)

If more than one ESOP Account is specified in A.7 and the Employer Stock to be allocated to ESOP Accounts is insufficient to fully fund the contributions to the ESOP Accounts, specify the ordering rule of the ESOP contributions made in the form of Employer Stock (Section 4A.01(b)):

☐ Pro rata

ii.

☐ Pursuant to the special ordering rule:

NOTE: It may be possible for other Accounts to be specified as ESOP Accounts. Consult with appropriate counsel before specifying any other Accounts.


		2		Copyright © 2002-2016

SECTION A. GENERAL INFORMATION

Compensation

8.	Compensation

Definition of Compensation for purposes of allocations:

☒ W-2. Wages within the meaning of Code section 3401(a) and all other payments of compensation paid to an Employee by the Employer (in the course of the Employer’s trade or business) for which the Employer is required to furnish the Employee a written statement under Code sections 6041(d), 6051(a)(3), and 6052.

ii.

☐ Withholding. Wages paid to an Employee by the Employer (in the course of the Employer’s trade or business) within the meaning of Code section 3401(a) for the purposes of income tax withholding at the source.

iii.

☐ Section 415 Safe Harbor Option. As described in the definition of “Section 415 Safe Harbor Option” in Article 2 of the Basic Plan Document.

If “415 Safe Harbor” is selected, exclude amounts received during the year by an employee pursuant to a nonqualified unfunded deferred compensation plan to the extent includible in gross income:

Compensation is determined over the period specified below ending with or within the Plan Year:

☒ Plan Year

ii.

☐ calendar year

iii.

☐ Plan Sponsor Fiscal Year

iv.

☐ Limitation Year

☐ Other twelve-month period beginning on: (enter month and day)

☒ Include deferrals in the definition of Compensation

☒ Include deemed Code section 125 compensation in the definition of Compensation

☒ Include differential military pay (as defined in Code section 3401(h)(2)) in the definition of Compensation

☐ Include other pay (not otherwise included in A.8a):

NOTE: A.8c must be “Plan Year” if the Plan is excluding compensation earned before entry (A.12 is selected).

NOTE: If “Plan Year” is not selected in A.8c, for new/rehired Employees whose date of hire is less than 12 months before the end of the 12-month period designated, Compensation will be determined over the Plan Year.

NOTE: If deferrals (A.8d) are selected, Compensation shall also include any amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includable in the gross income of the Employee under Code sections 125, 402(e)(3), 402(h), 403(b), 132(f) or 457. If the Plan uses the 415 Safe Harbor definition of Compensation (A.13a.iii is selected) and A.8c.i and/or A.8c.ii is not selected deferrals will not be included in Compensation for Non-Elective Contributions.

NOTE: If deemed 125 Compensation (A.8e) is selected, Compensation shall include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage. An amount will be treated as an amount under Code section 125 only if the Employer does not request or collect information regarding the Participant’s other health coverage as part of the enrollment process for the health plan. This option is meant to be interpreted consistent with Revenue Ruling 2002-27 and any superseding guidance.

NOTE: If A.8f is not selected and differential military pay exists, the payments will be included in Statutory Compensation.

NOTE: If other pay (A.8g) is selected, A.8g should indicate for what purposes and which class of Participants the Compensation is included, must be objectively determinable and may not be specified in a manner that is subject to Employer discretion.

9.	Post Severance Compensation

☒ Include Post Severance Compensation in definition of Compensation

NOTE: A.9 will also apply for purposes of Statutory Compensation.

10.

Post Year End Compensation

☒ Determine Compensation using Post Year End Compensation

NOTE: If selected, amounts earned during the current year and paid during the first few weeks of the next year will be included in current year Compensation.

NOTE: A.10 will also apply for purposes of Statutory Compensation.


		3		Copyright © 2002-2016

SECTION A. GENERAL INFORMATION

Compensation Exclusions

11.

Pay Before Participation

☐

Exclude pay earned before participation in the Plan from definition of Compensation

NOTE: If selected, Compensation shall include only that compensation which is actually paid to the Participant during that part of the Plan Year the Participant is eligible to participate in the Plan. If not selected, Compensation shall include that compensation which is actually paid to the Participant during the period specified in A.8c.

12.

414(s) Safe Harbor Alternative Definition

☒

Exclude certain benefits from definition of Compensation

NOTE: If selected, Compensation shall exclude all of the following items (even if includable in gross income): reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, and welfare benefits (Treas. Reg. section 1.414(s)-1(c)(3)).

13.

Other Pay

Exclude other pay from definition of Compensation for the following Participants:

☐ None

ii.

☐ Highly Compensated Employees only

iii.

☒ All Participants

Describe other pay excluded from definition of Compensation: bonuses, commissions

NOTE: If All Participants (A.13a.iii) is selected, the definition of Compensation will not be a safe harbor definition within the meaning of Treas. Reg. 1.414(s)-1(c).

NOTE: A.13b will only apply if A.13a.ii or iii is selected. A.14b should indicate for what purposes and which class of Participants the Compensation is excluded.

NOTE: The pay specified above (A.13b) must be objectively determinable and may not be specified in a manner that is subject to Employer discretion.

NOTE: See Section 4.01(c) for rules regarding elections for bonuses or other special pay.

14.

Statutory Compensation

Definition of Statutory Compensation:

ii.

☐ Withholding. Wages within the meaning of Code section 3401(a) for the purposes of income tax withholding at the source paid to the Employee by the Employer (in the course of the Employer’s trade or business).

iii.

☐ Section 415 Safe Harbor Option. As described in the definition of “Section 415 Safe Harbor Option” in Article 2 of the Basic Plan Document.

NOTE: See A.9 and A.10 to determine if Statutory Compensation will include Post Severance Compensation and/or be determined using Post Year End Compensation.

NOTE: If A.8f is not selected and differential military pay exists, the payments will be included in Statutory Compensation.

Definitions

15.

Highly Compensated Employee

☐ Use top-paid group election in determining Highly Compensated Employees

☐ Use calendar year beginning with or within the preceding Plan Year in determining Highly Compensated Employees

NOTE: A.15b will only apply if the Plan Year end in A.4a is not December 31.

16.

Disability

Definition of Disability

☒ Under Code section 22(e). The Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The permanence and degree of such impairment shall be supported by medical evidence.

☐ Under the Social Security Act. The determination by the Social Security Administration that the Participant is eligible to receive disability benefits under the Social Security Act.

☐ Inability to engage in comparable occupation. The Participant suffers from a physical or mental impairment that results in his inability to engage in any occupation comparable to that in which the Participant was engaged at the time of his disability. The permanence and degree of such impairment shall be supported by medical evidence.


		4		Copyright © 2002-2016

SECTION A. GENERAL INFORMATION

☐ Pursuant to other Employer Disability Plan. The Participant is eligible to receive benefits under a Employer-sponsored disability plan.

☐ Under uniform rules established by the Plan Administrator. The Participant is mentally or physically disabled under a written nondiscriminatory policy.

☐ Other:

NOTE: If A.16f is selected, provide the definition of Disability. The definition provided must be objectively determinable and may not be specified in a manner that is subject to discretion.

17.

Choice of Law

Name of state or commonwealth for choice of law (Section 14.05): Georgia

SECTION B. ELIGIBILITY

Exclusions

The term “Eligible Employee” shall not include (Check items B.1 - B.4 as appropriate):

1.	☒ Union Employees Any Employee who is included in a unit of Employees covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining, and if the collective bargaining agreement does not provide for participation in this Plan.

2.	☒ Any Leased Employee (as defined in Article 2).

3.	☒ Non-Resident Aliens Any Employee who is a non-resident alien who received no earned income (within the meaning of Code section 911(d)(2)) which constitutes income from services performed within the United States (within the meaning of Code section 861(a)(3)).

4.	Other Employees

☐

Other:

NOTE: If selected, describe other excluded Employees from definition of Eligible Employee and indicate for what purposes, the Employees are excluded. The definition provided must be objectively determinable and may not be specified in a manner that is subject to discretion.

NOTE: See Section 3.04(a) for rules regarding excluded employees.

5.	Opt-Out

☒

An Employee may irrevocably elect not to participate in Plan pursuant to Treas. Reg. section 1.401(k)-1(a)(3)(v).

Eligibility Service Rules

6.	Other Employer Service

☐

Count years of service with employers other than the Employer for eligibility purposes. List other employers and indicate for what purposes the service applies along with any limitations:

7.	Break in Service

☒ Rule of parity. Exclude eligibility service before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance if an Employee does not have any nonforfeitable right to the Account balance derived from Employer contributions.

☐ One-year holdout. If an Employee has a One-Year Break in Service/Period of Severance, exclude eligibility service before such period until the Employee has completed a Year of Eligibility Service after returning to employment with the Employer.

NOTE: B.7b applies for purposes of eligibility to receive Non-Elective Contributions only.

NOTE: B.7c could be used, for example, to require less than 500 hours of service (but not more than 500 hours) for a One-Year Break in Service under B.7a and/or B.7b, or to specify that the break in service rule(s) only apply to certain contributions.

8.	Special Participation Date

☒ Allow immediate participation for all Eligible Employees employed on a specific date. All Eligible Employees employed on 4/1/2017 shall become eligible to participate in the Plan as of 9/30/2016

☐ The Plan provides conditions or limitations on immediate participation:


		5		Copyright © 2002-2016

SECTION B. ELIGIBILITY

NOTE: If B.8b applies (B.8a is selected) and is selected, describe the conditions or limitations and indicate for what purposes the conditions or limitations apply. The conditions/limitations must be objectively determinable and may not be specified in a manner that is subject to discretion.

Eligibility for Non-Elective Contributions

9.	Age Requirement for Non-Elective Contributions

Minimum age requirement for Non-Elective Contributions: 21

NOTE: Age 21 maximum; an age 26 maximum will apply instead if the Plan is maintained exclusively for employees of an educational institution (as defined in Code section 170(b)(1)(A)(ii)) by an employer which is exempt from tax under section 501(a) which provides that each Participant having at least 1 year of service has a right to 100 percent of his accrued benefit under the Plan which is nonforfeitable (within the meaning of section 411) at the time such benefit accrues.

10.

Service Requirement for Non-Elective

Minimum service requirement for Non-Elective Contributions:

☐ None

ii.

☒ Completion of one Year of Eligibility Service - Hours of Service necessary for a Year of Eligibility Service: 1000 (not to exceed 1,000)

iii.

☐ Completion of one Year of Eligibility Service - elapsed time

iv.

☐ Completion of one and 1/2 Year of Eligibility Service - Hours of Service necessary for a Year of Eligibility Service: (not to exceed 1,000). An Eligible Employee shall be deemed to earn 1/2 Year of Eligibility Service on the date that is six months after the end of the Eligibility Computation Period during which he earns his first Year of Eligibility Service; provided, that the individual is an Eligible Employee on the applicable entry date

☐ Completion of one and 1/2 Year of Eligibility Service - elapsed time

vi.

☐ Completion of two Years of Eligibility Service - Hours of Service necessary for one Year of Eligibility Service: (not to exceed 1,000)

vii.

☐ Completion of two Years of Eligibility Service - elapsed time

viii.

☐ Completion of Hours of Service (not to exceed 1,000) within a twelve month period. The service requirement shall be deemed met at the time the specified number of Hours of Service are completed.

ix.

☐ Completion of months of service - elapsed time (not to exceed 24)

☐ Completion of Hours of Service (not to exceed 1,000) in a month period (not to exceed 12 - hours of service failsafe applies)

xi.

☐ Completion of consecutive months of continuous service (not to exceed 12 - hours of service failsafe applies)

xii.

☐ Other: (hours of service failsafe applies if elapsed time is not specified)

Months of service. If the service requirement is not met in the first consecutive period of months, describe the next service requirement:

☐ Rolling. Each successive period shall begin immediately after the preceding period and shall end on or before the first Eligibility Computation Period after which time the Plan will revert to 1,000 Hours of Service in an Eligibility Computation Period.

ii.

☐ Revert to 1,000 Hours of Service in an Eligibility Computation Period.

NOTE: Service taken into account for purposes of B.10 shall be determined under the terms and conditions specified for determining a Year of Eligibility Service.

NOTE: B.10a cannot exceed 1 year, unless the Plan provides a nonforfeitable right to 100% of the Participant’s Non-Elective Contribution Account balance after not more than 2 years of service, in which case up to 2 years is permitted.

NOTE: If B.10a.vii is selected, the service requirements provided must comply with Code section 410(a), be definitely determinable and may not be specified in a manner that is subject to discretion.

NOTE: B.10b only applies if B.10a.x or B.10a.xi is selected.

NOTE: Hours of service failsafe: if B.10a.x - B.10a.xii is selected and the Plan uses the Hours of Service method, the service requirement under B.10e Eligible Employee completes 1,000 Hours of Service; provided, that the individual is an Eligible Employee on the applicable entry date.

11.

Additional Requirements for Non-Elective Contributions

☐

Additional requirements, limitations, conditions or other modifications to B.9-10 (eligibility to receive allocations of Non-Elective Contributions) apply:


		6		Copyright © 2002-2016

SECTION B. ELIGIBILITY

NOTE: See Section 3.04 for rules regarding eligibility requirements.

NOTE: The additional requirements provided must be objectively determinable and may not be specified in a manner that is subject to Employer discretion and are subject to the same limits/requirements set out under options B.9-10.

12.

Entry Dates for Non-Elective Contributions

Frequency of entry dates for Non-Elective Contributions:

☐ immediate

ii.

☐ first day of each calendar month

iii.

☐ first day of each Plan quarter

iv.

☒ first day of the first month and seventh month of the Plan Year

☐ first day of the Plan Year

vi.

☐ other:

An Eligible Employee shall become a Participant eligible to receive an allocation of Non-Elective Contributions on the entry date selected in B.12a that is:

☒ coincident with or next following the date the requirements of B.9 through B.11 are met

ii.

☐ next following the date the requirements of B.9 through B.11 are met

iii.

☐ coincident with or immediately preceding the date the requirements of B.9 through B.11 are met

iv.

☐ immediately preceding the date the requirements of B.9 through B.11 are met

☐ nearest to the date the requirements of B.9 through B.11 are met

NOTE: If immediate entry (B.12a.i) is selected, an Eligible Employee shall become a Participant eligible to receive an allocation of Non-Elective Contributions immediately upon meeting the requirements of B.9 through B.11.

NOTE: B.12b is not applicable if immediate or other (B.12a.i or B.12a.vi) is selected.

NOTE: The Plan must provide that an Eligible Employee who has attained age 21 and who has completed one Year of Eligibility Service (two Years of Eligibility Service may be used for contributions other than Elective Deferrals if the Plan provides a nonforfeitable right to 100% of the Participant’s applicable Account balance after not more than 2 Years of Eligibility Service) shall commence participation in the Plan no later than the earlier of: (1) the first day of the first Plan Year beginning after the date on which such Eligible Employee satisfied such requirements; or (2) the date that is 6 months after the date on which he satisfied such requirements.

Eligibility Service Computation Rules

13.

Eligibility Service Computation Rules

☒ Eligibility Computation Period switches to Plan Year.

Select hours equivalency for eligibility purposes:

☐ None

An Employee shall be credited with the following service with the Employer:

ii.

☒ 10 Hours of Service for each day or partial day

iii.

☐ 45 Hours of Service for each week or partial week

iv.

☐ 95 Hours of Service for each semi-monthly payroll period or partial semi-monthly payroll period

☐ 190 Hours of Service for each month or partial month

The hours equivalency shall apply to:

☐ All Employees

ii.

☒ Only Employees not paid on a per-hour basis

☐ The following modifications shall be made to the requirements specified in B.13a-c:

NOTE: B.13c will not apply if B.13b.i is selected (“None”).

NOTE: The responses to B.13 are used only to the extent that the Plan determines eligibility service by the Hour of Service method and will apply uniformly to B.10, wherever Hours of Service is elected unless otherwise provided in B.13d.

NOTE: If B.13d is selected, the modifications must be objectively determinable and may not be specified in a manner that is subject to Employer discretion. For example, B.13d could be used to restrict the Accounts where Eligibility Computation Periods switch to the Plan Year.


		7		Copyright © 2002-2016

SECTION D. VESTING

SECTION C. CONTRIBUTIONS

Non-Elective - Allocation Service

NOTE: An Eligible Employee who has met the requirements of Section B and who has satisfied the following requirements shall be eligible to receive an allocation of Non-Elective Contributions during the applicable Plan Year.

1.	Allocation Service Requirements for Non-Elective Contributions

☐ In order to share in the allocation of Non-Elective Contributions, a Participant is required to complete the following Hours of Service in the applicable Plan Year

☐ In order to share in the allocation of Non-Elective Contributions, a Participant is required to be employed by the Employer on the last day of Plan Year

☒ In order to share in the allocation of Non-Elective Contributions, a Participant is required to be employed by the Employer on the last day of Plan Year or complete at least 1000 Hours of Service in the applicable Plan Year

NOTE: C.1a and C.1b are inapplicable if C.1c is selected.

NOTE: C.1a and C.1c may not be more than 1,000.

2.	Non-Elective Allocation Service Computation Rules

Select hours equivalency:

☐ None

An Employee shall be credited with the following service with the Employer:

ii.

☒ 10 Hours of Service for each day or partial day

iii.

☐ 45 Hours of Service for each week or partial week

iv.

☐ 95 Hours of Service for each semi-monthly payroll period or partial semi-monthly payroll period

☐ 190 Hours of Service for each month or partial month

The hours equivalency shall apply to:

☐ All Employees

ii.

☒ Only Employees not paid on a per-hour basis

NOTE: C.2 is only applicable if C.1a or C.1c is selected.

3.	Exceptions to Allocation Service Requirements for Non-Elective Contributions

Modify Hour of Service requirement and/or last day requirement for a Participant who terminates employment with the Employer during the Plan Year due to:

☒ death.

ii.

☒ Disability

iii.

☒ attainment of Normal Retirement Date

Any Hour of Service requirement and last day requirement shall be modified as follows:

☒ Waive both the Hour of Service requirement and last day requirement

ii.

☐ Waive the Hour of Service requirement only

iii.

☐ Waive last day requirement only

☐ The following other modifications shall be made to the requirements specified in C.1-3b:

NOTE: C.3 is only applicable if C.1a, C.1b or C.1c is selected.

NOTE: C.3c may only be used to make minor changes to the requirements specified in C.1-3b and must be specified in a manner that is objectively determinable and may not be specified in a manner that is subject to Employer discretion. For example, C.3c could be used to clarify that last day but not Hours of Service is waived for death while Hours of Service and last day are waived for Disability and attainment of Normal Retirement Age.

4.	Coverage Failures for Non-Elective Contributions

Method

to fix Non-Elective Contribution Code section 410(b) ratio percentage coverage failures (Section 4.03(d)):

☐ Do not automatically fix

☒ Add just enough Participants to meet the coverage requirements

☐ Add all non-excludable Participants

Non-Elective - Formula

5.	Non-Elective allocation formula. See Section 4.01(b) of the BPD.

6.	Allocation of Non-Elective Contributions

Non-Elective Contributions are allocated to Participant Accounts at the following time(s):

☒ End of Plan Year


		8		Copyright © 2002-2016

SECTION D. VESTING

ii.

☐ Semi-annually

iii.

☐ Quarterly

iv.

☐ Each calendar month

☐ Each pay period

Minimum and Maximum Non-Elective Allocations

☐ Allocations of Non-Elective Contributions for a Participant shall be subject to a minimum amount:

ii.

☐ Allocations of Non-Elective Contributions for a Participant shall be subject to a maximum amount:

NOTE: Any service requirements specified in C.1 through C.3 shall be applied pro rata to the period selected in this C.6a. Any last day rule specified in C.1 through C.3 shall be applied as of the end of each period selected in this C.6a.

7.	Non-Elective - Disability

☐

Allocate Non-Elective Contributions to Disabled Participants who do not meet the allocation service requirements (Section 4.01(e)). Allocations to Disabled Participants end as of the earliest of: (i) the last day of the Plan Year in which occurs the anniversary of the start of the Participant’s Disability or (ii) such other time specified in Section 4.01(e).

NOTE: C.7 shall not be more than “tenth”.

NOTE: Allocations under C.7 may occur after Termination.

8.	Death or Disability During Qualified Military Service

☐

For benefit accrual purposes, a Participant that dies or becomes Disabled while performing qualified military service will be treated as if he had been employed by the Employer on the day preceding death or Disability and terminated employment on the day of death or Disability (Section 4.04).

9.	Prevailing Wage

☐ In addition to any other Non-Elective Contributions otherwise provided in the Plan, an amount necessary to meet the Employer’s requirements under an applicable prevailing wage statute shall be allocated. The formula for allocating Non-Elective Contributions shall be specified in the Prevailing Wage Addendum to the Adoption Agreement.

The prevailing wage allocation offset:

☐ None

ii.

☐ The prevailing wage allocations will offset any other Non-Elective Contribution allocations that would otherwise be made to a Participant

iii.

☐ Other:

☐ Qualified Non-Elective Contributions (in addition to any non-elective contribution made pursuant to C.5 and Section 4.01) shall be allocated in an amount necessary to meet the Employer’s requirements under an applicable prevailing wage statute. Allocations will be made in an amount necessary to meet the Employer’s requirements under an applicable prevailing wage statute. The formula for allocating Qualified Non-Elective Contributions shall be specified in an Addendum to the Adoption Agreement.

The prevailing wage allocation offset:

☐ None

ii.

☐ The prevailing wage allocations will offset any other Qualified Non-elective Contribution allocations that would otherwise be made to a Participant.

iii.

☐ Other:

☐ Exclude from receiving benefits under an applicable prevailing wage statute under this Plan.

NOTE: Depending upon the offset rule chosen, timing of allocations may need to be considered as contributions under Prevailing Wage are typically required to be made not less often than quarterly.

NOTE: The offset provided under C.9a.iii and/or C.9b.iii must be objectively determinable and may not be specified in a manner that is subject to Employer discretion

NOTE: C.9c must be used to exclude Highly Compensated Employees or another nondiscriminatory class of employees from receiving Prevailing Wage allocations. Note that the Employees excluded will generally still need to be provided the Prevailing Wage benefits in another manner.

10.

QNECs

☐

The following limitations, conditions and/or special rules apply to Qualified Non-Elective Contributions:

(Section 4.01(b))Subject to C.10 if applicable, the Employer’s Qualified Non-elective Contribution shall be allocated in such manner as determined by the Company. The Company shall notify the Plan Administrator and/or the Trustee in writing of the manner in which such contributions shall be allocated.

NOTE: A Qualified Non-elective Contribution of a Nonhighly Compensated Employee will not be taken into account in satisfying the requirements of Section 5.01 to the extent it is a disproportionate contribution within the meaning of Treas. Reg. sections 1.401(k)-2(a)(6)(iv) and/or 1.401(m)-2(a)(6)(v).


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SECTION D. VESTING

11.

Rollovers

Rollover Contributions are permitted (Section 4.02):

☒ No

☐ Yes - All Eligible Employees may make a Rollover Contribution even if not yet a Participant in the Plan

☐ Yes - Only active Participants may make a Rollover Contribution

☐ Yes - may make a Rollover Contribution

NOTE: The Plan Administrator has discretion under Section 4.02 to limit the types of rollover contributions accepted by the Plan and must use that discretion in a consistent and nondiscriminatory manner.

12.

415 Additional Language

☐

Additional language necessary to satisfy Code section 415 because of the required aggregation of multiple plans: .

Vesting Service Rules

1.	Vesting service computation method

☒ Hours of Service. Number of Hours of Service necessary for a Year of Vesting Service: 1000

☐ Elapsed Time

NOTE: Unless D.1.b (Elapsed Time) is selected, the Plan will use the Hours of Service method for determining vesting service. If D.1.b (Elapsed Time) is selected, questions D.2 through D.3 are disregarded.

NOTE: D.1a may not be more than 1,000. If left blank, the Plan will use 1,000 Hours of Service.

2.	Vesting Service Equivalencies

Select equivalency for vesting purposes:

☐ None.

An Employee shall be credited with the following service with the Employer:

ii.

☒ 10 Hours of Service for each day or partial day

iii.

☐ 45 Hours of Service for each week or partial week

iv.

☐ 95 Hours of Service for each semi-monthly payroll period or partial semi-monthly payroll period

☐ 190 Hours of Service for each month or partial month

The hours equivalency selected in D.2a shall apply to:

☐ All Employees

ii.

☒ Only Employees not paid on a per-hour basis

NOTE: D.2b does not apply if D.2a.i is selected.

3.	Vesting Computation Period

☐ Calendar year

☒ Plan Year

☐ The twelve-consecutive month period commencing on the date the Employee first performs an Hour of Service; each subsequent twelve-consecutive month period shall commence on the anniversary of such date

☐ Other:

NOTE: D.3d must be a twelve-consecutive month period.

4.	Other Employer Service

☐

Count years of service with employers other than the Employer for vesting purposes. List other employers and indicate for what purposes (e.g., Non-Elective, etc.) the service applies along with any limitations:

5.	Vesting Exceptions

☒ Death. Provide for full vesting for a Participant who terminates employment with the Employer due to death while an Employee (Section 6.02).

☒ Disability. Provide for full vesting for a Participant who terminates employment with the Employer due to Disability while an Employee (Section 6.02).

☐ Early Retirement. Provide for 100% vesting upon the attainment of Early Retirement Date while an Employee (Section 6.02).

6.	Vesting Exclusions

☒ Exclude Years of Vesting Service earned before age 18

☐ Exclude Years of Vesting Service earned before the Employer maintained this Plan or a predecessor plan

☐ One-year holdout. If an Employee has a One-Year Break in Service/Period of Severance, exclude Years of Vesting Service earned before such period until the Employee has completed a Year of Vesting Service after returning to employment with the Employer.

☐ Rule of parity. If an Employee does not have any nonforfeitable right to the Account balance derived from Employer contributions, exclude Years of Vesting Service earned before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance.


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SECTION D. VESTING

7.	Special Vesting Provisions

☐

Provide for special vesting provisions:

NOTE: Any special provisions must satisfy Code sections 401(a)(4) and 411.

Vesting Schedules

8.	Non-Elective Contribution Account

Vesting Schedule for Non-Elective Contributions:

☐ 100%

☐ 2-6 Year Graded

☐ 1-5 Year Graded

☐ 1-4 Year Graded

☒ 3 Year Cliff

☐ 2 Year Cliff

☐ Other:

Other Non-Elective Schedule - less than 1 year: %

ii.

Other Non-Elective Schedule - 1 year but less than 2 years: %

iii.

Other Non-Elective Schedule - 2 years but less than 3 years: %

iv.

Other Non-Elective Schedule - 3 years but less than 4 years: %

Other Non-Elective Schedule - 4 years but less than 5 years: %

vi.

Other Non-Elective Schedule - 5 years but less than 6 years: %

vii.

Other Non-Elective Schedule - 6 or more years: 100 %.

NOTE: See Section 6.02 for definitions of the applicable vesting schedules .

NOTE: Any vesting schedule described in E.8g must provide vesting at least as rapidly as the “3 Year Cliff” vesting schedule or the “2-6 Year Graded” vesting schedule and D.8f.vii will be deemed to be 100% .

9.	Other Vesting Schedule

☐ The Plan has another vesting schedule:

Describe the Participants to which the other vesting schedule applies:

☐ Retain pre-PPA Non-Elective vesting schedule for pre 2007 contributions:

NOTE: The vesting schedule in D.9 is in addition to the vesting schedules in D.8

NOTE: D.9b must be applied in a consistent and nondiscriminatory manner. For example, D.9b could be used to describe a prior vesting schedule, vesting for a transfer account, or a vesting schedule that applies to Participants covered by a collective bargaining agreement provided retirement benefits were the subject of good faith bargaining.

NOTE: The vesting schedule must satisfy the applicable minimum vesting requirements of Code section 411(a)(2) at every point in time, for all Participants’ years of service.

10.

Forfeitures

Forfeitures will be used in the following manner (Articles 5 and 6):

☒ Any permissible method (restore forfeitures, reduce Employer contributions (or reallocate as Employer contributions) made pursuant to Article 4 or to pay Plan expenses)

☐ Other:

NOTE: D.10b is limited to one or a combination of the options described in D.10a. D.10b may be used to further restrict the uses of forfeiture and must be applied in a consistent and nondiscriminatory manner.


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SECTION E. DISTRIBUTIONS

SECTION E. DISTRIBUTIONS

Normal/Early Retirement

1.	Normal Retirement

Normal Retirement Age means:

☒ Attainment of age 65

ii.

☐ Later of attainment of age and the service specified in E.1b

Select the type and length of service used to measure Normal Retirement Age:

☐ Eligibility. Years of Eligibility Service

ii.

☐ Vesting. Years of Vesting Service

iii.

☐ Participation. anniversary of participation (e.g. third, fourth, etc.)

Normal Retirement Date means:

☒ Normal Retirement Age

ii.

☐ First day of calendar month coincident or next following Normal Retirement Age

iii.

☐ First day of calendar month nearest Normal Retirement Age

iv.

☐ Anniversary date nearest Normal Retirement Age

☐ Other:

NOTE: The age entered in E.1a may not be more than 65.

NOTE: E.1b may not require more than the fifth anniversary of participation as defined in Treas. Reg. section 1.411(a)-7(b)(1) and any superseding guidance.

NOTE: The Normal Retirement Age shall be deemed met no later than the later of age 65 or the fifth anniversary of participation as defined in Treas. Reg. section 1.411(a)-7(b)(1) and any superseding guidance.

2.	Early Retirement

Early Retirement Age means:

☒ None. The Plan does not have an early retirement feature.

ii.

☐ Attainment of age

iii.

☐ Later of attainment of age and the service specified in F.2b

Select the type and length of service used to measure Early Retirement Age:

☐ Eligibility. Years of Eligibility Service

ii.

☐ Vesting. Years of Vesting Service

iii.

☐ Participation. anniversary of participation (e.g. third, fourth, etc.)

Early Retirement Date means:

☐ Early Retirement Age

ii.

☐ First day of calendar month coincident or next following Early Retirement Age

iii.

☐ First day of calendar month nearest Early Retirement Age

iv.

☐ Anniversary date nearest Early Retirement Age

☐ Other:

NOTE: The age entered in E.2a may not be more than 65.

NOTE: E.2b is only applicable if E.2a.iii is selected.

NOTE: See related selections D.5c (vesting upon Early Retirement Date) and F.2b (in-service distributions upon Early Retirement Date).

Time & Form of Payment

NOTE: Unless E.10b is “Yes”, E.3 through E.5 shall only apply to Accounts other than those that comprise Participant’s ESOP Accounts.

3.	Time of Payment (Other than Death)

☐ Immediate. As soon as administratively feasible with a final payment made consisting of any allocations occurring after such Termination of Employment

☒ End of Plan Year. As soon as administratively feasible after all contributions have been allocated relating to the Plan Year in which the Participant’s Account balance becomes distributable

☐ Normal Retirement Date.

☐ Other:

NOTE: Any entry in E.3d must comply with Code section 401(a)(9), Section 7.02(e) and other requirements of Article 7.

4.	Form of Payment (Other than Death)

Medium of distribution from the Plan:

☐ Cash only

☒ Cash or in-kind

☐ Cash or in-kind rollover to an Individual Retirement Account sponsored by the following vendor:


		12		Copyright © 2002-2016

SECTION E. DISTRIBUTIONS

5.	Default Form of Payment (Other than Death)

Unless otherwise elected by the Participant, distributions shall be made in the form of:

☒ Lump sum only

ii.

☐ Qualified Joint and % Survivor Annuity (not less than 50% and not more than 100%)

In addition to the form described in E.5a, distributions from the Plan after Termination for reasons other than death may be made in the following forms (select all that apply):

☒ Lump sum only

ii.

☐ Lump sum payment or substantially equal annual, or more frequent installments over a period not to exceed the joint life expectancy of the Participant and his Beneficiary

iii.

☐ Under a continuous right of withdrawal pursuant to which a Participant may withdraw such amounts at such times as he shall elect

iv.

☐ Other:

NOTE: E.5b.iii and any entry in E.5b.iv must comply with Code section 401(a)(9), Section 7.02(e) and other requirements of Article 7.

6.	Distributions as an Annuity

Permit Participants to make distributions in the form of an annuity

☐ Yes - entire account

ii.

☐ Yes - the following conditions and/or limitations shall apply:

iii.

☒ No

NOTE: If E.6a.i or E.6a.ii is selected, a Participant may elect to have the Plan Administrator apply his vested Account to the extent provided above toward the purchase of an annuity contract, which shall be distributed to the Participant. The terms of such annuity contract shall comply with the provisions of this Plan and any annuity contract shall be nontransferable.

NOTE: If E.6b.i or E.6b.ii is selected, a Beneficiary may elect to have the Plan Administrator apply his vested Account to the extent provided above toward the purchase of an annuity contract, which shall be distributed to the Beneficiary. The terms of such annuity contract shall comply with the provisions of this Plan (including Section 7.05) and any annuity contract shall be nontransferable.

NOTE: E.6a.ii and E.6b.ii must be applied in a consistent and nondiscriminatory manner (for example, limiting annuity distributions to accounts in excess of a certain dollar amount.)

7.	Transfer from Pension Plan

☐

The Plan has received a transfer of assets from a plan subject to the survivor annuity rules of Code sections 411(a)(11) and 417 (e.g., a money purchase or defined benefit plan).

Payments on Death

8.	Beneficiary Designation

To the extent that a Participant’s Account is subject to the survivor annuity rules of Section 7.10, the spouse of a married Participant shall be the beneficiary of % of such Participant’s Account unless the spouse waives his or her rights to such benefit pursuant to Section 7.10 (Section 7.04).

NOTE: E.8 may not be less than 50%.

NOTE: E.8 only applies to Accounts subject to the survivor annuity requirements of Section 7.10.

9.	Payment upon Participant’s Death

Distributions on account of the death of the Participant shall be made in accordance with the following:

☒ Pay entire Account balance by end of fifth year for all Beneficiaries in accordance with Sections 7.02(b)(1)(A) and 7.02(b)(2)(A) only

☐ Pay entire Account balance no later than the 60th day following the end of Plan Year in which the Participant dies

☐ Allow extended payments for all beneficiaries in accordance with Sections 7.02(b)(1)(A), (B) and (C) and 7.02(b)(2)(A) and (B)

☐ Pay entire Account balance by end of fifth year for Beneficiaries in accordance with Sections 7.02(b)(1)(A) and 7.02(b)(2)(A) and allow extended payments in accordance with Sections 7.02(b)(1)(B) and (C) and 7.02(b)(2)(B) only if the Participant’s spouse is the Participant’s sole primary Beneficiary

☐ Other:

NOTE: Any entry in E.9e must comply with Code section 401(a)(9), Section 7.02(b) and other requirements of Article 7.


		13		Copyright © 2002-2016

SECTION E. DISTRIBUTIONS

10.

ESOP Distributions

Distributions from a Participant’s ESOP Accounts may be made over a period longer than the period described in Section 7.02(a)(3):

☐ Yes

ii.

☒ No

Distributions from a Participant’s ESOP Accounts may be made pursuant to the elections in E.3, E.5 and E.9

☒ Yes

ii.

☐ No

Distributions from a Participant’s ESOP Accounts may be made in Employer Stock:

☒ Yes

ii.

☐ No

Apply the distribution rules of Section 7.02(a) and the diversification rules of Section 9.02(b) to Employer Stock acquired by the Plan on or before December 31, 1986:

☐ Yes

ii.

☒ No

Provide for a right of first refusal for distributions payable in Employer Stock (Section 7.02(d)(3)):

☒ Yes

ii.

☐ No

11.

Beneficiaries

Death benefits when there is no designated beneficiary:

☒ Standard according to Section 7.04(c)

ii.

☐ Other:

☐ Revocation. A beneficiary designation to a spouse shall be automatically revoked upon the following circumstances:

Domestic Partners are treated as a spouse under the terms of this Plan for purposes of death benefits to the extent applicable:

☒ No

ii.

☐ Yes - limited to the following terms and conditions:

iii.

☐ Yes

☐ The term “Domestic Partner” as defined in Article 2 is modified in the following manner:

☐ For purposes of determining a Participant’s spouse, the one-year rule in Code section 417(d), Treas. Reg. section 1.401(a)-20 applies.

NOTE: If E.11a.ii (Other) is selected, death benefits when there is no designated beneficiary shall be provided pursuant to F.11a.ii. The death benefits described must be definitely determinable and may not be specified in a manner that is subject to discretion.

NOTE: If E.11c.i is selected, E.11d does not apply.

NOTE: If E.11d is selected, the modifications must be nondiscriminatory and definitely determinable.

NOTE: Domestic Partners shall not be treated as a spouse under the following Sections of the Plan: 7.02(b) (distribution upon death), 7.05 (minimum distributions) and 7.06 (direct rollovers).

NOTE: If revocation is selected (E.11b) you may use this item to indicate automatic revocation upon divorce.

Cash Out

12.

Cash Out

☒ Involuntary cash-out amount for purposes of Section 7.03: $ 5000

Minimum Account balance for Qualified Joint and Survivor Annuity consent requirements (Section 7.10): $

Involuntary cash-out of a terminated Participant’s Account balance when it exceeds the cash-out amount specified in E.10a is deferred under Section 7.03(b) until:

☒ Later of age 62 or Normal Retirement Date - payment made in a lump sum only

ii.

☐ Required Beginning Date - Participant may elect payment in a lump sum or installments

iii.

☐ Required Beginning Date - payment made in a lump sum only

iv.

☐ Other:

☐ Exclude amounts attributable to Rollover Contributions in determining the value of the Participant’s nonforfeitable account balance for purposes of the Plan’s Involuntary Cash out Rules (Sections 7.03 and 7.10)


		14		Copyright © 2002-2016

SECTION E. DISTRIBUTIONS

NOTE: E.12a and E.12b have a $5,000 maximum, $5,000 will be entered unless otherwise specified.

NOTE: If E.12a is not selected and E.10b is zero, E.10d does not apply.

NOTE: E.12b only applies to Accounts subject to the survivor annuity requirements of Section 7.10.

NOTE: If E.12a is less than $1,000, E.12d may not be selected.

NOTE: Any entry in E.12c.iv must comply with Code section 411(a)(11), Section 7.03 and other requirements of Article 7.

Required Beginning Date

13.

Required Beginning Date

Required Beginning Date for a Participant other than a More Than 5% Owner:

☒ Retirement. April 1 of the calendar year following the later of the calendar year in which the Participant: (x) attains age 70-1/2, or (y) retires

☐ Age 70-1/2. April 1 of the calendar year following the calendar year in which the Participant attains age 70-1/2 c. ☐ Election. The option provided in E.13a; provided that a Participant may elect to commence distributions pursuant to either E.13a or E.13b

NOTE: A Participant’s Required Beginning Date is a protected benefit under Code section 411(d)(6).

SECTION F. IN-SERVICE WITHDRAWALS

NOTE: See Section 8.05 for limits on in-service distributions.

NOTE: In-service withdrawal options are meant as enabling rules. If an in-service distribution is permitted under any option specified below, the in-service withdrawal is permissible.

Vesting Status

1.	Vesting Status for In-service Withdrawals

Select one:

☐ In-service withdrawals otherwise permitted under Section G are allowed from Accounts that are partially vested

☐ An Account must be fully vested for a Participant to receive an in-service withdrawal

NOTE: The response to F.1 will be ignored if the Plan does not allow in-service withdrawals.

NOTE: Withdrawals under F.2-10 are only permitted from the portion of a Participant’s Accounts described in F.1 unless otherwise specified in F.11.

Retirement/Hardship/Age

2.	Normal/Early Retirement

☐ Allow in-service distributions after attainment of Normal Retirement Date (Section 7.01(b)) from the following Accounts:

☐ Allow in-service distributions after attainment of Early Retirement Date (Section 7.01(a)) from the following Accounts:

3.	Hardship

Hardship withdrawals are allowed as follows (Section 8.01):

☒ None

☐ All Accounts.

☐ Selected Accounts

☐ Non-Elective Contribution Account

ii.

☐ Rollover Contribution Account

iii.

☐ Transfer Account

iv.

☐ Other:

The criteria used in determining whether a Participant is entitled to receive a Hardship withdrawal:

☐ Safe Harbor criteria set forth in Section 8.01(b)

ii.

☐ Non Safe Harbor criteria set forth in Section 8.01(c)

☐ More flexible Hardship criteria applies to permitted Account(s)


		15		Copyright © 2002-2016

SECTION F. IN-SERVICE WITHDRAWALS

☐ Use criteria specified in Section 8.01(c)

ii.

☐ Use criteria specified in Section 8.01(c) with the following additional criteria and/or modifications:

☐ Expand the Hardship criteria to include the Beneficiary of the Participant

☐ Other limitations on Hardship withdrawals:

NOTE: If F.3a is selected, F.3b through F.3g do not apply.

NOTE: F.3e only applies if Hardship withdrawals are permitted from Accounts not subject to Treas. Reg. 1.401(k)-1(d) (Accounts specified in F.3c.ii-iv to the extent applicable and selected above). If F.3e is selected, the requirements of Section 8.01(b)(2) shall not apply, the amount of the hardship distribution may not exceed the Participant’s vested interest under the applicable Account and the requirements of Revenue Ruling 71-224 and any superseding guidance shall apply.

NOTE: F.3f only applies if the Plan provides for in-service withdrawals on account of Hardship and uses the safe harbor criteria for Hardship determinations. If F.3f is selected, Hardship distributions may be made for a primary Beneficiary for expenses described in Treas. Reg. sections 1.401(k)-1(d)(3)(iii)(B)(1), (3), or (5) (relating to medical, tuition, and funeral expenses, respectively). A “primary Beneficiary” is an individual who is named as a Beneficiary under the Plan and has an unconditional right to all or a portion of the Participant’s Account Balance upon the death of the Participant.

4.	Specified Age and Service

In-service withdrawals are allowed on attainment of age and service (Section 8.02):

☒ None

ii.

☐ All Accounts

iii.

☐ Selected Accounts

If Selected Accounts is selected, specified age and service withdrawals may be made from the following Accounts:

☐ Non-Elective Contribution Account

ii.

☐ Rollover Contribution Account

iii.

☐ Transfer Account

iv.

☐ Other:

NOTE: F.4b only applies if F.4a.iii is selected.

5.	Specified Age

In-service withdrawals are allowed on attainment of age (Section 8.02):

☒ None

ii.

☐ All Accounts

iii.

☐ Selected Accounts

If Selected Accounts is selected, specified age withdrawals may be made from the following Accounts:

☐ Non-Elective Contribution Account

ii.

☐ Rollover Contribution Account

iii.

☐ Transfer Account

iv.

☐ Other:

NOTE: F.5b only applies if F.5a.iii is selected.

Other Withdrawals

6.	Withdrawals After Period of Participation

☐ Non-Elective Contributions (Section 8.03(a)). In-service withdrawals are allowed from a Participant’s Non-Elective Contribution Account after years of Participation

☐ ESOP Contributions. In-service withdrawals are allowed from a Participant’s ESOP Account after years of Participation

NOTE: F.6a-b may not be less than five.

7.	Withdrawals After Period of Accumulation

☐ Non-Elective Contributions (Section 8.03(a)). In-service withdrawals are allowed from a Participant’s Non-Elective Contribution Account on funds held for years.

☐ ESOP Contributions (Section 8.03(a)). In-service withdrawals are allowed from a Participant’s ESOP Account on funds held for years.

NOTE: F.7a-b may not be less than two.


		16		Copyright © 2002-2016

SECTION F. IN-SERVICE WITHDRAWALS

8.	At Any Time (Section 8.03(b)) ☐ In-service withdrawals are allowed from the Rollover Contribution Account

9.	Transfer Account

Permit a distribution to be made to a Participant who has attained age 62 and who has not separated from employment from the transfer Account

☐ Yes - under any distribution option offered to a Terminated Participant

☐ Yes - limited to the following terms and conditions:

NOTE: F.9 only applies if E.7 is selected (Plan has received a transfer of assets from a plan subject to the survivor annuity rules of Code sections 401(a)(11) and 417).

10.

Disability

☐

Allow distributions upon Disability.

NOTE: A severe disability equivalent to A.20a is as follows: the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The permanence and degree of such impairment shall be supported by medical evidence.

Conditions/Limitations

11.

Other Conditions/Limitations

☐

The following limitations, conditions and/or special rules apply to in-service withdrawals:

NOTE: Unless otherwise specified, the limitations will apply to all in-service withdrawals (F.1 through F.10). F.11 must be applied in a consistent and nondiscriminatory manner. For example, F.11 could be used to specify the number of withdrawals permitted in a specified time period. See Section 8.05.

Loans

12.

Loans

Loans are permitted:

☐ Yes ☒ No

SECTION G. PLAN OPERATIONS AND TOP-HEAVY

Plan Operations

1.	Permitted Investments

☒ Plan may invest up to 100% of the Trust Fund in “qualifying employer securities” and “qualifying employer real property” (Section 9.04)

☐ Plan may invest assets other than ESOP Accounts in life insurance (Section 9.11)

NOTE: If G.1a is selected, the selection shall not apply to Accounts prohibited from investing more than 10% of assets in “qualifying employer securities” and “qualifying employer real property” under section 407(b)(2) of ERISA.

2.	☐ Plan may invest in qualifying longevity annuity contracts (“QLACs”)

The date the QLAC option will first be available under the Plan

3.	Indicate the extent to which terminated Participants shall be subject to the Reshuffling provisions of Section 7.02(d)(4):

☐ Redemption. Employer Stock held in a terminated Participant’s ESOP Account shall be redeemed for assets other than Employer Stock

☐ Transfer. Employer Stock held in a terminated Participant’s ESOP Account shall be transferred to other Participant Accounts where it will be redeemed for assets other than Employer Stock held in that Account

☐ Other.

☒ None.

Reshuffling provisions. Indicate: (i) when such redemption/transfer shall occur, (ii) the manner in which Employer stock will be valued, and (iii) the method used to determine how many shares of Employer Stock shall be redeemed/transferred and to which Participant Accounts the Employer Stock shall be transferred:

5.	Indicate the extent to which Participants’ Accounts will be subject to Rebalancing:

☒ The Plan will not be subject to Rebalancing

☐ ESOP Accounts will be Rebalanced to: %


		17		Copyright © 2002-2016

SECTION G. PLAN OPERATIONS AND TOP-HEAVY

6.	Indicate which Participants will be affected by Rebalancing:

☐ All Participants

☐ Only Active Participants

☐ Only Terminated Participants

7.	Participant Self-Direction

Specify the extent to which the Plan permits Participant self-direction and indicate the Plan’s intent to comply with ERISA section 404(c) (Section 9.02):

☐ All Accounts other than ESOP Accounts

ii.

☐ Some Accounts

iii.

☒ None

If “Some Accounts” is selected, a Participant may self-direct the following Accounts Accounts if they are not ESOP Account:

☐ Non-Elective Contribution Account

ii.

☐ Rollover Contribution Account

iii.

☐ Transfer Account

iv.

☐ Other:

☐ Participants may also establish individual brokerage accounts.

Participants may exercise voting rights with respect to the assets held in Accounts other than ESOP Accounts (Section 9.06(a)):

☐ Employer stock only

ii .

☐ All investments

iii.

☐ Selected investments:

NOTE: If G.7a.iii (None) is selected, G.7b through G.7d do not apply.

NOTE: G.7b only applies if G.2a.ii is selected.

NOTE: If G.1a is selected (employer securities) and G.7a.i or G.7a.ii (404(c) applies) is selected, then voting rights must be selected in G.7d.i, G.7d.ii or G.2d.iii.

8.	Valuation Date for Accounts other than ESOP Accounts

☒ Last day of Plan Year

☐ Last day of each Plan quarter

☐ Last day of each month

☐ Each business day

☐ Other: (Must be at least annually).

NOTE: If G.7a.i or G.7a.iii (404(c) applies) is selected then Valuation Date must be at least quarterly.

9.	Valuation Date for ESOP Accounts (Article 2 Definitions and Section 9.10)

☒ Last day of Plan Year

☐ Other:

10.

Diversification

Enter the method used to determine “years of participation in the Plan” for the Diversification Election Period:

☐ Anniversaries of participation

ii .

☐ Plan Years entitled to receive an allocation

iii.

☒ Plan Years with minimum Hours of Service: 1000

iv.

☐ Other:

Enter the amount of Employer Stock the Qualified Participant will be permitted to diversify during the Qualified Election Period:

☒ the minimum amount permitted under section 9.02(b)

ii .

☐ amount for each Diversification Election Period

iii.

☐ Other Amount (please describe the amount and the affected Diversification Election Periods)

11.

Plan Administration

Designation of Plan Administrator (Section 12.01)

☒ Plan Sponsor

ii .

☐ Committee appointed by Plan Sponsor

iii.

☐ Other:

Establishment of procedures for the Plan Administrator and the Investment Fiduciary (Sections 12.01(c) and 12.02(c))

☒ Plan Administrator and Investment Fiduciary adopt own procedures

ii.

☐ Governing body of the Plan Sponsor sets procedures for Plan Administrator and Investment Fiduciary


		18		Copyright © 2002-2016

SECTION G. PLAN OPERATIONS AND TOP-HEAVY

Type of indemnification for the Plan Administrator and Investment Fiduciary

☐ None - the Employer will not indemnify the Plan Administrator or the Investment Fiduciary

ii.

☒ Standard according to Section 12.06

i ii.

☐ Provided pursuant to an outside agreement

☐ The following modifications shall be made to the duties of the applicable parties:

NOTE: G.11d may be used to reallocate duties between the Plan Sponsor and the Plan Administrator. It may also be used to designate additional parties to perform specific Plan Administrator and/or Plan Sponsor duties.

12.

Trust

Use the Trust agreement contained in the Basic Plan Document

☐ Yes

ii.

☒ No

iii .

☐ Yes, but only for the following assets/Accounts: ; other assets/Accounts will use an outside Trust or be held by an insurance company.

iv.

☐ Not Applicable - assets are held solely by an insurance company

Trustee Type

☒ Corporate. Trustee name and address: ABC Bank, 123 Main Street

i i.

☐ Individual. Trustee name(s):

Type of Trustee Indemnification:

☐ Standard according to Section 10.07(b)

ii .

☐ None

☐ The Trustees may designate one or more Trustees to act on behalf of all Trustees (Section 10.05(b)(2)).

The Trustee is also the Investment Fiduciary (Section 10.06):

☒ Yes

ii.

☐ No. The Investment Fiduciary is:

The special trustee for purposes of determining and collecting contributions under the Plan is:

☒ the chief executive officer of the Plan Sponsor

i i.

☐ the Trustee

iii.

☐ other:

NOTE: Section 10.09 shall apply to the extent assets are held in an outside trust agreement.

NOTE: If the Trust agreement contained in the Basic Plan Document applies, then Trustee signature(s) is/are not necessary on amendments if the amendment does not affect Trustee duties.

NOTE: If G.12a.iv is selected, G.12b - e shall not apply.

NOTE: If a separate trust agreement is to be used (G.12a.ii or G.12a.iii is selected), the items in G.1-5 shall apply only to the extent that they are not superseded by the terms of the separate trust agreement. Only the trust document(s) previously approved by the IRS may be utilized with this Plan and still rely on the Plan’s advisory letter.

NOTE: If G.12a.i or G.12a.iii (use trust in Basic Plan Document) is selected and G.12c.ii (no indemnification) is selected, indemnification for the Trustee may be pursuant to an agreement that is not a part of the Plan.

NOTE: If G.12c.ii (no indemnification) Section 10.07(b) shall not apply and indemnification for the Trustee may be pursuant to an agreement that is not a part of the Plan.

NOTE: G.12f must be an individual or a corporation with trust powers and is intended to comply with FAB 2008-01.

13.

Trust Administrative Modifications

☐ The following modifications are made to the permitted investments under the Trust Fund:

☐ The following modifications are made to the duties of the Trustee, Investment Fiduciary or Investment Manager:

☐ The following modifications are made to other administrative provisions of the Trust Fund:

NOTE: G.13 only applies if G.12a.i or G.12a.iii is selected (the Trust Agreement contained in the Basic Plan Document applies).

NOTE: The addition of language in G.13 cannot conflict with other provisions of the Plan and cannot cause the Plan to fail to qualify under Code section 401(a). Under no circumstances can a modification consist of: 1) removal or change to the prudent man rule, 2) addition of arbitration for Participant disputes, 3) addition of securities lending program, and 4) modification of the duties of the special trustee in Section 10.02(b) to determine and collect contributions under the Plan.


		19		Copyright © 2002-2016

SECTION G. PLAN OPERATIONS AND TOP-HEAVY

Statute of Limitations

14.

Statute of Limitations

☐

The Plan has a contractual statute of limitations as follows:

NOTE: The statute of limitations must not be unreasonably short (See Heimeshoff v. Hartford Life Ins. Co., U.S., No. 12-729 (2013)) .

Top-Heavy

15.

Top-Heavy Allocations

Top-Heavy allocations are made to

☒ This Plan. Participants who share in Top-Heavy minimum allocations:

☒ Non-Key only. Any Participant who is employed by the Employer on the last day of the Plan Year and is not a Key Employee

ii.

☐ All Participants. Any Participant who is employed by the Employer on the last day of the Plan Year

iii.

☒ Participants covered by a collective bargaining agreement will share in Top-Heavy minimum allocations provided retirement benefits were the subject of good faith bargaining.

☐ Pursuant to the terms of

☐ Other (include information about which Plan allocations are made to and which Participants in this Plan will share in Top-Heavy minimums):

Other plan maintained by the Employer

☐ N/A - no other plan

ii.

☒ Defined Contribution

iii.

☐ Defined Benefit

NOTE: Choose one option, G.15a, b or c.

NOTE: G.15a.iii may be selected in addition to G.15a.i or G.15a.ii. If G.15a.iii applies and is not selected, Employees covered under a collective bargaining agreement that bargains in good faith for retirement benefits shall not be eligible to receive top-heavy minimum allocations.

NOTE: If G.15b is selected, include the name of the other plan.

NOTE: G.15d is not applicable if G.15c is selected.

16.

Top-Heavy Vesting

Top-Heavy vesting schedule:

☐ 100%

☐ 2-6 Year Graded

☒ 3 Year Cliff

☐ Other:

Other Top-Heavy Schedule - less than 1 year: %

ii.

Other Top-Heavy Schedule - 1 year but less than 2 years: %

iii.

Other Top-Heavy Schedule - 2 years but less than 3 years: %

iv.

Other Top-Heavy Schedule - 3 years but less than 4 years: %

Other Top-Heavy Schedule - 4 years but less than 5 years: %

vi.

Other Top-Heavy Schedule - 5 years but less than 6 years: %

vii.

Other Top-Heavy Schedule - 6 or more years: 100 %.

NOTE: See Section 11.03 for definitions of the applicable vesting schedules.

NOTE: If G.16 is “Other”, then any vesting schedule described in G.11d must provide vesting at least as rapidly as the “3 Year Cliff” vesting schedule or the “2-6 Year Graded” vesting schedule.

17.

Present Value Assumptions

Enter the interest rate to be used for determining Present Value to compute the Top-Heavy ratio: %

Enter the mortality table to be used for determining Present Value to compute the Top-Heavy ratio:

18.

416 Additional Language

☐

Additional language necessary to satisfy Code section 416 because of the required aggregation of multiple plans: .


		20		Copyright © 2002-2016

SECTION I. MISCELLANEOUS

SECTION I. MISCELLANEOUS

Failure to properly fill out the Adoption Agreement may result in disqualification of the Plan.

The Plan shall consist of this Adoption Agreement #001, its related Basic Plan Document #CE2-ESOP and any related Appendix and Addendum specifically created in response to a question within the Adoption Agreement.


		21		Copyright © 2002-2016

SECTION J. EXECUTION PAGE

SECTION J. EXECUTION PAGE

The undersigned agree to be bound by the terms of this Adoption Agreement and Basic Plan Document and acknowledge receipt of same. The parties have caused this Plan to be executed this day of , 2016.


NEWTON FEDERAL BANK:

Signature:

Print Name:

Title/Position:


		22		Copyright © 2002-2016

BASIC PLAN DOCUMENT #CE2-ESOP

[INTENDED FOR CYCLE E2]

TABLE OF CONTENTS


ARTICLE 1. INTRODUCTION		1
Section 1.01	Plan and Trust	1
Section 1.02	Employee Stock Ownership Plan	1
Section 1.03	Application of Plan and Trust	1

ARTICLE 2. DEFINITIONS		2

ARTICLE 3. PARTICIPATION		16
Section 3.01	Non-Elective Contributions	16
Section 3.02	Transfers	16
Section 3.03	Termination and Rehires	16
Section 3.04	Limitations on Exclusions	16
Section 3.05	Procedures for Admission	17
Section 3.06	Participants Receiving Differential Military Pay	17

ARTICLE 4. CONTRIBUTIONS		18
Section 4.01	Non-Elective Contributions	18
Section 4.02	Rollover Contributions	19
Section 4.03	Transfers	20
Section 4.04	Military Service	20
Section 4.05	Multiple Employer Plan	20

ARTICLE 4A SPECIAL ESOP PROVISIONS		21
Section 4A.01	ESOP Contributions	21
Section 4A.02	Exempt Loan	21
Section 4A.03	Release of Employer Stock	22
Section 4A.04	Prohibited Allocation	22
Section 4A.05	Non-ESOP Portion of Plan	24

ARTICLE 5. LIMITATIONS ON CONTRIBUTIONS		25
Section 5.01	Maximum Amount of Annual Additions	25

ARTICLE 6. VESTING		27
Section 6.01	Participant Contributions	27
Section 6.02	Non-Elective Contributions	27
Section 6.03	Forfeitures	28

ARTICLE 7. DISTRIBUTIONS		30
Section 7.01	Commencement of Distributions	30
Section 7.02	Timing and Form of Distributions	30
Section 7.03	Cash-Out of Small Balances	34
Section 7.04	Beneficiary	34
Section 7.05	Minimum Distribution Requirements	35
Section 7.06	Direct Rollovers	40
Section 7.07	Minor or Legally Incompetent Payee	41
Section 7.08	Missing Payee	42
Section 7.09	Distributions Upon Termination of Plan	42
Section 7.10	Joint and Survivor Annuities	42

ARTICLE 8. IN-SERVICE DISTRIBUTIONS AND LOANS		44
Section 8.01	Hardship	44
Section 8.02	Specified Age	46
Section 8.03	Other Withdrawals	46


		i		Copyright © 2002-2016


Section 8.04	Transfer Account	46
Section 8.05	Rules Regarding In-Service Distributions	46
Section 8.06	Loans	47

ARTICLE 9. INVESTMENT AND VALUATION OF TRUST FUND		49
Section 9.01	Investment of Assets	49
Section 9.02	Participant Self-Direction	49
Section 9.03	Individual Accounts	50
Section 9.04	Qualifying Employer Investments	50
Section 9.05	Allocation of Earnings and Losses	50
Section 9.06	Voting Rights	51
Section 9.07	Liquidity	52
Section 9.08	Restrictions on Employer Stock	52
Section 9.09	Treatment of Dividends	52
Section 9.10	Use of Appraiser	53
Section 9.11	Life Insurance	53
Section 9.12	Nonterminable Protections and Rights	54
Section 9.13	Qualifying Longevity Annuity Contract (QLAC)	54

ARTICLE 10. TRUST FUND		55
Section 10.01	Trust Fund	55
Section 10.02	Duties of the Trustee	56
Section 10.03	General Investment Powers	57
Section 10.04	Other Investment Powers	58
Section 10.05	Instructions	59
Section 10.06	Investment of the Fund	60
Section 10.07	Compensation and Indemnification	61
Section 10.08	Resignation and Removal	61
Section 10.09	Other Trust Agreement	62

ARTICLE 11. SPECIAL TOP-HEAVY RULES		63
Section 11.01	Top-Heavy Status	63
Section 11.02	Minimum Allocations	63
Section 11.03	Minimum Vesting	64

ARTICLE 12. PLAN ADMINISTRATION		66
Section 12.01	Plan Administrator	66
Section 12.02	Investment Fiduciary	67
Section 12.03	Compensation of Plan Administrator and Investment Fiduciary	68
Section 12.04	Plan Expenses	68
Section 12.05	Allocation of Fiduciary Responsibility	68
Section 12.06	Indemnification	68
Section 12.07	Claims Procedure	68
Section 12.08	Written Communication	69

ARTICLE 13. AMENDMENT, MERGER AND TERMINATION		70
Section 13.01	Amendment	70
Section 13.02	Merger and Transfer	71
Section 13.03	Termination	71

ARTICLE 14. MISCELLANEOUS		72
Section 14.01	Nonalienation of Benefits	72
Section 14.02	Rights of Alternate Payees	72
Section 14.03	No Right to Employment	73
Section 14.04	No Right to Trust Assets	73
Section 14.05	Governing Law	73


		ii		Copyright © 2002-2016


		iii		Copyright © 2002-2016

ARTICLE 1 INTRODUCTION

ARTICLE 1 INTRODUCTION

Section 1.01

PLAN AND TRUST

This document (“Basic Plan Document”) and its related Adoption Agreement are intended to qualify as a tax-exempt plan and trust under Code sections 401(a) and 501(a), respectively.

Section 1.02

EMPLOYEE STOCK OWNERSHIP PLAN

The Plan and the Accounts specified in the Adoption Agreement as the Employee Stock Ownership Plan (ESOP) Accounts and the applicable portion of the Trust are also intended to qualify as a tax-exempt ESOP and trust under Code section 4975(e)(7). The Accounts specified in the Adoption Agreement as the ESOP Accounts of the Plan shall be invested primarily in Employer Stock.

Section 1.03

APPLICATION OF PLAN AND TRUST

Except as otherwise specifically provided herein, the provisions of this Plan shall apply to those individuals who are Eligible Employees of the Company on or after the Effective Date. Except as otherwise specifically provided for herein, the rights and benefits, if any, of former Eligible Employees of the Company whose employment terminated prior to the Effective Date, shall be determined under the provisions of the Plan, as in effect from time to time prior to that date.


		1		Copyright © 2002-2016

ARTICLE 2 DEFINITIONS

ARTICLE 2 DEFINITIONS

“ Account ” means the balance of a Participant’s interest in the Trust Fund as of the applicable date as adjusted pursuant to Article 9. “Account” or “Accounts” shall include to the extent provided in the Adoption Agreement, Non-Elective Contribution Account, Rollover Contribution Account, Transfer Account and such other account(s) or subaccount(s) as the Plan Administrator, in its discretion, deems appropriate.

“ Adoption Agreement ” means the document executed in conjunction with this Basic Plan Document that contains the optional features selected by the Plan Sponsor.

“ Alternate Payee ” means the person entitled to receive payment of benefits under the Plan pursuant to a Qualified Domestic Relations Order.

“ Annual Addition ” means the sum of the following amounts credited to a Participant’s Account for the Limitation Year:

(a) Employer contributions allocated to a Participant’s Account Non-Elective Contributions. Employer contributions shall also include;

(b) after-tax contributions;

(d) amounts allocated, after March 31, 1984, to an individual medical account, as defined in Code section 415(l)(2), which is part of a pension or annuity plan maintained by the Employer;

(e) amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits, allocated to the separate account of a key employee, as defined in Code section 419A(d)(3), under a welfare benefit fund, as defined in Code section 419(e), maintained by the Employer; and

(f) allocations under a simplified employee pension plan.

Notwithstanding the foregoing, an Annual Addition shall not include a restorative payment within the meaning of IRS Revenue Ruling 2002-45 and any superseding guidance.

“ Annuity Starting Date ” means the first day of the first period for which an amount is paid as an annuity or any other form.

“ Applicable Plan ” means a plan that is established and maintained by: (i) an employer whose charter or bylaws restrict the ownership of substantially all outstanding employer securities to employees or to a trust described in Code section 401(a), (ii) an S Corporation, or (iii) a bank (as defined in Code section 581) which is prohibited by law from redeeming or purchasing its own securities.

“ Beneficiary ” means the person(s) entitled to receive benefits, under Section 7.04 of the Plan, upon the Participant’s death.

“ Board ” means the governing body of the Plan Sponsor. If the Plan Sponsor is a sole proprietorship, the Board means the sole proprietor.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Committee ” means the Committee that may be appointed by the Plan Sponsor pursuant to Section 12.01 to serve as Plan Administrator.


		2		Copyright © 2002-2016

ARTICLE 2 DEFINITIONS

“ Company ” means the Plan Sponsor and any other entity that has adopted the Plan with the approval of the Plan Sponsor.

“ Compensation ” shall have the meaning set forth in the Adoption Agreement. To the extent provided in the Adoption Agreement, amounts not includible in gross income under Code section 125 shall include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage (“deemed Code section 125 compensation”). An amount will be treated as an amount under Code section 125 only if the Company does not request or collect information regarding the Participant’s other health coverage as part of the enrollment process for the health plan.

Compensation shall include other compensation paid by the later of: (a) 2-1/2 months after an Employee’s severance from employment with the Company or (b) the end of the Limitation Year that includes the date of the Employee’s severance from employment with the Company if: (1) the payment is regular compensation for services during the Participant’s regular working hours, or compensation for services outside the Participant’s regular working hours (e.g., overtime or shift differential), commissions, bonuses, or other similar payments; and (2) the payment would have been paid to the Participant prior to a severance from employment if the Participant had continued in employment with the Company.

The exclusions from Compensation for payments after severance from employment do not apply to payments to a Participant who does not currently perform services for the Company by reason of Qualified Military Service to the extent those payments do not exceed the amounts the Participant would have received if the individual had continued to perform services for the Company rather than entering Qualified Military Service. To the extent selected in the Adoption Agreement and pursuant to Code section 414(u)(12), IRS Notice 2010-15 and any superseding guidance, differential wage payments shall be treated as Compensation.

To the extent provided in Section 4.01(e), Compensation shall include compensation paid to a Participant who is permanently and totally disabled.

Compensation must be determined without regard to any rules under Code section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401(a)(2)). For any Self-Employed Individual covered under the Plan, Compensation will mean Earned Income.

For any Plan Year, the annual compensation of each Participant taken into account in determining allocations for any Plan Year beginning after December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Code section 401(a)(17)(B). Annual compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.

If a determination period consists of fewer than 12 months, the annual Compensation limit is an amount equal to the otherwise applicable annual Compensation limit multiplied by a fraction, the numerator of which is the number of months in the short determination period, and the denominator of which is 12.

“ Deemed-Owned Shares ” means, with respect to any person: (i) the stock in the S Corporation constituting employer securities of an employee stock ownership plan which is allocated to such person under the Plan, and; (ii) such person’s share of the stock in such corporation which is held by the Plan but which is not allocated under the Plan to Participants or Beneficiaries. For purposes of clause (ii) of the preceding sentence, a person’s share of unallocated S corporation stock held by the Plan is the amount of the unallocated stock which would be allocated to such person if the unallocated stock were allocated to all Participants in the same proportions as the most recent stock allocation under the Plan.

“ Determination Date ” means the last day of the preceding Plan Year. Notwithstanding the foregoing, the Determination Date for the first Plan Year shall be the last day of such year.


		3		Copyright © 2002-2016

ARTICLE 2 DEFINITIONS

“ Disabled ” or “ Disability ” shall have the meaning specified in the Adoption Agreement. The determination of Disability shall be made by the Plan Administrator.

“ Disqualified Person ” means a person defined in Code section 4975(e)(2), including but not limited to (i) a fiduciary of the Plan; (ii) a person providing services to the Plan; (iii) the Employer; (iv) an owner of 50% or more of the combined voting power or value of all classes of stock of the Plan Sponsor entitled to vote or the total value of shares of all classes of stock of the Plan Sponsor and certain members of such owner’s family; or (v) an officer, director, 10% or greater shareholder or highly compensated employee (who earns 10% or more of the yearly wages) of the Employer.

“ Diversification Election Period ” means the six Plan Years beginning with the Plan Year during which a Participant becomes a Qualified Participant.

“ Domestic Partner ” means, unless otherwise specified in the Adoption Agreement, a partner of the Participant if the Participant is in a civil union or similar relationship recognized under the laws of any state. A Participant may only have one Domestic Partner. A Participant may not have a Domestic Partner if the Participant is legally married to a person. If Domestic Partners are treated as a spouse under this Plan, Section 7.10 applies and a Domestic Partner instead of a spouse is the Beneficiary of the survivor annuity, the term “Qualified Joint and Survivor Annuity” shall be modified to “Joint and Survivor Annuity”, “qualified preretirement survivor annuity” shall be modified to “preretirement survivor annuity”, and Qualified Optional Survivor Annuity” shall be modified to “Optional Survivor Annuity”.

“ Earned Income ” means the net earnings from self-employment in the trade or business with respect to which the Plan is established, for which personal services of the individual are a material income-producing factor. Net earnings will be determined without regard to items not included in gross income and the deductions allocable to such items. Net earnings are reduced by contributions by the Employer to a qualified plan to the extent deductible under Code section 404. Net earnings shall be determined with regard to the deduction allowed to the taxpayer by Code section 164(f) for taxable years beginning after December 31, 1989.

“ Effective Date ” shall have the meaning set forth in Section A.3 of the Adoption Agreement except as otherwise specified in the Plan or Adoption Agreement.

“ Eligibility Computation Period ” means a 12-consecutive month period beginning with an Employee’s Employment Commencement Date and each anniversary thereof. Notwithstanding the foregoing, if the Adoption Agreement provides that the Eligibility Computation Period switches to the Plan Year his succeeding Eligibility Computation Period for such purpose will switch to the Plan Year, beginning with the Plan Year that includes the first anniversary of his Employment Commencement Date. If the Eligibility Computation Period switches to the Plan Year, an Employee who is credited with a Year of Eligibility Service in both the initial Eligibility Computation Period and the first Plan Year which commences prior to the first anniversary of the Employee’s initial Eligibility Computation Period will be credited with two Years of Eligibility Service.

“ Eligible Employee ” means any Employee employed by the Company, subject to the modifications and exclusions described in the Adoption Agreement.

If an individual is subsequently reclassified as, or determined to be, an Employee by a court, the Internal Revenue Service or any other governmental agency or authority, or if the Company is required to reclassify such individual as an Employee as a result of such reclassification or determination (including any reclassification by the Company in settlement of any claim or action relating to such individual’s employment status), such individual shall not become an Eligible Employee by reason of such reclassification or determination.

An individual who becomes employed by the Employer in a transaction between the Employer and another entity that is a stock or asset acquisition, merger, or other similar transaction involving a change in the employer of the employees of the trade or business shall not become eligible to participate in the Plan until the Plan Sponsor specifically authorizes such participation.

“ Employee ” means any individual who is employed by the Employer, including a Self-Employed Individual. The term “Employee” includes any Leased Employee of the Employer. No Leased Employee may become a Participant


		4		Copyright © 2002-2016

ARTICLE 2 DEFINITIONS

hereunder unless he becomes an Eligible Employee. The term “Employee” shall not include a person who is classified by the Employer as an independent contractor or a person (other than a Self-Employed Individual) who is not treated as an employee for purposes of withholding federal employment taxes.

“ Employer ” means the Company or any other employer that is a member of the same controlled group of corporations as the Employer within the meaning of Code section 1563(a) (as modified by subparagraphs (B) and (C) of Code section 409(l)(4) and as determined without regard to sections 1563(a)(4) and 1563(e)(C).

“ Employer Stock ” means the securities issued by the Employer that qualifies as employer securities within the meaning of Code section 409(l).

(1) Common stock of the employer which is (publically traded) readily tradable on an established securities market; or

(2) In a privately held company, it is the class of common stock with the greatest voting power and greatest dividend rights.

“ Employer Stock Fund ” means the Investment Fund which is invested primarily in Employer Stock.

“ Employment Commencement Date ” means the first date on which the Eligible Employee performs an Hour of Service.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, all amendments thereto and all federal regulations promulgated pursuant thereto.

“ ESOP Accounts ” means those Accounts specified in Section 1.02 and the Adoption Agreement as the ESOP portion of the Plan. The ESOP Accounts shall be invested in the Employer Stock Fund.

“ Exempt Loan ” means an extension of credit to the Plan pursuant to Article 4A.02.

“ Highly Compensated Employee ” means, effective for Plan Years beginning after December 31, 1996, any Employee who during the Plan Year performs services for the Employer and who:

(a) was a More Than 5% Owner at any time during the Plan Year or the preceding Plan Year; or

(b) during the preceding Plan Year (the Adoption Agreement may provide that the foregoing determination may be made with respect to the calendar year beginning with or within the preceding Plan Year) received Statutory Compensation in excess of the Code section 414(q)(1) amount ($80,000 as adjusted) and unless otherwise provided in the Adoption Agreement was a member of the top paid group of Employees within the meaning of Code section 414(q)(3).

The determination of who is a Highly Compensated Employee will be made in accordance with Code section 414(q) and the regulations thereunder to the extent they are not inconsistent with the method established above.

The term Highly Compensated Employee also includes a former Employee who was a Highly Compensated Employee when he separated from service or at any time after attaining age 55.

“ Hour of Service ” means:

(a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. These hours will be credited to the Employee for the computation period in which the duties are performed.

(b) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service will be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours under this paragraph will be calculated and credited pursuant to DOL Reg. section 2530.200b-2 which is incorporated herein by this reference.


		5		Copyright © 2002-2016

ARTICLE 2 DEFINITIONS

(c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service will not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made.

Solely for purposes of determining whether a One-Year Break in Service has occurred, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, 8 Hours of Service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of a birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited (1) in the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period, or (2) in all other cases, in the following computation period.

If the Employer is a member of an affiliated service group (under Code section 414(m)), a controlled group of corporations (under Code section 414(b)), a group of trades or businesses under common control (under Code section 414(c)) or any other entity required to be aggregated with the Employer pursuant to Code section 414(o), service will be credited for any employment with such groups during the time the Employer is a member of the applicable group. Service will also be credited for any individual considered an Employee for purposes of this Plan under Code sections 414(n) or 414(o).

If the Employer maintains the plan of a predecessor employer, service with such employer will be treated as service for the Employer.

Service with respect to Qualified Military Service shall be credited in accordance with Code section 414(u) and service shall also be determined to the extent required by the Family and Medical Leave Act of 1993.

Notwithstanding the foregoing, for determining service under the elapsed time method an Hour of Service means each hour for which an Employee is paid or entitled to payment for the performance of duties for the Employer.

“ Impermissible Allocation ” means, any Annual Addition occurring during a Nonallocation Year to a S Corporation Disqualified Person under this Plan or any other plan of the Employer qualified under Code section 401(a).

“ Impermissible Accrual ” means, all Employer Stock consisting of shares in the S Corporation and all other Plan assets attributable to S Corporation shares held in a S Corporation Disqualified Person’s Account for the benefit of that S Corporation Disqualified Person, regardless of whether such Impermissible Accrual is attributable to contributions in the current year or prior years Plan assets attributable to S Corporation stock held in a S Corporations Disqualified Person’s Account include distributions made on such S Corporation stock within the meaning of Code section 1368, proceeds from the sale of such S Corporation stock, and earnings on such distributions or proceeds.

“ Investment Fiduciary ” means the person(s) designated in the Adoption Agreement. The fiduciary will be subject to standards of conduct as prescribed under ERISA.

“ Investment Funds ” means the funds, including the Employer Stock Fund, in which the Trust Fund is invested.

“ Investment Manager ” means an investment manager as described in section 3(38) of ERISA.

“ Key Employee ” means for Plan Years beginning after December 31, 2001, any Employee or former Employee (including any deceased Employee) who, at any time during the Plan Year that includes the Determination Date, is an officer of the Employer having an annual Testing Compensation greater than $130,000 (as adjusted under Code section


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416(i)(1) for Plan Years beginning after December 31, 2002), a More Than 5% Owner of the Employer, or a 1-percent owner of the Employer having Testing Compensation of more than $150,000. In determining whether a plan is top-heavy for Plan Years beginning before January 1, 2002, Key Employee means any Employee or former Employee (including any deceased Employee) who at any time during the 5-year period ending on the Determination Date, is an officer of the Employer having Testing Compensation that exceeds 50 percent of the dollar limitation under Code section 415(b)(1)(A), an owner (or considered an owner under Code section 318) of one of the ten largest interests in the Employer if such individual’s Testing Compensation exceeds 100 percent of the dollar limitation under Code section 415(c)(1)(A), a More than 5% Owner of the Employer, or a 1-percent owner of the Employer who has Testing Compensation of more than $150,000. The determination of who is a Key Employee will be made in accordance with Code section 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.

“ Leased Employee ” means any person (other than an Employee of the Employer) who pursuant to an agreement between the Employer and any other person (“leasing organization”) has performed services for the Employer (or for the Employer and related persons determined in accordance with Code section 414(n)(6)) on a substantially full time basis for a period of at least one year, and such services are performed under primary direction or control by the Employer. Contributions or benefits provided a Leased Employee by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer. A person shall not be considered a Leased Employee if: (i) such person is covered by a money purchase pension plan providing: (1) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined in Code section 415(c)(3), but including amounts contributed pursuant to a salary reduction agreement which are excludable from the employee’s gross income under Code sections 125, 402(e)(3), 402(h), 403(b), 132(f) or 457, (2) immediate participation, and (3) full and immediate vesting; and (ii) Leased Employees do not constitute more than 20 percent of the Employer’s nonhighly compensated work force.

“ Leveraged Shares ” means shares of Employer Stock acquired by the Trustee with the proceeds of an Exempt Loan pursuant to Article 4A.02.

“ Limitation Year ” means the year specified in the Adoption Agreement for purposes of determining Annual Additions limits pursuant to Article 5. All qualified plans maintained by the Employer must use the same Limitation Year. If the Limitation Year is amended to a different 12-consecutive month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made.

“ Member of the Family ” means, with respect to any individual: (i) the spouse of the individual; (ii) an ancestor or lineal descendant of the individual or the individual’s spouse; (iii) a brother or sister of the individual or the individual’s spouse and any lineal descendant of the brother or sister; and (iv) the spouse of any individual described in clause (ii) or (iii). A spouse of an individual who is legally separated from such individual under a decree of divorce or separate maintenance shall not be treated as such individual’s spouse for purposes of this Subsection (D).

“ More Than 5% Owner ” means any person who (a) owns (either directly or by attribution, under Code section 318) more than 5% of the outstanding stock of the Employer or stock possessing more than 5% of the total combined voting power of all stock of the Employer or, (b) in the case of an unincorporated business, any person who owns more than 5% of the capital or profits interest in the Employer. For purposes of Section 7.05, a Participant is treated as a More Than 5% Owner if such Participant is a More Than 5% Owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70-1/2 and shall continue to be considered a More Than 5% Owner (and distributions must continue under Section 7.05) even if the Participant ceases to be a 5% owner in a subsequent year.

“ Nonallocation Event ” means any event that the Plan Administrator determines would otherwise cause a Nonallocation Year (as defined in Section 4A.04(b)) to occur. Events that may cause a nonallocation year include, but are not limited to, a contribution to the Plan in the form of shares of Employer Stock, a distribution from the Plan in the form of shares of Employer Stock, a change of investment within a Plan account of a S Corporation Disqualified Person that alters the number of shares of employer stock held in the account of the S Corporation Disqualified Person, or the issuance by the employer of Synthetic Equity as defined by Code section 409(p)(6)(C) and Treas. Reg. section 1.409(p)-1(f). A Nonallocation Event occurs only if (i) the total number of shares of Employer Stock that, held in the ESOP account of those Participants who are or who would be S Corporation Disqualified Persons after taking into account the Participant’s Synthetic Equity and the Nonallocation Event exceeds (ii) the number of shares of Employer Stock equal to 49.9% of the total number of shares of Employer Stock outstanding after taking the Nonallocation Event into account (causing a Nonallocation Year to occur).


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“ Nonallocation Period ” means the period beginning on the date of a sale of Employer Stock to the Plan financed with an Exempt Loan and ending on the later of ten years after the date of such sale or the date of the allocation attributable to the final payment on the Exempt Loan incurred with respect to the sale.

“ Nonallocation Year ” means any Plan Year if, at any time during such Plan Year: (i) the Plan holds employer securities consisting of stock in an S Corporation; and (ii) S Corporation Disqualified Persons own at least 50 percent of the number of outstanding shares of stock in the S Corporation or (iii) at least 50% of the sum of (A), the outstanding shares of stock in the S Corporation (including Deemed-Owned Shares), and (B) the Synthetic Equity shares owned by S Corporation Disqualified Persons. For purposes of this definition, the rules of Code section 318(a) shall apply for purposes of determining ownership, except that in applying Code section 318(a)(1), the members of an individual’s family shall include members of the family defined in Subsection (3)(D) herein pursuant to Code section 409(p)(4)(D) and Code section 318(a)(4) regarding options shall not apply. Notwithstanding the employee trust exception in Code section 318(a)(2)(B)(i), an individual shall be treated as owning Deemed-Owned Shares of the individual. Solely for purposes of applying Code section 409(p)(5) (regarding the treatment of synthetic equity), Synthetic Equity shares are only treated as owned by S Corporation Disqualified Persons if such treatment results in the treatment of a Plan Year as a Nonallocation Year.

“ Non-Elective Contribution ” means a contribution made by the Company that is allocated to a Participant’s Non-Elective Contribution Account pursuant to Article 4.

“ Non-Elective Contribution Account ” means so much of a Participant’s Account as consists of Non-Elective Contributions made to the Plan.

“ Non-ESOP Accounts ” means those Accounts specified in Section 1.02 and the Adoption Agreement as the Non-ESOP portion of the Plan. The Non-ESOP Accounts shall be invested in the other non-Employer Stock assets of the Plan.

“ Non-Key Employee ” means any Employee or former Employee who is not a Key Employee.

“ Nonhighly Compensated Employee ” means an Employee who is not a Highly Compensated Employee.

“ Normal Retirement Age ” shall have the meaning set forth in the Adoption Agreement.

“ One-Year Break in Service ” means, for purposes of determining eligibility service, an Eligibility Computation Period or, for purposes of determining a Year of Vesting Service, a Vesting Computation Period during which an Employee is credited with 500 or fewer Hours of Service.

“ One-Year Period of Severance ” means a Period of Severance of at least 12-consecutive months. In the case of an individual who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a One-Year Period of Severance. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the individual, (b) by reason of the birth of a child of the individual, (c) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement.

“ Participant ” means an Eligible Employee who participates in the Plan in accordance with Article 3.

“ Period of Severance ” means a continuous period of time during which the Employee does not perform an Hour of Service for the Employer. Such period begins on the date the Employee retires, dies, quits or is discharged, or if earlier, the 12 month anniversary of the date on which the Employee was otherwise first absent from service.

“ Permissive Aggregation Group ” means the Required Aggregation Group of plans, plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code sections 401(a)(4) and 410.

“ Plan Administrator ” means the person(s) designated pursuant to the Adoption Agreement and Section 12.01. The Plan Administrator is a “named fiduciary” within the meaning of ERISA section 402(a)(2).


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“ Plan Sponsor ” means the entity described in the Adoption Agreement.

“ Plan Year ” means the 12-consecutive month period described in the Adoption Agreement. In the event the Plan incurs a short Plan Year of less than 12-consecutive months, the requirements of the Department of Labor Regulations in 2530.202 and 2530.203 and corresponding Treas. Reg. section 1.410(a) shall be satisfied.

“ Post Severance Compensation ” means amounts paid by the later of: (a) 2-1/2 months after an Employee’s severance from employment with the Company or (b) the end of the applicable Limitation Year/Plan Year that includes the date of severance from employment with the Company; and those amounts would have been included in the definition of Compensation if they were paid prior to the Participant’s severance from employment with the Company. However the payment must be for (a) unused accrued bona fide sick, vacation, or other leave, but only if the Participant would have been able to use the leave if the Employee had continued in employment; or (b) received by a Participant pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid to the Participant at the same time if the Participant had continued in employment with the Company and only to the extent that the payment is includible in the Participant’s gross income.

“ Post Year End Compensation ” means amounts earned during a year but not paid during that year solely because of the timing of pay periods and pay dates if: (a) these amounts are paid during the first few weeks of the next year; (b) the amounts are included on a uniform and consistent basis with respect to all similarly situated Employees; and (c) no compensation is included in more than one year.

“ Present Value ” means a benefit of equivalent value and shall be based only on the interest and mortality rates specified in the Adoption Agreement.

“ QLAC ” means a qualifying longevity annuity contract as defined in Treasury Regulation 1.401(a)(9)-6, Q&A 17.

“ Qualified Domestic Relations Order ” means any judgment, decree, or order (including approval of a property settlement agreement) that constitutes a “qualified domestic relations order” within the meaning of Code section 414(p).

“ Qualified Joint and Survivor Annuity ” means for a married Participant, an immediate annuity for the life of the Participant with a survivor annuity for the life of the Participant’s spouse which is not less than 50 percent and not more than 100 percent of the amount of the annuity which is payable during the joint lives of the Participant and the spouse and which is the amount of benefit which can be purchased with the Participant’s vested Account balance subject to Section 7.10. The percentage of the survivor annuity under the plan shall be 50%, unless a different percentage is elected in the Adoption Agreement. For a single Participant, a Qualified Joint and Survivor Annuity means an immediate annuity for the life of the Participant and which is the amount of benefit which can be purchased with the Participant’s vested Account balance. The terms of such annuity contract shall comply with the provisions of this Plan and the annuity contract shall be nontransferable.

“ Qualified Military Service ” means qualified military service as defined in Code section 414(u).

“ Qualified Optional Survivor Annuity ” means an annuity for the life of the Participant with a survivor annuity that is equal to the applicable percentage of the amount of the annuity that is payable during the joint lives of the Participant and the spouse, and that is the actuarial equivalent of a single life annuity for the life of the Participant. The survivor percentage of the Qualified Optional Survivor Annuity shall be determined in accordance with the following:

(a) If the Plan provides for a specific Qualified Joint and Survivor Annuity survivor annuity percentage and such percentage is less than 75%, then the Plan’s Qualified Optional Survivor Annuity shall be 75%.

(b) If the Plan provides for a specific Qualified Joint and Survivor Annuity survivor annuity percentage and such percentage is greater than or equal to 75%, then the Plan’s Qualified Optional Survivor Annuity shall be 50%.

(c) If the Plan does not provide for a specific Qualified Joint and Survivor Annuity survivor annuity percentage, then the Qualified Joint and Survivor Annuity survivor annuity percentage shall be 50% and the Qualified Optional Survivor Annuity survivor annuity percentage shall be 75%.


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ARTICLE 2 DEFINITIONS

“ Qualified Participant ” means a Participant who has attained age 55 and has 10 years of participation in the Plan or a predecessor plan until the date on which the Participant ceases to be entitled to any benefit under the Plan as specified in the Adoption Agreement. For this purpose, a predecessor plan includes any ESOP maintained by the Employer or a predecessor employer within the meaning of Treasury Regulation 1.415(f)-1(c), and any plan that has been merged into, consolidated with, or transferred assets to the plan in accordance with 414(l) of the Code.

“ Qualifying Employer Real Property ” means real property (and related personal property) which is leased to the employer of employees covered by the Plan, or to an affiliate of such employer. For purposes of determining the time at which a Plan acquires Qualifying Employer Real Property for purposes of this section , such property shall be deemed to be acquired by the Plan on the date on which the plan acquires the property or on the date on which the lease to the employer (or affiliate) is entered into, whichever is later.

“ Qualifying Employer Security ” means a security issued by an employer of employees covered by the plan, or by an affiliate of such employer. A contract to which ERISA section 408(b)(5) applies shall not be treated as a security for purposes of this section.

“ Rebalancing ” is the mandatory transfer of Employer Stock into and out of Participant’s Accounts designed to result in all Participant Accounts having the same proportion of Employer Stock.

“ Released and Unallocated Account ” means the account established and maintained in the Trust to hold Employer Stock released from the Suspense Account, as described in Article 4A, but not yet allocated to Participants’ Accounts and dividends thereon.

“ Reshuffling ” means the mandatory transfer of Employer Stock into or out of the ESOP accounts for administrative purposes such as distributions, diversifications or segregation upon termination.

“ Required Aggregation Group ” means (a) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the Plan Year containing the Determination Date or any of the four preceding Plan Years (regardless of whether the Plan has terminated), and (b) any other qualified plan of the Employer which enables a plan described in (a) to meet the requirements of Code sections 401(a)(4) or 410.

“ Required Beginning Date ” means April 1 of the calendar year following the later of the calendar year in which the Participant attains age 70-1/2 or the calendar year in which the Participant retires, except that benefit distributions to a More Than 5% Owner must commence by April 1 of the calendar year following the calendar year in which the Participant attains age 70-1/2. The Adoption Agreement may provide that for a Participant other than a More Than 5% Owner: (a) the Required Beginning Date is the April 1 of the calendar year following the calendar year in which the Participant attains age 70-1/2; or (b) the Participant may elect to begin receiving distributions at the date specified in the preceding sentence or the date specified in clause (a) of this sentence.

“ Rollover Contribution ” means an Employee contribution made to the Plan as a rollover from another eligible retirement plan or individual retirement account pursuant to Article 4 of the Plan.

“ Rollover Contribution Account ” means so much of a Participant’s Account as consists of a Participant’s Rollover Contributions (and corresponding earnings) made to the Plan.

“ Section 415 Safe Harbor Option ” means a definition of Compensation that:

(a) Includes all of the following:

(1) The Employee’s wages, salaries, fees for professional services, and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the Plan, to the extent that the amounts are includible in gross income (or to the extent amounts would have been received and includible in gross income but for an election under Code section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b)). These amounts include, but are not limited to, commissions paid to salespersons, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or other expense allowances under a nonaccountable plan as described in Treas. Reg. section 1.62-2(c).


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(2) Amounts described in Code section 104(a)(3), 105(a), or 105(h), but only to the extent that these amounts are includible in the gross income of the Employee.

(3) Amounts paid or reimbursed by the Employer for moving expenses incurred by an Employee, but only to the extent that at the time of the payment it is reasonable to believe that these amounts are not deductible by the Employee under Code section 217.

(4) The value of a nonstatutory option (which is an option other than a statutory option as defined in Treas. Reg. section 1.421-1(b)) granted to an Employee by the Employer, but only to the extent that the value of the option is includible in the gross income of the Employee for the taxable year in which granted.

(5) The amount includible in the gross income of an Employee upon making the election described in Code section 83(b).

(6) Amounts that are includible in the gross income of an Employee under the rules of Code section 409A or 457(f)(1)(A) or because the amounts are constructively received by the Employee.

(b) Excludes all of the following:

(1) Contributions (other than elective contributions described in Code section 402(e)(3), 408(k)(6), 408(p)(2)(A)(i), or 457(b)) made by the Employer to a plan of deferred compensation (including a simplified employee pension plan described in Code section 408(k) or a simple retirement account described in Code section 408(p), and whether or not qualified) to the extent that the contributions are not includible in the gross income of the Employee for the taxable year in which contributed. In addition, any distributions from a plan of deferred compensation (whether or not qualified) are not considered as compensation for Code section 415 purposes, regardless of whether such amounts are includible in the gross income of the Employee when distributed.

(2) Amounts realized from the exercise of a nonstatutory option (which is an option other than a statutory option as defined in Treas. Reg. section 1.421-1(b)), or when restricted stock or other property held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture (see Code section 83 and regulations promulgated thereunder).

(3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a statutory stock option (as defined in Treas. Reg. section 1.421-1(b)).

(4) Other amounts that receive special tax benefits, such as premiums for group-term life insurance (but only to the extent that the premiums are not includible in the gross income of the Employee and are not salary reduction amounts that are described in Code section 125).

(5) Other items of remuneration that are similar to any of the items listed in paragraphs (b)(1) through (b)(4) of this section.

“ S Corporation ” means a corporation described in Code section 1361(a)(1) for which an election under Code section 1362(a) is in effect.

“ S Corporation Disqualified Person ” means any person whose: (i) number of Deemed-Owned Shares is at least 10% of the total number of the Deemed-Owned Shares,; (ii) aggregated number of Deemed-Owned Shares and Synthetic Equity shares is at least 10% of the sum of (a) the total number of Deemed-Owned Shares and (b) such person’s Synthetic Equity shares; (iii) number of Deemed-Owned Shares, together with the number of Deemed-Owned Shares of the Members of the Family of such person, is at least 20% of the total number of Deemed-Owned Shares; or (iv) aggregate number of Deemed-Owned Shares and Synthetic Equity shares, together with the aggregate number of Deemed-Owned Shares and Synthetic Equity shares of the Members of the Family of such person, is at least 20% of the sum of the total number of Deemed-Owned Shares and (b) the Synthetic Equity shares owned by such person and the members fo the family of such


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ARTICLE 2 DEFINITIONS

person. Solely for the purposes of determining whether a person is a S Corporation Disqualified Person, a person is only treated as owning Synthetic Equity shares if such treatment results in that person being treated as an S Corporation Disqualified Person.

“ Self-Employed Individual ” means any individual who has Earned Income for the taxable year from the trade or business for which the Plan is established, including an individual who would have Earned Income but for the fact that the trade or business had no net profits for the taxable year. An individual shall not be a Self-Employed Individual unless he or she is also an owner of the Company.

“ Suspense Account ” means the account established and maintained in the Trust to hold Employer Stock acquired with the proceeds of an Exempt Loan, which has not yet been released pursuant to Article 4A, and dividends thereon.

“ Statutory Compensation ” shall have the meaning set forth in the Adoption Agreement.

Statutory Compensation must be determined without regard to any rules under Code section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401(a)(2)). For any Self-Employed Individual, Statutory Compensation shall mean Earned Income.

Statutory Compensation shall include any amount which is contributed by the Company pursuant to a salary reduction agreement and which is not includible in the gross income of the Participant under Code sections 125, 402(e)(3), 402(h), 403(b), 132(f) or 457. To the extent provided in the Adoption Agreement, Statutory Compensation shall include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage (“deemed Code section 125 compensation”). An amount will be treated as an amount under Code section 125 only if the Company does not request or collect information regarding the Participant’s other health coverage as part of the enrollment process for the health plan.

Statutory Compensation shall include other compensation paid by 2-1/2 months after a Participant’s severance from employment with the Company if: (a) the payment is regular compensation for services during the Participant’s regular working hours, or compensation for services outside the Participant’s regular working hours (e.g., overtime or shift differential), commissions, bonuses, or other similar payments; and the payment would have been paid to the Participant prior to a severance from employment if the Participant had continued in employment with the Company. The exclusions from compensation for payments after severance from employment do not apply to payments to a Participant who does not currently perform services for the Company by reason of qualified military service (as that term is used in Code section 414(u)(1)) to the extent those payments do not exceed the amounts the Participant would have received if the individual had continued to perform services for the Company rather than entering qualified military service. To the extent provided in the Plan, Statutory Compensation shall include compensation paid to a Participant who is permanently and totally disabled.

Notwithstanding any other provision hereof to the contrary, the annual Statutory Compensation of each Employee taken into account under the Plan for any Plan Year shall not exceed the amount in effect for such year under Code section 401(a)(17). If a Plan Year consists of fewer than 12 months, the applicable limitation under Code section 401(a)(17) will be multiplied by a fraction, the numerator of which is the number of months in such year, and the denominator of which is 12.

“ Synthetic Equity ” means any stock option, warrant, restricted stock, deferred issuance stock right, or similar interest or right that gives the holder the right to acquire or receive stock of the S Corporation in the future. Except to the extent provided in the regulations, synthetic equity also includes a stock appreciation right, phantom stock unit, nonqualified deferred compensation or similar right to a future cash payment based on the value of such stock or appreciation in such value.

“ Termination ” and “ Termination of Employment ” means any absence from service that ends the employment of the Employee with the Employer.


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“ Top-Heavy Ratio ” means:

(a) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer has not maintained any defined benefit plan which during the 5-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio for this Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s), including any part of any account balance distributed in the one-year period ending on the Determination Date(s), (five-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death or disability and in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the 1-year period ending on the Determination Date(s)) (5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death or disability and in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002), both computed in accordance with Code section 416 and the regulations thereunder. Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under Code section 416 and the regulations thereunder.

(b) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation group as appropriate is a fraction, the numerator of which is the sum of account balances under the aggregated defined contribution plan or plans for all Key Employees, determined in accordance with (a) above, and the Present Value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all Participants, determined in accordance with (a) above, and the Present Value of accrued benefits under the defined benefit plan or plans for all Participants as of the Determination Date(s), all determined in accordance with Code section 416 and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the one-year period ending on the Determination Date (five-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death or disability and in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002).

(c) For purposes of (a) and (b) above the value of account balances and the Present Value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Code section 416 and the regulations thereunder for the first and second Plan Years of a defined benefit plan. The account balances and accrued benefits of a Participant (1) who is a Non Key Employee but who was a Key Employee in a prior year, or (2) who has not been credited with at least one hour of service with any Employer maintaining the Plan at any time during the one-year period (5-year period in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002) ending on the Determination Date will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code section 416 and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year.

The accrued benefit of a Non Key Employee shall be determined under: (x) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (y) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code section 411(b)(1)(C).

“ Transfer Account ” means so much of a Participant’s Account as consists of amounts transferred from another eligible retirement plan (and corresponding earnings) pursuant to Article 4 in a transaction that was not an eligible rollover distribution within the meaning of Code section 402.

“ Trust Fund ” means all of the assets of the Plan held by the Trustee pursuant to Article 10 or held by an insurance company pursuant to section 403 of ERISA.


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ARTICLE 2 DEFINITIONS

“ Trustee ” means the person or persons designated by the Plan Sponsor to serve as the Trustee of the Trust Fund to the extent the assets of the Plan are not held solely by an insurance company. If the Trustee is a corporate Trustee the Trustee will be a directed Trustee unless otherwise indicated in a separate agreement. If the Trustee is an individual Trustee, the Trustee will be a discretionary Trustee unless otherwise indicated in a separate agreement.

“ Valuation Date ” has the meaning specified in the Adoption Agreement. Valuations of Employer Stock shall be made pursuant to Section 9.10, in accordance with a method consistently followed and uniformly applied in good faith. Notwithstanding anything in the Adoption Agreement to the contrary and in the event that a Participant is to receive a distribution from the Plan, or there is to be a transfer of assets and/or division of assets from the Plan, the Plan Administrator may in its sole discretion declare a special Valuation Date for that portion of the Plan that is not daily-valued in extraordinary situations to protect the interests of Participants in the Plan or the Participant receiving the distribution. Such extraordinary circumstances include a significant change in economic conditions or market value of the Trust Fund.

“ Vesting Computation Period ” means, for purposes of determining Years of Vesting Service, the period described in the Adoption Agreement.

“ Year of Eligibility Service ” means, with respect to any Employee, an Eligibility Computation Period during which he completes at least the service specified in the Adoption Agreement. If the Plan uses the elapsed time method: (a) “Year of Eligibility Service” means a twelve month period of time beginning on an Employee’s Employment Commencement Date and ending on the date on which eligibility service is being determined; (b) in order to determine the number of whole Years of Eligibility Service under the elapsed time method, nonsuccessive periods of service and less than whole year periods of service shall be aggregated on the basis that twelve months of service (30 days are deemed to be a month in the case of the aggregation of fractional months) or 365 days of service are equal to a whole year of service; (c) an Employee will also receive credit for any Period of Severance of less than twelve consecutive months; and (d) if less than one Year of Eligibility Service is required in Article 3, such service shall be determined by substituting such period for “twelve month” and “Year” where they appear in this paragraph. If the Plan provides for fractional Years of Eligibility Service, the requirement to complete any specified hours in the fractional period shall be waived.

All eligibility service with the Employer is taken into account except that if permitted in the Adoption Agreement, the following service shall be disregarded in determining Years of Eligibility Service:

(a) One-Year Holdout. If an Employee has a One-Year Break in Service (One-Year Period of Severance to the extent the Plan uses the elapsed time method), Years of Eligibility Service before such period will not be taken into account until the Employee has completed a Year of Eligibility Service after returning to employment with the Employer.

(b) Rule of Parity. If an Employee does not have any nonforfeitable right to the Account balance derived from Employer contributions, Years of Eligibility Service before a period of five (5) consecutive One-Year Breaks in Service (One-Year Periods of Severance to the extent the Plan uses the elapsed time method) will not be taken into account in computing eligibility service.

If a Participant’s Years of Eligibility Service are disregarded pursuant to the foregoing, such Participant will be treated as a new Employee for eligibility purposes. If a Participant’s Years of Eligibility Service may not be disregarded pursuant to the foregoing, such Participant shall participate in the Plan pursuant to the terms of Article 3.

To the extent provided in the Adoption Agreement, eligibility service may also include service with employers other than the Employer.

“ Year of Vesting Service ” means a Vesting Computation Period during which the Employee completes at least the number of hours specified in the Adoption Agreement. If the Plan uses the elapsed time method: (a) “Year of Vesting Service” means a twelve month period of time beginning on an Employee’s Employment Commencement Date and ending on the date on which vesting service is being determined; (b) in order to determine the number of whole Years of Vesting Service under the elapsed time method, nonsuccessive periods of service and less than whole year periods of service shall be aggregated on the basis that 12 months of service (30 days are deemed to be a month in the case of the aggregation of fractional months) or 365 days of service are equal to a whole year of service; and (c) an Employee will also receive credit for any Period of Severance of less than 12-consecutive months.


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ARTICLE 2 DEFINITIONS

All Years of Vesting Service with the Employer are taken into account except that for an Employee who has five consecutive One-Year Breaks in Service (One-Year Periods of Severance to the extent the Plan uses the elapsed time method) and except to the extent provided in Article 6, all periods of service after such breaks in service/periods of severance shall be disregarded for the purpose of vesting the Employee’s Employer-derived Account balance that accrued before such breaks in service/periods of severance, but except as otherwise expressly provided, both the service before and after such breaks in service/periods of severance shall count for purposes of vesting the Employee’s Employer-derived Account balance that accrues after such breaks in service/periods of severance pursuant to Article 6.

In addition, if permitted in the Adoption Agreement, the following service shall be disregarded in determining Years of Vesting Service:

(a) One-Year Holdout. If an Employee has a One-Year Break in Service (One-Year Period of Severance to the extent the Plan uses the elapsed time method), Years of Vesting Service before such period will not be taken into account until the Employee has completed a Year of Vesting Service after returning to employment with the Employer.

(b) Rule of Parity. If an Employee does not have any nonforfeitable right to the Account balance derived from Employer contributions, Years of Vesting Service before a period of five (5) consecutive One-Year Breaks in Service (One-Year Periods of Severance to the extent the Plan uses the elapsed time method) will not be taken into account in computing vesting service. Elective Deferrals under a qualified CODA are taken into account for purposes of determining whether a Participant is a nonvested Participant for purposes of Code section 411(a)(6)(D)(iii).

(c) Years of Vesting Service before age 18 and/or Years of Vesting Service before the Employer maintained this Plan or a predecessor plan will not be taken into account in computing vesting service.

To the extent provided in the Adoption Agreement, vesting service may also include service with employers other than the Employer.


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ARTICLE 3 PARTICIPATION

ARTICLE 3 PARTICIPATION

Section 3.01

NON-ELECTIVE CONTRIBUTIONS

Each Eligible Employee as of the Effective Date who was eligible to participate in the Plan with respect to Non-Elective Contributions immediately prior to the Effective Date shall be a Participant eligible to receive Non-Elective Contributions pursuant to Article 4 on the Effective Date. Each other Eligible Employee who was not a Participant in the Plan with respect to Non-Elective Contributions immediately prior to the Effective Date shall become a Participant eligible to receive Non-Elective Contributions on the date specified in the Adoption Agreement; provided that he is an Eligible Employee on such date. Notwithstanding the foregoing, a Participant shall be eligible to receive Non-Elective Contributions only to the extent such contributions are permitted in the Adoption Agreement.

Section 3.02

TRANSFERS

If a change in job classification or a transfer results in an individual no longer qualifying as an Eligible Employee, such Employee shall cease to be a Participant for purposes of Article 4 (or shall not become eligible to become a Participant) as of the effective date of such change of job classification or transfer. Should such Employee again qualify as an Eligible Employee or if an Employee who was not previously an Eligible Employee becomes an Eligible Employee, he shall become a Participant with respect to the contributions for which the eligibility requirements have been satisfied as of the later of the effective date of such subsequent change of status or the date the Employee meets the eligibility requirements of this Article 3.

Section 3.03

TERMINATION AND REHIRES

If an Employee has a Termination of Employment, such Employee shall cease to be a Participant for purposes of Article 4 (or shall not become eligible to become a Participant) as of his Termination of Employment. An individual who has satisfied the applicable eligibility requirements set forth in Article 3 as of his Termination date, and who is subsequently reemployed by the Company as an Eligible Employee, shall resume or become a Participant immediately upon his rehire date with respect to the contributions for which the eligibility requirements of this Article 3 have been satisfied. An individual who has not so qualified for participation on his Termination date, and who is subsequently reemployed by the Company as an Eligible Employee, shall be eligible to participate as of the later of the effective date of such reemployment or the date the individual meets the eligibility requirements of this Article 3. The determination of whether a rehired Eligible Employee satisfies the requirements of Article 3 shall be made after the application of any applicable break in service rules.

Section 3.04

LIMITATIONS ON EXCLUSIONS

(a) Exclusions. Any employee exclusion entered in the Adoption Agreement shall not be valid to the extent that such exclusion requires that the maximum number of Nonhighly Compensated Employees with the highest amount of compensation and/or service shall be excluded from participation so that the Plan still meets the coverage requirements of Code section 410(b).

(b) Coverage. The Plan must provide that an Eligible Employee who has attained age 21 and who has completed one Year of Eligibility Service (two Years of Eligibility Service may be used for contributions other than Elective Deferrals if the Plan provides a nonforfeitable right to 100% of the Participant’s applicable Account balance after not more than 2 Years of Eligibility Service) shall commence participation in the Plan no later than the earlier of: (1) the first day of the first Plan Year beginning after the date on which such Eligible Employee satisfied such requirements; or (2) the date that is 6 months after the date on which he satisfied such requirements.

(c) A Participant shall be treated as benefiting under the Plan for any Plan Year during which the Participant received or is deemed to receive an allocation in accordance with Treas. Reg. section 1.410(b)-3(a). Notwithstanding any provision of the Plan to the contrary, no Participant shall earn an allocation hereunder except as provided under the terms of the Plan as in effect on the last day of the Plan Year after giving effect to all retroactive amendments that may be permitted under applicable Internal Revenue Service procedures and other applicable law; including, without limitation, any amendment permitted under Treas. Reg. section 1.401(a)(4)-11.


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ARTICLE 3 PARTICIPATION

Section 3.05

PROCEDURES FOR ADMISSION

The Plan Administrator shall prescribe such forms and may require such data from Participants as are reasonably required to enroll a Participant in the Plan or to effectuate any Participant elections made pursuant to this Article 3.

Section 3.06

PARTICIPANTS RECEIVING DIFFERENTIAL MILITARY PAY

To the extent selected in the Adoption Agreement and pursuant to Code section 414(u)(12), IRS Notice 2010-15 and any superseding guidance, a Participant receiving differential wage payments (as defined in Code section 3401(h)(2)) shall be treated as an Employee of the Employer making the payment and the differential wage payments may be treated as Compensation under the Plan to the extent selected in the Adoption Agreement.


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ARTICLE 4 CONTRIBUTIONS

ARTICLE 4 CONTRIBUTIONS

Section 4.01

NON-ELECTIVE CONTRIBUTIONS

(a) Amount. Subject to the limitations described in Article 5, the Company may, in its sole discretion, make Non-Elective Contributions to the Plan on behalf of each Participant who has completed any service requirements specified in the Adoption Agreement.

(b) Allocation of Non-Elective Contributions. Non-Elective Contributions shall be allocated to the Non-Elective Contribution Accounts of each Participant eligible to share in such allocations pursuant to Subsection (a) in the ratio that each Participant’s Compensation bears to the Compensation of all eligible Participants.

(c) Participant. For purposes of this Section, “Participant” shall mean an Eligible Employee who has met the eligibility requirements of Article 3 with respect to Non-Elective Contributions.

(d) Coverage Failures. If the application of the rules described above causes the Plan to fail to meet the minimum coverage requirements of Code section 410(b)(1)(B) (the Plan does not benefit a percentage of Nonhighly Compensated Employees that is at least 70% of the percentage of Highly Compensated Employees who benefit under the Plan) for any Plan Year with respect to contributions described in this Section 4.03 because such contributions have not been allocated to a sufficient number or percentage of Participants for such year, then the list of Participants eligible to share in such contributions for such year shall be expanded to include the Participants described in the Adoption Agreement.

(1) If the Adoption Agreement specifies that all non-excludable Participants shall be entitled to share in such contributions for such year, then the following additional Participants shall be eligible to share in such contributions:

(A) Any Participant who remains in the Employer’s employ on the last day of such Plan Year; and

(B) Any Participant who completes at least 501 Hours of Service during such Plan Year (whether or not he remains in the Employer’s employ on the last day of such Plan Year).

(2) If the Adoption Agreement specifies that just enough Participants shall be entitled to share in such contributions for such year, then the following additional Participants shall be eligible to share in such contributions:

(A) The list of Participants eligible to share in such contributions for such Plan Year shall be expanded to include the minimum number of Participants who would not otherwise be eligible as are necessary to satisfy the minimum coverage requirements under Code section 410(b)(1)(B). The specific Participants who shall become eligible to share in such contributions for such Plan Year pursuant to this Paragraph (A) shall be those Participants who remain in the Company’s employ on the last day of such Plan Year and who have completed the greatest amount of service during the Plan Year.

(B) If, after the application of Paragraph (A) above, the minimum coverage requirements of Code section 410(b)(1)(B) are still not satisfied, then the list of Participants eligible to share in such contributions for such Plan Year shall be further expanded to include the minimum number of Participants who do not remain in the Company’s employ on the last day of the Plan Year as are necessary to satisfy such requirements. The specific Participants who shall become eligible to share in the Company’s contribution for such Plan Year pursuant to this Paragraph (B) shall be those Participants who had completed the greatest amount of service during the Plan Year before terminating their employment with the Employer.

Notwithstanding the foregoing, the Plan Administrator always retains the option to meet the minimum coverage requirements of Code section 410(b) by using the average benefits test of Code section 410(b)(1)(C).


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ARTICLE 4 CONTRIBUTIONS

(e) Disability. In addition to the foregoing, if the Adoption Agreement specifies that contributions described in this Section shall be allocated to Disabled Participants, a Participant who does not meet the requirements of Subsection (a) due to Disability shall be eligible to share in such contributions; provided that such Disability would also constitute a disability pursuant to Code section 22(e). The Company shall allocate the applicable contributions on behalf of each such Disabled Participant on the basis of the Compensation each such Participant would have received for the Limitation Year if the Participant had been paid at the rate of Compensation paid immediately before suffering a Disability. Contributions allocated to Participants suffering a Disability pursuant to this Subsection shall be fully vested when made. Such allocations shall cease on the first to occur of the following:

(1) the last day of the Plan Year in which occurs the anniversary specified in the Adoption Agreement of the date the Plan Administrator determines that the Participant’s Disability commenced;

(2) the date the Participant ceases to suffer from a Disability;

(3) the date the Participant refuses to submit to a periodic examination by the Company or its agent to determine the existence of a Disability; or

(4) the date the Participant dies.

Section 4.02

ROLLOVER CONTRIBUTIONS

(a) To the extent provided in the Adoption Agreement, the Plan Administrator may direct the Trustee to accept Rollover Contributions made in cash or other form acceptable to the Trustee. Rollover Contributions shall be allocated to the Participant’s/Eligible Employee’s (to the extent elected in the Adoption Agreement) Rollover Contribution Account. The Plan may accept the following Rollover Contributions to the extent allowed by the Plan Administrator in its sole discretion:

(1) A rollover from a plan qualified under Code section 401(a) or 403(a) if the contribution qualifies as a tax-free rollover as defined in Code section 402(c). If it is later determined that the amount received does not qualify as a tax-free rollover, the amount shall be refunded to the Eligible Employee.

(2) A rollover from a “Conduit Individual Retirement Account”, as determined in accordance with procedures established by the Plan Administrator and only if the contribution qualifies as a tax-free rollover as defined in Code section 402(c). If it is later determined that the amount received does not qualify as a tax-free rollover, the amount shall be refunded to the Eligible Employee.

(3) A direct rollover of an eligible rollover distribution of after-tax employee contributions from a qualified plan described in Code section 401(a) or 403(a). The Plan shall separately account for amounts so transferred, including separately accounting for the portion of such contribution which is includible in gross income and the portion of such contribution which is not so includible.

(4) Any rollover of an eligible rollover distribution from an annuity contract described in Code section 403(b). The Plan shall separately account for after-tax amounts so transferred, including separately accounting for the portion of such contribution which is includible in gross income and the portion of such contribution which is not so includible.

(5) Any rollover of an eligible rollover distribution from an eligible plan under Code section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

(6) Any rollover contribution of the portion of a distribution from an individual retirement account or annuity described in Code sections 408(a) or 408(b) that is eligible to be rolled over and would otherwise be includible in gross income.

(7) If the Plan permits Roth Elective Deferrals, the Plan may accept a Rollover Contribution to a Roth Elective Deferral Account only if it is a direct rollover from another Roth elective deferral account under an applicable retirement plan described in Code section 402A(e)(1) and only to the extent the rollover is permitted under the rules of Code section 402(c).


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ARTICLE 4 CONTRIBUTIONS

(8) Any additional rollover contribution as may be permitted by applicable law.

(b Plan Administrator Procedures. The Plan Administrator may establish uniform procedures that include, but are not limited to, prescribing limitations on the frequency and minimum amount of rollovers; provided, that no procedures involving minimum amounts shall prescribe a minimum withdrawal greater than $1,000.

Section 4.03

TRANSFERS

The Trustee may accept a direct transfer of assets, made without the consent of the affected Employees, from the trustee of any other qualified plan described in Code section 401(a) to the extent permitted by the Code and the regulations and rulings thereunder. In the event assets are transferred to the Plan pursuant to the foregoing sentence, the transferred assets shall be accounted for separately in the Transfer Account of the affected Employees to the extent necessary to preserve a more favorable vesting schedule or any other any legally-protected benefits available to such Employees under the transferor plan. The Plan Administrator shall establish a vesting schedule for the Transfer Account; provided that such schedule is not less favorable that the vesting schedule under the transferor plan.

Section 4.04

MILITARY SERVICE

(a) In General. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service shall be provided in accordance with Code section 414(u).

(b) Death Benefits Under USERRA. Effective January 1, 2007, if a Participant dies while performing qualified military service (as defined in Code section 414(u)), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service specified in Subsection (d) below) provided under the plan as if the Participant had resumed and then terminated employment on account of death pursuant to Code section 401(a)(37), Notice 2010-5 and any superseding guidance.

(c) Death or Disability During Qualified Military Service. To the extent provided in the Adoption Agreement and pursuant to Code section 414(u)(9), Notice 2010-5 and any superseding guidance, a Participant that dies or becomes disabled while performing qualified military service (as defined in Code section 414(u)) will be treated as if he had been employed by the Company on the day preceding death or disability and terminated employment on the day of death or disability and receive benefit accruals related to the period of qualified military service as provided under Code section 414(u)(8), except as provided below:

(1) All Participants eligible for benefits under the Plan by reason of this Section shall be provided benefits on reasonably equivalent terms.

Section 4.05

MULTIPLE EMPLOYER PLAN

If the Employees of more than one employer within the meaning of Code section 413(c) and that is a member of the same controlled group of corporations as the Employer within the meaning of Code section 1563(a) (as modified by subparagraphs (B) and (C) of Code section 409(l)(4) and as determined without regard to sections 1563(a)(4) and 1563(e)(C) are covered under the Plan, the provisions of such section shall apply to the Plan. The Plan Administrator may restrict the allocation of any forfeitures arising hereunder to the entity for which the applicable Participant is or was employed.


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ARTICLE 4 CONTRIBUTIONS

ARTICLE 4A

SPECIAL ESOP PROVISIONS

Section 4A.01

ESOP CONTRIBUTIONS

(a) Amount of ESOP Contributions. The Company shall make a contribution to the Plan in cash sufficient to pay any currently maturing obligations on an Exempt Loan (to the extent that such obligations will not be satisfied pursuant to the terms of Article 4 by means of contributions paid to ESOP Accounts or by use of dividends pursuant to Article 9). Such contributions shall be applied, as the Plan Administrator shall direct the Trustee, to repay any outstanding Exempt Loan in accordance with any pledge or similar agreement. The Company may make additional contributions in cash or Employer Stock; provided however, that Rollover Contributions and transfers may be in such other form that may be acceptable to the Trustee and the Plan Administrator.

(b) Allocation of ESOP Contributions. ESOP Contributions made in the form of Employer Stock and Employer Stock transferred to the Released and Unallocated Account shall be allocated to the ESOP Accounts in the manner specified in Section 4.01(b) and determined by the Plan Administrator. The shares so allocated shall have a fair market value as of the allocation date equal to the amount of the contributions to which the Participant is entitled. Allocations to Participants within each ESOP Account shall be made pursuant to the terms of Section 4.01(b).

Section 4A.02

EXEMPT LOAN

(a) Authorization - Use. The Board may direct the Trustee to borrow money from a Disqualified Person, or another source which is guaranteed by a Disqualified Person, the proceeds of which are used within a reasonable time to: (1) acquire Employer Stock, (2) repay such Exempt Loan, or (3) repay a prior Exempt Loan pursuant to applicable regulations.

(b) Terms of Exempt Loan Agreements. All Exempt Loans shall satisfy the following requirements:

(1) The loan shall be primarily for the benefit of Participants and their Beneficiaries.

(2) The loan shall be for a specified term, shall bear no more than a reasonable rate of interest, and shall not be payable on demand except in the event of default.

(3) The terms of an Exempt Loan must be at least as favorable to the Plan as the terms of a comparable loan resulting from an arm’s length negotiation between independent parties.

(4) The collateral pledged by the Trustee shall consist only of the Employer Stock purchased with the borrowed funds, or Employer Stock that was pledged as collateral in connection with a prior Exempt Loan that was repaid with the proceeds of the current Exempt Loan.

(5) Under the terms of the loan agreement, the lender shall have no recourse against the Trust, or any of its assets, except with respect to the collateral and contributions (other than contributions of Employer Stock) by the Company that are made to satisfy the Trustee’s obligations under the loan agreement and earnings attributable to such collateral and such contributions.

(6) No person entitled to payment under the Exempt Loan has any right to Plan assets other than collateral given for the Exempt Loan, contributions (other than contributions of Employer Stock) that are made under the Plan to meet its obligations under the Exempt Loan, and earnings attributable to such collateral and the investment of such contributions.

(7) The payments made on the Exempt Loan during a Plan Year shall not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less such payments on the Exempt Loan in prior years. Such contributions and earnings must be accounted for separately in the books of account for separately in the books of account of the ESOP until the Exempt Loan is repaid.

(8) The Exempt Loan cannot be payable upon the demand of any person except in the event of default. In the event of default, the value of Plan assets transferred in satisfaction of the Exempt Loan shall not exceed the amount of default; moreover, if the lender is a Disqualified Person, the loan agreement shall provide for a transfer of Plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Exempt Loan. For purposes of this paragraph, the making of a guarantee does not make a person a lender.


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ARTICLE 4 CONTRIBUTIONS

Section 4A.03

RELEASE OF EMPLOYER STOCK

(a) Employer Stock purchased with the proceeds of an Exempt Loan shall be held in the Suspense Account as the collateral for that Exempt Loan. Such Employer Stock shall be released from the Suspense Account, and transferred to the Released and Unallocated Account, on a pro-rata basis according to the amount of the payment on the Exempt Loan determined under one of the following two alternative formulas specified in Subsections (a)(1) and (a)(2) in the discretion of the Plan Administrator and in accordance with the terms of the Exempt Loan.

(1) For each payment during the duration of the Exempt Loan, the number of shares of Employer Stock released and transferred to the Released and Unallocated Account shall equal the number of such shares held in the Suspense Account immediately before release for the current payment period multiplied by a fraction. The numerator of the fraction is the amount of principal and interest paid for the payment period, and the denominator of the fraction is the sum of the numerator plus the remaining principal and interest to be paid for all future payments. The number of future payments under the Exempt Loan must be definitely ascertainable and must be determined without taking into account any possible extensions or renewal periods. If the interest rate under the Exempt Loan is variable, the interest to be paid in future payment periods must be computed by using the interest rate applicable as of the end of the immediately preceding payment period. Notwithstanding the foregoing, if the Exempt Loan is repaid with the proceeds of a subsequent Exempt Loan, such repayment shall not operate to release all of the Employer Stock in the Suspense Account; rather, such release shall be effected pursuant to the foregoing provisions of this subsection on the basis of payments of principal and interest on such substitute loan. If collateral includes more than one class of securities, the number of securities of each class to be released for a Plan Year must be determined by applying the same fraction to each class; or

(2) For each payment during the duration of the Exempt Loan, the number of shares of Employer Stock released and transferred to the Released and Unallocated Account is determined solely with reference to the principal payment of the Exempt Loan. Employer Stock in the Suspense Account may be released in accordance with this subsection (2) only if the following three conditions are met:

(i) The Exempt Loan provides for annual payments of principal and interest at a cumulative rate that is not less rapid at any time than level annual payments of such amounts for ten years;

(ii) The interest portion of any payment is disregarded for purposes of determining the number of shares released only to the extent it would be treated as interest under standard loan amortization tables; and

(iii) If the Exempt Loan is renewed, extended or refinanced, the sum of the expired duration of the Exempt Loan and the renewal period, the extension period or the duration of a new Exempt Loan does not exceed ten years.

(b) More than One Exempt Loan. If at any time there is more than one Exempt Loan outstanding, separate accounts shall be established under the Suspense Account and the Released and Unallocated Account for each Exempt Loan. Each Exempt Loan for which a separate account is maintained shall be treated separately for purposes of Subsection (a) governing the release of shares from the Suspense Account.

(c) If the Employer is a C-Corporation and no more than one-third of the Employer contributions that are used to repay the principal and interest due on an Exempt Loan and that are deductible under Code section 404(a)(9) are allocated to the accounts of Highly Compensated Employees during the Plan Year, then Annual Additions do not include forfeitures of the Employer Stock purchased with the proceeds of an Exempt Loan and also do not include Employer contributions that are used to pay interest on an Exempt Loan and are deductible under Code section 404(a)(9)(B) and charged against the Participant’s Account.

Section 4A.04

PROHIBITED ALLOCATION

(a) Section 1042. Notwithstanding any provision in this Plan to the contrary, if shares of Employer Stock (in a C-Corporation only) are sold to the Plan by a shareholder in a transaction for which special tax treatment is elected by such shareholder (or his representative) pursuant to Code section 1042, no assets attributable to such Employer Stock may be allocated to the ESOP Accounts of: (i) the shareholder, and any person who is related to such shareholder [within the meaning of Code section 267(b)], during the Nonallocation Period except that lineal descendants of such shareholder may


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ARTICLE 4 CONTRIBUTIONS

receive allocations so long as no more than 5% of the aggregate amount of all Employer Stock sold by such shareholder in a transaction to which Code section 1042 applies is allocated to such lineal descendants of such shareholder; and (ii) any other person who owns [after application of Code section 318(a)] more than 25 percent in value of the outstanding securities of the Employer.

For purposes of this Subsection, “nonallocation period” means the period beginning on the date of a sale of Employer Stock to the Plan financed with an Exempt Loan and ending on the later of ten years after the date of such sale or the date of the allocation attributable to the final payment on the Exempt Loan incurred with respect to the sale.

(b) Subchapter S Corporations.

(1) In General. Notwithstanding any provision in this Plan to the contrary, if the Employer Stock is issued by an S Corporation, no portion of the assets attributable to (or allocable in lieu of) Employer Stock may, during a Nonallocation Year, accrue (or be allocated directly or indirectly under any Employer plan qualified under Code section 401(a)) for the benefit of any S Corporation Disqualified Person. This Subsection (b) shall be effective for Plan Years beginning after December 31, 2004 and only to the extent that Employer Stock consists of shares in an S Corporation. However, in the case of: (i) an employee stock ownership plan established after March 14, 2001 (within the meaning of Internal Revenue Service Revenue Ruling 2003-6); or (ii) an employee stock ownership plan established on or before March 14, 2001 where the employer securities held by the Plan consist of stock in a corporation that is not an S Corporation on such date, this Subsection (b) shall be effective for Plan Years ending after March 14, 2001.

(2) Prevention of Nonallocation Year. In the absence of a Board resolution to otherwise prevent a Nonallocation Year, or if the Plan Administrator determines that a future event will cause a Nonallocation Year, the Plan Adminstrator will reduce the account balances of S Corporation of Disqualified Persons by transferring as described below the number of shares of Employer Stock necessary to prevent a Nonallocation Year. The affected Employer Stock will be transferred from the ESOP Portion to the Non-ESOP Portion prior to the Nonallocation Year. Immediately following the transfer, the number of shares transferred from that Participant’s account in the ESOP portion will be credited to the Participant’s Non-ESOP portion. The Plan Administrator will take steps to ensure that all actions necessary to implement the transfer are taken before the Nonallocation Year occurs.

(3) Other Rules. The following other rules apply for purposes of this Subsection (b):

(A) Treatment of Synthetic Equity.

(i) In General. For purposes of Subsections (3)(A) and (3)(B), in the case of a person who owns Synthetic Equity in the S Corporation, except to the extent provided in regulations, the shares of stock in such corporation on which such Synthetic Equity is based shall be treated as outstanding stock in such corporation and Deemed-Owned Shares of such person if such treatment of Synthetic Equity of one or more such persons results in (i) the treatment of any person as a S Corporation Disqualified Person, or (ii) the treatment of any year as a Nonallocation Year. For purposes of this Subsection, Synthetic Equity shall be treated as owned by a person in the same manner as stock is treated as owned by a person under the rules of Code section 318(a)) as modified in this paragraph. In applying Code section 318(a)(1), the members of an individuals family include the Members of the Family and Code section 318(a)(4) regarding stock options ins disregarded. Notwithstanding the employee trust exception in section 318(a)(2)(B)(i), an individual is treated as owning Deemed-Owned Shares of the individual. If, without regard to this Subsection, a person is treated as a S Corporation Disqualified Person or a year is treated as a Nonallocation Year, this Subsection shall not be construed to result in the person or year not being so treated.

(ii) Determination of Other Synthetic Equity. This Subsection (2) shall apply with regard to other Synthetic Equity described in Treas. Reg. section 1.409(p)-1(f)(4)(iii)(A) or superseding guidance. The Plan Administrator shall use the first day of the Plan Year as the annual determination date and the number of shares of Synthetic Equity owned shall be treated as owned for the period from a determination date through the date immediately preceding the next following determination date pursuant to Treas. Reg. section 1.409(p)-1(f)(4)(iii)(B). The Plan Administrator shall use triannual recalculations specified in Treas. Reg. section 1.409(p)-1(f)(4)(iii)(C). Such triannual recalculations may be modified as provided in Treas. Reg. section 1.409(p)-1(f)(4)(iii)(C)(3).


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ARTICLE 4 CONTRIBUTIONS

Section 4A.05

NON-ESOP PORTION OF PLAN

(a) Non-ESOP Portion. Assets held under the Plan in accordance with this Section are held under a portion of the Plan that is not an employee stock ownership plan (ESOP), within the meaning of Code section 4975(e)(7). Amounts held in the portion of the Plan that is not an ESOP (the Non-ESOP portion) shall be held in Accounts that are separate from the Accounts for the amounts held in the remainder of the Plan (the ESOP Portion). Any statements provided to Participants and/or Beneficiaries to show their interest in the Plan shall separately identify the amounts held in each such portion. Except as specifically set forth in this Section, all of the terms of the Plan apply to any amount held under the Non-ESOP Portion of the Plan in the same manner and to the same extent as an amount held under the ESOP Portion of the Plan.

(b) Transfers from ESOP Portion to Non-ESOP Portion of Plan.

(1) Amount to be Transferred. In the case of any event that the Plan Administrator determines would otherwise cause a Nonallocation Event to occur, shares of employer stock held under the Plan before the date of the Nonallocation Event shall be transferred from the ESOP Portion of the Plan to the Non-ESOP Portion of the Plan as provided in Subsection (b)(2). The amount transferred under this Subsection shall be the amount that the Plan Administrator determines to be the minimum amount that is necessary to ensure that a Nonallocation Year does not occur, but in no event is the amount so transferred to be less than the excess of (i) the total number of shares of Employer Stock that, held in the ESOP account of those Participants who are or who would be S Corporation Disqualified Persons after taking into account the Participant’s Synthetic Equity and the Nonallocation Event exceeds (ii) the number of shares of Employer Stock equal to 49.9% of the total number of shares of Employer Stock outstanding after taking the Nonallocation Event into account (causing a Nonallocation Year to occur). The Plan Administrator shall take steps to ensure that all actions necessary to implement the transfer are taken before the Nonallocation Event occurs.

(2) Ordering Rules.

(A) Except as provided for in Subsection (b)(2)(B), at the date of the transfer, the total number of shares transferred, as provided for in Subsection (b)(1), shall be charged against the accounts of Participants who are S Corporation Disqualified Persons (i) by first reducing the ESOP account of the Participant who is a S Corporation Disqualified Person whose account has the largest number of shares (with the addition of Synthetic Equity shares) and (ii) thereafter by reducing the ESOP accounts of each succeeding Participant who is a S Corporation Disqualified Person who has the largest number of shares in his or her account (with the addition of Synthetic Equity shares). Immediately following the transfer, the number of transferred shares charged against any Participant’s account in the ESOP Portion of the Plan shall be credited to an account established for that Participant in the Non-ESOP portion of the Plan.

(B) Notwithstanding Subsection (b)(2)(A), the number of shares transferred shall be charged against the accounts of Participants who are S Corporation Disqualified Person (i) by first reducing the account of the Participant with the fewest shares (including Synthetic Equity shares) who is a S Corporation Disqualified Person and who is a Highly Compensated Employee to cause the Participant not to be a disqualified person, and (ii) thereafter reducing the account of each other Participant who is a S Corporation Disqualified Person and a Highly Compensated Employee, in the order of who has the fewest ESOP shares (including synthetic equity shares). A transfer under this Subsection (b)(2)(B) only applies to the extent that the transfer results in fewer shares being transferred than in a transfer under Subsection (b)(2)(A).

(3) Tie Breaker.

(A) If two or more Participants described in Subsection (b)(2) have the same number of shares, the account of the Participant with the longest service shall be reduced first.

(B) Beneficiaries of the Plan are treated as Plan Participants for purposes of this Section.

(c) Income Taxes. If the Trust owes income taxes as a result of unrelated business taxable income under Code section 512(e) with respect to shares of employer stock held in the Non-ESOP Portion of the Plan, the income tax payments made by the Trustee shall be charged against the accounts of each Participant or Beneficiary who has an account in the Non-ESOP Portion of the Plan in proportion to the ratio of the shares of employer stock in such Participant’s or Beneficiary’s account in the non-ESOP Portion of the Plan to the total shares of employer stock in the non-ESOP Portion of the Plan. The Employer shall purchase shares of employer stock from the Trustee with cash (based on the fair market value of the shares so purchased) from each such account to the extent cash is not otherwise available to make the income tax payments from the Participant’s or Beneficiary’s ESOP accounts or his or her other defined contribution plan accounts.


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ARTICLE 5 LIMITATIONS ON CONTRIBUTIONS

ARTICLE 5 LIMITATIONS ON CONTRIBUTIONS

Section 5.01

MAXIMUM AMOUNT OF ANNUAL ADDITIONS

(a) General Rule.

(1) One Plan. If the Participant does not participate in, and has never participated in another qualified plan maintained by the Employer or a welfare benefit fund, as defined in Code section 419(e) maintained by the Employer, or an individual medical account, as defined in Code section 415(l)(2), maintained by the Employer, or a simplified employee pension plan, as defined in Code section 408(k), maintained by the Employer, which provides an Annual Addition, the amount of Annual Additions which may be credited to the Participant’s Account for any Limitation Year will not exceed the lesser of the maximum permissible amount specified in Section 5.01(b) or any other limitation contained in this Plan. If the Employer contribution that would otherwise be contributed or allocated to the Participant’s Account would cause the Annual Additions for the Limitation Year to exceed such maximum permissible amount, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the maximum permissible amount.

(2) Multiple Plans. This Subsection 5.01(a)(2) applies if, in addition to this Plan, the Participant is covered under another qualified defined contribution plan maintained by the Employer, a welfare benefit fund maintained by the Employer, an individual medical account maintained by the Employer, or a simplified employee pension plan maintained by the Employer, that provides an Annual Addition during any Limitation Year. The Annual Additions which may be credited to a Participant’s Account under this Plan for any such Limitation Year will not exceed the maximum permissible amount specified in Section 5.01(b) reduced by the Annual Additions credited to a Participant’s account under the other qualified defined contribution plans, welfare benefit funds, individual medical accounts, and simplified employee pension plans for the same Limitation Year.

(b) Maximum Permissible Amount. For Limitation Years beginning on or after January 1, 2002, the maximum permissible amount is the lesser of:

(1) $40,000, as adjusted for increases in the cost-of-living under Code section 415(d); or

(2) 100% of the Participant’s Statutory Compensation for the Limitation Year. The Compensation limit referred to in this Subsection (b)(2) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code sections 401(h) or 419A(f)(2)) which is otherwise treated as an Annual Addition. Notwithstanding the preceding sentence, Statutory Compensation for purposes of Section 5.01 for a Participant in a defined contribution plan who is permanently and totally disabled (as defined in Code section 22(e)(3)) is the Compensation such Participant would have received for the Limitation Year if the Participant had been paid at the rate of Compensation paid immediately before becoming permanently and totally disabled.

Prior to determining the Participant’s actual Statutory Compensation for the Limitation Year, the Employer may determine the maximum permissible amount for a Participant on the basis of a reasonable estimation of the Participant’s Statutory Compensation for the Limitation Year, uniformly determined for all Participants similarly situated. As soon as is administratively feasible after the end of the Limitation Year, the maximum permissible amount for the Limitation Year will be determined on the basis of the Participant’s actual Statutory Compensation for the Limitation Year.

(c) Correction of Excess. If there is an allocation in excess of the Maximum Permissible Amount, the Plan Administrator shall correct such excess pursuant to the procedures outlined under EPCRS as described in Rev. Proc. 2008-50 and any superseding guidance.


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ARTICLE 5 LIMITATIONS ON CONTRIBUTIONS

(d) Special ESOP Rule.

(1) General Rule. In the case of an applicable plan that meets the requirements of Subsection (d)(2) below, the limitations imposed by this Section do not apply to: (i) forfeitures of employer securities (within the meaning of Code section 409(l)) if such securities were acquired with the proceeds of a loan (as described in Code section 404(a)(9)(A)); or (ii) employer contributions which are deductible under Code section 404(a)(9)(B) and charged against the Participant’s Account.

(2) Applicable Plan. An employee stock ownership plan as described in Code section 4975(e)(7) meets the requirements of this Subsection if no more than one-third of the employer contributions for the Limitation Year that are deductible under Code section 404(a)(9) are allocated to Highly Compensated Employees. This Subsection (f) shall not apply if the Employer Stock is issued by an S Corporation.

(e) Stock Value Declines Below Basis. Notwithstanding the foregoing, the amount of Company contributions attributable to ESOP Contributions that is considered an Annual Addition for any Limitation Year shall in no event be greater than the lesser of (i) the amount of the payment of principal and interest on the Acquisition Loan or (ii) the fair market value of shares released from the Suspense Account on account of the repayment and allocated to Participants.


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ARTICLE 6 VESTING

ARTICLE 6 VESTING

Section 6.01

PARTICIPANT CONTRIBUTIONS

A Participant shall have a fully vested and nonforfeitable interest in his Rollover Contribution Account. A Participant shall also be fully vested in cash dividends that the Participant elects to have reinvested in the Plan pursuant to Section 9.09(a)(2)(B).

Section 6.02

NON-ELECTIVE CONTRIBUTIONS

The Participant’s interest in his Non-Elective Contribution Account shall vest based on his Years of Vesting Service in accordance with the terms of the Adoption Agreement.

For purposes of the Adoption Agreement, “3-7 Year Graded”, “2-6 Year Graded”, “1-5 Year Graded”, “1-4 Year Graded”, “5 Year Cliff”, “3 Year Cliff” and “2 Year Cliff” shall be determined in accordance with the following schedules:


	Years of Vesting Service	Vesting Percentage

“3-7 Year Graded”:
	Less than Three Years		0	%
	Three Years but less than Four Years		20	%
	Four Years but less than Five Years		40	%
	Five Years but less than Six Years		60	%
	Six Years but less than Seven Years		80	%
	Seven or More Years		100	%

“2-6 Year Graded”:
	Less than Two Years		0	%
	Two Years but less than Three Years		20	%
	Three Years but less than Four Years		40	%
	Four Years but less than Five Years		60	%
	Five Years but less than Six Years		80	%
	Six or More Years		100	%

“1-5 Year Graded”:
	Less than One Year		0	%
	One Year but less than Two Years		20	%
	Two Years but less than Three Years		40	%
	Three Years but less than Four Years		60	%
	Four Years but less than Five Years		80	%
	Five or More Years		100	%

“5 Year Cliff”:
	Less than Five Years		0	%
	Five or More Years		100	%

“3 Year Cliff”:
	Less than Three Years		0	%
	Three or More Years		100	%

“2 Year Cliff”:
	Less than Two Years		0	%
	Two or More Years		100	%


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ARTICLE 6 VESTING

Notwithstanding the foregoing, a Participant will become fully (100%) vested upon his attainment of Normal Retirement Age while an Employee. In addition, the Adoption Agreement may provide that a Participant will become fully (100%) vested upon (i) his death while an Employee, or (ii) his suffering a Disability while an Employee.

Section 6.03

FORFEITURES

(a) Participants Receiving a Distribution. A Participant who receives a distribution of the value of the entire vested portion of his Account shall forfeit the nonvested portion of such Account as soon as administratively feasible after such distribution; but no later than the end of the Plan Year following the date of such distribution. For purposes of this Section, if the value of a Participant’s vested Account balance is zero upon Termination, the Participant shall be deemed to have received a distribution of such vested Account. A Participant’s vested Account balance shall not include accumulated deductible employee contributions within the meaning of Code section 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989. If the Participant elects to the extent permitted by Article 7 to have distributed less than the entire vested portion of the Account balance derived from Employer contributions, the part of the nonvested portion that will be treated as a forfeiture is the total nonvested portion multiplied by a fraction, the numerator of which is the amount of the distribution attributable to Employer contributions and the denominator of which is the total value of the vested Employer-derived Account balance. No forfeitures will occur solely as a result of a Participant’s withdrawal of employee contributions.

(b) Participants Not Receiving a Distribution. The nonvested portion of the Account balance of a Participant who has a Termination of Employment and does not receive a complete distribution of the vested portion of his Account shall be forfeited as soon as administratively feasible after the date he incurs five consecutive One-Year Breaks in Service (One-Year Periods of Severance if the Plan uses the elapsed time method); but no later than the end of the Plan Year following the date of such break in service.

(1) Before Five One-Year Breaks. If a Participant receives or is deemed to receive a distribution pursuant to this Section and the Participant resumes employment covered under this Plan, the Participant’s Employer-derived Account balance will be restored to the amount on the date of distribution if the Participant repays to the Plan the full amount of the distribution attributable to Employer contributions before the earlier of 5 years after the first date on which the Participant is subsequently reemployed by the Employer, or the date the Participant incurs 5 consecutive One-Year Breaks in Service (One-Year Periods of Severance if the Plan uses the elapsed time method) following the date of the distribution. If a zero-vested Participant is deemed to receive a distribution pursuant to this Section, and the Participant resumes employment covered under this Plan before the date the Participant incurs 5 consecutive One-Year Breaks in Service (One-Year Periods of Severance if the Plan uses the elapsed time method), upon the reemployment of such Participant, the Employer-derived Account balance of the Participant will be restored to the amount on the date of such deemed distribution. Forfeitures that are restored pursuant to the foregoing shall be accomplished by an allocation of forfeitures, or if such forfeitures are insufficient, by a special Company contribution.

(2) After Five One-Year Breaks. If a Participant resumes employment as an Eligible Employee after forfeiting the nonvested portion of his Account balance after 5 consecutive One-Year Breaks in Service (One-Year Periods of Severance if the Plan uses the elapsed time method) and is not fully vested upon reemployment, the Participant’s Account balance attributable to his pre-break service shall be kept separate from that portion of his Account balance attributable to his post-break service until such time as his post-break Account balance becomes fully vested.

(d) Disposition of Forfeitures. Amounts forfeited from a Participant’s Account under this Section shall be used to restore forfeitures, reduce Company contributions made pursuant to Article 4 or to pay Plan expenses.

(e) Employer Stock Fund. The portion of a Participant’s Account invested in Investment Funds other than the Employer Stock Fund shall be forfeited before that portion of the Account invested in the Employer Stock Fund. If the Participant’s Account is invested in more than one class of qualifying employer securities, the Participant shall forfeit the same proportion from each such class


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ARTICLE 6 VESTING

(f) Vesting Following In-Service Withdrawals or Payment in Installments. If a distribution is made at a time when a Participant has a nonforfeitable right to less than 100 percent of his Account derived from Employer contributions and the Participant may increase the nonforfeitable percentage in the Account:

(1) A separate Account will be established for the Participant’s interest in the Plan as of the time of the distribution, and

(2) At any relevant time the Participant’s nonforfeitable portion of the separate Account will be equal to an amount (“X”) determined by the formula:

X = P(AB + (R × D)) - (R × D)

For purposes of applying the formula: P is the nonforfeitable percentage at the relevant time; AB is the Account balance at the relevant time; D is the amount of the distribution; and R is the ratio of the Account balance at the relevant time to the Account balance after distribution.


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ARTICLE 7 DISTRIBUTIONS

ARTICLE 7 DISTRIBUTIONS

Section 7.01

COMMENCEMENT OF DISTRIBUTIONS

(a) Normal Retirement. A Participant, upon attainment of Normal Retirement Age, shall be entitled to retire and to receive his Account as his benefit hereunder pursuant to Section 7.02.

(b) Late Retirement. If a Participant continues in the employ of the Company beyond his Normal Retirement Age, his participation under the Plan shall continue, and his benefits under the Plan shall commence following his actual Termination of Employment pursuant to Section 7.02.

(c) Disability Retirement. If a Participant becomes Disabled, he shall become entitled to receive his vested Account pursuant to Section 7.02 following the date he has a Termination of Employment.

(d) Death. If a Participant dies, either before or after his Termination of Employment, his Beneficiary designated pursuant to Section 7.04 shall become entitled to receive the Participant’s vested Account pursuant to Section 7.02.

(e) Termination of Employment. A Participant shall become entitled to receive his vested Account pursuant to Section 7.02 following the date he has a Termination of Employment.

Section 7.02

TIMING AND FORM OF DISTRIBUTIONS

(a) ESOP Accounts.

(1) Distribution for Reasons of Attainment of Retirement Age, Disability or Death. If a Participant’s ESOP Accounts become distributable pursuant to Section 7.01 on account of attainment of Normal or Late Retirement, Disability or death, payment of his vested ESOP Accounts shall commence with respect to Employer Stock acquired by or contributed to the Plan after December 31, 1986 (or all Employer Stock if so provided in the Adoption Agreement) not later than one year after the close of the Plan Year in which the Participant otherwise separates from service unless the Participant elects a later date.

(2) Distribution for Reasons Other than Retirement, Disability or Death. If a Participant’s ESOP Accounts become distributable pursuant to Section 7.01 on account of any reason other than Normal or Late Retirement Age, Disability or death, payment of his vested ESOP Accounts shall commence with respect to Employer Stock acquired by or contributed to the Plan after December 31, 1986 (or all Employer Stock if so provided in the Adoption Agreement) not later than the close of the Plan Year which is the 6th Plan Year following the Plan Year in which the Participant otherwise separates from service unless the Participant elects a later date. This Subsection (a)(2) shall not apply if the Participant is reemployed by the Company before distribution is required to begin.

(3) Form of Payments. Form of Payments. The benefit of a Participant entitled to a distribution of his ESOP Accounts derived from Employer Stock acquired by or contributed to the Plan after December 31, 1986 (or all Employer Stock if so provided in the Adoption Agreement) shall be payable in substantially equal annual, or more frequent installments over a period not to exceed the greater of (i) five (5) years, or (ii) in case of Participant with account balance greater than $1,035,000, five (5) years plus one year for each $205,000 that the balance exceeds $1,035,000. These dollar amounts are adjusted for cost of living by the Secretary of the Treasury in accordance with Code section 409(o)(2) at the same time and manner as under Code section 415(d). To the extent permitted in the Adoption Agreement, a Participant may elect to have payments extend over a longer or shorter period.

(4) Delayed Distribution. Notwithstanding the foregoing and at the election of the Plan Administrator, distribution of the ESOP Contribution Account (other than for reasons specified in Paragraph (1) above) need not commence until the close of the Plan Year in which the Exempt Loan is repaid in full; provided that the proceeds of the Exempt loan were not used to acquire Employer Stock issued by an S Corporation.


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ARTICLE 7 DISTRIBUTIONS

(5) To the extent provided in the Adoption Agreement, distributions may also be paid over the periods applicable to Accounts other than the ESOP Accounts. In any event, distributions made on account of the death of the Participant must be made in the manner described in Subsections (c)(1)(A), (B) & (C) and Subsections (c)(2)(A) & (B) below.

(6) Any amendment or exercise of employer discretion regarding revisions of optional forms of benefit shall be subject to the requirements of Treas. Reg. section 1.411(d)-4 Q&A-2(d).

(b) Accounts other than ESOP Accounts.

(1) Distribution for Reasons Other Than Death. If a Participant’s Accounts other than his ESOP Account becomes distributable pursuant to Section 7.01 for any reason other than death and such amount is not required to be distributed in the form of a Qualified Joint and Survivor Annuity pursuant to Section 7.10, payment of his vested Accounts other than his ESOP Account shall commence at such times and shall be payable in the form and at such times as specified in the Adoption Agreement. To the extent permitted in the Adoption Agreement, a Participant may elect to have the Plan Administrator apply his Accounts other than his ESOP Account toward the purchase of an annuity contract. The terms of such annuity contract shall comply with the provisions of this Plan and any annuity contract shall be nontransferable and shall be distributed to the Participant.

The method of distribution shall be selected by the Participant on a form prescribed by the Plan Administrator. If no such selection is made by the Participant, payment shall be made in the form of a lump sum distribution unless payment is required to be made in the form of a Qualified Joint and Survivor Annuity pursuant to Section 7.10. No distribution shall be made if the Participant is rehired by the Company before payments commence.

(2) Distribution on Account of Death. If a Participant’s Accounts other than his ESOP Account becomes distributable pursuant to Section 7.01 on account of death, the distributions will be made pursuant to Subsection (c) below.

(1) Before Distribution Has Begun. If the Participant dies before distribution of his Account begins and such amount is not required to be distributed in the form of a Qualified Preretirement Survivor Annuity pursuant to Section 7.10, distribution of the Participant’s entire Account shall be completed by the time and in the manner specified in the Adoption Agreement. To the extent permitted in the Adoption Agreement, payments may be made over the following periods:

(A) A complete distribution shall be made by December 31 of the calendar year containing the fifth anniversary of the Participant’s death;

(B) Distributions may be made over the life or over a period certain not greater than the life expectancy of the Beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died; and/or

(C) If the Beneficiary is the Participant’s surviving spouse, the date distributions are required to begin in accordance with Subparagraph (B) above shall not be earlier than the later of (i) December 31 of the calendar year immediately following the calendar year in which the Participant died and (ii) December 31 of the calendar year in which the Participant would have attained age 70-1/2.

If the Plan permits Participant elections under this Subsection (c)(1) and the Participant has not made an election as to form of payment by the time of his death, the Participant’s Beneficiary must elect the method of distribution no later than the earlier of (1) December 31 of the calendar year in which distributions would be required to begin under this Section, or (2) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no designated Beneficiary, or if the designated Beneficiary does not elect a method of distribution, distribution of the Participant’s entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.


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ARTICLE 7 DISTRIBUTIONS

If the surviving spouse dies after the Participant, the provisions of this Subsection (c)(1), with the exception of Subparagraph (C) therein, shall be applied as if the surviving spouse were the Participant.

(2) After Distribution Has Begun. If the Participant dies after distribution of his Account has begun, the remaining portion of such Account will continue to be distributed at least as rapidly as the method of distribution being used prior to the Participant’s death. If the Participant’s Account was not being distributed in the form of an annuity at the time of his death: (i) distribution of the Participant’s entire Account shall be completed by the time and in the manner specified in the Adoption Agreement; and (ii) the Beneficiary may elect to receive the Participant’s remaining vested Account balance in a lump sum distribution. To the extent permitted in the Adoption Agreement, payments may be made over the following periods:

(A) A complete distribution shall be made by December 31 of the calendar year containing the fifth anniversary of the Participant’s death; and/or

(B) Distributions shall continue to be distributed at least as rapidly as the method of distribution being used prior to the Participant’s death.

The Beneficiary shall provide the Plan Administrator with the death notice or other sufficient documentation before any payments are made pursuant to this Subsection.

(d) Special Rules Relating to ESOP Accounts.

(1) In General. Unless a Participant elects to receive his distribution in cash, distribution of a Participant’s vested ESOP Account shall be made in whole shares of Employer Stock, with any fractional shares paid in cash. Shares of Employer Stock distributed may include such legend restrictions on transferability as the Company may reasonably require to assure compliance with applicable federal and state securities laws. Notwithstanding any provision of the Plan to the contrary: (i) a Participant shall not have the right to receive Employer Stock with respect to the portion of the Participant’s Account that has been reinvested pursuant to Section 9.02(b), and (ii) except as otherwise provided in the Adoption Agreement and if the Plan is an Applicable Plan , a distribution from the Employer Stock Fund shall be made in cash. If pursuant to the foregoing a Participant elects to receive any portion of his ESOP Account in the form of Employer Stock that is invested in Investment Funds other than the Employer Stock Fund, the Plan Administrator shall direct the Trustee to liquidate such other Investment Funds and purchase whole shares Employer Stock with the proceeds. In the event that there is not enough Employer Stock available for purchase, the Participant may elect to: (i) receive Employer Stock to the extent available and receive the balance in cash, (ii) receive Employer Stock to the extent available and receive the balance in Employer Stock at a later date when such stock becomes available, or (iii) defer distribution until such Employer Stock becomes available.

(2) Put Option. If the Employer Stock is not readily tradable on an established market (within the meaning of IRS Notice 2011-19 for Plan Years beginning on or after January 1, 2012 or such later date provided in such Notice) and the Plan is not an Applicable Plan, the Employer or the Plan will purchase Employer Stock that has been distributed to a Participant or Beneficiary if the Participant or Beneficiary offers the Employer stock for sale to the Employer or the Plan during one of the two put option periods described below. A fair valuation formula that meets the requirements of section 9.10 will be used to determine the amount to be paid to the Participant or Beneficiary.

The first put option period is the period of 60 days beginning on the date following the date that the Employer Stock distributed to the Participant or Beneficiary. The second put option period is a period of 60 days in the following Plan Year.

Such put option shall be enforceable by the Participant for a period of at least 60 days following the date of distribution of Employer Stock and, if the put option is not exercised within such 60-day period, for an additional period of at least 60 days in the following Plan Year (as provided in applicable Treasury regulations). The Company may permit the Trustee to purchase any shares covered by the put option directly from the Participant.

(A) Payment Requirement for Total Distribution. If the Company is required to repurchase Employer Stock that is distributed to the Participant as part of a total distribution, the Company may make payments in substantially equal periodic payments (not less frequently than annually) over a period beginning not later than 30 days


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ARTICLE 7 DISTRIBUTIONS

after the exercise of the put option and not exceeding 5 years, provided that there is adequate security provided and reasonable interest paid on the unpaid amounts. For purposes of this paragraph, the term “total distribution” means the distribution within one taxable year to the recipient of the balance to the credit of the recipient’s account.

(B) Payment Requirement for Installment Distributions. If the Company is required to repurchase Employer Stock as part of an installment distribution, payment shall made not later than 30 days after the exercise of the put option described in this paragraph (3).

(3) Right of First Refusal. To the extent provided in the Adoption Agreement, shares of Employer Stock distributed by the Trustee to a Participant or Beneficiary shall be subject to a “Right of First Refusal” if such shares do not constitute registration-type securities within the meaning of Code section 409(e).

(A) Parties. The Right of First Refusal shall be in favor of the Company, the Plan, or both in any order of priority as determined by the Plan Administrator.

(B) Price. The selling price and other terms under the Right of First Refusal must not be less favorable to the Participant than the greater of the value of the Employer Stock determined under Section 9.10, or the purchase price and other written terms offered by an independent and unrelated buyer making a good faith offer to purchase the Employer Stock.

(C) Term. The Right of First Refusal must lapse no later than 14 days after the Participant gives written notice to the holder of the Employer Stock by an independent and unrelated buyer.

(D) Conditions. The Company may require that the distributee execute such documents (and may provide suitable legends on the applicable stock certificates) that include the terms of the right of first refusal prior to receiving Employer Stock.

(4) Stock Reshuffling. If the Plan is an Applicable Plan, any Employer Stock held in an ESOP Account shall be redeemed or transferred annually to the extent provided in the Adoption Agreement. Such redemption or transfer shall be subject to the following:

(A) Employer Stock diversified under sections 9.02(b) shall not be mandatorily returned to Participants’ Accounts who are subject to such provisions.

(B) If the Participant may take an immediate distribution of his or her Account and does not consent to a distribution and is subject to the Reshuffling provisions such Participant must be provided sufficient investment options in order to ensure that the loss of the Employer Stock investment is not a significant detriment within the meaning of Treas. Reg. section 1.411(a)-11(c)(2)(i).

(e) Valuation Date. The distributable amount of a Participant’s Account is the vested portion of his Account as of the Valuation Date coincident with or next preceding the date distribution is made to the Participant or Beneficiary as reduced by any subsequent distributions, withdrawals or loans.

(f) Restriction on Deferral of Payment. Unless otherwise elected, benefit payments under the Plan will begin to a Participant not later than the 60th day after the latest of the close of the Plan Year in which:

(1) the Participant attains Normal Retirement Age;

(2) occurs the 10th anniversary of the year in which his participation commenced; or

(3) the Participant has a Termination of Employment.

(g) Minimum Distribution Requirements. Distributions shall be made in a method that is in conformance with the requirements set forth in Section 7.05. Section 7.05 shall not be deemed to create a type of benefit (e.g., installment payments, lump sum within five years or immediate lump sum payment) to any class of Participants and Beneficiaries that is not otherwise permitted by the Plan. Any elections described in Section 7.02(a)(5) and 7.02(c) shall also apply to this Section 7.05.


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Section 7.03

CASH-OUT OF SMALL BALANCES

(a) Vested Account Balance Does Not Exceed $5,000. Notwithstanding the foregoing, if involuntary cash-out is selected in the Adoption Agreement and the vested amount of an Account payable to a Participant or Beneficiary does not exceed $5,000 (or such lesser amount specified in the Adoption Agreement) at the time such individual becomes entitled to a distribution hereunder (or at any subsequent time established by the Plan Administrator to the extent provided in applicable Treasury Regulations), such vested Account shall be paid in a lump sum to the extent it is not subject to the automatic rollover provisions of Section 7.06(c) below.

(b) Vested Account Balance Exceeds $5,000. If the value of a Participant’s vested Account balance exceeds $5,000 or such lesser amount as specified in the Adoption Agreement, and the Account balance is immediately distributable, the Participant must consent to any distribution of such Account balance. Notwithstanding the foregoing and unless otherwise specified in the Adoption Agreement, payments shall commence as of the Participants Required Beginning Date in the form of a lump sum or installment payments. The Participant’s consent shall be obtained in writing within the 180-day period ending on the Annuity Starting Date. The Plan Administrator shall notify the Participant of the right to defer any distribution until the date specified in the Adoption Agreement. Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the Plan, and shall be provided no less than 30 days and no more than 180 days prior to the Annuity Starting Date. Except to the extent provided in Section 7.10, distribution may commence less than 30 days after the notice described in the preceding sentence is given, provided the Plan Administrator clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and the Participant, after receiving the notice, affirmatively elects a distribution. In the event a Participant’s vested Account balance becomes distributable without consent pursuant to this Subsection (b), and the Participant fails to elect a form of distribution, the vested Account balance of such Participant shall be paid in a single sum except to the extent provided in Section 7.10.

(c) For purposes of this Section 7.03, the Participant’s vested Account balance shall not include amounts attributable to accumulated deductible Employee contributions within the meaning of Code section 72(o)(5)(B).

(d) Required Distributions and Plan Termination. Consent of the Participant or his spouse shall not be required to the extent that a distribution is required to satisfy Code sections 401(a)(9) or 415. In addition, upon termination of this Plan the Participant’s Account balance shall be distributed to the Participant in a lump sum distribution unless payment is made in the form of a Qualified Joint and Survivor Annuity pursuant to Section 7.10. However, if the Employer maintains another defined contribution plan (other than an employee stock ownership plan as defined in Code section 4975(e)(7)), then the Participant’s Account balance will be transferred, without the Participant’s consent, to the other plan if the Participant does not consent to an immediate distribution.

(e) Rollovers (1) Applicability and Effective Date. This Section 7.03(e) shall apply if elected by the Plan Sponsor in the Adoption Agreement and shall be effective January 1, 2002 unless otherwise specified in the Adoption Agreement.

(2) Treatment of Rollovers. If elected in the Adoption Agreement, Rollovers shall be disregarded in determining the value of the Account balance for involuntary distributions. For purposes of this Section 7.03, the Participant’s vested Account balance shall not include that portion of the Account balance that is attributable to Rollover Contributions (and earnings allocable thereto) within the meaning of Code sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).

(f) Notice of Right to Defer. Any description of a Participant’s right to defer a distribution under Code section 411(a)(11) must also include a description of the consequences of failing to defer receipt of the distribution. The Plan will not be treated as failing to meet these notice requirements if the Plan Administrator makes a reasonable attempt to comply with the new requirements during the period that is within 90 days of the issuance of regulations.


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Section 7.04

BENEFICIARY

(a) Beneficiary Designation Right. Each Participant, and if the Participant has died, the Beneficiary of such Participant, shall have the right to designate one or more primary and one or more secondary Beneficiaries to receive any benefit becoming payable upon such individual’s death. To the extent that a Participant’s Account is not subject to Section 7.10, the spouse of a married Participant shall be the sole primary Beneficiary of such Participant unless the requirements of Subsection (b) are met. To the extent that a Participant’s Account is subject to Section 7.10, the spouse of a married Participant shall be the Beneficiary of 100% of such Participant’s Account unless the spouse waives his or her rights to such benefit pursuant to Section 7.10. All Beneficiary designations shall be in writing in a form satisfactory to the Plan Administrator and shall only be effective when filed with the Plan Administrator during the Participant’s lifetime (or if the Participant has died, during the lifetime of the Beneficiary of such Participant who desires to designate a further Beneficiary). Except as provided in Section 7.04(b) or Section 7.10, as applicable, each Participant (or Beneficiary) shall be entitled to change his Beneficiaries at any time and from time to time by filing written notice of such change with the Plan Administrator.

(b) Form and Content of Spouse’s Consent. To the extent that a Participant’s Account is not subject to Section 7.10, the Participant may designate a Beneficiary other than his spouse pursuant to this Subsection if: (i) the spouse has waived the spouse’s right to be the Participant’s Beneficiary in accordance with this Subsection, (ii) the Participant has no spouse, or (iii) the Plan Administrator determines that the spouse cannot be located or such other circumstances exist under which spousal consent is not required, as prescribed by Treasury regulations. If required, such consent: (i) shall be in writing, (ii) shall relate only to the specific alternate Beneficiary or beneficiaries designated (or permits Beneficiary designations by the Participant without the spouse’s further consent), (iii) shall acknowledge the effect of the consent, and (iv) shall be witnessed by a plan representative or notary public. Any consent by a spouse, or establishment that the consent of a spouse may not be obtained, shall not be effective with respect to any other spouse. Any spousal consent that permits subsequent changes by the Participant to the Beneficiary designation without the requirement of further spousal consent shall acknowledge that the spouse has the right to limit such consent to a specific Beneficiary, and that the spouse voluntarily elects to relinquish such right.

(c) In the event that the Participant fails to designate a Beneficiary, or in the event that the Participant is predeceased by all designated primary and secondary Beneficiaries, the death benefit shall be payable to the Participant’s spouse or, if there is no spouse, if there is no spouse, to the Participant’s children in equal shares or, if there are no children to the Participant’s estate unless otherwise specified in the Adoption Agreement.

Section 7.05

MINIMUM DISTRIBUTION REQUIREMENTS

(a) General Rules.

(1) Effective Date.

(A) In General. Subject to Section 7.10, the requirements of this Section shall apply to any distribution of a Participant’s interest and will take precedence over any inconsistent provisions of this Plan. Unless otherwise specified in the Adoption Agreement, the provisions of this Section apply to calendar years beginning after December 31, 2002.

(B) 2009 Waiver of Requirements. Notwithstanding other provisions of the Plan to the contrary; to the extent provided in the Adoption Agreement and by Code section 401(a)(9), IRS Notice 2009-82 and any superseding guidance, a Participant or Beneficiary who would have been required to receive 2009 RMDs or Extended 2009 RMDs will receive those distributions for 2009 unless the Participant or Beneficiary chooses not to receive such distributions. Participants and Beneficiaries described in the preceding sentence will be given the opportunity to elect to stop receiving the distributions described in the preceding sentence.

(i) In addition, notwithstanding other provisions of the Plan to the contrary, and solely for purposes of applying the direct rollover provisions of the Plan, certain additional distributions in 2009, as chosen in the Adoption Agreement, will be treated as eligible rollover distributions.


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(ii) Definitions:

(1) “2009 RMDs” are Required Minimum Distributions for 2009 but for the enactment of section 401(a)(9)(H) of the Code;

(2) “Extended 2009 RMDs” are one or more payments in a series of substantially equal distributions (that include the 2009 RMDs) made at least annually and expected to last for the life (or life expectancy) of the Participant, the joint lives (or joint life expectancy) of the Participant and the Participant’s designated Beneficiary, or for a period of at least 10 years.

(2) Construction. All distributions required under this Section shall be determined and made in accordance with the regulations under Code section 401(a)(9) and the minimum distribution incidental benefit requirement of Code section 401(a)(9)(G). Nothing contained in this Section shall be deemed to create a type of benefit (e.g., installment payments, lump sum within five years or immediate lump sum payment) to any class of Participants and/or Beneficiaries that is not otherwise permitted by the Plan.

(3) Limits on Distribution Periods. As of the first distribution calendar year, distributions to a Participant, if not made in a single sum, may only be made over one of the following periods:

(A) the life of the Participant;

(B) the joint lives of the Participant and a designated Beneficiary;

(D) a period certain not extending beyond the joint life and last survivor expectancy of the Participant and a designated Beneficiary.

(b) Time and Manner of Distribution.

(1) Required Beginning Date. Unless an earlier date is specified in Section 7.02(b), the Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.

(2) Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(A) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, then unless an earlier date is specified in Section 7.02(b), distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70-1/2, if later.

(B) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, then, unless otherwise specified in Section 7.02(b), distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(C) If there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death unless an earlier date is specified in Section 7.02(b).

(D) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse are required to begin, this Subsection (b)(2), other than Subsection (b)(2)(A), will apply as if the surviving spouse were the Participant except as otherwise provided in Section 7.02(b).

For purposes of this Subsection (b)(2) and Subsection (d), unless Subsection (b)(2)(D) applies, distributions are considered to begin on the Participant’s Required Beginning Date. If Subsection (b)(2)(D) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under section


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Subsection (b)(2)(A). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Subsection (b)(2)(A)), the date distributions are considered to begin is the date distributions actually commence.

(3) Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first distribution calendar year distributions will be made in accordance with Subsections (c) and (d) to the extent otherwise permitted by the Plan. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code 401(a)(9) and the regulations.

(1) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(A) the quotient obtained by dividing the Participant’s Account balance by the distribution period in the Uniform Lifetime Table set forth in Treas. Reg. section 1.401(a)(9)-9, Q&A-2 using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

(B) if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account balance by the number in the Joint and Last Survivor Table set forth in Treas. Reg. section 1.401(a)(9)-9, Q&A-3 using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

(2) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this Subsection (c) beginning with the first distribution calendar year and continuing up to, and including, the distribution calendar year that includes the Participant’s date of death.

(3) The amount of the Required Minimum Distribution shall include the amount payable under a QLAC that has passed its annuity starting date (as defined in the QLAC).

(d) Required Minimum Distributions After Participant’s Death.

(1) Death On or After Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated Beneficiary, determined as follows:

(i) The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(ii) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(iii) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.


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(B) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of the September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2) Death Before Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the remaining life expectancy of the Participant’s designated Beneficiary, determined as provided in Subsection (d)(1).

(B) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(C) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Subsection (b)(2)(i), this Subsection (d)(2) will apply as if the surviving spouse were the Participant.

(e) Definitions.

(1) Designated Beneficiary. The individual who is designated by the Participant (or the Participant’s surviving spouse) as the Beneficiary of the Participant’s interest under the Plan and who is the designated Beneficiary under Code section 401(a)(9) and Treas. Reg. section 1.401(a)(9)-4.

(2) Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Subsection (b)(2). The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that distribution calendar year.

(3) Life expectancy. Life expectancy is computed by use of the Single Life Table in Treas. Reg. section 1.401(a)(9)-9, Q&A-1.

(4) Participant’s Account Balance. The Account balance as of the last Valuation Date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the Account as of dates in the valuation calendar year after the Valuation Date and decreased by (1) distributions made in the valuation calendar year after the Valuation Date and (2) any amount held in a QLAC that has not reached its annuity starting date (as defined in the QLAC). The Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

(f) TEFRA Section 242(b)(2) Elections.

(1) Notwithstanding the other requirements of this Section and subject to the requirements of Section 7.10, distribution on behalf of any employee, including a More than 5% Owner, who has made a designation under section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (a “section 242(b)(2) election”) may be made in accordance with all of the following requirements (regardless of when such distribution commences):

(A) The distribution by the Plan is one which would not have disqualified such plan under Code section 401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of 1984.


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(B) The distribution is in accordance with a method of distribution designated by the Employee whose interest in the Plan is being distributed or, if the Employee is deceased, by a Beneficiary of such Employee.

(D) The Employee had accrued a benefit under the Plan as of December 31, 1983.

(E) The method of distribution designated by the Employee or the Beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Employee’s death, the Beneficiaries of the Employee listed in order of priority.

(2) A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Employee.

(3) For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Employee, or the Beneficiary, to whom such distribution is being made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in Subsections (f)(1)(A) and (E).

(4) If a designation is revoked, any subsequent distribution must satisfy the requirements of Code section 401(a)(9) and the regulations thereunder. If a designation is revoked subsequent to the date distributions are required to begin, the Plan must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Code section 401(a)(9) and the regulations thereunder, but for the section 242(b)(2) election. For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another Beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life).

(5) In the case in which an amount is transferred or rolled over from one plan to another plan, the rules in Treas. Reg. section 1.401(a)(9)-8, Q&A-14 and Q&A-15, shall apply.

(g) Application of Five Year Rule.

(1) To the extent permitted in Section 7.02(b), if the Participant dies before distributions are required to begin and there is a designated Beneficiary, distributions to the designated Beneficiary are not required to begin by the date specified in Subsection (b)(2), but the Participant’s entire interest may be distributed to the designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death. If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to either the Participant or the surviving spouse begin, this election will apply as if the surviving spouse were the Participant.

(2) To the extent permitted in Section 7.02(b), Participants or beneficiaries may elect on an individual basis whether the 5-year rule or the life expectancy rule in Subsections (b)(2) and (d)(2) applies to distributions after the death of a Participant who has a designated Beneficiary. The election must be made no later than the earlier of September 30 of the calendar year in which distributions would be required to begin under Subsections (b)(2), or by September 30 of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, surviving spouse’s) death. If neither the Participant nor Beneficiary makes an election under this paragraph, distributions will be made in accordance with Subsections (b)(2), (d)(2) and (h)(1).


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Section 7.06

DIRECT ROLLOVERS

(a) In General. This Section applies to distributions made after December 31, 2001. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this part, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution that is equal to at least $200 (or such lesser amount as determined by the Plan Administrator in a nondiscriminatory manner) paid directly to an eligible retirement plan specified by the distributee in a direct rollover. If an eligible rollover distribution is less than $500 (or such lesser amount as determined by the Plan Administrator in a nondiscriminatory manner), a distributee may not make the election described in the preceding sentence to roll over a portion of the eligible rollover distribution. This Paragraph shall be subject to Code sections 401(a)(31) and 402(f); Treas. Reg. sections 1.401(a)(31)-1, 1.402(c)-2; and IRS Notices 2005-5, 2008-30, 2009-69, and 2009-75.

(b) Definitions.

(1) Eligible Rollover Distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code section 401(a)(9); any hardship distribution; the portion of any other distribution(s) that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any other distribution(s) that is reasonably expected to total less than $200 during a year.

A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code section 408(a) or (b), or to a qualified defined contribution plan described in Code section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(2) Eligible Retirement Plan. An eligible retirement plan is an eligible plan under Code section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, an individual retirement account described in Code section 408(a), individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), an annuity contract described in Code section 403(b), or a qualified plan described in Code section 401(a), that accepts the distributee’s eligible rollover distribution. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relations Order, as defined in Code section 414(p).

If any portion of an eligible rollover distribution is attributable to payments or distributions from a Roth Elective Deferral Account, an eligible retirement plan shall only include another Roth elective deferral account under an applicable retirement plan described in Code section 402A(e)(1) or to a Roth IRA described in Code section 408A and only to the extent the rollover is permitted under the rules of Code section 402(c). The Plan will not provide for a direct rollover (including an automatic rollover) for distributions from a Participant’s Roth Elective Deferral Account if the amount of the distributions that are eligible rollover distributions are reasonably expected to total less than $200 during a year. In addition, any distribution from a Participant’s Roth Elective Deferral Account is not taken into account in determining whether distributions from a Participant’s other Accounts are reasonably expected to total less than $200 during a year. The provisions of this Section that allow a Participant to elect a direct rollover of only a portion of an eligible rollover distribution but only if the amount rolled over is at least $500 are applied by treating any amount distributed from the Participant’s Roth Elective Deferral Account as a separate distribution from any amount distributed from the Participant’s other Accounts in the Plan, even if the amounts are distributed at the same time.

Notwithstanding the foregoing, effective for distributions made after December 31, 2007, a Participant may roll over a distribution from the Plan to a Roth IRA provided that the amount rolled over is an eligible rollover distribution (as defined in Code section 402(c)(4)) and, pursuant to Code section 408A(d)(3)(A), there is included in gross income any amount that would be includible if the distribution were not rolled over.


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Notwithstanding the foregoing, effective January 1, 2007, a non-spouse Beneficiary who is a designated Beneficiary within the meaning of Code section 401(a)(9)(E) may, after the death of the Participant, make a direct rollover of a distribution to an IRA established on behalf of the designated Beneficiary; provided that the distributed amount satisfies all the requirements to be an eligible rollover distribution other than the requirement that the distribution be made to the Participant or the Participant’s spouse. Such direct rollovers shall be subject to the terms and conditions of IRS Notice 2007-7 and superseding guidance, including but not limited to the provision in Q&A-17 regarding required minimum distributions. Effective January 1, 2010, the distributions described in this paragraph shall be subject to Code sections 401(a)(31), 402(f) and 3405(c).

Notwithstanding the foregoing, effective for taxable years beginning on or after January 1, 2007, a portion of a distribution shall not fail to be an eligible rollover distribution merely because such portion consists of amounts which are not includible in gross income. However, such portion may be transferred as a direct rollover only to a qualified trust or to an annuity contract described in Code section 403(b) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(3) Distributee. A distributee includes an employee or former employee. In addition, the employee’s or former employee’s surviving spouse and the employee’s or former employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code section 414(p), are distributees with regard to the interest of the spouse or former spouse.

(4) Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee.

(c) Automatic Rollovers. In the event of a mandatory distribution greater than $1,000 (or such lesser amount as determined by the Plan Administrator in a nondiscriminatory manner) in accordance with the provisions of Section 7.03(a), if the Participant does not elect to have such distribution paid directly to an eligible retirement plan specified by the Participant in a direct rollover or to receive the distribution directly in accordance with Section 7.02, then the Plan Administrator will pay the distribution in a direct rollover to an individual retirement plan designated by the Plan Administrator. Unless otherwise elected in the Adoption Agreement, for purposes of determining whether a mandatory distribution is greater than $1,000, the portion of the Participant’s distribution attributable to any Rollover Contribution is included. Eligible rollover distributions from a Participant’s Roth Elective Deferral Account are separately taken into account in determining whether the total amount of the Participant’s Account balances under the Plan exceeds $1,000 for purposes of mandatory distributions from the Plan.

(d) Special Rule for S Corporations. The Plan may permit a direct rollover of the distribution of S Corporation stock to an IRA, provided that:

(1) The S Corporation shall repurchase the stock immediately upon the Plan’s distribution of the stock to an IRA;

(2) Either: (i) the S Corporation must repurchase the S Corporation stock contemporaneously with, and effective on the same day as, the distribution, or (ii) the Plan may assume the rights and obligations of the S Corporation to repurchase the S Corporation stock immediately upon the Plan’s distribution of the stock to an IRA and the Plan repurchases the S Corporation stock contemporaneously with, and effective on the same day as, the distribution;

(3) No income (including tax-exempt income), loss, deduction, or credit attributable to the distributed S Corporation stock under Code section 1366 shall be allocated to the Participant’s IRA.

Section 7.07

MINOR OR LEGALLY INCOMPETENT PAYEE

If a distribution is to be made to an individual who is either a minor or legally incompetent, the Plan Administrator may direct that such distribution be paid to the legal guardian. If a distribution is to be made to such person and there is no


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legal guardian, the Plan Administrator may direct that payment be made to: (a) a parent, (b) a person holding a power of attorney; (c) a person authorized to act on behalf of such person under state law, or (d) the custodian for such person under the Uniform Transfer to Minors Act, if such is permitted by the laws of the state in which such minor resides. Such payment shall fully discharge the Trustee, Plan Administrator, Trust Fund, and the Employer from further liability on account thereof.

Section 7.08

MISSING PAYEE

If all or any portion of the distribution payable to a Participant or Beneficiary remains unpaid because the Plan Administrator has been unable to ascertain the whereabouts of the Participant or Beneficiary after making reasonable efforts to contact the Participant or Beneficiary (which may include, but not be limited to, sending a registered letter, return receipt requested, to the last known address of such Participant or Beneficiary; and/or a commercial locating service) the Plan Administrator may use a reasonable method to remove the assets from the Plan that is consistent with ERISA and the Code. Such methods may include, but not be limited to, (a) creating an individual retirement plan designated by the Plan Administrator; or (b) if, for a period of more than five years after such distribution becomes payable or six months after all attempts to locate the Participant or Beneficiary, the Plan Administrator is still unable to ascertain the whereabouts of the Participant or Beneficiary, the amount so distributable may be treated as a forfeiture under Article 6 hereof. Notwithstanding the foregoing, if a claim is subsequently made by the Participant or Beneficiary for the forfeited benefit pursuant to clause (b) of the preceding sentence, such benefit shall be reinstated without any credit or deduction for earnings and losses. Amounts forfeited from a Participant’s Account under this Section shall be used pursuant to Section 6.03(d).

Section 7.09

DISTRIBUTIONS UPON TERMINATION OF PLAN

Except as provided in Section 7.10, a Participant may receive the balance of his Account in a lump sum payment upon termination of the Plan without the establishment of alternative defined contribution plan (as described in Treas. Reg. section 1.401(k)-1(d)(4)) other than an employee stock ownership plan (as defined in Code section 4975(e) or Code section 409), a simplified employee pension plan (as defined in Code section 408(k)), a SIMPLE IRA Plan (defined in Code section 408(p)), a plan or contract that satisfies the requirements of Code section 403(b), or a plan that is described in Code section 457(b) or (f).

Section 7.10

JOINT AND SURVIVOR ANNUITIES

(a) Application. Notwithstanding any provision to the contrary, this Section shall apply: (i) if a Participant elects benefits in the form of any annuity; or (ii) to the portion of the Participant’s Transfer Account attributable to funds subject to the survivor annuity requirements of Code section 401(a)(11) and section 417 that were transferred from another plan (or to such other Accounts if the amounts subject to such survivor annuities and were not separately accounted for). This Section shall only apply if the Participant’s Account exceeds $5,000 (or such lesser amount specified in the Adoption Agreement) at the time such individual becomes entitled to a distribution hereunder (or at any subsequent time established by the Plan Administrator to the extent provided in applicable Treasury regulations). Effective January 1, 2002 unless otherwise specified in the Adoption Agreement and if elected by the Plan Sponsor in the Adoption Agreement, for purposes of this Section 7.10(a), the Participant’s vested Account balance shall not include that portion of the Account balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Code sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).

(b) Qualified Joint and Survivor Annuity. Unless otherwise elected pursuant to Subsection (d) below, a Participant’s vested Account balance, to the extent provided in Subsection (a) above, will be paid to him by the purchase and delivery of an annuity in the form of a Qualified Joint and Survivor Annuity. Effective for Annuity Starting Dates in Plan Years beginning after December 31, 2007, to the extent that the Plan must offer a Qualified Joint and Survivor Annuity, the Plan shall also offer a Qualified Optional Survivor Annuity as another optional form of benefit.

A Participant may waive the Qualified Joint and Survivor Annuity during a period that begins on the first day of the 180-day period ending on the Annuity Starting Date and ends on the later of the Annuity Starting Date or the 30th day after the Plan Administrator provides the Participant with a written explanation of the Qualified Joint and Survivor Annuity. The Plan Administrator shall no less than 30 days and no more than 180 days prior to the Annuity Starting Date provide each Participant a written explanation of: (i) the terms and conditions of a Qualified Joint and Survivor Annuity;


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(ii) the Participant’s right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit; (iii) the rights of a Participant’s spouse; and (iv) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity; and (v) the relative values of the various optional forms of benefits under the Plan pursuant to Treas. Reg. section 1.417(a)(3)-1(c)(2).

The Annuity Starting Date for a distribution in a form other than a Qualified Joint and Survivor Annuity may be less than 30 days after receipt of the written explanation described in the preceding paragraph provided: (i) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect (with spousal consent) to a form of distribution other than a Qualified Joint and Survivor Annuity; (ii) the Participant is permitted to revoke any affirmative distribution election at least until the Annuity Starting Date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant; and (iii) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant.

(c) Qualified Preretirement Survivor Annuity. Unless otherwise elected within the applicable election period and to the extent provided in Subsection (a) above, if a Participant dies before the Annuity Starting Date then at least 50% of the Participant’s vested Account balance shall be applied toward the purchase of an annuity for the life of the surviving spouse which shall be distributed to the spouse. The surviving spouse may direct the commencement of payments under the qualified preretirement survivor annuity within a reasonable time after the Participant’s death. The terms of such annuity contract shall comply with the provisions of this Plan and the annuity contract shall be nontransferable. The applicable election period shall be the period which begins on the first day of the Plan Year in which the Participant attains age 35 and ends on the date of the Participant’s death. If a Participant separates from service prior to the first day of the Plan Year in which he attains age 35, the election period shall begin on the date of separation. A Participant who has not yet attained age 35 may waive the annuity specified in this Subsection (c) provided that (1) the Participant receives a written explanation pursuant to the following paragraph and (2) such election is not effective as of the first day of the Plan Year in which the Participant attains age 35. Any new waiver on or after such date shall be subject to the full requirements of this Subsection. Notwithstanding anything in this Section to the contrary, the surviving spouse may elect, in writing, to have the Account balance be distributed pursuant to Section 7.02(b).

The Plan Administrator shall provide each Participant within the applicable period for such Participant a written explanation of the annuity described in this Subsection (c) in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements of Subsection (b) applicable to a Qualified Joint and Survivor Annuity. The applicable period for a Participant is whichever of the following periods ends last: (i) the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35; (ii) a reasonable period ending after the individual becomes a Participant; or (iii) within a reasonable period ending after Termination of Employment in the case of a Participant who separates from service before attaining age 35.

For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (ii) and (iii) is the end of the two-year period beginning one year prior to the date the applicable event occurs, and ending one year after that date. If a Participant who separates from service before the Plan Year in which he attains age 35 thereafter returns to employment with the Employer, the applicable period for such Participant shall be redetermined.

(d) Elections. Any waiver of the annuities described in Subsections (b) and (c) above shall not be effective unless: (i) the Participant’s spouse consents in writing to the election; (ii) the election designates a specific Beneficiary, including any class of beneficiaries or any contingent beneficiaries, which may not be changed without spousal consent (or the spouse expressly permits designations by the Participant without any further spousal consent); (iii) the spouse’s consent acknowledges the effect of the election; and (iv) the spouse’s consent is witnessed by a plan representative or notary public. Additionally, a Participant’s waiver of the Qualified Joint and Survivor Annuity shall not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the spouse expressly permits designations by the Participant without any further spousal consent). If it is established to the satisfaction of a plan representative that there is no spouse (within the meaning of Code section 417) or that the spouse cannot be located, a waiver will be deemed a qualified election. Any consent by a spouse obtained under this provision (or establishment that the consent of a spouse may not be obtained) shall be effective only with respect to such spouse. A consent that permits designations by the Participant without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the


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spouse voluntarily elects to relinquish either or both such rights. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Subsections (b) and (c).

Any consent by a spouse obtained under this provision (or establishment that the consent of a spouse may not be obtained) shall be effective only with respect to such spouse. A consent that permits designations by the Participant without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the spouse voluntarily elects to relinquish either or both such rights. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Subsections (b) and (c).

For purposes of determining a Participant’s spouse, the Plan Administrator shall apply the one-year rule in Code section 417(d), Treas. Reg. section 1.401(a)-20 to the extent selected in the Adoption Agreement.

(f) Deferred Annuity Contracts. In determining whether and/or how the Qualified Joint and Survivor Annuity and the Qualified Preretirement Survivor Annuity rules described in Code sections 401(a)(11) and 417 apply to a deferred annuity contract purchased under the Plan, the provisions of Internal Revenue Service Revenue Ruling 2012-3 and any superseding guidance shall apply.

ARTICLE 8 IN-SERVICE DISTRIBUTIONS AND LOANS

Section 8.01

HARDSHIP

(a) Hardship. A Participant may receive a distribution on account of hardship from the Accounts specified in the Adoption Agreement. Notwithstanding anything in the Plan to the contrary if the Adoption Agreement permits a hardship distribution from an Account, the amount available for a hardship distribution from such Account shall include any amounts grandfathered under Treas. Reg. section 1.401(k)-1(d)(3)(ii)(B). Unless otherwise specified in the Adoption Agreement, a Participant shall only be permitted to receive a hardship distribution pursuant to this Section 8.01 from Accounts that are fully (100%) vested.

(b) Hardship - Safe Harbor. If the Adoption Agreement provides that the Plan has adopted safe harbor criteria for Hardship withdrawal, the following shall apply:

(A) Expenses for (or necessary to obtain) medical care that would be deductible under Code section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income) for the Employee, or the Employee’s spouse, children, or dependents (as defined in Code section 152, and, for taxable years beginning on or after January 1, 2005, without regard to Code section 152(b)(1), (b)(2) and (d)(1)(B));

(B) Costs directly related to the purchase of a principal residence for the Employee (excluding mortgage payments);

(C) Payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education for the Employee, or the Employee’s spouse, children, or dependents (as defined in Code section 152, and, for taxable years beginning on or after January 1, 2005, without regard to Code section 152(b)(1), (b)(2) and (d)(1)(B));

(D) Payments necessary to prevent the eviction of the Employee from the Employee’s principal residence or foreclosure on the mortgage on that residence;


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(E) Payments for burial or funeral expenses for the employee’s deceased parent, spouse, children or dependents (as defined in Code section 152, and, for taxable years beginning on or after January 1, 2005, without regard to Code section 152(d)(1)(B));

(F) Expenses for the repair of damage to the employee’s principal residence that would qualify for the casualty deduction under Code section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); and

(G) Other expenses as provided by the Commissioner as specified in Treas. Reg. section 1.401(k)-1(d)(3)(v).

(2) Amount Necessary to Satisfy Need. A distribution will be considered as necessary to satisfy an immediate and heavy financial need of the Participant only if:

(A) The distribution is not in excess of the amount of the immediate and heavy financial need (including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution);

(B) The Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans under all plans maintained by the Employer; and

(C) All plans maintained by the Employer provide that the Participant’s Elective Deferrals (and after tax contributions) will be suspended for 6 months (12 months, for hardship distributions before 2002) after the receipt of the hardship distribution; and

(c) Hardship - Non Safe Harbor. If the Adoption Agreement provides that the Plan has adopted the non-safe harbor criteria for hardship for permitted Accounts, the following shall apply:

(1) Immediate and Heavy Financial Need. A hardship distribution shall only be made upon the finding by the Plan Administrator of an immediate and heavy financial need where such Participant lacks other available resources. Whether a Participant has an immediate and heavy financial need is to be determined based on all relevant facts and circumstances. The need to pay the funeral expenses of a family member would constitute an immediate and heavy financial need and a distribution made to a Participant for the purchase of a boat or television would not constitute a distribution made on account of an immediate and heavy financial need. A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the Participant.

(2) Amount Necessary to Satisfy Need. A distribution is not treated as necessary to satisfy an immediate and heavy financial need of a Participant to the extent the amount of the distribution is in excess of the amount required to relieve the financial need or to the extent the need may be satisfied from other resources that are reasonably available to the Participant. This determination generally is to be made on the basis of all relevant facts and circumstances. For purposes of this Subsection, the Participant’s resources are deemed to include those assets of the Participant’s spouse and minor children that are reasonably available to the Participant. A vacation home jointly owned (regardless of the nature of legal title) by the Participant and the Participant’s spouse will be deemed a resource of the Participant. However, property held for the Participant’s child under an irrevocable trust or under the Uniform Gifts to Minors Act is not treated as a resource of the Participant. The amount of an immediate and heavy financial need may include any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution. A distribution generally may be treated as necessary to satisfy a financial need if the Employer relies upon the Participant’s written representation, unless the Employer has actual knowledge to the contrary, that the need cannot reasonably be relieved:

(A) Through reimbursement or compensation by insurance or otherwise;

(B) By liquidation of the Participant’s assets;


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(D) By other currently available distributions (including distribution of ESOP dividends under Code section 404(k)) and nontaxable (at the time of the loan) loans, under plans maintained by the Employer or by any other employer; or

(E) By borrowing from commercial sources on reasonable commercial terms in an amount sufficient to satisfy the need.

For purposes of this Subsection, a need cannot reasonably be relieved by one of the actions listed above if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a Plan loan if the loan would disqualify the Employee from obtaining other necessary financing.

Section 8.02

SPECIFIED AGE

A Participant may receive a distribution on attainment of a specified age from the Accounts specified in the Adoption Agreement. Unless otherwise specified in the Adoption Agreement, a Participant shall only be permitted to receive a specified age distribution pursuant to this Section 8.02 from Accounts that are fully (100%) vested.

Section 8.03

OTHER WITHDRAWALS

(a) After a Period Certain. To the extent provided in the Adoption Agreement, a Participant may receive a distribution from his Non-Elective Contribution Account which has accumulated for at least twenty-four (24) months. However, an individual who has been a Participant for five (5) or more Plan Years shall be entitled to receive a distribution of his Non-Elective Contribution Account regardless of the length of time the funds have accumulated. Unless otherwise specified in the Adoption Agreement, a Participant shall only be permitted to receive a distribution pursuant to this Section 8.03(a) from Accounts that are fully vested.

(b) At Any Time. To the extent provided in the Adoption Agreement, a Participant may receive a distribution from his Rollover Contribution Account at any time.

Section 8.04

TRANSFER ACCOUNT

In addition to the foregoing, a Participant may receive a distribution from his Transfer Account as permitted under the terms of any plan from which funds in such Account were transferred to the extent that such optional forms of benefit must be preserved pursuant to Code section 411(d)(6).

Section 8.05

RULES REGARDING IN-SERVICE DISTRIBUTIONS

(a) In General. This Section shall apply only to the extent that in-service withdrawals are otherwise permitted pursuant to this Article 8.

(b) Frequency and Amount of Withdrawals. The Plan Administrator may establish uniform procedures that include, but are not limited to, prescribing limitations on the frequency and minimum amount of withdrawals; provided, that no procedures involving minimum amounts shall prescribe a minimum withdrawal greater than $1,000. Unless otherwise provided in the Adoption Agreement, such distributions may be paid in cash or in-kind

(c) Form of Withdrawals. All distributions of amounts withdrawn pursuant to Sections 8.01, 8.02, 8.03 and 8.04 shall be made in the form of a single sum as soon as practicable following the Valuation Date as of which such withdrawal is made. Such distributions shall be paid in cash; provided however, that in-service withdrawals may be made from ESOP Accounts in Employer Stock to the extent that the Plan permits distributions from ESOP Accounts in Employer Stock.

(d) Active Employment. Only Employees shall be eligible to receive in-service distributions pursuant to this Article 8.


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(e) Ordering Rule. The Plan Administrator shall determine the ordering rule for in-service distributions. Such ordering rule may provide that the Participant may elect to have payments made any combination of such accounts and any other Account.

(f) Transfer Account. A Participant may receive a distribution from the vested portion of his Transfer Account only to the extent such account was not transferred from a qualified plan subject to Code section 412, to the extent Section 8.04 applies or to the extent the Adoption Agreement permits distributions to be made to a Participant who has attained age 62 and who has not separated from employment.

(g) Spousal Consent. If Section 7.10 applies to the Account distributed a Participant must obtain the consent of his or her spouse, if any, to obtain an Account balance as an in-service distribution. Spousal consent shall be obtained no earlier than the beginning of the 180-day period that ends on the date on which the in-service distribution is to be so secured. The consent must be in writing, must acknowledge the effect of the in-service distribution, and must be witnessed by a Plan representative or notary public. Such consent shall thereafter be binding with respect to the consenting spouse or any subsequent spouse with respect to that in-service distribution.

Section 8.06

LOANS

(a) Eligible Participants. To the extent provided in the Adoption Agreement, a Participant may apply for a loan from the Plan and the provisions of Code section 72(p) and Treas. Reg. section 1.72(p)-1 shall apply to the Plan and are hereby incorporated by reference. The Plan Administrator may provide that a loan may only be granted for the purpose of enabling the Participant to meet a financial hardship or an unusual or special situation in his financial affairs. Loans shall only be granted pursuant to the terms of this Section to persons who the Plan Administrator determines have the ability to repay the loan. Loans shall not be made available to Participants who are or were Highly Compensated Employees in an amount greater than the amount available to other Participants. Loans shall be made available to all Participants on a nondiscriminatory and reasonably equivalent basis.

(b) Maximum Loan Amount. Unless otherwise provided in the Adoption Agreement, loans shall not be made from an ESOP Account. No loan to any Participant can be made to the extent that such loan when added to the outstanding balance of all other loans to the Participant would exceed the lesser of:

(1) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans during the one year period ending on the day before the loan is made, over the outstanding balance of loans from the Plan on the date the loan is made; or

(2) one-half the present value of the vested Account balance of the Participant or, if greater and so provided in the Adoption Agreement, the total vested Account balance up to $10,000; provided that additional security is given to the extent such loan exceeds 50% of the vested Account balance.

For the purpose of the above limitation, all loans from all qualified plans of the Employer are aggregated.

(c) Loan Term and Amortization. Any loan shall by its terms require that repayment (principal and interest) be amortized in level payments, not less frequently than quarterly, over a period not extending beyond five years from the date of the loan. If so provided in the Adoption Agreement, a loan term may extend beyond five years if the loan is used to acquire a dwelling unit which within a reasonable time (determined at the time the loan is made) will be used as the principal residence of the Participant.

(d) Minimum Loan Amount - Maximum Number of Loans. The Adoption Agreement shall specify a minimum loan amount and the maximum number of loans outstanding at any one time.

(e) Interest Rate. Interest shall be charged at a rate to be fixed by the Plan Administrator and, in determining the interest rate, the Plan Administrator shall take into consideration interest rates currently being charged on similar commercial loans by persons in the business of lending money.

(f) Security. All loans shall be secured by no more than one-half of the vested portion of the Participant’s Accounts (determined immediately after the origination of the loan) and such additional security as the Plan Administrator may deem necessary. All loans made to Participants under this Section are to be considered Trust Fund investments and shall be segregated for purposes of Article 9 hereof unless provided otherwise in the Adoption Agreement.


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(g) Repayment. Loans shall be repaid in accordance with the foregoing and the Plan Administrator may require as a condition to granting such loan that it be repaid through payroll deductions. Unless the loan note provides otherwise, the principal amount of the loan and accrued interest shall become immediately due and payable upon a Termination of Employment. Repayment may be suspended pursuant to Code section 414(u).

(h) Loan Fees. Fees properly chargeable in connection with a loan may be charged, in accordance with a uniform and nondiscriminatory policy established by the Plan Administrator, against the Account of the Participant to whom the loan is granted.

(i) Default. In the event of default, foreclosure on the note and attachment of security shall not occur until a distributable event occurs in the Plan.

(j) Loans to Self-Employed Persons. For Plan loans made before January 1, 2002, no loans will be made to any shareholder-employee or owner-employee. For purposes of this requirement, a shareholder-employee means an employee or officer of an electing small business (Subchapter S) corporation who owns (or is considered as owning within the meaning of Code section 318(a)(1), on any day during the taxable year of such corporation, more than 5% of the outstanding stock of the corporation. An owner-employee means, if the Employer is a sole proprietorship, an individual who is the sole proprietor, or, if the Employer is a partnership, a partner owning more than 10% of either the capital or profits interest of the partnership.

(k) Loan Procedures. The Plan Administrator is authorized to adopt any administrative rules or procedures that it deems necessary or appropriate with respect to the granting and administering of loans under this Article 8.

(l) Spousal Consent. If Section 7.10 applies or if so provided in the Adoption Agreement, a Participant must obtain the consent of his or her spouse, if any, to use the Account balance as security for a loan. Spousal consent shall be obtained no earlier than the beginning of the 180-day period that ends on the date on which the loan is to be so secured. The consent must be in writing, must acknowledge the effect of the loan, and must be witnessed by a Plan representative or notary public. Such consent shall thereafter be binding with respect to the consenting spouse or any subsequent spouse with respect to that loan. A new consent shall be required if the Account balance is used for renegotiation, extension, renewal, or other revision of the loan.

(m) Ordering Rule. The Plan Administrator shall determine from which Accounts a Participant may receive a loan and the ordering rule for loans.

If Section 7.10 applies and a valid spousal consent has been obtained, then, notwithstanding any other provision of this Plan, the portion of the Participant’s vested Account balance used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the Account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant’s vested Account balance (determined without regard to the preceding sentence) is payable to the surviving spouse, then the Account balance shall be adjusted by first reducing the vested Account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse.


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ARTICLE 9 INVESTMENT AND VALUATION OF TRUST FUND

Section 9.01

INVESTMENT OF ASSETS

All existing assets of the Trust Fund and all future contributions shall be invested in accordance with the terms of this Article 9. All assets of the Trust Fund may be commingled for investment purposes with the assets of any retirement plan which is maintained by the Company and which qualifies under Code section 401(a) and may be held as a single fund under one or more trust instruments; provided that the value of each plan’s assets can be determined at any time. The assets allocable to each such plan shall in no event be used for the benefit of Participants in the other plans.

Section 9.02

PARTICIPANT SELF-DIRECTION

(a) In General. To the extent provided for in the Adoption Agreement, the Plan Administrator may permit Participants to direct the investment of their Accounts pursuant to this Section 9.02. Any Participant self direction shall be made pursuant to such uniform guidelines and procedures as the Plan Administrator may establish from time to time. Notwithstanding the foregoing, a Participant may not alter his investment in the Employer Stock Fund except as provided in Subsection (b) below.

(b) Pre-Retirement Diversification Rights.

(1) The Plan Administrator shall offer a Qualified Participant the option to direct the investment of Employer Stock acquired by or contributed to the Plan after December 31, 1986 (or all Employer Stock if so provided in the Adoption Agreement) into other Investment Funds pursuant to this Subsection and Code section 401(a)(28)(B)(ii)(II) during the Diversification Election Period. The Participant must elect such option within 90 days after the end of each Plan Year during the Diversification Election Period, and the value of such Employer Stock will be invested as directed by such Participant within 180 days after the end of such Plan Year.

(2) The maximum number of shares of Employer Stock which a Qualified Participant may elect to reinvest as of the end of each of the Plan Years during the Diversification Election Period shall be that number of such shares (rounded to the nearest whole number) which is equal to the result determined by the formula (25% × (A + B)) - B, where A is the number of shares of Employer Stock which are allocated to his Account as of the applicable date and B is the number of shares of Employer Stock, if any, previously reinvested by the Participant pursuant to this Subsection, provided that for purposes of determining such maximum number of shares for the last Plan Year in a Diversification Election Period, fifty percent (50%) shall be substituted for twenty-five percent (25%). No Participant may elect to reinvest during any Diversification Election Period if the fair market value as of the end of the preceding Plan Year of Employer Stock allocated to such Participant’s account is $500 or less, determined as of the Plan’s valuation date immediately preceding the first day on which a Qualified Participant is eligible to make a diversification election.

(3) In the event a Qualified Participant elects to diversify pursuant to the foregoing, the Plan Administrator may elect instead to distribute to the Qualified Participant the amounts subject to such election. The distribution must occur within 90 days after the last day of the annual Diversification Election Period. Distribution of diversified Employer Stock must comply with section 7.02(a).

(4) In the event a Qualified Participant elects to diversify pursuant to the foregoing, the Plan Administrator may elect instead to transfer an amount equal to the value of the diversified Employer Stock to another qualified defined contribution plan of the Employer that offers at least three investment options (each of which must be diversified and have materially different risk and return characteristics). This transfer must be made within 90 days after the last day of the annual Diversification Election Period and must comply with applicable qualification requirements, including Code section 414(l), 411(d)(6) and 401(a)(11).

(c) Investment Elections. To the extent provided in Subsections (a) and (b), each Qualified Participant shall direct in the form and manner and at the time or times prescribed by the Plan Administrator the percentage of the applicable Accounts to be invested in one or more of at least three alternative investment options available under the Plan. Each of these investment options must be diversified and have materially different risk and return characteristics. The Plan must


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invest the value of the diversified Employer Stock in accordance with the direction of the Qualified Participant within 90 days after the end of the annual Diversification Election Period. After the death of the Participant, a Beneficiary shall be entitled to make investment elections as if the Beneficiary were the Participant. Notwithstanding the foregoing, the Plan Administrator may restrict investment transfers to the extent required to comply with applicable law.

(d) Loans. If the Adoption Agreement does not permit Participant self-direction, any assets that are held in the form of a Participant loan made pursuant to Article 8 shall be treated as a segregated investment unless otherwise provided by the Plan Administrator.

Section 9.03

INDIVIDUAL ACCOUNTS

To the extent provided in the Adoption Agreement, there shall be maintained on the books of the Plan with respect to each Participant, as applicable, a Non-Elective Contribution Account, Rollover Contribution Account, Transfer Account and any other Account established by the Plan Administrator. Each such Account shall separately reflect the Participant’s interest in the Trust Fund relating to such Account. Each Participant shall receive, at least annually, a statement of his Account. A Participant’s interest in the Trust Fund shall be determined and accounted for based on his beneficial interest in such fund.

Section 9.04

QUALIFYING EMPLOYER INVESTMENTS

Subject to Section 1.02, the Trustee may invest up to 100% (to extent that the Plan is not subject to Section 7.10) of the fair market value of the assets of the Trust Fund in Qualifying Employer Securities or Qualifying Employer Real Property”. In accordance with IRC 409(l), the term “employer security” means (i) common stock issued by the Employer, or by a corporation within the same controlled group, which is readily tradeable on an established securities market (this requires that sales of the stock take place regularly and consistently based on the facts and circumstances), (ii) if there is no readily tradeable common stock, closely held common stock of the Employer which has a combination of voting power and dividend rights equal to or in excess of the class of common stock of the Employer having the greatest dividend rights, and (iii) noncallable preferred stock if the stock is convertible into stock which meets the requirements of (i) or (ii) above, and if the conversion price is reasonable as of the date the ESOP acquired the preferred stock.

Section 9.05

ALLOCATION OF EARNINGS AND LOSSES

(a) Reinvestment. Except as provided in Section 9.09, the dividends, capital gains distributions, and other earnings received on the Trust Fund shall be allocated to such fund and reinvested.

(b) Valuation. Except as provided in Section 9.10, the assets of each Investment Fund shall be valued at their current fair market value as of each Valuation Date, and Accounts of each Participant with interests in that Investment Fund shall be credited with such Participant’s allocable share of the earnings and losses of each Investment Fund since the immediately preceding Valuation Date. Such allocation shall be done on the basis of such Participant’s interest in the applicable Investment Fund. For purposes of the allocation of investment earnings and losses, the Plan Administrator may adjust the value of interests of Investment Funds in Accounts as of the preceding Valuation Date to account for any contributions, distributions or withdrawals that occur after such preceding Valuation Date.

(c) Allocation to Individual Accounts. The Accounts of each Participant shall be adjusted as of each Valuation Date by (i) reducing such Accounts by any distributions and withdrawals made therefrom since the preceding Valuation Date, (ii) increasing or reducing such Accounts by the Participant’s share of earnings and losses and reasonable fees charged against such accounts at the direction of the Plan Administrator, and (iii) crediting such Accounts with any contributions made thereto since the preceding Valuation Date.

(d) Allocation of Expenses. The Plan Administrator may allocate all, none or any portion of the Plan’s expenses to Participant Accounts. When allocating expenses among Participant Accounts, the Plan Administrator may allocate such expenses using any reasonable method that does not violate Title I of ERISA and does not discriminate in favor of Highly Compensated Employees within the meaning of applicable provisions of Code section 401(a)(4). Such methods may include, but not be limited to: (i) allocating expenses only to current or former employees (or among any other classification(s) of employees), (ii) allocating expenses directly to individual employees, (iii) allocating expenses using the per capita or pro rata method, and (iv) any combination of the foregoing.


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(e) Valuation for Distribution. Except as provided in Section 9.10, for the purposes of paying the amounts to be distributed to a Participant or Beneficiary pursuant to Articles 7 and 8, the value of the Participant’s interest shall be determined in accordance with the provisions of this Article as of the Valuation Date related to the date benefits are paid.

(f) No Rights Created by Allocation. An allocation of contributions or earnings to the separate Account of a Participant under this Article 9 shall not cause the Participant to have any right, title or interest in any assets of the Plan except at the time and under the terms and conditions expressly provided for in the Plan.

(g) Dividends and Credits. Any dividends or credits earned on insurance contracts will be allocated to the Participant’s Account for whose benefit the contract is held. No contract will be purchased under the Plan unless such contract or a separate definite written agreement between the Company and the insurer provides that no value under contracts providing benefits under the Plan or credits determined by the insurer (on account of dividends, earnings, or other experience rating credits, or surrender or cancellation credits) with respect to such contracts may be paid or returned to the Company or diverted to or used for other than the exclusive benefit of the Participants or their Beneficiaries. However, any contribution made by the Company may be returned to the Company pursuant to Article 10.

Section 9.06

VOTING RIGHTS

(a) Accounts other than ESOP Accounts. To the extent provided in the Adoption Agreement, a Participant and a Beneficiary of a deceased Participant shall have the right to direct the Trustee as to the exercise of voting rights with respect to investments allocated to Accounts other than ESOP Accounts. An individual’s allocable share of investment in the applicable Accounts shall be determined in the discretion of the Plan Administrator. As soon as practicable prior to the occasion for the exercise of such voting rights, the person designed by the Plan Administrator (the “Designee”) shall deliver or cause to be delivered, to each Participant and Beneficiary of a deceased Participant entitled to vote all notices, prospectuses, financial statements, proxies and proxy soliciting material relating to such investment allocated to the Participant’s Account. Instructions by Participants and Beneficiaries to the Designee shall be in such form and pursuant to such regulations as the Plan Administrator shall prescribe. Any such instructions shall remain in the strict confidence of the Designee. Any investments for which no instructions are received by the Designee within such time specified by notice and, unless otherwise required by applicable law, any shares which are not allocated to Participants’ Accounts shall be voted in the same proportion that the shares for which instructions are received are voted. With respect to fractional shares for which instructions are received by the Designee, the Designee shall aggregate all such fractional shares for which the same instructions are received into whole shares and shall vote such whole shares as instructed. Any remaining fractional shares shall be voted in the same proportion that the shares for which instructions are received are voted.

(b) ESOP Accounts. Except as provided below, all Employer Stock held in the Trust and allocated to ESOP Accounts shall generally be voted by the Trustee, as directed by the Plan Administrator.

(1) In General. Each Participant or, if applicable, his Beneficiary shall be entitled to direct the Trustee as to the exercise of any voting rights attributable to shares of Employer Stock then allocated to his ESOP Accounts.

(2) Nonregistered Securities. Notwithstanding the foregoing, this Subsection (b)(2) shall apply if the Employer Stock does not constitute registration-type securities within the meaning of Code section 409(e). A Participant or Beneficiary shall only be entitled to direct the Trustee with respect to the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all of the assets of a trade or business, or such other transactions which may be prescribed by applicable Treasury regulations promulgated under Code section 409(e). Each participant shall be entitled to one vote with respect to such issues.

(3) Instructions. If Participants are entitled to so direct the Trustee as to the voting of Employer Stock pursuant to Subsection (b)(1) or (b)(2), all such Employer Stock as to which such instructions have been received (which may include an instruction to abstain) shall be voted in accordance with such instructions. However, the Trustee shall vote any unallocated Employer Stock in the Trust Fund, or any allocated Employer Stock as to which no voting instructions have been received, in the same proportion as Employer Stock as to which voting instructions have been received, unless otherwise directed by the Plan Administrator.


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(4) Exempt Loan Subject to Code Section 133. Each Participant or, if applicable, his Beneficiary shall be entitled to direct the Trustee as to the exercise of any and all voting rights attributable to shares of Employer Stock then allocated to his Account that were acquired with the proceeds of an Exempt Loan that is subject to the full pass through voting requirements of Code section 133.

(5) Tender Offer. In the event of a tender offer for any Common Stock, the Plan Administrator shall direct the Trustee to accept or reject the offer with respect to the shares of Employer Stock held in the Trust Fund.

Section 9.07

LIQUIDITY

(a) Trustee’s Put Option. If Trustee determined that the Trust does not have sufficient cash to provide for distributions of benefits, payment of expenses or for other expenditures, the Trustee shall have an option to sell shares of Employer Stock to the Company to the to the extent necessary to provide for such expenditures, provided the sale does not violate the terms of the Plan or applicable law. The sales price shall be determined pursuant to Section 9.10.

(b) Loans. If permitted under applicable law, rulings or regulations, and not a prohibited transaction under Code section 4975(c) or sections 406 or 407 of ERISA (or a prohibited transaction exemption), the Plan Administrator, at the request of the Trustee, shall cause the Company to advance to the Trustee the amounts needed for distributions of benefits, payment of expenses or for other expenditures. Such amounts shall be reimbursed by the Trustee to the Company, with such interest as may be permitted under ERISA.

Section 9.08

RESTRICTIONS ON COMPANY STOCK

Except as required by Code section 409(h) and by Treas. Reg. section 54.4975-7(b)(9) and (10), or as otherwise required by applicable law, no Employer Stock purchased with an Exempt Loan may be subject to a put, call or other option, or buy-sell or similar arrangement while held by, and when distributed from, the Plan, whether or not the Plan is an employee stock ownership plan within the meaning of Code section 4975(e)(7) at that time. The Plan shall not obligate itself to acquire securities from a particular security holder at an indefinite time determined upon the happening of an event such as the death of the holder.

Section 9.09

TREATMENT OF DIVIDENDS

(a) Cash Dividends.

(1) Dividends on Unallocated Employer Stock. Any cash dividends received which are attributable to shares of Employer Stock (i) acquired with the proceeds of an Exempt Loan and (ii) held in the Suspense Account or the Released and Unallocated Account shall be either: (x) held invested until the next Exempt Loan repayment, at which time such dividends, and interest thereon, shall be applied to repay the principal and, at the Plan Administrator’s discretion the interest, of the Exempt Loan; or (y) allocated to Participants’ Accounts under Article 4 for such Plan Year.

(2) Dividends on Allocated Employer Stock. As determined in the sole discretion of the Plan Administrator, any cash dividends paid with respect to shares of Employer Stock allocated to a Participant’s Account may be: (i) used to repay the principal balance of an outstanding Exempt Loan or interest thereon in whole or in part pursuant to Subsection (a)(2)(A) below; (ii) allocated to Participants’ Accounts; or (iii) distributed currently (or within 90 days after the close of the Plan Year in which such dividends are paid to the Trustee) in cash to such Participants (or their Beneficiaries) on a nondiscriminatory basis pursuant to Subsection (a)(2)(B) below.

(A) Repay Exempt Loan. In the event the Plan Administrator elects to repay the Exempt Loan, Employer Stock with a fair market value of not less than the amount of such dividend shall be allocated to each Participant to whom such dividend would have been allocated.

(B) Distribute to Participants. The Plan Administrator may distribute cash dividends paid with respect to shares of Employer Stock allocated to Participants’ Accounts. The Plan Administrator may also allow Plan Participants to further elect to have such dividends paid to the Plan, or be distributed currently in cash to such Participants (or their Beneficiaries) under such election procedures as may be established by the Plan Administrator; provided that the dividends are paid within 90 days after the close of the Plan Year in which such dividends are paid. Such distributions may be made directly by the Corporation or by the Trustee after receipt of the dividends.


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(b) Stock Dividends. Stock dividends paid (and stock received by the Trustee as a result of a stock split, stock conversion, reorganization or recapitalization of the Company) shall be credited to the account under which such dividends arise.

Section 9.10

USE OF APPRAISER

If the Employer Stock is not readily tradable on an established securities market (within the meaning of IRS Notice 2011-19 for Plan Years beginning on or after January 1, 2012 or such later date provided in such Notice), all valuations of Employer Stock acquired by or contributed to the Plan after December 31, 1986 with respect to activities carried on by the Plan shall be performed by an independent appraiser. For purposes of the preceding sentence, the term “independent appraiser” means any appraiser meeting the requirements of Code section 170(a). Valuations of Employer Stock must be made in good faith and based on all relevant factors for determining the fair market value of securities. In the case of a transaction between the Plan and a S-Corporation Disqualified Person, value must be determined as of the date of the applicable transaction. For all other purposes under the Plan, value must be determined as of the most recent Valuation Date under the Plan. Earnings on shares allocated to Participant’s accounts will be allocated to those accounts at least annually.

Section 9.11

LIFE INSURANCE

(a) Purchase of Life Insurance. To the extent provided in the Adoption Agreement, a Participant may request that his Accounts that are not ESOP Accounts be invested in insurance on his life, and if the Plan Administrator, in its discretion, approves such request, it shall direct the Trustee to apply for and be the owner of any insurance contract purchased under the terms of this Section. The insurance contract(s) must provide that proceeds will be payable to the Trustee; however, the Trustee shall be required to pay over all proceeds of the contract(s) to the Participant’s Beneficiary in accordance with the distribution provisions of this Plan. The form and type of contract purchased shall be determined by the Plan Administrator. The Plan Administrator may also establish rules that prohibit the purchase of life insurance where the annual premium is estimated to be less than a certain minimum amount. If the Plan Administrator directs the Trustee to borrow against such contracts, such borrowings shall be on a uniform and nondiscriminatory basis. Any discretion shall be exercised in a non-discriminatory manner.

(b) Maximum Insurance Amounts. The total premiums paid for a Participant’s ordinary life insurance shall be less than 50% of the aggregate Company contributions allocated to such Participant’s Account. If term insurance or universal life insurance is purchased, the aggregate premiums shall not exceed 25% of aggregate Company contributions allocated to the insured Participant’s Account. If both ordinary life insurance and either term insurance or universal life insurance is purchased for a Participant, the aggregate premiums for such term insurance and/or universal life insurance plus one-half of the total premiums for such ordinary life insurance shall not in the aggregate exceed 25% of the aggregate Company contributions allocated to the insured Participant’s Account. However, the foregoing restrictions shall not apply to funds that may be withdrawn or distributed from the Plan in accordance with applicable law even if such withdrawals/distributions are not permitted under the terms of the Plan.

(c) Beneficiary. The Trust Fund shall be designated as the Beneficiary to receive death benefits payable pursuant to the provisions of any life insurance policy purchased pursuant to this Section. Any death proceeds received by the Trust Fund shall be added to the deceased Participant’s Account and distributed pursuant to Article 7 hereof. Under no circumstances shall the Trust Fund retain any part of the proceeds. In the event of any conflict between the terms of this Plan and the terms of any insurance contract purchased hereunder, the Plan provisions shall control.

(d) Conversion of Policies. If an insured Participant does not die prior to retirement, the Trustee may: (i) convert the entire value of any such life insurance contract at or before retirement into cash to provide the retirement benefits set forth in Article 7 so that no portion of such value may be used to continue life insurance protection beyond retirement; or (ii) distribute any such contract to the Participant. Nothing provided herein shall be construed to prohibit the purchase, sale, transfer or exchange of any individual life insurance contract which would otherwise be permitted under applicable prohibited transaction class exemptions or Department of Labor Regulations.


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(e) Distributions. Any distribution of an insurance policy or the proceeds of an insurance policy purchased pursuant to this Section shall be subject to the requirements of Article 7.

Section 9.12

NONTERMINABLE PROTECTIONS AND RIGHTS

If the Plan provides for an exempt loan and that loan is repaid or if the Plan ceases to be an ESOP plan, any existing put, call or other option, or buy-sell or similar arrangement existing at the time of the change are nonterminable with respect to distributions of securities that were acquired with the exempt loan, as required under Treas.

Section 9.13

QUALIFYING LONGEVITY ANNUITY CONTRACT (QLAC)

(a) Purchase of QLAC. To the extent provided in the Adoption Agreement, a Participant may request that a portion of his Account be invested in a QLAC. The QLAC must meet all requirements as stated under Treasury Regulation 1.401(a)(9)-6.

(b) Maximum QLAC Amount. The total amount of all QLACs purchased for a Participant under this Plan or any other plan cannot exceed the limits as specified in Treasury Regulation 1.401(a)(9)-6, A-17(b). The Plan Administrator may rely on information provided by the Participant with regard to QLACs purchased for the Participant under any other plan.

(c) Excess Premiums. If a QLAC fails to meet the maximum QLAC amount under Treasury Regulation 1.401(a)(9)-6, A-17(b), the amount will no longer be considered a QLAC and will be included in the Participant’s Account Balance for purposes of distributions under Plan Section 7.05 as of the date the excess premium payment is made unless the amount is returned to a non-QLAC portion of the Participant’s Account by the end of the calendar year following the calendar year in which the excess premium payment was made.


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Section 10.01

TRUST FUND

(a) Continuation of Trust Fund. A Trust is hereby established or continued under the Plan and the Trustee will maintain a trust account for the Plan and, as part thereof, Participants’ Accounts for such individuals as the Company shall from time to time give written notice to the Trustee are Participants in the Plan. The Trustee will accept and hold in the Trust Fund such contributions on behalf of Participants as it may receive from time to time from the Company, including amounts transferred by any prior trustee of the Plan, and such earnings, income and appreciation as may accrue thereon; less losses, depreciation and payments made by the Trustee to carry out the purposes of the Plan. The Trust Fund shall be fully invested and reinvested in accordance with the applicable provisions of the Plan.

(b) Exclusive Benefit. All contributions made to the Plan are made for the exclusive benefit of the Participants and their Beneficiaries, and such contributions shall not be used for, nor diverted to, purposes other than for the exclusive benefit of the Participants and their Beneficiaries (including the costs of maintaining and administering the Plan and corresponding Trust).

(c) Return of Contributions. Notwithstanding any other provision of the Plan: (1) as contributions made prior to the receipt of an initial determination letter are conditional upon a favorable determination as to the qualified status of the Plan under Code section 401(a), if the Plan receives an adverse determination with respect to its initial qualification, then any such contribution may be returned to the Company within one year after such determination, provided the application for determination is made by the time prescribed by law; (2) contributions made by the Company based upon mistake of fact may be returned to the Company within one year of such contribution; (3) as all contributions to the Plan are conditioned upon their deductibility under the Code, if a deduction for such a contribution is disallowed, such contribution may be returned to the Company within one year of the disallowance of such deduction; and (4) after all liabilities under the Plan have been satisfied, the remaining assets of the Trust shall be distributed to the Company if such distribution does not contravene any provision of applicable law.

In the case of the return of a contribution due to mistake of fact or the disallowance of a deduction, the amount that may be returned is the excess of the amount contributed over the amount that would have been contributed had there not been a mistake or disallowance. Earnings attributable to the excess contributions may not be returned to the Company but losses attributable thereto must reduce the amount to be so returned. Any return of contribution or distribution of assets made by the Trustee pursuant to this Section shall be made only upon the direction of the Company, which shall have exclusive responsibility for determining whether the conditions of such return or distribution have been satisfied and for the amount to be returned.

(d) Assets Not Held by Trustee. The Trustee shall not be responsible for any assets of the Plan that are held outside of the Trust Fund. The Trustee is expressly hereby relieved of any responsibility or liability for any losses resulting to the Plan arising from any acts or omissions on the part of any insurance company holding assets outside of the Trust Fund. The Trustee may require the Company to serve as custodian for all promissory notes and related documents issued in connection with the Plan’s Participant loan program and require the Company to be responsible for the safekeeping of same.

(e) Group Trust. In the event that the Trust is a part of any group trust (within the meaning of Internal Revenue Service Revenue Rulings 81-100 and 2011-1): (1) participation in the Trust is limited to (i) individual retirement accounts which are exempt under Code section 408(e), (ii) pension and profit-sharing trusts which are exempt under Code section 501(a) by qualifying under Code section 401(a) and (iii) accounts under Code sections 403(b)(7), 403(b)(9) and governmental retiree benefit plans under Code section 401(a)(24) to the extent the requirements of Revenue Ruling 2011-1 are met; (2) no part of the corpus or income which equitably belongs to any individual retirement account or Employer’s trust may be used for or diverted to any purposes other than for the exclusive benefit of the individual or the Employees, respectively, or their Beneficiaries who are entitled to benefits under such participating individual retirement account or Employer’s trust; (3) no part of the equity or interest in the Trust Fund shall be subject to assignment by a participating individual retirement account or Employer’s trust; and (4) the Trustee shall maintain separate accounts for each participating trust or individual retirement account.


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Section 10.02

DUTIES OF THE TRUSTEE

(a) In General. The Trustee is not a party to, and has no duties or responsibilities under the Plan, other than those that may be expressly contained in this Article. The Trustee shall have no duties, responsibilities or liability with respect to the acts or omissions of any prior trustee. The Trustee shall discharge its assigned duties and responsibilities under this Article and the Plan with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

(b) Contributions. The Trustee agrees to accept contributions that are paid to it by the Company (as well as Rollover Contributions and direct transfers from other eligible retirement plans) in accordance with the terms of this Article. Such contributions shall be in cash or in such other form that may be acceptable to the Trustee. In-kind contributions of other than qualifying employer securities are permitted provided that the contribution is discretionary and unencumbered. Qualifying employer securities may be contributed subject to the requirements of ERISA section 408(e). The Trustee shall have no responsibility for any property until it is received by the Trustee. The special trustee specified in the Adoption Agreement has the duty to determine and collect contributions under the Plan. The Company shall have the sole duty and responsibility for the determination of the accuracy or sufficiency of the contributions to be made under the Plan, the transmittal of the same to the Trustee and compliance with any statute, regulation or rule applicable to contributions.

(c) Distributions. The Trustee shall make distributions out of the Trust Fund pursuant to instructions described in Section 10.05. The Trustee shall not have any responsibility or duty under this Article for determining that such are in accordance with the terms of the Plan and applicable law, including without limitation, the amount, timing or method of payment and the identity of each person to whom such payments shall be made. The Trustee shall have no responsibility or duty to determine the tax effect of any payment or to see to the application of any payment. In making payments, the Company acknowledges that the Trustee is acting as a paying agent and not as the payor, for tax information reporting and withholding purposes. In the event that any dispute shall arise as to the persons to whom payment or delivery of any assets shall be made by the Trustee, the Trustee may withhold such payment or delivery until such dispute shall have been settled by the parties concerned or shall have been determined by a court of competent jurisdiction.

(d) Records. The Trustee shall keep full and accurate accounts of all receipts, investments, disbursements and other transactions hereunder, including such specific records as may be agreed upon in writing between the Company and the Trustee. All such accounts, books and records shall be open to inspection and audit at all reasonable times by any authorized representative of the Company or the Plan Administrator. A Participant may examine only those individual account records pertaining directly to him.

(e) Accounting. The Trustee shall file with the Plan Administrator a written account of the administration of the Trust Fund showing all transactions effected by the Trustee subsequent to the period covered by the last preceding account and all property held at the end of the accounting period. The Trustee shall use its best effort to file such written account within ninety (90) days, but not later than one hundred twenty (120) days after the end of each Plan Year. Upon approval of such accounting by the Plan Administrator, neither the Company nor the Plan Administrator shall be entitled to any further accounting by the Trustee. The Plan Administrator may approve such accounting by written notice of approval delivered to the Trustee or by failure to express objection to such accounting in writing delivered to the Trustee within six (6) months from the date on which the accounting is delivered to the Plan Administrator.

(f) Participant Eligibility. The Trustee shall not be required to determine the facts concerning the eligibility of any Participant to participate in the Plan, the amount of benefits payable to any Participant or Beneficiary under the Plan, or the date or method of payment or disbursement. The Trustee shall be fully entitled to rely in good faith solely upon the written advice and directions of the Plan Administrator as to any such question of fact.

(g) Indicia of Ownership. The Trustee shall not hold the indicia of ownership of any assets of the Trust Fund outside of the jurisdiction of the District Courts of the United States, unless in compliance with section 404(b) of ERISA and regulations thereunder.

(h) Notice. The Trustee shall provide the Company with advance notice of any legal actions the Trustee may take with respect to the Plan and Trust and shall promptly notify the Company of any claim against the Plan and Trust.

(i) Other Fiduciaries. The Trustee shall not be responsible for the acts or omissions of any other persons except as may be required by ERISA section 405.


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Section 10.03

GENERAL INVESTMENT POWERS

In addition to all powers and authority under common law, statutory authority and other provisions of this Article, the Trustee shall have the following powers and authorities to be exercised in accordance with and subject to the provisions of Section 10.04 hereof:

(a) Invest and reinvest the Trust Fund in any property, real, personal or mixed, wherever situated, and whether situated, and whether or not productive of income or consisting of wasting assets, including, without limitation, common and preferred stock, bonds, notes, debentures, options, mutual funds, leaseholds, mortgages (including without limitation, any collective or part interest in any bond and mortgage or note and mortgage), certificates of deposit, and oil, mineral or gas properties, royalties, interests or rights (including equipment pertaining thereto), without being limited to the classes of property in which trustees are authorized by law or any rule of court to invest trust funds and without regard to the proportion any such property may bear to the entire amount of the Trust Fund;

(b) Hold property in nominee name, in bearer form, or in book entry form, in a clearinghouse corporation or in a depository, provided that such property is held in conformance with DOL Reg. section 2550-403a-1(b) and that such property is held by (i) a bank or trust company that is subject to supervision by the United States or a state, or a nominee of such bank or trust company, (ii) a broker or dealer registered under the Securities Exchange Act of 1934, or a nominee of such broker or dealer; (iii) a “clearing agency,” as defined in section 3(a)(23) of the Securities Exchange Act of 1934, or its nominee; or (iv) any other entity as provided in DOL Reg. section 2550-403a-1(b);

(c) Collect income payable to and distributions due to the Trust Fund and sign on behalf of the Trust any declarations, affidavits, certificates of ownership and other documents required to collect income and principal payments, including but not limited to, tax reclamations, rebates and other withheld amounts;

(d) To sell, exchange, convey, transfer, grant options to purchase, or otherwise dispose of any securities or other property held by the Trustee. No person dealing with the Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any such sale or other disposition;

(e) Pursuant to the terms of Section 10.06, to vote upon any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights or other options, and to make any payments incidental thereto; to oppose, or to consent to, or otherwise participate in, corporate reorganizations or other changes affecting corporate securities, and to delegate discretionary powers, and to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities, or other property;

(f) Take all action necessary to pay for authorized transactions or make authorized distributions, including exercising the power to borrow or raise monies from any lender, upon such terms and conditions as are necessary to settle such transactions or distributions;

(g) To keep such portion of the Trust Fund uninvested in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Plan, without liability for interest thereon;

(h) To accept and retain for such time as the Trustee may deem advisable any securities or other property received or acquired as Trustee hereunder, whether or not such securities or other property would normally be purchased as investments hereunder;

(i) To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted;

(j) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from the Trust Fund, to commence or defend suits or legal or administrative proceedings, and to represent the Plan and/or Trust Fund in all suits and legal and administrative proceedings (arbitration shall not be permitted to the extent the claim involves a Participant);


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(k) To invest in Treasury Bills and other forms of United States government obligations;

(l) To deposit cash in accounts in the banking department of the Trustee or an affiliated banking organization;

(m) To deposit monies in federally insured savings accounts or certificates of deposit in banks or savings and loan associations;

(n) To invest and reinvest all or any portion of the Trust Fund collectively with funds of other retirement plan trusts exempt from tax under Code section 501(a), including, without limitation, the power to invest collectively with such other funds through the medium of one or more common, collective or commingled trust funds which have been or may hereafter be operated by the Trustee, the instrument or instruments establishing such trust fund or funds, as amended from time to time, being made part of this Trust so long as any portion of the Trust Fund shall be invested through the medium thereof;

(o) To sell, either at public or private sale, option to sell, mortgage, lease for a term of years less than or continuing beyond the possible date of the termination of the Trust created hereunder, partition or exchange any real property which may from time to time constitute a portion of the Trust Fund, for such prices and upon such terms as it may deem best, and to make, execute and deliver to the purchasers thereof good and sufficient deeds of conveyance therefor and all assignments, transfers and other legal instruments, either necessary or convenient for the passing of the title and ownership thereof to the purchaser, free and discharged of all trusts and without liability on the part of such purchasers to see to the proper application of the purchase price;

(p) To repair, alter, improve or demolish any buildings which may be on any real estate forming part of the Trust Fund or to erect entirely new structures thereon;

(q) To renew, extend or participate in the renewal or extension of any mortgage, upon such terms as may be deemed advisable, and to agree to a reduction in the rate of interest on any mortgage or to any other modification or change in the terms of any mortgage or of any guarantee pertaining thereto, in any manner and to any extent that may be deemed advisable for the protection of the Trust Fund or the preservation of the value of the investment; to waive any default, whether in the performance of any covenant or condition of any mortgage or in the performance of any guarantee, or to enforce any such default in such manner and to such extent as may be deemed advisable; to exercise and enforce any and all rights of foreclosure, to bid on property in foreclosure, to take a deed in lieu of foreclosure with or without paying a consideration therefor, and in connection therewith to release the obligation on the bond or note secured by the mortgage; and to exercise and enforce in any action, suit or proceeding at law or in equity any rights or remedies in respect to any mortgage or guarantee;

(r) To purchase any authorized investment at a premium or at a discount;

(s) To purchase any annuity contract; and

(t) To do all such acts and exercise all such rights and privileges, although not specifically mentioned herein, as the Trustee may deem necessary to carry out the purposes of the Plan.

Section 10.04

OTHER INVESTMENT POWERS

(a) Requirement for Preapproval. The powers granted the Trustee under Section 10.03 shall be exercised by the Trustee upon the written direction from the Investment Fiduciary pursuant to Sections 10.05 and 10.06. Any written direction of the Investment Fiduciary may be of a continuing nature, but may be revoked in writing by the Investment Fiduciary at any time. The Trustee shall comply with any direction as promptly as possible, provided it does not contravene the terms of the Plan or the provision of any applicable law. The Investment Fiduciary, by written direction, may require the Trustee to obtain written approval of the Investment Fiduciary before exercising such of its powers as may be specified in such direction. Any such direction may be of a continuing nature or otherwise and may be revoked in writing by the Investment Fiduciary at any time. The Trustee shall not be responsible for any loss that may result from the failure or refusal of the Investment Fiduciary to give any such required direction or approval.


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(b) Prohibited Transactions. The Trustee shall not engage in any prohibited transaction within the meaning of the Code and ERISA.

(c) Legal Actions. The Trustee is authorized to execute all necessary receipts and releases and shall be under the duty to make efforts to collect such sums as may appear to be due (except contributions hereunder); provided, however, that the Trustee shall not be required to institute suit or maintain any litigation to collect the proceeds of any asset unless it has been indemnified to its satisfaction for counsel fees, costs, disbursements and all other expenses and liabilities to which it may in its judgment be subjected by such action. Notwithstanding anything to the contrary herein contained, the Trustee is authorized to compromise and adjust claims arising out of any asset held in the Trust Fund upon such terms and conditions as the Trustee may deem just, and the action so taken by the Trustee shall be binding and conclusive upon all persons interested in the Trust Fund.

(d) Retention of Advisors. The Trustee, with the consent of the Investment Fiduciary, may retain the services of investment advisors to invest and reinvest the assets of the Trust Fund, as well as employ such legal, actuarial, medical, accounting, clerical and other assistance as may be required in carrying out the provisions of the Plan. The Trustee may also appoint custodians, subcustodians or subtrustees as to part or all of the Trust Fund.

Section 10.05

INSTRUCTIONS

(a) Reliance on Instructions. Whenever the Trustee is permitted or required to act upon the directions or instructions of the Investment Fiduciary, Plan Administrator or Company, the Trustee shall be entitled to act in good faith upon any written communication signed by any person or agent designated to act as or on behalf of the Investment Fiduciary, Plan Administrator or Company. Such person or agent shall be so designated either under the provisions of the Plan or in writing by the Company and their authority shall continue until revoked in writing. The Trustee shall incur no liability for failure to act in good faith on such person’s or agent’s instructions or orders without written communication, and the Trustee shall be fully protected in all actions taken in good faith in reliance upon any instructions, directions, certifications and communications believed to be genuine and to have been signed or communicated by the proper person.

(b) Designation of Agent.

(1) Plan Sponsor. The Plan Sponsor shall notify the Trustee in writing as to the appointment, removal or resignation of any person designated to act as or on behalf of the Investment Fiduciary, Plan Administrator or Plan Sponsor. After such notification, the Trustee shall be fully protected in acting in good faith upon the directions of, or dealing with, any person designated to act as or on behalf of the Investment Fiduciary, Plan Administrator or Plan Sponsor until it receives notice to the contrary. The Trustee shall have no duty to inquire into the qualifications of any person designated to act as or on behalf of the Investment Fiduciary, Plan Administrator or Plan Sponsor.

(2) Trustee. To the extent provided in the Adoption Agreement, if there is more than one Trustee, the Trustees may designate one or more of the Trustees to act on behalf of the Trustees. Such designated Trustee shall be authorized to take any and all actions and execute and deliver such documents as may be necessary or appropriate.

(c) Procedures. The Trustee may adopt such rules and procedures as it deems necessary, desirable, or appropriate including, but not limited to: (1) taking action with or without formal meetings; and (2) in the event that there is more than one Trustee, a procedure specifying whether action may be taken by a less than unanimous vote.

(d) Payment of Benefits. The Trustee shall pay benefits and expenses from the Trust Fund only upon the written direction of the Plan Administrator. The Trustee shall be fully entitled to rely in good faith on such directions furnished by the Plan Administrator, and shall be under no duty to ascertain whether the directions are in accordance with the provisions of the Plan.


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Section 10.06

INVESTMENT OF THE FUND

(a) Investment Funds. The Investment Fiduciary shall have the exclusive authority and discretion to select the Investment Funds available for investment under the Plan. In making such selection, the Investment Fiduciary shall use the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Subject to the first sentence of Subsection (b) below, the available investments under the Plan shall be sufficiently diversified so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. The Investment Fiduciary shall notify the Trustee in writing of the selection of the Investment Funds currently available for investment under the Plan, and any changes thereto.

(b) Participant Self-Direction. To the extent permitted by the Plan Administrator and the Adoption Agreement pursuant to Section 9.02, each Participant shall have the right, in accordance with the provisions of the Plan, to direct the investment by the Trustee of all amounts allocated to the separate Accounts of the Participant under the Plan among any one or more of the available Investment Funds; provided, however, that during any transition period as may be determined by the Investment Fiduciary, the Investment Fiduciary may direct the investment by the Trustee into the Investment Funds available during such period with respect to which individual Participants’ directions shall not have been made or shall not have been permitted to be made under the Plan. All investment directions by Participants shall be timely furnished to the Trustee by the Plan Administrator, except to the extent such directions are transmitted telephonically or otherwise by Participants directly to the Trustee or its delegate in accordance with rules and procedures established and approved by the Plan Administrator and communicated to the Trustee. In making any investment of the assets of the Fund, the Trustee shall be fully entitled to rely on such directions furnished to it by the Plan Administrator or by Participants in accordance with the Plan Administrator’s approved rules and procedures, and shall be under no duty to make any inquiry or investigation with respect thereto. If the Trustee receives any contribution under the Plan that is not accompanied by instructions directing its investment, the Trustee shall notify the Plan Administrator of that fact, and the Trustee may, in its discretion, hold all or a portion of the contribution uninvested without liability for loss of income or appreciation pending receipt of proper investment directions.

(1) Appointment of Investment Managers. The Investment Fiduciary may appoint one or more Investment Managers with respect to some or all of the assets of the Trust Fund as contemplated by section 402(c)(3) of ERISA. Any such Investment Manager shall acknowledge to the Investment Fiduciary in writing that it accepts such appointment and that it is an ERISA fiduciary with respect to the Plan and the Trust Fund. The Investment Fiduciary shall provide the Trustee with a copy of the written agreement (and any amendments thereto) between the Investment Fiduciary and the Investment Manager. By notifying the Trustee of the appointment of an Investment Manager, the Investment Fiduciary shall be deemed to certify that such Investment Manager meets the requirements of section 3(38) of ERISA. The authority of the Investment Manager shall continue until the Investment Fiduciary rescinds the appointment or the Investment Manager has resigned.

(2) Separation of Duties. The assets with respect to which a particular Investment Manager has been appointed shall be specified by the Investment Fiduciary and shall be segregated in a separate account for the Investment Manager (the “Separate Account”) and the Investment Manager shall have the power to direct the Trustee in every aspect of the investment of the assets of the Separate Account. The Trustee shall not be liable for the acts or omissions of an Investment Manager and shall have no liability or responsibility for acting pursuant to the direction of, or failing to act in the absence of, any direction from an Investment Manager, unless the Trustee knows that by such action or failure to act it would be itself committing a breach of fiduciary duty or participating in a breach of fiduciary duty by such Investment Manager, it being the intention of the parties that each party shall have the full protection of section 405(d) of ERISA.

(d) Proxies.

(1) Delivery of Information. The Trustee shall deliver, or cause to be delivered, to the Company or Plan Administrator all notices, prospectuses, financial statements, proxies and proxy soliciting materials received by the Trustee relating to securities held by the Trust or, if applicable, deliver these materials to the appropriate Participant or the Beneficiary of a deceased Participant.


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(2) Voting. The Trustee shall not vote any securities held by the Trust except in accordance with the written instructions of the Company, the Investment Fiduciary, or to the extent provided in the Adoption Agreement, the Participant or the Beneficiary of the Participant, if the Participant is deceased. However, the Trustee may, in the absence of instructions, vote “present” for the sole purpose of allowing such shares to be counted for establishment of a quorum at a shareholders’ meeting. The Trustee shall have no duty to solicit instructions from Participants, Beneficiaries, the Investment Fiduciary or the Company.

(3) Investment Manager. To the extent not delegated to Participants pursuant to Subsection (b), the Investment Manager shall be responsible for making any proxy voting or tender offer decisions with respect to securities held in the Separate Account and the Investment Manager shall maintain a record of the reasons for the manner in which it voted proxies or responded to tender offers.

(e) Life Insurance. Any life insurance investment allowed under Article 9 shall be a permitted Investment Fund.

Section 10.07

COMPENSATION AND INDEMNIFICATION

(a) Compensation. The Trustee shall be entitled to reasonable compensation for its services as is mutually agreed upon with the Plan Sponsor; provided that such compensation does not result in a prohibited transaction within the meaning of the Code and ERISA. If the Trustee and the Company mutually agree that the Trustee may retain as additional compensation for its services any earnings resulting from the anticipated short-term investment of funds (“float”) on Plan assets deposited in or transferred to a Trustee general or omnibus account, then the Trustee shall be authorized to retain such float; provided, that such agreement: (i) discloses the specific circumstances under which float will be earned and retained, (ii) in the case of float on distributions, discloses when the float period commences and ends, and (iii) discloses the rate of the float or the specific manner in which such rate will be determined. If approved by the Plan Administrator, the Trustee shall also be entitled to reimbursement for all direct expenses properly and actually incurred on behalf of the Plan. Such compensation or reimbursement shall be paid to the Trustee out of the Trust Fund unless paid directly by the Company.

(b) Indemnification. Unless otherwise provided in an Addendum to the Adoption Agreement, each Company shall indemnify and hold harmless the Trustee (and its delegates) from all claims, liabilities, losses, damages and expenses, including reasonable attorneys’ fees and expenses, incurred by the Trustee in connection with its duties hereunder to the extent not covered by insurance, except when the same is due to the Trustee’s own gross negligence, willful misconduct, lack of good faith, or breach of its fiduciary duties under the Plan or ERISA.

Section 10.08

RESIGNATION AND REMOVAL

(a) Resignation. The Trustee may resign at any time by written notice to the Plan Sponsor which shall be effective 60 days after delivery unless prior thereto a successor Trustee assumes the responsibilities of Trustee hereunder.

(b) Removal. The Trustee may be removed by the Plan Sponsor at any time.

(c) Successor Trustee. The appointment of a successor Trustee hereunder shall be accomplished by and shall take effect upon the delivery to the resigning or removed Trustee, as the case may be, of written notice of the Plan Sponsor appointing such successor Trustee, and an acceptance in writing of the office of successor Trustee hereunder executed by the successor so appointed. Any successor Trustee may be either a corporation authorized and empowered to exercise trust powers or one or more individuals. All of the provisions set forth herein with respect to the Trustee shall relate to each successor Trustee so appointed with the same force and effect as if such successor Trustee had been originally named herein as the Trustee hereunder. If within 45 days after notice of resignation shall have been given under the provisions of this Article a successor Trustee shall not have been appointed, the resigning Trustee or the Plan Sponsor may apply to any court of competent jurisdiction for the appointment of a successor Trustee.

(d) Transfer of Trust Fund. Upon the appointment of a successor Trustee, the resigning or removed Trustee shall transfer and deliver the Trust Fund to such successor Trustee, after reserving such reasonable amount as it shall deem necessary to provide for its expenses in the settlement of its account, the amount of any compensation due to it and any sums chargeable against the Trust Fund for which it may be liable. If the sums so reserved are not sufficient for such purposes, the resigning or removed Trustee shall be entitled to reimbursement for any deficiency from the Plan Sponsor.


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Section 10.09

OTHER TRUST AGREEMENT

(a) General. This Section 10.09 shall apply only to the extent provided in the Adoption Agreement. If this Section applies, the terms of a separate trust agreement shall apply and Sections 9.06, 10.01 through 10.08 and Article 12 shall apply only to the extent that they are not superseded by the terms of the separate trust agreement. Other Sections of the Plan shall be construed in a manner compatible with the separate trust agreement.

(b) Trustee. The Trustee shall be the person(s) or entity listed in the separate trust agreement. The Trustee shall be obligated under the terms and conditions of the separate trust agreement as executed by the Trustee and the Plan Administrator or Sponsor.


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ARTICLE 11 SPECIAL “TOP-HEAVY” RULES

ARTICLE 11 SPECIAL TOP-HEAVY RULES

Section 11.01

TOP-HEAVY STATUS

The special provisions set forth in this Article 11 shall apply during any Plan Year in which this Plan, together with any other retirement plans required to be aggregated under Code section 416(g) and the Treasury Regulations promulgated thereunder, is “Top-Heavy.” This Plan is Top-Heavy for any Plan Year beginning after 1983:

(a) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans;

(b) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required Aggregation Group of plans exceeds 60%; or

(c) If this Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%.

Section 11.02

MINIMUM ALLOCATIONS

(a) In General. In General. Notwithstanding other provisions of this Plan, for any Plan Year during which this Plan is Top-Heavy and the Top-Heavy minimum allocation is not met solely or partially in another plan, the following shall apply:

(1) Unless otherwise provided in the Adoption Agreement and subject to (a)(4) and (a)(5) below, a Participant specified in Subsection (a)(2) below shall receive the minimum allocation or benefit requirement applicable to Top-Heavy plans specified in (a)(3) below.

(2) Participants Receiving Minimum Allocation/Benefit. If the Participant is not eligible to participate in a defined benefit plan in a group specified in Section 11.01 other than a frozen plan in which no additional accruals are being made, he or she shall receive the minimum allocation or benefit in this Plan or any other defined contribution plan that is sponsored by the Employer provided, he or she is (i) an Eligible Employee as described in the Adoption Agreement; and (ii) employed by the Employer on the last day of the Plan Year. If the Participant is eligible to participate in a defined benefit plan in a group specified in Section 11.01, and the Top-Heavy minimum is to be made in this Plan for such Participant, he or she shall receive the minimum allocation or benefit in this Plan or any other defined contribution plan that is sponsored by the Employer provided, he or she is (i) an Eligible Employee as described in the applicable plan document; and (ii) has completed 1,000 Hours of Service (in accordance with such defined benefit plan) during such Plan Year. In the event a Participant is entitled to a Top-Heavy minimum benefit accrual under a defined benefit plan and is not otherwise eligible for a Top-Heavy minimum allocation under this Plan because of severance of employment prior to the last day of the Plan Year, such requirement shall be waived in this Plan solely to the extent the Top-Heavy minimum is required to be given in this Plan.

(3) Amount of Minimum Allocation/Benefit. If the Participant is not eligible to participate in a defined benefit plan in a group specified in Section 11.01, the Top-Heavy minimum allocation (“defined contribution minimum”) shall not be less than the lesser of 3% of such Participant’s Statutory Compensation or the largest percentage of Company contributions (including Elective Deferrals) and forfeitures, as a percentage of Key Employee’s Statutory Compensation, as limited by Code section 401(a)(17), allocated on behalf of any Key Employee for that Plan Year. If: (i) the Participant is eligible to participate in a defined benefit plan in a group specified in Section 11.01, (ii) satisfies the requirement in the defined benefit plan to receive the Top-Heavy minimum under the terms of that plan, and (iii) the Top-Heavy minimum is to be given in this Plan, the Top-Heavy minimum benefit (“defined benefit minimum”) shall be determined under one of the following methods:

(A) Defined Benefit Minimum. A defined benefit minimum, which is an accrued benefit at any point in time equal to at least the product of (i) a Participant’s average annual compensation for the period of consecutive years (not exceeding five) when the Participant had the highest aggregate compensation from the Employer and (ii) the lesser of 2% per year of service or 1-year period of service (within the meaning of Code section 416), as applicable, with the Employer or 20%, subject to the rules of Code section 416 and the Regulations thereunder;


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(B) Floor Offset. A floor offset approach, pursuant to Revenue Ruling 76-259, 1976-2 C.B. 111, under which the defined benefit minimum of the defined benefit plan that is provided pursuant to Subsection (A) above is offset by the benefits provided under the defined contribution plan (or plans);

(C) Comparability Analysis. A demonstration, using a comparability analysis of Rev. Rul. 81-202, that the plans are providing benefits at least equal to the defined benefit minimum that is provided pursuant to Subsection (A) above; or

(D) Defined Contribution Minimum. An allocation of Employer contributions and forfeitures that are made on behalf of such Participant under this Plan (or any defined contribution plan that is sponsored by the Employer) equal to 5% of the Participant’s Statutory Compensation unless off-setting a portion of the minimum allocation in another plan or the Participant in this Plan is not a participant in the defined benefit plan. If the Plan allocates its Profit Sharing or Pension Contribution using permitted disparity (integration), it may, therefore, substitute the 3% in the first step of its allocation process with 5% (or such other amount required) in order to satisfy the Top-Heavy minimum allocation.

(4) The minimum allocation is determined without regard to any Social Security contribution. The Top-Heavy minimum shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the Plan Year because of: (i) the Participant’s failure to complete 1,000 Hours of Service (or any equivalent provided in the Plan); (ii) the Participant’s failure to make mandatory Employee contributions to the Plan; or (iii) Compensation less than a stated amount. Except as provided in Subsections (b) and (c) below, neither Elective Deferrals nor Matching Contributions may be taken into account for the purpose of satisfying the minimum Top-Heavy contribution requirement.

(5) Contributions under other Plans. To the extent provided in the Adoption Agreement, the minimum allocation requirement discussed in Subsection 11.02(a) may be met solely or partially in another plan. If the minimum allocation requirement of this Section 11.02 for any Plan Year is met partially in another plan, this Plan may offset the minimum required allocation in Subsection 11.02(a) by the amount allocated in or the benefit accrued in the other plan. If, after applying the requirements of Code section 416, corresponding regulations and this Article 11, the Top-Heavy minimum allocation is not satisfied, then additional contributions may be made to this Plan and/or to one or more plans that are part of the Required Aggregation Group or Permissive Aggregation Group.

(b) Matching Contributions. Employer Matching Contributions may be taken into account for purposes of satisfying the minimum contribution requirements of Code section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the ACP test and other requirements of Code section 401(m).

(c) The Top-Heavy requirements of Code section 416 and this Section shall not apply in any year beginning after December 31, 2001, in which the Plan consists solely of a cash or deferred arrangement which meets the requirements of Code sections 401(k)(11), 401(k)(12) or 401(k)(13) and Matching Contributions with respect to which the requirements of Code sections 401(m)(10), 401(m)(11) or 401(m)(12) are met; or in which the Plan is part of an “eligible combined plan” in compliance with Code section 414(x), IRS Notice 2009-71, and any superseding/subsequent guidance.

Section 11.03

MINIMUM VESTING

(a) For any Plan Year in which this Plan is Top-Heavy, the Top-Heavy vesting schedule specified in the Adoption Agreement shall automatically apply to the Plan to the extent that it is more favorable than the vesting schedule provided for in Article 6.


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For purposes of the Adoption Agreement, “2-6 Year Graded” and “3 Year Cliff” shall be determined in accordance with the following schedules:


	Years of Vesting Service	Vesting Percentage

“2-6 Year Graded”:
	Less than Two Years		0	%
	Two Years but less than Three Years		20	%
	Three Years but less than Four Years		40	%
	Four Years but less than Five Years		60	%
	Five Years but less than Six Years		80	%
	Six or More Years		100	%

“3 Year Cliff”:
	Less than Three Years		0	%
	Three or More Years		100	%

(b) The minimum vesting schedule applies to all benefits within the meaning of Code section 411(a)(7) except those attributable to Employee contributions or those already subject to a vesting schedule which vests at least as rapidly as the schedule listed above, including benefits accrued before the effective date of Code section 416 and benefits accrued before the Plan became Top-Heavy. Further, no decrease in a Participant’s nonforfeitable percentage may occur in the event the Plan’s status as Top-Heavy changes for any Plan Year. However, this Section does not apply to the Account balances of any Employee who does not have an Hour of Service after the Plan initially became Top-Heavy and such Employee’s Account balance attributable to Company contributions and forfeitures will be determined without regard to this Section. The minimum allocation required (to the extent required to be nonforfeitable under Code section 416(b)) may not be forfeited under Code sections 411(a)(3)(B) or 411(a)(3)(D).


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ARTICLE 12 PLAN ADMINISTRATION

ARTICLE 12 PLAN ADMINISTRATION

Section 12.01

PLAN ADMINISTRATOR

(a) Designation. The Plan Administrator shall be specified in the Adoption Agreement. In the absence of a designation in the Adoption Agreement, the Plan Sponsor shall be the Plan Administrator. If a Committee is designated as the Plan Administrator, the Committee shall consist of one or more individuals who may be Employees appointed by the Plan Sponsor and the Committee may elect a chairman and may adopt such rules and procedures as it deems desirable. The Committee may also take action with or without formal meetings and may authorize one or more individuals, who may or may not be members of the Committee, to execute documents in its behalf.

(b) Authority and Responsibility of the Plan Administrator. The Plan Administrator shall be the Plan “administrator” as such term is defined in section 3(16) of ERISA and as such shall have total and complete discretionary power and authority:

(1) to make factual determinations, to construe and interpret the provisions of the Plan, to correct defects and resolve ambiguities and inconsistencies therein and to supply omissions thereto. Any construction, interpretation or application of the Plan by the Plan Administrator shall be final, conclusive and binding;

(2) to determine the amount, form or timing of benefits payable hereunder and the recipient thereof and to resolve any claim for benefits in accordance with this Article 12;

(3) to determine the amount and manner of any allocations and/or benefit accruals hereunder, including whether the Plan maintains an ERISA account and the manner in which amounts deposited in such ERISA account shall be allocated;

(4) to maintain and preserve records relating to Participants, former Participants, and their Beneficiaries and Alternate Payees;

(5) to prepare and furnish to Participants, Beneficiaries and Alternate Payees all information and notices required under applicable law or the provisions of this Plan;

(6) to prepare and file or publish with the Secretary of Labor, the Secretary of the Treasury, their delegates and all other appropriate government officials all reports and other information required under law to be so filed or published;

(7) to approve and enforce any loan hereunder including the repayment thereof;

(8) to provide directions to the Trustee with respect to the purchase of life insurance (to the extent permitted in the Adoption Agreement), methods of benefit payment, valuations at dates other than regular Valuation Dates and on all other matters where called for in the Plan or requested by the Trustee;

(9) to hire such professional assistants and consultants as it, in its sole discretion, deems necessary or advisable; and shall be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by same;

(10) to determine all questions of the eligibility of Employees and of the status of rights of Participants, Beneficiaries and Alternate Payees;

(11) to arrange for bonding, if required by law;

(12) to adjust Accounts in order to correct errors or omissions;


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(13) to determine whether any domestic relations order constitutes a Qualified Domestic Relations Order and to take such action as the Plan Administrator deems appropriate in light of such domestic relations order;

(14) to retain records on elections and waivers by Participants, their spouses and their Beneficiaries and Alternate Payees;

(15) to supply such information to any person as may be required;

(16) to establish, revise from time to time, and communicate to the Trustee and/or the Investment Fiduciary and Investment Manager(s), a funding policy and method for the Plan;

(17) to prepare and file or publish with the Secretary of Labor, the Secretary of the Treasury, their delegates and all other appropriate government officials all reports and other information required under law to be so filed or published; and

(18) to perform such other functions and duties as are set forth in the Plan that are not specifically given to the Investment Fiduciary or Trustee.

(c) Procedures. Unless otherwise provided in the Adoption Agreement and to the extent that the Adoption Agreement provides that the Board adopts procedures for the Plan Administrator and the Board fails to adopt such procedures, the Plan Administrator may adopt such rules and procedures as it deems necessary, desirable, or appropriate for the administration of the Plan. When making a determination or calculation, the Plan Administrator shall be entitled to rely upon information furnished to it. The Plan Administrator’s decisions shall be binding and conclusive as to all parties. Except as otherwise provided in a separate trust agreement, the Investment Fiduciary’s decisions shall be binding and conclusive as to all parties.

(d) Allocation of Duties and Responsibilities. The Plan Administrator may designate other persons to carry out any of his duties and responsibilities under the Plan.

Section 12.02

INVESTMENT FIDUCIARY

(a) Designation. The Plan Investment Fiduciary shall be designated by the Plan Sponsor. In the absence of a designation, the Plan Administrator shall be the Investment Fiduciary. The Investment Fiduciary may consist of a committee consisting of one or more individuals who may be Employees appointed by the Plan Sponsor. If a committee is appointed, the committee shall elect a chairman and may adopt such rules and procedures as it deems desirable. The committee may take action with or without formal meetings and may authorize one or more individuals, who may or may not be members of the committee, to execute documents in its behalf.

(b) Authority and Responsibility of the Investment Fiduciary. The Investment Fiduciary shall have the following discretionary authority and responsibility:

(1) to manage the investment of the Trust Fund;

(2) to appoint one or more Investment Managers;

(3) to hire such professional assistants and consultants as it, in its sole discretion, deems necessary or advisable;

(4) to establish, revise from time to time, and communicate to the Trustee and/or Investment Manager(s), an investment policy for the Plan; and

(5) to supply such information to any person as may be required.

(c) Procedures. Unless otherwise provided in the Adoption Agreement and to the extent that the Adoption Agreement provides that the Board adopts procedures for the Investment Fiduciary and the Board fails to adopt such procedures, the Investment Fiduciary may adopt such rules and procedures as it deems necessary, desirable, or appropriate in furtherance of its duties hereunder. When making a determination or calculation, the Investment Fiduciary shall be entitled to rely upon information furnished to it.


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Section 12.03

COMPENSATION OF PLAN ADMINISTRATOR AND INVESTMENT FIDUCIARY

The Plan Administrator and Investment Fiduciary shall be entitled to reasonable compensation for their services as is mutually agreed upon to the extent that such compensation would not constitute a prohibited transaction within the meaning of the Code and ERISA.

Section 12.04

PLAN EXPENSES

All direct expenses of the Plan, Trustee, Plan Administrator and Investment Fiduciary or any other person in furtherance of their duties hereunder shall be paid or reimbursed by the Company, and if not so paid or reimbursed, shall be proper charges to the Trust Fund and shall be paid therefrom.

Section 12.05

ALLOCATION OF FIDUCIARY RESPONSIBILITY

A Plan fiduciary shall have only those specific powers, duties, responsibilities and obligations as are explicitly given him under the Plan and Trust Agreement. It is intended that each fiduciary shall not be responsible for any act or failure to act of another fiduciary. A fiduciary may serve in more than one fiduciary capacity with respect to the Plan.

Section 12.06

INDEMNIFICATION

Unless otherwise provided in an Addendum to the Adoption Agreement, the Company shall indemnify and hold harmless any person serving as the Investment Fiduciary and/or Plan Administrator (and their delegates) from all claims, liabilities, losses, damages and expenses, including reasonable attorneys’ fees and expenses, incurred by such persons in connection with their duties hereunder to the extent not covered by insurance, except when the same is due to such person’s own gross negligence, willful misconduct, lack of good faith, or breach of its fiduciary duties under this Plan or ERISA.

Section 12.07

CLAIMS PROCEDURES

(a) Application for Benefits. A Participant or any other person entitled to benefits from the Plan (a “Claimant”) may apply for such benefits by completing and filing a claim with the Plan Administrator. Any such claim shall be in writing and shall include all information and evidence that the Plan Administrator deems necessary to properly evaluate the merit of and to make any necessary determinations on a claim for benefits. The Plan Administrator may request any additional information necessary to evaluate the claim.

(b) Timing of Notice of Denied Claim. The Plan Administrator shall notify the Claimant of any adverse benefit determination within a reasonable period of time, but not later than 90 days (45 days if the claim relates to a disability determination) after receipt of the claim. This period may be extended one time by the Plan for up to 90 days (30 additional days if the claim relates to a disability determination), provided that the Plan Administrator both determines that such an extension is necessary due to matters beyond the control of the Plan and notifies the Claimant, prior to the expiration of the initial review period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision. If the claim relates to a disability determination, the period for making the determination may be extended for up to an additional 30 days if the Plan Administrator notifies the Claimant prior to the expiration of the first 30-day extension period.

(c) Content of Notice of Denied Claim. If a claim is wholly or partially denied, the Plan Administrator shall provide the Claimant with a written notice identifying (1) the reason or reasons for such denial, (2) the pertinent Plan provisions on which the denial is based, (3) any material or information needed to grant the claim and an explanation of why the additional information is necessary, and (4) an explanation of the steps that the Claimant must take if he wishes to appeal the denial including a statement that the Claimant may bring a civil action under ERISA.

(d) Appeals of Denied Claim. If a Claimant wishes to appeal the denial of a claim, he shall file a written appeal with the Plan Administrator on or before the 60th day (180th day if the claim relates to a disability determination) after he receives the Plan Administrator’s written notice that the claim has been wholly or partially denied. The written


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ARTICLE 12 PLAN ADMINISTRATION

appeal shall identify both the grounds and specific Plan provisions upon which the appeal is based. The Claimant shall be provided, upon request and free of charge, documents and other information relevant to his claim. A written appeal may also include any comments, statements or documents that the Claimant may desire to provide. The Plan Administrator shall consider the merits of the Claimant’s written presentations, the merits of any facts or evidence in support of the denial of benefits, and such other facts and circumstances as the Plan Administrator may deem relevant. The Claimant shall lose the right to appeal if the appeal is not timely made. The Plan Administrator shall ordinarily rule on an appeal within 60 days (45 days if the claim relates to a disability determination). However, if special circumstances require an extension and the Plan Administrator furnishes the Claimant with a written extension notice during the initial period, the Plan Administrator may take up to 120 days (90 days if the claim relates to a disability determination) to rule on an appeal.

(e) Denial of Appeal. If an appeal is wholly or partially denied, the Plan Administrator shall provide the Claimant with a notice identifying (1) the reason or reasons for such denial, (2) the pertinent Plan provisions on which the denial is based, (3) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits, and (4) a statement describing the Claimant’s right to bring an action under section 502(a) of ERISA. The determination rendered by the Plan Administrator shall be binding upon all parties.

(f) Determinations of Disability. If the claim relates to a disability determination, determinations of the Plan Administrator shall include the information required under applicable United States Department of Labor regulations.

Section 12.08

WRITTEN COMMUNICATION

To the extent permitted by applicable Treasury and/or Department of Labor Regulations and accepted by the Plan Administrator and, as applicable, the Trustee, all provisions of the Plan and Trust that require written notices and elections shall be interpreted to mean authorized electronic and telephonic notices and elections. Any notice made under the terms of the Plan may be made in any electronic or telephonic method.


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ARTICLE 13 AMENDMENT, MERGER AND TERMINATION

ARTICLE 13 AMENDMENT, MERGER AND TERMINATION

Section 13.01

AMENDMENT

The provisions of the Plan may be amended in writing at any time and from time to time by the Plan Sponsor, provided, however, that:

(a) No amendment to the Plan shall be effective to the extent that it has the effect of decreasing a Participant’s accrued benefit and no amendment shall increase the duties and liabilities of the Trustee without the Trustee’s consent. Notwithstanding the preceding sentence, a Participant’s Account balance may be reduced to the extent permitted under Code section 412(c)(8). For purposes of this Subsection, a Plan amendment which has the effect of decreasing a Participant’s Account balance, with respect to benefits attributable to service before the amendment, shall be treated as reducing an accrued benefit.

A Plan amendment may not decrease a Participant’s accrued benefits, or otherwise place greater restrictions or conditions on a Participant’s rights to Code section 411(d)(6) protected benefits, even if the amendment merely adds a restriction or condition that is permitted under the vesting rules in Code section 411(a)(3) through (11). Notwithstanding the foregoing, an amendment described in the previous sentence does not violate Code section 411(d)(6) to the extent: (1) it applies with respect to benefits that accrue after the applicable amendment date; (2) the Plan amendment changes the Plan’s Vesting Computation Period and it satisfies the applicable requirements under 29 CFR 2530.203-2(c); or (3) permitted under Code section 412(d)(2) or Treas. Reg. sections 1.411(d)-3 and 1.411(d)-4 and any superseding guidance.

No amendment to the Plan shall be effective to eliminate or restrict an optional form of benefit. The preceding sentence shall not apply to a Plan amendment that eliminates or restricts the ability of a Participant to receive payment of his or her Account balance under a particular optional form of benefit if the amendment is permitted under applicable Treasury Regulations.

A Plan amendment may also provide exceptions from the general prohibition against the elimination or restriction of optional forms of benefit for in-kind distributions and elective transfers as specified under Treas. Reg. section 1.411(d)-4 Q&A 2 and 3.

(b) If the Plan’s vesting schedule is amended, in the case of an Employee who is a Participant as of the later of the date the amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee’s Employer-derived accrued benefit will not be less than the percentage computed under the Plan without regard to such amendment.

(c) If the Plan’s vesting schedule is amended, or the Plan is amended in any way that directly or indirectly affects the computation of the Participant’s nonforfeitable percentage or if the Plan is deemed amended by an automatic change to or from a Top-Heavy vesting schedule, each Participant with at least 3 Years of Vesting Service with the Employer may elect, within a reasonable period after the adoption of the amendment or change, to have the nonforfeitable percentage computed under the Plan without regard to such amendment or change. For Participants who do not have at least 1 Hour of Service in any Plan Year beginning after December 31, 1988, the preceding sentence shall be applied by substituting “5 Years of Vesting Service” for “3 Years of Vesting Service” where such language appears. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of:

(1) 60 days after the amendment is adopted;

(2) 60 days after the amendment becomes effective; or

(3) 60 days after the Participant is issued written notice of the amendment by the Plan Administrator.


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The election provided for in this Section 13.01 shall be made in writing and shall be irrevocable when made.

(d) Code section 411(d)(6) protected benefits will be available without regard to Employer discretion in accordance with Treas. Reg. section 1.411(d)(4), Q & A’s #8 & 9.

(e) Amendment to Other Vesting Provisions.

(1) Except as provided in Subsection (e)(2), a plan amendment may not decrease a Participant’s accrued benefits, or otherwise place greater restrictions or conditions on a Participant’s rights to Code section 411(d)(6) protected benefits, even if the amendment merely adds a restriction or condition that is permitted under the vesting rules in Code section 411(a)(3) through (11).

(2) An amendment described in Subsection (e)(2) does not violate Code section 411(d)(6) to the extent: (i) it applies with respect to benefits that accrue after the applicable amendment date; or (ii) the plan amendment changes the Plan’s vesting computation period and it satisfies the applicable requirements under 29 CFR 2530.203-2(c).

(f) An amendment or restatement of the Plan may be made by any method including a formal record of action by the Board or other written document and execution of such amendment or restatement may be made by written or electronic means.

Section 13.02

MERGER AND TRANSFER

(a) Merger. In the event of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each Participant shall have a benefit in the surviving or transferee plan (as if such plan were then terminated immediately after such merger, consolidation or transfer) that is equal to or greater than the benefit he would have had immediately before such merger, consolidation or transfer in the plan in which he was then a Participant had such plan been terminated at that time.

(b) Transfer. The Plan Administrator may direct the Trustee to accept assets and related liabilities from another qualified plan provided that it receives sufficient evidence that the transferor plan is a tax-qualified plan. The Plan Administrator may direct the Trustee to transfer assets and related liabilities to another qualified plan provided that it receives sufficient evidence that the transferee plan is a tax-qualified plan.

Section 13.03

TERMINATION

(a) It is the intention of the Plan Sponsor that this Plan will be permanent. However, the Plan Sponsor reserves the right to terminate the Plan at any time for any reason.

(b) Each entity constituting the Company reserves the right to terminate its participation in this Plan. Each such entity constituting the Company shall be deemed to terminate its participation in the Plan if: (1) it is a party to a merger in which it is not the surviving entity and the surviving entity is not an affiliate of another entity constituting the Company; or (2) it sells all or substantially all of its assets to an entity that is not an affiliate of another entity constituting the Company.

(c) Any termination of the Plan shall become effective as of the date designated by the Plan Sponsor. Except as expressly provided elsewhere in the Plan, prior to the satisfaction of all liabilities with respect to the benefits provided under this Plan, no termination shall cause any part of the funds or assets held to provide benefits under the Plan to be used other than for the benefit of Participants or to meet the administrative expenses of the Plan. In the event of the termination or partial termination of the Plan the Account balance of each affected Participant will be nonforfeitable. In the event of a partial termination of the Plan the Account balance of each affected Participant will be nonforfeitable. In the event of a complete discontinuance of contributions under the Plan, the Account balance of each affected Participant will be nonforfeitable. Upon termination of the Plan, Participant Accounts shall be distributed in a single lump sum payment unless otherwise required pursuant to Article 7.


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ARTICLE 14 MISCELLANEOUS

ARTICLE 14 MISCELLANEOUS

Section 14.01

NONALIENATION OF BENEFITS

(a) Except as provided in Section 14.01(b), the Trust Fund shall not be subject to any form of attachment, garnishment, sequestration or other actions of collection afforded creditors of the Company, Participants or Beneficiaries under the Plan and all payments, benefits and rights shall be free from attachment, garnishment, trustee’s process, or any other legal or equitable process available to any creditor of such Company, Participant or Beneficiary. Except as provided in Section 14.01(b), no Participant or Beneficiary shall have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments which he may expect to receive, contingently or otherwise, under the Plan, except the right to designate a Beneficiary. Any reference to a Participant or Beneficiary shall include an Alternate Payee or the Beneficiary of an Alternate Payee.

(b) Notwithstanding the foregoing, the Trustee and/or Plan Administrator may:

(1) Subject to Section 14.02 below, comply with the provisions and conditions of any Qualified Domestic Relations Order pursuant to the provisions of Code section 414(p).

(2) Comply with any federal tax levy made pursuant to Code section 6331.

(3) Subject to the provisions of Code section 401(a)(13), comply with the provisions and conditions of a judgment, order, decree or settlement agreement issued on or after August 5, 1997 between the Participant and the Secretary of Labor or the Pension Benefit Guaranty Corporation relating to a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA.

(4) Bring action to recover benefit overpayments.

Section 14.02

RIGHTS OF ALTERNATE PAYEES

(a) General. An Alternate Payee shall have no rights to a Participant’s benefit and shall have no rights under this Plan other than those rights specifically granted to the Alternate Payee pursuant to a Qualified Domestic Relations Order that are consistent with this Section 14.02.

(b) Distribution. Notwithstanding any provision of the Plan to the contrary, the Plan Administrator may direct the Trustee to distribute all or a portion of a Participant’s benefits under the Plan to an Alternate Payee in accordance with the terms and conditions of a Qualified Domestic Relations Order. The Plan hereby specifically permits and authorizes distribution of a Participant’s benefits under the Plan to an Alternate Payee in accordance with a Qualified Domestic Relations Order prior to the date the Participant has a Termination of Employment, or prior to the date the Participant attains his earliest retirement age as defined in Code section 414(p). Unless otherwise provided in the Adoption Agreement, the preceding sentence does not apply to the Participant’s ESOP Account.

(c) Investment Funds. If the Qualified Domestic Relations Order does not specify the Participant’s Accounts, or Investment Funds in which such Accounts are invested, from which amounts that are separately accounted for shall be paid to an Alternate Payee, such amounts shall be distributed, or segregated, from the Participant’s Accounts, and the Investment Funds in which such Accounts are invested (excluding any amounts invested as a Participant loan), on a pro rata basis. A Qualified Domestic Relations Order may not provide for the assignment to an Alternate Payee of an amount that exceeds the balance of the Participant’s vested Accounts after deduction of any outstanding loan.

(d) Default Rules. Unless a Qualified Domestic Relations Order establishing a separate account for an Alternate Payee provides to the contrary:

(1) Death Benefits. An Alternate Payee shall have the right to designate a Beneficiary who shall receive benefits payable to an Alternate Payee which have not been distributed at the time of the Alternate Payee’s death. If the Alternate Payee does not designate a Beneficiary, or if the Beneficiary predeceases the Alternate Payee, benefits


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ARTICLE 14 MISCELLANEOUS

payable to the Alternate Payee which have not been distributed shall be paid pursuant to Section 7.04(c) (substituting “Alternate Payee” for “Participant”). Any death benefit payable to the Beneficiary of an Alternate Payee shall be paid in a single sum as soon as administratively practicable after the Alternate Payee’s death.

(2) Investment Direction. An Alternate Payee shall have the right to direct the investment of any portion of a Participant’s Accounts payable to the Alternate Payee under such order in the same manner with respect to a Participant, which amounts shall be separately accounted for by the Trustee in the Alternate Payee’s name.

(3) Voting Rights. An Alternate Payee shall have the right to direct the Trustee as to the exercise of voting rights in the same manner as provided with respect to a Participant.

(e) Withdrawals/Loans. An Alternate Payee shall not be permitted to make any withdrawals under Article 8 and shall not be permitted to make a loan from the separate Account established for the Alternate Payee pursuant to the Qualified Domestic Relations Order.

(f) Treatment as Spouse. A former spouse may be treated as the spouse or surviving spouse and a current spouse will not be treated as the spouse or surviving spouse to the extent provided under a Qualified Domestic Relations Order.

(g) Plan Procedures. Effective April 6, 2007, pursuant to DOL regulation 2530.206, a domestic relations order will not fail to be a Qualified Domestic Relations Order solely because the domestic relations order: (1) revises or is issued after another domestic relations order or Qualified Domestic Relations Order, or (2) the domestic relations order is issued after the Participant’s death, divorce or Annuity Starting Date.

Section 14.03

NO RIGHT TO EMPLOYMENT

Nothing contained in this Plan shall be construed as a contract of employment between the Employer and the Participant, or as a right of any Employee to continue in the employment of the Employer, or as a limitation of the right of the Employer to discharge any of its Employees, with or without cause.

Section 14.04

NO RIGHT TO TRUST ASSETS

No Employee, Participant, former Participant, Beneficiary or Alternate Payee shall have any rights to, or interest in, any assets of the Trust upon Termination of Employment or otherwise, except as specifically provided under the Plan. All payments of benefits under the Plan shall be made solely out of the assets of the Trust.

Section 14.05

GOVERNING LAW

This Plan shall be construed in accordance with and governed by the laws of the state or commonwealth specified in the Adoption Agreement to the extent not preempted by Federal law.

Section 14.06

SEVERABILITY OF PROVISIONS

If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.

Section 14.07

HEADINGS AND CAPTIONS

The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

Section 14.08

GENDER AND NUMBER

Except where otherwise clearly indicated by context, the masculine and the neuter shall include the feminine and the neuter, the singular shall include the plural, and vice-versa.widctlpar


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Section 14.09

DISASTER RELIEF

The Plan may grant temporary disaster relief in compliance with Code sections 1400M and 1400Q, and subsequent guidance and/or law, to the extent provided in a resolution by the Plan Sponsor. Such resolution by the Plan Sponsor may include, but is not limited to: (a) increasing the statutory limits on, delaying the repayment of, and/or waiving the adequate security requirement for Participants loans; (b) permitting qualified disaster distributions; and/or (c) permitting the re-contribution of prior disaster distributions by Participants.


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Exhibit 10.2

DIRECTORS’ DEFERRED COMPENSATION PLAN

NEWTON FEDERAL BANK

(As amended and restated as of June 30, 2015)

W-I-T-N-E-S-S-E-T-H:

WHEREAS, the Board of Directors of Newton Federal Savings & Loan Association (“the Association”), of Covington, Georgia, established and duly adopted the Directors’ Deferred Compensation Plan of Newton Federal Savings & Loan Association (the “Plan”) on December 16, 1993; and

WHEREAS, the Association became Newton Federal Bank (the “Bank”), the Plan changed its name to Newton Federal Bank Directors’ Deferred Compensation Plan and the Plan has been amended three times; and

WHEREAS, it is in the best interests of the Bank and all of its members to attract good, qualified directors and to retain them over a span of many years to benefit from their natural abilities and the experience they gain through their services; and

WHEREAS, it is in the best interests of the Bank and all of its members for its directors to have a direct financial interest in the performance of the Bank; and

WHEREAS, the Board of Directors of the Bank now believes it is in the best interests of the Bank and all of its members that the Plan be frozen to further deferral contributions and to any new participants; and

NOW THEREFORE, to accomplish these purposes, the Bank does hereby adopt this Amended and Restated Directors’ Deferred Compensation Plan of Newton Federal Bank (“the Plan”) effective as of June 30, 2015 (the “Restatement Date”), on the following terms and conditions:

l. Each Director who elects to participate in the Plan shall enter into a separate agreement (“Director Agreement”) with the Bank pursuant to and in accordance with the terms and conditions hereof, a sample copy of such an agreement being hereunto annexed as Exhibit “A” and made a part hereof;

2. Each Director’s Agreement shall specify the amount of compensation to be deferred each month, either as a dollar amount or as a percentage of compensation earned; and each participating Director shall hereafter have the right to increase or decrease such specified amount during the final calendar month of the calendar year with respect to compensation to be earned during the next calendar year by notice in writing to the Bank, which must be acknowledged in writing by an Officer of the Bank to become effective, subject to such Director’s re-election to the Board in the event he or she is in the final year of his or her term. Prior to the Restatement Date, any new members of the Board shall have the right to make such election within 30 days of their election and thereafter on the same schedule as other members of the Board of Directors.

3. Each Director’s Agreement shall designate the beneficiary or beneficiaries to whom such Director’s benefits shall be payable in the event of the Director’s death before receiving all of his or her benefits.

4. All deferred compensation and all interest accruing thereon shall be held by the Bank and distributed to the beneficiaries thereof in accordance with the terms of this Plan. The Bank shall at all times maintain both sufficient liquidity and funds, in addition to all other regulatory funding requirements, to fully discharge its obligations under this Plan.

5. A. Participation in the Plan is voluntary, and any Director may elect not to participate. Likewise, any Director who elects to participate may thereafter during the final calendar month of the calendar year, on notice in writing to the Bank, elect to terminate his or her participation with respect to compensation payable in any succeeding calendar year; but all compensation deferred up to that date and including compensation deferred for the balance of the calendar year in which the election is made, and all interest accrued thereon at that time, for that Director, shall be retained by the Bank and, together with interest accruing after that date, distributed to such Director, or his or her designated beneficiary or beneficiaries, in accordance with the terms of this Plan and that Director’s Director Agreement. Notwithstanding the foregoing, participation in the Plan is frozen as of June 30, 2015 and no Director who does not have a Director Agreement in effect may enter into a Director Agreement on or after that date and no person elected a Director after the Restatement Date may become a participant in the Plan.

B. The Bank shall also have the right to unilaterally terminate the Plan, by notice in writing to all participating Directors, with respect to compensation accruing after that date; but all compensation deferred up to that date, and all interest accrued thereon at that time, shall be retained by the Bank and, together with interest accruing after that date, distributed to the beneficiaries thereof in accordance with the terms of this Plan and the various Directors’ Agreements. Upon the termination of the Plan, Participant’s accounts shall be maintained and paid in accordance with the terms of the Plan and the Director Agreements thereunder but no new deferrals or contributions of any kind will be permitted. Notwithstanding the foregoing, earlier payment following termination of the Plan shall be permitted in accordance with Code Section 409A and the rules and regulations

thereunder. Upon the payment of the last amount from all accounts, the Plan will be closed. Notwithstanding the foregoing to the contrary, the Bank may authorize a termination and liquidation of the Plan, in accordance with Internal Revenue Code (“ Code”) Section 409 A, in accordance with any one of the following:

(a) within twelve (12) months of a corporate dissolution taxed under Code Section 331 or with the approval of a bankruptcy court pursuant to 11 U.S.C. 503(b)(l)(A), provided that the amounts deferred under the Plan are included in the Participant’s gross income in the latest of:

(A) the calendar year in which the Plan terminates and liquidates under this subsection;

(B) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or

(b) within the thirty (30) days preceding or the twelve (12) months following a change in control event (as defined in Treasury Regulation Section l.409A-3(i)(5) or any successor thereto); provided that all substantially similar arrangements for Participant sponsored by the Bank immediately after the time of the change in control event with respect to which deferrals of compensation are treated as having been deferred under a single plan under Treasury Regulation Section l.409A-1(c)(2) are terminated and liquidated with respect to each Director or Participant who experienced a change in control event so that

under the terms of the termination and liquidation all such Directors and Participants are required to receive all amounts of compensation deferred under the terminated arrangements within 12 months of the date the Bank irrevocably takes all necessary action to terminate and liquidate such arrangements; or

(c) at any time not proximate to a downturn in the financial health of the Bank if all arrangements that would be aggregated with the Plan under Treasury Regulation Section 1.409A- l(c) are terminated and liquidated and no payments other than payments that would be payable under the terms of the Plan if the termination had not occurred, are made within twelve (12) months of the termination and all payments are made within twenty-four (24) months of the date the Bank takes all necessary action to irrevocably terminate and liquidate the Plan and no new arrangement that would be aggregated with the Plan under Treasury Regulation Section 1.409A-l ( c) is adopted within three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Plan; or

(d) at such other events and conditions as the Commissioner of Internal Revenue may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

6. All deferred compensation and accrued interest thereon shall during each fiscal year of the Bank (now, October I through September 30) accrue interest at a rate equal to the Bank’s pre-tax return on average equity during the Bank’s previous fiscal year, but at a rate not more than 12% per annum or less than 6% per annum, compounded quarterly through June 30, 2015. Effective as of the Restatement Date, in lieu of the foregoing, all deferred compensation under the Plan shall be credited with earnings, compounded quarterly, at a rate equal to the average pre-tax total return for the immediately preceding ten year period on shares in the Vanguard Balanced Index Fund Admiral Shares (Symbol: VBIAX) as published in the Fund’s Annual Report for December 31 of the immediately preceding calendar year, adjusted annually effective July 1 of each year

7. At the time each participating Director shall elect to participate in the Plan, his or her Director’s Agreement shall specify one of the following methods of payment:

(a) all deferred compensation and accrued interest in a lump sum; or

(b) a designated sum or percentage of the balance of all deferred compensation and accrued interest per month until paid in full.

Provided, however, that prior to a Director’s entitlement to receive funds from the Plan, each Director may change the method of payment by notice in writing to the Bank in accordance with Paragraph 19. In the event option (b) herein shall be elected by the Director, all undistributed funds held by the Bank shall continue to accrue interest at the rate provided in paragraph 6 of this Plan.

Provided, however, that nothing contained in this paragraph shall be construed as entitling any individual Director to receive funds from the Plan prior to the occurrence of events otherwise creating such entitlements under the Plan.

8. A. A Director’s benefit shall become payable according to his or her election, as provided in Paragraph 7 hereof on the date or upon reaching the age specified in his or her election, provided, however, that the date or age specified in the election shall not be a date prior to such Director having attained the age of 62 years. Notwithstanding such election, or any subsequent deferral thereof, distribution of payments from the deferred compensation of any participant shall commence as provided under Paragraph 17.

B. A Director’s benefits may become immediately payable in a lump sum if the Plan is terminated under paragraph I 0.

C. The provisions in this paragraph 8 notwithstanding, if any participating Director, or his or her beneficiary, should incur a severe financial hardship on account of unforeseeable emergency a distribution in accordance with Paragraph 17 may be made.

9. If there should be any change in the structure of the Bank, which is now a mutual association, the terms of such re-structure shall include such provisions as may be required to fully protect (a) the benefits accrued hereunder at that time which have not been distributed, and (b) the reasonably anticipated earnings thereon (see paragraph 6 hereof) until distribution has been completed.

10. If any regulatory agency having jurisdiction over the Bank should hereafter object to any provision hereof, (a) the Plan shall be amended to meet such objection, if that can be done to the satisfaction of the Bank; and (b) if that cannot be done to the satisfaction of the Bank, the Plan may be terminated by the Bank in accordance with Paragraph 5(B).

11. The Bank shall, for accounting and reporting purposes, maintain a schedule showing the amount of deferred compensation and interest accrued thereon for each participant in the Plan, and report an accounting thereof at least once each year to each participant in the Plan or his or her beneficiary or beneficiaries.

12. The Bank shall, for tax purposes and to the extent required by law, report as income the earnings on the deferred income and accrued interest thereon and pay any tax due thereon, and shall claim no deduction for any compensation deferred or accrued interest thereon until actually distributed to a participating Director or his or her beneficiary, at which time all distributions shall be reported as income to the recipient(s) thereof.

13. The provisions hereof shall be fully binding upon and inure to the benefit of the respective heirs and legal representatives of the participating Directors and their designated beneficiaries, and any and all successors to the Bank.

14. The benefits payable under this Plan and any interest in this Plan shall not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge in any form, and any attempt to take any of the aforesaid actions with regard to the benefits payable under this Plan shall be void.

15. For purposes of this Plan only, the General Counsel of the Bank shall be considered a “Director” and shall be eligible to participate in the Plan as though he were a Director, subject, however to the following limitations:

(1) No General Counsel shall be eligible to participate in the plan unless and until he shall have served five years continuous service to the Bank as its General Counsel.

(2) Any General Counsel participating in the Plan shall be limited in the compensation he elects to defer to the amount of his monthly retainer fees only.

In all other material respects, the General Counsel shall be permitted to participate in the Plan on the same basis as a Director, and shall further be subject to the same limitations as otherwise herein provided.

16. This Plan is adopted and shall function under the requirements of the Public Law Number 108-357, 114 Stat. 1418, the “American Jobs Creation Act of 2004” (the “Act”) as to its requirements relating to Non-Qualified Deferred Compensation Plans and shall be interpreted and construed in such manner as to meet and comply with the Act, and regulations thereunder. In the event of any conflict between any term of this Plan, as amended, and the provisions of the Act, the requirements of the Act shall in all cases control, and such conflicting provision shall be treated as though severed from the Plan. None of the payments under the Plan are intended to result in inclusion in a participant’s or beneficiary’s federal gross income on account of a failure under Code Section 409A(a)(9). Nevertheless, the Bank does not represent, warrant or guarantee any payments under the Plan will not result in inclusion in federal gross income or any penalty.

17. Notwithstanding any other provision of this Plan or the Director’s Agreements adopted pursuant thereto, once an election has been made, the payment of compensation deferred pursuant to this Plan may not under any circumstances be distributed to any participant except upon the occurrence of the earlier of (i) the time specified in the Director’s Agreement by which a deferral is made; (ii) separation from service (within the meaning of Treas. Reg. § l .409A-l (h)); (iii) the date on which the participant becomes disabled (within the meaning of Treas. Reg. §409A-3(i)(4)); (iv) the date on which the participant dies; (v) a change in ownership or effective control or in the ownership of the substantial portion of the assets of the Bank (as the same is now or hereafter defined in United States Treasury Regulations under Code Section 409A); or (vi) upon the occurrence of an unforeseeable emergency. For purposes of this Plan, the term “unforeseeable emergency” shall include only a severe financial hardship resulting from an illness or accident of the participant, the participant’s spouse or dependent; loss of the participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events

beyond the control of the participant. Further, in the case of such unforeseeable emergency, the amounts distributed with respect to the emergency shall not exceed those amounts necessary to satisfy the emergency plus amounts reasonably calculated to pay taxes on any such distribution. Whether or not an unforeseeable emergency exists, and if so, the extent of the distribution, shall be determined by the Board of Directors following the guidelines then established under United States Treasury Regulations.

18. Neither this Plan nor any Director’s Agreement adopted pursuant hereto may include any provision which permits any portion of the deferred amounts to be distributed earlier than that date established in the Director’s Agreement at the election of the participant except as provided in paragraph 17 hereof.

19. The Participant may, during the same time period of the annual deferral election herein provided, elect to delay a payment or change the form of the payment upon which an initial deferral has been made, but if such election to delay payment is made, it must meet the following requirements:

(a) Such election must take effect not less than twelve (12) months after the date upon which the election is made; and

(b) The first payment to which the election applies must be deferred for a period of not less than 5 years from the date such payment would have otherwise been made (except in the case of election relating to participant death, disability, or unforeseeable emergency); and

(c) Any such election related to a payment at a specified time or pursuant to a fixed schedule may not be made less than 12 months before the date of the first scheduled payment.

20. In addition to those provisions of Paragraph 17 hereof, acceleration of the time or schedule of payments pursuant to this Plan may be made in following circumstances:

(a) Payments under the Plan to an individual other the plan participant as may be necessary to fulfill a domestic relations order as the same is defined in IRC Section 414 (p )(I )(B); or

(b) Payments required for the payment of Federal Insurance Contributions Act (FICA) tax imposed under sections 3101 and 3121 (v)(2) on compensation deferred under the plan (the FICA amount) and the income tax withholding related to such FICA amount.

21. Any person who becomes newly eligible to participate in the Plan may elect to begin deferral of income pursuant to this Plan within the first thirty days following the initial date of eligibility, without regard to other time restrictions contained herein as to deferral elections; provided that as of the Restatement Date, no persons will become newly eligible to participate in the Plan. Except as provided in this paragraph, all deferral elections shall be made prior to the taxable year in which the services for which income to be deferred are performed.

22. To the extent required by the Act, in the event any participant in the Plan is deemed to be a “key employee” of the Bank pursuant to Code Section 416 and thus a “specified employee” within the meaning of Section 409A of the Code, such participant may not receive a distribution hereunder in the first six months immediately following such participant’s separation from service.

23. Assets held for purposes of making payments pursuant to this Plan shall not be set aside or transferred outside the United States, in trust or otherwise. Further, assets held for such purposes are to remain general assets of the Bank and shall not be restricted to the provision of plan benefits based upon any change in the Bank’s financial health.

24. Benefits under this Plan are subject to the following claims procedures.

A. Participant, or Participant’s Beneficiary (“claimant” for the purposes of this section), may deliver to the Bank a written claim for a determination with respect to the amounts distributable to such claimant under the Plan. All claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.

B. The Bank shall consider a claimant’s claim within sixty (60) days of the making of the claim, and shall notify the claimant in writing:

(a) that the claimant’s requested determination has been made, and that the claim has been allowed in full; or

(b) that the Bank has reached a conclusion contrary, in whole or in part, to the claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the claimant:

(d) specific reference( s) to pertinent provisions of the Plan upon which such denial was based;

(e) a description of any additional material or information necessary for the claimant to perfect the claim, and an explanation of why such material or information is necessary; and

(f) an explanation of the claim review procedure set forth below.

C. Within sixty (60) days after receiving a notice from the Bank that a claim has been denied, in whole or in part, a claimant (or the claimant’s duly authorized representative) may file with the Bank a written request for a review of the denial of the claim. Thereafter, but not later than thirty (30) days after the review procedure begins, the claimant (or the claimant’s duly authorized representative):

(a) may review pertinent documents;

(b) may submit written comments or other documents; and/or

D. The Bank shall render its decision on review promptly, and not later than sixty (60) days after the filing of a written request for review of the denial other special circumstances require additional time, in which case the Plan Administrator’s decision must be rendered within one hundred twenty (120) days after such date. Such decision must be written in a manner calculated to be understood by the claimant, and it must contain:

(a) specific reasons for the decision;

(b) specific reference( s) to the pertinent provisions of the Plan upon which the decision was based; and

E. A claimant’s compliance with the foregoing provisions of this paragraph 24 is a mandatory prerequisite to a claimant’s right to commence any legal action with respect to any claim for benefits under the Plan.

F. In the event that the Bank requests additional information necessary to determine the claim or appeal from a claimant, the claimant shall have at least 45 days in which to respond. The period for making a benefit determination or deciding an appeal, as the case may be, shall be tolled from the date of the notification to the claimant of the request for additional information until the date the claimant responds to such request or, if earlier, the expiration of the deadline provided by the Bank.

G. If a claimant challenges the determination of disability under the Plan, then sub-Sections B. and C. shall be read with “45” instead of “60” in the number of days in such section, and Section D. shall be read with “45” instead of “60” and “90” instead of “120” days in such section.

IN WITNESS WHEREOF, the undersigned have hereunto set their hands and the seal of the Bank, the day and year first above written.


NEWTON FEDERAL BANK

By:

By:

Signed and sealed in the presence of:

Witness

Notary Public

Exhibit A

Sample Directors Agreement

This Agreement, entered into this day of , by and between Newton Federal Bank (the “Association) and (the “Participant”), both of Covington, Newton County, Georgia

WITNESSETH:

THAT WHEREAS, the Association did on the 16th day of December, 1993, adopt a Deferred Compensation Plan (the “Plan”) for its directors, later amended to include its General Counsel; and

WHEREAS, Participant, is a duly elected participant under the terms of the Plan; and

NOW THEREFORE, in consideration of the mutual benefits to flow to the parties hereto from the provisions hereof, they have agreed and do hereby agree as follows:

1. This agreement is made pursuant to the Plan, which is by reference incorporated herein and made a part hereof. The provisions thereof shall be binding upon and inure to the benefit of the parties as fully as if recited verbatim herein.

2. Pursuant to the provisions of the Plan, the Participant elects to have the sum of of the eligible fees due him each month deferred, until further notice in writing to the Association as required by the Plan, but receipt of such notice, if given, must be acknowledged in writing by an officer of the Association to become effective.

3. Pursuant to the provisions of the Plan, if the Participant should die before receiving all of these benefits under the Plan, he directs that they be paid to the following beneficiary:

The Participant expressly reserves the right to change such beneficiary at any time and from time to time by notice in writing which must be acknowledged in writing by an officer of the Association to become effective.

4. Pursuant to the provisions of paragraph 8 of the Plan, participant hereby makes the following election for payments of sums due him under the Plan:

Commencing upon Participant (or upon death of the Participant, the first named beneficiary) having reached the age of 62 years ( or upon the occurrence of a mandatory payment event in accordance with the provisions of the Plan), the sum of $ or % per cent of the balance, whichever is greater, shall be paid to Participant or his beneficiary each month until all deferred compensation and earnings thereon shall have been paid in full. Provided, however, that upon the death of the Participant and all named beneficiaries herein, then and in that event the entire remaining balance shall be paid to the Estate of the Participant in a lump sum.

5. The provisions hereof shall be binding upon and shall inure to the benefit of the heirs and legal representatives of the Participant and his designated beneficiaries and any successor or successors of the Association.

In Witness Whereof, the parties have executed this agreement under seal, the day and year herein first above written.

Exhibit 10.3

COMPREHENSIVE RELEASE AND SEVERANCE AGREEMENT

This COMPREHENSIVE RELEASE AND SEVERANCE AGREEMENT (“Agreement”) is entered into by and between Newton Federal Bank (“Company”) and George Lazenby (“Employee”). In consideration of the mutual covenants, conditions and promises set forth in this Agreement, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

I.	Definitions

For purposes of this Agreement, the following Definitions will apply:

A. Retirement Date. The “Retirement Date” will be January 15, 2016.

B. Effective Date. The “Effective Date” of this Agreement is the eighth (8 ^th ) day after Employee’s execution of this Agreement, as set forth in Paragraph II. F(4) below, provided that Employee does not exercise the right to revoke as set forth in that paragraph.

C. Released Parties. The “Released Parties” are the Company and its present or former officers, directors, employees, agents, affiliated companies, insurers, predecessors, successors and assigns.

D. Releasing Parties. The “Releasing Parties” are the Employee and Employee’s attorneys, heirs, executors, administrators, representatives, agents, successors, and assigns.

E. Administrative Proceeding. An “Administrative Proceeding” includes any charge or complaint or other action instituted with a federal, state, or local governmental agency other than the U.S. Equal Employment Opportunity Commission (“EEOC”) or the Georgia Department of Labor.

II.

Terms

A. Return of Company Property. If Employee has not already done so, Employee will return and give to the Company as soon as possible, but no later than seven (7) days after the Retirement Date, all Company property including but not limited to, computer equipment, cell phone, documents, computer files, and any copies thereof, which relate to the Company’s business and which are in Employee’s possession, or under Employee’s direction or control.

Page 1 of 6

B. Severance Pay. In consideration for Employee’s retirement from employment with the Company, the Company’s Board of Directors, on the Retirement Date, execution of this Agreement, and a release of claims as set forth below, the Company will pay as severance pay the total sum of Two Hundred Eighteen Thousand Six Hundred Fifty Thousand Dollars and Eighty-Eight Cents paid in fourteen (14) equal installments of Fifteen Thousand Six Hundred Seventeen Dollars and Ninety-Two Cents ($15,617.92), less applicable withholding at regular monthly pay periods through February 13, 2017; and Twenty One Thousand Dollars ($21,000.00), less applicable withholdings, which totals what the employee would have earned had he remained on the Board of Directors one additional year.

C. Not Otherwise Entitled. The parties agree that, apart from this Agreement, Employee is entitled to no payments or other consideration from the Company. The payments described in Paragraph II. B are contingent upon Employee’s execution of this Agreement, Employee not exercising his right to revoke, and Employee’s compliance with all of the terms of this Agreement.

D. No Further Obligation. Employee agrees that Employee has been paid all earned and accrued compensation, less applicable deductions, through the Resignation Date.

E. Employee Benefits. Should Employee elect to continue health coverage through COBRA, the Company will pay the equivalent of fourteen (14) months premiums toward health care coverage totaling Twenty Thousand Nine Hundred Seventy Five Dollars and Sixty Four Cents ($20,975.64). Thereafter, Employee will be responsible for the entire premium. Employee understands that he is entitled to continuation of health benefits coverage under the provisions of COBRA regardless of whether he enters into this Comprehensive Release and Severance Agreement. Furthermore, Employee acknowledges that nothing herein affects his eligibility for COBRA continuation coverage consistent with federal requirements, upon the Retirement of his Company provided health benefits.

F. Acknowledgements. Employee acknowledges reading and understanding this Agreement, and specifically acknowledges the following:

(1) That Employee has been advised by the Company to consult with an attorney, and has had the opportunity to consult with an attorney, before signing this Agreement; and

(2) That Employee has been given twenty-one (21) days to decide whether to sign this Agreement; and

(3) That Employee is waiving, among other claims, age discrimination claims under the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. §621, et seq., and all amendments thereto; and

Page 2 of 6

(4) That if Employee signs this Agreement, Employee has seven (7) days in which to revoke the signature, and that the Agreement will not become effective or enforceable until after the Effective Date (in other words, the revocation period must have expired, and Employee must not have exercised the right to revoke). Specifically, Employee understands the Severance Payment referred to in Paragraph II. B will not be received until after the Effective Date. To revoke this Agreement, Employee must send a written notice to Mr. Billy Fortson, Ginn Motor Company, 8153 Access Road, Covington, GA 30014, no later than the eighth (8th) day after Employee’s signing of the Agreement; and

(5) That, by signing this Agreement, Employee is not waiving or releasing any claims based on actions or omissions that occur after the date of the signing of this Agreement.

G. Release . In exchange for the Severance Payment described in Paragraph II. B above, the Releasing Parties fully release and discharge the Released Parties from any and all claims of any nature, whether known or unknown, which Employee may have arising out of or in connection with Employee’s employment or Retirement of employment, through the Effective Date of this Agreement.

This release includes, but is not limited to, the following claims: Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., as amended by subsequent congressional legislation including, without limitation, the Civil Rights Act of 1991; the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq. ; the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. ; the Equal Pay Act of 1963, 19 U.S.C. § 206(d); the Civil Rights Act of 1866, 42 U.S.C. § 1981; the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. (except such rights as may be vested under any retirement plan sponsored by the Company); the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq. ; the Family and Medical Leave Act of 1993 (“FMLA”), 29 U.S.C. § 2601 et seq. ; any claims under Georgia state law or other state laws or any claims for wrongful discharge, discrimination, retaliation, harassment, breach of contract, intentional or negligent infliction of emotional distress, defamation, invasion of privacy, interference with contract, or any other cause of action based on federal, state, or local law or the common law, whether in tort or in contract. Employee further agrees that he and the Releasing Parties will not institute any legal or Administrative Proceeding against the Released Parties as to any matter based upon, arising out of, or related to employment, compensation during employment, or Retirement of employment with the Company. This Comprehensive Release and Severance Agreement shall constitute a complete defense to any such legal action brought in violation of this paragraph. Employee also covenants and agrees that Employee will not directly or indirectly participate in any other action, lawsuit, claim, charge or other legal proceeding against the Released Parties and/or against any affiliated entities, either as a party, witness, consultant or informant except as required by legal process, including the subpoena powers of any court or governmental entity or agency. If Employee files a charge with the U.S. Equal Employment Opportunity Commission that would otherwise have been released by this paragraph, Employee shall be limited to non-monetary relief.

Page 3 of 6

H. Non-Admission of Liability. Employee agrees that this Agreement is not an admission of any liability or wrongdoing on the part of the Released Parties.

I. Unemployment Compensation. Nothing in this Agreement shall preclude Employee from exercising Employee’s right to file a claim for unemployment compensation with the Georgia Department of Labor.

J. Re-Employment. Employee agrees not to seek re-employment with the Company or its affiliates at any time in the future.

K. Taxation. In the event that the Company is required to pay back taxes or Social Security, or fines or assessments, because of Employee’s non-payment of taxes on the amounts paid under this Agreement, Employee agrees to indemnify the Company for any such amounts.

L. Communications to Third Parties . Employee agrees that neither he nor his spouse will communicate in a derogatory manner concerning the Released Parties, and in the event that an employer or prospective employer contacts the Company for a job reference or referral concerning Employee, the Company will instruct its employees, agents or representatives with responsibility for making such reference or referral to provide only Employee’s dates of employment, position(s) held and that Employee retired in good standing.

M. Confidentiality . Employee agrees not to disclose the existence or contents of this Agreement, including the amount of monetary payment, to anyone other than Employee’s attorneys, financial advisers, or spouse, so long as Employee obtains their prior commitment to follow the confidentiality provisions of this paragraph; and provided, that any subsequent disclosure by these individuals which would be in violation of this paragraph if made by Employee shall be deemed to be a violation of this Agreement. Employee agrees that if he violates this confidentiality provision, he will be responsible for paying all attorneys’ fees and expenses incurred by Company in any prevailing action for equitable relief and/or damages pursued for purposes of alleging a breach of this provision. Employee is permitted to disclose the contents of this Agreement pursuant to an appropriate order from a court or other entity with competent jurisdiction.

The Company, and its officers, directors, agents and management-level employees, will have the right to discuss Employee’s employment and this Agreement among themselves.

Page 4 of 6

N. Entire Agreement; Modification . The parties agree that this is the entire agreement between the parties. This Agreement overrides and replaces all prior negotiations and terms proposed or discussed, whether in writing or orally, about the subject matter of this Agreement, with the exception of any non-competition agreement, confidentiality agreement or other obligation which, by its terms or by operation of law, survives the Retirement of Employee’s employment. In such event, the confidentiality obligations of this Agreement will supplement, but not replace, such agreement or agreements. No modification of this Agreement will be valid unless it is in writing identified as an Amendment to the Agreement and is signed by Employee and an authorized executive of the Company.

O. Regulatory Compliance. Prior to Employee’s Retirement Date, Employee has made Released Parties aware, in writing, of any areas or potential areas of non-compliance with any laws or regulations; and Employee has no knowledge of any other compliance-related matters.

P. Retirement as Board Member. Employee also agrees to resign from the Board of Directors of the Company on the same date as his Retirement Date.

Q. Governing Law . This Agreement is governed by and construed in accordance with the laws of the State of Georgia.

R. Remedies for Breach .

(1) ADEA . In the event that the Releasing Parties bring and prevail in an action against the Released Parties based on an ADEA claim released in Paragraph II. G, the Released Parties will be entitled to offset any recovery by the amounts paid under this Agreement or the amount recovered by the Releasing Parties, whichever is less. In the event that the Released Parties prevail in such an action, the Released Parties will be entitled to all remedies authorized by applicable law.

(2) All Other Claims . In the event that the Releasing Parties bring an action against the Released Parties based on any other claim released in Paragraph II. G, the Released Parties may, at their option, and as applicable (a) stop making payments that would otherwise have been due under this Agreement; (b) demand the return of any payments that have been made under this Agreement; (c) plead this Agreement in bar to any such action; (d) seek any and all remedies available, including but not limited to injunctive relief and monetary damages, costs and reasonable attorneys’ fees.

(3) Breach by the Company. In the event that the Released Parties breach this Agreement, the Releasing Parties will be entitled to bring an action for breach of this Agreement but not for any claims released by Paragraph II. G. In the event that the Releasing Parties prevail in such an action, they will be entitled to recover (as appropriate and applicable) monetary damages, injunctive relief, costs and reasonable attorneys’ fees.

Page 5 of 6

S. Severability . Each provision of this Agreement is intended to be severable. If any court of competent jurisdiction determines that any provision of this Agreement is invalid, illegal or unenforceable in any respect, the rest of the Agreement will remain in force.

EMPLOYEE ACKNOWLEDGES CAREFULLY READING THIS SEPARATION AND RELEASE AGREEMENT, AND KNOWING AND UNDERSTANDING ITS CONTENTS, AND VOLUNTARILY SIGNING IT OF HIS/HER OWN FREE WILL.

IN WITNESS WHEREOF, the parties sign this Agreement on the dates indicated below with the intent to be bound by its terms and conditions.

Page 6 of 6

Exhibit 21

Subsidiaries of the Registrant

The following is a list of the subsidiaries of Community First Bancshares, Inc.:


Name		State of Incorporation

Newton Federal Bank		Federal

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the inclusion in this Registration Statement on Form S-1 of Newton Federal Bank filed with the Securities and Exchange Commission, the Form H-(e)1 filed with the Board of Governors of the Federal Reserve System and the Form MHC-1/MHC-2 filed with the Board of Governors of the Federal Reserve System of our report dated December 7, 2016 on our audit of the financial statements of Newton Federal Bank, appearing in the Prospectus, which is part of this Registration Statement, the Form H-(e)1 and the Form MHC-1/MHC-2. We also consent to the references to our firm under the caption “The Reorganization and Offering,” “Experts” and “Legal and Tax Matters” in the Prospectus.

LOGO

Atlanta, Georgia

December 12, 2016

Exhibit 23.4

LOGO

December 9, 2016

Board of Directors

Newton Federal Bank

3175 Highway 278

Covington, Georgia 30014

Members of the Board of Directors:

We hereby consent to the use of our firm’s name in the Registration Statement on Form S-1, and any amendments thereto, to be filed with the Securities and Exchange Commission and the Form MHC-1/MHC-2 Notice of Mutual Holding Company Reorganization and Application for Approval of a Minority Stock Issuance by a Subsidiary of a Mutual Holding Company, and any amendments thereto, to be filed with the Federal Reserve Board. We also hereby consent to the inclusion of, summary of and references to our Valuation Appraisal Report and any Valuation Appraisal Report Updates and our statement concerning subscription rights and liquidation rights in such filings including the prospectus of Community First Bancshares, Inc. We also consent to the reference to our firm under the heading “Experts” in the prospectus.

Sincerely,

RP ^® FINANCIAL, LC.


Washington Headquarters
Three Ballston Plaza		Telephone: (703) 528-1700
1100 North Glebe Road, Suite 600		Fax No.: (703) 528-1788
Arlington, VA 22201		Toll-Free No.: (866) 723-0594
www.rpfinancial.com		E-Mail: mail@rpfinancial.com

Exhibit 99.1


RP ^® FINANCIAL, LC.

Advisory | Planning | Valuation

October 14, 2016

Johnny S. Smith

President and Chief Executive Officer

Newton Federal Bank

3175 Highway 278

Covington, Georgia 30014

Dear Mr. Smith:

This letter sets forth the agreement whereby Newton Federal Bank, Covington, Georgia, (the “Company”), has engaged RP ^® Financial, LC. (“RP Financial”) for independent conversion appraisal services in conjunction with the minority stock offering by the Company. The specific appraisal services to be rendered, along with the timing and fee structure for these appraisal services are described below.

Description of Appraisal Services

RP Financial will conduct financial due diligence, including interviews of senior management and reviews of historical and pro forma financial information and other documents and records, to gain insight into the operations, financial condition, profitability, market area, risks and various internal and external factors which will be considered in estimating the pro forma market value of the Company in accordance with the applicable regulatory appraisal guidelines.

RP Financial will prepare a detailed written valuation report of the Company that will be fully consistent with applicable regulatory appraisal guidelines and standard pro forma valuation practices, taking into consideration the intended minority stock offering. The appraisal report will include an analysis of the Company’s financial condition and operating results, as well as an assessment of the Company’s interest rate risk, credit risk and liquidity risk. The appraisal report will incorporate an evaluation of the Company’s business strategies, market area, prospects for the future and the intended use of proceeds both in the short term and over the longer term. A peer group analysis relative to certain relatively comparable publicly-traded companies will be conducted for the purpose of determining appropriate valuation adjustments for the Company relative to the peer group’s pricing ratios.

We will review pertinent sections of the applications and offering documents and conduct discussions with representatives of the Bank to obtain necessary data and information for the appraisal, including the impact of key deal elements on the appraised value, such as dividend policy, use of proceeds and reinvestment rate, tax rate, offering expenses, characteristics of stock plans and charitable foundation contribution (if applicable).


Washington Headquarters
Three Ballston Plaza		Direct: (703) 647-6549
1100 North Glebe Road, Suite 600		Telephone: (703) 528-1700
Arlington, VA 22201		Fax No.: (703) 528-1788
E-Mail: joren@rpfinancial.com		Toll-Free No.: (866) 723-0594

Newton Federal Bank

October 14, 2016

Page 2

The original appraisal report will establish a midpoint pro forma market value in accordance with the applicable regulatory requirements. The appraisal report will provide the basis for the Company to determine the size of the minority stock offering. The appraisal report may be periodically updated throughout the conversion process, and, in accordance with the conversion regulations, there will be at least one updated appraisal prepared at the closing of the minority stock offering to determine the number of shares to be issued.

RP Financial agrees to deliver the valuation appraisal and subsequent updates, in writing, to the Company at the above address in conjunction with the filing of the regulatory application. Subsequent updates will be filed promptly as certain events occur which would warrant the preparation and filing of such valuation updates. Further, RP Financial agrees to perform such other services as are necessary or required in connection with the regulatory review of the appraisal and respond to the regulatory comments, if any, regarding the valuation appraisal and subsequent updates. RP Financial will also prepare the pro forma presentations for inclusion in the prospectus, reflecting the original appraisal and subsequent updates, as appropriate.

RP Financial expects to formally present the appraisal report, including the appraisal methodology, peer group selection and assumptions, to the Board of Directors of the Company (the “Board”) for review and consideration. If appropriate, RP Financial will present subsequent updates to the Board. It is understood that this appraisal may be presented either in person or telephonically.

Fee Structure and Payment Schedule

The Company agrees to pay RP Financial a fixed fee of $40,000 for preparation and delivery of the original appraisal report and $7,500 for each subsequent update, plus reimbursable expenses. Payment of these fees shall be made according to the following schedule:

•

$10,000 upon execution of this letter of agreement engaging RP Financial’s appraisal services;

•

$30,000 upon delivery of the completed original appraisal report; and,

•

$7,500 for each valuation update that may be required, provided that the transaction is not delayed for reasons described below. It is anticipated that there will be at least one appraisal update report, specifically the update to be prepared in conjunction with the completion of the stock offering.

The Company will reimburse RP Financial for reasonable out-of-pocket expenses incurred in preparation of the original appraisal and subsequent updates. Such out-of-pocket expenses will likely include travel, printing, telephone, facsimile, shipping, reasonable counsel fees, computer and data services, and will not exceed $4,000 in the aggregate, without the Company’s authorization to exceed this level.

In the event the Company shall, for any reason, discontinue the conversion prior to delivery of the completed documents set forth above and payment of the respective progress payment fees, the Company agrees to compensate RP Financial according to RP Financial’s standard billing rates for consulting services based on accumulated and verifiable time expenses, not to exceed the respective fee caps noted above, after giving full credit to the initial retainer fee. RP Financial’s standard billing rates range from $75 per hour for research associates to $450 per hour for managing directors.

Newton Federal Bank

October 14, 2016

Page 3

If during the course of the proposed transaction, unforeseen events occur so as to materially change the nature or the work content of the services described in this contract, the terms of said contract shall be subject to renegotiation by the Company and RP Financial. Such unforeseen events shall include, but not be limited to, material changes to the structure of the transaction such as inclusion of a simultaneous business combination transaction, material changes in the conversion regulations, appraisal guidelines or processing procedures as they relate to conversion appraisals, material changes in management or procedures, operating policies or philosophies, and excessive delays or suspension of processing of conversion applications by the regulators such that completion of the conversion transaction requires the preparation by RP Financial of a new appraisal.

Covenants, Representations and Warranties

The Company and RP Financial agree to the following:

1. The Company agrees to make available or to supply to RP Financial such information with respect to its business and financial condition as RP Financial may reasonably request in order to provide the aforesaid valuation. Such information heretofore or hereafter supplied or made available to RP Financial shall include: annual financial statements, periodic regulatory filings and material agreements, debt instruments, off balance sheet assets or liabilities, commitments and contingencies, unrealized gains or losses and corporate books and records. All information provided by the Company to RP Financial shall remain strictly confidential (unless such information is otherwise made available to the public), and if the conversion is not consummated or the services of RP Financial are terminated hereunder, RP Financial shall promptly return to the Company the original and any copies of such information.

2. The Company represents and warrants to RP Financial that any information provided to RP Financial does not and will not, to the best of the Company’s knowledge, at the times it is provided to RP Financial, contain any untrue statement of a material fact or in response to informational requests by RP Financial fail to state a material fact necessary to make the statements therein not false or misleading in light of the circumstances under which they were made.

3. (a) The Company agrees that it will indemnify and hold harmless RP Financial, any affiliates of RP Financial, the respective members, officers, agents and employees of RP Financial or their successors and assigns who act for or on behalf of RP Financial in connection with the services called for under this agreement (hereinafter referred to as “RP Financial”), from and against any and all losses, claims, damages and liabilities (including, but not limited to, reasonable attorneys fees, and all losses and expenses in connection with claims under the federal securities laws) attributable to (i) any untrue statement or alleged untrue statement of a material fact contained in the financial statements or other information furnished or otherwise provided by the Company to RP Financial, either orally or in writing; (ii) the omission or alleged omission of a material fact from the financial statements or other information furnished or otherwise made available by the Company to RP Financial; or (iii) any action or omission to act by the Company, or the Company’s respective officers, directors, employees or agents, which action or omission is undertaken in bad faith or is negligent. The Company will be under no obligation to indemnify RP Financial hereunder if a court determines that RP Financial was negligent or acted in bad faith with respect to any actions or omissions of RP Financial related to a matter for which indemnification is sought hereunder. Reasonable time devoted by RP Financial to situations for which RP Financial is deemed entitled to indemnification hereunder, shall be an indemnifiable cost payable by the Company at the normal hourly professional rate chargeable by such employee.

Newton Federal Bank

October 14, 2016

Page 4

(b) RP Financial shall give written notice to the Company of such claim or facts within thirty days of the assertion of any claim or discovery of material facts upon which RP Financial intends to base a claim for indemnification hereunder, including the name of counsel that RP Financial intends to engage in connection with any indemnification related matter. In the event the Company elects, within seven days of the receipt of the original notice thereof, to contest such claim by written notice to RP Financial, the Company shall not be obligated to make payments under Section 3(c), but RP Financial will be entitled to be paid any amounts payable by the Company hereunder within five days after the final non-appealable determination of such contest either by written acknowledgement of the Company or a decision of a court of competent jurisdiction or alternative adjudication forum, unless it is determined in accordance with Section 3(c) hereof that RP Financial is not entitled to indemnity hereunder. If the Company does not so elect to contest a claim for indemnification by RP Financial hereunder, RP Financial shall (subject to the Company’s receipt of the written statement and undertaking under Section 3(c) hereof) be paid promptly and in any event within thirty days after receipt by the Company of detailed billing statements or invoices for which RP Financial is entitled to reimbursement under Section 3(c) hereof.

(c) Subject to the Company’s right to contest under Section 3(b) hereof, the Company shall pay for or reimburse the reasonable expenses, including reasonable attorneys’ fees, incurred by RP Financial in advance of the final disposition of any proceeding within thirty days of the receipt of such request if RP Financial furnishes the Company: (1) a written statement of RP Financial’s good faith belief that it is entitled to indemnification hereunder; (2) a written undertaking to repay the advance if it ultimately is determined in a final, non-appealable adjudication of such proceeding that it or he is not entitled to such indemnification; and (3) a detailed invoice of the expenses for which reimbursement is sought.

(d) In the event the Company does not pay any indemnified loss or make advance reimbursements of expenses in accordance with the terms of this agreement, RP Financial shall have all remedies available at law or in equity to enforce such obligation.

This agreement constitutes the entire understanding of the Company and RP Financial concerning the subject matter addressed herein, and such contract shall be governed and construed in accordance with the Commonwealth of Virginia. This agreement may not be modified, supplemented or amended except by written agreement executed by both parties.

The Company and RP Financial are not affiliated, and neither the Company nor RP Financial has an economic interest in, or is held in common with, the other and has not derived a significant portion of its gross revenues, receipts or net income for any period from transactions with the other. RP Financial represents and warrants that it is not aware of any fact or circumstance that would cause it not to be “independent” within the meaning of the conversion regulations of the federal banking agencies or otherwise prohibit or restrict in anyway RP Financial from serving in the role of independent appraiser for the Company.

******************************************************

Newton Federal Bank

October 14, 2016

Page 5

Please acknowledge your agreement to the foregoing by signing as indicated below and returning to RP Financial a signed copy of this letter along with the initial retainer.

Sincerely,

James J. Oren

Director


Agreed To and Accepted By:		Johnny S. Smith
		President and Chief Executive Officer



Upon Authorization of the Board of Directors of:		Newton Federal Bank
		Covington, Georgia



Date Executed:		10/14/16

Exhibit 99.2

LOGO

December 9, 2016

Boards of Directors

Community First Bancshares, MHC

Community First Bancshares, Inc.

Newton Federal Bank

3175 Highway 278

Covington, Georgia 30014

Re:	Plan of Reorganization

Community First Bancshares, MHC

Community First Bancshares, Inc.

Newton Federal Bank

Members of the Boards of Directors:

All capitalized terms not otherwise defined in this letter have the meanings given such terms in the Plan of Reorganization (the “Plan”) adopted by the Board of Directors of Newton Federal Bank, a federally-chartered savings institution (“Newton Federal” or the “Bank”). Pursuant to the Plan, Community First Bancshares, Inc. (the “Company”) will issue a majority of its common stock to Community First Bancshares, MHC, a federal mutual holding company, and sell a minority of its common stock to the public.

We understand that in accordance with the Plan, subscription rights to purchase shares of common stock in the Company are to be issued to: (1) Eligible Account Holders; (2) Tax-Qualified Employee Plans; (3) Supplemental Eligible Account Holders; and, (4) Other Members. Based solely upon our observation that the subscription rights will be available to such parties without cost, will be legally non-transferable and of short duration, and will afford such parties the right only to purchase shares of common stock at the same price as will be paid by members of the general public in the community or syndicated offerings but without undertaking any independent investigation of state or federal law or the position of the Internal Revenue Service with respect to this issue, we are of the belief that, as a factual matter:

(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.

Changes in the local and national economy, the legislative and regulatory environment, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability and may materially impact the value of thrift stocks as a whole or the Company’s value alone. Accordingly, no assurance can be given that persons who subscribe to shares of common stock in the subscription offering will thereafter be able to buy or sell such shares at the same price paid in the subscription offering.

Sincerely,

RP Financial, LC.

Washington Headquarters

Three Ballston Plaza

1100 North Glebe Road, Suite 600

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

Exhibit 99.3

LOGO

November 25, 2016

Boards of Directors

Community First Bancshares, MHC

Community First Bancshares, Inc.

Newton Federal Bank

3175 Highway 278

Covington, Georgia 30014

Members of the Boards of Directors:

At your request, we have completed and hereby provide an independent appraisal (“Appraisal”) of the estimated pro forma market value of the common stock which is to be issued in connection with the stock issuance transaction described below.

This Appraisal is furnished pursuant to the requirements stipulated in the Code of Federal Regulations and has been prepared in accordance with the “Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization” (the “Valuation Guidelines”) of the Office of Thrift Supervision (“OTS”) and accepted by the Federal Reserve Board (“FRB”), the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”) and applicable regulatory interpretations thereof.

Description of Plan of Stock Issuance

On October 31, 2016, the Board of Directors of the Newton Federal Bank (“Newton Federal” or the “Bank”) adopted a Plan of Reorganization. Pursuant to the Plan, the Bank will reorganize in to a three-tier mutual holding company structure, including Community First Bancshares, MHC (the “MHC”) and Community First Bancshares, Inc. (the “Company”). The MHC will be a top-tier mutual holding company and the Company will be the mid-tier stock holding company, which will own 100% of the outstanding common stock of Newton Federal. The Company will issue a majority of its common stock to the MHC and sell a minority of its common stock to the public. Concurrent with the completion of the public stock offering, Newton Federal will receive at least 50.0% of the net stock proceeds and the balance will be retained by the Company. The MHC will own a controlling interest in the Company of at least 51%, and the Company will be the sole subsidiary of the MHC. For purposes of this document, the existing consolidated entity will hereinafter be referred to as Community First or the Company.

The Company will offer its common stock in a subscription offering to Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Other Members and the MHC as such terms are defined in the Company’s Plan for purposes of applicable federal regulatory guidelines governing stock offerings by mutual institutions. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to members of the general public in a community offering and a syndicated offering


Washington Headquarters
Three Ballston Plaza		Telephone: (703) 528-1700
1100 North Glebe Road, Suite 600		Fax No.: (703) 528-1788
Arlington, VA 22201		Toll-Free No.: (866) 723-0594
www.rpfinancial.com		E-Mail: mail@rpfinancial.com

Boards of Directors

November 25, 2016

Page 2

A portion of the net proceeds received from the sale of the common stock will be used to purchase all of the then to be issued and outstanding capital stock of Newton Federal and the balance of the net proceeds will be retained by the Company.

At this time, no other activities are contemplated for the Company other than the ownership of the Bank, a loan to the newly-formed employee stock ownership plan (“ESOP”) and reinvestment of the proceeds that are retained by the Company. In the future, the Company may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

RP ^® Financial, LC.

RP ^® Financial, LC. (“RP Financial”) is a financial consulting firm serving the financial services industry nationwide that, among other things, specializes in financial valuations and analyses of business enterprises and securities, including the pro forma valuation for savings institutions converting from mutual-to-stock form. The background and experience of RP Financial is detailed in Exhibit V-1. We believe that, except for the fee we will receive for the Appraisal, we are independent of the MHC, the Company, the Bank and the other parties engaged by the MHC, the Company or the Bank to assist in the stock conversion process.

Valuation Methodology

In preparing our Appraisal, we have reviewed the regulatory applications of the Company, the Bank and the MHC, including the prospectus as filed with the FDIC and the Securities and Exchange Commission (“SEC”). We have conducted a financial analysis of the Company, the Bank and the MHC that has included a review of audited financial information for the years ended September 30, 2013 through September 30, 2016, a review of various unaudited information and internal financial reports through September 30, 2016, and due diligence related discussions with the Company’s management; Porter Keadle Moore, LLC, the Company’s independent auditor; Luse Gorman, PC, the Company’s counsel for the stock issuance and BSP Securities , LLP, the Company’s marketing advisor in connection with the stock offering. All assumptions and conclusions set forth in the Appraisal were reached independently from such discussions. In addition, where appropriate, we have considered information based on other available published sources that we believe are reliable. While we believe the information and data gathered from all these sources are reliable, we cannot guarantee the accuracy and completeness of such information.

We have investigated the competitive environment within which Newton Federal operates and have assessed Newton Federal’s relative strengths and weaknesses. We have kept abreast of the changing regulatory and legislative environment for financial institutions and analyzed the potential impact on Newton Federal and the industry as a whole. We have analyzed the potential effects of the stock offering on Newton Federal’s operating characteristics and financial performance as they relate to the pro forma market value of the Company. We have reviewed the economic and demographic characteristics of the Bank’s primary market area. We have compared Newton Federal’s financial performance and condition with selected publicly-traded thrifts in accordance with the Valuation Guidelines, as well as all publicly-traded thrifts and thrift holding companies. We have reviewed the current conditions in the securities markets in general

Boards of Directors

November 25, 2016

Page 3

and the market for thrift stocks in particular, including the market for existing thrift issues and initial public offerings by thrifts and thrift holding companies. We have excluded from such analyses thrifts subject to announced or rumored acquisition, and/or institutions that exhibit other unusual characteristics.

The Appraisal is based on Newton Federal’s representation that the information contained in the regulatory applications and additional information furnished to us by Newton Federal and its independent auditor, legal counsel and other authorized agents are truthful, accurate and complete. We did not independently verify the financial statements and other information provided by Newton Federal, or its independent auditor, legal counsel and other authorized agents nor did we independently value the assets or liabilities of the Bank. The valuation considers the Company only as a going concern and should not be considered as an indication of the Company’s liquidation value.

Our appraised value is predicated on a continuation of the current operating environment for the Company and for all thrifts and their holding companies. Changes in the local, state and national economy, the legislative and regulatory environment for financial institutions and mutual holding companies, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability and may materially impact the value of thrift stocks as a whole or the value of the Company’s stock alone. It is our understanding that there are no current plans for selling control of the Company following completion of the stock offering. To the extent that such factors can be foreseen, they have been factored into our analysis.

The estimated pro forma market value is defined as the price at which the Company’s common stock, immediately upon completion of the stock offering, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Valuation Conclusion

It is our opinion that, as of November 25, 2016, the estimated aggregate pro forma market value of the shares to be issued immediately following the offering, both shares issued publicly as well as to the MHC, was $51,000,000 at the midpoint, equal to 5,100,000 shares issued at a per share value of $10.00. Pursuant to the conversion guidelines, the 15% offering range indicates a minimum value of $43,350,000 and a maximum value of $58,650,000. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 4,335,000 shares at the minimum of the valuation range and 5,865,000 total shares outstanding at the maximum of the valuation range. In the event that the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a super maximum value of $67,447,500 without a resolicitation. Based on the $10.00 per share offering price, the super maximum value would result in total shares outstanding of 6,744,750. The Board of Directors has established a public offering range such that the public ownership of the Company will constitute a 46.0% ownership interest of the Company. Accordingly, the offering range to the public of the minority stock will be $19,941,000 at the minimum, $23,460,000 at the midpoint, $26,979,000 at the maximum and $31,025,850 at the super maximum.

Boards of Directors

November 25, 2016

Page 4

Limiting Factors and Considerations

The valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of the common stock. Moreover, because such valuation is determined in accordance with applicable regulatory guidelines and is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the stock offering will thereafter be able to buy or sell such shares at prices related to the foregoing valuation of the estimated pro forma market value thereof. The appraisal reflects only a valuation range as of this date for the pro forma market value of the Company immediately upon issuance of the stock and does not take into account any trading activity with respect to the purchase and sale of common stock in the secondary market on the date of issuance of such securities or at anytime thereafter following the completion of the stock offering.

RP Financial’s valuation was based on the financial condition and operations of Newton Federal as of September 30, 2016, the date of the financial data included in the prospectus.

RP Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by RP Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities. RP Financial maintains a policy which prohibits RP Financial, its principals or employees from purchasing stock of its client institutions.

This valuation will be updated as provided for in the conversion regulations and guidelines. These updates will consider, among other things, any developments or changes in the financial performance and condition of the Bank, management policies, and current conditions in the equity markets for thrift shares, both existing issues and new issues. These updates may also consider changes in other external factors which impact value including, but not limited to: various changes in the legislative and regulatory environment for financial institutions, the stock market and the market for thrift stocks, and interest rates. Should any such new developments or changes be material, in our opinion, to the valuation of the shares, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in the update at the date of the release of the update. The valuation will also be updated at the completion of the Company’s stock offering.

Respectfully submitted,

RP ^® FINANCIAL, LC.

LOGO

James J. Oren

Director


*RP ^® Financial, LC.*		*TABLE OF CONTENTS*

TABLE OF CONTENTS

NEWTON FEDERAL BANK

Covington, Georgia


		PAGE
DESCRIPTION		NUMBER

CHAPTER ONE	OVERVIEW AND FINANCIAL ANALYSIS
Introduction			I.1
Plan of Conversion			I.1
Strategic Overview			I.2
Balance Sheet Trends			I.4
Income and Expense Trends			I.8
Interest Rate Risk Management			I.11
Lending Activities and Strategy			I.12
Loan Originations and Sales			I.16
Asset Quality			I.16
Funding Composition and Strategy			I.17
Subsidiary Operations			I.17
Legal Proceedings			I.18

CHAPTER TWO	MARKET AREA ANALYSIS
Introduction			II.1
National Economic Factors			II.2
Interest Rate Environment			II.4
Market Area Regional Economy			II.5
Regional Employment			II.6
Market Area Demographics			II.7
Regional Economy			II.9
Unemployment Data			II.10
Market Area Deposit Characteristics/Competition			II.10
Competition			II.12

CHAPTER THREE	PEER GROUP ANALYSIS
Peer Group Selection			III.1
Financial Condition			III.5
Income and Expense Components			III.8
Loan Composition			III.11
Credit Risk			III.11
Interest Rate Risk			III.14
Summary			III.16


*RP ^® Financial, LC.*		*TABLE OF CONTENTS*

TABLE OF CONTENTS

NEWTON FEDERAL BANK

Covington, Georgia

(continued)


		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.2
2. Profitability, Growth and Viability of Earnings		IV.4
3. Asset Growth		IV.6
4. Primary Market Area		IV.6
5. Dividends		IV.8
6. Liquidity of the Shares		IV.9
7. Marketing of the Issue		IV.9
A. The Public Market		IV.10
B. The New Issue Market		IV.14
C. The Acquisition Market		IV.14
8. Management		IV.17
9. Effect of Government Regulation and Regulatory Reform		IV.18
Summary of Adjustments		IV.18
Valuation Approaches		IV.18
1. Price-to-Earnings (“P/E”)		IV.20
2. Price-to-Book (“P/B”)		IV.24
3. Price-to-Assets (“P/A”)		IV.25
Comparison to Recent Offerings		IV.29
Valuation Conclusion		IV.30


*RP ^® Financial, LC.*		*LIST OF TABLES*

iii

LIST OF TABLES.

NEWTON FEDERAL BANK

Covington, Georgia


TABLE NUMBER	DESCRIPTION	PAGE
1.1	Historical Balance Sheets	I.5
1.2	Historical Income Statements	I.9
2.1	Market Area Largest Employers	II.6
2.2	Summary Demographic Data	II.8
2.3	Primary Market Area Employment Sectors	II.9
2.4	Unemployment Trends	II.10
2.5	Deposit Summary	II.11
2.6	Market Area Deposit Competitors – Newton County	II.13
3.1	Peer Group of Publicly-Traded Thrifts	III.3
3.2	Balance Sheet Composition and Growth Rates	III.6
3.3	Income as a % of Average Assets and Yields, Costs, Spreads	III.9
3.4	Loan Portfolio Composition and Related Information	III.12
3.5	Credit Risk Measures and Related Information	III.13
3.6	Interest Rate Risk Measures and Net Interest Income Volatility	III.15
4.1	Market Area Unemployment Rates	IV.8
4.2	Pricing Characteristics and After Market Trends	IV.15
4.3	Public Market Pricing Versus Peer Group	IV.16
4.4	Valuation Adjustments	IV.18
4.5	Derivation of Core Earnings	IV.21
4.6	Fully Converted Market Pricing Versus Peer Group	IV.22
4.7	MHC Market Pricing Versus Peer Group	IV.23
4.8	MHC Institutions Implied Ratios, Full Conversion Basis	IV.27
4.9	Comparative MHC Pricing Data	IV.29


*RP ^® Financial, LC.*		*OVERVIEW AND FINANCIAL ANALYSIS*

I.1

I. OVERVIEW AND FINANCIAL ANALYSIS

Introduction

Newton Federal is a federally-chartered mutual savings association headquartered in Covington, Georgia. The Bank was originally organized in 1928 as a Georgia chartered mutual building and loan association under the name Newton County Building and Loan Association. In 1947, the Bank converted to a federal charter and changed its name to “Newton Federal Savings and Loan Association.” In 2004 the name was changed to “Newton Federal Bank.

Newton Federal operates in the northeastern section of the state of Georgia, maintaining three banking offices in Newton County (about 30 miles east of the city of Atlanta) and a loan production office in Oconee County, which is close to the city of Athens, Georgia. The Bank’s primary market area for deposit gathering thus consists of Newton County, while lending activities are focused in Newton County (1-4 family residential and commercial lending) and Gwinnett, Clarke, Walton, Barrow, Oconee and Jackson Counties (commercial and construction lending). A map of the Bank’s branch offices is provided in Exhibit I-1. Newton Federal is a member of the Federal Home Loan Bank (“FHLB”) system, and its deposits are insured up to the regulatory maximums by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). Newton Federal is subject to regulatory oversight and examination by the Office of the Comptroller of the Currency (“OCC”) and the FDIC (for deposit insurance purposes). At September 30, 2016, Newton Federal reported $232.8 million in assets, $181.7 million in deposits and total equity of $45.1 million, equal to 19.36% of total assets. Newton Federal’s audited financial statements are included by reference as Exhibit I-2.

Plan of Conversion

The Board of Directors of Newton Federal adopted a plan of conversion and reorganization on October 31, 2016. Pursuant to the Plan, the Bank will reorganize into a three-tier mutual holding company structure, including Community First Bancshares, MHC (the “MHC”) and Community First Bancshares, Inc. (the “Company”). The MHC will be a top-tier mutual holding company and the Company will be the mid-tier stock holding company, which will own 100% of the outstanding common stock of Newton Federal. The Company will issue a majority of its common stock to the MHC and sell a minority of its common stock to the public. Concurrent with the completion of the public stock offering, Newton Federal will receive at least 50% of the net stock proceeds and the balance will be retained by the Company. The MHC will own a controlling interest in the Company of at least 51%, and the Company will be the sole subsidiary of the MHC. For purposes of this document, the post-conversion consolidated entity will hereinafter be referred to as Community First or the Company.


*RP ^® Financial, LC.*		*OVERVIEW AND FINANCIAL ANALYSIS*

I.2

The plan of conversion and reorganization provides that the Company will sell shares of its common stock in a subscription offering in descending order of priority to the Bank’s members and other stakeholders as follows: Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Other Members. If all shares are not subscribed for in the subscription offering, the Bank intends to offer common stock for sale to certain members of the public through a community offering. Shares not purchased in the subscription and community offerings may be offered for sale to the general public in a syndicated community offering. The MHC will be issued shares as prescribed in the Plan.

At this time, no other activities are contemplated for Community First other than the ownership of the Bank, a loan to the newly-formed employee stock ownership plan (“ESOP”) and reinvestment of the proceeds that are retained by the Company. In the future, the Company may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends to shareholders and/or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

Strategic Overview

Newton Federal has been serving the Newton County area as a locally-owned and operated financial institution since its founding in 1928. Following a long history of serving the local market area through a single office, the Bank expanded its customer reach by opening an “eastside office” in Covington in 2000, and a “southside office” in Covington in 2006. To further the lending capabilities of the Bank, in January 2016 Newton Federal opened a loan production office in Bogart, Oconee County, which provides access to the Athens, Georgia market and other surrounding counties , located approximately 45 miles northeast of Covington. Newton Federal thus operates within the Atlanta-Sandy Springs-Roswell metropolitan statistical area (of which Newton County is part), and the Athens, Georgia metropolitan area (Athens-Clark County).

For many years Newton Federal operated as a traditional thrift institution, originating for portfolio long-term fixed rate residential loans funded with certificates of deposit. In recent years, the Bank has strived to diversify the loan portfolio into commercial real estate, commercial and industrial and construction/land loans. The Bank’s products and services are focused on the lending and investment needs of the local retail and commercial customer base as well as


*RP ^® Financial, LC.*		*OVERVIEW AND FINANCIAL ANALYSIS*

I.3

households in the market area. Based on the operating history and growth of the Bank since its founding, the Bank has established, to a notable degree, its name recognition and overall reputation in the area. In addition, the Bank views itself as an integral part of the local communities served, and thus has historically strongly supported the retail customer base in Newton County through providing residential loan products.

Newton Federal’s original market area of Newton County experienced a substantial downturn in economic activity and related housing prices during the “great recession” of 2007-2009 which led to elevated levels of non-performing assets and net losses due to these asset quality issues. Since the end of the great recession, the economic condition of Newton County, and Newton Federal’s customer base, have improved such that the local market area economy is currently expanding in terms of population, with economic activity relatively stable. A new president and CEO and several other senior managers have been added over the past several years to direct the operations of the Bank.

The equity from the stock offering will increase the Bank’s liquidity, leverage and growth capacity and the overall financial strength. Newton Federal’s higher equity position resulting from the infusion of stock proceeds is anticipated to reduce interest rate risk through enhancing the interest-earning assets to interest-bearing liabilities (“IEA/IBL”) ratio. The increased equity is expected to reduce overall funding costs for the asset base. The Bank will also be better positioned to pursue growth and revenue diversification. The projected use of proceeds is highlighted below.

•

The Company. The Company is expected to retain an estimated 50% of the net conversion proceeds. At present, funds at the holding company level are expected to be initially invested primarily into short-term liquid investments, along with providing the funds for the employee stock ownership plan purchases. Over time, the funds may be utilized for various corporate purposes.

•

The Bank. An estimated 50% of the net conversion proceeds will be infused into the Bank as cash and equity. Cash proceeds (i.e., net proceeds less deposits withdrawn to fund stock purchases) infused into the Bank are expected to be deposited as an interest-earning deposit, providing additional funds for reinvestment in earning assets.


*RP ^® Financial, LC.*		*OVERVIEW AND FINANCIAL ANALYSIS*

I.4

With the Bank’s enhanced equity position, following the completion of the offering, Newton Federal intends to implement the following strategies in order to grow and achieve the Bank’s objective to develop into an independent high performing bank focused on meeting the needs of individuals, small businesses, and community organizations in Northeast Georgia through providing enhanced service and competitive products:

•

Controlled loan growth with a focus on diversifying the loan portfolio, particularly in commercial real estate and commercial and industrial lending;

•

Continue to increase core deposits, with an emphasis on low cost commercial demand deposits, and add non-core funding opportunities;

•

Manage credit risk to maintain a low level of nonperforming assets; and,

•

Disciplined expansion through organic growth and opportunistic bank or branch acquisitions.

Balance Sheet Trends

Table 1.1 presents the Bank’s historical balance sheet data for the most recent five fiscal years, all of which reflects data for Newton Federal as a mutual savings bank. Over this period, Newton Federal’s total assets have increased at a 0.4% annual rate, with loans receivable, representing the majority of the asset base, increasing at a 0.8% annual rate, a slightly higher rate than assets over the same time period.

Assets fluctuated within a modest range from fiscal 2012 through 2016 as a result of the Bank’s focus on resolving problem assets and limited lending activities available as the Newton County geographic area recovered from the recession of 2007-2009. Additional asset growth was also not required given the declining level of loans receivable experienced through fiscal 2015, which resulted in sufficient available liquidity. Over the time period shown in Table 1.1 investments also recorded minimal annual changes. Since September 30, 2012 assets have been funded with deposits and equity, as no borrowing have been required to fund the asset or liquidity base. Deposits declined by 1.3% annually over the past five years, while continued profitability has resulted in an annual increase in equity of 7.0%. Equity reached $45.1 million at September 30, 2016, or 19.36% of assets. A summary of Newton Federal’s key operating ratios for the past five years is presented in Exhibit I-3.

A key long term business strategy of Newton Federal is to maintain a significant investment in whole loans receivable. As such, the Bank’s loan portfolio totaled $190.1 million, or 81.6% of assets at September 30, 2016, an increase from $184.0 million, or 80.2% of assets as of September 30, 2012. From fiscal 2012 through September 30, 2016, the increase in the loan balance was enabled though the overall increase in balance sheet funding, funds from the


*RP ^® Financial, LC.*		*OVERVIEW AND FINANCIAL ANALYSIS*

I.5

Table 1.1

Newton Federal Bank

Historical Balance Sheets


																															2012-2016
	As of September 30,																														Annualized
	2012						2013						2014						2015						2016						Growth
	Amount			Pct(1)			Amount			Pct(1)			Amount			Pct(1)			Amount			Pct(1)			Amount			Pct(1)			Pct
	($000)			(%)			($000)			(%)			($000)			(%)			($000)			(%)			($000)			(%)			(%)
Total Amount of:
Assets	$	229,519			100.00	%	$	222,328			100.00	%	$	227,089			100.00	%	$	226,337			100.00	%	$	232,832			100.00	%		0.36	%
Loans Receivable (net) (2)		183,958			80.15	%		180,006			80.96	%		174,132			76.68	%		169,798			75.02	%		190,050			81.63	%		0.82	%
Cash and Equivalents		27,823			12.12	%		29,316			13.19	%		34,140			15.03	%		38,494			17.01	%		25,693			11.03	%		-1.97	%
Investment Securities		7,065			3.08	%		5,431			2.44	%		7,183			3.16	%		7,694			3.40	%		7,704			3.31	%		2.19	%
Deferred Tax Asset		0			0.00	%		0			0.00	%		4,999			2.20	%		4,197			1.85	%		3,536			1.52	%		NM
Fixed Assets		4,475			1.95	%		4,394			1.98	%		4,338			1.91	%		4,261			1.88	%		4,325			1.86	%		-0.85	%
OREO		4,121			1.80	%		1,880			0.85	%		1,129			0.50	%		532			0.24	%		0			0.00	%		-100.00	%
Other Assets		2,077			0.90	%		1,301			0.59	%		1,168			0.51	%		1,361			0.60	%		1,524			0.65	%		-7.45	%
Deposits	$	191,389			83.39	%	$	183,763			82.65	%	$	179,264			78.94	%	$	176,687			78.06	%	$	181,699			78.04	%		-1.29	%
Borrowings		0			0.00	%		0			0.00	%		0			0.00	%		0			0.00	%		0			0.00	%		0.00	%
Other Liabilities		3,779			1.65	%		4,507			2.03	%		5,514			2.43	%		5,726			2.53	%		6,052			2.60	%		12.49	%
Retained Earnings		34,351			14.97	%		34,058			15.32	%		42,311			18.63	%		43,924			19.41	%		45,081			19.36	%		7.03	%
Tangible Retained Earnings		34,351			14.97	%		34,058			15.32	%		42,311			18.63	%		43,924			19.41	%		45,081			19.36	%		7.03	%
Net Unrealized Gain/(Loss) on Investment/MBS Available for Sale	$	0			0.00	%	$	0			0.00	%	$	0			0.00	%	$	0			0.00	%	$	0			0.00	%
Loans/Deposits		96.12	%					97.96	%					97.14	%					96.10	%					104.60	%
Offices Open		3						3						3						3						3

(1)	Ratios are as a percent of ending assets.

(2)	Includes loans held for sale.

Source: Community First’s preliminary prospectus, audited financial reports.


*RP ^® Financial, LC.*		*OVERVIEW AND FINANCIAL ANALYSIS*

I.6

resolution of other real estate owned (“OREO”), and additional investment of available funds in cash equivalents. The combination of the increase in loans receivable as a percent of assets and a reduction in deposit funds resulted in the loan/deposit ratio increasing from 96.1% at September 30, 2012 to 104.6% at September 30, 2016.

Newton Federal’s investment in loans reflects the Bank’s historical concentration in traditional long-term fixed rate 1-4 family residential loans, along with an increasing level of diversity into commercial real estate, commercial business and commercial construction lending. The 1-4 family residential loan first position portfolio comprised 69% of total loans as of September 30, 2016. Over the last five years, the Bank has been pursuing a diversification strategy and emphasizing growth in the commercial and construction/land portfolio, as such loans totaled 30.3% at the same date. Such loans increased from $33.2 million, or 17.5% of loans at September 30, 2012 to $58.7 million at September 30, 2016. The commercial and construction/land lending activities represent a primary part of the Bank’s business strategy to maximize revenue (in terms of yield on portfolio loans) and provide benefits in areas such as interest rate risk, and such activities have been focused in the loan production office operations in the Athens, Georgia area. The lending area for these types of loans has been expanded to include the region between Covington and Athens. Newton Federal historically originated consumer loans to customers, primarily second position home equity lines of credit and home equity loans, and other consumer type loans. This type of lending has remained modest in recent years, and consumer loans totaled $2.3 million, or 1.2% of loans as of September 30, 2016. The Bank has not typically sold loans into the secondary market, although there was a modest balance of loans held for sale ($472,000) as of September 30, 2016.

As indicated above, the Bank’s loan portfolio comprises over 80% of assets. The intent of the Bank’s cash and investment policy is to provide adequate liquidity and to generate a favorable return within the context of supporting Newton Federal’s cash operating needs and credit and interest rate risk objectives. Historically, the level of cash and equivalents has remained in the range of 11% to 17% of assets, which has been sufficient for daily operational needs. The ratio decreased as of September 30, 2016 primarily due to the use of funds for additional loan originations. As of September 30, 2016, the portfolio of cash and cash equivalents totaled $25.7 million, equal to 11.0% of assets. Within this portfolio, the Bank maintained insured investments in certificates of deposit in other financial institutions of approximately $11 million.


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Regarding the investment securities portfolio, as of September 30, 2016 the Bank held a modest portfolio of investments in the form of three government agency bonds that mature within three years. The only other investment security consisted of the required investment of FHLB of Atlanta stock of $205,000. The level of cash and investments is anticipated to increase initially following conversion, pending gradual redeployment into higher yielding loans. Details of the Bank’s investment securities portfolio are presented in Exhibit I-4.

Newton Federal owns the headquarters office and eastside office land and building and leases the land but owns the building for the southside office, while leasing the loan production office in Oconee County. The headquarters office was originally constructed in 1974, and was carried with a net book value of $1.2 million at September 30, 2016. This office, along with investment in the other branch offices (including land, buildings, and furniture, fixtures and equipment), totaled $4.3 million, or 1.9% of assets as of September 30, 2016. The investment in fixed assets has declined slightly since fiscal 2012 as only minimal costs were incurred in the opening of the Athens area LPO, and the remaining offices were opened fairly recently. The Bank has in place plans to build an operations center adjacent to one of the branch locations, which will open up space in the headquarters office for additional lending, customer service and marketing personnel.

As a result of the operating losses incurred prior to 2014, Newton Federal accumulated a notable balance of net operating loss carryforwards that created a net deferred tax asset (“DTA”). For a period of time the DTA was fully reserved on the balance sheet, given the uncertain time frame for the Bank to return to profitability. During fiscal 2014, the valuation allowance was removed in light of the expected future levels of profitability. Thus, a DTA of $5.0 million was added to the balance sheet as of September 30, 2014. As a result of continued profitability through September 30, 2016, this DTA has been reduced to $3.5 million, as the Bank can offset taxes payable by reducing this account.

Reflecting the overall improvement of the asset quality since the end of the 2007-2009 recession, the balance of OREO was reduced to a zero balance at September 30, 2016. Such OREO reached a high of $4.1 million as of September 30, 2012, and declined consistently over the last five years as a result of resolutions of existing properties and the lack of substantial additions of foreclosed properties from the loan portfolio.

Since December 31, 2012, Newton Federal’s funding needs have been provided by retail deposits and retained earnings. In contrast to the modest increase in assets, the balance of the Bank’s deposits has decreased slightly since 2012, reaching a low of $176.7 million as of September 30, 2015. Deposits increased by $5.0 million during fiscal 2016, primarily due to funds raised through the Bank’s “Kasasa” deposit program, which motivates customers to maintain


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checking accounts at the Bank. As a result of the growth in assets, the proportion of assets funded with deposits has declined from 83.4% to 78.0% over the past five years. The Bank maintains a concentration of deposits in certificates of deposit (reflective of the traditional thrift operations), which comprised 47.1% of deposits at September 30, 2016, although this ratio has declined notably from versus 59.0% of total deposits at fiscal year-end 2012.

The balance of equity increased between fiscal 2012 and 2016 as the Bank recorded profitable operations, including the capture of the DTA. Reflecting the combination of this increase in equity and the increase in assets over that time period, the equity-to-assets ratio increased from 14.97% at year end 2012 to 19.36% at September 30, 2016. All of the Bank’s equity is tangible, and the Bank maintained surpluses relative to all of its regulatory capital requirements at September 30, 2016. The pro forma return on equity (“ROE”) is expected to initially decline given the increased equity position.

Income and Expense Trends

Table 1.2 presents the Bank’s income and expense trends over the past five fiscal years. The effects of the last years of the economic recession are evident in the net losses and provisions for loan losses recorded for fiscal 2012 and 2013, followed by the recovery of the fully-reserved deferred tax asset in fiscal 2014 and the return to profitability since that year. Profitability for fiscal 2015 and 2016 averaged $1.4 million, or 0.61% of average assets. The income statement has been affected to a modest degree by non-operating income or expense items over the past five years. Net interest income and operating expenses represent the primary components of the Bank’s income statement. Other revenues for the Bank largely are derived from customer service fees and charges on the deposit base and lending operations. The level of loan loss provisions has also followed the improvement in assets quality over the past five years.

The Bank’s net interest income to average assets ratio has reflected the impact of market interest rate trends and internal lending strategies over the time period shown in Table 1.2. Net interest income as a percent of average assets has increased from a low of 3.87% during fiscal 2012 to a high of 4.33% for fiscal 2016. The net interest income ratio is supported by several factors, including: (1) the high proportion of loans on the balance sheet as a percent of assets;


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Table 1.2

Newton Federal Bank

Historical Income Statements


	For the Fiscal Year Ended September 30,
	2012						2013						2014						2015						2016
	Amount			Pct(1)			Amount			Pct(1)			Amount			Pct(1)			Amount			Pct(1)			Amount			Pct(1)
	($000)			(%)			($000)			(%)			($000)			(%)			($000)			(%)			($000)			(%)
Interest Income	$	12,571			5.25	%	$	11,401			5.06	%	$	11,570			5.22	%	$	11,045			4.93	%	$	11,248			4.96	%
Interest Expense		(3,311	)		-1.38	%		(2,700	)		-1.20	%		(2,156	)		-0.97	%		(1,813	)		-0.81	%		(1,415	)		-0.62	%

Net Interest Income	$	9,260			3.87	%	$	8,701			3.86	%	$	9,414			4.24	%	$	9,232			4.12	%	$	9,833			4.33	%
Provision for Loan Losses		(9,017	)		-3.76	%		(3,147	)		-1.40	%		0			0.00	%		0			0.00	%		0			0.00	%

Net Interest Income after Provisions	$	243			0.10	%	$	5,554			2.46	%	$	9,414			4.24	%	$	9,232			4.12	%	$	9,833			4.33	%
Other Income	$	945			0.39	%	$	876			0.39	%	$	840			0.38	%	$	921			0.41	%	$	1,208			0.53	%
Gain(Loss) on Sale of Loans		0			0.00	%		0			0.00	%		0			0.00	%		0			0.00	%		0			0.00	%
Operating Expense		(7,259	)		-3.03	%		(6,723	)		-2.98	%		(6,603	)		-2.98	%		(7,486	)		-3.34	%		(8,764	)		-3.86	%

Net Operating Income	($	6,071	)		-2.53	%	($	293	)		-0.13	%	$	3,652			1.65	%	$	2,667			1.19	%	$	2,277			1.00	%
OREO Expense	$	0			0.00	%	$	0			0.00	%	($	366	)		-0.16	%	($	174	)		-0.08	%	($	172	)		-0.08	%
Termination Expense-Former CEO		0			0.00	%		0			0.00	%		0			0.00	%		0			0.00	%		(251	)		-0.11	%
Gain on Sale of Investments		0			0.00	%		0			0.00	%		31			0.01	%		0			0.00	%		0			0.00	%

Total Non-Operating Income (Exp.)	$	0			0.00	%	$	0			0.00	%	($	335	)		-0.15	%	($	174	)		-0.08	%	($	423	)		-0.19	%
Net Income Before Tax	($	6,071	)		-2.53	%	($	293	)		-0.13	%	$	3,317			1.50	%	$	2,493			1.11	%	$	1,854			0.82	%
Income Taxes		(349	)		-0.15	%		0			0.00	%		4,935			2.22	%		(879	)		-0.39	%		(697	)		-0.31	%

Net Income (Loss)	($	6,420	)		-2.68	%	($	293	)		-0.13	%	$	8,252			3.72	%	$	1,614			0.72	%	$	1,157			0.51	%
Adjusted Earnings:
Net Income	($	6,420	)		-2.68	%	($	293	)		-0.13	%	$	8,252			3.72	%	$	1,614			0.72	%	$	1,157			0.51	%
Add(Deduct): Non-Operating (Inc)/Exp		0			0.00	%		0			0.00	%		31			0.01	%		0			0.00	%		251			0.11	%
Tax Effect		0			0.00	%		0			0.00	%		(12	)		-0.01	%		0			0.00	%		(95	)		-0.04	%

Adjusted Earnings:	($	6,420	)		-2.68	%	($	293	)		-0.13	%	$	8,271			3.73	%	$	1,614			0.72	%	$	1,313			0.58	%
Memo:
Efficiency Ratio (%)		71.13	%					70.20	%					64.39	%					73.73	%					79.38	%
Return on Equity (%)		-15.70	%					-0.88	%					23.39	%					3.83	%					2.60	%
Effective Tax Rate (%)		-5.75	%					0.00	%					-148.78	%					35.26	%					37.59	%

(1)	Ratios are as a percent of average assets.

Source: Community First’s preliminary prospectus, audited financial reports.


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(2) the practice of originating long-term fixed rate loans that do not meet all requirements for secondary market sales, and thus bear higher interest rates; (3) the prevailing low interest rate environment, which has kept deposit funding costs low; (3) an effort to cause higher costing deposit funds to be withdrawn and replaced by low cost checking accounts through the Kasasa program; and, (4) the relatively significant fixed rate residential loan portfolio and increasing diversification into higher yielding commercial real estate and non-real estate loans, which has supported the interest income ratio. Interest income as a percent of average assets has increased from 4.93% for fiscal 2010 to 4.96% for the latest 12 month period. The Bank’s level of interest income is also supported by the relatively modest level of non- accruing loans, which would act to reduce the level of interest income recognized. The Bank’s interest rate spreads and yields and costs for the past three years are set forth in Exhibits I-3 and I-5.

Non-interest operating income (“other income”) has historically been a notable contributor to the Bank’s income statement, and averaged 0.42% of average assets for fiscal years 2012 through 2016. The non-interest operating income ratio is dependent upon the level of banking activities, including core deposit accounts, with customer service fees constituting the primary source of non-interest income for the Bank. For the 12 months ended September 30, 2016 other income totaled $1.2 million, or 0.53% of average assets.

Operating expenses represent the other major component of the Bank’s income statement, with such expenses showing a level of fluctuation over the time period covered in Table 1.2 as a percent of average assets. Total operating expenses equaled $8.8 million, or 3.86% of average assets during the 12 months ended September 30, 2016. Such expenses declined through fiscal 2014 as asset resolution costs declined substantially. The increase in operating expenses since 2014 reflects general inflation costs, the overall costs of operations and the hiring of a number of new mid-level managers in various operating departments of the Bank, including the LPO operations. The Bank’s level of operating expenses is indicative of the higher staffing needs associated with the intended diversification of the loan portfolio and lending operations. Additional increasing operating expenses include data processing and marketing as the Bank attempts to grow the balance sheet and loan portfolio. Upward pressure will be placed on the Bank’s expense ratio following the stock offering, due to expenses associated with operating as a publicly-traded company, including expenses related to the stock benefit plans.


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The trends in the net interest income and operating expense ratios since fiscal 2009 have caused the expense coverage ratio (net interest income divided by operating expenses) to decrease gradually from a high of 127.7% in fiscal 2012 to 112.2% in fiscal 2016. Also reflecting a similar trend, Newton Federal’s efficiency ratio (operating expenses, net of amortization of intangibles, as a percent of the sum of net interest income and other operating income) has increased from 71.1% for fiscal 2012 to 79.4% for fiscal 2016. The level of other income has assisted in maintaining the efficiency ratio. Going forward, the Bank believes the efficiency ratio should improve with continued efforts to control operating expenses and reinvestment of the offering proceeds.

As noted earlier, loan loss provisions had a significant impact on the income statement through fiscal 2013 as the Bank continued to work out of post-recession asset quality issues. In contrast, Newton Federal has not recorded any loan loss provisions since fiscal 2013, reflecting the Bank’s favorable asset quality and the decreasing need for increased reserve coverage. Reflecting the Bank’s asset quality position, chargeoffs have been relatively modest and generally decreasing in recent periods from a high reached in fiscal 2012. As of September 30, 2016, ALLLs equaled 132.87% of non-performing loans and non-performing assets and 2.22% of total loans receivable. Exhibit I-6 sets forth the Bank’s allowance for loan loss activity during the past five years.

Non-operating items have had a minimal impact on the Bank’s income statement in past five years and have consisted losses on the resolution of OREO, a small amount of gains on the sale of securities, and the costs related to the separation of the former CEO in 2016.

As noted above, the Bank’s income tax status has been impacted by operating losses incurred through fiscal 2013, which resulted in a DTA that was fully reserved until fiscal 2014. For fiscal years 2015 and 2016, Newton Federal recorded tax expense based on recorded taxable income, with the DTA utilized to offset required payments to the US Treasury. The effective tax rates for those years were within a narrow range and equaled 37.6% for fiscal 2016. The Bank’s marginal effective statutory tax rate approximates 38.0%, and this is the rate utilized to calculate the net reinvestment benefit from the offering proceeds.

Interest Rate Risk Management

Newton Federal’s balance sheet is liability-sensitive in the shorter-term and, thus, the net interest margin will typically be unfavorably affected during periods of rising and higher interest rates. Newton Federal measures its interest rate risk exposure by use of the net economic value risk (“NEV”) methodology, which provides an analysis of estimated changes in the Bank’s NEV under the assumed instantaneous changes in the U.S. treasury yield curve. Utilizing figures as of September 30, 2016, based on a 2.0% instantaneous and sustained increase in interest rates, the NEV model indicates that the Bank’s NEV would decrease by 12.3% (see Exhibit I-7).


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In recent periods, the Bank has pursued a number of strategies to manage interest rate risk, particularly with respect to seeking to limit the repricing mismatch between interest rate sensitive assets and liabilities. The Bank manages interest rate risk from the asset side of the balance sheet through pricing 1-4 family residential real estate loans in a way that encourages borrowers to select balloon loans as opposed to longer-term fixed rate loans, and diversifying into other types of lending beyond 1-4 family permanent mortgage loans such as originating commercial real estate, commercial business and construction/land loans, all of which have shorter terms to repricing or maturity, and carry higher interest rates. On the liability side of the balance sheet, management of interest rate risk has been pursued through growing the volume of deposits in lower cost and less interest rate sensitive transaction and savings accounts, and reducing dependence on certificates of deposits and wholesale funding. Core deposits, which consist of transaction and savings accounts, comprised 52.9% of the Bank’s deposits at September 30, 2016. As of September 30, 2016, of the Bank’s total loans due after September 30, 2017, ARM loans comprised 2.5% of those loans (see Exhibit I-8). In addition, the Bank maintains a notable balance of cash and cash equivalents, which provide for short-term to maturity funds on the balance sheet. Further, the Bank holds a relatively large percentage of the balance sheet in interest-free equity (19.36%), which funds interest earning assets at no repricing risk. The infusion of stock proceeds will serve to further limit the Bank’s interest rate risk exposure, as most of the net proceeds will be redeployed into interest-earning assets and the increase in the Bank’s capital will lessen the proportion of interest rate sensitive liabilities funding assets.

There are numerous limitations inherent in interest rate risk analyses such as the credit risk of Bank’s loans pursuant to changing interest rates. Additionally, such analyses do not measure the impact of changing spread relationships, as interest rates among various asset and liability accounts rarely move in tandem, as the shape of the yield curve for various types of assets and liabilities is constantly changing in response to investor perceptions and economic events and circumstances.

Lending Activities and Strategy

Newton Federal operates two principal lending activities: (1) the origination of 1-4 family residential first mortgage loans, originated primarily for retention in portfolio; and, (2) commercial real estate, commercial business and construction/land loans as part of a commercial lending


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focus. In recent periods, Newton Federal has increased its focus on commercial lending in an effort to diversify its overall loan portfolio, shorten the term-to-maturity or repricing, and increase the overall yield earned on loans. Details of the Bank’s loan portfolio composition are shown in Exhibit I-9, while Exhibit I-10 provides details of the Bank’s loan portfolio by contractual maturity date.

Residential Real Estate Lending

Newton Federal’s historical lending focus has been the origination of first position fixed-rate 1-4 family residential real estate loans, and depending on interest rate, local and regional real estate market conditions and borrower preferences, also offers 1-4 family residential real estate loans with balloon features, secured by traditional 1-4 family residential real estate property. The Bank typically retains such loans in portfolio, but occasionally sells loans to the secondary market. Newton Federal also originates to a much more limited extent second position home equity and home equity lines of credit. As of September 30, 2016, residential first and second position mortgage loans equaled $132.9 million, or 68.5% of total loans, with adjustable rate loans totaling less than 1% of total residential first mortgage loans. As shown in Exhibit I-9, the balance of first and second position residential mortgage loans has declined since September 30, 2012, given the increased focus on other lending activities.

Newton Federal’s first mortgage loans are generally underwritten to internal guidelines, although the Bank generally follows documentation practices of Fannie Mae guidelines. The guidelines allow for loans to be originated at higher interest rates given the non-conforming characteristics. Most of the 1-4 family mortgage loans secured by residences in the Newton County market surrounding the branch office locations. Loan-to-value ratios (“LTV”) of mortgage loans are generally limited to 90% LTV or the purchase price, whichever is lower, or above 90% if the loans carry private mortgage insurance. 1-4 family residential real estate loans typically have terms of up to 30 years and balances up to $150,000, although loans with balances above that amount will be originated. The balloon loans generally have terms of five to seven years and amortize over 30 years. The Bank will originate balloon loans with initial terms of ten years. Newton Federal does not offer “interest only”, “negative amortization” or “subprime” loans, all of which are loans with higher risk underwriting characteristics.

Second position residential loans totaled a minimal $1.3 million as of September 30, 2016, consisting of $1.2 million of home equity lines of credit and $0.1 million of home equity loans. These loans are provided as an additional lending service to customers.


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Commercial Real Estate/Multi-Family Lending

As of September 30, 2016, commercial real estate/multi-family loans totaled $29.2 million, or 15.0% of the total loan portfolio, and the balances of these loans have been trending upward in recent years due to the Bank’s focus to diversify its loan portfolio and increase yield. As of September 30, 2012, commercial real estate/multi-family loans totaled $27.1 million, or 14.3% of the total loan portfolio. These types of loans are attractive credits given the higher yields, larger balances, shorter duration and prospective relationship potential. Commercial real estate loans are generally balloon loans with an initial term of five years and an amortization term of 20 years, with a balloon payment at the end of the initial term. The maximum LTVs are generally 80% of the lower of cost or appraised value of the property securing the loan. Debt service coverage ratios are generally required at 1.20x.

These loans are generally priced at a higher rate of interest, have larger balances and involve a greater risk profile than 1-4 residential mortgage loans. Often the payments on commercial real estate loans are dependent on successful operations and management of the property. When originating commercial real estate loans, the Bank evaluates the qualifications and financial condition of the borrower, as well as the value and condition of the property securing the loan. The Bank will also generally require and obtain personal guarantees from the principals. The commercial real estate loans are generally secured by office buildings, industrial facilities, retail facilities, churches and 1-4 family non-owner occupied investment properties in the primary market area. As of September 30, 2016, the largest commercial real estate loan was $3.1 million and was secured by an owner occupied funeral home located in the primary market area. A certain portion of recent originations have been sourced from the Athens, Georgia LPO.

Construction/Land Loans

Construction and land loans totaled $13.3 million, or 6.9% of loans outstanding, at September 30, 2016, representing a modest, but increasing level of lending activity for the Bank. Most of the recent construction/land loans have been originated from the newly opened LPO near Athens. Such balances have increased from $2.0 million, or 1.0% of total loans as of September 30, 2012. Construction loans are made to individuals for the construction of their primary residences and loans to contractors and builders of single family homes. The Bank also makes land loans consisting of lots that will be used for future residential development. Newton Federal also originates construction loans for commercial development projects, including retail buildings, churches, small industrial, hotels and office buildings. Construction loans generally have initial


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terms of up to 12 months, during which the borrow pays interest only. Upon completion of construction, these loans may convert to permanent loans or may be paid off in full. Construction loans have loans and terms comparable to permanent commercial real estate loan originations, with maximum LTV is 80% of the lesser of the appraised value of the completed property.

Construction loans generally involve greater credit risk than improved owner-occupied real estate lending. Newton Federal reviews and inspects each property before disbursement of loan funds, and also requires detailed cost estimates to complete the construction project and an appraisal of the property. As of September 30, 2016, the largest construction/land loan had a total balance of $655,000, all of which was secured by improved building lots. This loan was performing according to its terms as of September 30, 2016.

Commercial Business Lending

As part of the full-service business lending philosophy, Newton Federal originates commercial business loans on non-real estate commercial business assets including lines of credit and term loans. The Bank originates commercial business loans to small businesses, professionals and sole proprietorships in the located regionally in its market area, including loans secured by business assets. As of September 30, 2016, the Bank had $16.2 million of commercial business loans in portfolio, equal to 8.4% of total loans, an increase from $4.2 million, or 2.2% of loans as of September 30, 2016. Newton Federal encourages the borrowers to maintain their primary deposit accounts with the Bank.

Commercial business term loans are either fixed rate or adjustable rate, with such rates based on the prime rate as published in the Wall Street Journal, plus a margin. Commercial business loans have greater credit risk compared to 1-4 family residential real estate loans, because the availability of funds for the repayment of commercial business loans are dependent on the success of the business and the general economic environment of the Bank’s market area. The Bank generally obtains personal guarantees with these loans. LTV’s are generally made up to 80% of the value of the collateral securing the loan.

Consumer Lending

To a minor extent, Newton Federal originates a variety of consumer loans to individuals who reside or work in the Bank’s market area, including loans secured by new and used automobiles, certificates of deposits, and unsecured personal loans. As of September 30, 2016, consumer loans totaled $2.3 million, or 1.2% of total loans. The Bank offers such loans since


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they tend to have shorter maturities and higher interest rates than mortgage loans. These loans also help to expand and create stronger customer relationships and opportunities for cross-marketing. Consumer loans have greater risk compared to mortgage loans, due to their dependence on the borrower’s continuing financial stability.

Loan Originations and Sales

All lending activities are conducted by bank personnel located at the office locations, including the LPO, underwritten pursuant to bank policies and procedures. Loan sources typically include loan officers, marketing efforts, the existing customer base, walk-in customers and referrals from real estate brokers, builders and attorneys. Newton Federal occasionally purchases whole loans from third parties to supplement internal loan production. These loans usually consist of loans to health care professionals and loans secured by manufactured housing. The majority of purchased loans are to borrowers who are not located in the primary market area.

Further, the Bank may purchase or sell participation interests in loans. Such loans are underwritten pursuant to existing bank underwriting criteria and procedures. The Bank has not historically sold participation interests in loans originated by the Bank. Historically, Newton Federal has not originated significant amounts of loans for sale, but such activity may increase in the future in order to assist in management of interest rate risk and to generate fee income. The Bank currently sell loans through the LenderSelect Mortgage Group. At September 30, 2016, there were a total of $472,000 of loans held for sale, and the Bank sold $2.3 million of loans during the year ended September 30, 2016.

Asset Quality

Newton Federal’s lending operations include originations of commercial real estate/multi-family, commercial business, construction/land and consumer loans for portfolio, all of which carry a higher risk profile than traditional 1-4 family mortgage lending. Since fiscal 2012 the Bank has recorded a declining level of non-performing assets (“NPAs”), consisting of non-accruing loans and OREO. NPAs have ranged from a low of $3.1 million as of September 30, 2015 to a high of $18.9 million at September 30, 2012, and totaled $3.2 million at September 30, 2016. This balance consisted solely of non-accruing loans, as the OREO balance was zero. The non-accruing loans were comprised of 1-4 family first and second position loans (93%) and commercial loans (7%). Exhibit I-11 presents a history of NPAs for the Bank since 2012.


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To track the Bank’s asset quality and the adequacy of valuation allowances, Newton Federal has established detailed asset classification policies and procedures which are consistent with regulatory guidelines. Detailed asset classifications are reviewed quarterly by senior management and the Board. Pursuant to these procedures, when needed, the Bank establishes additional valuation allowances to cover anticipated losses in classified or non-classified assets. As of September 30, 2016, the Bank maintained an allowance for loan losses of $4.3 million, equal to 2.22% of total loans receivable and 132.87% of non-accruing loans.

Funding Composition and Strategy

Deposits have traditionally accounted for all of the Bank’s IBL, as no borrowings has been used over the past five fiscal years. At September 30, 2016, deposits equaled $181.7 million. Exhibit I-12 sets forth the Bank’s deposit composition for the past three years and Exhibit I-13 provides the maturity composition of the certificate of deposit (“CD”) portfolio at September 30, 2016 for all CDs in excess of $250,000 in balance. CDs constitute the largest but decreasing portion of the Bank’s deposit base, totaling 47.1% of deposits at September 30, 2016 versus 59.0% of deposits as of September 30, 2012. Checking and savings accounts equaled $73.6 million, or 40.5% of total deposits as of September 30, 2016, versus $49.8 million, or 27.8% of total deposits at September 30, 2012.

Newton Federal’s current CD composition reflects a concentration of short-term CDs (maturities of one year or less). As of September 30, 2016, the CD portfolio totaled $85.5 million, and $35.0 million of CDs with balances in excess of $250,000. Of the CDs with balances greater than $250,000, 39.6% of the CDs were scheduled to mature in one year or less. There were no brokered CDs in portfolio as of September 30, 2016.

Newton Federal has not historically utilized borrowings for funding. The Bank has not needed such funds due to the level of lending activities and available cash and liquidity, which has been used for recent increases in portfolio loans. The Bank maintains a $58.0 million line of credit with the FHLB of Atlanta as a contingent funding source. Newton Federal also has two un-secured federal funds lines of credit for a total amount of $12.5 million. No amounts have been utilized under these borrowing relationships except for annual testing of the funding sources.

Subsidiary Operations

The Bank currently does not operate any subsidiaries. Upon completion of the conversion, Newton Federal will become the wholly-owned subsidiary of the Company.


*RP ^® Financial, LC.*		*OVERVIEW AND FINANCIAL ANALYSIS*

I.18

Legal Proceedings

The Bank is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, are believed by management to be immaterial to the financial condition of the Bank.


*RP ^® Financial, LC.*		*MARKET AREA*

II.1

II. MARKET AREA ANALYSIS

Introduction

Newton Federal currently conducts operations through three banking offices in Newton County, Georgia and an LPO in Bogart, Oconee County, Georgia. Newton County is located approximately 35 miles east of Atlanta, Georgia, while Oconee County is part of the Athens, Georgia metropolitan area. The Bank’s primary market area for deposit gathering thus consists of Newton County, while lending activities are focused in Newton County (1-4 family residential and commercial lending) and Gwinnett, Clarke, Walton, Barrow, Oconee and Jackson Counties (commercial and construction lending). The expansion of the lending market beyond Newton County (all of the additional counties are located to the north and northeast of Newton County extending to the city of Athens, Georgia), has been recently pursued in order to gain access to a larger market for business activities that has more favorable demographic and economic characteristics and trends. The LPO in Oconee County was opened in January 2016 and is staffed by loan originators that have experience and knowledge of the market area counties outside of Newton County. The primary market area contains small towns and has suburban and rural areas, all of which are exurbs of the Atlanta metropolitan area. The LPO is located close to the city of Athens, Georgia (Clarke County), the site of the University of Georgia. Details of the Bank’s office buildings are presented in Exhibit II-1.

The regional market area has a diversified economy, with services, wholesale/retail trade, construction, health care, manufacturing and state and local government constituting the primary sectors of employment. Within the expanded market area counties, income levels and housing values are generally higher than levels found in the Bank’s traditional Newton County market. The regional banking environment is highly competitive, and includes a large number of commercial banks, along with a number of credit unions and other financial services companies, some of which have a national presence. Within this region, community banking institutions remain a part of the banking industry.

Future business and growth opportunities will be partially influenced by economic and demographic characteristics of the markets served by the Bank, particularly the future growth trends of the regional economy, demographic growth trends, and the nature and intensity of the competitive environment for financial institutions. These factors outlined herein have been accounted for in the determination of the Company’s pro forma market value.


*RP ^® Financial, LC.*		*MARKET AREA*

II.2

National Economic Factors

The business potential of a financial institution is partially dependent on the future operating environment and growth opportunities for the financial services industry and the economy as a whole. Since the end of the “great recession” in 2009, the national economy has recorded modest growth rates, in terms of gross domestic product (“GDP”), ranging from a low of 1.6% in calendar year 2011 to a high of 2.5% in calendar year 2010. GDP growth was 2.2% for calendar year 2013, 2.4% for calendar years 2014 and 2015, and an annualized 1.8% for the nine months ended September 30, 2016, indicating positive, yet modest growth for the US economy. As a result of the recession, approximately 8 million jobs were lost as consumers cut back on spending, causing a reduction in the need for many products and services. Total personal wealth declined notably due to the housing crisis and the drop in real estate values. The economy has recorded slow, but steady job growth since reaching a low in early 2010, with approximately 2.5 million jobs added in 2015, and a total of 1.6 million jobs created for the nine months ended September 30, 2016.

For the 12 months ended October 2016, the national inflation rate was 1.06%, showing that inflation remains under control. Indicating a level of continued improvement, the national unemployment rate equaled 4.7% as of October 2016, slightly lower than the 4.8% rate as of October 2015. Job growth is expected to slow as baby boomers are aging and economy is approaching full employment level nationally. The Federal Reserve has indicated that it will continue efforts to stimulate growth in the economy through maintaining low interest rates, although certain signals have been given that rates may start to rise by the end of 2016. Low interest rates are expected to remain a focus in order to support a continued recovery of the economy in general and the housing sector specifically.

The major stock exchange indices have fluctuated, but trended upward over the last 12 months. Stock prices continue to be impacted by world events, including during the second half of June 2016, with Britain’s late-June vote on exiting the European Union (“Brexit”) impacting global stock markets. Stocks traded higher ahead of the Brexit vote and then plunged sharply lower, as the shock from Britain’s vote to leave the European Union swept across global stock markets. Further impacts to the stock market included the national election through November 2016 and the implications of the new administration that will be in place in early 2017. As an indication of the changes in the nation’s stock markets over the last 12 months, on September 30, 2016, the DJIA closed at 18,308.15, an increase of 12.4% from September 30, 2015, and the


*RP ^® Financial, LC.*		*MARKET AREA*

II.3

NASDAQ Composite Index closed at 5,312.00 an increase of 15.0% over the same time period. The S&P 500 closed at 2,168.27 on September 30, 2016, an increase of 13.0% from September 30, 2015. Forecasts indicate mediocre economic growth through 2017, with an expectation of a mild recession in 2018, given that the economic recovery is already the third longest in history.

Regarding factors that most directly impact the banking and financial services industries, the residential real estate industry has, to a large extent, recovered from the 2007-2009 housing crisis and recession. Following a relatively slow recovery through early 2012, in recent periods the number of housing foreclosures has remained modest, new and previously-owned home sales have increased, and residential housing prices have continued to trend upward in most metropolitan areas of the country. Home builders continue to report strong activity for new home construction. National home price indices have, to a large extent, recovered from the lows reached in 2009, with the national median home price reaching $236,450 in June 2016, versus $169,000 in March 2009. The commercial real estate market has also generally improved through mid-2016, in terms of sales activity, lease terms, and vacancy rates. However, competition among lenders remains high in most regions of the country.

According to the September 2016 housing forecast from the Mortgage Bankers Association (the “MBA”), existing home sales are projected to increase by approximately 4.8% and new home sales are expected to increase by 15.7% through the course of 2016. The MBA forecast also showed modest increase in the median sales prices for existing homes in 2016 and 2017. Total mortgage production is forecasted to increase in 2016 to $1.838 trillion compared to $1.630 trillion in 2015. The growth in 2016 originations is due in part to 11.4% increase in home purchase mortgage originations, with purchase lending forecasted to total $981 billion in 2016. Comparatively, refinancing volumes are predicted to increase by 14.4% in 2016, with refinancing volume forecasted to total $857 billion in 2016. For 2017, refinancing volume is projected to decline significantly, while home purchase mortgage originations are projected to continue growing.

Based on the consensus outlook of nearly 63 economists surveyed by The Wall Street Journal in September 2016, the U.S. economy is poised for stronger growth in 2016, with GDP growth forecasted at 1.8% for the year, due to lower gas prices, a tighter job market and expectation of steady wage gains. The forecast reveals the U.S. economy should grow at a faster pace of 2.2% in 2017. Economists expect that the unemployment rate will continue to steadily decline, from 5.0% in August 2016 to 4.7% by December 2016, and is forecasted to fall to 4.6%


*RP ^® Financial, LC.*		*MARKET AREA*

II.4

by the end of 2017, which would be the lowest jobless rate since April 2008. On average, the economists expect the Federal Reserve to begin raising its target rate in fourth quarter of 2016, and forecast an increase in 10-year Treasury yield to 1.8% by the end of 2016; thereafter increasing to 2.0% through June 2017. Inflation pressures were forecasted to remain below 2.5% through the end of 2017 and the price of oil was expected to increase to approximately $47 a barrel through the end of 2016.

Interest Rate Environment

The Federal Reserve manages interest rates in order to promote economic growth and to avoid inflationary periods. Amid increased indications of the economic downturn developing in 2007, the Fed began reducing market interest rates. Beginning in August 2007 and through December 2008, the Fed decreased market interest rates a total of 12 times in an effort to stimulate the economy, both for personal and business spending. As of January 2009, the Discount Rate had been lowered to 0.50%, and the Federal Funds rate target was 0.00% to 0.25%. These historically low rates were intended to enable a faster recovery of the housing industry, while at the same time lower business borrowing costs, and such rates remained in effect through early 2010. In February 2010, the Fed increased the discount rate to 0.75%, reflecting a slight change to monetary strategy. The effect of the interest rate decreases since mid-2008 has been most evident in short term rates, which decreased more than longer term rates, increasing the slope of the yield curve. The low interest rate environment has been maintained as part of a strategy to stimulate the economy by keeping both personal and business borrowing costs as low as possible. The strategy has achieved its goals, as borrowing costs for residential housing have been at historical lows, and the prime rate of interest remains at a low level.

As of September 30, 2016, the bond equivalent yields for U.S. Treasury bonds with terms of one and ten years equaled 0.59% and 1.60%, respectively, versus comparable year ago yields of 0.33% and 2.06%. The overall low interest rates have had an unfavorable impact on the net interest margins of many financial institutions, as they rely on a spread between the yields on longer term assets and the costs of shorter term funding sources. In the last couple of years, asset yields have continued to decline, while material reductions in liability costs have ceased, resulting a gradual reduction in yield/cost spreads for many institutions. In addition, institutions who originate substantial volumes of prime-based loans have also given up yield as the prime


*RP ^® Financial, LC.*		*MARKET AREA*

II.5

rate declined from 5.00% as of June 30, 2008 to 3.25% as of December 31, 2008. The rate remained at that level until January 2016, when it increased to 3.50%. This low interest rate environment, along with continued competition in the industry for quality loans, has placed downward pressure on net interest margins. Historical interest rate trends are presented in Exhibit II-2.

Market Area Regional Economy

Newton Federal’s primary market area (extending from Newton County in the south to the city of Athens in the north), lies in the heart of Georgia’s “Innovation Crescent”, a multi-county region anchored by Hartsfield-Jackson Atlanta International Airport and the Georgia Institute of Technology at the southern end and the University of Georgia and the Interstate 85 corridor on the northern end, with the region between Atlanta and Athens connected by the “Innovation Corridor”, Georgia Highway 316. The Crescent spans the area of Georgia to the east of the Atlanta metropolitan area. This region, typically one of the nation’s most economically active and diverse areas, is home to 40% of Georgia’s population, 16 Fortune 500 company headquarters, and 7 of the top 100 Health Information Technology company headquarters.

The Innovation Crescent serves as a hub for the life sciences, biotech and technology firms and contains highly rated research universities and government facilities such as the Centers for Disease Control. The higher education universities include the University of Georgia, Georgia Tech, Emory University, Morehouse School of Medicine, The Technical College System of Georgia and Georgia State University. There also is a concentration in advanced manufacturing firms and logistics and distribution centers. The region is centrally located in the southeastern US, with easy access to transportation facilities both nationally and internationally.

Newton Federal’s specific market area counties are also impacted by the economy and presence of the Atlanta metropolitan area, as a portion of the market area residents commute to employment in the city of Atlanta or in the close-in suburbs of Atlanta. The city of Covington, Georgia lies approximately 35 miles east of downtown Atlanta, with easy access along Interstate 20. The other market area counties also are within reasonable commuting distance to Atlanta.


*RP ^® Financial, LC.*		*MARKET AREA*

II.6

Regional Employment

Table 2.1 details the largest employers in the Bank’s market area counties. The market area contains a diverse cross section of employment sectors, which partially mitigates the risk

Table 2.1

Newton Federal Bank

Market Area Largest Employers


Company/Institution	County	Employees
Newton County Board of Education	Newton		2,324
Shire Pharmaceuticals	Newton		1,500
CR Bard	Newton		650
Newton County Government	Newton		615
Piedmont Newton Hospital	Newton		600
General Mills	Newton		575
Pactiv Corp.	Newton		500
SRG Global	Newton		385
Walton County Board of Education	Walton		1,876
Wal-Mart Supply Chain	Walton		1,718
Hitachi Automotive Systems	Walton		900
Walton County Government	Walton		721
Gwinnett County Public School System	Gwinnett		20,479
Gwinnett County Government	Gwinnett		4,854
Gwinnett Health Care System	Gwinnett		3,566
Publix	Gwinnett		3,558
Barrow County School System	Barrow		2,100
Chico’s FAS, Inc.	Barrow		1,200
Harrison Poultry	Barrow		1,100
University of Georgia	Clark, Madison, Oconee		9,400
Athens Regional Medical Center	Clark, Madison, Oconee		2,720
Clarke County School District	Clark, Madison, Oconee		2,100
ConAgra	Clark, Madison, Oconee		1,590
Athens-Clarke County Government	Clark, Madison, Oconee		1,500

Source: County and Government Websites.

associated with a decline in any particular economic sector or industry. Similar to many areas of the country, the largest employers typically include local school systems and local governments. Further, health care employment continues to expand in the nation, and the Bank’s market area also includes certain regional health care facilities. The above described Innovation Crescent has resulted in significant employment in the life sciences and technology, including employment in areas such as bio-medical, agriculture and food sciences, bio-chemistry and bio-physics, and nuclear medicine. There is further employment in services, retail and trade, with the size and scope of the market area employment resulting in a diversified employment base. As indicated earlier, a notable portion of residents also commute into the Atlanta metropolitan area for employment.


*RP ^® Financial, LC.*		*MARKET AREA*

II.7

Market Area Demographics

Demographic and economic growth trends, measured by changes in population, number of households, age distribution and median household income, provide key insight into the health of the Bank’s market area. Trends in these key measures are summarized by the data presented in Table 2.2 from 2010 to 2017 (estimated by the census) and projected through 2022, with additional detail shown in Exhibit II-3. The Bank’s market area population base totaled 108,000 in Newton County, the location of most residential lending and the deposit gathering branch offices. The other expanded market area counties contained a total population of 1.3 million, including 0.9 million in Gwinnett County. This recent market area expansion thus provides a significant population base for access to additional loan and deposit customers.

The original market area county of Newton recorded population growth from 2010 to 2017 of 1.1% annually, which was slightly higher than the state growth rate of 1.0%, and much higher than the national growth rate of 0.7%. The expanded market area counties are also included in Table 2.2, revealing that all such counties recorded annual population growth equal to or higher than the state growth rate from 2010-2017, with such growth rates ranging from a low of 1.0% in Walton and Jackson Counties to a high of 2.0% in Barrow County. Projections for the next five years indicate that these growth trends are expected to continue, with Newton County also recording relatively comparable population growth. This data supports the efforts by the Bank of expanding the market area counties to areas outside of Newton County, and into areas of strong growth trends. Household growth rates showed similar relative trends for all of the market area counties, the state and nation.

Age distribution figures in Table 2.2 indicate that the state of Georgia has a generally lower age profile than the nation as a whole. This characteristic is also present in the Bank’s market area counties, including the home county of Newton. This indicates that a larger portion of the residents are in their higher income or higher wealth years, a favorable characteristic for financial institutions such as the Bank.

Income levels in the market area tend to reflect the nature of the markets served, with the expanded market area counties recording higher income levels than Newton County in terms of median household and per capita incomes. Such levels of income reinforce the attractiveness of the expanded market area, which contains a higher proportion of professional and technical jobs


*RP ^® Financial, LC.*		*MARKET AREA*

II.8

Table 2.2

Newton Federal Bank

Summary Demographic Data


	Year						Growth Rate
	2010		2017		2022		2010-2017			2017-2022
							(%)			(%)
Population (000)
USA		308,746		325,139		337,393		0.7	%		0.7	%
Georgia		9,688		10,375		10,911		1.0	%		1.0	%
Newton County		100		108		114		1.1	%		1.2	%
Gwinnett County		805		923		998		2.0	%		1.6	%
Barrow County		69		78		84		1.7	%		1.6	%
Walton County		84		90		95		1.0	%		1.1	%
Jackson County		60		65		69		1.0	%		1.2	%
Clark County		117		126		134		1.2	%		1.2	%
Oconee County		33		37		40		1.8	%		1.6	%
Households (000)
USA		116,716		123,357		128,247		0.8	%		0.8	%
Georgia		3,586		3,854		4,062		1.0	%		1.1	%
Newton County		34		37		39		0.9	%		1.1	%
Gwinnett County		269		304		327		1.8	%		1.5	%
Barrow County		24		27		29		1.5	%		1.5	%
Walton County		30		32		34		1.1	%		1.1	%
Jackson County		21		23		24		0.8	%		1.1	%
Clark County		45		48		51		0.9	%		1.3	%
Oconee County		12		13		14		1.9	%		1.7	%
Median Household Income ($)
USA		NA		57,462		61,642		NA			1.4	%
Georgia		NA		52,421		56,517		NA			1.5	%
Newton County		NA		49,669		52,667		NA			1.2	%
Gwinnett County		NA		63,148		66,521		NA			1.0	%
Barrow County		NA		52,405		54,971		NA			1.0	%
Walton County		NA		54,096		56,950		NA			1.0	%
Jackson County		NA		57,111		62,006		NA			1.7	%
Clark County		NA		32,847		34,181		NA			0.8	%
Oconee County		NA		76,548		80,089		NA			0.9	%
Per Capita Income ($)
USA		NA		31,459		34,068		NA			1.6	%
Georgia		NA		28,400		30,771		NA			1.6	%
Newton County		NA		22,448		23,538		NA			1.0	%
Gwinnett County		NA		27,361		28,974		NA			1.2	%
Barrow County		NA		21,267		22,235		NA			0.9	%
Walton County		NA		24,268		25,757		NA			1.2	%
Jackson County		NA		24,987		27,123		NA			1.7	%
Clark County		NA		22,369		23,519		NA			1.0	%
Oconee County		NA		36,468		38,488		NA			1.1	%

2017 Age Distribution (%)	0-14 Yrs.		15-34 Yrs.		35-54 Yrs.		55-69 Yrs.			70+ Yrs.
USA		18.8		27.1		25.7		18.1			10.3
Georgia		20.0		27.7		26.8		16.9			8.6
Newton County		21.4		26.9		27.4		16.0			8.3
Gwinnett County		22.0		27.4		29.3		15.3			5.9
Barrow County		22.3		26.8		27.6		15.5			7.8
Walton County		20.3		25.5		26.8		17.6			9.9
Jackson County		20.7		24.7		27.7		17.4			9.5
Clark County		15.4		45.6		20.4		11.8			6.8
Oconee County		19.8		24.0		27.7		19.1			9.4

2017 HH Income Dist. (%)	Less Than 25,000		$25,000 to 50,000		$50,000 to 100,000		$100,000+
USA		21.9		22.9		29.5		25.7
Georgia		24.2		24.1		29.2		22.5
Newton County		24.4		26.0		31.5		18.1
Gwinnett County		16.5		23.6		32.1		27.8
Barrow County		19.5		28.3		36.7		15.5
Walton County		21.1		25.4		33.5		19.9
Jackson County		21.6		23.0		32.4		23.0
Clark County		40.8		24.1		22.0		13.1
Oconee County		13.5		18.8		30.7		37.0

Source: SNL Financial, LC.


*RP ^® Financial, LC.*		*MARKET AREA*

II.9

in the life sciences and other employment areas that require a higher level of skills and education. Such incomes, with the exception of Clarke County (which contains a large student population base), were also in-line with or higher than statewide averages. The greater wealth of these markets confirms the efforts by the Crescent region to build a higher income employment base.

Household income levels shown in Table 2.2 also support this income data, with the market area having a higher proportion of households earning incomes in the $25,000 to $100,000 range, the type of incomes expected to be seen in the expanded market area counties and the employment characteristics implied by the Innovation Crescent.

Regional Economy

Comparative employment sector data for Newton Federal’s market area presented in Table 2.3 shows that employment in the services industry constituted the major source of jobs in Newton County and the expanded market area counties, while wholesale/retail employment and construction generally were the second and third largest employment sectors for the Bank’s primary market area counties. The level of construction employment is consistent with the higher demographic and economic growth characteristics of the market area. Finance/insurance/real estate employment represented a fourth significant employment sector. The data indicates that the Bank’s market area counties have economies that are relatively diversified.

Table 2.3

Newton Federal Bank

Primary Market Area Employment Sectors

(Percent of Labor Force)


				Newton			Gwinnett			Barrow			Walton			Jackson			Clarke			Oconee
Employment Sector	Georgia			County			County			County			County			County			County			County
	(% of Total Employment)
Services		34.5	%		32.9	%		32.9	%		30.9	%		31.4	%		29.2	%		34.9	%		33.0	%
Healthcare		4.9	%		4.1	%		4.6	%		4.3	%		4.2	%		3.2	%		6.4	%		5.8	%
Government		3.7	%		2.9	%		0.7	%		5.1	%		3.9	%		6.0	%		4.8	%		4.0	%
Wholesale/Retail Trade		25.7	%		24.5	%		26.4	%		25.5	%		23.4	%		28.4	%		26.9	%		21.4	%
Finance/Ins/Real Estate		10.2	%		8.4	%		9.8	%		8.2	%		9.1	%		9.0	%		11.4	%		12.4	%
Manufacturing		2.9	%		3.6	%		3.8	%		3.9	%		2.8	%		4.2	%		2.5	%		2.1	%
Construction		7.9	%		12.0	%		9.6	%		10.8	%		14.1	%		10.0	%		5.7	%		10.3	%
Information		1.0	%		0.7	%		1.2	%		0.8	%		0.7	%		0.5	%		0.9	%		1.0	%
Transportation/Utility		3.4	%		3.7	%		2.9	%		3.8	%		3.4	%		3.4	%		2.6	%		2.7	%
Agriculture		2.5	%		3.8	%		2.1	%		3.7	%		4.0	%		3.6	%		2.2	%		5.5	%
Other		3.3	%		3.2	%		5.9	%		2.8	%		3.0	%		2.4	%		1.7	%		1.9	%

		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Source: SNL Financial, LC.


*RP ^® Financial, LC.*		*MARKET AREA*

II.10

Unemployment Data

Comparative unemployment rates for Newton County and the expanded market area counties, as well as for the U.S. and Georgia, are shown in Table 2.4. As of September 2016, Newton County reported a notably higher unemployment level than the state of Georgia and the expanded market area counties. This also provides an indication of the economic strength of the expanded market area that is located within the Innovation Crescent, and the more limited market in Newton County. Newton County’s unemployment rate of 5.9% was about 1.0% higher than the comparative rates, with such rate declining somewhat over the past 12 months. The statewide and expanded market area counties reported relatively stable unemployment rates over the past year, with such rates in general at a “full employment” level of just under 5.0%.

Table 2.4

Newton Federal Bank

Unemployment Trends


Region	Sept. 2015 Unemployment			Sept. 2016 Unemployment			Change
USA		4.9	%		4.8	%		-0.1	%
Georgia		5.6	%		5.3	%		-0.3	%
Newton County		6.3	%		5.9	%		-0.4	%
Expanded Market Area Avg		4.8	%		4.9	%		0.1	%
Gwinnett County		4.9	%		4.7	%		-0.2	%
Clarke County		5.6	%		6.0	%		0.4	%
Walton County		5.0	%		5.1	%		0.1	%
Barrow County		4.9	%		4.9	%		0.0	%
Oconee County		4.2	%		4.4	%		0.2	%
Jackson County		4.4	%		4.3	%		-0.1	%

Source: U.S. Bureau of Labor Statistics.

Market Area Deposit Characteristics/Competition

The Bank’s deposit base is closely tied to the economic fortunes of Newton County, the location of the Bank’s three branches. Table 2.5 displays deposit market trends from June 30, 2013 through June 30, 2016 for Newton Federal, as well as for all commercial bank and savings institution branches located in Newton County, the expanded market area counties and the state


*RP ^® Financial, LC.*		*MARKET AREA*

II.11

Table 2.5

Newton Federal Bank

Deposit Summary


	As of June 30,
	2013							2016							Deposit
	Deposits		Market Share			No. of Branches		Deposits		Market Share			No. of Branches		Growth Rate 2013-2016
	(Dollars in Thousands)														(%)
Georgia	$	187,642,000		100.0	%		2,576	$	225,317,000		100.0	%		2,440		6.3	%
Commercial Banks		183,988,000		98.1	%		2,466		222,313,000		98.7	%		2,351		6.5	%
Savings Institutions		3,654,000		1.9	%		110		3,004,000		1.3	%		89		-6.3	%
Newton County	$	827,798		100.0	%		109	$	873,294		100.0	%		16		1.8	%
Commercial Banks		634,731		76.7	%		103		683,101		78.2	%		10		2.5	%
Savings Institutions		193,067		23.3	%		6		190,193		21.8	%		6		-0.5	%
Newton Federal		186,895		22.6	%		3		182,100		20.9	%		3		-0.9	%
Expanded Market Area-Below Listed Counties
Total Deposits	$	16,326,575		100.0	%		282	$	19,872,009		100.0	%		268		6.8	%
Commercial Banks		16,180,674		99.1	%		273		19,779,412		99.5	%		260		6.9	%
Savings Institutions		145,901		0.9	%		9		92,597		0.5	%		8		-14.1	%
Gwinnett County	$	11,907,835		100.0	%		201	$	14,724,037		100.0	%		192		7.3	%
Commercial Banks		11,827,006		99.3	%		193		14,697,379		99.8	%		185		7.5	%
Savings Institutions		80,829		0.7	%		8		26,658		0.2	%		7		-30.9	%
Clarke County	$	2,398,139		100.0	%		33	$	2,826,332		100.0	%		32		5.6	%
Commercial Banks		2,398,139		100.0	%		33		2,826,332		100.0	%		32		5.6	%
Savings Institutions		0		0.0	%		0		0		0.0	%		0		0.0	%
Walton County	$	821,785		100.0	%		17	$	958,386		100.0	%		17		5.3	%
Commercial Banks		819,021		99.7	%		16		958,386		100.0	%		17		5.4	%
Savings Institutions		2,764		0.3	%		1		0		0.0	%		0		-100.0	%
Barrow County	$	740,024		100.0	%		16	$	804,449		100.0	%		14		2.8	%
Commercial Banks		740,024		100.0	%		16		804,449		100.0	%		14		2.8	%
Savings Institutions		0		0.0	%		0		0		0.0	%		0		0.0	%
Oconee County	$	596,989		100.0	%		13	$	802,433		100.0	%		13		10.4	%
Commercial Banks		531,917		89.1	%		12		736,494		91.8	%		12		11.5	%
Savings Institutions		65,072		10.9	%		1		65,939		8.2	%		1		0.4	%
Jackson County	$	680,824		100.0	%		18	$	714,758		100.0	%		17		1.6	%
Commercial Banks		680,824		100.0	%		18		714,758		100.0	%		17		1.6	%
Savings Institutions		0		0.0	%		0		0		0.0	%		0		0.0	%

Source: FDIC.

of Georgia. In the state of Georgia, commercial banks hold essentially all financial institution deposits, with a market share of 98.7% as of June 30, 2016. Since June 30, 2010, commercial banks increased deposits at an annual rate of 6.5%, versus a decline of 6.3% annually for savings institutions.


*RP ^® Financial, LC.*		*MARKET AREA*

II.12

Consistent with the state of Georgia, commercial banks maintained a dominant market share of deposits versus savings institutions in all of Newton Federal’s market area counties, except for Newton County, which recorded the deposits held by the Bank. For the three-year period covered in Table 2.5, savings institutions experienced a decrease in deposit market share in Newton County of 0.5% annually, while overall deposits increased at an annual rate of 1.8%. This deposit growth rate is lower than the expanded market area counties, which together recorded an annual increase in deposits of 6.8% over the most recent three year period, and the statewide rate of 6.3% over the same time period. The most rapid deposit growth over the time period shown in Table 2.5 was recorded in Oconee County (10.4% annually), with other high growth counties including Gwinnett County (7.4% annually) and Clarke County (5.6% annually). This implies that the expanded market area counties are a more attractive market area for financial institutions and future growth capabilities, and confirms the Bank’s efforts to expand the market area.

Based on June 30, 2016 deposit data, Newton Federal’s $182.1 million of deposits provided for a 20.9% market share of bank and thrift deposits in Newton County, indicating a relatively strong market presence. Due to the Bank’s net deposit shrinkage since June 30, 2014, the Bank’s deposit market share declined from 22.6% as of June 30, 2013. This data indicates a reduction in the competitiveness of the Bank given the overall market growth.

Competition

Newton Federal faces notable competition in both deposit gathering and lending activities, including direct competition with financial institutions that primarily have a local, regional or national presence. Securities firms and mutual funds also represent major sources of competition in raising deposits. In many cases, these competitors are also seeking to provide some or all of the community-oriented services as the Bank. With regard to lending competition, the Bank encounters the most significant competition from the same institutions providing deposit services. In addition, the Bank competes with mortgage companies, independent mortgage brokers, and credit unions. Table 2.6 lists the Bank’s largest competitors in the Newton County market area based on deposit market share as noted parenthetically, indicating that the large commercial banks with national operations dominate the local markets, with Newton Federal having a relatively high market share position. This is a positive factor in terms of competitive position for the Bank.


*RP ^® Financial, LC.*		*MARKET AREA*

II.13

Table 2.6

Newton Federal Bank

Market Area Deposit Competitors - Newton County


Location	Name	Market Share	Rank
Newton County, GA	Synovus Bank	24.38%
	Branch Banking and Trust Co.	24.27%
	Newton Federal Bank	20.85%	3 out of 8
	United Bank	9.73%
	Pinnacle Bank	8.58%
	Wells Fargo Bank, NA	7.96%
	United Community Bank	3.30%
	Guaranty Bank	0.93%

Source: SNL Financial, LC.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.1

III. PEER GROUP ANALYSIS

This chapter presents an analysis of Newton Federal’s operations versus a group of comparable banks (the “Peer Group”) selected from the universe of all publicly-traded savings institutions in a manner consistent with the regulatory valuation guidelines. The basis of the pro forma market valuation of Newton Federal is derived from the pricing ratios of the Peer Group institutions, incorporating valuation adjustments for key differences in relation to the Peer Group. Since no Peer Group can be exactly comparable to Newton Federal, key areas examined for differences are: financial condition; profitability, growth and viability of earnings; asset growth; primary market area; dividends; liquidity of the shares; marketing of the issue; management; and effect of government regulations and regulatory reform.

Peer Group Selection

The Peer Group selection process is governed by the general parameters set forth in the regulatory valuation guidelines. Accordingly, the Peer Group is comprised of only those publicly-traded savings institutions whose common stock is either listed on a national exchange (NYSE or AMEX), or is NASDAQ listed, since their stock trading activity is regularly reported and generally more frequent than non-publicly traded and closely-held institutions. Institutions that are not listed on a national exchange or NASDAQ are inappropriate, since the trading activity for thinly-traded or closely-held stocks is typically highly irregular in terms of frequency and price and thus may not be a reliable indicator of market value. We have also excluded from the Peer Group those companies those under acquisition or subject to rumored acquisition and recent conversions, since their pricing ratios are subject to unusual distortion and/or have limited trading history. A recent listing of the universe of all publicly-traded savings institutions is included as Exhibit III-1.

Ideally, the Peer Group, which must have at least 10 members to comply with the regulatory valuation guidelines, should be comprised of publicly-traded MHCs with comparable resources, strategies and financial characteristics as Newton Federal. However, there are currently only eight publicly-traded MHCs. Accordingly, in deriving a Peer Group comprised of institutions with relatively comparable characteristics as Newton Federal, the companies selected for Newton Federal’s Peer Group are all fully-converted companies. The valuation adjustments applied in the Chapter IV analysis will take into consideration differences between the Company’s MHC form of ownership relative to the fully-converted Peer Group companies. Also included in Chapter IV is a pricing analysis of the publicly-traded MHCs on a fully-converted basis.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.2

From the universe of publicly-traded thrifts, we selected 10 institutions with characteristics similar to those of Newton Federal. In the selection process, we applied one “screen” to the universe of all public companies that were eligible for consideration:

•

Screen: Savings institutions with assets less than $600 million, equity/assets ratios above 12.50% and having been fully converted for at least one year. Ten companies met the criteria for the screen and were included in the Peer Group.

Exhibit III-1 provides financial and public market pricing characteristics of all publicly-traded thrifts, while Exhibit III-2 provides financial and public market pricing characteristics for all savings institutions with assets greater than $600 million. Table 3.1 shows the general characteristics of each of the 10 Peer Group companies and Exhibit III-3 provides summary demographic and deposit market share data for the primary market areas served by each of the Peer Group companies. While there are expectedly some differences between the Peer Group companies and Newton Federal, we believe that the Peer Group companies, on average, provide a good basis for valuation subject to valuation adjustments. The following sections present a comparison of Newton Federal’s financial condition, income and expense trends, loan composition, credit risk and interest rate risk versus the Peer Group as of the most recent publicly available date. Comparative data for all publicly-traded thrifts have been included in the Chapter III tables as well.

A summary description of the key comparable characteristics of each of the Peer Group companies relative to Peer Group as a whole is detailed below.

•

Anchor Bancorp of Washington. Comparable due to elevated equity/asset ratio, similar yield/cost spread, similar earning asset concentration in loans, elevated level of interest income and operating expenses.

•

Equitable Financial Corp. of Nebraska. Comparable due to elevated equity/asset ratio, similar earning asset concentration in loans, costing liability funding composition, similar return on assets with comparable non-interest income, limited investment in MBS, relatively favorable asset quality.

•

IF Bancorp, Inc. of Illinois. Comparable due to elevated equity/asset ratio, relatively limited asset growth in most recent year, similar funding costs, level of non-interest income and effective tax rate, level of construction loans.

•

Jacksonville Bancorp of Illinois. Comparable due to elevated equity/asset ratio, similar balance sheet funding composition, limited levels of non-recurring income or losses, similar operating expense ratio, elevated yield on interest earning assets and similar


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.3

Table 3.1

Peer Group of Publicly-Traded Thrifts

As of November 25, 2016 or the Most Recent Date Available

As of

November 25, 2016

Total

Fiscal

Conv.

Stock

Market

Ticker

Financial Institution

Exchange

Region

City

State

Assets

Offices

Mth End

Date

Price

Value

($Mil)

($)

($Mil)

ANCB

Anchor Bancorp

NASDAQ

Lacey

436

Jun

1/26/11

25.40

EQFN

Equitable Financial Corp.

NASDAQ

Grand Island

228

Jun

7/9/15

9.10

IROQ

IF Bancorp, Inc.

NASDAQ

Watseka

589

Jun

7/8/11

19.35

JXSB

Jacksonville Bancorp, Inc.

NASDAQ

Jacksonville

331

Dec

7/15/10

29.26

MELR

Melrose Bancorp, Inc.

NASDAQ

Melrose

267

Dec

10/22/14

15.91

MSBF

MSB Financial Corp.

NASDAQ

Millington

434

Dec

7/17/15

13.70

PBSK

Poage Bankshares, Inc.

NASDAQ

Ashland

449

Dec

9/13/11

18.95

PBIP

Prudential Bancorp, Inc.

NASDAQ

Philadelphia

559

Sep

10/10/13

15.81

127

UCBA

United Community Bancorp

NASDAQ

Lawrenceburg

528

Jun

1/10/13

16.20

WBKC

Wolverine Bancorp, Inc.

NASDAQ

Midland

369

Dec

1/20/11

27.97

Source: SNL Financial, LC.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.4

levels of commercial real estate and commercial business loans as a percent of assets, and comparable reserve coverage ratios.

•

Melrose Bancorp, Inc. of Massachusetts. Comparable due to elevated equity/asset ratio, comparable level of cash and investments, relatively similar earning asset/funding liabilities composition, similar return on assets and cost of interest-bearing liabilities, level of 1-4 family residential loans as a percent of assets, limited diversification into construction/land loans.

•

MSB Financial Corp. of New Jersey. Comparable due to elevated equity/asset ratio, similar earning asset/costing liability structure, costs of interest bearing liabilities, similar lending focus on 1-4 family residential loans and diversification into commercial real estate loans, comparable level of NPAs+90 day delinquencies and NPAs as a percent of loans.

•

Poage Bankshares, Inc. of Kentucky. Comparable due to elevated equity/asset ratio, similar earning asset/costing liability structure, similar level of interest income, non-interest income and operating expenses as a percent of average assets, similar yield cost spread, similar level of loan portfolio diversification as a percent of assets.

•

Prudential Bancorp, Inc. of Pennsylvania. Comparable due to elevated equity/asset ratio, level of net income and interest expense as a percent of average assets, similar level of cost of funds, lending diversification on commercial real estate and low risk-weighted assets/assets ratio.

•

United Community Bancorp of Indiana. Comparable due to elevated equity/asset ratio, similar composition of balance sheet liability base, limited asset growth in past 12 months, similar investment in 1-4 family residential assets in the form of MBS and whole loans, similar loan diversification into non-residential lending, relatively more favorable asset quality.

•

Wolverine Bancorp, Inc. of Michigan. Comparable due to elevated equity/asset ratio, similar loans/assets ratio, similar level of interest income and yield on interest earning assets, comparable levels of construction loans and commercial business loans, and relatively more favorable asset quality.

In aggregate, the Peer Group companies maintained a higher level of equity as the industry average (15.88% of assets versus 12.51% for all public companies), but recorded a lower level of profitability as a percent of average assets (0.57% ROAA versus 0.63% for all public companies), as well as a less favorable ROE (3.59% ROE versus 5.40% for all public companies). The Peer Group’s average P/TB ratio was lower than the industry average, while the average P/CE multiple was above the respective average for all publicly-traded thrifts.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.5


	All Fully-Conv. Publicly-Traded			Peer Group
Financial Characteristics (Averages)
Assets ($Mil)	$	1,882		$	419
Market capitalization ($Mil)	$	318		$	67
Equity/assets (%)		12.51	%		15.88	%
Return on average assets (%)		0.63	%		0.57	%
Return on average equity (%)		5.40	%		3.59	%
Pricing Ratios (Averages) (1)
Price/core earnings (x)		18.23	x		21.94	x
Price/tangible book (%)		119.15	%		100.73	%
Price/assets (%)		13.58	%		15.84	%

(1)	Based on market prices as of November 25, 2016.

Ideally, the Peer Group companies would be comparable to Newton Federal in terms of all of the selection criteria, but the universe of publicly-traded thrifts does not provide for an appropriate number of such companies. However, in general, the companies selected for the Peer Group were fairly comparable to Newton Federal, as will be highlighted in the following comparative analysis.

Financial Condition

Table 3.2 shows comparative balance sheet measures for Newton Federal and the Peer Group, reflecting the expected similarities and some differences given the selection procedures outlined above. The Bank’s and Peer Group ratios reflect balances as of September 30, 2016. Newton Federal’s equity-to-assets ratio of 19.36% was higher than the Peer Group’s average equity ratio of 15.88%. The Bank’s pro forma capital position will increase with the addition of stock proceeds, providing the Bank with an increased advantage in for this metric in comparison to the Peer Group. Tangible equity-to-assets ratios for the Bank and the Peer Group equaled 19.36% and 15.70%, respectively. The increase in Newton Federal’s pro forma capital position will be favorable from a risk perspective and in terms of future earnings potential that could be realized through leverage and lower funding costs. At the same time, the Bank’s higher pro forma capitalization will depress return on equity. Both Newton Federal’s and the Peer Group’s capital ratios reflected capital surpluses with respect to the regulatory capital requirements, with the Bank’s ratios currently higher than the Peer Group’s ratios. On a pro forma basis, the Bank’s regulatory surpluses will become more significant.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.6

Table 3.2

Balance Sheet Composition and Growth Rates

Comparable Institution Analysis

As of September 30, 2016 or the Most Recent Date Available


			Balance Sheet as a Percent of Assets																														Balance Sheet Annual Growth Rates																					Regulatory Capital
			Cash &			MBS &						Net						Borrowed			Sub.			Total			Goodwill			Tangible						MBS, Cash &									Borrows.			Total			Tangible			Tier 1			Tier 1			Risk-Based
			Equivalents			Invest			BOLI			Loans (1)			Deposits			Funds			Debt			Equity			& Intang			Equity			Assets			Investments			Loans			Deposits			&Subdebt			Equity			Equity			Leverage			Risk-Based			Capital
Newton Federal Bank
September 30, 2016				11.03	%		3.31	%		0.00	%		81.63	%		78.04	%		0.00	%		0.00	%		19.36	%		0.00	%		19.36	%		2.87	%		-27.69	%		11.93	%		2.84	%		0.00	%		2.63	%		2.63	%		19.32	%		30.86	%		32.13	%
All Thrifts
Averages				7.18	%		14.77	%		1.59	%		72.36	%		75.70	%		10.29	%		0.44	%		12.50	%		0.46	%		12.26	%		12.67	%		9.53	%		14.59	%		13.78	%		9.00	%		10.70	%		8.51	%		12.08	%		18.54	%		19.67	%
Medians				5.28	%		12.31	%		1.63	%		74.94	%		76.84	%		9.04	%		0.00	%		11.42	%		0.00	%		11.12	%		8.34	%		3.59	%		10.46	%		9.16	%		0.00	%		3.98	%		3.31	%		10.91	%		15.60	%		16.85	%
State of GA
CHFN	Charter Financial Corporation	GA		7.37	%		14.55	%		3.41	%		69.09	%		80.52	%		3.46	%		0.46	%		14.08	%		2.25	%		11.83	%		40.50	%		44.93	%		39.21	%		57.25	%		-8.73	%		-0.87	%		-14.83	%		11.51	%		14.34	%		15.26	%
Comparable Group
Averages				5.80	%		16.22	%		2.05	%		73.05	%		76.78	%		6.29	%		0.06	%		15.88	%		0.19	%		15.70	%		10.11	%		-1.03	%		13.84	%		10.83	%		147.65	%		-0.35	%		-0.27	%		14.28	%		20.76	%		21.91	%
Medians				5.06	%		12.96	%		2.09	%		75.87	%		78.67	%		4.04	%		0.00	%		15.73	%		0.00	%		15.46	%		7.82	%		-13.63	%		10.77	%		7.90	%		0.00	%		-0.11	%		-0.04	%		13.71	%		19.80	%		20.82	%
Comparable Group
ANCB	Anchor Bancorp	WA		2.83	%		7.23	%		4.51	%		80.82	%		69.78	%		14.11	%		0.00	%		14.63	%		0.00	%		14.63	%		14.45	%		-21.43	%		23.59	%		1.04	%		515.00	%		0.77	%		0.77	%		14.20	%		15.30	%		16.20	%
EQFN	Equitable Financial Corp.	NE		3.92	%		0.70	%		0.00	%		90.74	%		83.23	%		0.00	%		0.00	%		15.92	%		0.00	%		15.92	%		7.67	%		-30.32	%		11.21	%		8.53	%		0.00	%		3.29	%		3.29	%		11.83	%		13.00	%		14.25	%
IROQ	IF Bancorp, Inc.	IL		2.01	%		20.17	%		1.46	%		74.73	%		71.96	%		12.74	%		0.00	%		14.23	%		0.00	%		14.23	%		5.50	%		-13.63	%		12.99	%		3.82	%		19.46	%		3.27	%		3.27	%		13.80	%		18.80	%		20.10	%
JXSB	Jacksonville Bancorp, Inc.	IL		9.47	%		28.31	%		2.19	%		56.14	%		81.25	%		2.04	%		0.00	%		14.60	%		0.82	%		13.77	%		7.97	%		31.18	%		-2.45	%		15.16	%		-65.61	%		3.35	%		3.56	%		13.16	%		18.96	%		20.21	%
MELR	Melrose Bancorp, Inc.	MA		7.91	%		12.31	%		2.00	%		77.06	%		81.69	%		1.87	%		0.00	%		16.23	%		0.00	%		16.23	%		19.29	%		-17.97	%		36.29	%		23.06	%		NA			-5.74	%		-5.74	%		13.61	%		21.04	%		22.14	%
MSBF	MSB Financial Corp.	NJ		7.30	%		10.63	%		3.15	%		75.92	%		77.18	%		5.23	%		0.00	%		16.74	%		0.00	%		16.74	%		16.94	%		-20.85	%		30.52	%		29.67	%		-30.60	%		-4.95	%		-4.95	%		13.52	%		17.68	%		18.93	%
PBSK	Poage Bankshares, Inc.	KY		4.79	%		13.61	%		1.58	%		75.81	%		80.15	%		2.85	%		0.63	%		15.54	%		0.53	%		15.01	%		5.54	%		-3.87	%		9.51	%		7.28	%		3.00	%		-1.53	%		-1.08	%		13.85	%		20.64	%		21.43	%
PBIP	Prudential Bancorp, Inc.	PA		2.55	%		31.93	%		2.33	%		61.66	%		69.56	%		9.05	%		0.00	%		20.38	%		0.00	%		20.38	%		14.84	%		NA			10.34	%		6.61	%		895.28	%		-2.56	%		-2.56	%		20.41	%		38.57	%		39.70	%
UCBA	United Community Bancorp	IN		5.34	%		36.45	%		3.29	%		52.04	%		83.70	%		2.27	%		0.00	%		13.38	%		0.53	%		12.85	%		1.57	%		-0.57	%		3.96	%		2.50	%		-7.69	%		-0.98	%		-0.85	%		11.42	%		21.11	%		22.36	%
WBKC	Wolverine Bancorp, Inc.	MI		11.88	%		0.87	%		0.00	%		85.56	%		69.25	%		12.73	%		0.00	%		17.20	%		0.00	%		17.20	%		7.33	%		68.18	%		2.44	%		10.63	%		0.00	%		1.54	%		1.54	%		17.02	%		22.50	%		23.78	%

(1)	Includes loans held for sale.

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.7

The interest-earning asset compositions for the Bank and the Peer Group were similar, with loans constituting the bulk of interest-earning assets for both. The Bank’s loans-to-assets ratio of 81.63% was higher than the comparable Peer Group ratio of 73.05%. Comparatively, the Bank’s cash-to-assets ratio of 11.03% was also higher than the ratio for the Peer Group of 5.80%. Newton Federal reported a smaller level of investment securities (3.31%) and no investments in BOLI at all, compared to a combined ratio of 18.27% for the Peer Group. Overall, Newton Federal’s earning assets amounted to 95.97% of assets, which was slightly lower than the comparable Peer Group ratio of 97.12%.

Newton Federal’s funding liabilities reflected a funding strategy that relied on a similar level of deposits as the Peer Group’s funding composition. The Bank’s deposits equaled 78.04% of assets, which was slightly above the Peer Group’s ratio of 76.78%. Comparatively, the Bank maintained a zero level of borrowings, while the Peer Group reported a borrowings-to-assets ratio of 6.35%.

Total interest-bearing liabilities maintained by the Bank and the Peer Group, as a percent of assets, equaled 78.04% and 83.13%, respectively. Following the increase in equity provided by the net proceeds of the stock offering, the Bank’s ratio of interest-bearing liabilities as a percent of assets will further decline in comparison to the Peer Group’s ratio. A key measure of balance sheet strength for a thrift institution is its IEA/IBL ratio. Presently, the Bank’s IEA/IBL ratio is lower than the Peer Group’s ratio, based on IEA/IBL ratios of 122.98% and 116.83%, respectively. The additional equity realized from stock proceeds will serve to strengthen Newton Federal’s IEA/IBL ratio in comparison to the Peer Group ratio, as the increase in capital provided by the infusion of stock proceeds will lower the level of interest-bearing liabilities funding assets and will be primarily deployed into interest-earning assets.

The growth rate section of Table 3.2 shows annual growth rates for key balance sheet items, with growth rates for both Newton Federal and the Peer Group based on annual growth rates for the 12 months ended September 30, 2016. Newton Federal recorded asset growth of 2.87%, lower than the Peer Group’s asset growth of 10.11%. The Bank’s cash and investments declined by 27.69% over the past year, with the funds reinvested into loans, which increased at a rate of 11.93%. The asset growth for the Peer Group was also evident in the higher loan growth, with a corresponding decrease in cash/investments. Funding of Newton Federal’s growth was obtained from a deposit increase of 2.84%, with no change in borrowings. The Peer Group recorded an increase in deposits and also increased borrowings as a funding base, although the percent increase in borrowings reflected the low initial balance.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.8

Reflecting the recent levels of net income, the Bank’s equity increased at a 2.63% annual rate, versus a reduction in equity of 0.87% for the Peer Group. The increase in equity realized from stock proceeds will likely depress the Bank’s equity growth rate initially following the stock offering. Dividend payments and stock repurchases, pursuant to regulatory limitations and guidelines could also potentially slow the Bank’s equity growth rate in the longer term following the stock offering.

Income and Expense Components

Table 3.3 displays statements of operations for the Bank and the Peer Group, with the income ratios based on earnings for the 12 months ended September 30, 2016 for the Bank and the Peer Group.

Newton Federal reported net income of 0.51% of average assets for the 12 months ended September 30, 2016, similar to average net income of 0.57% of average assets for the Peer Group. A higher level of net operating expenses and lower non-interest income accounted for the Bank’s slightly less favorable reported results, despite of the Bank’s higher level of net interest income.

The Bank’s net interest income ratio was higher than the Peer Group’s ratio, due to a much higher level of interest income despite a slightly higher level of interest expense. The Bank’s interest income is supported by the higher ratio of loans in the asset base than the Peer Group, along with the traditional lending practice which provides for higher interest rates on residential loans that do not generally meet secondary market standards and thus carry higher interest rates. Newton Federal’s overall yield earned on interest-earning assets (5.02%) was higher than the 3.97% ratio for the Peer Group. The Bank’s cost of funds was somewhat higher than the Peer Group (0.87% versus 0.79% for the Peer Group), reflecting the deposit base that contains a level of higher costing certificates of deposit. Overall, Newton Federal reported a significantly higher net interest income to average assets ratio than the Peer Group, at 4.33% and 3.11%, respectively.

In another key area of core earnings strength, the Bank reported a higher ratio of operating expenses, 3.94% of average assets versus the Peer Group (2.86% of average assets). In connection with the operating expense ratios, Newton Federal maintained a comparatively higher number of employees relative to its asset size. Assets per full time equivalent employee equaled $3.5 million for the Bank versus a comparable measure of $5.8 million for the Peer Group.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.9

Table 3.3

Income as Percent of Average Assets and Yields, Costs, Spreads

Comparable Institution Analysis

For the 12 Months Ended September 30, 2016 or the Most Recent 12 Months Available


						Net Interest Income															Non- Interest Income									Non-Op. Items									Yields, Costs, and Spreads
															Loss			NII			Gain			Other			Total									Provision												MEMO:		MEMO:
			Net												Provis.			After			on Sale of			Non-Int			Non-Int			Net Gains/			Extrao.			for			Yield			Cost			Yld-Cost			Assets/		Effective
			Income			Income			Expense			NII			on IEA			Provis.			Loans			Income			Expense			Losses (1)			Items			Taxes			On IEA			Of IBL			Spread			FTE Emp.		Tax Rate
			(%)
Newton Federal Bank
September 30, 2016				0.51	%		4.96	%		-0.62	%		4.33	%		0.00	%		4.33	%		0.00	%		0.53	%		-3.94	%		-0.11	%		0.00	%		0.31	%		5.02	%		0.87	%		4.15	%	$	3,537		38.00	%
All Public Thrifts
Averages				0.62	%		3.66	%		0.60	%		3.07	%		0.07	%		0.30	%		0.33	%		0.46	%		2.91	%		-0.01	%		0.00	%		0.22	%		3.89	%		0.77	%		3.10	%	$	6,075		24.55	%
Medians				0.59	%		3.59	%		0.57	%		3.03	%		0.06	%		0.00	%		0.05	%		0.38	%		2.84	%		0.00	%		0.00	%		0.24	%		3.81	%		0.73	%		3.05	%	$	5,273		32.93	%
State of GA
CHFN	Charter Financial Corporation	GA		0.98	%		3.96	%		0.47	%		3.49	%		-0.02	%		0.00	%		0.18	%		1.24	%		3.33	%		-0.10	%		0.00	%		0.51	%		4.40	%		0.67	%		3.73	%	$	4,474		33.98	%
Comparable Group
Averages				0.57	%		3.70	%		0.58	%		3.11	%		0.08	%		0.36	%		0.09	%		0.60	%		2.86	%		0.04	%		0.00	%		0.26	%		3.97	%		0.79	%		3.18	%	$	5,824		30.15	%
Medians				0.48	%		3.67	%		0.57	%		3.14	%		0.11	%		0.00	%		0.08	%		0.67	%		2.66	%		0.01	%		0.00	%		0.24	%		3.83	%		0.77	%		3.12	%	$	5,394		33.93	%
Comparable Group
ANCB	Anchor Bancorp	WA		0.17	%		4.37	%		0.70	%		3.68	%		0.10	%		3.58	%		0.05	%		0.99	%		4.41	%		0.00	%		0.00	%		0.04	%		5.01	%		1.00	%		4.01	%	$	3,824		17.75	%
EQFN	Equitable Financial Corp.	NE		0.46	%		3.73	%		0.47	%		3.26	%		0.16	%		0.00	%		0.34	%		0.76	%		3.47	%		-0.02	%		0.00	%		0.26	%		3.95	%		0.68	%		3.27	%	$	3,209		35.69	%
IROQ	IF Bancorp, Inc.	IL		0.70	%		3.61	%		0.60	%		3.02	%		0.17	%		0.00	%		0.05	%		0.57	%		2.46	%		0.10	%		0.00	%		0.41	%		3.71	%		0.75	%		2.96	%	$	6,197		36.60	%
JXSB	Jacksonville Bancorp, Inc.	IL		0.99	%		3.76	%		0.33	%		3.42	%		0.04	%		0.00	%		0.07	%		1.20	%		3.43	%		0.11	%		0.00	%		0.35	%		4.02	%		0.45	%		3.57	%	$	3,518		25.99	%
MELR	Melrose Bancorp, Inc.	MA		0.42	%		2.91	%		0.64	%		2.27	%		0.12	%		0.00	%		0.00	%		0.10	%		1.81	%		0.20	%		0.00	%		0.22	%		3.18	%		0.85	%		2.33	%	$	9,525		34.82	%
MSBF	MSB Financial Corp.	NJ		0.18	%		3.47	%		0.55	%		2.92	%		0.15	%		0.00	%		0.00	%		0.26	%		2.62	%		-0.13	%		0.00	%		0.09	%		3.68	%		0.79	%		2.89	%	$	6,883		33.04	%
PBSK	Poage Bankshares, Inc.	KY		0.43	%		4.45	%		0.53	%		3.92	%		0.19	%		0.00	%		0.13	%		0.40	%		3.57	%		-0.02	%		0.00	%		0.24	%		4.75	%		0.70	%		4.05	%	$	4,081		35.44	%
PBIP	Prudential Bancorp, Inc.	PA		0.51	%		3.27	%		0.62	%		2.64	%		0.04	%		0.00	%		0.09	%		0.80	%		2.05	%		0.02	%		0.00	%		0.24	%		3.49	%		0.83	%		2.66	%	$	9,024		31.64	%
UCBA	United Community Bancorp	IN		0.68	%		3.02	%		0.43	%		2.59	%		0.03	%		0.00	%		0.09	%		0.76	%		2.70	%		0.09	%		0.00	%		0.13	%		3.25	%		0.56	%		2.69	%	$	4,592		15.62	%
WBKC	Wolverine Bancorp, Inc.	MI		1.13	%		4.38	%		0.98	%		3.40	%		-0.16	%		0.00	%		0.13	%		0.15	%		2.11	%		0.00	%		0.00	%		0.60	%		4.65	%		1.28	%		3.37	%	$	7,383		34.87	%

(1)	Net gains/losses includes gain/loss on sale of securities and nonrecurring income and expense.

(2)	For the twelve months ended March 31, 2015 or the most recent date available.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.10

On a post-offering basis, the Bank’s operating expenses can be expected to further increase with the addition of the ESOP and certain expenses that result from being a publicly-traded savings institution, with such expenses already impacting the Peer Group’s operating expenses. At the same time, Newton Federal’s capacity to leverage operating expenses will be enhanced following the increase in capital realized from the infusion of net stock proceeds.

When viewed together, net interest income and operating expenses provide considerable insight into a bank’s earnings strength, since those sources of income and expenses are typically the most prominent components of earnings and are generally more predictable than losses and gains realized from the sale of assets or other non-recurring activities. In this regard, as measured by their expense coverage ratios (net interest income divided by operating expenses), the Bank’s earnings were similar to the Peer Group’s, based on respective expense coverage ratios of 1.10x for Newton Federal and 1.09x for the Peer Group. A ratio less than 1.00x indicates that an institution depends on non-interest operating income to achieve profitable operations.

Sources of non-interest operating income provided a somewhat lower contribution to Newton Federal’s earnings compared to the Peer Group. Non-interest operating income equaled 0.53% and 0.60% of Newton Federal’s and the Peer Group’s average assets, respectively. Taking non-interest operating income into account in comparing the Bank’s and the Peer Group’s earnings, Newton Federal’s efficiency ratio (operating expenses, net of amortization of intangibles, as a percent of the sum of non-interest operating income and net interest income) of 81.1% was less favorable than the Peer Group’s efficiency ratio of 77.1%.

Loan loss provisions had a modest, but larger impact on the Peer Group’s earnings, with loan loss provisions established by the Bank and the Peer Group equaling 0.00% and 0.08% of average assets, respectively. The impact of loan loss provisions on the Bank’s and the Peer Group’s earnings, particularly when taking into consideration the prevailing credit market environment for mortgage based lenders, were indicative of the asset quality position of the Bank and Peer Group.

For the 12 months ended September 30, 2016, the Bank reported net non-operating losses equal to 0.11% of average assets, while the Peer Group reported, on average, 0.04% of average assets of net non-operating gains. Non-operating items for the Bank consisted of one-time payments for the termination of a senior manager. Typically, gains and losses generated from non-operating items are viewed as non-recurring in nature, particularly to the extent that such gains and losses result from the sale of investments or other assets that are not considered to be part of an institution’s core operations. Extraordinary items were not a factor in either the Bank’s or the Peer Group’s earnings.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.11

On average, the Peer Group reported an average effective tax rate of 30.15%, while Newton Federal reported an effective tax rate of 37.60%. As indicated in the prospectus, the Bank’s effective marginal tax rate is assumed to equal 38.0% when calculating the after tax return on conversion proceeds.

Loan Composition

Table 3.4 presents data related to the Bank’s and the Peer Group’s loan portfolio compositions (including any investment in MBS). The Bank’s loan portfolio composition reflected a higher concentration of investment in 1-4 family property secured assets (permanent mortgage loans and MBS) than maintained by the Peer Group (57.45% of assets versus 41.10% for the Peer Group). The Bank reported no investments in MBS, while the Peer Group reported an MBS investment at 7.3% of assets on average. Newton Federal did not have a portfolio of loans serviced for others, while six members of the Peer Group reported a loan servicing portfolio and related capitalized servicing right.

Diversification into higher risk and higher yielding types of lending was greater for the Peer Group, as the Bank reported total loans other than 1-4 family and MBS of 26.21% of assets, versus 40.78% for the Peer Group. Commercial real estate/multi-family loans represented the most significant area of lending diversification for the Bank (12.47% of assets), followed by commercial business loans (6.97% of assets). The Peer Group’s lending diversification consisted primarily also of commercial real estate/multi-family loans (22.16% of assets), followed by commercial business loans (6.48% of assets). The relative concentration of assets in loans and diversification into higher risk types of loans by the Peer Group translated into a lower risk weighted assets-to-assets ratio for the Bank (62.35%) than the Peer Group (71.04%).

Credit Risk

Based on a comparison of credit quality measures, the Bank’s credit risk exposure was considered to be somewhat unfavorable to that of the Peer Group. As shown in Table 3.5, the Bank’s non-performing assets/assets (excluding performing troubled debt restructured loans)


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.12

Table 3.4

Loan Portfolio Composition and Related Information

Comparable Institution Analysis

As of September 30, 2016 or the Most Recent Date Available


			Portfolio Composition as a Percent of Assets
			MBS			1-4 Family			Constr. & Land			Multi- Family			Comm RE			Commerc. Business			Consumer			RWA/ Assets			Serviced For Others		Servicing Assets
			(%)			(%)			(%)			(%)			(%)			(%)			(%)			(%)			($000)		($000)
Newton Federal Bank
September 30, 2016				0.00	%		57.45	%		5.73	%		0.05	%		12.47	%		6.97	%		0.99	%		62.35	%	$	0	$	0
All Public Thrifts
Averages				8.18	%		37.85	%		4.10	%		7.38	%		16.80	%		0.67	%		1.72	%		67.10	%	$	909,667	$	5,583
Medians				5.80	%		38.18	%		2.67	%		2.79	%		15.82	%		0.00	%		0.51	%		65.91	%	$	17,083	$	148
State of	GA
CHFN	Charter Financial Corporation	GA		11.37	%		18.74	%		10.12	%		1.89	%		32.67	%		0.00	%		1.47	%		77.55	%	$	0	$	820
Comparable Group
Averages				7.30	%		33.80	%		4.47	%		6.24	%		22.16	%		6.48	%		1.43	%		71.04	%	$	47,761	$	317
Medians				5.90	%		32.83	%		3.71	%		3.34	%		18.67	%		6.87	%		1.12	%		69.44	%	$	42,482	$	281
Comparable Group
ANCB	Anchor Bancorp	WA		6.51	%		17.87	%		8.80	%		12.51	%		35.03	%		8.42	%		1.21	%		90.76	%	$	79,237	$	216
EQFN	Equitable Financial Corp.	NE		0.34	%		22.51	%		8.13	%		2.93	%		39.32	%		17.60	%		1.58	%		90.75	%	$	103,050	$	748
IROQ	IF Bancorp, Inc.	IL		4.84	%		26.20	%		3.79	%		13.98	%		21.02	%		8.88	%		1.56	%		73.94	%	$	81,378	$	518
JXSB	Jacksonville Bancorp, Inc.	IL		9.59	%		16.99	%		2.79	%		1.82	%		19.90	%		10.99	%		4.21	%		66.19	%	$	128,982	$	585
MELR	Melrose Bancorp, Inc.	MA		0.00	%		64.83	%		4.59	%		3.07	%		4.86	%		0.00	%		0.05	%		58.80	%	$	0	$	0
MSBF	MSB Financial Corp.	NJ		5.80	%		44.26	%		2.04	%		6.07	%		17.44	%		3.56	%		0.11	%		72.00	%	$	0	$	0
PBSK	Poage Bankshares, Inc.	KY		6.01	%		43.22	%		3.64	%		1.26	%		14.59	%		8.19	%		4.12	%		66.89	%	$	0	$	345
PBIP	Prudential Bancorp, Inc.	PA		17.52	%		42.09	%		2.94	%		2.23	%		14.22	%		0.02	%		0.14	%		52.30	%	$	0	$	0
UCBA	United Community Bancorp	IN		22.36	%		39.46	%		1.80	%		3.60	%		14.68	%		1.55	%		1.04	%		62.51	%	$	72,752	$	694
WBKC	Wolverine Bancorp, Inc.	MI		0.00	%		20.59	%		6.20	%		14.93	%		40.53	%		5.56	%		0.26	%		76.28	%	$	12,211	$	60

Source:

SNL Financial LC. and RP ^® Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reilable, but we cannot guarantee the accuracy or completeness of such information.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.13

Table 3.5

Credit Risk Measures and Related Information

Comparable Institution Analysis

As of September 30, 2016 or the Most Recent Date Available


						NPAs &			Adj NPAs &												Rsrves/
			REO/			90+Del/			90+Del/			NPLs/			Rsrves/			Rsrves/			NPAs &			Net Loan		NLCs/
			Assets			Assets (1)			Assets (2)			Loans (3)			Loans HFI			NPLs (3)			90+Del (1)			Chargeoffs (4)		Loans
			(%)			(%)			(%)			(%)			(%)			(%)			(%)			($000)		(%)
Newton Federal Bank
September 30, 2016				0.00	%		3.77	%		1.39	%		4.62	%		2.27	%		49.11	%		49.11	%	$	1,565		0.82	%
All Public Thrifts
Averages				0.15	%		1.33	%		0.86	%		1.57	%		1.09	%		120.47	%		102.06	%	$	997		0.07	%
Medians				0.06	%		1.13	%		0.64	%		1.20	%		0.99	%		85.51	%		68.00	%	$	121		0.04	%
State of	GA
CHFN	Charter Financial Corporation	GA		0.19	%		0.76	%		0.45	%		0.83	%		1.03	%		124.65	%		94.06	%	-$	1,132		-0.13	%
Comparable Group
Averages				0.07	%		1.81	%		1.06	%		2.29	%		1.31	%		66.93	%		63.94	%	$	140		0.05	%
Medians				0.05	%		1.85	%		0.81	%		2.10	%		1.22	%		71.34	%		67.78	%	$	90		0.04	%
Comparable Group
ANCB	Anchor Bancorp	WA		0.06	%		2.26	%		0.63	%		2.69	%		1.08	%		39.88	%		38.78	%	$	258		0.08	%
EQFN	Equitable Financial Corp.	NE		0.20	%		1.93	%		0.98	%		0.98	%		1.47	%		77.76	%		69.57	%	-$	17		-0.01	%
IROQ	IF Bancorp, Inc.	IL		0.04	%		0.82	%		0.47	%		1.03	%		1.22	%		118.60	%		112.83	%	$	187		0.04	%
JXSB	Jacksonville Bancorp, Inc.	IL		0.07	%		1.33	%		0.57	%		2.22	%		1.58	%		71.34	%		67.78	%	$	52		0.03	%
MELR	Melrose Bancorp, Inc.	MA		0.00	%		0.00	%		0.00	%		0.00	%		0.42	%		NA			NA		$	0		0.00	%
MSBF	MSB Financial Corp.	NJ		0.00	%		3.60	%		1.45	%		4.59	%		1.21	%		26.42	%		25.94	%	$	127		0.05	%
PBSK	Poage Bankshares, Inc.	KY		0.22	%		1.78	%		1.07	%		2.04	%		0.68	%		33.13	%		29.03	%	$	537		0.16	%
PBIP	Prudential Bancorp, Inc.	PA		0.10	%		3.39	%		2.94	%		5.28	%		0.94	%		17.79	%		17.24	%	-$	114		-0.03	%
UCBA	United Community Bancorp	IN		0.01	%		1.03	%		0.60	%		1.90	%		1.62	%		84.53	%		82.99	%	$	818		0.30	%
WBKC	Wolverine Bancorp, Inc.	MI		0.02	%		1.92	%		1.87	%		2.16	%		2.87	%		132.93	%		131.27	%	-$	448		-0.14	%

(1)	NPAs are defined as nonaccrual loans, performing TDRs, and OREO.

(2)	Adjusted NPAs are defined as nonaccrual loans and OREO (performing TDRs are excluded).

(3)	NPLs are defined as nonaccrual loans and performing TDRs.

(4)	Net loan chargeoffs are shown on a last twelve month basis.

Source:

SNL Financial, LC and RP ^® Financial, LC. calculations. The information provided in this table has been obrained 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

and foreclosed real estate/assets equaled 1.39% and 0.00%, respectively, versus comparable measures of 1.06% and 0.07% for the Peer Group, indicating a disadvantage for the Bank. At the same time, the Bank recorded a higher non-performing loans/loans ratio than the Peer Group, at 4.62% and 1.88% respectively. The Bank maintained a lower reserve coverage ratio, loss reserves as a percent of total NPAs, which equaled 49.11% for the Bank versus 63.94% for the Peer Group. Reflecting a more favorable ratio for the Bank, loss reserves maintained as percent of net loans receivable equaled 2.27% for the Bank versus 1.31% for the Peer Group. Net loan charge-offs were much higher for Newton Federal than the Peer Group, based on ratios of 0.82% and 0.05% of net loans receivable, respectively, indicating a higher more recent level of activities in terms of addressing problem assets.

Interest Rate Risk

Table 3.6 reflects various key ratios highlighting the relative interest rate risk exposure of the Bank versus the Peer Group. In terms of balance sheet ratios, Newton Federal’s interest rate risk characteristics were considered to be more favorable than the Peer Group. The Bank’s equity-to-assets and IEA/IBL ratios were higher than the Peer Group, thereby implying a lower dependence on the yield-cost spread to sustain the net interest margin for the Bank. The Bank also reported a lower level of non-interest earning assets, which provides an indication of the earnings capabilities and interest rate risk of the balance sheet. On a pro forma basis, the infusion of stock proceeds can be expected to provide the Bank with more favorable balance sheet interest rate risk characteristics than currently maintained by the Peer Group, particularly with respect to the increases that will be realized in the Bank’s equity-to-assets and IEA/IBL ratios.

To analyze interest rate risk associated with the net interest margin, we reviewed quarterly changes in net interest income as a percent of average assets for Newton Federal and the Peer Group. The relative fluctuations in the Bank’s net interest income to average assets ratio were considered to be higher than the Peer Group and, thus, based on the interest rate environment that prevailed during the period analyzed in Table 3.6, Newton Federal was viewed as maintaining a higher degree of interest rate risk exposure in the net interest margin. The stability of the Bank’s net interest margin should be enhanced by the infusion of stock proceeds, as the increase in capital will reduce the level of interest rate sensitive liabilities funding Newton Federal’s assets.


*RP ^® Financial, LC.*		*PEER GROUP ANALYSIS*

III.15

Table 3.6

Interest Rate Risk Measures and Net Interest Income Volatility

Comparable Institution Analysis

As of September 30, 2016 or the Most Recent Date Available


			Balance Sheet Measures
			Tangible			Avg			Non-Earn.			Quarterly Change in Net Interest Income
			Equity/			IEA/			Assets/
			Assets			Avg IBL			Assets			9/30/2016		6/30/2016		3/31/2016		12/31/2015		9/30/2015		6/30/2015
			(%)			(%)			(%)			(change in net interest income is annualized in basis points)
Newton Federal Bank
September 30, 2016				19.4	%		138.5	%		4.0	%		4		5		7		8		-9		-6
All Public Thrifts				12.3	%		125.7	%		7.3	%		-2		2		-4		0		1		1
State of	GA			12.1	%		124.8	%		11.4	%		-12		18		-29		0		41		10
Comparable Group
Average				15.7	%		124.3	%		6.4	%		4		3		-5		-1		13		0
Median				15.5	%		126.6	%		6.3	%		3		2		3		2		10		0
Comparable Group
ANCB	Anchor Bancorp	WA		14.6	%		127.7	%		9.3	%		5		7		4		-11		1		5
EQFN	Equitable Financial Corp.	NE		15.9	%		131.0	%		5.9	%		18		17		-20		-26		38		22
IROQ	IF Bancorp, Inc.	IL		14.2	%		118.2	%		3.0	%		4		2		-5		9		5		5
JXSB	Jacksonville Bancorp, Inc.	IL		13.9	%		126.3	%		9.9	%		-18		-12		7		13		-4		0
MELR	Melrose Bancorp, Inc.	MA		16.2	%		126.9	%		6.3	%		6		-3		8		2		15		0
MSBF	MSB Financial Corp.	NJ		16.7	%		130.3	%		11.0	%		-14		5		18		6		-5		-1
PBSK	Poage Bankshares, Inc.	KY		15.1	%		129.6	%		6.4	%		0		-11		-40		36		15		-15
PBIP	Prudential Bancorp, Inc.	PA		20.4	%		116.3	%		3.6	%		2		1		4		-4		15		-14
UCBA	United Community Bancorp	IN		12.9	%		117.5	%		6.8	%		-12		0		1		2		4		5
WBKC	Wolverine Bancorp, Inc.	MI		17.2	%		119.5	%		1.6	%		45		26		-31		-31		50		-7

NA=Change is greater than 100 basis points during the quarter.

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.16

Summary

Based on the above analysis, RP Financial concluded that the Peer Group forms a reasonable basis for determining the pro forma market value of the Bank. Such general characteristics as asset size, capital position, interest-earning asset composition, funding composition, core earnings measures, loan composition, credit quality and exposure to interest rate risk all tend to support the reasonability of the Peer Group from a financial standpoint. Those areas where differences exist will be addressed in the form of valuation adjustments to the extent necessary.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.1

IV. VALUATION ANALYSIS

Introduction

This chapter presents the valuation analysis and methodology, prepared pursuant to the regulatory valuation guidelines, and valuation adjustments and assumptions used to determine the estimated pro forma market value of the common stock to be issued in conjunction with the Company’s minority stock offering.

Appraisal Guidelines

The federal regulatory appraisal guidelines utilized by the OCC specify the pro forma market value methodology for estimating the pro forma market value of an institution. Pursuant to this methodology: (1) a peer group of comparable publicly-traded institutions is selected; (2) a financial and operational comparison of the subject company relative to the peer group is conducted to discern key differences, leading to valuation adjustments; and, (3) a valuation analysis in which the pro forma market value of the converting thrift is determined based on the market pricing of the peer group as of the date of the valuation, incorporating valuation adjustments for key differences. In addition, the pricing characteristics of recent conversions, both at conversion and in the aftermarket, must be considered. Given the unique differences in the pricing characteristics of publicly-traded MHCs relative to fully-converted thrift stocks, we have also reviewed the pricing characteristics of publicly-traded and non-publicly-traded MHCs on a fully-converted basis.

RP Financial Approach to the Valuation

The valuation analysis herein complies with such regulatory approval guidelines. Accordingly, the valuation incorporates a detailed analysis based on the Peer Group, discussed in Chapter III, which constitutes “fundamental analysis” techniques. Additionally, the valuation incorporates a “technical analysis” of recently completed conversions, including closing pricing and aftermarket trading of such offerings. It should be noted that these valuation analyses cannot possibly fully account for all the market forces which impact trading activity and pricing characteristics of a particular stock on a given day.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.2

The pro forma market value determined herein is a preliminary value for the Company’s to-be-issued stock. Throughout the stock issuance process, RP Financial will: (1) review changes in Newton Federal’s operations and financial condition; (2) monitor the Bank’s operations and financial condition relative to the Peer Group to identify any fundamental changes; (3) monitor the external factors affecting value including, but not limited to, local and national economic conditions, interest rates, and the stock market environment, including the market for thrift stocks; and, (4) monitor pending conversion offerings, both regionally and nationally. If material changes should occur prior to closing of the offering, RP Financial will evaluate if updated valuation reports should be prepared reflecting such changes and their related impact on value, if any. RP Financial will also prepare a final valuation update at the closing of the offering to determine if the prepared valuation analysis and resulting range of value continues to be appropriate.

The appraised value determined herein is based on the current market and operating environment for the Bank and for all thrifts. Subsequent changes in the local and national economy, the legislative and regulatory environment, the stock market, interest rates, and other external forces (such as natural disasters or major world events), which may occur from time to time (often with great unpredictability) may materially impact the market value of all thrift stocks, including the Company’s value, or the Company’s value alone. To the extent a change in factors impacting the Bank’s value can be reasonably anticipated and/or quantified, RP Financial has incorporated the estimated impact into the analysis.

Valuation Analysis

A fundamental analysis discussing similarities and differences relative to the Peer Group was presented in Chapter III. The following sections summarize the key differences between the Bank and the Peer Group and how those differences affect the pro forma valuation. Emphasis is placed on the specific strengths and weaknesses of Newton Federal relative to the Peer Group in such key areas as financial condition, profitability, growth and viability of earnings, asset growth, primary market area, dividends, liquidity of the shares, marketing of the issue, management, and the effect of government regulations and/or regulatory reform. We have also considered the market for thrift stocks, in particular new issues, to assess the impact on value of the Bank coming to market at this time.

1.	Financial Condition

The financial condition of an institution is an important determinant in pro forma market value because investors typically look to such factors as liquidity, capital, asset composition and quality, and funding sources in assessing investment attractiveness. The similarities and differences in the Bank’s and the Peer Group’s financial strengths are noted as follows:


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.3

•

Overall A/L Composition . In comparison to the Peer Group, the Bank’s IEA composition was slightly more favorable, reflecting a higher concentration of loans, and a lower concentration of cash and investments, resulting in a higher earnings capacity. In terms of funding liabilities, Newton Federal’s deposits were lower and borrowings were lower as a percent of assets compared to the Peer Group, resulting from the higher equity position of the Bank. Lending diversification into higher yielding types of loans (albeit higher risk loans) was more significant for the Peer Group, with such loans approximating 41% percent of assets for the Peer Group versus 26% for Newton Federal. Recent loan growth has occurred in the construction loan portfolio, and the relative unseasoned nature of this portfolio provides additional risk. The lower investment in higher risk loans resulted in Newton Federal reporting a lower risk weighted assets-to-assets ratio in comparison to the Peer Group’s ratio, as well as all, but two of the Peer Group members. The Bank’s IEA composition also resulted in a higher yield earned on IEA, while the Bank’s cost of IBL was slightly higher than the Peer Group’s cost of funds. As a percent of assets, Newton Federal maintained a lower level of IEA and a lower level of IBL, given the higher pre-conversion equity position of the Bank. The Bank’s IEA/IBL ratio of 123.0% was higher than the 116.8% ratio for the Peer Group. After factoring in the impact of the net stock proceeds, the Company’s IEA/IBL ratio will continue to exceed the Peer Group’s ratio. RP Financial concluded that A/L composition was a slight upward factor in the adjustment for financial condition.

•

Credit Quality. Newton Federal’s NPAs/assets and NPLs/loans ratios were higher than the comparable Peer Group ratios. Additionally, when excluding performing TDRs from the NPA/assets ratio, Newton Federal’s ratio remained higher than the Peer Group average. Loan loss reserves as a percent of NPLs and NPAs were lower than the Peer Group averages, while Newton Federal reported a higher ratio of loan loss reserves as a percent of loans. Net loan charge-offs as a percent of loans for Newton Federal were much higher than the Peer Group average. As noted above, Newton Federal’s risk weighted assets-to-assets ratio was lower than the Peer Group’s ratio. In addition, the Bank’s loan portfolio composition was concentrated in lower risk residential assets, including MBS. Overall, RP Financial concluded that credit quality was a slight downward factor in the adjustment for financial condition.

•

Balance Sheet Liquidity . As of the valuation date, Newton Federal reported a lower level of cash and investment securities relative to the Peer Group, with the Bank’s investments concentrated in cash and equivalents. Following the infusion of stock proceeds, the Bank’s cash and investments ratio is expected to increase as the proceeds retained at the holding company level will be initially deployed into shorter term investment securities while the Bank’s portion of the proceeds will also be deployed into investments pending the longer term reinvestment into loans. The Bank’s future borrowing capacity was considered to be higher than the Peer Groups’, given current zero level of borrowings currently utilized by the Bank in funding the asset base. Overall, RP Financial concluded that pro forma balance sheet liquidity was a neutral factor in our adjustment for financial condition.

•

Funding Liabilities . Newton Federal’s IBL composition reflected a slightly higher concentration of deposits and lower use of borrowings relative to the comparable Peer Group ratios, although Newton Federal’s cost of funds was somewhat higher than the Peer Group’s ratio. Total IBL as a percent of assets were lower for the Bank as compared to the Peer Group’s ratio due to the higher pre-conversion equity ratio


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.4

maintained by the Bank. Following the stock offering, the increase in the Bank’s equity position will reduce the level of IBL, further expanding this advantage in comparison to the Peer Group. Overall, RP Financial concluded that funding liabilities were a slightly positive factor in our adjustment for financial condition.

•

Tangible Equity/Return on Equity . Newton Federal currently operates with a higher tangible equity-to-assets ratio as compared to the Peer Group. Following the stock offering, Newton Federal’s pro forma tangible equity position will further exceed the Peer Group’s ratio, which will result in greater leverage potential. At the same time, the Bank’s more significant equity surplus will likely result in a lower ROE, an unattractive metric from an investor view. On balance, RP Financial concluded that the tangible equity position was a moderate downward factor in our adjustment for financial condition, primarily due to the reduced return on equity.

On balance, Newton Federal’s financial condition, taking into account the above factors, was considered to be somewhat less favorable to the Peer Group’s, particularly in terms of asset quality and pro forma return on equity, and thus a slight downward adjustment was applied for this valuation adjustment.

2.	Profitability, Growth and Viability of Earnings

Earnings are a key factor in determining pro forma market value, as the level and risk characteristics of a financial institution’s earnings stream and the prospects and ability to generate future earnings, heavily influence the multiple that the investment community will pay for earnings. The major factors considered in the valuation are described below.

•

Reported Profitability . For the most recent 12 month period, Newton Federal reported net income of $1.2 million, or 0.51% of average assets, versus average and median profitability of 0.57% and 0.48% of average assets for the Peer Group. The Bank’s lower income in comparison to the Peer Group was attributable a higher level of operating expense and lower non-interest income, which was partially offset by higher net interest income (a result of higher interest income and slightly higher interest expense). The Peer Group relied to a limited extent on gains on the sale of loans. A key difference between the Bank and the Peer Group is Newton Federal’s higher interest income ratio, a result of the higher loans/assets ratio and the Bank’s higher yield on earning assets and overall yield/cost spread. Reinvestment and leveraging of stock proceeds into interest-earning assets will serve to increase the Bank’s bottom line income, with the benefit of reinvesting proceeds expected to be somewhat offset by higher operating expenses associated with operating as a publicly-traded company. The Bank’s level of NPAs will remain as a potential negative factor in future earnings as additional loan loss reserves may be incurred. However, the Peer Group can also be expected to experience losses related to problem assets. On balance, RP Financial concluded that the Bank’s reported earnings were a neutral factor in our adjustment for profitability, growth and viability of earnings.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.5

•

Core Profitability . Net interest income, operating expenses, non-interest operating income and loan loss provisions were reviewed in assessing the relative strengths and weaknesses of core profitability. Newton Federal operated with a higher net interest income ratio and a lower level of non-interest operating income, based on a comparison to the Peer Group averages and medians. The advantage in terms of revenues were mitigated to an extent by the Bank’s higher operating expense ratio such that the Bank’s efficiency ratio was modestly less favorable to the Peer Group’s ratio. Loan loss provisions had a larger impact on the Peer Group’s earnings, although Peer Group provisions were modest in total. The expected earnings benefits the Bank should realize from the redeployment of stock proceeds into IEA and leveraging of post-conversion equity will be somewhat negated by expenses associated with the stock benefit plans, as well as incremental costs associated with the growth oriented business plan. On balance we believe the Bank’s core profitability was a neutral factor in this valuation adjustment.

•

Interest Rate Risk . Quarterly changes in the net interest income ratio for Newton Federal indicated a somewhat higher degree of volatility. Other measures of interest rate risk, such as tangible equity and the IEA/IBL ratio were more favorable than the Peer Group. On a pro forma basis, the infusion of stock proceeds can be expected to provide the Bank with equity-to-assets and IEA/IBL ratios that will further exceed the Peer Group ratios, as well as enhance the stability of the Bank’s net interest margin through the reinvestment of stock proceeds into IEA. On balance, RP Financial concluded that interest rate risk was a neutral factor in our adjustment for profitability, growth and viability of earnings.

•

Credit Risk . Loan loss provisions were a lower factor in the Bank’s income statement over the most recent 12 month time period. In terms of future exposure to credit quality related losses, Newton Federal maintained a higher concentration of assets in loans and less lending diversification into higher credit risk loans. The Bank’s risk weighted assets-to-assets ratio was lower than the Peer Group’s ratio, as well as all but one of the Peer Group member ratios. The Bank’s NPAs/assets ratio was less favorable than the Peer Group and loss reserves also were less favorable for the Bank in comparison to NPAs and NPLs but more favorable in terms of loans receivable. Net loan charge-offs over the last 12 months as a percent of loans were higher for the Bank as a percent of loans as compared to the Peer Group. Overall, RP Financial concluded that credit risk was a slightly negative factor in the adjustment for profitability, growth and viability of earnings.

•

Earnings Growth Potential . Newton Federal maintained a higher level of net interest income and a higher interest rate spread as compared to the Peer Group. The Bank’s earnings growth potential is limited by growth capabilities of the balance sheet in general – a key part of the future operating strategy. However, the timing of such asset and loan growth, and quality of such loans to be obtained, remains uncertain. In addition, the Bank’s original primary market area reveals less favorable current demographic and economic data and future trends, which may limit future franchise growth and profitability. Newton Federal’s eventual success in transitioning to the expanded market area between Covington and Athens also will determine future profitability growth, which will be partially offset by the costs associated with this expansion. The infusion of stock proceeds will provide the Bank with greater leverage potential than the Peer Group. On balance, because of the uncertainty related to successful expansion in the new market area, and the intended expansion of the commercial and construction lending activities, and the likely increase in operating expenses, as well as costs associated with operating as a publicly-traded company, we concluded that a moderate downward adjustment was warranted for this factor.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.6

•

Return on Equity . Currently, the Bank’s trailing 12 month ROE on either a reported or core basis is lower than the Peer Group’s ROE. On a pro forma basis, immediately following the conversion the Bank’s earnings increase will be limited whereas the equity will increase considerably, thus resulting in a lower pro forma ROE relative to the Peer Group. Accordingly, this was a moderately negative factor in the adjustment for profitability, growth and viability of earnings.

On balance, Newton Federal’s pro forma earnings strength was considered to be less favorable than the Peer Group’s and, thus, a moderate downward adjustment was warranted for profitability, growth and viability of earnings.

3.	Asset Growth

Newton Federal’s assets increased at an annual rate of 2.9% during the most recent 12 month period, while the Peer Group’s assets increased by 10.1% over the same time period. All ten of the Peer Group companies reported increases in assets, with the highest growth of a peer member equal to 19.29% (due to loan growth). The recent modest asset growth reported by Newton Federal is primarily the result of lower needs for additional funds given the current level of liquidity and overall loan demand. On a pro forma basis, Newton Federal’s tangible equity-to-assets ratio will further exceed the Peer Group’s tangible equity-to-assets ratio, indicating greater leverage capacity for the Bank. Newton Federal’s original market area location in Newton County and the related size and growth rate of the population base implies a restricted growth capability. The Bank has begun a movement north and northeastward to higher population centers and geographic areas that have more favorable demographic and economic trends. After taking into account the lower historical asset growth rate, and based on the greater leverage capacity with the enhanced equity base following the offering, and the market area expansion in process, we concluded that no valuation adjustment was warranted for asset growth.

4.	Primary Market Area

The general condition of an institution’s market area has an impact on value, as future success is in part dependent upon opportunities for profitable activities in the local market served. Newton Federal’s primary market area for loans and deposits is considered to be Newton County (1-4 family residential), with additional lending activities in the expanded market area counties to the north and northeast of Newton County, extending to the Athens, Georgia metropolitan area where the Bank maintains its LPO. Within this market, the Bank faces significant competition for loans and deposits from both community based institutions and larger regional financial institutions, which provide a broader array of services and have significantly larger branch networks. However, the Peer Group companies by virtue of their relatively comparable size relative to Newton Federal also face numerous and/or large competitors.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.7

Demographic and economic trends and characteristics in the Bank’s primary market area are presented in Exhibit III-3 along with Peer Group comparable data. In this regard, the total population of Newton County is lower than the average and higher than the median primary market areas of the Peer Group. In addition, the historical and projected population growth rate in Newton County is well above the Peer Group average over the 2010-2016 and 2016-2022 periods. While these demographic trends are more favorable, the per capita income level in Newton County ($22,587 as of 2016) is well below the average and median of the Peer Group’s markets. As a percentage of the state average, Newton County is also below the average and median of the Peer Group. This low income characteristic of Newton County is a notable limitation on business activities such as financial institutions, as income levels translate to an extent to average home prices and value appreciation. The deposit market share exhibited by the Bank in Newton County is above the Peer Group average and median, however, indicative of the smaller market within which the Bank operates, as several of the Peer Group members operate in large metropolitan areas. As shown in Table 4.1, the average unemployment rate for the primary market area counties served by the Peer Group companies was below the unemployment rate reflected for Newton County.

The size of the Bank’s original market area of Newton County in terms of population was more favorable than the Peer Group, although the economic base is less favorable. The Bank has recently expanded the lending market area beyond Newton County to include a number of counties with more attractive demographic and economic trends. The ability to successfully expand operations in a reasonable time period and at acceptable costs remains uncertain. There also remains significant uncertainty as to the timing and level of loan originations to be obtained in these new markets. On balance, we concluded that no adjustment was appropriate for the Bank’s market area.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.8

Table 4.1

Market Area Unemployment Rates

Newton Federal and the Peer Group Companies (1)


	County	September 2016 Unemployment
Newton Federal - GA	Newton		5.9	%
Peer Group Average			4.9
The Peer Group
Anchor Bancorp – WA	Thurston		5.7
Equitable Financial Corp. - NE	Hall		3.2
IF Bancorp, Inc. – IL	Iroquois		5.3
Jacksonville Bancorp, Inc. – IL	Morgan		4.8
Melrose Bancorp, Inc. – MA	Middlesex		2.8
MSB Financial Corp. – NJ	Morris		4.2
Poage Bankshares, Inc. - KY	Boyd		7.9
Prudential Bancorp, Inc. – PA	Philadelphia		7.0
United Community Bancorp, Inc. - IN	Dearborn		4.4
Wolverine Bancorp, Inc. – MI	Midland		3.6

(1)	Unemployment rates are not seasonally adjusted.

Source:

SNL Financial, LC; Department of Labor.

Dividends

At this time the Bank has not established a dividend policy. Future declarations of dividends by the Board of Directors will depend upon a number of factors, including investment opportunities, growth objectives, financial condition, profitability, tax considerations, minimum capital requirements, regulatory limitations, stock market characteristics and general economic conditions.

Five of the ten Peer Group companies pay regular cash dividends, with implied dividend yields ranging from 0.76% to 1.69%. The median dividend yield on the stocks of the Peer Group institutions was 1.10% as of November 25, 2016, representing a median payout ratio of 40.03% of earnings. Comparatively, as of November 25, 2016, the median dividend yield on the stocks of all fully-converted publicly-traded thrifts equaled 1.41%.

Our valuation adjustment for dividends for Newton Federal also considered the regulatory policy with regard to payment of dividends to the MHC. Under current FRB policy, any dividends declared by Newton Federal would be required to be paid to all shareholders. Accordingly, dividends paid by Newton Federal would increase the amount of assets held by the MHC, after adjusting for applicable income taxes, and, thereby, increase the implied dilution incurred by the minority shareholders in a second-step conversion pursuant to the calculation to account for net assets held by the MHC in a second-step offering.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.9

Overall, while the Bank has not established a definitive dividend policy prior to its stock offering, the Bank will have the capacity to pay a dividend comparable to the Peer Group’s average dividend yield based on pro forma earnings and capitalization. At the same time, dividend payments retained by the MHC would increase the implied dilution to minority shareholders in a second-step offering. On balance, we concluded that a slight downward adjustment was warranted for purposes of the Bank’s dividend policy.

6.	Liquidity of the Shares

The Peer Group is by definition composed of companies that are traded in the public markets. All ten of the Peer Group members trade on NASDAQ. Typically, the number of shares outstanding and market capitalization provides an indication of how much liquidity there will be in a particular stock. The market capitalization of the Peer Group companies ranged from $31.6 million to $127.2 million as of November 25, 2016, with average and median market values of $66.8 million and $65.8 million, respectively. The shares issued and outstanding to the public shareholders of the Peer Group members ranged from 1.8 million to 8.0 million, with average and median shares outstanding of 3.8 million and 3.6 million, respectively. The Bank’s stock offering at the midpoint is expected to provide for pro forma shares outstanding that will be lower than the average and median shares outstanding indicated for the Peer Group companies. Likewise, the market capitalization of the Bank at the midpoint of the offering range will be lower than the Peer Group average and median values. Like all of the Peer Group companies, the Company’s stock is expected to be quoted on NASDAQ following the conversion offering, however the stock will retain characteristics of an initial public offering. Based on the above factors and the comparability of the anticipated trading market on NASDAQ, we concluded that a slight downward valuation adjustment was warranted for this factor.

7.	Marketing of the Issue

We believe that three separate markets exist for thrift stocks, including those coming to market such as Newton Federal’s: (A) the after-market for public companies both fully-converted and MHCs, in which trading activity is regular and investment decisions are made based upon financial condition, earnings, capital, ROE, dividends and future prospects; (B) the new issue


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.10

market in which converting thrifts are evaluated on the basis of the same factors, but on a pro forma basis without the benefit of prior operations as a fully-converted publicly-held company and stock trading history; and, (C) the thrift acquisition market. All three of these markets were considered in the valuation of the Bank’s to-be-issued stock.

The Public Market

The value of publicly-traded thrift stocks is easily measurable, and is tracked by most investment houses and related organizations. Exhibit IV-1 provides pricing and financial data on all publicly-traded thrifts. In general, thrift stock values react to market stimuli such as interest rates, inflation, perceived industry health, projected rates of economic growth, regulatory issues, and stock market conditions in general. Exhibit IV-2 displays historical stock market trends for various indices and includes historical stock price index values for thrifts and commercial banks. Exhibit IV-3 displays historical stock price indices for thrifts only.

In terms of assessing general stock market conditions, the overall stock market has generally trended higher in recent quarters. Stocks traded in a narrow range during the first couple weeks of the second quarter of 2016, as investors turned cautious at the start of the first quarter earnings season that was expected to show a decline in corporate profits. Bank stocks contributed to stock market gains in mid-April with the Dow Jones Industrial Average (“DJIA”) closing above 18000 for the first time since July 20, 2015, as first quarter earnings reports posted by some of the large banks came in above lowered expectations. The broader stock market traded in a narrow range heading into the last week of April, as investors turned cautious ahead of the late-April meeting of the Federal Reserve. The broader stock market trended lower in late-April 2016, as investors reacted to weak first quarter GDP growth and the Bank of Japan’s decision not to launch additional stimulus measures. Fresh worries about a slowing global economy and lower oil prices extended the downturn in stocks during the first week of May, as U.S. stock indexes fell for a second consecutive week. Volatility prevailed in the broader stock market heading into mid-May. Energy shares led the stock market higher as crude oil prices hit a new high for 2016, while consumer-focused companies led indexes lower following weak earnings reports posted by some of the large retailers. The DJIA traded down for three consecutive sessions at the start of the second half of May, as a handful of upbeat economic data releases and comments from Federal Reserve officials raised the possibility of a June rate increase. Technology and financial stocks led a rebound in the stock market in late-May, as strong housing data, rising oil prices and growing investor confidence that higher interest rates


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.11

would not undermine stock prices combined to lift major U.S. stock indexes. The positive trend in the broader stock market continued through the last full trading week of May, with major U.S. stock indexes matching their biggest weekly gains in months. Comments by Federal Reserve Chairwoman Janet Yellen reiterating that Federal Reserve policymakers were looking at a possible rate increase at its June or July meeting served to trim May stock market gains at the close of the month. During the first two weeks of June, the broader stock market seesawed in a narrow range. Weak job growth reflected in the May employment report pulled stocks lower at the start of June, which was followed by a stock market rebound led by a rally in energy stocks as oil approached $50 a barrel. Volatility prevailed in the broader stock market during the second half of June, with Britain’s late-June vote on whether to exit the European Union (“Brexit”) impacting global stock markets. Stocks traded higher ahead of the Brexit vote and then plunged sharply lower, as the shock from Britain’s vote to leave the European Union swept across global stock markets. Stocks rebounded to close out the month of June, led by the sectors that were hit hardest by the Brexit vote.

The rally in the broader stock market continued at the start of July 2016, with the stronger-than-expected job growth reflected in the June employment report propelling the S&P 500 to a record high close. Stocks continued to trend higher going in the second half of July, as a string of economic data releases that showed improvement in home building, retail sales and job creation helped to propel the DJIA higher for nine consecutive sessions. Following the extended rally, the DJIA closed lower for seven consecutive sessions going into early-August. A decline in oil prices amid concerns of a glut in the supply of oil and weaker-than-expected second quarter GDP growth were factors that contributed to the downturn in the broader stock market. A rally in energy and financial shares helped to snap the seven day losing streak in the DJIA ahead of the July employment report. Better-than-expected job growth reflected in the July employment report fueled a rally in the broader stock market to close out the first week of trading in August. All three major stock indexes closed at record highs in mid-August, led by gains in commodity-linked shares. The broader stock market eased lower during the second half of August with the DJIA finishing down for the month of August, which snapped a six-month winning streak for the DJIA. Some lackluster data for the U.S. economy provided for a narrow trading range in the broader stock market in early-September, as investors reassessed the likelihood of a rate increase in the near term. Volatility prevailed in the broader stock market in mid-September, based on various hawkish and dovish comments from Federal Reserve officials for a near term rate hike. Stocks rebounded after the Federal Reserve concluded its September meeting leaving interest rates unchanged and then seesawed higher and lower to close out the third quarter. Overall, all three of the major U.S. stock indexes posted gains for the third quarter.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.12

Stocks traded unevenly at the start of the fourth quarter of 2016, as investors reacted to third quarter earnings reports that had varied results. Consumer shares weighed on the broader stock market in the second half of October, following a string of disappointing earnings reports coming out of the consumer sector and a downbeat outlook for the rest of 2016. The DJIA fell for a third month in a row to close out October, with a monthly decline of 0.9%. Stocks extended their losing streak in early-November, as investors reacted to tightening polls for the presidential election. News of the FBI finding no new evidence to warrant charges against Democratic candidate Hillary Clinton sent stocks sharply higher the day before the presidential election. However, investors embraced Trump’s election, as stocks surged higher based on expectations for reduced corporate taxes and regulation and greater infrastructure spending under a Trump administration. Additional news regarding the election and Trump’s intentions upon taking office through mid- and late-November resulted in further strength to the stock market in general. On November 25, 2016, the DJIA closed at 19152.14, an increase of 7.5% from one year ago and an increase of 9.9% year-to-date, and the NASDAQ Composite Index closed at 5398.92, an increase of 5.5% from one year ago and an increase of 7.8% year-to-date. The S&P 500 closed at 2213.35 on November 25, 2016, an increase of 6.0% from one year ago and an increase of 8.3% year-to-date.

The market for thrift stocks has also experienced varied trends in recent quarters. Financial shares traded lower at the start of the second quarter of 2016, as investors anticipated a decline in first quarter profitability for the banking sector. Better-than-expected first quarter earnings reports posted by some of the money center banks contributed to a mid-April rebound for bank and thrift stocks in general. Thrift stocks advanced ahead of the late-April policy meeting of the Federal Reserve, which was followed by a downturn in thrift shares at the close of April and into the first week of May. The pullback in financial shares was fueled by growing expectations that the Federal Reserve was not in a hurry to raise interest rates, based on economic data that showed a slowdown in first quarter GDP growth and a decline in April job growth. Thrift shares seesawed along with the broader stock market heading into mid-May, initially rallying with a rebound in oil prices followed by a pullback as some favorable economic reports spurred increased expectations that the Federal Reserve could move to increase interest rates at its next meeting in June. Financial shares outpaced the broader stock market going into the second half of May, as minutes from the Federal Reserve’s April meeting suggested that a June interest rate


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.13

increase was a possibility. A surge in April new home sales added to gains in the banking sector heading into late-May. Financial shares led the market lower in early-June and then settled into narrow trading range heading into mid-June, as the weak jobs report for May dimmed expectations that the Federal Reserve would move to lift interest rates this summer. Going into the second half June, thrift shares paralleled trends in the broader stock market. After trending higher ahead of the Brexit vote, financial shares were among the hardest hit sectors on Britain’s surprising vote to exit the European Union. Also, similar to the broader stock market, thrift shares rallied at the close of the second quarter.

The positive trend for thrift stocks continued at the start of July 2016, with the strong jobs report for June fueling additional gains for the thrift sector. Some stronger-than-expected second quarter earnings reports coming out of the banking sector, along with favorable data on the U.S. economy, helped to sustain the positive trend in thrift shares going into the second half of July. Financial shares traded in a narrow range to closeout July and into early-August, as the Federal Reserve concluded its late-July policy meeting with no change in its target interest rate as expected. Financial shares posted healthy gains on the heels of the favorable jobs report for July, as the S&P 500’s financial sector moved into positive territory for the first time in 2016. After trading in a narrow range into the second half of August, some favorable housing data helped thrift shares to rally in late-August. The positive trend in thrift stocks continued into early-September, as a slowdown in August job growth reduced expectations that the Federal Reserve would soon raise rates. Thrift shares followed the broader stock market lower in mid-September, as investors reacted to oil prices moving to a one-month low. For the balance of September and into mid-October, thrift shares traded in a tight range as Federal Reserve minutes released in mid-October offered investors few new insights about a next rate increase. Financial shares led the stock market higher heading into the second half of October, in light of third quarter earnings reports generally offering fresh evidence of profitability improving for banks. Thrift stocks were largely trendless through the end of October and then pulled back along with the broader stock market in early-November. Bank and thrift stocks were among the strongest performers in leading the post-election stock market rally, reflecting investor expectations for reduced regulation of the banking sector. On November 25, 2016, the SNL Index for all publicly-traded thrifts closed at 932.54, an increase of 13.8% from one year ago and an increase of 15.3% year-to-date.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.14

The New Issue Market

In addition to thrift stock market conditions in general, the new issue market for converting thrifts is also an important consideration in determining the Bank’s pro forma market value. The new issue market is separate and distinct from the market for seasoned thrift stocks in that the pricing ratios for converting issues are computed on a pro forma basis, specifically: (1) the numerator and denominator are both impacted by the conversion offering amount, unlike existing stock issues in which price change affects only the numerator; and (2) the pro forma pricing ratio incorporates assumptions regarding source and use of proceeds, effective tax rates, stock plan purchases, etc. which impact pro forma financials, whereas pricing for existing issues are based on reported financials. The distinction between pricing of converting and existing issues is perhaps no clearer than in the case of the price/book (“P/B”) ratio in that the P/B ratio of a converting thrift will typically result in a discount to book value whereas in the current market for existing thrifts the P/B ratio may reflect a premium to book value. Therefore, it is appropriate to also consider the market for new issues, both at the time of the conversion and in the aftermarket.

As shown in Table 4.2, two second-step conversions have been completed during the past three months. While the second step conversion are not considered to be totally relevant for Newton Federal’s pro forma pricing, given the MHC offering structure, we can still examine such information. The average closing pro forma price/tangible book ratio of the two recent second step conversion offerings equaled 72.5%. On average, the two second step conversion offerings reflected price appreciation of 23.7% after the first week of trading. As of November 25, 2016, the two recent second step conversion offerings reflected a 20.5% increase in price on average.

Shown in Table 4.3 are the current pricing ratios for these two second step converted offerings completed during the past three months that trade on NASDAQ. The current average P/TB ratio of these two companies equaled 87.51%, based on closing stock prices as of November 25, 2016.

The Acquisition Market

Also considered in the valuation was the potential impact on Newton Federal’s stock price of recently completed and pending acquisitions of other thrift institutions operating in Georgia. As shown in Exhibit IV-4, there have been eight thrift acquisitions completed from the beginning of 2001 through November 25, 2016, and there are currently no acquisitions pending


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.15

Table 4.2

Pricing Characteristics and After-Market Trends

Conversions Completed in the Last Three Months


Institutional Information					Pre-Conversion Data											Offering Information															Insider Purchases												Initial Div. Yield			Pro Forma Data																			Post-IPO Pricing Trends
					Financial Info.					Asset Quality																	Contribution to Char. Found.				% Off Incl. Fdn.+Merger Shares															Pricing Ratios(2)(5)								Financial Charac.											Closing Price:
																Excluding Foundation													% of Public Off. Inc. Fdn.		Benefit Plans																																		First Trading Day					After First Week(3)					After First Month(4)
Institution	Conversion Date		Ticker		Assets		Equity/ Assets			NPAs/ Assets			Res. Cov.			Gross Proc.		% Offer			% of Mid.			Exp./ Proc.			Form		% of Public Off. Inc. Fdn.		ESOP			Recog. Plans			Stk Option			Mgmt.& Dirs.						P/TB			Core P/E		P/A			Core ROA			TE/A			Core ROE			IPO Price		First Trading Day		% Chge			After First Week(3)		% Chge			After First Month(4)		% Chge			Thru 11/25/2016		% Chge
					($Mil)		(%)			(%)			(%)			($Mil.)		(%)			(%)			(%)					(%)		(%)			(%)			(%)			(%)(1)			(%)			(%)			(x)		(%)			(%)			(%)			(%)			($)		($)		(%)			($)		(%)			($)		(%)			($)		(%)
*Second Step Conversions*
Bancorp 34, Inc.		10/12/16		BCTF- NASDAQ	$	287		10.61	%		0.54	%		626	%	$	18.8		55	%		132	%		7.5	%		N.A.		N.A.		8.0	%		4.0	%		10.0	%		5.2	%		0.00	%		76.0	%		52.3x		11.4	%		0.2	%		15.0	%		1.4	%	$	10.00	$	12.75		27.5	%	$	13.00		30.0	%	$	12.33		23.3	%	$	12.37		23.7	%
Ottawa Bancorp, Inc.		10/12/16		OTTW- NASDAQ	$	217		14.55	%		2.16	%		NA		$	23.8		69	%		115	%		6.4	%		N.A.		N.A.		8.0	%		4.0	%		10.0	%		1.5	%		1.60	%		69.1	%		30.1x		14.6	%		0.5	%		21.2	%		2.3	%	$	10.00	$	11.57		15.7	%	$	11.74		17.4	%	$	11.68		16.8	%	$	11.73		17.3	%
Averages - Second Step Conversions:					$	252		12.58	%		1.35	%		626	%	$	21.3		62	%		123	%		6.9	%		N.A.		N.A.		8.0	%		4.0	%		10.0	%		3.3	%		0.80	%		72.5	%		41.2x		13.0	%		0.4	%		18.1	%		1.8	%	$	10.00	$	12.16		21.6	%	$	12.37		23.7	%	$	12.00		20.0	%	$	12.05		20.5	%
Medians - Second Step Conversions:					$	252		12.58	%		1.35	%		626	%	$	21.3		62	%		123	%		6.9	%		N.A.		N.A.		8.0	%		4.0	%		10.0	%		3.3	%		0.80	%		72.5	%		41.2x		13.0	%		0.4	%		18.1	%		1.8	%	$	10.00	$	12.16		21.6	%	$	12.37		23.7	%	$	12.00		20.0	%	$	12.05		20.5	%

Note:

*-Appraisal performed by RP Financial; BOLD = RP Fin. Did the business plan, “NT” - Not Traded; “NA” - Not Applicable, Not Available; C/S-Cash/Stock.

(1)	As a percent of MHC offering for MHC transactions.

(2)	Does not take into account the adoption of SOP 93-6.

(3)	Latest price if offering is less than one week old.

(4)	Latest price if offering is more than one week but less than one month old.

(5)	Mutual holding company pro forma data on full conversion basis.

(6)	Simultaneously completed acquisition of another financial institution.

(7)	Simultaneously converted to a commercial bank charter.

(8)	Former credit union.

11/25/2016


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.16

Table 4.3

Public Market Pricing Versus Peer Group

Community First Bancshares, Inc.

As of November 25, 2016


			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
			Share(1)		Value		EPS(2)		Share		P/E		P/B			P/A			P/TB			P/Core		Share		Yield			Ratio(5)			Assets		Assets			T. Assets			Assets			ROAA			ROAE			ROAA			ROAE
			($)		($Mil)		($)		($)		(x)		(%)			(%)			(%)			(x)		($)		(%)			(%)			($Mil)		(%)			(%)			(%)			(%)			(%)			(%)			(%)
All Non-MHC Public Companies(6)
Averages			$	20.55	$	530.90	$	1.05	$	15.78		18.80x		123.90	%		15.20	%		134.09	%		19.59x	$	0.31		1.49	%		49.23	%	$	3,069		12.71	%		12.15	%		1.13	%		0.71	%		5.98	%		0.73	%		6.11	%
Median			$	16.33	$	132.28	$	0.78	$	14.42		18.77x		121.48	%		14.66	%		127.40	%		19.15x	$	0.24		1.43	%		39.21	%	$	937		11.50	%		11.12	%		0.88	%		0.62	%		5.34	%		0.64	%		5.14	%
Comparable Group
Averages			$	12.05	$	41.51	$	0.26	$	14.02		35.27x		86.31	%		15.60	%		87.51	%		35.27x	$	0.08		0.68	%		24.24	%	$	269		18.34	%		18.11	%		1.35	%		0.36	%		1.85	%		0.36	%		1.85	%
Medians			$	12.05	$	41.51	$	0.26	$	14.02		35.27x		86.31	%		15.60	%		87.51	%		35.27x	$	0.08		0.68	%		24.24	%	$	269		18.34	%		18.11	%		1.35	%		0.36	%		1.85	%		0.36	%		1.85	%
Comparable Group
BCTF	Bancorp 34, Inc.	NM	$	12.37	$	42.53	$	0.19	$	13.26		NM		93.26	%		14.08	%		93.95	%		NM	$	0.00		0.00	%		0.00	%	$	302		15.09	%		14.99	%		0.54	%		0.22	%		1.44	%		0.22	%		1.44	%
OTTW	Ottawa Bancorp, Inc.	IL	$	11.73	$	40.48	$	0.33	$	14.78		35.27x		79.35	%		17.13	%		81.07	%		35.27x	$	0.16		1.36	%		48.48	%	$	236		21.58	%		21.22	%		2.16	%		0.49	%		2.25	%		0.49	%		2.25	%

(1)	Core income, on a diluted per-share basis. Core income is net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of securities, amortization of intangibles, goodwill and nonrecurring items. Assumed tax rate is 35%.

(2)	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. P/E and P/Core =NM if the ratio is negative or above 35x.

(3)	Indicated 12 month dividend, based on last quarterly dividend declared.

(4)	Indicated 12 month dividend as a percent of trailing 12 month earnings.

(5)	ROAA (return on average assets) and ROAE (return on average equity) are indicated ratios based on trailing 12 month earnings and average equity and assets balances.

(6)	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.17

of a Georgia savings institution. The recent acquisition activity may imply a certain degree of acquisition speculation for the Company’s stock. To the extent that acquisition speculation may impact the offering, we have largely taken this into account in selecting companies for the Peer Group which operate in markets that have experienced a comparable level of acquisition activity as the Bank’s market and, thus, are subject to the same type of acquisition speculation that may influence the Company’s stock. However, since converting thrifts are subject to a three-year regulatory moratorium from being acquired, acquisition speculation in the Company’s stock would tend to be less, compared to the stocks of the Peer Group companies. . Furthermore, in comparison to the stocks of the fully-converted Peer Group companies, the degree of acquisition speculation in the Bank’s stock is also viewed to be relatively more limited since there are fewer potential acquirers for the Bank’s stock as a re-mutualization transaction can only be completed by a mutual institution or an institution in the MHC form of ownership. Additionally, there tends to be less acquisition speculation in the stocks of publicly-traded MHCs in general, given the majority of the shares are held by the MHC rather than public shareholders which own 100% of the stocks of the fully-converted Peer Group companies. Accordingly, the Peer Group companies are considered to be subject to a greater degree of acquisition speculation relative to the acquisition speculation that may influence Newton Federal’s trading price.

* * * * * * * * * * *

In determining our valuation adjustment for marketing of the issue, we considered trends in both the overall thrift market, the new issue market including the new issue market for MHC conversions and the local acquisition market for thrift stocks. Taking these factors and trends into account, RP Financial concluded that no valuation adjustment was appropriate in the valuation analysis for purposes of marketing of the issue.

8.	Management

The Bank’s management team appears to have experience and expertise in all of the key areas of the Bank’s operations. Exhibit IV-5 provides summary resumes of the Newton Federal’s Board of Directors and senior management. The financial characteristics of the Bank suggest that the Board and senior management have been effective in pursuing an operating strategy that can be well managed by the Bank’s present organizational structure. The Bank currently does not have any senior management positions that are vacant.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.18

Similarly, the returns, equity positions, and other operating measures of the Peer Group companies are indicative of well-managed financial institutions, which have Boards and management teams that have been effective in implementing competitive operating strategies. Therefore, on balance, we concluded no valuation adjustment relative to the Peer Group was appropriate for this factor.

9.	Effect of Government Regulation and Regulatory Reform

In summary, as a federally-insured savings institution operating in the MHC form of ownership, Newton Federal will be operating in substantially the same regulatory environment as the Peer Group members — all of whom are adequately capitalized institutions and are operating with no apparent restrictions. Exhibit IV-6 reflects the Bank’s pro forma regulatory capital ratios. Accordingly, no adjustment has been applied for the effect of government regulation and regulatory reform.

Summary of Adjustments

Overall, based on the factors discussed above, we concluded that the Bank’s pro forma market value should reflect the following valuation adjustments relative to the Peer Group:

Table 4.4

Newton Federal Bank

Valuation Adjustments


Key Valuation Parameters :		Valuation Adjustment
Financial Condition		Slight Downward
Profitability, Growth and Viability of Earnings		Moderate Downward
Asset Growth		No Adjustment
Primary Market Area		No Adjustment
Dividends		Slight Downward
Liquidity of the Shares		Slight Downward
Marketing of the Issue		No Adjustment
Management		No Adjustment
Effect of Govt. Regulations and Regulatory Reform		No Adjustment

Valuation Approaches

In applying the accepted valuation methodology utilized by the OCC, i.e., the pro forma market value approach, we considered the three key pricing ratios in valuing the Bank’s to-be-issued stock — price/earnings (“P/E”), price/book (“P/B”), and price/assets (“P/A”) approaches — all performed on a pro forma basis including the effects of the stock proceeds. In computing the


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.19

pro forma impact of the conversion and the related pricing ratios, we have incorporated the valuation parameters disclosed in the Bank’s prospectus for the reinvestment rate, effective tax rate, stock benefit plan assumptions, and offering expenses (summarized in Exhibits IV-9 and IV-10). The assumptions utilized in the pro forma analysis in calculating the Company’s full conversion value were consistent with the assumptions utilized for the minority stock offering, except that expenses were adjusted for variable expenses based on the amount sold (summarized in Exhibits IV-7 and IV-8).

In our estimate of value, we assessed the relationship of the pro forma pricing ratios relative to the Peer Group, recent conversion offerings and publicly-traded MHCs on a fully-converted basis.

RP Financial’s valuation placed an emphasis on the following:

•

P/E Approach . The P/E approach is generally the best indicator of long-term value for a stock. Given the similarities between the Company’s and the Peer Group’s earnings composition and overall financial condition, the P/E approach was carefully considered in this valuation. At the same time, recognizing that (1) the earnings multiples will be evaluated on a pro forma fully-converted basis for the Company; and (2) the Peer Group on average has had the opportunity to realize the benefit of reinvesting net conversion proceeds, we also gave 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 taking into account the pricing ratios under the P/E and P/A approaches. 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, in the case of highly capitalized institutions, high P/A ratios may limit the investment community’s willingness to pay market multiples for earnings or book value when ROE is expected to be low.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.20

The Company will adopt “Employers’ Accounting for Employee Stock Ownership Plans” (“ASC 718-40”), which will cause earnings per share computations to be based on shares issued and outstanding excluding unreleased ESOP shares. For purposes of preparing the pro forma pricing analyses, we have reflected all shares issued in the offering, including all ESOP shares, to capture the full dilutive impact, particularly since the ESOP shares are economically dilutive, receive dividends and can be voted. However, we did consider the impact of ASC 718-40 in the valuation.

Based on the application of the three valuation approaches, taking into consideration the valuation adjustments discussed above, RP Financial concluded that as of November 25, 2016, the pro forma market value of the Company’s full conversion offering equaled $51,000,000 at the midpoint, equal to 5,100,000 shares at $10.00 per share. The $10.00 per share price was determined by the Newton Federal Board.

Basis of Valuation – Fully Converted Pricing Ratios

1. Price-to-Earnings (“P/E”) . The application of the P/E valuation method requires calculating the Company’s pro forma market value by applying a valuation P/E multiple (fully-converted basis) to the pro forma earnings base. In applying this technique, we considered both reported earnings and a recurring earnings base, that is, earnings adjusted to exclude any one-time non-operating items, plus the estimated after-tax earnings benefit of the reinvestment of the net proceeds. The Bank reported net income of $1.157 million for the fiscal year ended September 30, 2016. In deriving Newton Federal’s core earnings, the adjustments made to reported earnings were to eliminate expense related to the separation of the former President and CEO in early 2016 ($251,000). As shown in the table below, on a tax-effected basis, assuming an effective marginal tax rate of 38% for the earnings adjustments, the Company’s core earnings were determined to equal $1.313 million for the fiscal year ended September 30, 2016.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.21

Table 4.5

Newton Federal Bank

Derivation of Core Earnings


	Amount
	($000)
Net Income	$	1,157
Addback: Expenses Related to CEO Separation		251
Tax Effect (1)		(95	)

Core Earnings Estimate	$	1,313

(1)	Tax effected at 38%.

Based on the Company’s reported and estimated core earnings, and incorporating the impact of the pro forma assumptions discussed previously, the Company’s pro forma reported and core P/E multiples (fully-converted basis) at the $51.0 million midpoint value equaled 57.10 times and 48.63 times, respectively, indicating premiums of 196.2% and 121.7%, relative to the Peer Group’s average reported and core earnings multiples of 19.28 times and 21.94 times (see Table 4.6). In comparison to the Peer Group’s median reported and core earnings multiples of 17.92 times and 19.92 times, the Company’s pro forma reported and core P/E multiples (fully-converted basis) at the midpoint value indicated premiums of 218.6% and 144.1%, respectively. The Company’s pro forma P/E ratios (fully-converted basis) based on reported earnings at the minimum and the maximum, as adjusted equaled 46.54 times and 83.22 times, and based on core earnings at the minimum and the maximum, as adjusted equaled 39.87 times and 69.81 times, respectively.

On an MHC reported basis, the Company’s reported and core P/E multiples at the midpoint value of $51.0 million equaled 50.38 times and 43.66 times, respectively (see Table 4.7). The Company’s reported and core P/E multiples provided for premiums of 161.3% and 99.0% relative to the Peer Group’s average reported and core P/E multiples of 19.28 times and 21.94 times, respectively. In comparison to the Peer Group’s median reported and core earnings multiples which equaled 17.92 times and 19.92 times, respectively, the Company’s pro forma reported and core P/E multiples (MHC basis) at the midpoint value indicated premiums of 181.1% and 119.2%, respectively. The Company’s pro forma reported P/E ratios (MHC basis) at the minimum and the super maximum equaled 41.97 times and 69.65 times, respectively. The Company’s pro forma core P/E ratios (MHC basis) at the minimum and the super maximum equaled 36.48 times and 60.00 times, respectively.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.22

Table 4.6

Fully Converted Market Pricing Versus Peer Group

Community First Bancshares, Inc.

As of November 25, 2016


					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
					Share(1)		Value		EPS(2)		Share		P/E		P/B			P/A			P/TB			P/Core		Share		Yield			Ratio(5)			Assets		Assets			T. Assets			Assets			ROAA			ROAE			ROAA			ROAE
					($)		($Mil)		($)		($)		(x)		(%)			(%)			(%)			(x)		($)		(%)			(%)			($Mil)		(%)			(%)			(%)			(%)			(%)			(%)			(%)
Community First Bancshares, Inc.
Supermaximum					$	10.00	$	67.45	$	0.14	$	15.23		83.22x		65.66	%		23.22	%		65.66	%		69.81x	$	0.00		0.00	%		0.00	%	$	290		35.37	%		35.37	%		1.12	%		0.28	%		0.79	%		0.33	%		0.94	%
Maximum					$	10.00	$	58.65	$	0.17	$	16.21		68.62x		61.69	%		20.74	%		61.69	%		58.05x	$	0.00		0.00	%		0.00	%	$	283		33.62	%		33.62	%		1.15	%		0.30	%		0.90	%		0.36	%		1.06	%
Midpoint					$	10.00	$	51.00	$	0.21	$	17.34		57.10x		57.67	%		18.47	%		57.67	%		48.63x	$	0.00		0.00	%		0.00	%	$	276		32.01	%		32.01	%		1.17	%		0.32	%		1.01	%		0.38	%		1.19	%
Minimum					$	10.00	$	43.35	$	0.25	$	18.86		46.54x		53.02	%		16.09	%		53.02	%		39.87x	$	0.00		0.00	%		0.00	%	$	270		30.33	%		30.33	%		1.20	%		0.35	%		1.14	%		0.40	%		1.33	%
All Non-MHC Public Companies(6)
Averages					$	20.55	$	530.90	$	1.05	$	15.78		18.80x		123.90	%		15.20	%		134.09	%		19.59x	$	0.31		1.49	%		49.23	%	$	3,069		12.71	%		12.15	%		1.13	%		0.71	%		5.98	%		0.73	%		6.11	%
Median					$	16.33	$	132.28	$	0.78	$	14.42		18.77x		121.48	%		14.66	%		127.40	%		19.15x	$	0.24		1.43	%		39.21	%	$	937		11.50	%		11.12	%		0.88	%		0.62	%		5.34	%		0.64	%		5.14	%
All Non-MHC State of XX(6)
Averages					$	19.16	$	66.83	$	0.75	$	19.29		19.28x		99.32	%		15.84	%		100.73	%		21.94x	$	0.21		1.02	%		42.97	%	$	419		15.88	%		15.72	%		1.72	%		0.57	%		3.59	%		0.55	%		3.48	%
Medians					$	17.58	$	65.82	$	0.48	$	17.81		17.92x		98.00	%		15.61	%		99.99	%		19.92x	$	0.20		1.10	%		40.03	%	$	435		15.73	%		15.50	%		1.55	%		0.48	%		2.84	%		0.50	%		3.08	%
Comparable Group
Averages					$	19.16	$	66.83	$	0.75	$	19.29		19.28x		99.32	%		15.84	%		100.73	%		21.94x	$	0.21		1.02	%		42.97	%	$	419		15.88	%		15.72	%		1.72	%		0.57	%		3.59	%		0.55	%		3.48	%
Medians					$	17.58	$	65.82	$	0.48	$	17.81		17.92x		98.00	%		15.61	%		99.99	%		19.92x	$	0.20		1.10	%		40.03	%	$	435		15.73	%		15.50	%		1.55	%		0.48	%		2.84	%		0.50	%		3.08	%
State of GA (6)
CHFN	Charter Financial Corporation	(7	)	GA	$	14.47	$	217.50	$	0.86	$	13.52		18.32x		107.06	%		15.07	%		127.40	%		16.80x	$	0.22		1.52	%		25.95	%	$	1,443		14.08	%		12.10	%		0.76	%		0.98	%		5.90	%		1.07	%		6.43	%
Comparable Group
ANCB	Anchor Bancorp	(7	)	WA	$	25.40	$	63.63	$	0.29	$	25.46		NM		99.77	%		14.60	%		99.77	%		NM		NA		NA			NA		$	436		14.63	%		14.63	%		NA			0.17	%		1.14	%		0.17	%		1.14	%
EQFN	Equitable Financial Corp.	(7	)	NE	$	9.10	$	31.64	$	0.32	$	10.43		29.35x		87.24	%		13.89	%		87.24	%		28.58x		NA		NA			NA		$	228		15.92	%		15.92	%		NA			0.46	%		3.00	%		0.47	%		3.08	%
IROQ	IF Bancorp, Inc.	(7	)	IL	$	19.35	$	76.44	$	0.98	$	21.12		17.92x		91.60	%		13.04	%		91.60	%		19.77x	$	0.16		0.83	%		14.81	%	$	589		14.23	%		14.23	%		0.82	%		0.70	%		4.93	%		0.64	%		4.46	%
JXSB	Jacksonville Bancorp, Inc.	(7	)	IL	$	29.26	$	52.63	$	1.57	$	26.84		17.21x		109.00	%		15.91	%		115.53	%		18.58x	$	0.40		1.37	%		81.18	%	$	331		14.60	%		13.89	%		1.33	%		0.99	%		6.53	%		0.92	%		6.05	%
MELR	Melrose Bancorp, Inc.	(7	)	MA	$	15.91	$	41.39	$	0.28	$	16.61		NM		95.77	%		15.54	%		95.77	%		NM		NA		NA			NA		$	267		16.23	%		16.23	%		0.00	%		0.42	%		2.26	%		0.29	%		1.55	%
MSBF	MSB Financial Corp.	(7	)	NJ	$	13.70	$	78.24	$	0.12	$	12.71		NM		107.81	%		18.04	%		107.81	%		NM	$	0.00		0.00	%		NA		$	434		16.74	%		16.74	%		3.53	%		0.18	%		0.90	%		0.26	%		1.34	%
PBSK	Poage Bankshares, Inc.	(7	)	KY	$	18.95	$	70.37	$	0.60	$	18.78		NM		100.89	%		15.68	%		104.44	%		31.57x	$	0.32		1.69	%		53.85	%	$	449		15.54	%		15.09	%		1.78	%		0.43	%		2.68	%		0.50	%		3.08	%
PBIP	Prudential Bancorp, Inc.	(7	)	PA	$	15.81	$	127.20	$	0.35	$	14.17		NM		111.58	%		22.74	%		111.58	%		NM	$	0.12		0.76	%		33.33	%	$	559		20.38	%		20.38	%		3.39	%		0.51	%		2.36	%		0.49	%		2.29	%
UCBA	United Community Bancorp	(7	)	IN	$	16.20	$	68.01	$	0.81	$	16.83		18.84x		96.23	%		12.88	%		100.20	%		20.07x	$	0.24		1.48	%		27.91	%	$	528		13.38	%		12.92	%		1.02	%		0.68	%		5.14	%		0.63	%		4.83	%
WBKC	Wolverine Bancorp, Inc.	(7	)	MI	$	27.97	$	58.70	$	2.14	$	29.97		13.07x		93.33	%		16.05	%		93.33	%		13.07x		NA		NA			46.73	%	$	369		17.20	%		17.20	%		1.92	%		1.13	%		7.00	%		1.13	%		7.00	%

(1)	Core income, on a diluted per-share basis. Core income is net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of securities, amortization of intangibles, goodwill and nonrecurring items. Assumed tax rate is 35%.

(2)	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. P/E and P/Core =NM if the ratio is negative or above 35x.

(3)	Indicated 12 month dividend, based on last quarterly dividend declared.

(4)	Indicated 12 month dividend as a percent of trailing 12 month earnings.

(5)	ROAA (return on average assets) and ROAE (return on average equity) are indicated ratios based on trailing 12 month earnings and average equity and assets balances.

(6)	Excludes from averages and medians those companies the subject of actual or rumored acquisition activities or unusual operating characteristics.

(7)	Financial information is as of or for the twelve months ended December 31, 2013.

Source:


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.23

Table 4.7

MHC Market Pricing Versus Peer Group

Community First Bancshares, Inc.

As of November 25, 2016


			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
			Share(1)		Value		EPS(2)		Share		P/E		P/B			P/A			P/TB			P/Core		Share		Yield			Ratio(5)			Assets		Assets			T. Assets			Assets			ROAA			ROAE			ROAA			ROAE
			($)		($Mil)		($)		($)		(x)		(%)			(%)			(%)			(x)		($)		(%)			(%)			($Mil)		(%)			(%)			(%)			(%)			(%)			(%)			(%)
Community First Bancshares, Inc.
Supermaximum			$	10.00	$	67.45	$	0.14	$	10.48		69.65x		95.43	%		26.10	%		95.43	%		60.00x	$	0.00		0.00	%		0.00	%	$	258		27.35	%		27.35	%		1.25	%		0.37	%		1.37	%		0.43	%		1.59	%
Maximum			$	10.00	$	58.65	$	0.17	$	11.46		59.13x		87.30	%		23.01	%		87.30	%		51.11x	$	0.00		0.00	%		0.00	%	$	255		26.35	%		26.35	%		1.27	%		0.39	%		1.48	%		0.45	%		1.71	%
Midpoint			$	10.00	$	51.00	$	0.20	$	12.58		50.38x		79.50	%		20.25	%		79.50	%		43.66x	$	0.00		0.00	%		0.00	%	$	252		25.47	%		25.47	%		1.29	%		0.40	%		1.58	%		0.46	%		1.82	%
Minimum			$	10.00	$	43.35	$	0.24	$	14.10		41.97x		70.94	%		17.42	%		70.94	%		36.48x	$	0.00		0.00	%		0.00	%	$	249		24.56	%		24.56	%		1.30	%		0.42	%		1.69	%		0.48	%		1.94	%
All Non-MHC Public Companies(6)
Averages			$	20.55	$	530.90	$	1.05	$	15.78		18.80x		123.90	%		15.20	%		134.09	%		19.59x	$	0.31		1.49	%		49.23	%	$	3,069		12.71	%		12.15	%		1.13	%		0.71	%		5.98	%		0.73	%		6.11	%
Median			$	16.33	$	132.28	$	0.78	$	14.42		18.77x		121.48	%		14.66	%		127.40	%		19.15x	$	0.24		1.43	%		39.21	%	$	937		11.50	%		11.12	%		0.88	%		0.62	%		5.34	%		0.64	%		5.14	%
Comparable Group
Averages			$	19.16	$	66.83	$	0.75	$	19.29		19.28x		99.32	%		15.84	%		100.73	%		21.94x	$	0.21		1.02	%		42.97	%	$	419		15.88	%		15.72	%		1.72	%		0.57	%		3.59	%		0.55	%		3.48	%
Medians			$	17.58	$	65.82	$	0.48	$	17.81		17.92x		98.00	%		15.61	%		99.99	%		19.92x	$	0.20		1.10	%		40.03	%	$	435		15.73	%		15.50	%		1.55	%		0.48	%		2.84	%		0.50	%		3.08	%
State of GA (6)
CHFN	Charter Financial Corporation	GA	$	14.47	$	217.50	$	0.86	$	13.52		18.32x		107.06	%		15.07	%		127.40	%		16.80x	$	0.22		1.52	%		25.95	%	$	1,443		14.08	%		12.10	%		0.76	%		0.98	%		5.90	%		1.07	%		6.43	%
Comparable Group
ANCB	Anchor Bancorp	WA	$	25.40	$	63.63	$	0.29	$	25.46		NM		99.77	%		14.60	%		99.77	%		NM		NA		NA			NA		$	436		14.63	%		14.63	%		NA			0.17	%		1.14	%		0.17	%		1.14	%
EQFN	Equitable Financial Corp.	NE	$	9.10	$	31.64	$	0.32	$	10.43		29.35x		87.24	%		13.89	%		87.24	%		28.58x		NA		NA			NA		$	228		15.92	%		15.92	%		NA			0.46	%		3.00	%		0.47	%		3.08	%
IROQ	IF Bancorp, Inc.	IL	$	19.35	$	76.44	$	0.98	$	21.12		17.92x		91.60	%		13.04	%		91.60	%		19.77x	$	0.16		0.83	%		14.81	%	$	589		14.23	%		14.23	%		0.82	%		0.70	%		4.93	%		0.64	%		4.46	%
JXSB	Jacksonville Bancorp, Inc.	IL	$	29.26	$	52.63	$	1.57	$	26.84		17.21x		109.00	%		15.91	%		115.53	%		18.58x	$	0.40		1.37	%		81.18	%	$	331		14.60	%		13.89	%		1.33	%		0.99	%		6.53	%		0.92	%		6.05	%
MELR	Melrose Bancorp, Inc.	MA	$	15.91	$	41.39	$	0.28	$	16.61		NM		95.77	%		15.54	%		95.77	%		NM		NA		NA			NA		$	267		16.23	%		16.23	%		0.00	%		0.42	%		2.26	%		0.29	%		1.55	%
MSBF	MSB Financial Corp.	NJ	$	13.70	$	78.24	$	0.12	$	12.71		NM		107.81	%		18.04	%		107.81	%		NM	$	0.00		0.00	%		NA		$	434		16.74	%		16.74	%		3.53	%		0.18	%		0.90	%		0.26	%		1.34	%
PBSK	Poage Bankshares, Inc.	KY	$	18.95	$	70.37	$	0.60	$	18.78		NM		100.89	%		15.68	%		104.44	%		31.57x	$	0.32		1.69	%		53.85	%	$	449		15.54	%		15.09	%		1.78	%		0.43	%		2.68	%		0.50	%		3.08	%
PBIP	Prudential Bancorp, Inc.	PA	$	15.81	$	127.20	$	0.35	$	14.17		NM		111.58	%		22.74	%		111.58	%		NM	$	0.12		0.76	%		33.33	%	$	559		20.38	%		20.38	%		3.39	%		0.51	%		2.36	%		0.49	%		2.29	%
UCBA	United Community Bancorp	IN	$	16.20	$	68.01	$	0.81	$	16.83		18.84x		96.23	%		12.88	%		100.20	%		20.07x	$	0.24		1.48	%		27.91	%	$	528		13.38	%		12.92	%		1.02	%		0.68	%		5.14	%		0.63	%		4.83	%
WBKC	Wolverine Bancorp, Inc.	MI	$	27.97	$	58.70	$	2.14	$	29.97		13.07x		93.33	%		16.05	%		93.33	%		13.07x		NA		NA			46.73	%	$	369		17.20	%		17.20	%		1.92	%		1.13	%		7.00	%		1.13	%		7.00	%

(1)	Core income, on a diluted per-share basis. Core income is net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of securities, amortization of intangibles, goodwill and nonrecurring items. Assumed tax rate is 35%.

(2)	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. P/E and P/Core =NM if the ratio is negative or above 35x.

(3)	Indicated 12 month dividend, based on last quarterly dividend declared.

(4)	Indicated 12 month dividend as a percent of trailing 12 month earnings.

(5)	ROAA (return on average assets) and ROAE (return on average equity) are indicated ratios based on trailing 12 month earnings and average equity and assets balances.

(6)	Excludes from averages and medians those companies the subject of actual or rumored acquisition activities or unusual operating characteristics.

Source:


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.24

2. Price-to-Book (“P/B”) . The application of the P/B valuation method requires calculating the Company’s pro forma market value by applying a valuation P/B ratio, as derived from the Peer Group’s P/B ratio, to the Company’s pro forma book value (fully-converted basis). Based on the $51.0 million midpoint valuation, the Company’s pro forma P/B and P/TB ratios (fully-converted basis) both equaled 57.67% (see Table 4.6). In comparison to the average P/B and P/TB ratios for the Peer Group of 99.32% and 100.73%, respectively, the Company’s ratios reflected a discount of 41.9% on a P/B basis and a discount of 42.8% on a P/TB basis. In comparison to the Peer Group’s median P/B and P/TB ratios of 98.00% and 99.99%, respectively, the Company’s pro forma P/B and P/TB ratios (fully-converted basis) at the midpoint value reflected discounts of 41.2% and 42.3%, respectively. At the top of the super range or supermaximum, the Company’s P/B and P/TB ratios (fully-converted basis) both equaled 65.66%. In comparison to the Peer Group’s average P/B and P/TB ratios, the Bank’s P/B and P/TB ratios at the top of the super range reflected discounts of 33.9% and 34.8%, respectively. In comparison to the Peer Group’s median P/B and P/TB ratios, the Company’s P/B and P/TB ratios at the top of the super range reflected discounts of 33.0% and 34.3%, respectively. RP Financial considered the discounts under the P/B approach to be reasonable, given the nature of the calculation of the P/B ratio, which mathematically results in a ratio discounted to book value, along with consideration of the Company’s higher pro forma equity ratio and in consideration of the trading of recent conversions.

On an MHC reported basis, the Company’s P/B and P/TB ratios at the $51.0 million midpoint value both equaled 79.50% (see Table 4.7). In comparison to the average P/B and P/TB ratios indicated for the Peer Group of 99.32% and 100.73%, respectively, the Company’s ratios were discounted by 20.0% on a P/B basis and 21.1% on a P/TB basis. In comparison to the Peer Group’s median P/B and P/TB ratios of 98.00% and 99.99%, respectively, the Company’s pro forma P/B and P/TB ratios (MHC basis) at the midpoint value reflected discounts of 18.9% and 20.5%, respectively. At the top of the super range, the Company’s P/B and P/TB ratios (MHC basis) both equaled 95.43%. In comparison to the Peer Group’s average P/B and P/TB ratios, the Company’s P/B and P/TB ratios at the top of the super range reflected discounts of 3.9% and 5.3%, respectively. In comparison to the Peer Group’s median P/B and P/TB ratios, the Company’s P/B and P/TB ratios at the top of the super range reflected discounts of 2.6% and 4.5%, respectively.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.25

3. Price-to-Assets (“P/A”) . The P/A valuation methodology determines market value by applying a valuation P/A ratio (fully-converted basis) to the Company’s pro forma asset base, conservatively assuming no deposit withdrawals are made to fund stock purchases. In all likelihood there will be deposit withdrawals, which results in understating the pro forma P/A ratio, which is computed herein. At the $51.0 million midpoint of the valuation range, the Company’s pro forma P/A ratio (fully-converted basis) equaled 18.47% of pro forma assets. Comparatively, the Peer Group companies exhibited an average P/A ratio of 15.84%, which implies a premium of 16.6% has been applied to the Company’s pro forma P/A ratio. In comparison to the Peer Group’s median P/A ratio of 15.61%, the Bank’s pro forma P/A ratio (fully-converted basis) at the midpoint value reflects a premium of 18.3%.

On an MHC reported basis, the Company’s pro forma P/A ratio at the $51.0 million midpoint value equaled 20.25% (see Table 4.7). In comparison to the Peer Group’s average P/A ratio of 15.84%, the Company’s P/A ratio (MHC basis) indicated a premium of 27.84%. In comparison to the Peer Group’s median P/A ratio of 15.61%, the Company’s pro forma P/A ratio (MHC basis) at the midpoint value reflects a premium of 29.72%.

Comparison to Publicly-Traded MHCs

As indicated in Chapter III, we believe there are a number of characteristics of MHC shares that make them different from the shares of fully-converted companies. These factors include: (1) lower aftermarket liquidity in the MHC shares since less than 50% of the shares are available for trading; (2) no opportunity for public shareholders to exercise voting control; (3) the potential pro forma impact of second-step conversions on the pricing of MHC institutions; and (4) the regulatory policies regarding the accounting for net assets and/or waived dividends held by the MHC in a second-step conversion and, thereby, lessening the attractiveness of paying cash dividends. The above characteristics of MHC shares have provided MHC stocks with different trading characteristics versus fully-converted companies. To account for the unique trading characteristics of MHC shares, RP Financial has placed the financial data and pricing ratios of the publicly-traded MHCs and the MHCs listed on the Over-the-Counter Bulletin Board (“OTCBB”) on a fully-converted basis to make them comparable for valuation purposes. We feel that examining the OTCBB MHCs is also useful as Newton Federal shares more characteristics to those companies than the publicly-traded companies in terms of asset size, market capitalization, resources, etc.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.26

Using the per share and pricing information of the publicly-traded and OTC MHCs on a fully-converted basis accomplishes a number of objectives. First, such figures eliminate distortions that result when trying to compare institutions that have different public ownership interests outstanding. Secondly, such an analysis provides ratios that are comparable to the pricing information of fully-converted public companies and are directly applicable to determining the pro forma market value range of the 100% ownership interest in the Company as an MHC. This technique is validated by the investment community’s evaluation of MHC pricing, which also incorporates the pro forma impact of a second-step conversion based on the current market price.

To calculate the fully-converted pricing information for MHCs, the reported financial information for the public MHCs incorporate the following assumptions: (1) all shares owned by the MHC are assumed to be sold at the current trading price in a second step-conversion; (2) the gross proceeds from such a sale are adjusted to reflect reasonable offering expenses and standard stock based benefit plan parameters that would be factored into a second-step conversion of an MHC institution; and (3) net proceeds are assumed to be reinvested at market rates on a tax effected basis. Book value per share and earnings per share figures for the public MHCs were adjusted by the impact of the assumed second step-conversion, resulting in an estimation of book value per share and earnings per share figures on a fully-converted basis. Table 4.8 on the following pages shows the calculation of per share financial data (fully-converted basis) for each of the eight publicly-traded MHC institutions and the 18 OTCBB-listed MHCs, which have not announced plans to complete a second-step conversion offering.

Table 4.9 below shows a comparative pricing analysis of the publicly-traded MHCs and the OTCBB MHCs on a fully-converted basis versus the Company’s Peer Group. In comparison to the Peer Group’s P/TB ratio, the P/TB ratio of the publicly-traded MHCs reflected a discount of 24.01%. In comparison to the Peer Group’s P/E multiple, the P/E multiple of the publicly-traded MHCs reflected a premium of 7.2%, while the OTC MHCs P/E multiple indicated a discount of 5.4%. In comparison to the publicly-traded MHCs, the Company’s pro forma P/TB ratio (fully-converted basis) of 57.67% at the midpoint of the valuation range reflected a discount of 36.2%, and reflected a discount of 11.6% to the average of the OTCBB MHCs. At the top of the super range, the Company’s P/TB ratio (fully-converted basis) of 65.66% reflected a discount of 27.4% to the publicly-traded MHCs, and a premium of 0.6% to the average of the OTCBB MHCs.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.27

Table 4.8

MHC Institutions, Implied Pricing Ratios, Full Conversion Basis

Financial Data as of the Most Recent Quarter or Twelve Month Period Available

Prices as of November 25, 2016


																								Key Financial Data(2)
										Per Share Data			Pricing Ratios(2)						Dividends								LTM
						Stock		Mkt		LTM		Tang.	P/E	Price/		Price/	Price/		Ann Div		Div.		Div Pay	Total		Tang.	Reported
	Ticker	Company Name	City	State	Exchange	Price(1)		Value		EPS		BV/Sh	LTM	Book		TBk	Assts		Rate		Yield		Ratio	Assets		E/A	ROAA		ROAE
						($)		($M)		($)		($)	(x)	(%)		(%)	(%)		($)		(%)		(%)	($000)		(%)	(%)		(%)
	Publicly Traded MHCs, Full Conversion Basis—Averages						16.70		835.4		0.60	18.46	20.66		88.45	90.43		20.83		0.25		1.60	53.98		2,884,449	23.09		0.69		3.05
	Publicly Traded MHCs, Full Conversion Basis—Medians						18.39		149.1		0.58	19.00	19.98		85.94	87.44		21.19		0.33		1.78	33.94		729,735	23.12		0.77		2.94
	OTC MHCs, Full Conversion Basis—Averages						10.72		25.71		0.55	16.96	18.24		62.20	65.27		11.41		0.24		4.90	20.91		261,313	18.14		0.46		2.55
	OTC MHCs, Full Conversion Basis—Medians						9.46		18.18		0.50	15.70	19.53		62.10	63.25		10.82		0.12		1.10	22.44		173,822	17.68		0.46		2.81
	Publicly Traded MHCs, Full Conversion Basis
1	GCBC	Greene County Bancorp, Inc. (MHC)	Catskill	NY	NASDAQ		21.70		184.2		1.21	19.14	17.97		113.39	113.39		18.81		0.38		1.75	31.5		979,133	16.59		1.05		6.31
2	HONE	HarborOne Bancorp, Inc. (MHC)	Brockton	MA	NASDAQ		19.62		630.2		0.24	18.86	NM		101.73	104.01		23.88		0.00		0.00	0.0		2,638,719	22.96		0.29		1.24
3	KFFB	Kentucky First Federal Bancorp (MHC)	Frankfort	KY	NASDAQ		8.65		73.4		0.19	10.39	NM		71.48	83.25		22.22		0.40		4.62	206.8		330,280	26.69		0.50		1.60
4	LSBK	Lake Shore Bancorp, Inc. (MHC)	Dunkirk	NY	NASDAQ		14.18		86.5		0.77	19.95	18.44		71.06	71.06		16.54		0.28		1.97	36.4		522,780	23.27		0.90		3.85
5	MGYR	Magyar Bancorp, Inc. (MHC)	New Brunswick	NJ	NASDAQ		10.60		61.7		0.24	13.21	NM		80.23	80.23		10.06		0.00		0.00	0.0		613,552	12.53		0.23		1.83
6	OFED	Oconee Federal Financial Corp. (MHC)	Seneca	SC	NASDAQ		22.05		127.8		1.02	27.76	21.53		77.83	79.43		22.69		0.40		1.81	39.1		563,182	28.56		1.05		3.62
7	PVBC	Provident Bancorp, Inc. (MHC)	Amesbury	MA	NASDAQ		17.95		170.5		0.73	19.59	24.70		91.64	91.64		20.16		0.00		0.00	0.0		845,917	21.99		0.82		3.71
8	TFSL	TFS Financial Corporation (MHC)	Cleveland	OH	NASDAQ		18.82		5,349.0		0.42	18.74	NM		100.24	100.42		32.26		0.50		2.66	118.1		16,582,031	32.12		0.73		2.25
	OTC MHCs, Full Conversion Basis
9	ABBB	Auburn Bancorp, Inc. (MHC)	Auburn	ME	OTC Pink		9.40		4.7		0.66	17.50	14.16		53.71	53.71		6.47		0.00		0.00	0.0		73,143	12.04		0.46		3.79
10	BVFL	BV Financial, Inc. (MHC)	Baltimore	MD	OTC Pink		6.70		20.1		0.00	10.94	NM		60.95	61.23		11.22		0.00		0.00	0.0		179,110	18.32		0.00		0.00
11	CNNB	Cincinnati Bancorp (MHC)	Cincinnati	OH	OTC Pink		9.51		16.4		0.39	15.03	24.13		63.25	63.25		9.96		0.00		0.00	0.0		164,152	15.75		0.41		2.62
12	CULL	Cullman Bancorp, Inc. (MHC)	Cullman	AL	OTC Pink		22.50		57.7		1.08	28.25	20.85		79.65	79.65		19.12		0.25		1.11	23.2		301,705	24.01		0.92		3.82
13	FSGB	First Federal of South Carolina, FSB (MHC)	Walterboro	SC	OTC Pink		4.49		4.5		0.50	7.92	8.91		56.71	56.71		5.97		0.12		2.67	23.8		76,224	10.52		0.67		6.37
14	GOVB	Gouverneur Bancorp, Inc. (MHC)	Gouverneur	NY	OTC Pink		14.50		32.2		0.58	20.79	24.85		69.73	69.73		20.43		0.34		2.34	58.3		157,751	29.30		0.82		2.81
15	GVFF	Greenville Federal Financial Corporation (MHC)	Greenville	OH	OTC Pink		8.46		17.6		0.36	14.35	23.43		58.93	58.93		10.42		0.28		3.31	77.6		168,535	17.68		0.44		2.51
16	GFCJ	Guaranty Financial Corp. (MHC)	Glendale	WI	OTC Pink		2.85		5.3		-0.20	NA	NM		20.37	NA		0.53		2.00		70.18	NM		999,850	NA		-0.04		-1.41
17	HTWC	Hometown Bancorp, Inc. (MHC)	Walden	NY	OTC Pink		2.65		6.2		0.00	4.68	NM		54.75	56.67		4.90		0.00		0.00	0.0		125,934	8.64		0.00		0.00
18	LSFG	LifeStore Financial Group (MHC)	West Jefferson	NC	OTC Pink		16.75		17.1		2.07	NA	8.10		57.74	NA		6.23		0.00		0.00	0.0		273,802	NA		0.77		7.13
19	LPBC	Lincoln Park Bancorp (MHC)	Lincoln Park	NJ	OTC Pink		11.00		19.8		0.55	15.70	19.91		69.95	70.08		5.78		0.12		1.09	21.7		343,058	8.25		0.29		3.51
20	MSVB	Mid-Southern Savings Bank, FSB (MHC)	Salem	IN	OTC Pink		17.95		26.4		1.36	26.94	13.20		66.62	66.62		13.39		0.53		2.92	38.6		197,276	20.09		1.01		5.05
21	MFDB	Mutual Federal Bancorp, Inc. (MHC)	Chicago	IL	OTC Pink		5.35		17.6		NA	NA	NA		65.73	NA		18.95		0.00		0.00	NM		92,940	NA		NA		NA
22	NECB	NorthEast Community Bancorp, Inc. (MHC)	White Plains	NY	OTC Pink		7.30		89.2		0.38	12.42	19.16		58.39	58.75		12.63		0.12		1.64	31.5		706,584	21.49		0.66		3.05
23	SCAY	Seneca-Cayuga Bancorp, Inc. (MHC)	Seneca Falls	NY	OTC Pink		12.00		27.7		0.04	16.66	NM		71.43	72.03		9.56		0.00		0.00	0.0		290,082	13.28		0.03		0.22
24	WAKE	Wake Forest Bancshares, Inc. (MHC)	Wake Forest	NC	OTC Pink		16.35		18.7		0.94	27.75	17.39		58.92	58.92		16.30		0.24		1.47	25.5		114,948	27.67		0.94		3.39
25	WAWL	Wawel Bank (MHC)	Garfield	NJ	OTC Pink		5.09		10.9		-0.14	6.05	NM		84.16	84.16		13.86		0.00		0.00	0.0		78,764	16.47		-0.37		-2.25
26	WMPN	William Penn Bancorp, Inc. (MHC)	Levittown	PA	OTC Pink		20.20		70.6		0.81	29.44	24.86		68.62	68.62		19.61		0.28		1.39	34.5		359,774	28.58		0.79		2.76

(1)	Current stock price of minority stock.

(2)	Ratios are pro forma assumings a second step conversion to full stock form.

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.28

Table 4.8

Calculation of Implied Per Share Data - Incorporating MHC Second Step Conversion

Publicly Traded MHC Institutions


												Per Share															Pro Forma
						Current Ownership						TTM NI Reported			Tang. Bk Value				Share Price		Gross Proceeds(1)		Net Capital Increase(2)		Net Income Increase(3)		Net Inc./ Share					Assets/ Share
	Ticker	Name	City	State	Exhange	Public		MHC Shares		Total Shares		TTM NI Reported			Tang. Bk Value		Assets		Share Price		Gross Proceeds(1)		Net Capital Increase(2)		Net Income Increase(3)		Net Inc./ Share			Tang. Bk. Value/ Share		Assets/ Share
1	GCBC	Greene County Bancorp, Inc. (MHC)	Catskill	NY	NASDAQ		3,878,350		4,609,264		8,487,614	$	1.10		$	9.00	$	105.23	$	21.70	$	100,021,029	$	86,018,085	$	930,796	$	1.21		$	19.14	$	115.36
2	HONE	HarborOne Bancorp, Inc. (MHC)	Brockton	MA	NASDAQ		14,839,846		17,281,034		32,120,880	$	0.14		$	9.79	$	73.07	$	19.62	$	339,053,887	$	291,586,343	$	3,155,235	$	0.24		$	18.86	$	82.15
3	KFFB	Kentucky First Federal Bancorp (MHC)	Frankfort	KY	NASDAQ		3,755,563		4,727,938		8,483,501	$	0.15		$	6.25	$	34.79	$	8.65	$	40,896,664	$	35,171,131	$	380,584	$	0.19		$	10.39	$	38.93
4	LSBK	Lake Shore Bancorp, Inc. (MHC)	Dunkirk	NY	NASDAQ		2,460,881		3,636,875		6,097,756	$	0.69		$	12.68	$	78.46	$	14.18	$	51,569,069	$	44,349,399	$	479,902	$	0.77		$	19.95	$	85.73
5	MGYR	Magyar Bancorp, Inc. (MHC)	New Brunswick	NJ	NASDAQ		2,620,296		3,200,450		5,820,746	$	0.19		$	8.20	$	100.40	$	10.60	$	33,924,770	$	29,175,302	$	315,704	$	0.24		$	13.21	$	105.41
6	OFED	Oconee Federal Financial Corp. (MHC)	Seneca	SC	NASDAQ		1,629,894		4,164,415		5,794,309	$	0.88		$	14.13	$	83.57	$	22.05	$	91,825,351	$	78,969,802	$	854,527	$	1.02		$	27.76	$	97.20
7	PVBC	Provident Bancorp, Inc. (MHC)	Amesbury	MA	NASDAQ		4,464,399		5,034,323		9,498,722	$	0.64		$	11.41	$	80.87	$	17.95	$	90,366,098	$	77,714,844	$	840,947	$	0.73		$	19.59	$	89.06
22	TFSL	TFS Financial Corporation (MHC)	Cleveland	OH	NASDAQ		57,099,887		227,119,132		284,219,019	$	0.28		$	5.81	$	45.41	$	18.82	$	4,274,382,064	$	3,675,968,575	$	39,777,399	$	0.42		$	18.74	$	58.34
8	ABBB	Auburn Bancorp, Inc. (MHC)	Auburn	ME	OTC Pink		226,478		276,806		503,284	$	0.62		$	13.06	$	140.88	$	9.40	$	2,601,976	$	2,237,700	$	24,214	$	0.66		$	17.50	$	145.33
9	BVFL	BV Financial, Inc. (MHC)	Baltimore	MD	OTC Pink		949,136		2,049,988		2,999,124	($	0.04	)	$	7.00	$	55.78	$	6.70	$	13,734,920	$	11,812,031	$	127,817	($	0.00	)	$	10.94	$	59.72
10	CNNB	Cincinnati Bancorp (MHC)	Cincinnati	OH	OTC Pink		773,663		945,587		1,719,250	$	0.35		$	10.54	$	90.98	$	9.51	$	8,992,532	$	7,733,578	$	83,685	$	0.39		$	15.03	$	95.48
11	CULL	Cullman Bancorp, Inc. (MHC)	Cullman	AL	OTC Pink		1,160,727		1,403,731		2,564,458	$	0.96		$	17.66	$	107.06	$	22.50	$	31,583,948	$	27,162,195	$	293,920	$	1.08		$	28.25	$	117.65
12	FSGB	First Federal of South Carolina, FSB (MHC)	Walterboro	SC	OTC Pink		162,041		850,714		1,012,755	$	0.47		$	4.67	$	72.02	$	4.49	$	3,819,706	$	3,284,947	$	35,546	$	0.50		$	7.92	$	75.26
13	GOVB	Gouverneur Bancorp, Inc. (MHC)	Gouverneur	NY	OTC Pink		911,527		1,311,222		2,222,749	$	0.50		$	13.44	$	63.61	$	14.50	$	19,012,719	$	16,350,938	$	176,932	$	0.58		$	20.79	$	70.97
14	GVFF	Greenville Federal Financial Corporation (MHC)	Greenville	OH	OTC Pink		812,397		1,264,126		2,076,523	$	0.31		$	9.93	$	76.73	$	8.46	$	10,691,725	$	9,194,883	$	99,497	$	0.36		$	14.35	$	81.16
15	GFCJ	Guaranty Financial Corp. (MHC)	Glendale	WI	OTC Pink		884,470		982,961		1,867,431	($	0.21	)		NA	$	534.12	$	2.85	$	2,801,439	$	2,409,237	$	26,070	($	0.20	)		NA	$	535.41
16	HTWC	Hometown Bancorp, Inc. (MHC)	Walden	NY	OTC Pink		1,017,664		1,309,275		2,326,939	($	0.01	)	$	3.39	$	52.84	$	2.65	$	3,469,579	$	2,983,838	$	32,288	$	0.00		$	4.68	$	54.12
17	LSFG	LifeStore Financial Group (MHC)	West Jefferson	NC	OTC Pink		480,870		538,221		1,019,091	$	1.99			NA	$	261.07	$	16.75	$	9,015,202	$	7,753,074	$	83,895	$	2.07			NA	$	268.67
18	LPBC	Lincoln Park Bancorp (MHC)	Lincoln Park	NJ	OTC Pink		803,435		999,810		1,803,245	$	0.50		$	10.45	$	185.00	$	11.00	$	10,997,910	$	9,458,203	$	102,347	$	0.55		$	15.70	$	190.24
19	MSVB	Mid-Southern Savings Bank, FSB (MHC)	Salem	IN	OTC Pink		430,322		1,040,750		1,471,072	$	1.24		$	16.02	$	123.18	$	17.95	$	18,681,463	$	16,066,058	$	173,850	$	1.36		$	26.94	$	134.10
20	MFDB	Mutual Federal Bancorp, Inc. (MHC)	Chicago	IL	OTC Pink		745,959		2,545,936		3,291,895		NA			NA	$	24.67	$	5.35	$	13,620,758	$	11,713,852	$	126,755		NA			NA	$	28.23
21	NECB	NorthEast Community Bancorp, Inc. (MHC)	White Plains	NY	OTC Pink		4,950,052		7,273,750		12,223,802	$	0.34		$	8.69	$	54.07	$	7.30	$	53,098,375	$	45,664,603	$	494,133	$	0.38		$	12.42	$	57.80
23	SCAY	Seneca-Cayuga Bancorp, Inc. (MHC)	Seneca Falls	NY	OTC Pink		1,002,345		1,309,275		2,311,620	($	0.03	)	$	10.81	$	119.64	$	12.00	$	15,711,300	$	13,511,718	$	146,209	$	0.04		$	16.66	$	125.49
24	WAKE	Wake Forest Bancshares, Inc. (MHC)	Wake Forest	NC	OTC Pink		511,196		635,000		1,146,196	$	0.86		$	19.96	$	92.50	$	16.35	$	10,382,250	$	8,928,735	$	96,617	$	0.94		$	27.75	$	100.29
25	WAWL	Wawel Bank (MHC)	Garfield	NJ	OTC Pink		840,548		1,304,153		2,144,701	($	0.16	)	$	3.39	$	34.06	$	5.09	$	6,638,139	$	5,708,799	$	61,775	($	0.14	)	$	6.05	$	36.72
26	WMPN	William Penn Bancorp, Inc. (MHC)	Levittown	PA	OTC Pink		944,305		2,548,713		3,493,018	$	0.68		$	16.76	$	90.32	$	20.20	$	51,484,003	$	44,276,242	$	479,110	$	0.81		$	29.44	$	103.00

(1)	Gross proceeds calculated as stock price multiplied by the number of shares owned by the MHC (i.e. non-public shares).

(2)

Net increase in capital reflects gross proceeds less offering expenses, contra-equity account for leveraged ESOP and Restricted Stock Plan. For MHC’s with assets at the MHC level, the net increase in capital also includes consolidation of MHC assets with the capital of the institution concurrent with hypothetical second step.


Offering Expense Percent:	2.00	%
ESOP Percent Purchase:	8.00	%
RRP Percent Purchase:	4.00	%

(3)	Net increase in earnings reflects after-tax reinvestment income (assumes ESOP and RRP do not generate reinvestment income), less after-tax ESOP amortization and RRP vesting.


After-Tax Reinvestment Rate:	3.50	%
ESOP Loan Term (Yrs.):	10
Recognition Plan Vesting (Yrs.):	5
Effective Tax Rate:	34.00	%

Source: SNL Securities, LC and RP Financial, LC. calculations.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.29

Detailed pricing characteristics of the fully-converted MHCs is shown in Table 4.8.

Table 4.9

Newton Federal Bank

Comparative MHC Pricing Data


	Publicly-Traded			OTC			Peer
	MHCs			MHCs			Group
Pricing Ratios (Averages) (1)
Price/earnings (x)		20.66	x		18.24	x		19.28	x
Price/tangible book (%)		90.43	%		65.27	%		100.73	%
Price/assets (%)		20.83			11.41			15.84	%

(1)	Based on market prices as of November 25, 2016.

It should be noted that in a comparison of the publicly-traded and OTCBB MHCs to the Company, the publicly-traded and OTCBB MHCs maintain certain inherit characteristics in support of increasing the attractiveness of their stocks relative to the Company’s stock as an MHC that will just be completing an IPO: (1) the seasoned publicly-traded MHCs are viewed as potential candidates to complete a second-step offering; (2) some of the publicly-traded MHCs have been grandfathered to waive dividend payments to the MHC pursuant to receiving an annual majority vote by the depositors to approve the waiver of dividends; and (3) given the limited recent MHC conversion offerings, there is a degree of uncertainty on how well an MHC offering will be received in the prevailing regulatory environment.

Comparison to Recent Offerings

As indicated at the beginning of this section, RP Financial’s analysis of recent conversion offering pricing characteristics at closing and in the aftermarket has been limited to a “technical” analysis and, thus, the pricing characteristics of recent conversion offerings cannot be a primary determinate of value. Particular focus was placed on the P/TB approach in this analysis, since the P/E multiples do not reflect the actual impact of reinvestment and the source of the stock proceeds (i.e., external funds vs. deposit withdrawals).

As discussed previously, the two second step conversion offerings that were completed during the past three months had an average pro forma P/TB ratio at closing of 72.5%. In comparison to the 72.5% average closing forma P/TB ratio of the two recent second step conversions, the Company’s P/TB ratio (fully-converted basis) of 57.67% at the midpoint value reflects an implied discount of 20.5%. At the top of the super range, the Company’s P/TB ratio of 65.66% reflects an implied discount of 9.4% relative to the recent second step conversions average P/TB ratio at closing.


*RP ^® Financial, LC.*		*VALUATION ANALYSIS*

IV.30

Valuation Conclusion

Based on the foregoing, it is our opinion that, as of November 25, 2016, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, both shares issued publicly as well as to the MHC, equaled $51,000,000 at the midpoint, equal to 5,100,000 shares offered at a per share value of $10.00. Pursuant to conversion guidelines, the 15% offering range indicates a minimum value of $43,350,000 and a maximum value of $58,650,000. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 4,335,000 at the minimum and 5,865,000 at the maximum. In the event the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a super maximum value of $67,447,500 without a resolicitation. Based on the $10.00 per share offering price, the super maximum value would result in total shares outstanding of 6,744,750.

The Board of Directors has established a public offering range such that the public ownership of the Company will constitute a 46.0% ownership interest. Accordingly, the offering to the public of the minority stock will equal $19,941,000 at the minimum, $23,460,000 at the midpoint, $26,979,000 at the maximum and $31,025,850 at the super maximum of the valuation range. Based on the public offering range, the public ownership of shares will represent 46.0% of the shares issued throughout the valuation range. The pro forma valuation calculations relative to the Peer Group (fully-converted basis) are shown in Table 4.6, and are detailed in Exhibit IV-7 and Exhibit IV-8; the pro forma valuation calculations relative to the Peer Group based on reported financials are shown in Table 4.7 and are detailed in Exhibits IV-9 and IV-10.

EXHIBITS

RP ^® Financial, LC.

LIST OF EXHIBITS


Exhibit Number		Description

I-1		Map of Branch Office Network

I-2		Audited Financial Statements

I-3		Key Operating Ratios

I-4		Investment Securities

I-5		Yields and Costs

I-6		Loan Loss Allowance Activity

I-7		Interest Rate Risk Analysis

I-8		Fixed Rate and Adjustable Rate Loans

I-9		Loan Portfolio Composition

I-10		Contractual Maturity By Loan Type

I-11		Non-Performing Assets

I-12		Deposit Composition

I-13		CDs >$100,000 in balance by Maturity

II-1		Description of Office Facilities

II-2		Historical Interest Rates

II-3		Market Area Demographic/Economic Information

LIST OF EXHIBITS (continued)


Exhibit Number		Description

III-1		General Characteristics of Publicly-Traded Institutions

III-2		Public Market Pricing of Publicly-Traded Institutions – $600 Million in Assets or Less

III-3		Peer Group Summary Demographic and Deposit Market Share Data

IV-1		Thrifts Stock Prices: As of November 25, 2016

IV-2		Historical Stock Price Indices

IV-3		Historical Thrift Stock Indices

IV-4		Market Area Acquisition Activity

IV-5		Director and Senior Management Summary Resumes

IV-6		Pro Forma Regulatory Capital Ratios

IV-7		Pro Forma Analysis Sheet – Fully Converted Basis

IV-8		Pro Forma Effect of Conversion Proceeds – Fully Converted Basis

IV-9		Pro Forma Analysis Sheet – MHC Basis

IV-10		Pro Forma Effect of Conversion Proceeds – MHC Basis

V-1		Firm Qualifications Statement

EXHIBIT I-1

Newton Federal Bank

Map of Branch Office Network

LOGO

EXHIBIT I-2

Newton Federal Bank

Audited Financial Statements

(Incorporated by Reference)

EXHIBIT I-3

Newton Federal Bank

Key Operating Ratios


	At or For the Years Ended September 30,
	2016			2015			2014			2013			2012
Performance Ratios:
Return (loss) on average assets		0.51	%		0.72	%		3.71	%		(0.13	)%		(2.68	)%
Return (loss) on average equity		2.60	%		3.83	%		23.39	%		(0.88	)%		(15.70	)%
Interest rate spread (1)		4.15	%		4.04	%		4.04	%		3.63	%		3.74	%
Net interest margin (2)		4.39	%		4.32	%		4.32	%		3.93	%		4.06	%
Non-interest expense to average assets		4.00	%		3.41	%		3.14	%		2.96	%		3.03	%
Efficiency ratio (3)		83.17	%		75.35	%		67.75	%		70.20	%		71.13	%
Average interest-earning assets to average interest-bearing liabilities		138.46	%		133.81	%		129.08	%		124.02	%		122.05	%
Average equity to average assets		19.41	%		18.86	%		15.87	%		14.68	%		17.04	%
Capital Ratios:
Average equity to average assets		19.41	%		18.86	%		15.87	%		14.68	%		17.04	%
Total capital to risk weighted assets		32.13	%		36.67	%		33.95	%		29.34	%		28.54	%
Tier 1 capital to risk weighted assets		30.86	%		35.38	%		32.66	%		28.04	%		27.25	%
Common equity tier 1 capital to risk weighted assets		30.86	%		35.38	%		N/A			N/A			N/A
Tier 1 capital to average assets		19.32	%		19.37	%		17.25	%		15.28	%		14.85	%
Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans		2.22	%		3.34	%		3.17	%		3.20	%		3.00	%
Allowance for loan losses as a percentage of non-performing loans		132.87	%		229.18	%		187.39	%		78.44	%		43.90	%
Net (charge-offs) recoveries to average outstanding loans during the year		(0.86	)%		0.09	%		(0.13	)%		(1.56	)%		(4.24	)%
Non-performing loans as a percentage of total loans		1.67	%		1.46	%		1.69	%		4.08	%		6.84	%
Non-performing loans as a percentage of total assets		1.39	%		1.13	%		1.34	%		3.41	%		5.65	%
Total non-performing assets as a percentage of total assets		1.39	%		1.37	%		1.84	%		4.26	%		8.25	%
Other:
Number of offices		3			3			3			3			3
Number of full-time employees		66			65			60			57			56
Number of part-time employees

(1)	Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(2)	Represents net interest income as a percentage of average interest-earning assets.

(3)	Represents noninterest expense divided by the sum of net interest income and noninterest income

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-4

Newton Federal Bank

Investment Securities


	At September 30,
	2016				2015				2014
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In thousands)
U.S. Government sponsored enterprises	$	7,499	$	7,517	$	7,492	$	7,533	$	6,986	$	6,989

Total	$	7,499	$	7,517	$	7,492	$	7,533	$	6,986	$	6,989

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-5

Newton Federal Bank

Yields and Costs


	At September 30, 2016			For the Year Ended September 30, 2016
	Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans		5.57	%	$	182,181		$	10,937		6.00	%
Securities		1.09	%		7,496			82		1.09	%
Interest-earning deposits		0.74	%		34,070			219		0.64	%
Federal Home Loan Bank of Atlanta stock		4.64	%		204			10		4.90	%

Total interest-earning assets					223,951			11,248		5.02	%
Non-interest-earning assets					4,980

Total assets				$	228,931

Interest-bearing liabilities:
Passbook savings accounts		0.04	%	$	20,766			8		0.04	%
Interest-bearing checking accounts		0.45	%		27,162			83		0.31	%
Money market checking accounts		0.26	%		22,919			59		0.26	%
Certificates of deposit		1.05	%		90,902			1,265		1.39	%

Total interest-bearing deposits					161,749			1,415		0.87	%

Total interest-bearing liabilities					161,749			1,415		0.87	%

Non-interest-bearing liabilities					22,736
Total liabilities					184,485

Total retained earnings				$	44,446

Total liabilities and retained earnings				$	228,931

Net interest income							$	9,833

Net interest rate spread (1)										4.15	%
Net interest-earning assets (2)				$	62,202

Net interest margin (3)										4.39	%
Average interest-earning assets to interest-bearing liabilities					138.46	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. Net interest margin represents net interest income divided by average total interest-earning assets.

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-5 (continued)

Newton Federal Bank

Yields and Costs


	For the Years Ended September 30,
	2015								2014
	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	177,805		$	10,815		6.08	%	$	186,610		$	11,416		6.12	%
Securities		7,781			89		1.14	%		5,957			69		1.16	%
Interest-earning deposits		33,661			132		0.39	%		24,965			77		0.31	%
Federal Home Loan Bank of Atlanta stock		200			9		4.50	%		230			9		3.91	%

Total interest-earning assets		219,447			11,045		5.03	%		217,762			11,571		5.31	%
Non-interest-earning assets		3,947								4,478

Total assets	$	223,394							$	222,240

Interest-bearing liabilities:
Passbook savings accounts	$	19,933			8		0.04	%	$	18,709			7		0.04	%
Interest-bearing checking accounts		20,711			36		0.17	%		16,738			7		0.04	%
Money market checking accounts		22,997			58		0.25	%		23,321			64		0.27	%
Certificates of deposit		100,356			1,711		1.70	%		109,937			2,078		1.89	%

Total interest-bearing deposits		163,997			1,813		1.11	%		168,705			2,156		1.28	%

Total interest-bearing liabilities		163,997			1,813		1.11	%		168,708			2,156		1.28	%

Non-interest-bearing liabilities		17,258								18,261

Total liabilities		181,255								186,966
Total retained earnings		42,139								35,274

Total liabilities and retained earnings	$	223,394							$	222,240

Net interest income				$	9,232							$	9,415

Net interest rate spread (1)							3.93	%							4.04	%
Net interest-earning assets (2)	$	55,450							$	49,057

Net interest margin (3)							4.21	%							4.32	%
Average interest-earning assets to interest-bearing liabilities		133.81	%							129.08	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-6

Newton Federal Bank

Loan Loss Allowance Activity


	Years Ended September 30,
	2016			2015			2014			2013			2012
	(Dollars in thousands)
Allowance at beginning of year	$	5,874		$	5,708		$	5,947		$	5,694		$	5,032
Provision for loan losses		—			—			—			3,147			9,017
Charge offs:
Real estate loans:
One- to four-family residential		(337	)		(438	)		(1,214	)		(4,073	)		(7,018	)
Commercial		(1,796	)		(20	)		(132	)		(386	)		(1,211	)
Construction and land		—			—			(125	)		(230	)		(519	)
Commercial and industrial loans		—			—			(48	)		(243	)		—
Consumer loans		(12	)		(18	)		(1	)		(38	)		(12	)

Total charge-offs		(2,145	)		(476	)		(1,520	)		(4,970	)		(8,760	)

Recoveries:
Real estate loans:
One- to four-family residential		341			356			970			1,816			401
Commercial		233			130			281			12			—
Construction and land		—			—			23			120			—
Commercial and industrial loans		—			154			7			127			—
Consumer loans		6			2			—			1			4

Total recoveries		580			642			1,281			2,076			405

Net (charge-offs) recoveries		(1,565	)		166			(239	)		(2,984	)		(8,355	)

Allowance at end of year	$	4,309		$	5,874		$	5,708		$	5,947		$	5,694

Allowance to non-performing loans		132.87	%		229.18	%		187.39	%		78.44	%		43.90	%
Allowance to total loans outstanding at the end of the year		2.22	%		3.34	%		3.17	%		3.20	%		3.00	%
Net (charge-offs) recoveries to average loans outstanding during the year		(0.86	)%		0.09	%		(0.13	)%		(1.56	)%		(4.24	)%

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-7

Newton Federal Bank

Interest Rate Risk Analysis


Change in Interest Rates (basis points) (1)	Estimated NEV (2)								NEV as a Percentage of Present Value of Assets (3)
			Estimated Increase (Decrease) in NEV						NEV Ratio (4)			Increase (Decrease) (basis points)
			Amount			Percent			NEV Ratio (4)			Increase (Decrease) (basis points)
	(Dollars in thousands)
+400	$	39,368	$	(11,902	)		(23.21	)%		18.72	%		(289	)
+200		44,947		(6,323	)		(12.33	)%		20.15	%		(146	)
—		51,270		—			—	%		21.61	%		—
-200		51,544		274			0.53	%		21.25	%		(36	)
-400		49,173		(2,371	)		(4.09	)%		20.49	%		(112	)

(1)	Assumes an immediate uniform change in interest rates at all maturities.

(2)	NEV 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)	NEV Ratio represents NEV divided by the present value of assets.

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-8

Newton Federal Bank

Fixed Rate and Adjustable Rate Loans


	Due After September 30, 2017
	Fixed		Adjustable		Total
	(In thousands)
Real estate loans:
One- to four-family residential	$	127,004	$	1,079	$	128,083
Commercial		24,130		2,681		26,811
Construction and land		2,591		542		3,133
Commercial and industrial loans		12,760		15		12,775
Consumer loans		1,522		21		1,543

Total loans	$	168,007	$	4,338	$	172,345

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-9

Newton Federal Bank

Loan Portfolio Composition


	At September 30,
	2016					2015					2014					2013					2012
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Real estate loans:
One- to four-family residential (1)	$	132,899		68.54	%	$	132,480		75.42	%	$	139,977		77.84	%	$	147,396		79.26	%	$	154,959		81.71	%
Commercial (2)		29,162		15.04			24,581		13.99			25,860		14.38			24,862		13.37			27,092		14.29
Construction and land		13,343		6.88			2,261		1.28			817		0.45			1,205		0.65			1,980		1.04
Commercial and industrial loans		16,221		8.37			14,333		8.16			11,639		6.47			11,067		5.95			4,160		2.19
Consumer loans		2,262		1.17			2,017		1.15			1,547		0.86			1,423		0.77			1,461		0.77

		193,887		100.00	%		175,672		100.00	%		179,840		100.00	%		185,953		100.00	%		189,652		100.00	%

Less:
Allowance for losses		4,309					5,874					5,708					5,947					5,694

Total loans	$	189,578				$	169,798				$	174,132				$	180,006				$	183,958

(1)	Includes home equity loans, which totaled $ at September 30, 2016.

(2)	Includes multi-family residential real estate loans, which totaled $806,000 at September 30, 2016.

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-10

Newton Federal Bank

Contractual Maturity By Loan Type


September 30, 2016	One- to Four- Family Residential Real Estate		Commercial Real Estate		Construction and Land
	(In thousands)
Amounts due in: One year or less	$	4,816	$	2,351	$	10,210
More than one to five years		26,742		13,529		2,019
More than five years		101,341		13,282		1,114

Total	$	132,899	$	29,162	$	13,343


September 30, 2016	Commercial and Industrial		Consumer		Total
	(In thousands)
Amounts due in: One year or less	$	3,446	$	719	$	21,542
More than one to five years		7,556		1,364		51,210
More than five years		5,219		179		121,135

Total	$	16,221	$	2,262	$	193,887

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-11

Newton Federal Bank

Non-Performing Assets


	At September 30,
	2016			2015			2014			2013			2012
	(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One- to four-family residential	$	3,013		$	2,056		$	2,269		$	5,295		$	8,365
Commercial		230			448			777			1,952			3,581
Construction and land		—			—			—			—			581
Commercial and industrial loans		—			33			—			335			434
Consumer loans		—			26			—			—			8

Total non-accrual loans		3,243			2,563			3,046			7,582			12,969

Accruing loans past due 90 days or more		—			—			—			—			—
Real estate owned:
One- to four-family		—			—			822			1,239			4,226
Commercial		—			470			—			64			1,159
Construction and land		—			62			307			577			577
Commercial and industrial loans		—			—			—			—			—
Consumer loans		—			—			—			—			—

Total real estate owned		—			532			1,129			1,880			5,962

Total non-performing assets	$	3,243		$	3,095		$	4,175		$	9,462		$	18,931

Total accruing troubled debt restructured loans	$	5,815		$	4,358		$	4,845		$	3,730		$	2,716
Total non-performing loans to total loans		1.71	%		1.51	%		1.75	%		4.21	%		7.05	%
Total non-performing assets to total assets		1.39	%		1.37	%		1.84	%		4.26	%		8.25	%

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-12

Newton Federal Bank

Deposit Composition


	At September 30,
	2016								2015								2014
	Amount		Percent			Average Rate			Amount		Percent			Average Rate			Amount		Percent			Average Rate
	(Dollars in thousands)
Non-interest bearing checking accounts	$	21,727		11.96	%		—	%	$	15,132		8.56	%		—	%	$	13,276		7.41	%		—	%
Passbook savings accounts		21,180		11.65			0.04	%		19,906		11.27			0.04	%		19,559		10.91			0.04	%
Interest-bearing checking accounts		30,662		16.88			0.31	%		22,750		12.88			0.17	%		16,991		9.48			0.04	%
Money market checking accounts		22,607		12.44			0.26	%		22,587		12.78			0.25	%		23,689		13.21			0.27	%
Certificates of deposit		85,523		47.07			1.39	%		96,312		54.51			1.70	%		105,749		58.99			1.89	%

Total	$	181,699		100.00	%		0.87	%	$	176,687		100.00	%		1.11	%	$	179,264		100.00	%		1.28	%

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT I-13

Newton Federal Bank

CDs >$100,000 in Balance by Maturity


	At September 30, 2016
	(In thousands)
Maturity Period:
Three months or less	$	5,319
Over three through six months		2,436
Over six through twelve months		6,102
Over twelve months		21,159

Total	$	35,016

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT II-1

Newton Federal Bank

Description of Office Facilities

Location

Leased or
Owned

Year Acquired
or Leased

Net Book Value of
Real Property

(In thousands)

Main Office:

3175 Highway 278

Owned

1974

1,169

Covington, Georgia 30014

Other Properties:

Eastside Branch

Owned

2000

1,514

8278 Highway 278

Covington, Georgia 30014

Southside Branch

Building

Owned/Land

Leased

2006

1,110

Bypass Road & Highway 36

10131 Carlin Avenue

Covington, Georgia 30014

Loan Production Office

Leased

2016

N/A

3001 Monroe Highway

Suite 500B

Bogart, Georgia 30622

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

Exhibit II-2

Newton Federal Bank

Historical Interest Rates(1)


		Prime		90 Day		One Year		10 Year
Year/Qtr. Ended		Rate		T-Note		T-Note		T-Note
2004:	Quarter 1		4.00%		0.95%		1.20%		3.86%
	Quarter 2		4.00%		1.33%		2.09%		4.62%
	Quarter 3		4.75%		1.70%		2.16%		4.12%
	Quarter 4		5.25%		2.22%		2.75%		4.24%
2005:	Quarter 1		5.75%		2.80%		3.43%		4.51%
	Quarter 2		6.00%		3.12%		3.51%		3.98%
	Quarter 3		6.75%		3.55%		4.01%		4.34%
	Quarter 4		7.25%		4.08%		4.38%		4.39%
2006:	Quarter 1		7.75%		4.63%		4.82%		4.86%
	Quarter 2		8.25%		5.01%		5.21%		5.15%
	Quarter 3		8.25%		4.88%		4.91%		4.64%
	Quarter 4		8.25%		5.02%		5.00%		4.71%
2007:	Quarter 1		8.25%		5.04%		4.90%		4.65%
	Quarter 2		8.25%		4.82%		4.91%		5.03%
	Quarter 3		7.75%		3.82%		4.05%		4.59%
	Quarter 4		7.25%		3.36%		3.34%		3.91%
2008:	Quarter 1		5.25%		1.38%		1.55%		3.45%
	Quarter 2		5.00%		1.90%		2.36%		3.99%
	Quarter 3		5.00%		0.92%		1.78%		3.85%
	Quarter 4		3.25%		0.11%		0.37%		2.25%
2009:	Quarter 1		3.25%		0.21%		0.57%		2.71%
	Quarter 2		3.25%		0.19%		0.56%		3.53%
	Quarter 3		3.25%		0.14%		0.40%		3.31%
	Quarter 4		3.25%		0.06%		0.47%		3.85%
2010:	Quarter 1		3.25%		0.16%		0.41%		3.84%
	Quarter 2		3.25%		0.18%		0.32%		2.97%
	Quarter 3		3.25%		0.18%		0.32%		2.97%
	Quarter 4		3.25%		0.12%		0.29%		3.30%
2011:	Quarter 1		3.25%		0.09%		0.30%		3.47%
	Quarter 2		3.25%		0.03%		0.19%		3.18%
	Quarter 3		3.25%		0.02%		0.13%		1.92%
	Quarter 4		3.25%		0.02%		0.12%		1.89%
2012:	Quarter 1		3.25%		0.07%		0.19%		2.23%
	Quarter 2		3.25%		0.09%		0.21%		1.67%
	Quarter 3		3.25%		0.10%		0.17%		1.65%
	Quarter 4		3.25%		0.05%		0.16%		1.78%
2013:	Quarter 1		3.25%		0.07%		0.14%		1.87%
	Quarter 2		3.25%		0.04%		0.15%		2.52%
	Quarter 3		3.25%		0.02%		0.10%		2.64%
	Quarter 4		3.25%		0.07%		0.13%		3.04%
2014:	Quarter 1		3.25%		0.05%		0.13%		2.73%
	Quarter 2		3.25%		0.04%		0.11%		2.53%
	Quarter 3		3.25%		0.02%		0.13%		2.52%
	Quarter 4		3.25%		0.04%		0.25%		2.17%
2015:	Quarter 1		3.25%		0.03%		0.26%		1.94%
	Quarter 2		3.25%		0.01%		0.28%		2.35%
	Quarter 3		3.25%		0.00%		0.33%		2.06%
	Quarter 4		3.50%		0.16%		0.65%		2.27%
2016:	Quarter 1		3.50%		0.21%		0.59%		1.78%
	Quarter 2		3.50%		0.26%		0.45%		1.49%
	Quarter 3		3.50%		0.29%		0.59%		1.60%
	As of Nov. 25, 2016		3.50%		0.49%		0.81%		2.36%

(1)	End of period data.

Sources: Federal Reserve and The Wall Street Journal.

EXHIBIT II-3

Newton Federal Bank

Market Area Demographic/Economic Information

Demographic Detail: US


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017			% Change 2017 - 2022
Total Population (actual)		308,745,538		325,139,271		337,393,057		5.31			3.77
0-14 Age Group (%)		19.83		18.83		18.23		0.00			0.46
15-34 Age Group (%)		27.43		27.12		26.50		4.13			1.39
35-54 Age Group (%)		27.88		25.71		24.84		(2.90	)		0.29
55-69 Age Group (%)		15.84		18.08		18.95		20.18			8.76
70+ Age Group (%)		9.01		10.26		11.47		19.83			16.06
Median Age (actual)		37.10		38.20		39.20		2.96			2.62
Female Population (actual)		156,964,212		165,084,335		171,230,620		5.17			3.72
Male Population (actual)		151,781,326		160,054,936		166,162,437		5.45			3.82
Population Density (#/ sq miles)		87.50		92.15		95.62		5.31			3.77
Diversity Index (actual)		NA		NA		NA		NA			NA
Black (%)		12.61		12.81		12.97		7.01			5.04
Asian (%)		4.75		5.56		6.14		23.10			14.68
White (%)		72.41		70.33		68.81		2.29			1.52
Hispanic (%)		16.35		18.05		19.27		16.24			10.80
Pacific Islander (%)		0.17		0.19		0.21		16.35			10.99
American Indian/Alaska Native (%)		0.95		0.98		1.00		8.65			6.29
Multiple races (%)		2.92		3.35		3.67		20.96			13.61
Other (%)		6.19		6.78		7.20		15.35			10.28
Total Households (actual)		116,716,292		123,356,629		128,246,828		5.69			3.96
< $25K Households (%)		NA		21.91		20.30		NA			(3.70	)
$25-49K Households (%)		NA		22.90		21.83		NA			(0.91	)
$50-99K Households (%)		NA		29.47		29.04		NA			2.46
$100-$199K Households (%)		NA		19.48		21.14		NA			12.83
$200K+ Households (%)		NA		6.24		7.69		NA			28.21
Average Household Income ($)		NA		80,853		87,464		NA			8.18
Median Household Income ($)		NA		57,462		61,642		NA			7.27
Per Capita Income ($)		NA		31,459		34,068		NA			8.29
Total Owner Occupied Housing Units (actual)		75,986,074		80,105,481		83,162,784		5.42			3.82
Renter Occupied Housing Units (actual)		40,730,218		43,251,148		45,084,044		6.19			4.24
Vacant Occupied Housing Units (actual)		14,988,438		15,772,131		16,105,948		5.23			2.12

Source: Nielsen

Demographic data is provided by Nielsen based primarily on US Census data. For non-census year data, Nielsen uses samples and projections to estimate the demographic data. S&P Global Market Intelligence performs calculations on the underlying data provided by Nielsen for some of the data presented on this page.

% Change values are calculated using the underlying actual data.

Demographic Detail: Georgia


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017			% Change 2017 - 2022
Total Population (actual)		9,687,653		10,375,263		10,911,290		7.10			5.17
0-14 Age Group (%)		21.38		20.04		19.03		0.37			(0.15	)
15-34 Age Group (%)		28.14		27.72		27.42		5.53			4.03
35-54 Age Group (%)		28.79		26.75		25.60		(0.47	)		0.62
55-69 Age Group (%)		14.72		16.88		17.93		22.89			11.70
70+ Age Group (%)		6.98		8.60		10.02		31.95			22.54
Median Age (actual)		35.30		36.70		37.80		3.97			3.00
Female Population (actual)		4,958,482		5,310,064		5,579,569		7.09			5.08
Male Population (actual)		4,729,171		5,065,199		5,331,721		7.11			5.26
Population Density (#/ sq miles)		168.72		180.70		190.03		7.10			5.17
Diversity Index (actual)		NA		NA		NA		NA			NA
Black (%)		30.46		31.27		31.96		9.96			7.49
Asian (%)		3.25		4.01		4.55		32.22			19.45
White (%)		59.74		57.42		55.67		2.94			1.95
Hispanic (%)		8.81		9.61		10.15		16.80			11.06
Pacific Islander (%)		0.07		0.08		0.09		24.25			16.15
American Indian/Alaska Native (%)		0.33		0.35		0.37		13.75			9.26
Multiple races (%)		2.14		2.54		2.83		27.01			17.12
Other (%)		4.01		4.33		4.54		15.42			10.31
Total Households (actual)		3,585,584		3,854,460		4,062,208		7.50			5.39
< $25K Households (%)		NA		24.18		22.50		NA			(1.93	)
$25-49K Households (%)		NA		24.11		22.99		NA			0.47
$50-99K Households (%)		NA		29.22		29.08		NA			4.88
$100-$199K Households (%)		NA		17.30		18.97		NA			15.61
$200K+ Households (%)		NA		5.19		6.46		NA			31.23
Average Household Income ($)		NA		74,512		80,638		NA			8.22
Median Household Income ($)		NA		52,421		56,517		NA			7.81
Per Capita Income ($)		NA		28,400		30,771		NA			8.35
Total Owner Occupied Housing Units (actual)		2,354,402		2,527,797		2,662,768		7.36			5.34
Renter Occupied Housing Units (actual)		1,231,182		1,326,663		1,399,440		7.76			5.49
Vacant Occupied Housing Units (actual)		503,217		528,850		537,404		5.09			1.62

Source: Nielsen

% Change values are calculated using the underlying actual data.

Demographic Detail: Newton, GA


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017			% Change 2017 - 2022
Total Population (actual)		99,958		107,577		113,991		7.62			5.96
0-14 Age Group (%)		23.89		21.43		19.73		(3.44	)		(2.44	)
15-34 Age Group (%)		26.47		26.90		27.95		9.39			10.09
35-54 Age Group (%)		29.39		27.36		25.30		0.17			(2.02	)
55-69 Age Group (%)		13.92		16.00		17.09		23.71			13.21
70+ Age Group (%)		6.34		8.31		9.93		41.21			26.57
Median Age (actual)		34.70		36.30		37.00		4.61			1.93
Female Population (actual)		52,332		56,308		59,599		7.60			5.84
Male Population (actual)		47,626		51,269		54,392		7.65			6.09
Population Density (#/ sq miles)		367.47		395.48		419.06		7.62			5.96
Diversity Index (actual)		NA		NA		NA		NA			NA
Black (%)		40.90		43.39		45.23		14.18			10.47
Asian (%)		0.91		1.13		1.30		34.22			21.55
White (%)		53.78		50.50		48.08		1.07			0.88
Hispanic (%)		4.64		5.21		5.63		20.84			14.52
Pacific Islander (%)		0.04		0.07		0.10		113.51			45.57
American Indian/Alaska Native (%)		0.23		0.26		0.28		20.26			14.34
Multiple races (%)		2.08		2.34		2.54		21.03			14.64
Other (%)		2.07		2.30		2.47		19.68			13.90
Total Households (actual)		34,390		36,650		38,662		6.57			5.49
< $25K Households (%)		NA		24.40		23.39		NA			1.12
$25-49K Households (%)		NA		25.96		24.54		NA			(0.28	)
$50-99K Households (%)		NA		31.54		31.91		NA			6.74
$100-$199K Households (%)		NA		15.43		16.85		NA			15.17
$200K+ Households (%)		NA		2.68		3.32		NA			30.78
Average Household Income ($)		NA		64,936		68,497		NA			5.48
Median Household Income ($)		NA		49,669		52,667		NA			6.04
Per Capita Income ($)		NA		22,448		23,538		NA			4.86
Total Owner Occupied Housing Units (actual)		25,836		27,458		28,930		6.28			5.36
Renter Occupied Housing Units (actual)		8,554		9,192		9,732		7.46			5.87
Vacant Occupied Housing Units (actual)		3,952		4,029		4,072		1.95			1.07

Source: Nielsen

% Change values are calculated using the underlying actual data.

Demographic Detail: Gwinnett, GA


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017		% Change 2017 - 2022
Total Population (actual)		805,321		923,142		997,990		14.63		8.11
0-14 Age Group (%)		24.25		22.01		20.07		4.04		(1.38	)
15-34 Age Group (%)		27.69		27.44		27.80		13.58		9.51
35-54 Age Group (%)		31.73		29.34		27.30		6.01		0.57
55-69 Age Group (%)		12.07		15.34		17.41		45.69		22.65
70+ Age Group (%)		4.26		5.87		7.43		57.95		36.81
Median Age (actual)		33.60		35.40		36.60		5.36		3.39
Female Population (actual)		408,168		471,256		509,481		15.46		8.11
Male Population (actual)		397,153		451,886		488,509		13.78		8.10
Population Density (#/ sq miles)		1,871.44		2,145.24		2,319.17		14.63		8.11
Diversity Index (actual)		NA		NA		NA		NA		NA
Black (%)		23.61		27.21		29.87		32.08		18.69
Asian (%)		10.59		11.66		12.46		26.22		15.46
White (%)		53.34		47.93		43.92		3.00		(0.93	)
Hispanic (%)		20.12		20.76		21.23		18.28		10.58
Pacific Islander (%)		0.06		0.06		0.06		11.32		6.03
American Indian/Alaska Native (%)		0.50		0.49		0.48		11.59		5.88
Multiple races (%)		3.14		3.64		4.00		32.71		19.01
Other (%)		8.75		9.02		9.22		18.12		10.47
Total Households (actual)		268,519		303,641		326,638		13.08		7.57
< $25K Households (%)		NA		16.45		15.17		NA		(0.83	)
$25-49K Households (%)		NA		23.64		22.62		NA		2.93
$50-99K Households (%)		NA		32.12		31.76		NA		6.37
$100-$199K Households (%)		NA		22.28		23.68		NA		14.35
$200K+ Households (%)		NA		5.51		6.77		NA		32.21
Average Household Income ($)		NA		82,732		88,105		NA		6.49
Median Household Income ($)		NA		63,148		66,521		NA		5.34
Per Capita Income ($)		NA		27,361		28,974		NA		5.90
Total Owner Occupied Housing Units (actual)		189,167		214,683		231,346		13.49		7.76
Renter Occupied Housing Units (actual)		79,352		88,958		95,292		12.11		7.12
Vacant Occupied Housing Units (actual)		23,028		23,587		24,105		2.43		2.20

Source: Nielsen

% Change values are calculated using the underlying actual data.

Demographic Detail: Barrow, GA


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017		% Change 2017 - 2022
Total Population (actual)		69,367		77,898		84,247		12.30		8.15
0-14 Age Group (%)		23.98		22.30		20.95		4.47		1.58
15-34 Age Group (%)		28.08		26.83		26.35		7.30		6.24
35-54 Age Group (%)		28.61		27.63		27.12		8.45		6.14
55-69 Age Group (%)		13.30		15.48		16.27		30.71		13.67
70+ Age Group (%)		6.04		7.76		9.31		44.35		29.78
Median Age (actual)		33.70		35.60		36.90		5.64		3.65
Female Population (actual)		35,159		39,440		42,636		12.18		8.10
Male Population (actual)		34,208		38,458		41,611		12.42		8.20
Population Density (#/ sq miles)		432.75		485.97		525.58		12.30		8.15
Diversity Index (actual)		NA		NA		NA		NA		NA
Black (%)		11.37		11.45		11.51		13.08		8.68
Asian (%)		3.43		3.81		4.09		24.52		16.05
White (%)		78.81		77.30		76.19		10.16		6.59
Hispanic (%)		8.70		10.24		11.37		32.09		20.14
Pacific Islander (%)		0.05		0.08		0.09		63.89		35.59
American Indian/Alaska Native (%)		0.27		0.31		0.34		28.49		18.41
Multiple races (%)		2.32		2.68		2.95		29.98		19.04
Other (%)		3.75		4.37		4.83		30.91		19.53
Total Households (actual)		23,971		26,565		28,577		10.82		7.57
< $25K Households (%)		NA		19.50		18.52		NA		2.20
$25-49K Households (%)		NA		28.32		27.00		NA		2.58
$50-99K Households (%)		NA		36.73		36.80		NA		7.76
$100-$199K Households (%)		NA		14.12		16.00		NA		21.83
$200K+ Households (%)		NA		1.33		1.68		NA		36.26
Average Household Income ($)		NA		62,138		65,336		NA		5.15
Median Household Income ($)		NA		52,405		54,971		NA		4.90
Per Capita Income ($)		NA		21,267		22,235		NA		4.55
Total Owner Occupied Housing Units (actual)		18,495		20,466		22,006		10.66		7.52
Renter Occupied Housing Units (actual)		5,476		6,099		6,571		11.38		7.74
Vacant Occupied Housing Units (actual)		2,429		2,479		2,520		2.06		1.65

Source: Nielsen

% Change values are calculated using the underlying actual data.

Demographic Detail: Walton, GA


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017			% Change 2017 - 2022
Total Population (actual)		83,768		89,994		95,120		7.43			5.70
0-14 Age Group (%)		22.27		20.31		18.72		(2.03	)		(2.53	)
15-34 Age Group (%)		24.43		25.51		26.66		12.19			10.48
35-54 Age Group (%)		29.64		26.76		24.55		(3.03	)		(3.04	)
55-69 Age Group (%)		15.93		17.56		18.67		18.42			12.39
70+ Age Group (%)		7.73		9.87		11.40		37.13			22.03
Median Age (actual)		37.20		38.40		39.10		3.23			1.82
Female Population (actual)		43,005		46,202		48,818		7.43			5.66
Male Population (actual)		40,763		43,792		46,302		7.43			5.73
Population Density (#/ sq miles)		257.48		276.62		292.37		7.43			5.70
Diversity Index (actual)		NA		NA		NA		NA			NA
Black (%)		15.64		17.42		18.73		19.63			13.68
Asian (%)		1.14		1.47		1.71		38.39			23.20
White (%)		80.05		77.23		75.15		3.65			2.84
Hispanic (%)		3.20		4.35		5.19		45.81			26.30
Pacific Islander (%)		0.06		0.09		0.11		62.50			30.77
American Indian/Alaska Native (%)		0.27		0.30		0.33		23.42			15.69
Multiple races (%)		1.49		1.73		1.90		24.22			16.22
Other (%)		1.35		1.76		2.07		40.14			24.16
Total Households (actual)		29,583		31,893		33,756		7.81			5.84
< $25K Households (%)		NA		21.12		20.05		NA			0.49
$25-49K Households (%)		NA		25.44		24.28		NA			1.01
$50-99K Households (%)		NA		33.54		33.45		NA			5.54
$100-$199K Households (%)		NA		17.03		18.53		NA			15.21
$200K+ Households (%)		NA		2.87		3.69		NA			35.92
Average Household Income ($)		NA		68,008		72,132		NA			6.06
Median Household Income ($)		NA		54,096		56,950		NA			5.28
Per Capita Income ($)		NA		24,268		25,757		NA			6.14
Total Owner Occupied Housing Units (actual)		22,330		23,971		25,324		7.35			5.64
Renter Occupied Housing Units (actual)		7,253		7,922		8,432		9.22			6.44
Vacant Occupied Housing Units (actual)		2,852		2,935		2,978		2.91			1.47

Source: Nielsen

% Change values are calculated using the underlying actual data.

Demographic Detail: Jackson, GA


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017			% Change 2017 - 2022
Total Population (actual)		60,485		64,854		68,944		7.22			6.31
0-14 Age Group (%)		22.24		20.68		19.43		(0.29	)		(0.13	)
15-34 Age Group (%)		24.91		24.74		25.46		6.46			9.41
35-54 Age Group (%)		29.69		27.69		25.64		(0.02	)		(1.56	)
55-69 Age Group (%)		15.60		17.40		18.24		19.57			11.46
70+ Age Group (%)		7.55		9.49		11.23		34.82			25.76
Median Age (actual)		36.90		38.40		39.20		4.07			2.08
Female Population (actual)		30,483		32,664		34,742		7.15			6.36
Male Population (actual)		30,002		32,190		34,202		7.29			6.25
Population Density (#/ sq miles)		178.12		190.99		203.04		7.22			6.31
Diversity Index (actual)		NA		NA		NA		NA			NA
Black (%)		6.78		7.25		7.60		14.67			11.39
Asian (%)		1.71		1.95		2.13		22.46			16.13
White (%)		86.79		85.29		84.19		5.37			4.92
Hispanic (%)		6.18		7.16		7.89		24.28			17.10
Pacific Islander (%)		0.02		0.04		0.05		76.92			39.13
American Indian/Alaska Native (%)		0.21		0.29		0.35		50.00			29.03
Multiple races (%)		1.76		2.03		2.24		23.62			16.83
Other (%)		2.73		3.14		3.45		23.65			16.72
Total Households (actual)		21,343		22,544		23,804		5.63			5.59
< $25K Households (%)		NA		21.56		19.66		NA			(3.72	)
$25-49K Households (%)		NA		23.00		21.25		NA			(2.43	)
$50-99K Households (%)		NA		32.44		32.32		NA			5.20
$100-$199K Households (%)		NA		19.85		22.50		NA			19.64
$200K+ Households (%)		NA		3.14		4.27		NA			43.44
Average Household Income ($)		NA		70,938		77,511		NA			9.27
Median Household Income ($)		NA		57,111		62,006		NA			8.57
Per Capita Income ($)		NA		24,987		27,123		NA			8.55
Total Owner Occupied Housing Units (actual)		16,429		17,409		18,409		5.97			5.74
Renter Occupied Housing Units (actual)		4,914		5,135		5,395		4.50			5.06
Vacant Occupied Housing Units (actual)		2,409		2,517		2,543		4.48			1.03

Source: Nielsen

% Change values are calculated using the underlying actual data.

Demographic Detail: Clarke, GA


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017			% Change 2017 - 2022
Total Population (actual)		116,714		126,464		134,269		8.35			6.17
0-14 Age Group (%)		15.02		15.37		15.90		10.83			9.89
15-34 Age Group (%)		49.61		45.64		41.96		(0.31	)		(2.40	)
35-54 Age Group (%)		18.97		20.37		22.55		16.33			17.55
55-69 Age Group (%)		10.54		11.84		11.75		21.80			5.37
70+ Age Group (%)		5.86		6.78		7.84		25.38			22.67
Median Age (actual)		26.30		28.20		30.10		7.22			6.74
Female Population (actual)		61,326		66,168		70,050		7.90			5.87
Male Population (actual)		55,388		60,296		64,219		8.86			6.51
Population Density (#/ sq miles)		979.25		1,061.06		1,126.54		8.35			6.17
Diversity Index (actual)		NA		NA		NA		NA			NA
Black (%)		26.55		27.59		28.36		12.60			9.14
Asian (%)		4.17		4.40		4.58		14.40			10.32
White (%)		61.89		60.04		58.67		5.12			3.75
Hispanic (%)		10.45		11.07		11.54		14.87			10.64
Pacific Islander (%)		0.07		0.08		0.08		15.48			11.34
American Indian/Alaska Native (%)		0.21		0.27		0.31		37.25			22.71
Multiple races (%)		2.16		2.40		2.57		20.00			13.83
Other (%)		4.94		5.22		5.43		14.54			10.41
Total Households (actual)		45,414		48,264		51,486		6.28			6.68
< $25K Households (%)		NA		40.84		39.48		NA			3.12
$25-49K Households (%)		NA		24.08		24.04		NA			6.50
$50-99K Households (%)		NA		21.96		22.04		NA			7.10
$100-$199K Households (%)		NA		10.08		10.99		NA			16.31
$200K+ Households (%)		NA		3.05		3.46		NA			20.91
Average Household Income ($)		NA		53,144		55,946		NA			5.27
Median Household Income ($)		NA		32,847		34,181		NA			4.06
Per Capita Income ($)		NA		22,369		23,519		NA			5.14
Total Owner Occupied Housing Units (actual)		19,166		20,237		21,530		5.59			6.39
Renter Occupied Housing Units (actual)		26,248		28,027		29,956		6.78			6.88
Vacant Occupied Housing Units (actual)		5,654		5,805		5,878		2.67			1.26

Source: Nielsen

% Change values are calculated using the underlying actual data.

Demographic Detail: Oconee, GA


	Base 2010		Current 2017		Projected 2022		% Change 2010 - 2017			% Change 2017 - 2022
Total Population (actual)		32,808		37,122		40,135		13.15			8.12
0-14 Age Group (%)		22.95		19.82		16.76		(2.28	)		(8.55	)
15-34 Age Group (%)		21.60		24.03		27.40		25.85			23.31
35-54 Age Group (%)		31.74		27.65		24.04		(1.43	)		(6.00	)
55-69 Age Group (%)		16.83		19.13		20.64		28.55			16.68
70+ Age Group (%)		6.88		9.38		11.15		54.34			28.58
Median Age (actual)		38.60		39.90		40.90		3.37			2.51
Female Population (actual)		16,801		18,982		20,547		12.98			8.24
Male Population (actual)		16,007		18,140		19,588		13.33			7.98
Population Density (#/ sq miles)		178.07		201.48		217.83		13.15			8.12
Diversity Index (actual)		NA		NA		NA		NA			NA
Black (%)		4.98		5.36		5.63		21.59			13.68
Asian (%)		3.12		4.23		5.06		53.82			29.26
White (%)		88.41		86.26		84.68		10.41			6.13
Hispanic (%)		4.38		4.89		5.27		26.46			16.46
Pacific Islander (%)		0.02		0.02		0.02		20.00			33.33
American Indian/Alaska Native (%)		0.15		0.23		0.29		73.47			35.29
Multiple races (%)		1.38		1.73		1.99		42.26			24.26
Other (%)		1.95		2.17		2.33		25.59			16.27
Total Households (actual)		11,622		13,280		14,417		14.27			8.56
< $25K Households (%)		NA		13.52		12.69		NA			1.95
$25-49K Households (%)		NA		18.83		18.20		NA			4.92
$50-99K Households (%)		NA		30.66		29.87		NA			5.77
$100-$199K Households (%)		NA		27.45		28.20		NA			11.55
$200K+ Households (%)		NA		9.55		11.04		NA			25.47
Average Household Income ($)		NA		101,622		106,842		NA			5.14
Median Household Income ($)		NA		76,548		80,089		NA			4.63
Per Capita Income ($)		NA		36,468		38,488		NA			5.54
Total Owner Occupied Housing Units (actual)		9,418		10,794		11,733		14.61			8.70
Renter Occupied Housing Units (actual)		2,204		2,486		2,684		12.79			7.96
Vacant Occupied Housing Units (actual)		761		778		804		2.23			3.34

Source: Nielsen

% Change values are calculated using the underlying actual data.

EXHIBIT III-1

Newton Federal Bank

General Characteristics of Publicly-Traded Institutions

Exhibit III-1

Characteristics of Publicly-Traded Thrifts

November 25, 2016

As of

November 25, 2016

Total

Fiscal

Conv.

Stock

Market

Ticker

Financial Institution

Exchange

Region

City

State

Assets

Offices

Mth End

Date

Price

Value

($Mil)

($)

($Mil)

ANCB

Anchor Bancorp

NASDAQ

Lacey

436

Jun

1/26/11

25.40

ASBB

ASB Bancorp, Inc.

NASDAQ

Asheville

797

Dec

10/12/11

27.80

105

ACFC

Atlantic Coast Financial Corporation

NASDAQ

Jacksonville

937

Dec

2/4/11

7.06

109

BCTF

Bancorp 34, Inc.

NASDAQ

Alamogordo

328

Dec

10/12/16

12.37

BKMU

Bank Mutual Corporation

NASDAQ

Milwaukee

2,653

Dec

10/30/03

9.00

411

BFIN

BankFinancial Corporation

NASDAQ

Burr Ridge

1,540

Dec

6/24/05

14.50

279

BYBK

Bay Bancorp, Inc.

NASDAQ

Columbia

606

Dec

1/0/00

6.05

BNCL

Beneficial Bancorp, Inc.

NASDAQ

Philadelphia

5,580

Dec

1/13/15

17.25

1,310

BHBK

Blue Hills Bancorp, Inc.

NASDAQ

Norwood

2,314

Dec

7/22/14

18.00

482

BOFI

BofI Holding, Inc.

NASDAQ

San Diego

7,855

Jun

3/14/05

24.67

1,562

BYFC

Broadway Financial Corporation

NASDAQ

Los Angeles

413

Dec

1/9/96

1.59

BLMT

BSB Bancorp, Inc.

NASDAQ

Belmont

2,074

Dec

10/5/11

26.70

243

CFFN

Capitol Federal Financial, Inc.

NASDAQ

Topeka

9,267

Sep

12/22/10

15.99

2,198

CARV

Carver Bancorp, Inc.

NASDAQ

New York

702

Mar

10/25/94

4.00

CFBK

Central Federal Corporation

NASDAQ

Worthington

408

Dec

12/30/98

1.45

CHFN

Charter Financial Corporation

NASDAQ

West Point

1,443

Sep

4/9/13

14.47

217

CSBK

Clifton Bancorp Inc.

NASDAQ

Clifton

1,312

Mar

4/2/14

16.54

381

CWAY

Coastway Bancorp, Inc.

NASDAQ

Warwick

633

Dec

1/15/14

13.95

DCOM

Dime Community Bancshares, Inc.

NASDAQ

Brooklyn

5,822

Dec

6/26/96

19.15

719

ESBK

Elmira Savings Bank

NASDAQ

Elmira

567

Dec

3/1/85

19.90

ENFC

Entegra Financial Corp.

NASDAQ

Franklin

1,218

Dec

10/1/14

19.37

125

EQFN

Equitable Financial Corp.

NASDAQ

Grand Island

228

Jun

7/9/15

9.10

ESSA

ESSA Bancorp, Inc.

NASDAQ

Stroudsburg

1,772

Sep

4/4/07

14.89

170

FCAP

First Capital, Inc.

NASDAQ

Corydon

742

Dec

1/4/99

32.13

107

FBNK

First Connecticut Bancorp, Inc.

NASDAQ

Farmington

2,832

Dec

6/30/11

22.40

354

FDEF

First Defiance Financial Corp.

NASDAQ

Defiance

2,450

Dec

10/2/95

46.43

417

FNWB

First Northwest Bancorp

NASDAQ

Port Angeles

1,049

Jun

1/30/15

14.89

194

FBC

Flagstar Bancorp, Inc.

NYSE

Troy

14,273

Dec

4/30/97

27.78

1,573

FSBW

FS Bancorp, Inc.

NASDAQ

Mountlake Terrace

827

Dec

7/10/12

32.65

100

FSBC

FSB Bancorp, Inc.

NASDAQ

Fairport

260

Dec

7/14/16

14.50

HBK

Hamilton Bancorp, Inc.

NASDAQ

Towson

517

Mar

10/10/12

13.98

HIFS

Hingham Institution for Savings

NASDAQ

Hingham

1,960

Dec

12/20/88

168.32

359

HMNF

HMN Financial, Inc.

NASDAQ

Rochester

686

Dec

6/30/94

16.33

HFBL

Home Federal Bancorp, Inc. of Louisiana

NASDAQ

Shreveport

390

Jun

12/22/10

24.00

IROQ

IF Bancorp, Inc.

NASDAQ

Watseka

589

Jun

7/8/11

19.35

ISBC

Investors Bancorp, Inc.

NASDAQ

Short Hills

22,536

151

Dec

5/8/14

14.10

4,361

JXSB

Jacksonville Bancorp, Inc.

NASDAQ

Jacksonville

331

Dec

7/15/10

29.26

KRNY

Kearny Financial Corp.

NASDAQ

Fairfield

4,523

Jun

5/19/15

15.30

1,354

MLVF

Malvern Bancorp, Inc.

NASDAQ

Paoli

821

Sep

10/12/12

20.40

134

MELR

Melrose Bancorp, Inc.

NASDAQ

Melrose

267

Dec

10/22/14

15.91

EBSB

Meridian Bancorp, Inc.

NASDAQ

Peabody

4,173

Dec

7/29/14

18.10

972

CASH

Meta Financial Group, Inc.

NASDAQ

Sioux Falls

4,007

Sep

9/20/93

94.55

852

MSBF

MSB Financial Corp.

NASDAQ

Millington

434

Dec

7/17/15

13.70

NYCB

New York Community Bancorp, Inc.

NYSE

Westbury

49,463

263

Dec

11/23/93

16.01

7,798

NFBK

Northfield Bancorp, Inc.

NASDAQ

Woodbridge

3,785

Dec

1/25/13

18.84

911

NWBI

Northwest Bancshares, Inc.

NASDAQ

Warren

9,715

177

Dec

12/18/09

18.37

1,861

OCFC

OceanFirst Financial Corp.

NASDAQ

Toms River

4,151

Dec

7/3/96

23.99

620

ORIT

Oritani Financial Corp.

NASDAQ

Township of Washington

3,795

Jun

6/24/10

17.65

799

OTTW

Ottawa Bancorp, Inc.

NASDAQ

Ottawa

276

Dec

10/12/16

11.73

PBHC

Pathfinder Bancorp, Inc.

NASDAQ

Oswego

717

Dec

10/17/14

12.51

PBBI

PB Bancorp, Inc.

NASDAQ

Putnam

506

Jun

1/8/16

9.30

Exhibit III-1

Characteristics of Publicly-Traded Thrifts

November 25, 2016

As of

November 25, 2016

Total

Fiscal

Conv.

Stock

Market

Ticker

Financial Institution

Exchange

Region

City

State

Assets

Offices

Mth End

Date

Price

Value

($Mil)

($)

($Mil)

PBSK

Poage Bankshares, Inc.

NASDAQ

Ashland

449

Dec

9/13/11

18.95

PROV

Provident Financial Holdings, Inc.

NASDAQ

Riverside

1,243

Jun

6/28/96

20.00

160

PFS

Provident Financial Services, Inc.

NYSE

Iselin

9,390

Dec

1/16/03

27.20

1,796

PBIP

Prudential Bancorp, Inc.

NASDAQ

Philadelphia

559

Sep

10/10/13

15.81

127

RNDB

Randolph Bancorp, Inc.

NASDAQ

Stoughton

490

Dec

7/1/16

15.13

RVSB

Riverview Bancorp, Inc.

NASDAQ

Vancouver

984

Mar

10/1/97

5.99

135

SVBI

Severn Bancorp, Inc.

NASDAQ

Annapolis

778

Dec

1/0/00

6.65

SIFI

SI Financial Group, Inc.

NASDAQ

Willimantic

1,538

Dec

1/13/11

14.20

173

SBCP

Sunshine Bancorp, Inc.

NASDAQ

Plant City

564

Dec

7/15/14

15.91

127

TBNK

Territorial Bancorp Inc.

NASDAQ

Honolulu

1,849

Dec

7/13/09

32.06

313

TSBK

Timberland Bancorp, Inc.

NASDAQ

Hoquiam

891

Sep

1/13/98

19.05

132

TRST

TrustCo Bank Corp NY

NASDAQ

Glenville

4,813

145

Dec

1/0/00

8.35

799

UCBA

United Community Bancorp

NASDAQ

Lawrenceburg

528

Jun

1/10/13

16.20

UCFC

United Community Financial Corp.

NASDAQ

Youngstown

2,160

Dec

7/9/98

8.58

399

UBNK

United Financial Bancorp, Inc.

NASDAQ

Glastonbury

6,545

Dec

3/4/11

16.84

851

WSBF

Waterstone Financial, Inc.

NASDAQ

Wauwatosa

1,795

Dec

1/23/14

18.20

535

WAYN

Wayne Savings Bancshares, Inc.

NASDAQ

Wooster

446

Dec

1/9/03

15.05

WCFB

WCF Bancorp, Inc.

NASDAQ

Webster City

124

Dec

7/14/16

8.90

WEBK

Wellesley Bancorp, Inc.

NASDAQ

Wellesley

666

Dec

1/26/12

24.45

WBB

Westbury Bancorp, Inc.

NASDAQ

West Bend

703

Sep

4/10/13

20.04

WNEB

Western New England Bancorp, Inc.

NASDAQ

Westfield

1,378

Dec

1/4/07

8.50

257

WBKC

Wolverine Bancorp, Inc.

NASDAQ

Midland

369

Dec

1/20/11

27.97

WSFS

WSFS Financial Corporation

NASDAQ

Wilmington

6,628

Dec

11/26/86

42.25

1,323

WVFC

WVS Financial Corp.

NASDAQ

Pittsburgh

335

Jun

11/29/93

13.01

GCBC

Greene County Bancorp, Inc. (MHC)

NASDAQ

Catskill

893

Jun

12/30/98

21.70

184

HONE

HarborOne Bancorp, Inc. (MHC)

NASDAQ

Brockton

2,347

Dec

6/30/16

19.62

630

KFFB

Kentucky First Federal Bancorp (MHC)

NASDAQ

Frankfort

295

Jun

3/3/05

8.65

LSBK

Lake Shore Bancorp, Inc. (MHC)

NASDAQ

Dunkirk

478

Dec

4/4/06

14.18

MGYR

Magyar Bancorp, Inc. (MHC)

NASDAQ

New Brunswick

584

Sep

1/24/06

10.60

OFED

Oconee Federal Financial Corp. (MHC)

NASDAQ

Seneca

484

Jun

1/14/11

22.05

128

PVBC

Provident Bancorp, Inc. (MHC)

NASDAQ

Amesbury

768

Dec

7/16/15

17.95

171

TFSL

TFS Financial Corporation (MHC)

NASDAQ

Cleveland

12,906

Sep

4/23/07

18.82

5,335

Source: SNL Financial, LC.

EXHIBIT III-2

Newton Federal Bank

Public Market Pricing of Publicly-Traded Institutions-

$600 Million in Assets or Less

Exhibit III-2

Public Market Pricing Versus Peer Group

Newton Federal Bank

As of November 25, 2016


			Market				Per Share Data
			Capitalization				Core			Book													Dividends(3)			Financial Characteristics(5)
			Price/		Market		12 Month			Value/		Pricing Ratios(2)											Amount/		Payout	Total		Equity/			Tang. Eq./			NPAs/	Reported						Core
			Share		Value		EPS(1)			Share		P/E	P/B			P/A			P/TB			P/Core	Share	Yield	Ratio(4)	Assets		Assets			T. Assets			Assets	ROAA			ROAE			ROAA			ROAE
			($)		($Mil)		($)			($)		(x)	(%)			(%)			(%)			(x)	($)	(%)	(%)	($Mil)		(%)			(%)			(%)	(%)			(%)			(%)			(%)
All Non-MHC Public Companies(6)
Averages			$	20.55	$	530.90	$	1.05		$	15.78	18.80x		123.90	%		15.20	%		134.09	%	19.59x	$0.31	1.49%	49.23%	$	3,069		12.71	%		12.15	%	1.13%		0.71	%		5.98	%		0.73	%		6.11	%
Median			$	16.33	$	132.28	$	0.78		$	14.42	18.77x		121.48	%		14.66	%		127.40	%	19.15x	$0.24	1.43%	39.21%	$	937		11.50	%		11.12	%	0.88%		0.62	%		5.34	%		0.64	%		5.14	%
Comparable Group
Averages			$	15.35	$	57.43	$	0.59		$	15.43	16.97x		99.68	%		13.66	%		104.16	%	19.50x	$0.25	1.21%	55.52%	$	409		14.02	%		13.65	%	1.30%		0.55	%		4.30	%		0.55	%		4.31	%
Medians			$	15.09	$	50.17	$	0.35		$	15.54	16.79x		98.53	%		14.18	%		99.99	%	18.21x	$0.18	1.26%	42.93%	$	424		13.81	%		13.40	%	1.10%		0.46	%		3.43	%		0.49	%		3.92	%
Comparable Group
ANCB	Anchor Bancorp	WA	$	25.40	$	63.63	$	0.29		$	25.46	NM		99.77	%		14.60	%		99.77	%	NM	NA	NA	NM	$	436		14.63	%		14.63	%	NA		0.17	%		1.14	%		0.17	%		1.14	%
BCTF	Bancorp 34, Inc.	NM	$	12.37	$	42.53	$	0.35		$	9.01	NM		137.27	%		12.96	%		138.61	%	34.93x	$0.59	0.00%	NM	$	328		9.44	%		9.36	%	0.37%		0.41	%		3.85	%		0.43	%		4.04	%
BYFC	Broadway Financial Corporation	CA	$	1.59	$	46.23	$	0.23		$	1.63	6.91x		97.29	%		11.18	%		97.29	%	7.01x	$0.04	0.00%	NM	$	413		11.50	%		11.50	%	2.91%		1.74	%		15.02	%		1.71	%		14.81	%
CFBK	Central Federal Corporation	OH	$	1.45	$	23.20	$	0.21		$	1.73	6.90x		83.61	%		5.84	%		83.61	%	6.90x	$0.00	0.00%	NM	$	408		9.58	%		9.58	%	1.03%		1.31	%		12.37	%		1.31	%		12.37	%
ESBK	Elmira Savings Bank	NY	$	19.90	$	54.54	$	1.23		$	16.80	15.79x		118.47	%		9.78	%		161.90	%	16.23x	$0.92	4.62%	73.02%	$	567		9.83	%		7.83	%	NA		0.77	%		7.81	%		0.75	%		7.67	%
EQFN	Equitable Financial Corp.	NE	$	9.10	$	31.64	$	0.32		$	10.43	29.35x		87.24	%		13.89	%		87.24	%	28.58x	NA	NA	NM	$	228		15.92	%		15.92	%	NA		0.46	%		3.00	%		0.47	%		3.08	%
FSBC	FSB Bancorp, Inc.	NY	$	14.50	$	28.15	$	0.28		$	16.20	NM		89.51	%		10.84	%		89.51	%	NM	NA	NA	NM	$	260		12.11	%		12.11	%	0.01%		0.22	%		2.52	%		0.21	%		2.42	%
HBK	Hamilton Bancorp, Inc.	MD	$	13.98	$	47.71	$	0.15		$	18.10	NM		77.19	%		9.22	%		91.08	%	NM	NA	NA	NM	$	517		11.95	%		10.32	%	1.16%		-0.01	%		-0.04	%		0.11	%		0.78	%
HFBL	Home Federal Bancorp, Inc. of Louisiana	LA	$	24.00	$	47.19	$	1.80		$	22.44	13.33x		106.94	%		12.07	%		106.94	%	13.33x	$0.36	1.50%	18.89%	$	390		11.29	%		11.29	%	0.24%		0.92	%		7.63	%		0.92	%		7.63	%
IROQ	IF Bancorp, Inc.	IL	$	19.35	$	76.44	$	0.98		$	21.12	17.92x		91.60	%		13.04	%		91.60	%	19.77x	$0.16	0.83%	14.81%	$	589		14.23	%		14.23	%	0.82%		0.70	%		4.93	%		0.64	%		4.46	%
JXSB	Jacksonville Bancorp, Inc.	IL	$	29.26	$	52.63	$	1.57		$	26.84	17.21x		109.00	%		15.91	%		115.53	%	18.58x	$0.40	1.37%	81.18%	$	331		14.60	%		13.89	%	1.33%		0.99	%		6.53	%		0.92	%		6.05	%
MELR	Melrose Bancorp, Inc.	MA	$	15.91	$	41.39	$	0.28		$	16.61	NM		95.77	%		15.54	%		95.77	%	NM	NA	NA	NM	$	267		16.23	%		16.23	%	0.00%		0.42	%		2.26	%		0.29	%		1.55	%
MSBF	MSB Financial Corp.	NJ	$	13.70	$	78.24	$	0.12		$	12.71	NM		107.81	%		18.04	%		107.81	%	NM	$0.00	0.00%	NM	$	434		16.74	%		16.74	%	3.53%		0.18	%		0.90	%		0.26	%		1.34	%
OTTW	Ottawa Bancorp, Inc.	IL	$	11.73	$	40.55	$	0.41		$	9.23	30.40x		127.06	%		14.66	%		131.32	%	28.82x	$0.00	0.00%	NM	$	276		11.54	%		11.21	%	2.00%		0.59	%		4.15	%		0.62	%		4.37	%
PBBI	PB Bancorp, Inc.	CT	$	9.30	$	73.29	$	0.12		$	10.85	NM		85.75	%		14.47	%		93.30	%	NM	$0.12	1.29%	91.67%	$	506		16.87	%		15.72	%	NA		0.18	%		1.23	%		0.19	%		1.27	%
PBSK	Poage Bankshares, Inc.	KY	$	18.95	$	70.37	$	0.60		$	18.78	NM		100.89	%		15.68	%		104.44	%	31.57x	$0.32	1.69%	53.85%	$	449		15.54	%		15.09	%	1.78%		0.43	%		2.68	%		0.50	%		3.08	%
PBIP	Prudential Bancorp, Inc.	PA	$	15.81	$	127.20	$	0.35		$	14.17	NM		111.58	%		22.74	%		111.58	%	NM	$0.12	0.76%	33.33%	$	559		20.38	%		20.38	%	3.39%		0.51	%		2.36	%		0.49	%		2.29	%
RNDB	Randolph Bancorp, Inc.	MA	$	15.13	$	88.78		NA		$	14.63	NM		103.41	%		18.13	%		103.54	%	NM	NA	NA	NM	$	490		17.54	%		17.52	%	1.41%		NA			2.73	%		NA			3.80	%
SBCP	Sunshine Bancorp, Inc.	FL	$	15.91	$	127.20	($	0.33	)	$	13.82	NM		115.10	%		14.84	%		133.49	%	NM	NA	NA	NM	$	564		12.89	%		11.32	%	0.41%		-0.26	%		-1.85	%		-0.29	%		-2.04	%
UCBA	United Community Bancorp	IN	$	16.20	$	68.01	$	0.81		$	16.83	18.84x		96.23	%		12.88	%		100.20	%	20.07x	$0.24	1.48%	27.91%	$	528		13.38	%		12.92	%	1.02%		0.68	%		5.14	%		0.63	%		4.83	%
WAYN	Wayne Savings Bancshares, Inc.	OH	$	15.05	$	41.87	$	0.92		$	14.88	16.36x		101.12	%		9.39	%		105.50	%	16.36x	$0.36	2.39%	39.13%	$	446		9.29	%		8.94	%	NA		0.57	%		6.20	%		0.57	%		6.20	%
WCFB	WCF Bancorp, Inc.	IA	$	8.90	$	22.81	$	0.07		$	11.54	NM		77.12	%		18.39	%		77.30	%	NM	$0.20	2.25%	158.74%	$	124		23.85	%		23.80	%	NA		0.19	%		1.44	%		0.13	%		0.98	%
WBKC	Wolverine Bancorp, Inc.	MI	$	27.97	$	58.70	$	2.14		$	29.97	13.07x		93.33	%		16.05	%		93.33	%	13.07x	NA	NA	46.73%	$	369		17.20	%		17.20	%	1.92%		1.13	%		7.00	%		1.13	%		7.00	%
WVFC	WVS Financial Corp.	PA	$	13.01	$	26.13	$	0.73		$	16.44	17.58x		79.14	%		7.80	%		79.14	%	17.84x	$0.16	1.23%	27.03%	$	335		9.85	%		9.85	%	0.08%		0.42	%		4.32	%		0.42	%		4.26	%

(1)	Core income, on a diluted per-share basis. Core income is net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of securities, amortization of intangibles, goodwill and nonrecurring items. Assumed tax rate is 35%.

(2)	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. P/E and P/Core =NM if the ratio is negative or above 35x.

(3)	Indicated 12 month dividend, based on last quarterly dividend declared.

(4)	Indicated 12 month dividend as a percent of trailing 12 month earnings.

(5)	ROAA (return on average assets) and ROAE (return on average equity) are indicated ratios based on trailing 12 month earnings and average equity and assets balances.

(6)	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.

Exhibit III-3

Peer Group Market Area Comparative Analysis


						Proj.								Per Capita Income					Deposit
		Population				Pop.		2010-2016			2016-2022			2016		% State			Market
Institution	County	2010		2016		2022		% Change			% Change			Amount		Average			Share(1)
Anchor Bancorp - WA	Thurston		252,264		271,588		293,737		1.2	%		1.3	%		29,507		89.5	%		1.49	%
Equitable Financial Corp. - NE	Hall		58,607		62,421		64,882		1.1	%		0.6	%		24,046		82.5	%		5.62	%
IF Bancorp, Inc. - IL	Iroquois		29,718		28,599		27,804		-0.6	%		-0.5	%		27,730		87.6	%		25.29	%
Jacksonville Bancorp, Inc. - IL	Morgan		35,547		34,692		34,215		-0.4	%		-0.2	%		29,817		94.2	%		26.52	%
Melrose Bancorp, Inc. - MA	Middlesex		1,503,085		1,592,352		1,678,407		1.0	%		0.9	%		47,267		121.9	%		0.39	%
MSB Financial Corp. - NJ	Morris		492,276		501,318		507,646		0.3	%		0.2	%		52,009		138.7	%		0.83	%
Poage Bankshares, Inc. - KY	Boyd		49,542		48,562		47,255		-0.3	%		-0.5	%		26,801		105.4	%		20.76	%
Prudential Bancorp, Inc. - PA	Philadelphia		1,526,006		1,569,473		1,608,752		0.5	%		0.4	%		23,204		75.1	%		0.98	%
United Community Bancorp - IN	Dearborn		50,047		49,234		49,348		-0.3	%		0.0	%		26,820		103.0	%		40.83	%
Wolverine Bancorp, Inc. - MI	Midland		83,629		83,266		84,018		-0.1	%		0.1	%		30,041		108.2	%		16.04	%
	Averages:		408,072		424,151		439,606		0.2	%		0.3	%		31,724		100.6	%		13.88	%
	Medians:		71,118		72,844		74,450		0.1	%		0.2	%		28,619		98.6	%		10.83	%
Newton Federal Bank - GA	Newton		99,958		105,461		113,991		1.3	%		1.6	%		22,587		84.2	%		20.90	%

(1)	Total institution deposits in headquarters county as percent of total county deposits as of June 30, 2016.

Sources: SNL Financial, LC.

EXHIBIT IV-1

Newton Federal Bank

Thrift Stock Prices: As of November 25, 2016

RP ^® Financial, LC.

Exhibit IV-1A

Weekly Thrift Market Line - Part One

Prices As of November 25, 2016


			Market Capitalization						Price Change Data												Current Per Share Financials
			Price/		Shares		Market		52 Week (1)						% Change From						LTM		LTM Core		BV/		TBV/		Assets/
			Share(1)		Outstanding		Capitalization		High		Low		Last Wk		Last Wk		52 Wks (2)		MRY (2)		EPS (3)		EPS (3)		Share		Share (4)		Share
			($)		(000)		($Mil)		($)		($)		($)		(%)		(%)		(%)		($)		($)		($)		($)		($)
Companies
ANCB	Anchor Bancorp	WA		25.40		2,505		63.6		26.39		22.61		26.00		-2.31		-0.39		-1.89		0.29		0.29		25.46		25.46		174.02
ASBB	ASB Bancorp, Inc.	NC		27.80		3,787		105.3		27.80		24.07		27.45		1.28		9.17		7.10		1.47		1.21		24.12		24.12		210.50
ACFC	Atlantic Coast Financial Corporation	FL		7.06		15,509		109.5		7.08		5.03		6.79		3.98		17.08		20.48		0.33		0.27		5.55		5.55		60.41
BCTF	Bancorp 34, Inc.	NM		12.37		3,438		42.5		13.15		7.91		12.29		0.62		44.71		40.69		0.34		0.35		9.01		8.92		95.43
BKMU	Bank Mutual Corporation	WI		9.00		45,672		411.0		9.00		7.00		8.70		3.45		17.65		15.38		0.37		0.38		6.32		6.32		58.10
BFIN	BankFinancial Corporation	IL		14.50		19,271		279.4		14.60		11.38		14.25		1.75		11.62		14.81		0.38		0.40		10.57		10.52		79.93
BYBK	Bay Bancorp, Inc.	MD		6.05		10,370		62.7		6.20		4.57		5.95		1.68		16.35		19.57		0.14		0.18		6.28		5.96		58.47
BNCL	Beneficial Bancorp, Inc.	PA		17.25		75,914		1,309.5		17.25		12.30		16.65		3.60		24.46		29.50		0.31		0.40		13.41		11.13		73.51
BHBK	Blue Hills Bancorp, Inc.	MA		18.00		26,782		482.1		18.00		13.22		17.50		2.86		9.49		17.57		0.28		0.27		14.43		14.03		86.39
BOFI	BofI Holding, Inc.	CA		24.67		63,299		1,561.6		25.13		13.47		23.49		5.02		21.29		17.20		1.91		1.89		11.32		11.32		124.09
BYFC	Broadway Financial Corporation	CA		1.59		29,077		46.2		2.50		1.27		1.60		-0.63		18.66		5.30		0.23		0.23		1.63		1.63		14.22
BLMT	BSB Bancorp, Inc.	MA		26.70		9,102		243.0		26.88		20.72		25.75		3.69		19.20		14.15		1.19		NA		17.23		17.23		227.83
CFFN	Capitol Federal Financial, Inc.	KS		15.99		137,486		2,198.4		16.39		11.39		16.22		-1.42		25.02		27.31		0.63		NA		10.13		10.13		67.40
CARV	Carver Bancorp, Inc.	NY		4.00		3,696		14.8		5.99		1.92		4.00		0.00		-33.44		6.67		-0.19		-0.42		2.51		2.51		189.86
CFBK	Central Federal Corporation	OH		1.45		16,003		23.2		1.68		1.10		1.49		-2.68		4.50		9.85		0.21		0.21		1.73		1.73		25.52
CHFN	Charter Financial Corporation	GA		14.47		15,031		217.5		14.70		12.34		14.03		3.14		8.07		9.54		0.79		0.86		13.52		11.36		96.00
CSBK	Clifton Bancorp Inc.	NJ		16.54		23,046		381.2		16.73		13.09		16.54		0.00		12.14		15.34		0.19		0.19		13.12		13.12		56.94
CWAY	Coastway Bancorp, Inc.	RI		13.95		4,467		62.3		14.01		11.29		13.45		3.72		23.89		6.65		0.79		0.79		15.52		15.52		141.70
DCOM	Dime Community Bancshares, Inc.	NY		19.15		37,544		719.0		19.25		15.61		18.65		2.68		3.51		9.49		2.26		1.05		14.79		13.31		155.07
ESBK	Elmira Savings Bank	NY		19.90		2,741		54.5		21.50		16.83		19.34		2.90		4.74		0.09		1.26		1.23		16.80		12.29		207.03
ENFC	Entegra Financial Corp.	NC		19.37		6,442		124.8		19.90		16.11		19.10		1.44		5.35		0.09		0.92		1.04		21.37		20.90		189.14
EQFN	Equitable Financial Corp.	NE		9.10		3,477		31.6		9.25		8.05		8.88		2.52		12.07		3.29		0.31		0.32		10.43		10.43		65.53
ESSA	ESSA Bancorp, Inc.	PA		14.89		11,394		169.7		14.90		12.69		14.78		0.74		11.20		8.85		0.73		0.71		15.48		14.05		155.57
FCAP	First Capital, Inc.	IN		32.13		3,338		107.2		35.00		23.50		32.16		-0.11		25.98		23.08		1.91		2.04		23.55		21.22		222.34
FBNK	First Connecticut Bancorp, Inc.	CT		22.40		15,809		354.1		22.50		14.42		21.15		5.91		25.56		28.66		0.89		0.87		16.17		16.17		179.13
FDEF	First Defiance Financial Corp.	OH		46.43		8,981		417.0		46.83		34.80		45.80		1.38		13.11		22.90		3.08		3.10		32.53		25.49		272.80
FNWB	First Northwest Bancorp	WA		14.89		13,008		193.7		14.92		11.99		14.79		0.68		6.05		5.23		0.29		0.27		14.60		14.60		80.61
FBC	Flagstar Bancorp, Inc.	MI		27.78		56,606		1,572.5		29.29		17.25		28.22		-1.56		12.65		20.21		2.60		2.74		22.72		22.72		252.14
FSBW	FS Bancorp, Inc.	WA		32.65		3,058		99.8		32.75		22.05		32.09		1.72		25.56		25.58		3.35		3.58		26.02		24.65		270.62
FSBC	FSB Bancorp, Inc.	NY		14.50		1,942		28.2		14.89		9.19		14.32		1.26		46.81		40.28		0.30		0.28		16.20		16.20		133.76
HBK	Hamilton Bancorp, Inc.	MD		13.98		3,414		47.7		15.11		13.19		13.75		1.64		-5.89		-2.00		-0.01		0.15		18.10		15.34		151.50
HIFS	Hingham Institution for Savings	MA		168.32		2,131		358.6		171.00		115.05		164.76		2.16		27.21		40.50		10.41		10.31		72.35		72.35		920.01
HMNF	HMN Financial, Inc.	MN		16.33		4,489		73.3		16.45		10.81		15.80		3.33		36.22		41.35		1.22		1.23		16.67		16.39		152.75
HFBL	Home Federal Bancorp, Inc. of Louisiana	LA		24.00		1,966		47.2		25.00		21.20		24.00		0.00		4.48		3.23		1.80		1.80		22.44		22.44		198.13
IROQ	IF Bancorp, Inc.	IL		19.35		3,950		76.4		19.97		17.25		19.14		1.10		10.26		4.59		1.08		0.98		21.12		21.12		149.02
ISBC	Investors Bancorp, Inc.	NJ		14.10		309,294		4,361.0		14.12		10.67		13.79		2.25		10.07		13.34		0.58		0.58		10.03		9.75		72.86
JXSB	Jacksonville Bancorp, Inc.	IL		29.26		1,799		52.6		33.08		23.20		29.89		-2.11		19.23		11.34		1.70		1.57		26.84		25.33		183.88
KRNY	Kearny Financial Corp.	NJ		15.30		88,521		1,354.4		15.60		11.31		15.15		0.99		23.09		20.76		0.19		0.19		12.57		11.34		51.10
MLVF	Malvern Bancorp, Inc.	PA		20.40		6,560		133.8		20.47		15.00		19.25		5.97		26.16		16.17		1.86		1.80		14.42		14.42		125.19
MELR	Melrose Bancorp, Inc.	MA		15.91		2,602		41.4		17.00		14.60		16.35		-2.72		7.83		4.09		0.41		0.28		16.61		16.61		102.50
EBSB	Meridian Bancorp, Inc.	MA		18.10		53,714		972.2		18.95		12.28		17.85		1.40		22.80		28.37		0.56		0.56		11.12		10.86		77.69
CASH	Meta Financial Group, Inc.	SD		94.55		9,006		851.5		95.10		36.22		90.90		4.02		112.90		105.86		3.92		4.65		39.30		NA		444.88
MSBF	MSB Financial Corp.	NJ		13.70		5,711		78.2		14.00		11.85		13.95		-1.79		15.51		9.60		0.12		0.12		12.71		12.71		75.93
NYCB	New York Community Bancorp, Inc.	NY		16.01		487,057		7,797.8		17.05		13.74		15.87		0.88		-0.93		-1.90		-0.08		1.20		12.50		7.50		101.55
NFBK	Northfield Bancorp, Inc.	NJ		18.84		48,333		910.6		18.84		14.31		18.42		2.28		18.42		18.34		0.52		0.58		12.84		12.00		78.30
NWBI	Northwest Bancshares, Inc.	PA		18.37		101,303		1,860.9		18.38		11.78		18.04		1.83		32.16		37.19		0.41		0.78		11.48		8.11		95.90
OCFC	OceanFirst Financial Corp.	NJ		23.99		25,851		620.2		24.00		15.98		23.32		2.87		22.09		19.77		1.07		1.41		16.14		13.42		160.58
ORIT	Oritani Financial Corp.	NJ		17.65		45,244		798.5		18.00		14.95		17.65		0.00		2.92		6.97		1.12		0.87		11.94		11.94		83.87
OTTW	Ottawa Bancorp, Inc.	IL		11.73		3,456		40.5		11.75		8.39		11.73		0.02		38.48		39.17		0.39		0.41		9.23		8.93		79.88
PBHC	Pathfinder Bancorp, Inc.	NY		12.51		4,230		52.9		13.32		10.76		12.50		0.08		1.05		-3.06		0.73		0.65		13.91		12.79		169.54
PBBI	PB Bancorp, Inc.	CT		9.30		7,880		73.3		9.75		8.17		9.50		-2.11		13.57		9.10		0.12		0.12		10.85		9.97		64.27
PBSK	Poage Bankshares, Inc.	KY		18.95		3,714		70.4		20.90		15.50		19.05		-0.52		14.23		10.82		0.52		0.60		18.78		18.14		120.88
PROV	Provident Financial Holdings, Inc.	CA		20.00		7,990		159.8		20.66		16.73		20.00		0.00		9.89		5.88		0.80		0.81		16.70		16.70		155.52
PFS	Provident Financial Services, Inc.	NJ		27.20		66,043		1,796.4		27.26		17.71		26.91		1.08		30.77		34.99		1.37		1.40		18.84		12.44		142.18
PBIP	Prudential Bancorp, Inc.	PA		15.81		8,046		127.2		16.20		13.80		15.47		2.20		7.99		4.01		0.36		0.35		14.17		14.17		69.54
RNDB	Randolph Bancorp, Inc.	MA		15.13		5,869		88.8		15.13		12.06		14.91		1.46		NA		NA		NA		NA		14.63		14.61		83.42
RVSB	Riverview Bancorp, Inc.	WA		5.99		22,508		134.8		6.00		4.15		5.79		3.45		29.93		27.72		0.29		0.30		4.93		3.79		43.72
SVBI	Severn Bancorp, Inc.	MD		6.65		12,104		80.5		7.20		4.99		6.65		0.00		17.70		15.65		1.14		1.14		6.90		6.87		64.25
SIFI	SI Financial Group, Inc.	CT		14.20		12,210		173.4		14.47		12.30		14.15		0.35		9.06		4.03		0.53		NA		13.08		11.64		125.97
SBCP	Sunshine Bancorp, Inc.	FL		15.91		7,995		127.2		15.95		13.55		15.53		2.45		13.24		4.67		-0.35		-0.33		13.82		11.92		70.54
TBNK	Territorial Bancorp Inc.	HI		32.06		9,764		313.0		32.50		24.87		31.59		1.49		10.90		15.57		1.69		1.66		23.39		23.39		189.33
TSBK	Timberland Bancorp, Inc.	WA		19.05		6,944		132.3		19.06		11.60		18.94		0.58		49.38		53.51		1.43		1.42		13.95		13.13		128.37
TRST	TrustCo Bank Corp NY	NY		8.35		95,705		799.1		8.45		5.17		8.15		2.45		26.52		35.99		0.44		0.43		4.56		4.55		50.29
UCBA	United Community Bancorp	IN		16.20		4,198		68.0		17.00		12.95		15.82		2.38		8.14		8.07		0.86		0.81		16.83		16.17		125.78
UCFC	United Community Financial Corp.	OH		8.58		46,550		399.4		8.58		5.28		8.15		5.28		46.67		45.42		0.38		0.37		5.51		5.48		46.41
UBNK	United Financial Bancorp, Inc.	CT		16.84		50,512		850.6		17.06		10.28		16.43		2.50		21.50		30.75		0.90		1.02		13.00		10.60		129.57
WSBF	Waterstone Financial, Inc.	WI		18.20		29,386		534.8		18.55		13.30		18.00		1.11		32.75		29.08		0.81		0.81		13.94		13.92		61.08
WAYN	Wayne Savings Bancshares, Inc.	OH		15.05		2,782		41.9		15.05		11.90		14.55		3.44		18.97		13.93		0.92		0.92		14.88		14.27		160.25
WCFB	WCF Bancorp, Inc.	IA		8.90		2,563		22.8		10.97		8.15		8.80		1.14		0.31		-1.74		0.10		0.07		11.54		11.51		48.40
WEBK	Wellesley Bancorp, Inc.	MA		24.45		2,459		60.1		24.80		18.05		24.40		0.20		29.45		28.68		1.33		1.32		22.52		22.52		271.01
WBB	Westbury Bancorp, Inc.	WI		20.04		4,098		82.1		20.26		17.51		19.81		1.16		12.69		11.33		0.93		0.83		19.43		19.43		171.45

RP ^® Financial, LC.

Exhibit IV-1A

Weekly Thrift Market Line - Part One

Prices As of November 25, 2016


			Market Capitalization						Price Change Data												Current Per Share Financials
			Price/		Shares		Market		52 Week (1)						% Change From						LTM		LTM Core		BV/		TBV/		Assets/
			Share(1)		Outstanding		Capitalization		High		Low		Last Wk		Last Wk		52 Wks (2)		MRY (2)		EPS (3)		EPS (3)		Share		Share (4)		Share
			($)		(000)		($Mil)		($)		($)		($)		(%)		(%)		(%)		($)		($)		($)		($)		($)
Companies
WNEB	Western New England Bancorp, Inc.	MA		8.50		30,250		257.1		8.85		7.30		8.30		2.41		5.33		1.19		0.25		0.30		7.92		7.92		45.55
WBKC	Wolverine Bancorp, Inc.	MI		27.97		2,099		58.7		27.99		25.26		26.53		5.42		8.41		4.99		2.14		2.14		29.97		29.97		175.88
WSFS	WSFS Financial Corporation	DE		42.25		31,324		1,323.5		42.30		26.40		41.05		2.92		24.34		30.56		1.97		2.50		22.08		16.59		211.58
WVFC	WVS Financial Corp.	PA		13.01		2,008		26.1		13.07		10.73		12.61		3.17		6.55		5.77		0.74		0.73		16.44		16.44		166.85
MHCs
GCBC	Greene County Bancorp, Inc. (MHC)	NY		21.70		8,493		184.3		25.20		14.38		21.90		-0.91		49.66		35.84		1.10		1.10		9.00		9.00		105.16
HONE	HarborOne Bancorp, Inc. (MHC)	MA		19.62		32,121		630.2		19.70		12.53		18.75		4.64		NA		NA		NA		NA		10.21		9.79		73.07
KFFB	Kentucky First Federal Bancorp (MHC)	KY		8.65		8,440		73.0		10.21		8.00		8.59		0.69		-11.01		-7.39		0.16		0.16		7.96		6.25		34.97
LSBK	Lake Shore Bancorp, Inc. (MHC)	NY		14.18		6,098		86.5		15.10		12.97		14.20		-0.14		6.36		5.82		0.71		0.51		12.68		12.68		78.46
MGYR	Magyar Bancorp, Inc. (MHC)	NJ		10.60		5,821		61.7		11.00		9.51		10.37		2.26		8.28		5.89		0.19		NA		8.20		8.20		100.40
OFED	Oconee Federal Financial Corp. (MHC)	SC		22.05		5,803		128.0		24.25		18.13		22.93		-3.82		19.58		18.23		0.87		0.86		14.70		14.13		83.44
PVBC	Provident Bancorp, Inc. (MHC)	MA		17.95		9,499		170.5		17.95		12.51		17.60		1.99		44.06		38.18		NA		NA		11.41		11.41		80.87
TFSL	TFS Financial Corporation (MHC)	OH		18.82		283,469		5,334.9		19.42		15.58		18.75		0.37		0.11		-0.05		0.28		NA		5.84		5.81		45.53
Under Acquisition
AF	Astoria Financial Corporation	NY		16.30		101,329		1,651.7		16.65		13.92		16.15		0.93		2.13		2.84		0.64		0.67		15.57		13.74		146.20
EVER	EverBank Financial Corp	FL		19.33		125,445		2,424.8		19.47		12.32		19.34		-0.05		12.19		20.96		0.96		NA		13.92		13.53		228.81
GTWN	Georgetown Bancorp, Inc.	MA		25.90		1,841		47.7		26.00		18.25		25.65		0.97		41.38		36.89		0.43		0.46		17.62		17.62		171.09

(1)	Average of High/Low or Bid/Ask price per share.

(2)	Or since offering price if converted of first listed in the past 52 weeks. Percent change figures are actual year-to-date and are not annualized.

(3)	EPS (earnings per share) is based on actual trailing 12 month data and is not shown on a pro forma basis.

(4)	Excludes intangibles (such as goodwill, value of core deposits, etc.).

(5)	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.

(6)	Annualized based on last regular quarterly cash dividend announcement.

(7)	Indicated dividend as a percent of trailing 12 month earnings.

(8)	Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.

(9)	For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.

RP ^® Financial, LC.

Exhibit IV-1B

Weekly Thrift Market Line - Part Two

Prices As of November 25, 2016


			Key Financial Ratios												Asset Quality Ratios				Pricing Ratios										Dividend Data (6)
			Equity/		Tang Equity/		Reported Earnings				Core Earnings				NPAs/		Rsvs/		Price/		Price/		Price/		Price/		Price/		Div/		Dividend		Payout
			Assets(1)		Assets(1)		ROA(5)		ROE(5)		ROA(5)		ROE(5)		Assets		NPLs		Earnings		Book		Assets		Tang Book		Core Earnings		Share		Yield		Ratio (7)
			(%)		(%)		(%)		(%)		(%)		(%)		(%)		(%)		(x)		(%)		(%)		(%)		(x)		($)		(%)		(%)
Companies
ANCB	Anchor Bancorp	WA		14.63		14.63		0.17		1.14		0.17		1.14		NA		39.88		NM		99.77		14.60		99.77		87.59		NA		NA		NM
ASBB	ASB Bancorp, Inc.	NC		11.46		11.46		0.70		5.91		0.57		4.87		1.31		114.00		18.91		115.27		13.21		115.27		22.94		NA		NA		NM
ACFC	Atlantic Coast Financial Corporation	FL		9.19		9.19		0.59		6.10		0.48		4.97		4.29		21.76		21.39		127.13		11.69		127.13		26.33		0.00		0.00		NM
BCTF	Bancorp 34, Inc.	NM		9.44		9.36		0.41		3.85		0.43		4.04		0.37		179.30		36.18		137.27		12.96		138.61		34.93		0.59		0.00		NM
BKMU	Bank Mutual Corporation	WI		10.89		10.89		0.65		5.85		0.66		5.95		0.54		164.11		24.32		142.29		15.49		142.29		23.91		0.22		2.44		58.11
BFIN	BankFinancial Corporation	IL		13.22		13.17		0.49		3.50		0.51		3.65		0.55		203.32		38.16		137.20		18.14		137.82		36.61		0.24		1.66		55.26
BYBK	Bay Bancorp, Inc.	MD		10.76		10.27		0.33		2.49		0.41		3.15		2.19		21.03		43.21		96.34		10.34		101.43		34.43		0.00		0.00		NM
BNCL	Beneficial Bancorp, Inc.	PA		18.34		15.70		0.44		2.13		0.56		2.73		0.30		286.82		55.65		128.62		23.58		155.03		42.97		0.24		1.39		38.71
BHBK	Blue Hills Bancorp, Inc.	MA		16.84		16.45		0.33		1.78		0.32		1.73		0.35		221.90		64.29		124.70		21.00		128.27		66.10		0.12		0.67		39.29
BOFI	BofI Holding, Inc.	CA		9.19		9.19		1.70		18.81		1.68		18.63		0.56		89.01		12.92		217.86		19.89		217.86		13.04		NA		NA		NM
BYFC	Broadway Financial Corporation	CA		11.50		11.50		1.74		15.02		1.71		14.81		2.91		38.17		6.91		97.29		11.18		97.29		7.01		0.04		0.00		NM
BLMT	BSB Bancorp, Inc.	MA		7.56		7.56		0.57		7.15		NA		NA		0.41		152.33		22.44		154.97		11.72		154.97		NA		NA		NA		NM
CFFN	Capitol Federal Financial, Inc.	KS		15.03		15.03		0.74		5.95		NA		NA		0.60		16.33		25.38		157.82		23.72		157.82		NA		0.34		2.13		139.68
CARV	Carver Bancorp, Inc.	NY		7.75		7.75		-0.06		-0.80		-0.18		-2.36		2.45		29.90		NM		159.06		2.25		159.06		NM		0.00		0.00		NM
CFBK	Central Federal Corporation	OH		9.58		9.58		1.31		12.37		1.31		12.37		1.03		164.20		6.90		83.61		5.84		83.61		6.90		0.00		0.00		NM
CHFN	Charter Financial Corporation	GA		14.08		12.10		0.98		5.90		1.07		6.43		0.76		124.65		18.32		107.06		15.07		127.40		16.80		0.22		1.52		25.95
CSBK	Clifton Bancorp Inc.	NJ		23.08		23.08		0.36		1.40		0.36		1.38		NA		NA		NM		126.07		29.10		126.07		88.04		0.24		1.45		126.32
CWAY	Coastway Bancorp, Inc.	RI		10.95		10.95		0.59		4.83		0.59		4.83		2.20		18.19		17.66		89.89		9.84		89.89		17.66		NA		NA		NM
DCOM	Dime Community Bancshares, Inc.	NY		9.54		8.67		1.57		15.89		0.73		7.42		0.24		158.94		8.47		129.48		12.35		143.89		18.16		0.56		2.92		24.78
ESBK	Elmira Savings Bank	NY		9.83		7.83		0.77		7.81		0.75		7.67		NA		NA		15.79		118.47		9.78		161.90		16.23		0.92		4.62		73.02
ENFC	Entegra Financial Corp.	NC		11.34		11.12		0.54		4.45		0.62		5.05		1.78		53.29		21.06		90.65		10.28		92.71		18.59		NA		NA		NM
EQFN	Equitable Financial Corp.	NE		15.92		15.92		0.46		3.00		0.47		3.08		NA		NA		29.35		87.24		13.89		87.24		28.58		NA		NA		NM
ESSA	ESSA Bancorp, Inc.	PA		9.95		9.11		0.45		4.40		0.44		4.31		NA		NA		20.40		96.20		9.57		105.99		20.84		0.36		2.42		61.64
FCAP	First Capital, Inc.	IN		10.61		9.66		0.89		8.39		0.95		8.90		1.25		65.73		16.82		136.41		14.45		151.37		15.74		0.84		2.61		32.98
FBNK	First Connecticut Bancorp, Inc.	CT		9.03		9.03		0.49		5.34		0.48		5.22		1.01		73.97		25.17		138.51		12.50		138.51		25.75		0.36		1.61		34.83
FDEF	First Defiance Financial Corp.	OH		11.92		9.59		1.19		9.93		1.20		10.00		1.14		94.92		15.07		142.73		17.02		182.17		14.97		0.88		1.90		28.57
FNWB	First Northwest Bancorp	WA		18.05		18.05		0.34		1.79		0.32		1.67		0.83		89.70		51.34		102.01		18.42		102.01		55.34		NA		NA		NM
FBC	Flagstar Bancorp, Inc.	MI		9.01		9.01		1.30		11.55		1.17		10.40		0.92		123.28		10.68		122.26		11.02		122.26		10.12		0.00		0.00		NM
FSBW	FS Bancorp, Inc.	WA		9.61		9.16		1.32		13.33		1.41		14.26		0.08		NM		9.74		125.47		12.06		132.41		9.12		0.40		1.23		11.04
FSBC	FSB Bancorp, Inc.	NY		12.11		12.11		0.22		2.52		0.21		2.42		0.01		NM		49.09		89.51		10.84		89.51		51.14		NA		NA		NM
HBK	Hamilton Bancorp, Inc.	MD		11.95		10.32		-0.01		-0.04		0.11		0.78		1.16		34.98		NM		77.19		9.22		91.08		93.73		NA		NA		NM
HIFS	Hingham Institution for Savings	MA		7.86		7.86		1.21		15.48		1.20		15.32		0.28		193.31		16.17		232.66		18.30		232.66		16.33		1.28		0.76		20.75
HMNF	HMN Financial, Inc.	MN		10.91		10.75		0.89		8.02		0.90		8.10		1.04		162.38		13.38		97.93		10.69		99.63		13.25		0.00		0.00		NM
HFBL	Home Federal Bancorp, Inc. of Louisiana	LA		11.29		11.29		0.92		7.63		0.92		7.63		0.24		331.61		13.33		106.94		12.07		106.94		13.33		0.36		1.50		18.89
IROQ	IF Bancorp, Inc.	IL		14.23		14.23		0.70		4.93		0.64		4.46		0.82		118.60		17.92		91.60		13.04		91.60		19.77		0.16		0.83		14.81
ISBC	Investors Bancorp, Inc.	NJ		13.82		13.49		0.83		5.44		0.83		5.44		0.49		210.34		24.31		140.56		19.43		144.63		24.32		0.32		2.27		44.83
JXSB	Jacksonville Bancorp, Inc.	IL		14.60		13.89		0.99		6.53		0.92		6.05		1.33		71.34		17.21		109.00		15.91		115.53		18.58		0.40		1.37		81.18
KRNY	Kearny Financial Corp.	NJ		24.75		22.89		0.39		1.51		0.39		1.52		NA		NA		NM		121.73		30.13		134.86		80.05		0.08		0.52		42.11
MLVF	Malvern Bancorp, Inc.	PA		11.52		11.52		1.59		14.05		1.54		13.62		0.45		148.63		10.97		141.49		16.30		141.49		11.32		0.11		0.00		NM
MELR	Melrose Bancorp, Inc.	MA		16.23		16.23		0.42		2.26		0.29		1.55		0.00		NM		38.79		95.77		15.54		95.77		56.78		NA		NA		NM
EBSB	Meridian Bancorp, Inc.	MA		14.31		14.03		0.80		5.05		0.79		5.02		0.69		134.22		32.32		162.84		23.30		166.66		32.56		0.12		0.66		21.43
CASH	Meta Financial Group, Inc.	SD		8.36		NA		1.10		10.79		1.31		12.79		NA		NA		24.12		240.59		20.11		303.37		20.34		0.52		0.55		9.95
MSBF	MSB Financial Corp.	NJ		16.74		16.74		0.18		0.90		0.26		1.34		3.53		26.42		NM		107.81		18.04		107.81		114.17		0.00		0.00		NM
NYCB	New York Community Bancorp, Inc.	NY		12.31		7.77		-0.05		-0.39		1.16		9.56		0.12		380.89		NM		128.03		15.77		213.42		13.39		0.68		4.25		NM
NFBK	Northfield Bancorp, Inc.	NJ		16.40		15.50		0.66		3.93		0.74		4.41		0.83		77.25		36.23		146.76		24.06		156.95		32.39		0.32		1.70		59.62
NWBI	Northwest Bancshares, Inc.	PA		11.97		8.76		0.46		3.57		0.88		6.79		1.24		54.76		44.80		159.98		19.15		226.54		23.53		0.60		3.27		146.34
OCFC	OceanFirst Financial Corp.	NJ		10.05		8.50		0.69		6.95		0.91		9.22		1.25		36.40		22.42		148.63		14.94		178.73		17.07		0.60		2.50		50.47
ORIT	Oritani Financial Corp.	NJ		14.22		14.22		1.37		9.19		1.07		7.19		0.30		273.73		15.76		147.79		21.02		147.79		20.20		0.70		3.97		107.14
OTTW	Ottawa Bancorp, Inc.	IL		11.54		11.21		0.59		4.15		0.62		4.37		2.00		42.36		30.40		127.06		14.66		131.32		28.82		0.00		0.00		NM
PBHC	Pathfinder Bancorp, Inc.	NY		8.27		7.66		0.48		4.88		0.43		4.41		0.89		106.87		17.14		89.92		7.38		97.80		19.15		0.20		1.60		27.40
PBBI	PB Bancorp, Inc.	CT		16.87		15.72		0.18		1.23		0.19		1.27		NA		NA		NM		85.75		14.47		93.30		75.10		0.12		1.29		91.67
PBSK	Poage Bankshares, Inc.	KY		15.54		15.09		0.43		2.68		0.50		3.08		1.78		33.13		36.44		100.89		15.68		104.44		31.57		0.32		1.69		53.85
PROV	Provident Financial Holdings, Inc.	CA		10.72		10.72		0.56		4.88		0.57		4.93		1.09		87.14		25.00		119.77		12.84		119.77		24.75		0.52		2.60		62.50
PFS	Provident Financial Services, Inc.	NJ		13.25		9.16		0.96		7.12		0.98		7.28		0.76		99.95		19.85		144.34		19.13		218.63		19.41		0.72		2.65		51.82
PBIP	Prudential Bancorp, Inc.	PA		20.38		20.38		0.51		2.36		0.49		2.29		3.39		17.79		43.92		111.58		22.74		111.58		45.20		0.12		0.76		33.33
RNDB	Randolph Bancorp, Inc.	MA		17.54		17.52		NA		2.73		NA		3.80		1.41		47.29		NA		103.41		18.13		103.54		NA		NA		NA		NA
RVSB	Riverview Bancorp, Inc.	WA		11.28		8.91		0.71		5.94		0.72		6.11		1.48		71.92		20.66		121.48		13.70		157.85		20.24		0.08		1.34		26.72
SVBI	Severn Bancorp, Inc.	MD		11.16		11.12		2.00		17.36		2.00		17.36		4.11		29.33		5.83		96.37		10.39		96.75		5.83		0.00		0.00		NM
SIFI	SI Financial Group, Inc.	CT		10.39		9.35		0.42		3.98		NA		NA		1.13		72.00		26.79		108.54		11.28		122.00		NA		0.16		1.13		30.19
SBCP	Sunshine Bancorp, Inc.	FL		12.89		11.32		-0.26		-1.85		-0.29		-2.04		0.41		126.26		NM		115.10		14.84		133.49		NM		NA		NA		NM
TBNK	Territorial Bancorp Inc.	HI		12.36		12.36		0.85		7.00		0.84		6.86		0.38		39.11		18.97		137.05		16.93		137.05		19.35		0.72		2.25		48.52
TSBK	Timberland Bancorp, Inc.	WA		10.86		10.29		1.19		11.00		1.19		10.93		1.72		93.56		13.32		136.61		14.84		145.07		13.40		0.36		1.89		23.78
TRST	TrustCo Bank Corp NY	NY		9.05		9.04		0.88		9.92		0.87		9.82		0.88		117.51		19.02		183.28		16.59		183.51		19.22		0.26		3.14		59.79
UCBA	United Community Bancorp	IN		13.38		12.92		0.68		5.14		0.63		4.83		1.02		84.53		18.84		96.23		12.88		100.20		20.07		0.24		1.48		27.91
UCFC	United Community Financial Corp.	OH		11.87		11.81		0.89		7.33		0.87		7.11		1.96		44.97		22.58		155.74		18.49		156.69		23.30		0.12		1.40		28.95
UBNK	United Financial Bancorp, Inc.	CT		10.03		8.32		0.72		7.12		0.82		8.08		0.84		78.87		18.71		129.49		12.98		158.94		16.48		0.48		2.85		53.33
WSBF	Waterstone Financial, Inc.	WI		22.82		22.79		1.26		5.59		1.26		5.59		NA		90.49		22.47		130.59		29.79		130.78		22.47		0.32		1.76		32.10
WAYN	Wayne Savings Bancshares, Inc.	OH		9.29		8.94		0.57		6.20		0.57		6.20		NA		NA		16.36		101.12		9.39		105.50		16.36		0.36		2.39		39.13
WCFB	WCF Bancorp, Inc.	IA		23.85		23.80		0.19		1.44		0.13		0.98		NA		105.80		NM		77.12		18.39		77.30		128.14		0.20		2.25		158.74
WEBK	Wellesley Bancorp, Inc.	MA		8.31		8.31		0.50		5.81		0.50		5.79		NA		NA		18.38		108.56		9.02		108.56		18.45		0.16		0.65		11.28
WBB	Westbury Bancorp, Inc.	WI		11.33		11.33		0.51		4.46		0.46		3.99		NA		NA		21.55		103.14		11.69		103.14		24.06		NA		NA		NM

RP ^® Financial, LC.

Exhibit IV-1B

Weekly Thrift Market Line - Part Two

Prices As of November 25, 2016


			Key Financial Ratios												Asset Quality Ratios				Pricing Ratios										Dividend Data (6)
			Equity/		Tang Equity/		Reported Earnings				Core Earnings				NPAs/		Rsvs/		Price/		Price/		Price/		Price/		Price/		Div/		Dividend		Payout
			Assets(1)		Assets(1)		ROA(5)		ROE(5)		ROA(5)		ROE(5)		Assets		NPLs		Earnings		Book		Assets		Tang Book		Core Earnings		Share		Yield		Ratio (7)
			(%)		(%)		(%)		(%)		(%)		(%)		(%)		(%)		(x)		(%)		(%)		(%)		(x)		($)		(%)		(%)
Companies
WNEB	Western New England Bancorp, Inc.	MA		10.54		10.54		0.33		3.11		0.39		3.71		0.59		122.46		34.00		107.29		11.31		107.29		28.51		0.12		1.41		48.00
WBKC	Wolverine Bancorp, Inc.	MI		17.20		17.20		1.13		7.00		1.13		7.00		1.92		132.93		13.07		93.33		16.05		93.33		13.07		NA		NA		46.73
WSFS	WSFS Financial Corporation	DE		10.44		8.05		1.04		9.85		1.33		12.50		0.61		104.48		21.45		191.31		19.98		254.70		16.93		0.28		0.66		12.69
WVFC	WVS Financial Corp.	PA		9.85		9.85		0.42		4.32		0.42		4.26		0.08		149.21		17.58		79.14		7.80		79.14		17.84		0.16		1.23		27.03
MHCs
GCBC	Greene County Bancorp, Inc. (MHC)	NY		8.56		8.56		1.12		12.84		1.12		12.84		0.61		193.63		19.73		241.03		20.62		241.03		19.73		0.38		1.75		34.09
HONE	HarborOne Bancorp, Inc. (MHC)	MA		13.97		13.47		0.20		1.99		0.34		3.29		2.17		32.29		NA		192.19		26.85		200.51		NA		NA		NA		NA
KFFB	Kentucky First Federal Bancorp (MHC)	KY		22.87		18.88		0.43		1.86		0.43		1.86		NA		NA		54.06		108.74		24.87		138.51		54.06		0.40		4.62		250.00
LSBK	Lake Shore Bancorp, Inc. (MHC)	NY		16.16		16.16		0.88		5.56		0.64		4.03		1.38		36.15		19.97		111.82		18.07		111.82		27.54		0.28		1.97		39.44
MGYR	Magyar Bancorp, Inc. (MHC)	NJ		8.17		8.17		0.19		2.32		NA		NA		NA		NA		55.79		129.28		10.56		129.28		NA		NA		NA		NM
OFED	Oconee Federal Financial Corp. (MHC)	SC		17.59		17.03		1.05		6.21		1.04		6.16		1.15		19.69		25.34		149.99		26.39		156.05		25.56		0.40		1.81		45.98
PVBC	Provident Bancorp, Inc. (MHC)	MA		14.10		14.10		0.82		5.71		0.78		5.42		0.65		168.33		NA		157.37		22.19		157.37		NA		NA		NA		NA
TFSL	TFS Financial Corporation (MHC)	OH		12.87		12.80		0.65		4.73		NA		NA		1.58		31.39		67.21		322.14		41.45		324.04		NA		0.50		2.66		116.07
Under Acquisition
AF	Astoria Financial Corporation	NY		11.53		10.41		0.49		4.41		0.51		4.56		1.69		37.20		25.47		104.68		11.25		118.59		24.50		0.16		0.98		25.00
EVER	EverBank Financial Corp	FL		6.60		6.45		0.49		7.07		NA		NA		0.74		45.16		20.14		138.91		8.49		142.84		NA		0.24		1.24		25.00
GTWN	Georgetown Bancorp, Inc.	MA		10.30		10.30		0.25		2.39		0.27		2.55		NA		NA		60.23		146.98		15.14		146.98		56.51		0.20		0.77		45.93

(1)	Average of High/Low or Bid/Ask price per share.

(2)	Or since offering price if converted of first listed in the past 52 weeks. Percent change figures are actual year-to-date and are not annualized.

(3)	EPS (earnings per share) is based on actual trailing 12 month data and is not shown on a pro forma basis.

(4)	Exludes intangibles (such as goodwill, value of core deposits, etc.).

(5)	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.

(6)	Annualized based on last regular quarterly cash dividend announcement.

(7)	Indicated dividend as a percent of trailing 12 month earnings.

(8)	Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.

(9)	For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.

EXHIBIT IV-2

Newton Federal Bank

Historical Stock Price Indices

Exhibit IV-2

Newton Federal Bank

Historical Stock Price Indices(1)


								SNL		SNL
						NASDAQ		Thrift		Bank
Year/Qtr. Ended		DJIA		S&P 500		Composite		Index		Index
2004:	Quarter 1		10357.7		1126.2		1994.2		1585.3		562.20
	Quarter 2		10435.5		1140.8		2047.8		1437.8		546.62
	Quarter 3		10080.3		1114.6		1896.8		1495.1		556.00
	Quarter 4		10783.0		1211.9		2175.4		1605.6		595.10
2005:	Quarter 1		10503.8		1180.6		1999.2		1516.6		551.00
	Quarter 2		10275.0		1191.3		2057.0		1577.1		563.27
	Quarter 3		10568.7		1228.8		2151.7		1527.2		546.30
	Quarter 4		10717.5		1248.3		2205.3		1616.4		582.80
2006:	Quarter 1		11109.3		1294.8		2339.8		1661.1		595.50
	Quarter 2		11150.2		1270.2		2172.1		1717.9		601.14
	Quarter 3		11679.1		1335.9		2258.4		1727.1		634.00
	Quarter 4		12463.2		1418.3		2415.3		1829.3		658.60
2007:	Quarter 1		12354.4		1420.9		2421.6		1703.6		634.40
	Quarter 2		13408.6		1503.4		2603.2		1645.9		622.63
	Quarter 3		13895.6		1526.8		2701.5		1523.3		595.80
	Quarter 4		13264.8		1468.4		2652.3		1058.0		492.85
2008:	Quarter 1		12262.9		1322.7		2279.1		1001.5		442.5
	Quarter 2		11350.0		1280.0		2293.0		822.6		332.2
	Quarter 3		10850.7		1166.4		2082.3		760.1		414.8
	Quarter 4		8776.4		903.3		1577.0		653.9		268.3
2009:	Quarter 1		7608.9		797.9		1528.6		542.8		170.1
	Quarter 2		8447.0		919.3		1835.0		538.8		227.6
	Quarter 3		9712.3		1057.1		2122.4		561.4		282.9
	Quarter 4		10428.1		1115.1		2269.2		587.0		260.8
2010:	Quarter 1		10856.6		1169.4		2398.0		626.3		301.1
	Quarter 2		9744.0		1030.7		2109.2		564.5		257.2
	Quarter 3		9744.0		1030.7		2109.2		564.5		257.2
	Quarter 4		11577.5		1257.6		2652.9		592.2		290.1
2011:	Quarter 1		12319.7		1325.8		2781.1		578.1		293.1
	Quarter 2		12414.3		1320.6		2773.5		540.8		266.8
	Quarter 3		10913.4		1131.4		2415.4		443.2		198.9
	Quarter 4		12217.6		1257.6		2605.2		481.4		221.3
2012:	Quarter 1		13212.0		1408.5		3091.6		529.3		284.9
	Quarter 2		12880.1		1362.2		2935.1		511.6		257.3
	Quarter 3		13437.1		1440.7		3116.2		557.6		276.8
	Quarter 4		13104.1		1426.2		3019.5		565.8		292.7
2013:	Quarter 1		14578.5		1569.2		3267.5		602.3		318.9
	Quarter 2		14909.6		1606.3		3404.3		625.3		346.7
	Quarter 3		15129.7		1681.6		3771.5		650.8		354.4
	Quarter 4		16576.7		1848.4		4176.6		706.5		394.4
2014:	Quarter 1		16457.7		1872.3		4199.0		718.9		410.8
	Quarter 2		16826.6		1960.2		4408.2		723.9		405.2
	Quarter 3		17042.9		1972.3		4493.4		697.7		411.0
	Quarter 4		17823.1		2058.9		4736.1		738.7		432.8
2015:	Quarter 1		17776.1		2067.9		4900.9		749.3		418.8
	Quarter 2		17619.5		2063.1		4986.9		795.7		448.4
	Quarter 3		16284.7		1920.0		4620.2		811.7		409.4
	Quarter 4		17425.0		2043.9		5007.4		809.1		431.5
2016:	Quarter 1		17685.1		2059.7		4869.9		788.1		381.4
	Quarter 2		17930.0		2098.9		4842.7		780.9		385.6
	Quarter 3		18308.2		2168.3		5312.0		827.2		413.7
As of Nov. 25, 2016			19152.1		2213.4		5398.9		932.5		502.6

(1)	End of period data.

Sources: SNL Financial and The Wall Street Journal.

EXHIBIT IV-3

Newton Federal Bank

Historical Thrift Stock Indices

Industry: Savings Bank/Thrift/Mutual

Geography: United States and Canada


	Close		Last Update		Change (%)																				Price / Earnings (x)
	Close		Last Update		1 Day			1 Week			MTD			QTD			YTD			1 Year			3 Years		Price / Earnings (x)
SNL Custom Indexes**
SNL Banking Indexes
SNL U.S. Bank and Thrift		482.31		11/25/2016		0.36			1.58			16.72			21.23			16.46			12.37			29.43		16.0
SNL U.S. Thrift		932.54		11/25/2016		0.46			1.40			11.94			12.74			15.26			13.83			35.13		30.7
SNL TARP Participants		89.24		11/25/2016		(2.29	)		(1.29	)		20.72			19.32			70.67			52.08			17.35		16.1
S&P 500 Bank		267.61		11/25/2016		0.47			1.56			16.84			22.34			14.25			11.55			30.98		NA
NASDAQ Bank		3,628.06		11/25/2016		0.07			2.17			19.25			20.93			27.16			19.85			42.65		NA
SNL Asset Size Indexes
SNL U.S. Thrift < $250M		1,077.65		11/25/2016		0.24			1.94			4.63			(3.14	)		(0.40	)		4.76			22.85		29.4
SNL U.S. Thrift $250M-$500M		5,541.09		11/25/2016		(0.06	)		(0.33	)		2.26			3.67			9.53			11.53			42.15		28.5
SNL U.S. Thrift < $500M		1,883.02		11/25/2016		(0.04	)		(0.23	)		2.33			3.14			8.97			11.12			41.41		28.5
SNL U.S. Thrift $500M-$1B		2,621.16		11/25/2016		0.70			1.70			8.51			10.48			16.15			18.74			59.21		20.5
SNL U.S. Thrift $1B-$5B		3,432.34		11/25/2016		0.40			2.23			14.39			16.98			25.70			23.83			56.87		26.6
SNL U.S. Thrift $5B-$10B		1,029.92		11/25/2016		0.76			1.91			18.10			16.99			28.41			25.37			25.75		27.4
SNL U.S. Thrift > $10B		170.71		11/25/2016		0.34			0.75			8.68			9.30			4.90			3.54			21.78		37.3
SNL Market Cap Indexes
SNL Micro Cap U.S. Thrift		950.58		11/25/2016		0.27			1.20			5.20			6.88			8.60			9.37			42.01		22.5
SNL Micro Cap U.S. Bank & Thrift		635.60		11/25/2016		0.35			1.81			6.54			7.06			12.31			13.17			39.73		17.1
SNL Small Cap U.S. Thrift		754.61		11/25/2016		0.48			2.28			15.47			18.00			28.15			24.32			51.54		24.6
SNL Small Cap U.S. Bank & Thrift		632.37		11/25/2016		0.23			2.09			17.02			17.23			27.13			21.21			46.24		20.6
SNL Mid Cap U.S. Thrift		362.32		11/25/2016		0.63			1.31			12.58			12.63			20.43			17.23			35.50		25.4
SNL Mid Cap U.S. Bank & Thrift		412.15		11/25/2016		0.06			2.15			19.48			20.37			27.49			17.63			37.82		21.2
SNL Large Cap U.S. Thrift		163.59		11/25/2016		0.21			0.67			8.36			8.96			(3.21	)		(2.58	)		9.91		67.2
SNL Large Cap U.S. Bank & Thrift		310.54		11/25/2016		0.41			1.44			16.29			21.69			14.16			10.86			26.99		14.9
SNL Geographic Indexes
SNL Mid-Atlantic U.S. Thrift		3,542.63		11/25/2016		0.49			1.59			14.05			15.32			12.82			11.48			26.30		27.6
SNL Midwest U.S. Thrift		3,307.93		11/25/2016		0.28			0.43			8.00			9.29			15.15			14.31			58.33		40.5
SNL New England U.S. Thrift		2,885.04		11/25/2016		0.79			2.63			13.72			18.16			28.24			24.56			47.05		29.9
SNL Southeast U.S. Thrift		394.13		11/25/2016		0.25			0.33			1.78			1.45			18.14			12.11			23.68		20.3
SNL Southwest U.S. Thrift		735.84		11/25/2016		0.00			0.29			(0.13	)		6.90			7.31			7.96			45.47		24.2
SNL Western U.S. Thrift		129.20		11/25/2016		0.66			3.29			21.98			9.87			18.30			20.65			41.00		17.4
SNL Stock Exchange Indexes
SNL U.S. Thrift NYSE		147.94		11/25/2016		0.38			0.50			9.27			10.36			7.34			5.70			10.26		19.3
SNL U.S. Thrift NASDAQ		2,746.25		11/25/2016		0.49			1.79			13.13			13.78			18.93			17.61			46.53		33.3
SNL U.S. Thrift Pink		275.08		11/25/2016		0.15			0.17			(0.70	)		2.66			7.20			4.27			43.18		17.2
SNL Other Indexes
SNL U.S. Thrift MHCs		6,372.51		11/25/2016		0.12			0.70			6.73			7.72			4.63			4.94			61.28		63.8
Broad Market Indexes
DJIA		19,152.14		11/25/2016		0.36			1.51			5.57			4.61			9.91			7.52			19.16		NA
S&P 500		2,213.35		11/25/2016		0.39			1.44			4.10			2.08			8.29			5.96			22.79		NA
S&P Mid-Cap		1,640.81		11/25/2016		0.32			2.17			8.70			5.70			17.32			12.06			25.66		NA
S&P Small-Cap		825.28		11/25/2016		0.44			2.77			14.21			9.03			22.86			16.69			27.47		NA
S&P 500 Financials		371.95		11/25/2016		0.25			1.22			13.49			15.94			15.61			12.94			28.57		NA
SNL U.S. Financial Institutions		813.50		11/25/2016		0.23			1.54			14.02			15.67			14.74			11.16			25.99		17.2
MSCI US IMI Financials		1,389.33		11/25/2016		0.25			1.33			13.59			15.51			17.27			14.14			29.23		NA
NASDAQ		5,398.92		11/25/2016		0.34			1.45			4.04			1.64			7.82			5.53			35.16		NA
NASDAQ Finl		3,860.87		11/25/2016		0.15			1.65			12.95			11.26			19.11			13.81			27.68		NA
NYSE		10,878.09		11/25/2016		0.39			1.57			3.78			1.46			7.24			4.09			6.90		NA
Russell 1000		1,229.11		11/25/2016		0.39			1.50			4.41			2.23			8.59			6.02			22.57		NA
Russell 2000		1,347.20		11/25/2016		0.38			2.40			13.08			7.63			18.60			12.45			19.78		NA
Russell 3000		1,318.56		11/25/2016		0.39			1.57			5.05			2.64			9.32			6.50			22.31		NA
S&P TSX Composite		15,075.44		11/25/2016		0.00			1.42			1.95			2.37			15.88			12.47			11.90		NA
MSCI AC World (USD)		414.96		11/25/2016		0.44			1.38			0.96			(0.83	)		3.91			1.47			3.57		NA
MSCI World (USD)		1,720.84		11/25/2016		0.44			1.38			1.77			(0.28	)		3.49			1.36			5.98		NA
Bermuda Royal Gazette/BSX		1,766.32		11/25/2016		0.00			(0.45	)		9.22			12.88			35.45			32.81			50.99		NA

Intraday data is available for certain exchanges. In all cases, the data is at least 15 minutes delayed.

**-	Non-publicly traded institutions and institutions outside of your current subscription are not included in custom indexes. Custom indexes including foreign institutions do not take into account currency translations. Data is as of the previous close.

All SNL indexes are market-value weighted; i.e., an institution’s effect on an index is proportional to that institution’s market capitalization.

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products.

Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR Midwest: IA, IN, IL, KS, KY, MI, MN, MO, ND, NE, OH, SD, WI

New England: CT, ME, MA, NH, RI, VT Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV

Southwest: CO, LA, NM, OK, TX, UT West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY

EXHIBIT IV-4

Newton Federal Bank

Market Area Acquisition Activity

Exhibit IV-4

Georgia Thrift Acquisitions 2000 - Present


						Target Financials at Announcement														Deal Terms and Pricing at Announcement
Announce Date	Complete Date	Buyer Short Name		Target Name		Total Assets ($000)		E/A (%)		TE/A (%)		LTM ROAA (%)		LTM ROAE (%)		NPAs/ Assets (%)		Rsrvs/ NPLs (%)		Deal Value ($M)		Value/ Share ($)		P/B (%)		P/TB (%)		P/E (x)		P/A (%)		Prem/ Cdeps (%)
12/10/2014	07/01/2015	Renasant Corp.	MS	Heritage Financial Group, Inc.	GA		1,755,534		9.11		8.44		0.60		6.60		0.88		85.65		254.4		27.576		158.33		172.10		24.62		15.08		10.90
02/27/2014	12/01/2014	Oconee Federal Financial Corp.	SC	Stephens Federal Bank	GA		158,267		4.19		4.19		-0.39		-9.32		12.40		43.88		NA		NA		NA		NA		NA		NA		NA
08/28/2005	03/14/2006	RLJ Companies LLC	MD	Worldwide Financial Investors Inc.	GA		9,806		35.58		34.82		-5.97		-14.41		1.35		135.61		NA		NA		NA		NA		NA		NA		NA
03/31/2005	07/01/2005	Omni Financial Services	GA	Georgia Community Bancshares, Inc.	GA		45,088		2.67		2.54		-8.06		-160.78		9.15		74.02		2.0		NA		168.05		176.86		NM		4.49		2.01
03/16/2004	06/01/2004	United Community Banks Inc.	GA	Fairbanco Holding Company, Inc.	GA		191,660		9.42		9.42		0.82		9.01		1.60		229.11		23.6		30.379		130.94		130.94		14.70		12.33		5.75
03/26/2002	07/22/2002	Royal Bank of Canada	0	Eagle Bancshares, Inc.	GA		1,148,807		7.29		7.29		NA		NA		1.40		65.12		154.2		26.000		176.15		176.15		NM		13.42		12.58
10/23/2001	03/29/2002	Colony Bankcorp Inc.	GA	Quitman Bancorp, Inc.	GA		65,258		9.90		9.90		NA		NA		0.47		169.29		7.2		13.460		105.73		105.73		28.04		11.09		1.62
01/18/2001	05/23/2001	Community First Banking Co.	GA	First Deposit Bancshares, Inc.	GA		138,779		17.54		17.54		NA		NA		0.16		505.43		30.6		19.375		119.60		119.60		18.45		22.02		9.47

				Average:			439,150		11.96		11.77		-2.60		-33.78		3.43		163.51						143.13		146.90		21.45		13.07		7.06
				Median:			148,523		9.26		8.93		-0.39		-9.32		1.37		110.63						144.64		151.52		21.54		12.88		7.61

Source: SNL Financial, LC.

EXHIBIT IV-5

Newton Federal Bank

Director and Senior Management Summary Resumes

Bob W. Richardson was a licensed pharmacist for 40 years until his retirement in 2010. Mr. Richardson was the owner and manager of People’s Drug Store, located in Athens, Georgia, beginning in 1979. Mr. Richardson is also the co-owner of Taziki’s Mediterranean Cafe, located in Athens, Georgia, which opened in 2014. Mr. Richardson’s experience as a small business owner gives him extensive insight into the customers who live in our market areas and economic developments affecting the communities in which we operate, as well as the challenges facing small businesses in our market area.

Johnny S. Smith has served as the President and Chief Executive Officer of Newton Federal Bank since February 2016, having joined Newton Federal Bank in 1992 as Comptroller. Mr. Smith served as an elected board member of the Newton County School System and is the Chairman of the Board of the Rotary Club of Covington’s foundation. Mr. Smith’s positions as President and Chief Executive Officer foster clear accountability, effective decision-making, a clear and direct channel of communication from senior management to the full board of directors, and alignment on corporate strategy.

Edward P. Stone has served as the President of Peoples Home Health, located in Pensacola, Florida, since 2008, the President of Peoples Home Medical, located in Covington Georgia, since 2009, and the President, owner and administrator of Longleaf Hospice LLC, located in Covington, Georgia, since 2011. He has been involved in the home healthcare industry since 1982. Mr. Stone’s experience gives him extensive insight into the challenges facing senior citizens and families who live in our market areas, as well as into matters related to small businesses and economic developments in our market area.

EXHIBIT IV-5 (continued)

Newton Federal Bank

Director and Senior Management Summary Resumes

Tessa M. Nolan , age 31, was named our Senior Vice President and Chief Financial Officer in March 2014, and served as our controller beginning in March 2014. Ms. Nolan joined Newton Federal Bank in August 2005.

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT IV-6

Newton Federal Bank

Pro Forma Regulatory Capital Ratios


	Newton Federal Bank Historical at September 30, 2016					Pro Forma at September 30, 2016, Based Upon the Sale in the Offering of (1)
	Newton Federal Bank Historical at September 30, 2016					1,994,100 Shares						2,346,000 Shares						2,697,900 Shares						3,102,585 Shares (2)
	Amount		Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)
	(Dollars in thousands)
Equity	$	45,081		19.36	%	$	51,872			21.42	%	$	53,165			21.80	%	$	54,458			22.17	%	$	55,946			22.59	%
Tier 1 leverage capital	$	44,801		19.32	%	$	51,592			21.39	%	$	52,885			21.77	%	$	54,178			22.14	%	$	55,666			22.57	%
Tier 1 leverage capital requirement		11,593		5.00			12,060			5.00			12,147			5.00			12,234			5.00			12,334			5.00

Excess	$	33,208		14.32	%	$	39,532			16.39	%	$	40,738			16.77	%	$	41,944			17.14	%	$	43,332			17.57	%

Tier 1 risk-based capital (4)	$	44,801		30.86	%	$	51,592			35.09	%	$	52,885			35.88	%	$	54,178			36.67	%	$	55,666			37.58	%
Tier 1 risk-based requirement		11,614		8.00			11,763			8.00			11,791			8.00			11,819			8.00			11,851			8.00

Excess	$	33,187		22.86	%	$	39,829			27.09	%	$	41,094			27.88	%	$	42,359			28.67	%	$	43,815			29.58	%

Total risk-based capital (4)	$	46,647		32.13	%	$	53,438			36.34	%	$	54,731			37.13	%	$	56,024			37.92	%	$	57,512			38.82	%
Total risk-based requirement		14,517		10.00			14,704			10.00			14,739			10.00			14,774			10.00			14,814			10.00

Excess	$	32,130		22.13	%	$	38,734			26.34	%	$	39,992			27.13	%	$	41,250			27.92	%	$	42,698			28.82	%

Common equity tier 1 risk-based capital (4)	$	44,801		30.86	%	$	51,592			35.09	%	$	52,885			35.88	%	$	54,178			36.67	%	$	55,666			37.58	%
Common equity tier 1 risk-based requirement		9,436		6.50			9,558			6.50			9,580			6.50			9,603			6.50			9,629			6.50

Excess	$	35,365		24.36	%	$	42,034			28.59	%	$	43,305			29.38	%	$	44,575			30.17	%	$	46,037			31.08	%

Reconciliation of capital infused into Newton Federal Bank:
Net offering proceeds						$	18,679					$	22,165					$	25,652					$	29,662

Proceeds to Newton Federal Bank						$	9,340					$	11,083					$	12,826					$	14,831
Proceeds to Community First Bancshares, MHC							—						—						—						—
Less: Common stock acquired by employee stock ownership plan							(1,699	)					(1,999	)					(2,299	)					(2,644	)
Less: Common stock acquired by stock-based benefit plans							(850	)					(1,000	)					(1,150	)					(1,322	)

Pro forma increase						$	6,791					$	8,084					$	9,377					$	10,865

Source: Community First Bancshares, Inc.’s Preliminary Offering Prospectus

EXHIBIT IV-7

Newton Federal Bank

Pro Forma Analysis Sheet- Fully Converted Basis

EXHIBIT IV-7

PRO FORMA ANALYSIS SHEET-FULLY CONVERTED BASIS

COMMUNITY FIRST BANCSHARES, INC.

Prices as of November 25, 2016


			Subject at Midpoint				Peer Group						Georgia Companies						All Public Thrifts
Valuation Pricing Multiples		Symbol	Subject at Midpoint				Mean			Median			Mean			Median			Mean			Median
Price-earnings multiple	=	P/E		57.10		x		19.28	x		17.92	x		18.32	x		18.32	x		18.80x			18.77	x
Price-core earnings multiple	=	P/CE		48.63		x		21.94	x		19.92	x		16.80	x		16.80	x		19.59x			19.15	x
Price-book ratio	=	P/B		57.67	%			99.32	%		98.00	%		107.06	%		107.06	%		123.90	%		121.48	%
Price-tangible book ratio	=	P/TB		57.67	%			100.73	%		99.99	%		127.40	%		127.40	%		134.09	%		127.40	%
Price-assets ratio	=	P/A		18.47	%			15.84	%		15.61	%		15.07	%		15.07	%		15.20	%		14.66	%


Valuation Parameters						% of Offering			% of Offering + Foundation
						% of Offering			% of Offering + Foundation
Pre-Conversion Earnings (Y)	$	1,157,000		(12 Mths 9/16)	ESOP Stock as % of Offering (E)		8.0000	%		8.0000	%
Pre-Conversion Core Earnings	$	1,312,620		(12 Mths 9/16)	Cost of ESOP Borrowings (S)		0.00	%
Pre-Conversion Book Value (B)	$	45,081,000		(9/16)	ESOP Amortization (T)		25.00 years
Intangibles	$	0		(9/16)	RRP Stock as % of Offering (M)		4.0000	%		4.0000	%
Pre-Conv. Tang. Book Value (B)	$	45,081,000		(9/16)	Stock Programs Vesting (N)		5.00 years
Pre-Conversion Assets (A)	$	232,832,000		(9/16)	Fixed Expenses	$	1,105,000
Reinv. Rate: (5 Yr Treas)@9/2016		1.140	%		Subscr/Dir Comm Exp (Mdpnt)	$	444,200			1.00	%
Tax rate (TAX)		38.00	%		Total Expenses (Midpoint)	$	1,549,200
A-T Reinvestment Rate(R)		0.707	%		Syndicate Expenses (Mdpnt)	$	0			0.00	%
Est. Conversion Expenses (1)(X)		3.04	%		Syndicate Amount	$	0
Insider Purchases ($)	$	2,500,000			Percent Sold (PCT)		100.00	%
Price/Share	$	10.00			MHC Assets	$	100,000
Foundation Cash Contrib. (FC)	$	0			Options as % of Offering (O1)		10.0000	%		10.00	%
Found. Stk Contrib (% of Total Shrs (FS)		0.0000	%		Estimated Option Value (O2)		23.40	%
Foundation Tax Benefit (Z)	$	0			Option Vesting Period (O3)		5.00 years
Foundation Amount (Mdpt.)	$	0			% of Options taxable (O4)		25.00	%

Calculation of Pro Forma Value After Conversion

1. V=

P/E * (Y)

51,000,000

1 - P/E * PCT * ((1-X-E-M-FC-FS)*R - (1-TAX)*E/T - (1-TAX)*M/N)-(1-(TAX*O4))*(O1*O2)/O3)

1. V=

P/E * (Y)

51,000,000

1 - P/Core E * PCT * ((1-X-E-M-FC-FS)*R - (1-TAX)*E/T - (1-TAX)*M/N)-(1-(TAX*O4))*(O1*O2)/O3)

2. V=

P/B * (B+Z)

51,000,000

1 - P/B * PCT * (1-X-E-M-FC-FS)

2. V=

P/TB * (TB+Z)

51,000,000

1 - P/TB * PCT * (1-X-E-M-FC-FS)

3. V=

P/A * (A+Z+PA)

51,000,000

1 - P/A * PCT * (1-X-E-M-FC-FS)


Valuation Conclusion	Shares Issued to MHC			Shares Sold to Public			Foundation Shares			Total Shares Issued			Price Per Share		Market Value of Stock Sold in Offering		Market Value of Stock Issued in Reorganization
Supermaximum		0			6,744,750			0			6,744,750		$	10.00	$	67,447,500	$	67,447,500
Maximum		0			5,865,000			0			5,865,000			10.00		58,650,000	$	58,650,000
Midpoint		0			5,100,000			0			5,100,000			10.00		51,000,000	$	51,000,000
Minimum		0			4,335,000			0			4,335,000			10.00		43,350,000	$	43,350,000

Valuation Conclusion	Shares Issued to MHC			Shares Sold to Public			Foundation Shares			Total Shares Issued
Supermaximum		0.000	%		100.000	%		0.000	%		100.000	%
Maximum		0.000	%		100.000	%		0.000	%		100.000	%
Midpoint		0.000	%		100.000	%		0.000	%		100.000	%
Minimum		0.000	%		100.000	%		0.000	%		100.000	%

(1)	Estimated offering expenses at midpoint of the offering.

EXHIBIT IV-8

Newton Federal Bank

Pro Forma Effect of Conversion Proceeds – Fully Converted Basis

Exhibit IV-8

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Minimum of the Range


1.	Market Value of Shares Sold In Offering:	$43,350,000
	Market Value of Shares Issued to Foundation:	0

	Total Market Value of Company:	$43,350,000

2.	Offering Proceeds of Shares Sold In Offering	$43,350,000
	Less: Estimated Offering Expenses	1,478,820

	Net Conversion Proceeds	$41,871,180

3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds	$41,871,180
	Less: Cash Contribution to Foundation	0
	Less: Non-Cash ESOP Stock Purchases (1)	(3,468,000	)
	Less: Non-Cash MRP Stock Purchases (2)	(1,734,000	)

	Net Conversion Proceeds Reinvested	$36,669,180
	Estimated After-Tax Reinvestment Rate	0.71	%

	Earnings from Reinvestment of Proceeds	$ 259,178
	Less: Estimated cost of ESOP borrowings(1)	0
	Less: Amortization of ESOP borrowings(1)	(86,006	)
	Less: Stock Programs Vesting (2)	(215,016	)
	Less: Option Plan Vesting (3)	(183,605	)

	Net Earnings Increase	($ 225,449	)


				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	225,449	)	$	931,551
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	225,449	)	$	1,087,171

		Before Conversion		Net Equity Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	36,669,180	$	0		$	81,750,180
	September 30, 2016 (Tangible)	$	45,081,000	$	36,669,180	$	0		$	81,750,180

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	36,669,180	$	0		$	269,501,180

(1)	ESOP stock (8.00% of total shares issued in conversion) amortized over 25 years, amortization expense is tax effected at 38%.

(2)	Restricted stock program (4.00% of total shares issued in conversion) amortized over 5 years, amortization expense is tax effected at 38%.

(3)	Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

Exhibit IV-8

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Midpoint of the Range


1.	Market Value of Shares Sold In Offering:								$	51,000,000
	Market Value of Shares Issued to Foundation:									0

	Total Market Value of Company:								$	51,000,000

2.	Offering Proceeds of Shares Sold In Offering								$	51,000,000
	Less: Estimated Offering Expenses									1,549,200

	Net Conversion Proceeds								$	49,450,800

3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds								$	49,450,800
	Less: Cash Contribution to Foundation									0
	Less: Non-Cash ESOP Stock Purchases (1)									(4,080,000	)
	Less: Non-Cash MRP Stock Purchases (2)									(2,040,000	)

	Net Conversion Proceeds Reinvested								$	43,330,800
	Estimated After-Tax Reinvestment Rate									0.71	%

	Earnings from Reinvestment of Proceeds								$	306,262
	Less: Estimated cost of ESOP borrowings(1)									0
	Less: Amortization of ESOP borrowings(1)									(101,184	)
	Less: Stock Programs Vesting (2)									(252,960	)
	Less: Option Plan Vesting (3)									(216,005	)

	Net Earnings Increase								($	263,887	)

				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	263,887	)	$	893,113
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	263,887	)	$	1,048,733

		Before Conversion		Net Capital Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	43,330,800	$	0		$	88,411,800
	September 30, 2016 (Tangible)	$	45,081,000	$	43,330,800	$	0		$	88,411,800

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	43,330,800	$	0		$	276,162,800

(1)	ESOP stock (8.00% of total shares issued in conversion) amortized over 25 years, amortization expense is tax effected at 38%.

(2)	Restricted stock program (4.00% of total shares issued in conversion) amortized over 5 years, amortization expense is tax effected at 38%.

(3)	Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

Exhibit IV-8

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Maximum of the Range


1.	Market Value of Shares Sold In Offering:								$	58,650,000
	Market Value of Shares Issued to Foundation:									0

	Total Market Value of Company:								$	58,650,000

2.	Offering Proceeds of Shares Sold In Offering								$	58,650,000
	Less: Estimated Offering Expenses									1,619,580

	Net Conversion Proceeds								$	57,030,420

3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds								$	57,030,420
	Less: Cash Contribution to Foundation									0
	Less: Non-Cash ESOP Stock Purchases (1)									(4,692,000	)
	Less: Non-Cash MRP Stock Purchases (2)									(2,346,000	)

	Net Conversion Proceeds Reinvested								$	49,992,420
	Estimated After-Tax Reinvestment Rate									0.71	%

	Earnings from Reinvestment of Proceeds								$	353,346
	Less: Estimated cost of ESOP borrowings(1)									0
	Less: Amortization of ESOP borrowings(1)									(116,362	)
	Less: Stock Programs Vesting (2)									(290,904	)
	Less: Option Plan Vesting (3)									(248,406	)

	Net Earnings Increase								($	302,325	)

				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	302,325	)	$	854,675
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	302,325	)	$	1,010,295

		Before Conversion		Net Capital Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	49,992,420	$	0		$	95,073,420
	September 30, 2016 (Tangible)	$	45,081,000	$	49,992,420	$	0		$	95,073,420

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	49,992,420	$	0		$	282,824,420

(1)	ESOP stock (8.00% of total shares issued in conversion) amortized over 25 years, amortization expense is tax effected at 38%.

(2)	Restricted stock program (4.00% of total shares issued in conversion) amortized over 5 years, amortization expense is tax effected at 38%.

(3)	Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

Exhibit IV-8

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Supermaximum Value


1.	Market Value of Shares Sold In Offering:								$	67,447,500
	Market Value of Shares Issued to Foundation:									0

	Total Market Value of Company:								$	67,447,500
2.	Offering Proceeds of Shares Sold In Offering								$	67,447,500
	Less: Estimated Offering Expenses									1,700,517

	Net Conversion Proceeds								$	65,746,983
3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds								$	65,746,983
	Less: Cash Contribution to Foundation									0
	Less: Non-Cash ESOP Stock Purchases (1)									(5,395,800	)
	Less: Non-Cash MRP Stock Purchases (2)									(2,697,900	)

	Net Conversion Proceeds Reinvested								$	57,653,283
	Estimated After-Tax Reinvestment Rate									0.71	%

	Earnings from Reinvestment of Proceeds								$	407,493
	Less: Estimated cost of ESOP borrowings(1)									0
	Less: Amortization of ESOP borrowings(1)									(133,816	)
	Less: Stock Programs Vesting (2)									(334,540	)
	Less: Option Plan Vesting (3)									(285,667	)

	Net Earnings Increase								($	346,529	)

				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	346,529	)	$	810,471
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	346,529	)	$	966,091

		Before Conversion		Net Capital Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	57,653,283	$	0		$	102,734,283
	September 30, 2016 (Tangible)	$	45,081,000	$	57,653,283	$	0		$	102,734,283

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	57,653,283	$	0		$	290,485,283

(1)	ESOP stock (8.00% of total shares issued in conversion) amortized over 25 years, amortization expense is tax effected at 38%.

(2)	Restricted stock program (4.00% of total shares issued in conversion) amortized over 5 years, amortization expense is tax effected at 38%.

(3)	Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

EXHIBIT IV-9

Newton Federal Bank

Pro Forma Analysis Sheet- MHC Basis

EXHIBIT IV-9

PRO FORMA ANALYSIS SHEET - MHC BASIS

COMMUNITY FIRST BANCSHARES, INC.

Prices as of November 25, 2016


			Subject at			Peer Group						Georgia Companies						All Public Thrifts
Final Valuation Pricing Multiples		Symbol	Midpoint			Mean			Median			Mean			Median			Mean			Median
Price-earnings multiple	=	P/E		50.38	x		19.28	x		17.92	x		18.32	x		18.32	x		18.80	x		18.77	x
Price-core earnings multiple	=	P/CE		43.66	x		21.94	x		19.92	x		16.80	x		16.80	x		19.59	x		19.15	x
Price-book ratio	=	P/B		79.50	%		99.32	%		98.00	%		107.06	%		107.06	%		123.90	%		121.48	%
Price-tangible book ratio	=	P/TB		79.50	%		100.73	%		99.99	%		127.40	%		127.40	%		134.09	%		127.40	%
Price-assets ratio	=	P/A		20.25	%		15.84	%		15.61	%		15.07	%		15.07	%		15.20	%		14.66	%


Valuation Parameters (2)									As a % of Offering
									+ Foundation
Pre-Conversion Earnings (Y)	$	1,157,000		(12 Mths 9/16)	ESOP Stock Purchases (E)		8.52	%		8.52	%
Pre-Conversion Core Earnings	$	1,312,620		(12 Mths 9/16)	Cost of ESOP Borrowings (S)		0.00	%
Pre-Conversion Book Value (B)	$	45,081,000			ESOP Amortization (T)		25.00 years
Pre-Conv. Tang. Book Value (B)	$	45,081,000			Stock Programs Amount (M)		4.261	%		4.26	%
Pre-Conversion Assets (A)	$	232,832,000			Stock Programs Vesting (N)		5.00 years
Reinvestment Rate:		1.14	%		Fixed Expenses	$	1,105,000
Tax rate (TAX)		38.00	%		Variable Expenses		1.00	%
A-T Reinvestment Rate(R)		0.71	%		Percent Sold (PCT)		46.0000	%
Est. Conversion Expenses (1)(X)		5.52	%		MHC Assets	$	0
Insider Purchases	$	2,500,000			Options as % of Offering (O1)		10.65	%		10.65	%
Price/Share	$	10.00			Estimated Option Value (O2)		23.40	%
Foundation Cash Contrib. (FC)	$	0			Option Vesting Period (O3)		5.00 years
Foundation Stock Contrib. (FS)		0.00	%		% of Options taxable (O4)		25.00	%
Foundation Tax Benefit (Z)	$	0

Calculation of Pro Forma Value After Conversion

P/E * (Y)

$51,000,000

1 - P/E * PCT * ((1-X-E-M-C-D)*R - (1-TAX)*E/T - (1-TAX)*M/N)

P/E * (Y)

$51,000,000

1 - P/Core E * PCT * ((1-X-E-M-FC-FS)*R - (1-TAX)*E/T - (1-TAX)*M/N)-(1-(TAX*O4))*(O1*O2)/O3)

P/B * B

$51,000,000

1 - P/B * PCT * (1-X-E-M-FC-FS)

P/TB * TB

$51,000,000

1 - P/B * PCT * (1-X-E-M-FC-FS)

P/A * (A+Z)

$51,000,000

1 - P/A * PCT * (1-X-E-M-FC-FS)


Valuation Conclusion	Shares Issued to MHC			Shares Sold to Public			Foundation Shares			Total Shares Issued			Price Per Share		Mark. Val of Stock Sold in Offering+Issued to Foundation		Full Value of Total Shares
Supermaximum		3,642,165			3,102,585			0			6,744,750		$	10.00	$	31,025,850	$	67,447,507
Maximum		3,167,100			2,697,900			0			5,865,000			10.00		26,979,000	$	58,649,997
Midpoint		2,754,000			2,346,000			0			5,100,000			10.00		23,460,000	$	51,000,000
Minimum		2,340,900			1,994,100			0			4,335,000			10.00		19,941,000	$	43,350,003

Valuation Conclusion	Shares Issued to MHC			Shares Sold to Public			Foundation Shares			Total Shares Issued
Supermaximum		54.000	%		46.000	%		0.000	%		100.000	%
Maximum		54.000	%		46.000	%		0.000	%		100.000	%
Midpoint		54.000	%		46.000	%		0.000	%		100.000	%
Minimum		54.000	%		46.000	%		0.000	%		100.000	%

(1)	Estimated offering expenses at midpoint of the offering.

(2)	Reflects reduction in earnings, equity and assets due to $100,000 contributed to the MHC.

EXHIBIT IV-10

Newton Federal Bank

Pro Forma Effect of Conversion Proceeds – MHC Basis

Exhibit IV-10

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Minimum of the Range


1.	Market Value of Shares Sold In Offering:								$	19,941,000
	Market Value of Shares Issued to Foundation:									0
	Market Value of Shares Issued to MHC:									23,409,000

	Total Market Value of Company:								$	43,350,000
2.	Offering Proceeds of Shares Sold In Offering								$	19,941,000
	Less: Estimated Offering Expenses									1,262,410

	Net Conversion Proceeds								$	18,678,590
3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds								$	18,678,590
	Less: Cash Contribution to Foundation									0
	Less: Cash for Capitalization of the MHC									(100,000	)
	Less: Non-Cash ESOP/MRP Purchases (1)									(2,548,980	)

	Net Proceeds Reinvested								$	16,029,610
	Estimated net incremental rate of return									0.71	%

	Earnings Increase								$	113,297
	Less: Estimated cost of ESOP borrowings									0
	Less: Amortization of ESOP borrowings(2)									(42,143	)
	Less: Stock Programs Vesting (3)									(105,358	)
	Less: Option Plan Vesting (4)									(89,966	)

	Net Earnings Increase								($	124,170	)

				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	124,170	)	$	1,032,830
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	124,170	)	$	1,188,450

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	16,029,610	$	0		$	61,110,610
	September 30, 2016 (Tangible)	$	45,081,000	$	16,029,610	$	0		$	61,110,610

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	16,029,610	$	0		$	248,861,610

(1)	Includes ESOP purchases equal to 3.92% of total shares issued in the conversion, and stock program purchases equal to 1.96% of total shares issued in the conversion.

(2)	ESOP stock amortized over 25 years, and amortization expense is tax effected at 38%.

(3)	Stock programs amortized over 5 years, and amortization expense is tax effected at 38%.

(4)	Option valuation based on Black-Scholes model, 10 year vesting, and assuming 25% taxable.

Exhibit IV-10

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Midpoint of the Range


1.	Market Value of Shares Sold In Offering:								$	23,460,000
	Market Value of Shares Issued to Foundation:									0
	Market Value of Shares Issued to MHC:									27,540,000

	Total Market Value of Company:								$	51,000,000
2.	Offering Proceeds of Shares Sold In Offering								$	23,460,000
	Less: Estimated Offering Expenses									1,294,608

	Net Conversion Proceeds								$	22,165,392
3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds								$	22,165,392
	Less: Cash Contribution to Foundation									0
	Less: Cash for Capitalization of the MHC									(100,000	)
	Less: Non-Cash ESOP/MRP Purchases (1)									(2,998,800	)

	Net Proceeds Reinvested								$	19,066,592
	Estimated net incremental rate of return									0.71	%

	Earnings Increase								$	134,763
	Less: Estimated cost of ESOP borrowings									0
	Less: Amortization of ESOP borrowings(2)									(49,580	)
	Less: Stock Programs Vesting (3)									(123,950	)
	Less: Option Plan Vesting (4)									(105,843	)

	Net Earnings Increase								($	144,611	)

				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	144,611	)	$	1,012,389
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	144,611	)	$	1,168,009

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	19,066,592	$	0		$	64,147,592
	September 30, 2016 (Tangible)	$	45,081,000	$	19,066,592	$	0		$	64,147,592

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	19,066,592	$	0		$	251,898,592

(1)	Includes ESOP purchases equal to 3.92% of total shares issued in the conversion, and stock program purchases equal to 1.96% of total shares issued in the conversion.

(2)	ESOP stock amortized over 25 years, and amortization expense is tax effected at 38%.

(3)	Stock programs amortized over 5 years, and amortization expense is tax effected at 38%.

(4)	Option valuation based on Black-Scholes model, 10 year vesting, and assuming 25% taxable.

Exhibit IV-10

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Maximum of the Range


1.	Market Value of Shares Sold In Offering:								$	26,979,000
	Market Value of Shares Issued to Foundation:									0
	Market Value of Shares Issued to MHC:									31,671,000

	Total Market Value of Company:								$	58,650,000

2.	Offering Proceeds of Shares Sold In Offering								$	26,979,000
	Less: Estimated Offering Expenses									1,326,806

	Net Conversion Proceeds								$	25,652,194

3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds								$	25,652,194
	Less: Cash Contribution to Foundation									0
	Less: Cash for Capitalization of the MHC									(100,000	)
	Less: Non-Cash ESOP/MRP Purchases (1)									(3,448,620	)

	Net Proceeds Reinvested								$	22,103,574
	Estimated net incremental rate of return									0.71	%

	Earnings Increase								$	156,228
	Less: Estimated cost of ESOP borrowings									0
	Less: Amortization of ESOP borrowings(2)									(57,017	)
	Less: Stock Programs Vesting (3)									(142,543	)
	Less: Option Plan Vesting (4)									(121,719	)

	Net Earnings Increase								($	165,051	)

				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	165,051	)	$	991,949
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	165,051	)	$	1,147,569

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	22,103,574	$	0		$	67,184,574
	September 30, 2016 (Tangible)	$	45,081,000	$	22,103,574	$	0		$	67,184,574

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	22,103,574	$	0		$	254,935,574

(1)	Includes ESOP purchases equal to 3.92% of total shares issued in the conversion, and stock program purchases equal to 1.96% of total shares issued in the conversion.

(2)	ESOP stock amortized over 25 years, and amortization expense is tax effected at 38%.

(3)	Stock programs amortized over 5 years, and amortization expense is tax effected at 38%.

(4)	Option valuation based on Black-Scholes model, 10 year vesting, and assuming 25% taxable.

Exhibit IV-10

PRO FORMA EFFECT OF CONVERSION PROCEEDS

COMMUNITY FIRST BANCSHARES, INC.

At the Supermaximum Value



1.	Market Value of Shares Sold In Offering:								$	31,025,855
	Market Value of Shares Issued to Foundation:									0
	Market Value of Shares Issued to MHC:									36,421,655

	Total Market Value of Company:								$	67,447,510
2.	Offering Proceeds of Shares Sold In Offering								$	31,025,855
	Less: Estimated Offering Expenses									1,363,835

	Net Conversion Proceeds								$	29,662,020
3.	Estimated Additional Equity and Income from Offering Proceeds
	Net Conversion Proceeds								$	29,662,020
	Less: Cash Contribution to Foundation									0
	Less: Cash for Capitalization of the MHC									(100,000	)
	Less: Non-Cash ESOP/MRP Purchases (1)									(3,965,914	)

	Net Proceeds Reinvested								$	25,596,106
	Estimated net incremental rate of return									0.71	%

	Earnings Increase								$	180,913
	Less: Estimated cost of ESOP borrowings									0
	Less: Amortization of ESOP borrowings(2)									(65,570	)
	Less: Stock Programs Vesting (3)									(163,924	)
	Less: Option Plan Vesting (4)									(139,977	)

	Net Earnings Increase								($	188,558	)

				Before Conversion		Net Earnings Increase			After Conversion
4.	Pro Forma Earnings
	12 Months ended September 30, 2016 (reported)			$	1,157,000	($	188,558	)	$	968,442
	12 Months ended September 30, 2016 (core)			$	1,312,620	($	188,558	)	$	1,124,062

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
5.	Pro Forma Net Worth
	September 30, 2016	$	45,081,000	$	25,596,106	$	0		$	70,677,106
	September 30, 2016 (Tangible)	$	45,081,000	$	25,596,106	$	0		$	70,677,106

		Before Conversion		Net Cash Proceeds		Tax Benefit of Foundation			After Conversion
6.	Pro Forma Assets
	September 30, 2016	$	232,832,000	$	25,596,106	$	0		$	258,428,106

(1)	Includes ESOP purchases equal to 3.92% of total shares issued in the conversion, and stock program purchases equal to 1.96% of total shares issued in the conversion.

(2)	ESOP stock amortized over 25 years, and amortization expense is tax effected at 38%.

(3)	Stock programs amortized over 5 years, and amortization expense is tax effected at 38%.

(4)	Option valuation based on Black-Scholes model, 10 year vesting, and assuming 25% taxable.

EXHIBIT V-1

RP ^® Financial, LC.

Firm Qualifications Statement

LOGO

FIRM QUALIFICATION STATEMENT

RP ^® Financial (“RP ^® ) provides financial and management consulting, merger advisory and valuation services to the financial services industry nationwide. We offer a broad array of services, high quality and prompt service, hands-on involvement by principals and senior staff, careful structuring of strategic initiatives and sophisticated valuation and other analyses consistent with industry practices and regulatory requirements. Our staff maintains extensive background in financial and management consulting, valuation and investment banking. Our clients include commercial banks, thrifts, credit unions, mortgage companies, insurance companies and other financial services companies.

STRATEGIC PLANNING SERVICES

RP ^® ’s strategic planning services are designed to provide effective feasible plans with quantifiable results. We analyze strategic options to enhance shareholder value, achieve regulatory approval or realize other objectives. Such services involve conducting situation analyses; establishing mission/vision statements, developing strategic goals and objectives; and identifying strategies to enhance franchise and/or market value, capital management, earnings enhancement, operational matters and organizational issues. Strategic recommendations typically focus on: capital formation and management, asset/liability targets, profitability, return on equity and stock pricing. Our proprietary financial simulation models provide the basis for evaluating the impact of various strategies and assessing their feasibility and compatibility with regulations.

MERGER ADVISORY SERVICES

RP ^® ’s merger advisory services include targeting potential buyers and sellers, assessing acquisition merit, conducting due diligence, negotiating and structuring merger transactions, preparing merger business plans and financial simulations, rendering fairness opinions, preparing mark-to-market analyses, valuing intangible assets and supporting the implementation of post-acquisition strategies. Our merger advisory services involve transactions of financially healthy companies and failed bank deals. RP ^® is also expert in de novo charters and shelf charters. Through financial simulations, comprehensive data bases, valuation proficiency and regulatory familiarity, RP ^® ’s merger advisory services center on enhancing shareholder returns.

VALUATION SERVICES

RP ^® ’s extensive valuation practice includes bank and thrift mergers, thrift mutual-to-stock conversions, goodwill impairment, insurance company demutualizations, ESOPs, subsidiary companies, merger accounting and other purposes. We are highly experienced in performing appraisals which conform to regulatory guidelines and appraisal standards. RP ^® is the nation’s leading valuation firm for thrift mutual-to-stock conversions, with appraised values ranging up to $4 billion.

OTHER CONSULTING SERVICES

RP ^® offers other consulting services including evaluating the impact of regulatory changes (TARP, etc.), branching and diversification strategies, feasibility studies and special research. We assist banks/thrifts in preparing CRA plans and evaluating wealth management activities on a de novo or merger basis. Our other consulting services are facilitated by proprietary valuation and financial simulation models.

KEY PERSONNEL (Years of Relevant Experience & Contact Information)


Ronald S. Riggins, Managing Director (36)	(703) 647-6543	rriggins@rpfinancial.com
William E. Pommerening, Managing Director (32)	(703) 647-6546	wpommerening@rpfinancial.com
Marcus Faust, Managing Director (28)	(703) 647-6553	mfaust@rpfinancial.com
Gregory E. Dunn, Director (32)	(703) 647-6548	gdunn@rpfinancial.com
James P. Hennessey, Director (29)	(703) 647-6544	jhennessey@rpfinancial.com
James J. Oren, Director (28)	(703) 647-6549	joren@rpfinancial.com
Carla Pollard, Senior Vice President (26)	(703) 647-6556	cpollard@rpfinancial.com

Washington Headquarters


Three Ballston Plaza		Telephone: (703) 528-1700
1100 North Glebe Road, Suite 600		Fax No.: (703) 528-1788
Arlington, VA 22201		Toll-Free No.: (866) 723-0594
www.rpfinancial.com		E-Mail: mail@rpfinancial.com

Exhibit 99.4

IMPORTANT REMINDER Please Support Us

LOGO

Dear Member:

As a follow-up to our recent mailing, WE URGE YOU TO VOTE ALL OF YOUR PROXY CARDS on the proposed plan of reorganization. We value your relationship with Newton Federal Bank and ask for your support by voting the enclosed proxy card today.

Your Board of Directors urges you to vote “FOR” the Plan of Reorganization.

If you are unsure whether you voted, please vote the enclosed proxy card. If you have already voted all of your proxy card(s), I would like to extend my appreciation for your vote. Let me assure you that:

•

The reorganization will not affect the terms of your deposit accounts or loans.

•

Deposit accounts will continue to be federally insured to the legal maximum.

•

Although you have the right to subscribe for stock, voting does not obligate you to subscribe for stock.

Thank you for choosing Newton Federal Bank, and we appreciate your vote. If you have any questions, please call our Stock Information Center at ( ) - .

Sincerely,

Johnny S. Smith

President and Chief Executive Officer

The Plan of Reorganization must be approved by a majority of the votes eligible to be cast.

If you have more than one account or a qualifying loan you may receive more than one proxy card.

Please support us by voting all proxy cards received.

SECOND REQUEST Please Support Us

LOGO

Dear Member:

As a follow-up to our recent proxy mailing, our records show that YOU HAVE NOT VOTED ALL OF YOUR PROXY CARDS on the proposed plan of reorganization. We value your relationship with Newton Federal Bank and ask for your support by voting the enclosed proxy card today.

Your Board of Directors urges you to vote “FOR” the Plan of Reorganization.

•

The reorganization will not affect the terms of your deposit accounts or loans.

•

Deposit accounts will continue to be federally insured to the legal maximum.

•

Although you have the right to subscribe for stock, voting does not obligate you to subscribe for stock.

Thank you for choosing Newton Federal Bank, and we appreciate your vote. If you have any questions, please call our Stock Information Center at ( ) - .

Sincerely,

Johnny S. Smith

President and Chief Executive Officer

The Plan of Reorganization must be approved by a majority of the votes eligible to be cast.

If you have more than one account or a qualifying loan you may receive more than one proxy card.

Please support us by voting all proxy cards received.

LOGO

Information about our

Reorganization and Stock Offering

Questions?

Call our Stock Information Center, at 1-( ) -

from 10:00 a.m. to 4:00 p.m., Eastern Time, Monday through

Friday, except bank holidays.

This booklet is neither an offer to sell nor an offer to buy shares of common stock. The offer is made only by the Prospectus. These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Questions and Answers about our Reorganization and Stock Offering

This section answers questions about our reorganization and stock offering. Investing in shares of common stock involves certain risks. Before making an investment decision, please read the enclosed Prospectus carefully, including the “Risk Factors” section.

GENERAL — THE REORGANIZATION

Our Board of Directors has determined that the reorganization is in the best interests of Newton Federal Bank (“Newton Federal”), our customers and the communities we serve.


Q.		W HAT IS THE REORGANIZATION ?

Under our Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan (the “Plan”), Newton Federal Bank will convert from a mutual (meaning no stockholders) savings association to a mutual holding company form of ownership. Concurrently with the reorganization, Community First Bancshares, Inc., a newly formed mid-tier stock holding company, will offer shares of its common stock. Upon completion of the reorganization, 46% of the common stock of Community First Bancshares, Inc., will be owned by stockholders, 54% of the outstanding common stock will be retained by Community First Bancshares, MHC (to be formed as the federally chartered mutual holding company of Community First Bancshares, Inc.), and Community First Bancshares, Inc., will own 100% of the common stock of Newton Federal Bank.


Q.		W HAT CHANGES WILL OCCUR AS A RESULT OF THE CONVERSION ? WILL THERE BE ANY CHANGES AT MY LOCAL BRANCH ?

No changes are planned in the way we operate our business. The reorganization is an internal change to our corporate structure. The reorganization will have no effect on the staffing, products or services we offer to our customers through our offices, except to enable us to potentially add additional staff, products and services in the future.


Q.		W ILL THE REORGANIZATION AND OFFERING AFFECT CUSTOMERS ’ DEPOSIT ACCOUNTS OR LOANS ?

A.	No. The reorganization will have no effect on the balance or terms of any deposit account. Your deposits will continue to be federally insured to the fullest extent permissible by law. The terms, including interest rates, of your loans with us will also be unaffected by the conversion.


Q.		I S N EWTON F EDERAL B ANK CONSIDERED “ WELL - CAPITALIZED ” FOR REGULATORY PURPOSES ?

A.	Yes. As of September 30, 2016, Newton Federal Bank was considered “well-capitalized” for regulatory purposes.

THE PROXY VOTE

Although we have received conditional regulatory approval, the Plan is also subject to approval by our eligible customers.


Q.		W HY SHOULD I VOTE “FOR” THE P LAN ?

Your vote “FOR” the Plan is extremely important to us. Each Newton eligible customer as of , 2017 received a Proxy Card attached to a Stock Order Form. These packages received by eligible customers also include a Proxy Statement describing the Plan, which cannot be implemented without their approval.

Although you have the right to subscribe for stock, voting does not require you to purchase common stock in the offering.


Q.		W HAT VOTE IS REQUIRED TO APPROVE THE PLAN ?

A.	The Plan must be approved by the affirmative vote of a majority of votes eligible to be cast by the members of Newton Federal Bank at the special meeting of members.


Q.		W HAT HAPPENS IF I DON ’ T VOTE ?

A.	Your vote is very important. Not voting all the Proxy Cards you receive will have the same effect as voting “ AGAINST ” the Plan. Without sufficient favorable votes, we cannot proceed with the reorganization and related stock offering.


Q.		H OW DO I VOTE ?

Mark your vote, sign and date each Proxy Card enclosed and return the card(s) in the enclosed Proxy Reply Envelope. Alternatively, you may vote by Internet or by telephone, by following the simple instructions on the Proxy Card. PLEASE VOTE PROMPTLY. NOT VOTING HAS THE SAME EFFECT AS VOTING “ AGAINST ” THE PLAN.


Q.		H OW MANY VOTES ARE AVAILABLE TO ME ?

Eligible depositors at the close of business on , 2017 are entitled to one vote for each $100 or fraction thereof on deposit. No depositor may cast more than 1,000 votes. Additionally, each borrower as of January 19, 1984 whose borrowing remained outstanding at the close of business on , 2017 will be entitled to one vote. Proxy Cards are not imprinted with your number of votes; however, votes will be automatically tallied by computer.


Q.		W HY DID I RECEIVE MORE THAN ONE P ROXY C ARD ?

If you had more than one deposit and/or applicable loan account on , 2017, you may have received more than one Proxy Card, depending on the ownership structure of your accounts. There are no duplicate cards — please promptly vote all the Proxy Cards sent to you. Telephone and Internet voting are available 24 hours a day.


Q.		M ORE THAN ONE NAME APPEARS ON MY P ROXY C ARD . W HO MUST SIGN ?

A.	The name(s) reflect the title of your account. Proxy Cards for joint accounts require the signature of only one of the account holders. Proxy Cards for trust or custodian accounts must be signed by the trustee or the custodian, not the listed beneficiary.

THE STOCK OFFERING AND PURCHASING SHARES


Q.		H OW MANY SHARES ARE BEING OFFERED AND AT WHAT PRICE ?

A.	Community First Bancshares, Inc., is offering for sale between 1,994,100 and 2,697,900 shares of common stock (subject to increase to 3,102,585 shares) at $10.00 per share. No sales commission will be charged to purchasers.


Q.		W HO IS ELIGIBLE TO PURCHASE STOCK DURING THE STOCK OFFERING ?

A.	Pursuant to our Plan, non-transferable rights to subscribe for shares of Community First Bancshares, Inc., common stock in the Subscription Offering have been granted in the following descending order of priority:

Priority #1 —Depositors of Newton Federal Bank with aggregate balances of at least $50 at the close of business on September 30, 2015;

Priority #2 —Our tax-qualified employee benefit plans;

Priority #3 —Depositors of Newton Federal Bank with aggregate balances of at least $50 at the close of business on , 2016; and

Priority #4 —Other depositors of Newton Federal Bank at the close of business on , 2017 and borrowers as of January 19, 1984 who maintain such borrowing as of the close of business on , 2017.

Shares of common stock not purchased in the Subscription Offering may be offered for sale to the public in a Community Offering , with a preference given to natural persons and trusts of natural persons residing in Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale or Walton County, Georgia

Shares not sold in the Subscription and Community Offerings may be offered for sale through a Syndicated Community Offering to the general public.


Q.		I AM ELIGIBLE TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN THE S UBSCRIPTION O FFERING BUT AM NOT INTERESTED IN INVESTING . M AY I ALLOW SOMEONE ELSE TO USE MY S TOCK O RDER F ORM TO TAKE ADVANTAGE OF MY PRIORITY AS AN ELIGIBLE ACCOUNT HOLDER ?

No. Subscription rights are non-transferable! Only those eligible to subscribe in the Subscription Offering, as listed above, may purchase shares in the Subscription Offering. On the stock order form, you cannot add the names of others for joint stock registration unless they are also named on the qualifying deposit or loan account, and you cannot delete names of others except in the case of certain orders placed through an IRA, Keogh, 401(k) or similar plan, and except in the event of the death of a named eligible depositor. In addition, the stock order form requires that you list all deposit or loan accounts, giving all names on each account and the account number at the applicable eligibility record date. Your failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, if there is an

oversubscription. Eligible depositors or borrowers who enter into agreements to allow ineligible investors to participate in the subscription offering may be violating federal and state law and may be subject to civil enforcement actions or criminal prosecution.


Q.		W HAT IS THE DEADLINE FOR PURCHASING SHARES ?

A.	To purchase shares in the Subscription and Community Offerings, you must deliver a properly completed, signed Stock Order Form, with full payment, so that it is received (not postmarked) before 4:00 p.m., Eastern Time, on , 2017.


Q.		H OW MAY I PAY FOR THE SHARES ?

A.	Payment for shares can be remitted in two ways:

(1)

By personal check, bank check or money order , payable to Community First Bancshares, Inc. These will be deposited upon receipt. We cannot accept wires or third party checks. Please do not mail cash!

(2)

By authorized deposit account withdrawal of funds from your Newton Federal Bank deposit account(s). The Stock Order Form section titled “Method of Payment — Deposit Account Withdrawal” allows you to list the deposit account number(s) and amount(s) to be withdrawn. Funds designated for direct withdrawal must be in the account(s) at the time the Stock Order Form is received. You may not authorize direct withdrawal from accounts with check-writing privileges. Please submit a check instead. If you request direct withdrawal from such accounts, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will immediately withdraw the amount from your checking account(s). Also, IRA or other retirement accounts held at Newton Federal may not be listed for direct withdrawal. See information on retirement accounts on the next page.


Q.		W ILL I EARN INTEREST ON MY FUNDS ?

Yes. If you pay by personal check, bank check or money order, you will earn interest at a rate of % per annum from the date we process your payment until the completion or termination of the reorganization and offering. At that time, you will be issued a check for interest earned on these funds. If you pay for shares by authorizing a direct withdrawal from your Newton Federal Bank deposit account(s), your funds will continue earning interest within the account at the contract rate. The interest will remain in your account(s) when the designated withdrawal is made, upon completion or termination of the reorganization and offering.


Q.		A RE THERE LIMITS TO HOW MANY SHARES I CAN ORDER ?

Yes. The minimum order is 25 shares ($250). The maximum number of shares that may be purchased by a person or group of persons exercising subscription rights through a single deposit account held jointly is 30,000 shares ($300,000). Additionally, no person or entity, together with any associate or group of persons acting in concert, may purchase more than 40,000 shares ($400,000) in all categories of the offering combined.

More detail on purchase limits, including the definition of “associate” and “acting in concert,” can be found in the Prospectus section entitled “The Reorganization and Offering — Limits on the Amount of Common Stock You May Purchase.”


Q.		M AY I USE MY N EWTON F EDERAL B ANK INDIVIDUAL RETIREMENT ACCOUNT (“IRA”) TO PURCHASE SHARES ?

You may use funds currently held in retirement accounts with Newton Federal Bank. However, before you place your stock order, the funds you wish to use must be transferred to a self-directed retirement account maintained by an independent trustee or custodian, such as a brokerage firm. If you are interested in using IRA or any other retirement funds held at Newton Federal Bank or elsewhere, please call our Stock Information Center as soon as possible for guidance, but preferably at least two weeks before the , 2017 offering deadline. Your ability to use such funds for this purchase may depend on time constraints, because this type of purchase requires additional processing time, and may be subject to limitations imposed by the institution where the funds are held.


Q.		M AY I USE A LOAN FROM N EWTON F EDERAL B ANK TO PAY FOR SHARES ?

A.	No. Newton Federal Bank, by regulation, may not extend a loan for the purchase of Community First Bancshares, Inc. common stock during the offering.


Q.		M AY I CHANGE MY MIND AFTER I PLACE AN ORDER TO SUBSCRIBE FOR STOCK ?

A.	No. After receipt, your executed Stock Order Form cannot be modified or revoked unless the offering is terminated or is extended beyond , 2017 or the number of shares of common stock to be sold is increased to more than 3,102,585 shares or decreased to less than 1,994,100 shares.


Q.		A RE DIRECTORS AND SENIOR OFFICERS OF N EWTON F EDERAL B ANK PLANNING TO PURCHASE STOCK ?

A.	Yes. Directors and senior officers, together with their associates, are expected to subscribe for an aggregate of shares ($ million), or approximately %, of the shares to be sold in the offering at the minimum of the offering range.


Q.		W ILL THE STOCK BE INSURED ?

A.	No. Like any common stock, Community First Bancshares, Inc.’s stock will not be insured.


Q.		W ILL DIVIDENDS BE PAID ON THE STOCK ?

A.	Community First Bancshares, Inc. intends to pay cash dividends to our stockholders, beginning no earlier than the first calendar quarter of 2018. However, no decision has been made with respect to the amount of any dividend payments.


Q.		H OW WILL Community First Bancshares, Inc.’s SHARES TRADE ?

A.	Upon completion of the reorganization and offering, we expect the common stock will be traded on the Nasdaq Capital Market under the symbol “CFBI”. Once the shares have begun trading, you may contact a firm offering investment services in order to buy or sell “CFBI” shares in the future.

WHERE TO GET MORE INFORMATION


Q.		H OW CAN I GET MORE INFORMATION ?

A.	For more information, refer to the enclosed Prospectus or call our Stock Information Center, at 1-( ) - , from 10:00 a.m. to 4:00 p.m., Eastern Time, Monday through Friday. The Stock Information Center is not open on bank holidays.

LOGO

Dear Valued Customer:

I am pleased to tell you about an investment opportunity and, just as importantly, to request your vote. Pursuant to a Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan (the “Plan”), we will convert from a mutual (meaning no stockholders) savings and loan association to a mutual holding company form of ownership. To accomplish the reorganization, Community First Bancshares, Inc., a newly formed mid-tier stock holding company for Newton Federal Bank (“Newton Federal”), is conducting an offering of shares of its common stock. Enclosed you will find a Prospectus, a Proxy Statement, Proxy Card(s) and a Questions and Answers Brochure describing the reorganization, the offering and the Plan.

THE PROXY VOTE:

Your vote is extremely important for us to meet our goals. Although we have received conditional regulatory approval to undertake the reorganization, we must receive the approval of our eligible depositors. NOT VOTING YOUR ENCLOSED PROXY CARD(S) WILL HAVE THE SAME EFFECT AS VOTING “AGAINST” THE PLAN. Note that you may receive more than one Proxy Card, depending on the ownership structure of your accounts at Newton Federal. Please vote all the Proxy Cards you receive — none are duplicates! To cast your vote, please sign each Proxy Card and return the card(s) in the Proxy Reply Envelope provided. Alternatively, you may vote by Internet or telephone by following the simple instructions on the Proxy Card.

Our Board of Directors urges you to vote “FOR” the Plan.

Please note:

•

The proceeds resulting from the sale of stock will support our business strategy.

•

There will be no change to account numbers, interest rates or other terms of your accounts at Newton Federal. Deposit accounts will not be converted to stock. Your deposit accounts will continue to be insured by the FDIC, up to the maximum legal limits.

•

You will continue to enjoy the same services with the same Board of Directors, management and staff.

•

Voting does not obligate you to purchase shares of common stock in our offering.

THE STOCK OFFERING:

As an eligible Newton Federal customer, you have non-transferable rights, but no obligation, to purchase shares of common stock during our Subscription Offering before any shares are made available for sale to the general public. The common stock is being offered at $10.00 per share, and there will be no sales commission charged to purchasers during the offering.

Please read the enclosed materials carefully. If you are interested in purchasing shares of common stock, complete the enclosed Stock Order Form and return it, with full payment, in the Stock Order Reply Envelope provided. You may submit your Stock Order Form by overnight delivery to the address indicated on the Stock Order Form, by hand-delivery to Newton Federal’s main office located at 3175 Highway 278, Covington, Georgia or by mail using the Stock Order Reply Envelope provided. Stock Order Forms and full payment must be received (not postmarked) before 4:00 p.m., Eastern Time, on , 2017. If you are considering purchasing stock with funds you have in an IRA or other retirement account, please call our Stock Information Center promptly for guidance, because these orders require additional processing time.

I invite you to consider this opportunity to share in our future. Thank you for your continued support as a Newton Federal customer. Sincerely,

Johnny S. Smith

President and Chief Executive Officer

This letter is neither an offer to sell nor a solicitation of an offer to buy shares of common stock. The offer is made only by the Prospectus. These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Questions?

Call our Stock Information Center, at 1-( ) - ,

from 10:00 a.m. to 4:00 p.m., Eastern Time, Monday through Friday, except bank holidays.

Dear Sir/Madam:

BSP Securities, LLC has been retained by Community First Bancshares, Inc., as selling agent in connection with the offering of Community First Bancshares, Inc., common stock.

At the request of Community First Bancshares, Inc., we are enclosing materials regarding the offering of shares of Community First Bancshares, Inc., common stock. Included in this package is a Prospectus describing the stock offering. We encourage you to read the enclosed information carefully, including the “Risk Factors” section of the Prospectus.

Sincerely,

LOGO

Dear Friend:

I am pleased to tell you about an investment opportunity. Community First Bancshares, Inc., a newly formed mid-tier stock holding company for Newton Federal Bank (“Newton Federal”), is offering shares of its common stock for sale at a price of $10.00 per share. No sales commission will be charged to purchasers during the offering.

Our records indicate that you were a depositor of Newton Federal at the close of business on September 30, 2015 or , 2016 whose account(s) was/were closed thereafter. As such, you have non-transferable rights, but no obligation, to subscribe for shares of common stock during our Subscription Offering before any shares are made available for sale to the general public.

Please read the enclosed materials carefully before making an investment decision. If you are interested in purchasing shares of common stock, complete the enclosed Stock Order Form and return it, with full payment, in the Stock Order Reply Envelope provided. You may submit your Stock Order Form by overnight delivery to the address indicated on the Stock Order Form, by hand-delivery to Newton Federal’s main office located at 3175 Highway 278, Covington, Georgia or by mail using the Stock Order Reply Envelope provided. Stock Order Forms and full payment must be received (not postmarked) before 4:00 p.m., Eastern Time, on , 2017 . If you are considering purchasing stock with funds you have in an IRA or other retirement account, please call our Stock Information Center promptly for guidance, because these orders require additional processing time.

If you have questions about our organization or purchasing shares, please refer to the enclosed Prospectus and Questions and Answers Brochure, or call our Stock Information Center at the number shown below.

I invite you to consider this opportunity to share in our future as a Community First Bancshares, Inc. stockholder.

Sincerely,

Johnny S. Smith

President and Chief Executive Officer

Questions?

Call our Stock Information Center, at 1-( ) - ,

from 10:00 a.m. to 4:00 p.m., Eastern Time, Monday through Friday, except bank holidays.

LOGO

Dear Member:

I am pleased to tell you about an investment opportunity. Community First Bancshares, Inc., a newly-formed mid-tier stock holding company for Newton Federal Bank (“Newton Federal”), is offering shares of its common stock for sale at a price of $10.00 per share. No sales commission will be charged to purchasers during the offering.

Please read the enclosed materials carefully. If you are interested in purchasing shares of Newton Federal common stock, complete the enclosed Stock Order Form and return it, with full payment, in the Stock Order Reply Envelope provided. You may submit your Stock Order Form by overnight delivery to the address indicated on the Stock Order Form, by hand-delivery to Newton Federal’s main office located at 3175 Highway 278, Covington, Georgia or by mail using the Stock Order Reply Envelope provided. Stock Order Forms and full payment must be received (not postmarked) before 4:00 p.m., Eastern Time, on , 2017. If you are considering purchasing stock with funds you have in an IRA or other retirement account, please call our Stock Information Center promptly for guidance, because these orders require additional processing time.

I invite you to consider this opportunity to share in our future as a Community First Bancshares, Inc. stockholder.

Sincerely,

Johnny S. Smith

President and Chief Executive Officer

Questions?

Call our Stock Information Center, at 1-( ) - ,

from 10:00 a.m. to 4:00 p.m., Eastern Time, Monday through Friday, except bank holidays.

LOGO

Dear Potential Investor:

I invite you to consider this opportunity to share in our future as a Community First Bancshares, Inc. stockholder.

Sincerely,

Johnny S. Smith

President and Chief Executive Officer

Questions?

Call our Stock Information Center, at 1-( ) - ,

from 10:00 a.m. to 4:00 p.m., Eastern Time, Monday through Friday, except bank holidays.

Exhibit 99.5

LOGO

STOCK ORDER FORM SEND OVERNIGHT PACKAGES TO: Stock Information Center 3175 Highway 278 Covington, GA 30014 Call us at 1-( ) - For Internal Use Only BATCH # ORDER # CATEGORY # REC’D O C ORDER DEADLINE & DELIVERY: A Stock Order Form, properly completed and with full payment, must be received (not postmarked) before 4:00 p.m., Eastern Time, on , 2017. Subscription rights will become void after the deadline. Stock Order Forms can be delivered by using the enclosed Stock Order Reply Envelope, by overnight delivery to the Stock Information Center address on this form, or by hand-delivery to Newton Federal Bank’s (“Newton Federal”) main office located at 3175 Highway 278, Covington, GA 30014. Hand delivered stock order forms will only be accepted at this location. You may not deliver this form to our other Newton Federal offices. Do not mail Stock Order Forms to Newton Federal. Faxes or copies of this form are not required to be accepted. PLEASE PRINT CLEARLY AND COMPLETE ALL APPLICABLE SHADED AREAS. READ THE ENCLOSED STOCK ORDER FORM INSTRUCTIONS (BLUE SHEET) AS YOU COMPLETE THIS FORM. SUBSCRIPTION (1) NUMBER OF SHARES PRICE PER SHARE (2) TOTAL PAYMENT DUE x $10.00 = $ .00 Minimum Number of Shares: 25 ($250). Maximum Number of Shares: 30,000($300,000). See Stock Order Form Instructions for more information regarding maximum number of shares. (3) METHOD OF PAYMENT –– CHECK OR MONEY ORDER Enclosed is a personal check, bank check or money order made payable to Newton Federal in the amount of: $ .00 Cash, wire transfers and third party checks will not be accepted for this purchase. Checks and money orders will be cashed upon receipt. (4) METHOD OF PAYMENT –– DEPOSIT ACCOUNT WITHDRAWAL The undersigned authorizes withdrawal from the Newton Federal deposit account(s) listed below. There will be no early withdrawal penalty applicable for funds authorized on this form. Funds designated for withdrawal must be in the listed account(s) at the time this form is received. IRA and other retirement accounts held at Newton Federal and accounts with check-writing privileges may NOT be listed for direct withdrawal below. For Internal Use Only Newton Federal Withdrawal Deposit Account Number Amount(s) $ .00 $ .00 Total Withdrawal Amount $ .00 ATTACH A SEPARATE PAGE IF ADDITIONAL SPACE IS NEEDED. (5) PURCHASER INFORMATION Subscription Offering. Check the one box that applies, as of the earliest eligibility date, to the purchaser(s) listed in Section 9: a. Depositors of Newton Federal with aggregate balances of at least $50 at the close of business on September 30, 2015. b. Depositors of Newton Federal with aggregate balances of at least $50 at the close of business on , 2016. c. Depositors of Newton Federal at the close of business on , 2017 and borrowers as of January 19, 1984, who maintain such borrowings as of the close of business on , 2017. Community Offering. If (a), (b) or (c) above do not apply to the purchaser(s) listed in Section 9, check the first box that applies to this order: d. You are a resident of Barrow, Butts, Clarke, Greene, Gwinnett, Hall, Henry, Jackson, Jasper, Morgan, Newton, Oconee, Putnam, Rockdale or Walton County, Georgia. e. You are placing an order in the Community Offering, but (d) above does not apply. ACCOUNT INFORMATION –– SUBSCRIPTION OFFERING If you checked box (a), (b) or (c) under ‘‘Subscription Offering,’’ please provide the following information as of the eligibility date under which purchaser(s) listed in Section 9 below qualify in the Subscription Offering: Deposit Account Title Newton Federal (Name(s) on Account) Account Number NOTE: NOT LISTING ALL ELIGIBLE ACCOUNTS, OR PROVIDING INCORRECT OR INCOMPLETE INFORMATION, COULD RESULT IN THE LOSS OF ALL OR PART OF ANY SHARE ALLOCATION. ATTACH A SEPARATE PAGE IF ADDITIONAL SPACE IS NEEDED. (6) MANAGEMENT Check if you are a Community First Bancshares, MHC, Community First Bancshares, Inc., or Newton Federal: Director Officer Employee Immediate family member, as defined in the Stock Order Form Instructions (7) MAXIMUM PURCHASER IDENTIFICATION Check here if you, individually or together with others (see Section 8), are subscribing in the Subscription Offering for the maximum purchase allowed and are interested in purchasing more shares if the maximum purchase limitation(s) is/are increased. If you do not check the box, you will not be contacted and resolicited in the event the maximum purchase limitations are increased. (8) ASSOCIATES/ACTING IN CONCERT Check here if you, or any associate or persons acting in concert with you, have submitted other orders for shares in the Subscription Offering. If you check the box, list below all other orders submitted by you or your associates or by persons acting in concert with you. (“Associate” and “Acting in Concert” defined on reverse side of this form) Name(s) listed in Section 9 on other Stock Order Forms Number of shares Name(s) listed in Section 9 on other Stock Order Forms Number of shares (9) STOCK REGISTRATION The name(s) and address that you provide below will be reflected on your ownership statement, and will be used for other communications related to this order. Please PRINT clearly and use full first and last name(s), not initials. If purchasing in the Subscription Offering, you may not add the name(s) of persons/entities who do not have subscription rights or who qualify only in a lower purchase priority than yours. See Stock Order Form Instructions for further guidance. Individual Tenants in Common Uniform Transfers to Minors Act (for reporting SSN, use minor’s) FOR TRUSTEE/BROKER USE ONLY: Joint Tenants Corporation Partnership Trust –– Under Agreement Dated Other IRA (SSN of Beneficial Owner) —— —— First Name, Middle Initial, Last Name Reporting SSN/Tax ID No. First Name, Middle Initial, Last Name SSN/Tax ID No. Street Daytime Phone # City State Zip County (Important) Evening Phone # (10) ACKNOWLEDGMENT AND SIGNATURE(S) I understand that, to be effective, this form, properly completed, together with full payment, must be received no later than 4:00 p.m., Eastern Time, on , 2017, otherwise this form and all subscription rights will be void. (continued on reverse side of this form) ? ORDER NOT VALID UNLESS SIGNED ? ONE SIGNATURE REQUIRED, UNLESS SECTION 4 OF THIS FORM INCLUDES ACCOUNTS REQUIRING MORE THAN ONE SIGNATURE TO AUTHORIZE WITHDRAWAL. IF SIGNING AS A CUSTODIAN, TRUSTEE, CORPORATE OFFICER, ETC., PLEASE INCLUDE YOUR FULL TITLE. Signature (title, if applicable) Date Signature (title, if applicable) Date

STOCK ORDER FORM – SIDE 2

(8) ASSOCIATES/ACTING IN CONCERT (continued from front of Stock Order Form)

Associate – The term “associate” of a person means:

(1)

any corporation or organization, other than Community First Bancshares, MHC, Community First Bancshares, Inc., Newton Federal or a majority-owned subsidiary of these entities, of which the person is a senior officer, partner or beneficial owner, directly or indirectly, of 10% or more of any class of equity securities of the corporation or organization;

(2)

any trust or other estate in which the person has a substantial beneficial interest or serves as a trustee or in a fiduciary capacity, excluding any employee stock benefit plan in which the person has a substantial beneficial interest or serves as trustee or in a fiduciary capacity; and

(3)

any blood or marriage of the person, who either lives in the same house as the person or who is a director or senior officer of Community First Bancshares, MHC, Community First Bancshares, Inc., Newton Federal or a subsidiary thereof.

Acting in concert – The term “acting in concert” means:

(1)

knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or

(2)

In general, a person or company that acts in concert with another person or company (“other party”) shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any tax-qualified employee plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the employee plan will be aggregated.

Our directors are not treated as associates of each other solely because of their membership on the Board of Directors. We have the right to determine, in our sole discretion, whether prospective purchasers are associates or acting in concert. Persons having the same address or exercising subscription rights through qualifying accounts registered to the same address generally will be assumed to be associates of, and acting in concert with, each other.

Please see the Prospectus section entitled “The Reorganization and Offering – Limits on the Amount of Common Stock You May Purchase” for more information on purchase limitations.

(10) ACKNOWLEDGMENT AND SIGNATURE(S) (continued from front of Stock Order Form)

I agree that, after receipt by Community First Bancshares, Inc., this Stock Order Form may not be modified or canceled without Community First Bancshares, Inc., consent, and that if withdrawal from a deposit account has been authorized, the authorized amount will not otherwise be available for withdrawal. Under penalty of perjury, I certify that (1) the Social Security or Tax ID information and all other information provided hereon are true, correct and complete, (2) I am purchasing shares solely for my own account and that there is no agreement or understanding regarding the sale or transfer of such shares, or my right to subscribe for shares, and (3) I am not subject to backup withholding tax [cross out (3) if you have been notified by the IRS that you are subject to backup withholding]. I acknowledge that my order does not conflict with the overall purchase limitation of $400,000 in all categories of the offering combined, for any person or entity, together with any associate or group of persons acting in concert, as set forth in the Plan of Reorganization and Stock Issuance and the Prospectus dated , 2017.

Subscription rights pertain to those eligible to subscribe in the Subscription Offering. Subscription rights are only exercisable by completing and submitting a Stock Order Form, with full payment for the shares subscribed for. Federal regulations prohibit any person from transferring or entering into any agreement directly or indirectly to transfer the legal or beneficial ownership of subscription rights, or the underlying securities, to the account of another.

I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

I further certify that, before subscribing for shares of the common stock of Community First Bancshares, Inc., I received the Prospectus dated , 2017, and I have read the terms and conditions described in the Prospectus, including disclosure concerning the nature of the security being offered and the risks involved in the investment, described by Community First Bancshares, Inc., in the “Risk Factors” section, beginning on page 19. Risks include, but are not limited to the following:

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease

We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services

Future changes in interest rates could reduce our profits and asset values

Strong competition within our market areas may limit our growth and profitability

10.

Our small size makes it more difficult for us to compete

11.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations

12.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions

13.

Our ability to originate loans could be restricted by recently adopted federal regulations

14.

15.

16.

The cost of additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements will increase our expenses

17.

Changes in accounting standards could affect reported earnings

18.

Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results

19.

Legal and regulatory proceedings and related matters could adversely affect us

20.

We are subject to environmental liability risk associated with lending activities or properties we own

21.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

22.

The future price of our common stock may be less than the purchase price in the stock offering

23.

24.

There may be a limited trading market in our common stock, which would hinder your ability to sell our common stock and may lower the market price of the stock

25.

Our stock-based benefit plans will increase our costs, which will reduce our income

26.

The implementation of one or more stock-based benefit plans may dilute your ownership interest

27.

28.

29.

Our stock value may be negatively affected by our mutual holding company structure and federal regulations restricting takeovers

30.

31.

Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business

32.

You may not receive dividends on our common stock

33.

Under current law, if we declare dividends on our common stock, Community First Bancshares, MHC will be restricted in waiving the receipt of dividends

34.

35.

By executing this form, the investor is not waiving any rights under federal or state securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934.

LOGO See Front of Stock Order Form

Community First Bancshares, Inc.

STOCK INFORMATION CENTER: 1-( ) -

STOCK ORDER FORM INSTRUCTIONS – SIDE 1

Sections (1) and (2) – Number of Shares and Total Payment Due. Indicate the Number of Shares that you wish to subscribe for and the Total Payment Due. Calculate the Total Payment Due by multiplying the Number of Shares by the $10.00 price per share. The minimum purchase is 25 shares ($250). The maximum allowable purchase by a person or group of persons exercising subscription rights through a single deposit account held jointly is 30,000 shares ($300,000). Further, no person or entity, together with any associate or group of persons acting in concert, may purchase more than 40,000 shares ($400,000) in all categories of the offering combined. Please see the Prospectus section entitled “The Reorganization and Offering – Limits on the Amount of Common Stock You May Purchase” for more specific information. By signing this form, you are certifying that your order does not conflict with these purchase limitations.

Section (3) – Method of Payment – Check or Money Order. Payment may be made by including with this form a personal check, bank check or money order made payable directly to Community First Bancshares, Inc. These will be deposited upon receipt. The funds remitted by personal check must be available within the account(s) when your Stock Order Form is received. Indicate the amount remitted. Interest will be calculated at % per annum from the date payment is processed until the offering is completed or terminated, at which time a subscriber will be issued a check for interest earned. Please do not remit cash, wire transfers or third party checks for this purchase.

Section (4) – Method of Payment – Deposit Account Withdrawal. Payment may be made by authorizing a direct withdrawal from your Newton Federal deposit account(s). Indicate the account number(s) and the amount(s) you wish withdrawn. Attach a separate page, if necessary. Funds designated for withdrawal must be available within the account(s) at the time this Stock Order Form is received. Upon receipt of this order, we will place a hold on the amount(s) designated by you – the funds will be unavailable to you for withdrawal thereafter. The funds will continue to earn interest within the account(s) at the contract rate. The interest will remain in the accounts when the designated withdrawal is made, at the completion or termination of the offering. There will be no early withdrawal penalty for withdrawal from a Newton Federal certificate of deposit (CD) account. Note that you may NOT designate accounts with check-writing privileges. Please submit a check instead. If you request direct withdrawal from such accounts, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will immediately withdraw the amount from your checking account(s). Additionally, you may not designate direct withdrawal from a Newton Federal IRA or other retirement accounts. For guidance on using retirement funds, whether held at Newton Federal or elsewhere, please contact the Stock Information Center as soon as possible – preferably at least two weeks before the , 2017 offering deadline. See the Prospectus section entitled “The Reorganization and Offering – Procedure for Purchasing Shares – Using Retirement Account Funds.” Your ability to use retirement account funds to purchase shares cannot be guaranteed and depends on various factors, including timing constraints and the institution where those funds are currently held.

Section (5) – Purchaser Information. Please check the one box that applies to the purchaser(s) listed in Section 9 of this form. Purchase priorities in the Subscription Offering are based on eligibility dates. Boxes (a), (b) and (c) refer to the Subscription Offering. If you checked box (a) or (b), list all Newton Federal deposit account numbers that the purchaser(s) had ownership in as of the applicable eligibility date. If you checked box (c), list all Newton Federal deposit and/or applicable loan account numbers that the purchaser(s) had ownership in as of , 2017. Include all forms of account ownership (e.g. individual, joint, IRA, etc.). If purchasing shares for a minor, list only the minor’s eligible accounts. If purchasing shares for a corporation or partnership, list only that entity’s eligible accounts. Attach a separate page, if necessary. Failure to complete this section, or providing incorrect or incomplete information, could result in a loss of part or all of your share allocation in the event of an oversubscription. Boxes (d) and (e) refer to the Community Offering. Orders placed in the Subscription Offering will take priority over orders placed in the Community Offering. See the Prospectus section entitled “The Reorganization and Offering” for further details about the Subscription and Community Offerings.

Section (6) – Management. Check the box if you are a Community First Bancshares, MHC, Community First Bancshares, Inc., or Newton Federal director, officer or employee, or a member of their immediate family. Immediate family includes spouse, parents, siblings and children who live in the same house as the director, officer or employee.

Section (7) – Maximum Purchaser Identification. Check the box, if applicable. Failure to check the box will result in you not receiving notification in the event the maximum purchase limit(s) is/are increased. If you checked the box but have not subscribed for the maximum amount in the Subscription Offering, you will not receive this notification.

Section (8) – Associates/Acting in Concert. Check the box, if applicable, and provide the requested information. Attach a separate page if necessary.

Section (9) – Stock Registration. Clearly PRINT the name(s) in which you want the shares registered and the mailing address for all correspondence related to your order, including a stock ownership statement. Each Stock Order Form will generate one stock ownership statement, subject to the stock allocation provisions described in the Prospectus. IMPORTANT: Subscription rights are non-transferable . If placing an order in the Subscription Offering, you may not add the names of persons/entities who do not have subscription rights or who qualify only in a lower purchase priority than yours. A Social Security or Tax ID Number must be provided. The first number listed will be identified with the stock certificate for tax reporting purposes. Listing at least one phone number is important in the event we need to contact you about this form. NOTE FOR FINRA MEMBERS (Formerly NASD) : If you are a member of the Financial Industry Regulatory Authority (“FINRA”), formerly the National Association of Securities Dealers (“NASD”), or a person affiliated or associated with a FINRA member, you may have additional reporting requirements. Please report this subscription in writing to the applicable department of the FINRA member firm within one day of payment thereof.

(over)

COMMUNITY FIRST BANCSHARES, INC

STOCK INFORMATION CENTER: 1-( ) -

STOCK ORDER FORM INSTRUCTIONS – SIDE 2

Form of Stock Ownership. For reasons of clarity and standardization, the stock transfer industry has developed uniform stockholder registrations for issuance of stock ownership statements. Beneficiaries may not be named on stock registrations. If you have any questions on wills, estates, beneficiaries, etc., please consult your legal advisor. When registering stock, do not use two initials – use the full first name, middle initial and last name. Omit words that do not affect ownership such as “Dr.” or “Mrs.” Check the one box that applies.

Buying Stock Individually – Used when shares are registered in the name of only one owner. To qualify in the Subscription Offering, the individual named in Section 9 of the Stock Order Form must have had an eligible deposit account at Newton Federal as of the close of business on September 30, 2015, , 2016 or , 2017 or a loan on January 19, 1984 whose borrowing remained outstanding as of close of business on , 2017.

Buying Stock Jointly – To qualify in the Subscription Offering, the persons named in Section 9 of the Stock Order Form must have had an eligible deposit account at Newton Federal as of the close of business on September 30, 2015, , 2016 or , 2017 or a loan on January 19, 1984 whose borrowing remained outstanding as of close of business on , 2017

Joint Tenants – Joint Tenancy (with Right of Survivorship) may be specified to identify two or more owners where ownership is intended to pass automatically to the surviving tenant(s). All owners must agree to the sale of shares.

Tenants in Common – May be specified to identify two or more owners where, upon the death of one co-tenant, ownership of the stock will be held by the surviving co-tenant(s) and by the heirs of the deceased co-tenant. All owners must agree to the sale of shares.

Buying Stock for a Minor – Shares may be held in the name of a custodian for a minor under the Uniform Transfer to Minors Act. To qualify in the Subscription Offering, the minor (not the custodian) named in Section 9 of the Stock Order Form must have had an eligible deposit account at Newton Federal as of the close of business on September 30, 2015, , 2016 or , 2017 The standard abbreviation for custodian is “CUST.” The Uniform Transfer to Minors Act is “UTMA.” Include the state abbreviation. For example, stock held by John Smith as custodian for Susan Smith under the OH Uniform Transfer to Minors Act, should be registered as John Smith CUST Susan Smith UTMA-OH (list only the minor’s social security number).

Buying Stock for a Corporation/Partnership – On the first name line indicate the name of the corporation or partnership and indicate the entity’s Tax ID Number for reporting purposes. To qualify in the Subscription Offering, the corporation or partnership named in Section 9 of the Stock Order Form must have had an eligible deposit account at Newton Federal as of the close of business on September 30, 2015, , 2016 or , 2017 or a loan on January 19, 1984 whose borrowing remained outstanding as of close of business on , 2016

Buying Stock in a Trust/Fiduciary Capacity – Indicate the name of the fiduciary and the capacity under which the fiduciary is acting (for example, “Executor”), or name of the trust, the trustees and the date of the trust. Indicate the Tax ID Number to be used for reporting purposes. To qualify in the Subscription Offering, the entity named in Section 9 of the Stock Order Form must have had an eligible deposit account at Newton Federal as of the close of business on September 30, 2015, , 2016 or , 2017 or a loan on January 19, 1984 whose borrowing remained outstanding as of close of business on , 2017

Buying Stock in a Self-Directed IRA (for trustee/broker use only) – Registration should reflect the custodian or trustee firm’s registration requirements. For example, on the first name line, indicate the name of the brokerage firm, followed by CUST or TRUSTEE. On the second name line, indicate the name of the beneficial owner (for example, “FBO John SMITH IRA”). You can indicate an account number or other underlying information and the custodian or trustee firm’s address and department to which all correspondence should be mailed related to this order, including a stock ownership statement. Indicate the TAX ID Number under which the IRA account should be reported for tax purposes. To qualify in the Subscription Offering, the beneficial owner named in Section 9 of this form must have had an eligible deposit account at Newton Federal as of the close of business on September 30, 2015, , 2016 or , 2017 or a loan on January 19, 1984 whose borrowing remained outstanding as of close of business on , 2017

Section (10) – Acknowledgment and Signature(s). Sign and date the Stock Order Form where indicated. Before you sign, please carefully review the information you provided and read the acknowledgment. Verify that you have printed clearly and completed all applicable shaded areas on the Stock Order Form. Only one signature is required, unless any account listed in Section 4 requires more than one signature to authorize a withdrawal.

Please review the Prospectus carefully before making an investment decision. Deliver your completed Stock Order Form, with full payment or deposit account withdrawal authorization, so that it is received (not postmarked) before 4:00 p.m., Eastern Time, on , 2017. Stock Order Forms can be delivered by using the enclosed postage paid Stock Order Reply Envelope, by overnight delivery to the Stock Information Center address on the front of the Stock Order Form, or by hand-delivery to Newton Federal’s main office located at 3175 Highway 278, Covington, GA 30014. Hand delivered stock order forms will only be accepted at this location. You may not deliver this form to our other Newton Federal offices. Please do not mail Stock Order Forms to Newton Federal. We are not required to accept Stock Order Forms that are found to be deficient or incorrect, or that do not include proper payment or the required signature. Faxes or copies of this form are not required to be accepted.

OVERNIGHT DELIVERY can be made to the Stock Information Center address provided on the front of the Stock Order Form. QUESTIONS? Call our Stock Information Center, at 1-( ) - , from 10:00 a.m. to 4:00 p.m., Eastern Time, Monday through Friday. The Stock Information Center is not open on bank holidays.